Sustainable agriculture practices should be investor friendly

Dr Arpita Mukherjee, Professor at ICRIER, opines that while businesses understand the concept of risk, they also need reasonable chances of success if they invest in sustainable agriculture practices. The key is to be investor friendly, climate friendly, innovator friendly and community friendly with the key indicator for success being an increasing number of investors and enterprises entering agri-business in a sustainable model.

IBT: How can the concept of ‘sustainable business development’ be incorporated into the F&B sector in India? How can sustainability help these businesses stay competitive?

Dr Arpita Mukherjee: Sustainable business development is now a priority for many F&B companies, especially global players. The food supply chain is responsible for around 20-30% of total greenhouse gas emissions. Food processing constitutes 25% of all water consumption worldwide. F&B industry is now focusing on limiting the use of chemical inputs like fertilisers, better management of irrigation and reduction of wastage across the entire value chain. They are focusing on more environment-friendly production methods like organic production and recycling and conservation of water. Some companies have chosen to work with programmes like Fairtrade to support this effort.

Efficient packaging, alternative food, traceability of the supply chain to the farm are some measures taken by companies to create sustainable food supply chains.

There is now a growing demand and awareness among consumers for sustainable products. Following sustainable business practices helps to reduce losses in food supply chain. Processing food with minimum use of water, raw materials, and energy help to reduce inefficient production costs. Proper packaging helps to keep the food safe and increases the shelf-life. A number of food companies have now moved into biodegradable products.

Many companies are directly working with farmers through models like contract farming to train and handhold them in sustainable farming practices. Companies are also working closely with environmental experts to create efficient farming practices so that they can maximize profit and at the same time have minimal negative environmental adverse impacts. Increasingly consumers globally are aware of sustainable business practices like women entrepreneurship and no child labour. Adopting such measures can help to promote exports from India.

IBT: What benefits do sustainable agri-business innovation have for Indian farmers, customers and the environment?

Dr Arpita Mukherjee: By using resources efficiently, sustainable practices can reduce input costs and produce more food and agriculture produce by using lesser land, water and energy. For food products, sustainable business practices lead to efficient use of resources like water in the field and minimise the use of chemical inputs, which can be harmful for the health of consumers.

Farmers can have crop rotation and shift to produce like millets, which require less water. Crop diversity practices including intercropping (growing a mix of crops in the same area) can help improve health of the soil. Several farmers are now adopting integrated pest management, while minimising the use of chemical pesticides.

Sustainable agri-business innovation helps to reduce food wastage and thereby increase farmers’ income. The entire food supply chain from farm to the final consumers can be tracked and consumers can be assured of better quality and food safety standards while farmers can produce as per the market demand. Indian farmers can benefit from sustainable agri-business development. Use of technology for timely harvesting, price forecasting, efficient transportation and logistics, processing and delivery, can help mitigate supply and demand gaps and reduce wastage. This can help in increasing farmers’ income by getting the right price for their produce.

IBT: What different sustainability business models can Indian agri-food companies explore in order to meet the international low-cost competition with quality products?

Dr Arpita Mukherjee: There are many different sustainable business models. One of the key models that we can explore is integrated crop-livestock and aquaculture-crop systems. The other model is organic farming. India is one of the pioneers in organic farming.

Second, we can use digital technologies such as Big Data, robotics, artificial intelligence, virtual and augmented reality, the Internet of Things, and Blockchain, for better risk management and traceability across the supply chain. Organisations such as the Food and Agriculture Organization recommend the use of digital technology to ensure food safety and compliance in the value chain, which can be adopted by Indian companies. Food companies can adopt biodegradable packaging and work towards minimising food wastages in their supply chains.

Since majority of the Indian farmers have small land holdings, food and beverage companies can enter into partnerships with farmers through contract farming and other models like FPOs, where they share the knowledge and best practices, and producers produce as per the guidelines.

IBT: How can agribusinesses in India ensure net zero carbon emissions?

Dr Arpita Mukherjee: India is among the top emitters of greenhouse gases. A study by the International Maize and Wheat Improvement Centre (CIMMYT) pointed out that India has the potential to cut 18% of its annual greenhouse gas emissions from agriculture and livestock sector. The study estimated that 50% of this reduction could be achieved by implementing three measures – efficient use of fertiliser, adoption of zero-tillage and management of water used to irrigate paddy.

Agribusinesses in India have to map the sources of carbon emission in their value chain from production in the field to storage and transportation to final consumers. They can use locally available resources and minimise the use of chemical fertilisers and pesticides. They can design a package of practices that lower the use of water (through in-situ soil moisture conservation and other demand management measures), promote the use of bio-fertilisers and bio-pesticides and provide training to farmers and farmer produce organisations (FPOs).

IBT: How can Indian agri entrepreneurs leverage technology to make their businesses sustainable?

Dr Arpita Mukherjee: Technologies such as blockchain, Big Data and IOT are now used across the entire agri value chain from risk management to product traceability and for crop insurance and pest control. Technology is also used to check soil health and price forecasting. Several agri-tech start-ups have emerged in India, but many are unable to scale up due to a lack of support from the government. Agri entrepreneurs can partner with them and leverage these technologies to ensure sustainable business practices.

IBT: What could be the challenges to agribusiness growth for those employing sustainable models? How can these be resolved?

Dr Arpita Mukherjee: One of the key challenges is that at a policy level, input subsidies on energy, fertilizers, and water, as well as public purchases of agricultural produce may lead to depletion of natural resources and non-sustainable business practices. Therefore, policies and subsidies need to focus on sustainable business practices.

In countries like India with small farm sizes, underdevelopment of the rural economy, and difficulties in application of modern agricultural science and technology across small and marginal farmers can be a challenge. Directly connecting and sourcing from farmers can be a challenge too which can be mitigated by supporting regulations. The government should also have supporting regulations such as food waste management Act.

IBT: How can sustainable business development-oriented investments be enhanced in India’s agribusinesses?

Dr Arpita Mukherjee: Sustainable business development-oriented investment can be enhanced through research, working in partnership with industry, farmers and other stakeholders. A few pilot projects may be initiated in partnership with companies which can then be replicated. The government through right policies, subsides and initiatives can encourage companies to invest in sustainable business practices.

Given that a number of global companies and brands have already implemented sustainable business practices, partnerships and collaboration with them can help Indian companies. Focusing on exports and on meeting standards and requirements of developed country markets will help Indian agribusinesses to adopt sustainable practices, which can be supported by the government through right policies. Investors look at their return-on-investment (ROI) and how the value of the asset they have invested in will increase over time.

While investors understand the concept of risk, they also need reasonable chances of success. This can only happen when sustainable business practices adopted by agri-businesses result in commercial success.

The government needs to ensure that there is a level playing field, a competitive landscape so that businesses can invest in efficient supply chains. The key is to be investor friendly, climate friendly, innovator friendly and community friendly with the key indicator for success being an increasing number of investors and enterprises entering agri-business in a sustainable model.

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Dr Arpita Mukherjee is a Professor at ICRIER. She has several years of experience in policy-oriented research, working closely with the Government of India and policymakers in the EU, US, ASEAN and in East Asian countries. She has conducted studies for international organizations such as ADB, ADBI, ASEAN Secretariat, FCO (UK), Italian Trade Commission, Konrad-Adenauer Stiftung (KAS), OECD, Taipei Economic and Cultural Centre (TECC), UNCTAD and the WTO and Indian industry associations such as NASSCOM, FICCI, IBA, IDSA and EICI. Her research is a key contributor to India’s negotiating strategies in the WTO and bilateral agreements. The views expressed here are her own.