Regenerative agriculture is being heralded as a transformative solution that could halve global food system greenhouse gas (GHG) emissions by 2030. This agricultural approach, which emphasizes restoring and enhancing soil, water, biodiversity, and carbon capture on farms, integrates practices such as low or no tillage, precision fertilizers, and biochar applications. However, despite its potential, the adoption of regenerative agriculture is fraught with challenges, primarily due to the high costs and risks that fall disproportionately on the shoulders of farmers, who are already struggling to make ends meet in a changing climate.
The food sector, responsible for a third of total annual GHG emissions and a significant contributor to biodiversity loss, is at a pivotal juncture. Companies within the food value chain, like OFI and Nestle, are beginning to pilot targeted regenerative agriculture practices and offer financial incentives. However, these efforts are not yet widespread, and the lack of market premiums for regeneratively grown products remains a significant barrier. This economic challenge is compounded by the precarious financial position of farmers, especially smallholders in developing regions, who face potentially ruinous costs without immediate financial returns.
Institutional investors and entities such as the Science Based Targets initiative are pushing for broader adoption of regenerative agriculture practices in alignment with net-zero commitments. Nonetheless, the responsibility and financial burden of implementing these changes often rest with the farmers. For instance, adopting regenerative practices could cost a large-scale beef farm in Brazil up to 17% of its revenues, potentially leading to insolvency. The report by the World Business Council for Sustainable Development, along with the Food and Land Use Coalition and We Mean Business, highlights these issues and calls for a more equitable distribution of costs and risks up the supply chain.
Support from higher up the value chain is crucial. While companies are beginning to engage with these practices, only a small fraction are taking significant steps to alleviate the financial burdens faced by farmers. For example, OFI is helping its suppliers identify the most relevant regenerative methods to maximize impact without overwhelming the farmers. Similarly, Nestle is running pilot projects to test effective regenerative methods in crops like cocoa and coffee and exploring innovative insurance models to stabilize farmers’ incomes during the transition.
However, much more action is needed across the industry to scale up regenerative agriculture. This includes implementing financial mechanisms that reward farmers for their transition efforts and establishing market premiums for regeneratively grown products. Global and regional regulations, such as the EU’s Corporate Sustainability Reporting Directive and the Deforestation Regulation, are starting to drive change by integrating environmental accountability into corporate operations. Yet, as stakeholders continue to debate the most effective methods to support and expand regenerative practices, it is clear that achieving substantial environmental goals will require placing farmers at the center of agricultural and environmental policy.