2022 was a momentous year for regenerative agriculture. With over $3.1 billion in investments from the federal government across 140 ‘climate smart’ projects (part of the Biden Administration’s larger Inflation Reduction Act), ‘nature-based solutions,’ a broader category of climate mitigation techniques which includes regenerative agriculture, was elevated to the forefront of American climate strategy. In 2023 and beyond, this trend is expected to continue. The global market for climate smart agriculture-based goods and services is expected to double over the next decade, with projections that it will reach $43 billion by 2030.
With so much wind in its sails, we can expect strong market forces to shape the growth of this industry in 2023 (and beyond).
Here, we will dissect 4 of those forces, including forthcoming standards and protocols which will be released this year, new emissions focuses, new players we expect to see enter this market, and increased emphasis on specific methods of reducing carbon emissions across our supply chains.
Of course, these are only a few of the themes we expect to emerge in 2023. We look forward to tracking these trends and identifying others in the coming months.
Theme 1: New guidance from the Greenhouse Gas Protocol (GHGp) and Science Based Targets Initiative (SBTi) will reshape how companies measure their value chain footprints in the Forestry, Land Use, and Agriculture (FLAG) sector.
In 2023, the Greenhouse Gas Protocol and the Science Based Targets Initiative, two of the most influential organizations that govern GHG accounting best practices and corporate environmental goal setting, respectively, will release new guidance governing the FLAG sector (in the case of SBTi, a draft of the guidance is already publicly available, and will go into effect officially in April).
This new guidance will write a new, more detailed rulebook for how and what companies will have to account for and report in their Scope 3 emissions – a crucial component of a firm’s ESG strategy.
On average, 75% of a company’s emissions are considered Scope 3 according to the World Resource Institute, and that number can be as high as 90% for agrifood companies.
In a nutshell, it is expected that the new guidelines will put a greater emphasis on collecting much more granular emissions data from the entire agricultural supply chain. This reach extends beyond carbon emissions and into the realm of other land-based emissions, leading us to our second theme:
Theme 2: Measuring and reducing methane and nitrous oxide emissions will become an increasingly integral part of corporate climate strategy.
According to the Global Methane Pledge, only about 2% of climate financing goes towards eliminating methane and nitrous oxide emissions, whereas the other 98% goes towards reducing carbon emissions. However, methane and nitrous oxide, despite their short-lived time in the atmosphere relative to carbon dioxide, account for 30-50% of all the atmospheric warming that has occurred since preindustrial times.
This incongruity, and the fact that we are collectively falling short of hitting both the 2030 and 2050 climate targets set forth in the Paris Agreement, have led many scientists and policymakers to conclude that we are not investing enough energy and resources into mitigating methane and nitrous oxide emissions.
Between livestock rearing and wetland farming, agriculture accounts for just under half of all anthropogenic methane emissions (and a much higher proportion of nitrous oxide emissions).
This is why the new FLAG guidance documents for GHG Protocol and SBTi are rumored to include more stringent requirements governing, accounting for and setting goals to reduce methane and nitrous oxide emissions.
Since methane and nitrous oxide emissions often occur far upstream in a company’s supply chain, it can be challenging to measure these emissions accurately at scale. This will necessitate, for many companies, investing in novel ways to accurately measure these emissions.
Theme 3: Banks, in order to meet their net zero targets, will start investing more heavily in emissions reductions solutions for agriculture
While the financial industry might not seem like an intuitive player when it comes to investing in sustainable agriculture, it is likely that a number of banks will need to address their portfolio emissions from financed activities in the agricultural sector if they are going to meet their net zero targets.
Globally, 126 banks are signatories to the Net Zero Banking Alliance (NZBA), which commits members to align their lending and investment portfolios with net-zero emissions by 2050 (including meeting intermediate targets by 2030). However, in the most recent progress report, as of November, 2022 only 3 out of the 62 banks sampled had set targets in the agricultural sector, and just 24 had baselined their agricultural emissions footprint.
A follow up report by the World Business Council for Sustainable Development noted that banks were having a difficult time operationalizing any of their agricultural emissions targets due to the lack of data. Specifically, the report noted that banks were overly reliant on default and static emissions factors, and were having a particularly difficult time measuring nature-based removals and storage, such as rates of soil organic carbon sequestration.
Theme 4: We will hear the words “carbon insetting” a lot more in 2023.
In 2022, a point of emphasis for companies making climate pledges was, at all costs, to avoid ‘greenwashing’ – the act of conveying misleading information about a company’s environmental performance. Rightly, companies realize that there is significant reputational and brand risk if they are caught doing this.
Too often, emissions reductions that a company has claimed and publicized in their sustainability reports are associated with offsetting projects – often outside the geographic purview of a company – that were fraught with data issues or accentuated by creative accounting techniques.
Instead, increasing numbers of companies are turning to ‘insetting,’ the process of investing in climate mitigation projects within their own supply chains. There are a multitude of benefits to investing internally, rather than externally.
Often, insetting projects involve investing in a nature-based solution, like regenerative agriculture, and can come along with a stack of other climate benefits such as increasing biodiversity and water quality. Furthermore, the funding for insetting projects stays within a company’s supply chain, making it easier to be transparent and accurate in emissions accounting and reporting.
Perhaps most importantly, there is a growing library of resources illustrating the business case for investing in insetting projects. Governance bodies like The International Platform for Insetting are paving the way here, publishing reports that sustainability leaders can use to start designing robust, credible insetting programs and review how these programs can be sold internally to gain approval from executives.
We are eager to see these trends in agriculture-based climate solutions. Better regulation, increased investment and transparent efforts will increase the scalability and accessibility of these solutions, and will ultimately promote a more sustainable food system.
However, none of these trends can continue without collaboration across the agriculture industry. Growers, scientists, food companies, regulators and consumers must work together in support of industry progress. At Regrow, we are proud to partner with stakeholders across the agrifood industry to ensure the growth of nature-based solutions, and we look forward to seeing what the future holds for agriculture.