Issued by Boston Consulting Group
The need for fertile farmland is greater than ever with endemic malnourishment, growing population, poor land management and climate change as some key components of the current scenario.
The world is inhabited by eight billion people. In the next 30 years, there will be two billion more people who will need to be fed. Today, already 30% of all land globally is considered degraded with 28% of crop land in water-stressed regions, malnutrition is endemic, and climate change is accelerating. There is a growing and urgent need for fertile farmland.
Farmers, regulators, consumers, and food companies are questioning the status quo. Despite the clear challenges, there is an undeniable opportunity for agribusinesses to embrace sustainable farming and to make it an essential element of their core business. A BCG survey of 9,000 consumers in nine countries revealed that 86% of respondents want “good food for the world and me.” And 70 percent of sales growth in 2011 and 2014 in the US retail sector came from responsible-consumption products. Farmers are the key element to providing more nutritious and safer food.
Agricultural companies can play a pivotal role by creating new ways of partnering with farmers to ease their transition toward more sustainable agricultural practice.
Traditional agriculture emerged for good reasons and with good intentions. However, these practices often prioritized output over sustainability and resilience. We are also currently witnessing how they have had serious consequences on land stewardship, resources, the environment, and society. For example, overreliance on herbicides and pesticides has led to a growing number of weeds and insects resistant to the chemicals intended to contain them. Worsening agricultural conditions and their negative impact on farm profitability might be a key reason why 17% of European farms went out of business from 2005-2010. The traditional approach is no longer an option, whether viewed through an economic, production, environmental, or nutritional lens.
The goal of the new sustainability in agriculture claim is four-fold:
While agricultural companies have started to actively join this transformation, other stakeholders such as regulators, consumers, food companies, and farmers are the ones driving the sense of urgency. Regulators are setting change in motion primarily by linking farm subsidies to sustainable agriculture practices.
The opportunity for agribusiness companies is huge. They can play a larger role in sustainable farming, become knowledge partners with their customers, drive innovation and technological solutions, improve crop yield, and enhance the quality for food for people—while protecting the environment.
Crop protection companies have an opportunity to focus on precision agriculture, a market that though still nascent, offers the opportunity to reduce the amount of pesticides and herbicides needed. It is expected to be a $7.9 billion market by 2022. Seed producers can develop biotech seeds that are more tolerant of natural events resulting from climate change, such as droughts and floods. Crop nutrition companies can work with farmers to plan fertilization programs suited to the farmers’ local conditions. New tools and systems can open new markets and increase opportunities for farming equipment managers.
This report outlines the opportunities for agribusiness companies to plant the seeds for a more sustainable agriculture and future.
About Boston Consulting Group
Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients organizations, and secure lasting results. Founded in 1963, BCG is a private company with offices in more than 90 cities in 50 countries. For more information, please visit bcg.com.
Alex Meyer zum Felde
BCG Sustainability Expert Principal