in Business, Economics and Finance

Governance for Sustainable Global Agri-Food Systems

Kostas Karantininis, author of A New Paradigm for Greek Agriculture, writes about the challenges in sustainability in the agri-food business.

No other industry is faced with the combined global challenges that the agri-food industry is faced, while it is required to deliver both private and public goods. “Sustainability” takes a broader set of dimensions now, as agri-food takes a primary role among other industries for the future. This may require more complex forms of organisation and governance.

Agri-food is challenged to feed a projected ten billion mouths by 2050, while at the same time almost one billion people are undernourished. Tragically, most of the world’s poor are farmers or live in rural areas and depend on agriculture. Out of the 570 million farms in the world, about 500 million are smallholders, mainly in Asia, Africa and Latin America. More than 2 billion people depend on small holder farms for their livelihoods. These small farms produce about 80% of the food consumed in Asia and sub-Saharan Africa. All those smallholders and their dependants need to find a place in the future of agri-food. It is not an easy task to remove all these people from rural areas and find employment elsewhere. Hence agri-food is not only expected to provide food for all, but is also expected to provide income and employment to a large portion of the planet’s population.

Problematically, rural youth are shying away from agriculture, attracted by the flamboyance of city lights or fleeing the developing world for search of a better future in Europe and the prosperous regions, in East Asia, the Middle East, or the Americas. This outflow of youth leaves behind an ageing farmer population, with a decreasing capacity for physical labour and inability to comprehend and apply the rapid innovations in agri-food coming out of not only the agricultural sciences, but also from biotechnology, informatics and robotics, among others. The support of science and innovation to agriculture has never been greater – it is rapid and requires young, inquisitive and entrepreneurial minds to comprehend and apply.

While it has to feed the world, both rich and poor, agri-food is called to do this in a way that does not harm the environment and the planet as a whole, in present and future. While agri-food is a heavy user of fossil-based fertilisers and chemicals and a thirsty consumer of water, it is expected to deliver, without wasting, food and fibre at low impact on the planet, while it is challenged by the planet’s climate change more than any other industry.

Agri-food has served this planet well and will continue to do so, however, it has to deal with all the combined challenges, and the biggest challenge of all is not of technical or economic nature, it is rather organisational and institutional. How is the agri-food industry to be organised and governed in order to provide both the private and public goods demanded? How will it link with other industries in order to address the challenges posed by hunger, poverty, environment, and technology?

In many countries, especially in the developing world, economic activity operates in an institutional environment cluttered with uncertainty, instability, improperly defined property rights, and corruption, and as a result is loaded with transaction costs. While most of primary production – with the exception of the few centrally planned economies - is privately governed, there is a variety of systems of agri-food organisation and governance. At one extreme there exist systems dominated by large corporate farms – although often family owned – coupled with large multinational enterprises both upstream and downstream. At the other extreme a large number of small holders sell to local merchants, who distribute food to local markets, forming a very decentralised spot market system. In between, one can find several systems, with an interesting one being the corporatist Scandinavian system dominated by large cooperatives organised in a tightly knit network that dominates input supply, processing, marketing, exports, research, extension, and even policy formation. Even more intriguing are agricultural systems organised in environments where public governance and even formal governments are absent, such as the livestock trade in Somaliland.

It is important to consider organisation and governance of the agri-food industry when we look at sustainable food systems of the future, in both the so-called “developed” and “developing” worlds. Especially in the latter, the absence of concrete, secure, political and economic institutions creates need for more self-contained structures. It is often required to invent systems that by-pass the existing bottlenecks and vacuums of public administration, public policy, systems of property rights, etc. These “by-pass” systems are often based in ties that are not necessarily economic but rather, ethnic, tribal, religious, or family-based. In all these cases mutual trust and reciprocity glue the network together. A sophisticated system of “carrot and stick”, incentives and punishments have been invented, along with well-maintained implementation mechanisms to make the system deliver private and often public goods, such as the maintenance of the commons or the collective good will and brand name capital.

The pressure on the global agri-food industry to deliver private and public goods sustainably has never been greater and more timely than today. Governments and intergovernmental organisations often do not sufficiently provide the necessary institutional environment for the agri-food industry to deliver and perform. In many situations, agri-food needs to be organised as such that it by-passes, where necessary, the bottlenecks of governments and local nomenclatures. To do this, organisations must rely on collective action by all stakeholders of the agri-food chain, from farmers, to input suppliers, to processors, traders, distributors, and even to consumers, scientists and the civil society. Otherwise agri-food will fail to deliver sustainable food - food that feeds the hungry, generates income for the poor, creates employment and business opportunities to the youth, while maintaining the capacity of the planet to provide for future generations and remain as rich and beautiful as our ancestors have found it for millennia.

Konstantinos Karantininis is Professor of Business Administration at the Swedish University of Agricultural Sciences, Sweden. ​​​​​​​

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