Business Case (Version May 2021)

Business Case

 The Economic Viability of Agroecology

Critics of agroecology often question the economic viability of agroecological farming practices and, by extension, of businesses engaged in the production, distribution, or sales of agroecological produce. They argue that agroecology results in low yields, unquantified costs and risks, and thus lower profits1,2.
Current evidence, however, points to the contrary; agroecological farming is economically viable and can be more profitable than conventional farming practices. Furthermore, agroecological practices can strengthen the resilience of agricultural businesses, fostering long-term, sustainable profitability.

Key Messages

Profitability

Growing evidence suggests that agroecology is profitable - in terms of yields, prices and productivity - and resilient. This objects the widely held notion that agroecological businesses are not lucrative and presents agroecology as an economically viable business option.

Human Capital and Knowledge

While agroecological approaches can lower input costs, they make farming practices more knowledge intensive. Agroecology thus requires investing in human capital. Furthermore, creating an informed costumer base and establishing close links between consumers and producers is key.

Investment

For agroecology to unfold its full potential of improving long-term revenues and strengthening the resilience of agricultural value chains, it needs to be matched by sustainable, long-term investment models that seek to deliver social, economic, and environmental value.

Policy Environment

Agricultural policies need to be transformed to create an enabling policy environment that does not favor intensive food production but provides regulatory incentives and subsidies for sustainable farming practices. Agroecological businesses may benefit from forming strong networks and coalitions to advocate for policy changes and communicate their social, economic and environmental benefits to the broader public.

The Economic Viability of Agroecology

We define economic viability as a state where agricultural businesses are both profitable – considering yields, prices and productivity – and resilient. We use these four dimensions to analyze the economic viability of agroecology: Agricultural yields (mostly measured as agricultural production output per hectare) have been at the center of the agricultural policy debate3,4,5. The value of the agricultural output, as the prices received per unit produces, is key to understand the revenues of an agricultural business. Revenues, in turn, need to be considered in context of the costs of production (e.g. land and labor), to give an idea of the total productivity as the ratio between agricultural input and output. Together, yields, prices and productivity are the key drivers of the profitability of any agricultural business. In addition, agricultural businesses aim to achieve a stable economic viability in the long-term. Long-term profitability highly depends on resilience, which requires a sustainable use of natural resources that form the very basis of agricultural production3,6-8.

An overview of the conceptual framework of the economic viability of agroecology is presented in the graph on the right. To learn more about a specific dimension, click on the pictures below.

Yields

Agroecological farming can result in higher yields in the long term, as compared to conventional farming approaches

Productivity

Agroecology can increase agricultural productivity by reducing external inputs

Prices

Agroecological businesses can benefit from increased prices per unit produced and conseuqently improve the overall revenue of farmers

Resilience

Agroecology fosters resilience to external shocks, such as adverse climatic conditions or volatility in agricultural input prices

Success Factors and Barriers for Upscaling Agroecology

Current evidence shows that agroecology is an economically viable farming system and therefore a worthwhile business option. In the SWOT analysis (Strengths, Opportunities, Weaknesses, Threats) below, we outline several success factors and challenges that might help or hinder agroecological businesses, policy makers and other actors in reaping the economic benefits of agroecology. These reveal possible entry points for actors looking to strengthen the economic viability of their own agroecological initiatives.

Strengths

In the long-term, agroecology is more resilient to climatic shocks, extreme weather events, as well as pests and diseases.

Agroecology supports long-term sustainability as it maintains the natural resource base of agricultural production.

As agroecology is knowledge-intensive, it is important for agroecological businesses to have low staff turnover, for instance by ensuring attractive working conditions.

Realizing price premiums for agroecological produce requires access to well-functioning markets. Sustainable business models can benefit by establishing direct links between consumers and producers, for example via digital solutions.

A solid and loyal costumer basis is key to sustainably increase revenues and profitability.

Weaknesses

Lack of capital at the outset may constrain agroecological business abilities to invest and grow.

In many cases, agroecological business face an uneven playing field as compared to other agricultural businesses. Political incentives for agroecological businesses are often lacking

It takes time for the full yield, productivity, and revenue benefits of agroecology to materialize. Agroecological businesses hence need to establish their planning with a long-term perspective.

Opportunities

An increasing demand for sustainable and healthy produce is a key opportunity for agroecological business, yet the sustainability benefits of agroecology need to be clearly communicated.

Investors seeking to attain social, economic and environmental impacts are one opportunity for agroecological business to establish robust and long-term financing.

Support for agroecology and sustainable food systems is growing in global policy commitments and strategies, such as the Agenda 2030, The Paris Agreement (UNFCCC), and the Biodiversity targets (CBD), which can foster public and policy support for agroecological farming and businesses.

Threats

The access of agroecological business to investment and credits may continue to be constrained if impact investments remain comparatively small, and access to credits is difficult in the absence of suitable collateral.

Although the policy environment is somewhat improving for agroecological businesses, policies are likely to remain unfavorable and put agroecology at a disadvantage.

Existing policies and market structures favor large-scale enterprises, which predominantly practice conventional farming.

1.         Oxfam. Scaling up AE approaches. Igarss 2014 1–5 (2014) doi:10.1007/s13398-014-0173-7.2.

2.         Wezel, A. et al. Challenges and action points to amplify agroecology in Europe. Sustain. 10, 1–12 (2018).

3.         Seufert, V. & Ramankutty, N. Many shades of gray—The context-dependent performance of organic agriculture. Sci. Adv. 3, e1602638 (2017).

4.         FAO. Guiding the Transition To Sustainable Food and Agricultural Systems the 10 Elements of Agroecology. (2016).

5.         Crowder, D. W. & Reganold, J. P. Financial competitiveness of organic agriculture on a global scale. Proc. Natl. Acad. Sci. U. S. A. 112, 7611–7616 (2015).

6.         Garibaldi, L. A. et al. Farming Approaches for Greater Biodiversity, Livelihoods, and Food Security. Trends Ecol. Evol. 32, 68–80 (2017).

7.         D’Annolfo, R., Gemmill-Herren, B., Graeub, B. & Garibaldi, L. A. A review of social and economic performance of agroecology. Int. J. Agric. Sustain. 15, 632–644 (2017).

8.         Chappell, M. J. et al. Agroecology as a Pathway towards Sustainable Food Systems. https://pureportal.coventry.ac.uk/en/publications/agroecology-as-a-pathway-towards-sustainable-food-systems (2018).

9.         Jat, M. L. et al. Conservation agriculture for sustainable intensification in South Asia. Nat. Sustain. 3, 336–343 (2020).

10.       Bennett, E. M., Balvanera, P. & Folke, C. Toward a More Resilient Agriculture. Solut. J. 5, 65–75 (2014).

11.       HLPE. Agroecological and other innovative approaches for sustainable agriculture and food systems that enhance food security and nutrition. A Rep. by High Lev. Panel Expert. Food Secur. Nutr. Comm. World Food Secur. 1–162 (2019).

12.       Corbeels, M., Naudin, K., Whitbread, A. M., Kühne, R. & Letourmy, P. Limits of conservation agriculture to overcome low crop yields in sub-Saharan Africa. Nat. Food 1, 447–454 (2020).

13.       F Leippert, M Darmaun, M Bernoux, M Mpheshea. The potential of agroecology to build climate-resilient livelihoods and food systems. (FAO and Biovision, 2020). doi:10.4060/cb0438en.

14.       Dumont, A. M., Vanloqueren, G., Stassart, P. M. & Baret, P. V. Clarifying the socioeconomic dimensions of agroecology: between principles and practices. Agroecol. Sustain. Food Syst. 40, 24–47 (2016).

15.       Silici, L. Agroecology. What It Is And What It Has To Offer. Int. Inst. Environ. Dev. London 1–27 (2014).

16.       Ponisio, L. C. et al. Diversification practices reduce organic to conventional yield gap. Proc. R. Soc. B Biol. Sci. 282, (2015).

17.       Inkota-netzwerk e. V., A. von M. et al. Strengthening AgroecologySustainability (Switzerland) vol. 10 www.bothends.org (2019).

18.       Siegner, A. B., Acey, C. & Sowerwine, J. Producing urban agroecology in the East Bay: from soil health to community empowerment. Agroecol. Sustain. Food Syst. 44, 566–593 (2020).

19.       Formisano, V., Quattrociocchi, B., Fedele, M. & Calabrese, M. From viability to sustainability: The contribution of the Viable Systems Approach (VSA). Sustain. 10, 1–17 (2018).

20.       United Nations. United Nations General AssemblyInternational Organization vol. 11 (2011).

21.       Grémillet, A. & Fosse, J. Améliorer les performances économiques et environnementales de l’agriculture : les coûts et bénéfices de l’agroécologie. https://www.strategie.gouv.fr/sites/strategie.gouv.fr/files/atoms/files/fs-2020-dt-agroecologie-aout.pdf (2020).

22.       de Molina, M. G. & Guzmán Casado, G. I. Agroecology and ecological intensification. A discussion from a metabolic point of view. Sustain. 9, (2017).

23.       Pawlewicz, A. Change of price premiums trend for organic food products: The example of the polish egg market. Agric. 10, 14–18 (2020).

24.       Röös, E. et al. Risks and opportunities of increasing yields in organic farming. A review. Agronomy for Sustainable Development (2018) doi:10.1007/s13593-018-0489-3.

25.       FAO. Constructing markets for agroecology : an analysis of diverse options for marketing products from agroecology / by Loconto, A., Jimenez, A. & Vandecandelaere, E. (2018).

26.       FAO. Catalysing Dialogue and Cooperation To Scale Up Agroecology. (2018).

27.       Altieri, M. A., Funes-Monzote, F. R. & Petersen, P. Agroecologically efficient agricultural systems for smallholder farmers: Contributions to food sovereignty. Agron. Sustain. Dev. 32, 1–13 (2012).

28.       Isbell, F. et al. Benefits of increasing plant diversity in sustainable agroecosystems. J. Ecol. 105, 871–879 (2017).

29.       Urruty, N., Tailliez-Lefebvre, D. & Huyghe, C. Stability, robustness, vulnerability and resilience of agricultural systems. A review. Agron. Sustain. Dev. 36, 1–15 (2016).

30.       Suen, H. K. Principles of Test Theories. (Routledge, 2012).

Yields

Yields

Agroecological farming can result in higher yields in the long term, as compared to conventional farming approaches

Business Case Expanded

Business Case

 The Economic Viability of Agroecology

Introduction

Critics of Agroecology often question the economic viability of agroecological farming practices, and, by extension, the economic viability of businesses engaged in the production, distribution, or sales of agroecological produce. Their argument is that agroecology results in low yields, unquantified costs and risks, and thus lower profits1,2. Here we show that current evidence points to the contrary; agroecological farming is economically viable and can be more profitable than conventional farming practices. Furthermore, agroecological practices can strengthen the resilience of agricultural businesses, fostering long-term, sustainable profitability.

In the following, we present and discuss the literature and evidence on the economic viability of agroecology, and outline key success factors and barriers for building economically viable agroecological business models.

Agroecological farming is economically viable and can be more profitable than conventional farming practices.

Conceptual Framework on Economic Viability of Agroecology

We define economic viability as a state where agricultural businesses are both profitable (considering yields, prices, and productivity) and resilient (see illustration above). We use these four dimensions to analyze the economic viability of Agroecology. Agricultural yields (mostly measured as agricultural production output per hectare) have been at the centre of the agricultural policy debate3,4. However, yields alone reveal little about the economic viability of agricultural practices or businesses3,5. The value of the agricultural output (i.e. prices received per unit produced) is key to understand the revenues of an agricultural business. Revenues realized, however, also need to be put in context of the costs of production, including land and labour, which emphasizes the need to consider total productivity (the ratio between agricultural output and input). Taken together, yields, prices and productivity are key drivers of the profitability of any agricultural business. Finally, agricultural businesses aim to be economically viable in the long term, not only in the short run. Long-term profitability depends also on resilience, which requires a sustainable use of natural resource that form the very basis of agricultural production, and hence, of agricultural businesses3,6-8.

Review of Evidence on Economic Viability of Agroecology

Yields

“Agroecological farming can result in higher yields in the long term, as compared to conventional farming approaches.

Evidence
Comparative studies on different farming systems show that agroecological farming practices have the potential to sustainably increase yields, though these benefits may only manifest after a certain transition time. For example, a meta-analysis on studies from a diverse set of countries found that yields were 16% greater, on average, for agroecological practices as compared to conventional practices7. Similar findings are shown in meta-analyses on conservation agricultural practices, such as reduced tillage and mulching, which are often used as part of agroecological practices. For example, a large meta-analysis on studies from South Asia showed that conservation agriculture increases yields by 5.8%, on average, though yield gains are even higher in maize and wheat-based farming systems9. When comparing yields in conventional and agroecological systems, a distinction between short-term and long-term differences is important. In conventional farming systems, short-term yield gains can result in long-term yield losses across the agricultural landscape, for example, due to soil degradation or loss of biodiversity. In contrast, agroecological approaches aim to sustainably manage the natural resource base, which can result in higher yield gain over time10,11. Empirical evidence on differences in short-term and long-term yields is provided in a meta-analysis on conservation agriculture in Sub-Saharan Africa, which found that yield advantages in conservation agriculture may be small at first but gradually increase12. Similar findings are shown in a meta-analysis on agroecological practices13, which finds that increased diversity strongly correlates with more stable production and, therefore, long-term and livelihood resilience (see also section “Resilience”). In addition to the time dimension, also the choice of the baseline for comparisons and the metrics chosen to estimateyields, for example, single-crop yields versus more comprehensive metrics for “yield” (such as the land equivalent ratio, LER), are important determinants for the findings.

Success Factors
Key success factors to sustainably increasing yields in agroecological farming is the in ‘depth knowledge of cropping systems and ecology2,3,6,14,15 required to diversify agricultural production (e.g. multiple cropping and crop rotation)16. Therefore, investing in improving and retaining human capital, i.e. the skills, knowledge and experience of employees of agroecological businesses, is critical (see for example, the SEKEM showcase). Long-term commitment and planning horizons together with beneficial work conditions, are hence crucial to optimize agroecological production and sustainably increasing yields.

Barriers
A key challenge is building the kind of detailed in-depth and context specific knowledge and expertise of agricultural practices needed. When these factors are lacking, agroecological approaches cannot compete effectively with conventional farming systems and its ready to use packages of seed, fertilizer, and pesticide. In addition, key stakeholders, including many policymakers and investors, still tend to focus on short-term gains to achieve rapid financial results. The resulting business environment presents significant barriers for agroecological businesses to attract investment and growth8. In Europe, for example, policies have traditionally pushed for agriculture at large scale with a focus on maximizing single crop yields, using more synthetic inputs and requiring more financial investment2,17. These policies are slowly changing by increasingly taking into account social and environmental sustainability17–19.

Prices

Agroecological businesses can benefit from increased prices per unit produced, and hence enhanced gains in overall revenue, if access to well-functioning markets is available.

Evidence
Agroecological practices can fetch higher prices per unit produced when appropriate market linkages are established. Agroecology was found to increase the net-income of smallholder households by 14% in India, by between 26% and 49% in Brazil, and by 49% in Senegal, on average8. The authors attributed these effects to differences in sales prices8. A study from France, using a simulation model, concludes that agroecological farmers have a better medium-term economic results than conventional farms, on average21.

Success Factors
A key success factor to increase revenues in agroecological businesses is access to markets that reward agroecologically produced crops. In price-differentiated markets, sales of agroecological produce can result in higher revenues5,22–24. In this regard, linking producers with consumers is critical, and for larger agroecological businesses, establishing direct marketing channels can facilitate building trust and loyalty among consumers, which can result in price premiums (see EOSTA and the Big Carrots showcases as examples)5,23. Digital solutions can facilitate  the efficient matching of producers, traders and consumers (see for example Premium Hortus’s web and mobile platform)25.

Barriers
When agroecological businesses lack access to premium markets, as is often the case in segmented local markets of middle- and low-income countries, increased prices and revenues are difficult to realize. Furthermore, “agroecology”, unlike “organic”, is not an established (though costly) label that is easily understood by consumers, which may potentially limit access to premium markets. Agroecological businesses face a challenge to create demand for their products by building awareness of agroecological production and by increasing trust in the benefits of agroecological produce. It may take time for agroecological businesses to build interest and trust that results in a loyal customer base, which emphasizes, again, the need to secure long-term investments. Additionally, agroecological businesses can deliver wider economic benefits (e.g. jobs and employment), as well as environmental and social benefits (positive externalities), while conventional practices often come with substantial costs, which are not accounted for in their pricing (negative externalities). Realizing a relative increase of prices per unit sold in Agroecology can be increased when positive externalities are remunerated, and negative externalities accounted for in prices.

Productivity

Agroecology can increase agricultural productivity by reducing agricultural production costs, but these benefits are constrained by structural barriers that favour conventional agriculture practices.

Evidence
Current evidence suggests that agroecology increases agricultural productivity (i.e. the ratio between agricultural production input and output), yet more research is needed to capture context-specific differences and drivers of productivity advantages. Among the few studies to consider the productivity of Agroecology, a three-country study found that smallholder farming households practicing agroecology had higher productivity: 17% in Senegal, 32% in India, and between 26% and 48% in two different regions of Brazil8. The study reports that the main productivity benefits of agroecology are in the reduction of external input use (and their respective costs), which outweighincreased labour costs (that also have positive societal and economic effects). Increased farm profitability (i.e. contrasting total revenues and farm investment) in agroecology is also supported in a meta-analysis, which reports increased profitability associated with agroecological practices in a majority of studies analyzed7. Possibly as a result of these gains, financial reserves of farmers practicing agroecology increased. Likewise, a meta-analysis from South Asia shows that conservation agriculture practices, often used in Agroecology, increased net-returns by between 15.7% (rice) and 33.8% (wheat)9.

Success Factors
Similar to increasing yields in agroecological systems, building human capacity (e.g. skills, knowledge), labour and investing with a long-term perspective are key success factors to sustainably increasing productivity in agroecological and other sustainable farming systems2,3. Building market knowledge, to understand the demand for agroecological produce, can support agricultural businesses to make informed investment and production decisions20. Additionally, as the productivity benefits of Agroecology increase over time, and as an initial investment is needed, there is a need for agroecological businesses to build a solid and long-term capital structure (see for example the showcase on Adapta Sertão).

Barriers
When aiming to assess and increase productivity in Agroecology, a key barrier is the uneven playing field between agroecological and conventional practices. Specifically, in many countries, preferential rules apply for purchasing agricultural inputs, such as machinery, seeds, or fertilizers, which artificially lower the costs of conventionally produced crops as compared to crops from agroecological production. In Agroecology, a big part of the production costs pertains to labour costs, which are rarely subsidized. Hence, agroecology benefits little from regulatory incentives and payments that drive costs down in conventional agriculture. For productivity to further increase in agroecological farming systems, these structural barriers need to be addressed.

Resilience

“Agroecology fosters resilience to external shocks, such as adverse climatic conditions or volatility in agricultural input prices (e.g. fertilizer), making it a viable long-term sustainable strategy for agriculture globally.”

Evidence
To be economically viable in the long-term, any agricultural businesses needs to be resilient to external shocks, including shocks from climatic change. The resilience in agricultural production can be fostered through re-designing agroecological systems through Agroecology4,7,11,26,27. A diverse multi-cropping design, which is a key element of agroecological principles, can serve as a cushion over losses in selected crops, e.g. due to pests and diseases1,8,11,14,17,28. Having a diversity of crops and plants fosters ecosystem services like pollination and natural pest control, which decreases vulnerability to shocks3,6,7,29. Moreover, nutrient recycling in Agroecology can help reducing dependence on external inputs and their volatile prices10,15,25,26. A recent study by FAO, FIBL and Biovision, demonstrated the benefits of agroecology as a resilience strategy13.

Success Factors
Although agroecology enhances resilience, any agricultural business, including agroecological businesses, are to some extent vulnerable to external shocks, yield, and price crashes. However, agroecological businesses can become less vulnerable to external shocks through reduced dependency on external inputs. A key success strategy for agroecological businesses is to build adequate financial capital and other reserves (e.g., including safe grain reserves13) to withstand periods of decreased revenues, while maintaining operations and retaining the investment made in building human capital. A sound capital basis is therefore critical. Agroecology, however, can offer a unique return to risk profile as compared to other investment opportunities, which allows investors to diversify their portfolio and thereby hedge against long-run risks (see showcases on SEKEM and BNP Paribas S.A. for examples).

Barriers
A key challenge is the prevailing policy environment that punishes rather than remunerates investments in the long-term resilience of farming systems. Agroecological businesses can be supported by facilitating access of agricultural enterprises to long-term funding opportunities, and by novel regulatory incentives that focus on long-term gains. However, agroecological businesses, in contrast to many large and well-connected actors in the food system, have limited policy influence to bring about such favourable policy changes.

Success Factors and Barriers

Current evidence shows that agroecology is an economically viable farming system and, hence, business option. We have outlined several success factors and challenges that help or hinder agroecological businesses, policy makers and other actors in reaping the economic benefits of agroecology, which are summarized in the following SWOT (Strength, Opportunities, Weaknesses, Threats) analysis. This reveals possible entry points for actors looking to strengthen the economic viability of their own agroecology initiatives.

Strengths

  • Enhanced resilience
    Agroecology has significant advantages over the long-term through enhanced resilience to shocks, e.g. due to pests and diseases or climatic and weather events.
  • Long-term sustainability
    Agroecology supports long-term sustainability as it maintains the natural resource base of agricultural production.
  • Strong human capital and knowledge
    As Agroecology is knowledge-intensive, it is important for agroecological businesses to have low staff turnover , e.g. by providing attractive working conditions.
  • Integrated markets (e.g. via digital solutions)
    Realizing price premiums for agroecological produce requires access to well-functioning markets. Sustainable business models can benefit by establishing direct links between consumers and producers.
  • Solid customer loyalty and retention
    A solid and loyal costumer basis is key to sustainably increase revenues and profitability.

Weaknesses

  • Inadequate capital to invest and grow
    Lack of capital at the outset may constrain agroecological business abilities to invest and grow.
  • Lack of market power/political economy
    In many cases, agroecological business face an uneven playing field as compared to other agricultural businesses. Political incentives for agroecological businesses are often lacking.
  • Transition period
    It takes time for the full yield, productivity, and revenue benefits of agroecology to materialize. Agroecological business hence need to establish their planning with a long-term perspective.

Opportunities

  • Increased customer demand for sustainable produce
    An increasing demand for sustainable and healthy produce is a key opportunity for agroecological business, yet the sustainability benefits of agroecology need to be clearly communicated.
  • Growing impact investments
    Investors seeking to attain social, economic and environmental impacts are one opportunity for agroecological business to establish robust and long-term financing.
  • Global policy commitments and strategies
    Support for agroecology and sustainable food systems is growing in global policy commitments and strategies, such as the Agenda 2030, The Paris Agreement (UNFCCC), and the Biodiversity targets (CBD), which can foster public and policy support for agroecological farming and businesses.

Threats

  • Limited access to investment and credits
    The access of agroecological business to investment and credits may continue to be constrained if impact investments remain comparatively small, and access to credits is difficult in the absence of suitable collateral.
  • Unfavourable policies
    Though some improvements in the policy environment for agroecological businesses are realistic, policies may remain unfavourable and put agroecology at a disadvantage.

  • Structural bias towards conventional farming
    Existing policies and market structures favour large-scale enterprises, which are predominantly conventional. Addressing this structural bias will provide additional benefits for agroecological businesses.


Key messages / Conclusion

Current evidence suggest that agroecology is profitable (in terms of yields, prices, and productivity) and resilient, and hence an economically viable business option.
Although assessing the economic viability of agroecology and of agroecological businesses will benefit from additional empirical evidence, the current state of knowledge contrasts with the widely held notion that agroecological businesses are not profitable.

Agroecology is an economically viable business strategy with significant advantages over the long-term, which needs to be matched by sustainable, long-term investment models.
Agroecology allows businesses to sustainably improving productivity and revenues beyond the common focus on short-term increases in yields and strengthening the resilience of agricultural value chains. Investing in agroecological businesses hence implies investing with a long-term perspective, which is increasingly well matched by investors seeking to deliver social, economic, and environmental value.

Fostering profitability of agroecological businesses requires investing in human capital and knowledge, integrating markets, and establishing a loyal customer base.
Agroecological businesses have the potential to achieve higher prices per unit produce and lower input costs, which results in increased improved profitability. To reap these benefits, integrating markets by establishing closer links between consumers and producers is key.

Strengthening agroecological businesses will benefit from a conducive policy environment that rewards rather than punishes sustainable farming practices.
In many countries, conventional agricultural systems capture the bulk of regulatory incentives and subsidies. Agricultural policies need to be transformed to further support the economic viability of agroecological businesses. To this end, agroecological businesses may benefit from forming strong networks and coalitions to advocate for policy changes and to communicate their societal, economic, and environmental benefits to the broader public.

References

  1. Oxfam. Scaling up AE approaches. Igarss 2014 1–5 (2014) doi:10.1007/s13398-014-0173-7.2.
  2. Wezel, A. et al. Challenges and action points to amplify agroecology in Europe. Sustain. 10, 1–12 (2018).
  3. Seufert, V. & Ramankutty, N. Many shades of gray—The context-dependent performance of organic agriculture. Sci. Adv. 3, e1602638 (2017).
  4. FAO. Guiding the Transition To Sustainable Food and Agricultural Systems the 10 Elements of Agroecology. (2016).
  5. Crowder, D. W. & Reganold, J. P. Financial competitiveness of organic agriculture on a global scale. Proc. Natl. Acad. Sci. U. S. A. 112, 7611–7616 (2015).
  6. Garibaldi, L. A. et al. Farming Approaches for Greater Biodiversity, Livelihoods, and Food Security. Trends Ecol. Evol. 32, 68–80 (2017).
  7. D’Annolfo, R., Gemmill-Herren, B., Graeub, B. & Garibaldi, L. A. A review of social and economic performance of agroecology. Int. J. Agric. Sustain. 15, 632–644 (2017).
  8. Chappell, M. J. et al. Agroecology as a Pathway towards Sustainable Food Systems. https://pureportal.coventry.ac.uk/en/publications/agroecology-as-a-pathway-towards-sustainable-food-systems (2018).
  9. Jat, M. L. et al. Conservation agriculture for sustainable intensification in South Asia. Nat. Sustain. 3, 336–343 (2020).
  10. Bennett, E. M., Balvanera, P. & Folke, C. Toward a More Resilient Agriculture. Solut. J. 5, 65–75 (2014).
  11. HLPE. Agroecological and other innovative approaches for sustainable agriculture and food systems that enhance food security and nutrition. A Rep. by High Lev. Panel Expert. Food Secur. Nutr. Comm. World Food Secur. 1–162 (2019).
  12. Corbeels, M., Naudin, K., Whitbread, A. M., Kühne, R. & Letourmy, P. Limits of conservation agriculture to overcome low crop yields in sub-Saharan Africa. Nat. Food 1, 447–454 (2020).
  13. F Leippert, M Darmaun, M Bernoux, M Mpheshea. The potential of agroecology to build climate-resilient livelihoods and food systems. (FAO and Biovision, 2020). doi:10.4060/cb0438en.
  14. Dumont, A. M., Vanloqueren, G., Stassart, P. M. & Baret, P. V. Clarifying the socioeconomic dimensions of agroecology: between principles and practices. Agroecol. Sustain. Food Syst. 40, 24–47 (2016).
  15. Silici, L. Agroecology. What It Is And What It Has To Offer. Int. Inst. Environ. Dev. London 1–27 (2014).
  16. Ponisio, L. C. et al. Diversification practices reduce organic to conventional yield gap. Proc. R. Soc. B Biol. Sci. 282, (2015).
  17. Inkota-netzwerk e. V., A. von M. et al. Strengthening Agroecology. Sustainability (Switzerland) vol. 10 www.bothends.org (2019).
  18. Siegner, A. B., Acey, C. & Sowerwine, J. Producing urban agroecology in the East Bay: from soil health to community empowerment. Agroecol. Sustain. Food Syst. 44, 566–593 (2020).
  19. Formisano, V., Quattrociocchi, B., Fedele, M. & Calabrese, M. From viability to sustainability: The contribution of the Viable Systems Approach (VSA). Sustain. 10, 1–17 (2018).
  20. United Nations. United Nations General Assembly. International Organization vol. 11 (2011).
  21. Grémillet, A. & Fosse, J. Améliorer les performances économiques et environnementales de l’agriculture : les coûts et bénéfices de l’agroécologie. https://www.strategie.gouv.fr/sites/strategie.gouv.fr/files/atoms/files/fs-2020-dt-agroecologie-aout.pdf (2020).
  22. de Molina, M. G. & Guzmán Casado, G. I. Agroecology and ecological intensification. A discussion from a metabolic point of view. Sustain. 9, (2017).
  23. Pawlewicz, A. Change of price premiums trend for organic food products: The example of the polish egg market. Agric. 10, 14–18 (2020).
  24. Röös, E. et al. Risks and opportunities of increasing yields in organic farming. A review. Agronomy for Sustainable Development (2018) doi:10.1007/s13593-018-0489-3.
  25. FAO. Constructing markets for agroecology : an analysis of diverse options for marketing products from agroecology / by Loconto, A., Jimenez, A. & Vandecandelaere, E. (2018).
  26. FAO. Catalysing Dialogue and Cooperation To Scale Up Agroecology. (2018).
  27. Altieri, M. A., Funes-Monzote, F. R. & Petersen, P. Agroecologically efficient agricultural systems for smallholder farmers: Contributions to food sovereignty. Agron. Sustain. Dev. 32, 1–13 (2012).
  28. Isbell, F. et al. Benefits of increasing plant diversity in sustainable agroecosystems. J. Ecol. 105, 871–879 (2017).
  29. Urruty, N., Tailliez-Lefebvre, D. & Huyghe, C. Stability, robustness, vulnerability and resilience of agricultural systems. A review. Agron. Sustain. Dev. 36, 1–15 (2016).
  30. Suen, H. K. Principles of Test Theories. (Routledge, 2012).

Business Case (Version 2020)

Business Case

 The Economic Viability of Agroecology

Introduction

Critics of Agroecology often question the economic viability of agroecological farming practices, and, by extension, the economic viability of businesses engaged in the production, distribution, or sales of agroecological produce. Their argument is that agroecology results in low yields, unquantified costs and risks, and thus lower profits1,2. Here we show that current evidence points to the contrary; agroecological farming is economically viable and can be more profitable than conventional farming practices. Furthermore, agroecological practices can strengthen the resilience of agricultural businesses, fostering long-term, sustainable profitability.

In the following, we present and discuss the literature and evidence on the economic viability of agroecology, and outline key success factors and barriers for building economically viable agroecological business models.

Agroecological farming is economically viable and can be more profitable than conventional farming practices.

Conceptual Framework on Economic Viability of Agroecology

We define economic viability as a state where agricultural businesses are both profitable (considering yields, prices, and productivity) and resilient (see illustration above). We use these four dimensions to analyze the economic viability of Agroecology. Agricultural yields (mostly measured as agricultural production output per hectare) have been at the centre of the agricultural policy debate3,4. However, yields alone reveal little about the economic viability of agricultural practices or businesses3,5. The value of the agricultural output (i.e. prices received per unit produced) is key to understand the revenues of an agricultural business. Revenues realized, however, also need to be put in context of the costs of production, including land and labour, which emphasizes the need to consider total productivity (the ratio between agricultural output and input). Taken together, yields, prices and productivity are key drivers of the profitability of any agricultural business. Finally, agricultural businesses aim to be economically viable in the long term, not only in the short run. Long-term profitability depends also on resilience, which requires a sustainable use of natural resource that form the very basis of agricultural production, and hence, of agricultural businesses3,6-8.

Review of Evidence on Economic Viability of Agroecology

Evidence
Comparative studies on different farming systems show that agroecological farming practices have the potential to sustainably increase yields, though these benefits may only manifest after a certain transition time. For example, a meta-analysis on studies from a diverse set of countries found that yields were 16% greater, on average, for agroecological practices as compared to conventional practices7. Similar findings are shown in meta-analyses on conservation agricultural practices, such as reduced tillage and mulching, which are often used as part of agroecological practices. For example, a large meta-analysis on studies from South Asia showed that conservation agriculture increases yields by 5.8%, on average, though yield gains are even higher in maize and wheat-based farming systems9. When comparing yields in conventional and agroecological systems, a distinction between short-term and long-term differences is important. In conventional farming systems, short-term yield gains can result in long-term yield losses across the agricultural landscape, for example, due to soil degradation or loss of biodiversity. In contrast, agroecological approaches aim to sustainably manage the natural resource base, which can result in higher yield gain over time10,11. Empirical evidence on differences in short-term and long-term yields is provided in a meta-analysis on conservation agriculture in Sub-Saharan Africa, which found that yield advantages in conservation agriculture may be small at first but gradually increase12. Similar findings are shown in a meta-analysis on agroecological practices13, which finds that increased diversity strongly correlates with more stable production and, therefore, long-term and livelihood resilience (see also section “Resilience”). In addition to the time dimension, also the choice of the baseline for comparisons and the metrics chosen to estimateyields, for example, single-crop yields versus more comprehensive metrics for “yield” (such as the land equivalent ratio, LER), are important determinants for the findings.

Success Factors
Key success factors to sustainably increasing yields in agroecological farming is the in ‘depth knowledge of cropping systems and ecology2,3,6,14,15 required to diversify agricultural production (e.g. multiple cropping and crop rotation)16. Therefore, investing in improving and retaining human capital, i.e. the skills, knowledge and experience of employees of agroecological businesses, is critical (see for example, the SEKEM showcase). Long-term commitment and planning horizons together with beneficial work conditions, are hence crucial to optimize agroecological production and sustainably increasing yields.

Barriers
A key challenge is building the kind of detailed in-depth and context specific knowledge and expertise of agricultural practices needed. When these factors are lacking, agroecological approaches cannot compete effectively with conventional farming systems and its ready to use packages of seed, fertilizer, and pesticide. In addition, key stakeholders, including many policymakers and investors, still tend to focus on short-term gains to achieve rapid financial results. The resulting business environment presents significant barriers for agroecological businesses to attract investment and growth8. In Europe, for example, policies have traditionally pushed for agriculture at large scale with a focus on maximizing single crop yields, using more synthetic inputs and requiring more financial investment2,17. These policies are slowly changing by increasingly taking into account social and environmental sustainability17–19.

Evidence
Agroecological practices can fetch higher prices per unit produced when appropriate market linkages are established. Agroecology was found to increase the net-income of smallholder households by 14% in India, by between 26% and 49% in Brazil, and by 49% in Senegal, on average8. The authors attributed these effects to differences in sales prices8. A study from France, using a simulation model, concludes that agroecological farmers have a better medium-term economic results than conventional farms, on average21.

Success Factors
A key success factor to increase revenues in agroecological businesses is access to markets that reward agroecologically produced crops. In price-differentiated markets, sales of agroecological produce can result in higher revenues5,22–24. In this regard, linking producers with consumers is critical, and for larger agroecological businesses, establishing direct marketing channels can facilitate building trust and loyalty among consumers, which can result in price premiums (see EOSTA and the Big Carrots showcases as examples)5,23. Digital solutions can facilitate  the efficient matching of producers, traders and consumers (see for example Premium Hortus’s web and mobile platform)25.

Barriers
When agroecological businesses lack access to premium markets, as is often the case in segmented local markets of middle- and low-income countries, increased prices and revenues are difficult to realize. Furthermore, “agroecology”, unlike “organic”, is not an established (though costly) label that is easily understood by consumers, which may potentially limit access to premium markets. Agroecological businesses face a challenge to create demand for their products by building awareness of agroecological production and by increasing trust in the benefits of agroecological produce. It may take time for agroecological businesses to build interest and trust that results in a loyal customer base, which emphasizes, again, the need to secure long-term investments. Additionally, agroecological businesses can deliver wider economic benefits (e.g. jobs and employment), as well as environmental and social benefits (positive externalities), while conventional practices often come with substantial costs, which are not accounted for in their pricing (negative externalities). Realizing a relative increase of prices per unit sold in Agroecology can be increased when positive externalities are remunerated, and negative externalities accounted for in prices.

Evidence
Current evidence suggests that agroecology increases agricultural productivity (i.e. the ratio between agricultural production input and output), yet more research is needed to capture context-specific differences and drivers of productivity advantages. Among the few studies to consider the productivity of Agroecology, a three-country study found that smallholder farming households practicing agroecology had higher productivity: 17% in Senegal, 32% in India, and between 26% and 48% in two different regions of Brazil8. The study reports that the main productivity benefits of agroecology are in the reduction of external input use (and their respective costs), which outweighincreased labour costs (that also have positive societal and economic effects). Increased farm profitability (i.e. contrasting total revenues and farm investment) in agroecology is also supported in a meta-analysis, which reports increased profitability associated with agroecological practices in a majority of studies analyzed7. Possibly as a result of these gains, financial reserves of farmers practicing agroecology increased. Likewise, a meta-analysis from South Asia shows that conservation agriculture practices, often used in Agroecology, increased net-returns by between 15.7% (rice) and 33.8% (wheat)9.

Success Factors
Similar to increasing yields in agroecological systems, building human capacity (e.g. skills, knowledge), labour and investing with a long-term perspective are key success factors to sustainably increasing productivity in agroecological and other sustainable farming systems2,3. Building market knowledge, to understand the demand for agroecological produce, can support agricultural businesses to make informed investment and production decisions20. Additionally, as the productivity benefits of Agroecology increase over time, and as an initial investment is needed, there is a need for agroecological businesses to build a solid and long-term capital structure (see for example the showcase on Adapta Sertão).

Barriers
When aiming to assess and increase productivity in Agroecology, a key barrier is the uneven playing field between agroecological and conventional practices. Specifically, in many countries, preferential rules apply for purchasing agricultural inputs, such as machinery, seeds, or fertilizers, which artificially lower the costs of conventionally produced crops as compared to crops from agroecological production. In Agroecology, a big part of the production costs pertains to labour costs, which are rarely subsidized. Hence, agroecology benefits little from regulatory incentives and payments that drive costs down in conventional agriculture. For productivity to further increase in agroecological farming systems, these structural barriers need to be addressed.

Evidence
To be economically viable in the long-term, any agricultural businesses needs to be resilient to external shocks, including shocks from climatic change. The resilience in agricultural production can be fostered through re-designing agroecological systems through Agroecology4,7,11,26,27. A diverse multi-cropping design, which is a key element of agroecological principles, can serve as a cushion over losses in selected crops, e.g. due to pests and diseases1,8,11,14,17,28. Having a diversity of crops and plants fosters ecosystem services like pollination and natural pest control, which decreases vulnerability to shocks3,6,7,29. Moreover, nutrient recycling in Agroecology can help reducing dependence on external inputs and their volatile prices10,15,25,26. A recent study by FAO, FIBL and Biovision, demonstrated the benefits of agroecology as a resilience strategy13.

Success Factors
Although agroecology enhances resilience, any agricultural business, including agroecological businesses, are to some extent vulnerable to external shocks, yield, and price crashes. However, agroecological businesses can become less vulnerable to external shocks through reduced dependency on external inputs. A key success strategy for agroecological businesses is to build adequate financial capital and other reserves (e.g., including safe grain reserves13) to withstand periods of decreased revenues, while maintaining operations and retaining the investment made in building human capital. A sound capital basis is therefore critical. Agroecology, however, can offer a unique return to risk profile as compared to other investment opportunities, which allows investors to diversify their portfolio and thereby hedge against long-run risks (see showcases on SEKEM and BNP Paribas S.A. for examples).

Barriers
A key challenge is the prevailing policy environment that punishes rather than remunerates investments in the long-term resilience of farming systems. Agroecological businesses can be supported by facilitating access of agricultural enterprises to long-term funding opportunities, and by novel regulatory incentives that focus on long-term gains. However, agroecological businesses, in contrast to many large and well-connected actors in the food system, have limited policy influence to bring about such favourable policy changes.

Success Factors and Barriers

Current evidence shows that agroecology is an economically viable farming system and, hence, business option. We have outlined several success factors and challenges that help or hinder agroecological businesses, policy makers and other actors in reaping the economic benefits of agroecology, which are summarized in the following SWOT (Strength, Opportunities, Weaknesses, Threats) analysis. This reveals possible entry points for actors looking to strengthen the economic viability of their own agroecology initiatives.

Strengths

Agroecology has significant advantages over the long-term through enhanced resilience to shocks, e.g. due to pests and diseases or climatic and weather events.

Agroecology supports long-term sustainability as it maintains the natural resource base of agricultural production.

As Agroecology is knowledge-intensive, it is important for agroecological businesses to have low staff turnover , e.g. by providing attractive working conditions.

Realizing price premiums for agroecological produce requires access to well-functioning markets. Sustainable business models can benefit by establishing direct links between consumers and producers.

A solid and loyal costumer basis is key to sustainably increase revenues and profitability.

Weaknesses

Lack of capital at the outset may constrain agroecological business abilities to invest and grow.

In many cases, agroecological business face an uneven playing field as compared to other agricultural businesses. Political incentives for agroecological businesses are often lacking.

It takes time for the full yield, productivity, and revenue benefits of agroecology to materialize. Agroecological business hence need to establish their planning with a long-term perspective.

Opportunities

An increasing demand for sustainable and healthy produce is a key opportunity for agroecological business, yet the sustainability benefits of agroecology need to be clearly communicated.

Investors seeking to attain social, economic and environmental impacts are one opportunity for agroecological business to establish robust and long-term financing.

Support for agroecology and sustainable food systems is growing in global policy commitments and strategies, such as the Agenda 2030, The Paris Agreement (UNFCCC), and the Biodiversity targets (CBD), which can foster public and policy support for agroecological farming and businesses.

Threats

The access of agroecological business to investment and credits may continue to be constrained if impact investments remain comparatively small, and access to credits is difficult in the absence of suitable collateral.

Though some improvements in the policy environment for agroecological businesses are realistic, policies may remain unfavourable and put agroecology at a disadvantage.

Existing policies and market structures favour large-scale enterprises, which are predominantly conventional. Addressing this structural bias will provide additional benefits for agroecological businesses.


Key messages / Conclusion

Although assessing the economic viability of agroecology and of agroecological businesses will benefit from additional empirical evidence, the current state of knowledge contrasts with the widely held notion that agroecological businesses are not profitable.

Agroecology allows businesses to sustainably improving productivity and revenues beyond the common focus on short-term increases in yields and strengthening the resilience of agricultural value chains. Investing in agroecological businesses hence implies investing with a long-term perspective, which is increasingly well matched by investors seeking to deliver social, economic, and environmental value.

Agroecological businesses have the potential to achieve higher prices per unit produce and lower input costs, which results in improved profitability. To reap these benefits, integrating markets by establishing closer links between consumers and producers is key.

In many countries, conventional agricultural systems capture the bulk of regulatory incentives and subsidies. Agricultural policies need to be transformed to further support the economic viability of agroecological businesses. To this end, agroecological businesses may benefit from forming strong networks and coalitions to advocate for policy changes and to communicate their societal, economic, and environmental benefits to the broader public.

1.         Oxfam. Scaling up AE approaches. Igarss 2014 1–5 (2014) doi:10.1007/s13398-014-0173-7.2.

2.         Wezel, A. et al. Challenges and action points to amplify agroecology in Europe. Sustain. 10, 1–12 (2018).

3.         Seufert, V. & Ramankutty, N. Many shades of gray—The context-dependent performance of organic agriculture. Sci. Adv. 3, e1602638 (2017).

4.         FAO. Guiding the Transition To Sustainable Food and Agricultural Systems the 10 Elements of Agroecology. (2016).

5.         Crowder, D. W. & Reganold, J. P. Financial competitiveness of organic agriculture on a global scale. Proc. Natl. Acad. Sci. U. S. A. 112, 7611–7616 (2015).

6.         Garibaldi, L. A. et al. Farming Approaches for Greater Biodiversity, Livelihoods, and Food Security. Trends Ecol. Evol. 32, 68–80 (2017).

7.         D’Annolfo, R., Gemmill-Herren, B., Graeub, B. & Garibaldi, L. A. A review of social and economic performance of agroecology. Int. J. Agric. Sustain. 15, 632–644 (2017).

8.         Chappell, M. J. et al. Agroecology as a Pathway towards Sustainable Food Systems. https://pureportal.coventry.ac.uk/en/publications/agroecology-as-a-pathway-towards-sustainable-food-systems (2018).

9.         Jat, M. L. et al. Conservation agriculture for sustainable intensification in South Asia. Nat. Sustain. 3, 336–343 (2020).

10.       Bennett, E. M., Balvanera, P. & Folke, C. Toward a More Resilient Agriculture. Solut. J. 5, 65–75 (2014).

11.       HLPE. Agroecological and other innovative approaches for sustainable agriculture and food systems that enhance food security and nutrition. A Rep. by High Lev. Panel Expert. Food Secur. Nutr. Comm. World Food Secur. 1–162 (2019).

12.       Corbeels, M., Naudin, K., Whitbread, A. M., Kühne, R. & Letourmy, P. Limits of conservation agriculture to overcome low crop yields in sub-Saharan Africa. Nat. Food 1, 447–454 (2020).

13.       F Leippert, M Darmaun, M Bernoux, M Mpheshea. The potential of agroecology to build climate-resilient livelihoods and food systems. (FAO and Biovision, 2020). doi:10.4060/cb0438en.

14.       Dumont, A. M., Vanloqueren, G., Stassart, P. M. & Baret, P. V. Clarifying the socioeconomic dimensions of agroecology: between principles and practices. Agroecol. Sustain. Food Syst. 40, 24–47 (2016).

15.       Silici, L. Agroecology. What It Is And What It Has To Offer. Int. Inst. Environ. Dev. London 1–27 (2014).

16.       Ponisio, L. C. et al. Diversification practices reduce organic to conventional yield gap. Proc. R. Soc. B Biol. Sci. 282, (2015).

17.       Inkota-netzwerk e. V., A. von M. et al. Strengthening Agroecology. Sustainability (Switzerland) vol. 10 www.bothends.org (2019).

18.       Siegner, A. B., Acey, C. & Sowerwine, J. Producing urban agroecology in the East Bay: from soil health to community empowerment. Agroecol. Sustain. Food Syst. 44, 566–593 (2020).

19.       Formisano, V., Quattrociocchi, B., Fedele, M. & Calabrese, M. From viability to sustainability: The contribution of the Viable Systems Approach (VSA). Sustain. 10, 1–17 (2018).

20.       United Nations. United Nations General Assembly. International Organization vol. 11 (2011).

21.       Grémillet, A. & Fosse, J. Améliorer les performances économiques et environnementales de l’agriculture : les coûts et bénéfices de l’agroécologie. https://www.strategie.gouv.fr/sites/strategie.gouv.fr/files/atoms/files/fs-2020-dt-agroecologie-aout.pdf (2020).

22.       de Molina, M. G. & Guzmán Casado, G. I. Agroecology and ecological intensification. A discussion from a metabolic point of view. Sustain. 9, (2017).

23.       Pawlewicz, A. Change of price premiums trend for organic food products: The example of the polish egg market. Agric. 10, 14–18 (2020).

24.       Röös, E. et al. Risks and opportunities of increasing yields in organic farming. A review. Agronomy for Sustainable Development (2018) doi:10.1007/s13593-018-0489-3.

25.       FAO. Constructing markets for agroecology : an analysis of diverse options for marketing products from agroecology / by Loconto, A., Jimenez, A. & Vandecandelaere, E. (2018).

26.       FAO. Catalysing Dialogue and Cooperation To Scale Up Agroecology. (2018).

27.       Altieri, M. A., Funes-Monzote, F. R. & Petersen, P. Agroecologically efficient agricultural systems for smallholder farmers: Contributions to food sovereignty. Agron. Sustain. Dev. 32, 1–13 (2012).

28.       Isbell, F. et al. Benefits of increasing plant diversity in sustainable agroecosystems. J. Ecol. 105, 871–879 (2017).

29.       Urruty, N., Tailliez-Lefebvre, D. & Huyghe, C. Stability, robustness, vulnerability and resilience of agricultural systems. A review. Agron. Sustain. Dev. 36, 1–15 (2016).

30.       Suen, H. K. Principles of Test Theories. (Routledge, 2012).

Business Case (old)

Business Case

 Private Sector engagement in Agroecology

Have you ever wondered why and how private sector businesses could make a contribution to achieve the SDG's and the development of agroecology?

This section firstly summarizes the importance of agroecological businesses for transforming food systems. Secondly, the pre-existing literature as well as the created business showcases were used to provide a general view on where agroecological businesses are staying at the moment and what the future could potentially offer. Afterwards 5 key takeaways were elaborated. Subsequently, flipboxes provide the reader with answers to questions regarding agro-ecological farming methods and businesses following and operating in harmony with agroecological principles. Thereafter, the advantages for agroecological farmers are compared to their disadvantages. Lastly, the references provide a wide selection of agroecological literature. 

As food has become commodified and seen as an object of economic value, it is nowadays exchanged in a global market driven system. Most large corporations operating in the agriculture sector are rooted in the centralization of financial and political power in a system based on a globalized, industrialized and neoliberal food system driven by shareholder profits. Accordingly, they favor large-scale monocultures to make use of economies of scale, which often heavily depend on large amounts of chemical fertilizers and pesticides. Moreover, there is heavy emphasis on a few crops that overwhelmingly end up as animal feed, biofuels, and processed junk food ingredients. Nevertheless, there are businesses, mostly those smaller in scale that operate on the local and regional level, that are resisting the pressure of the profit based economy by including the social and environmental dimensions to their goals and values. Although these businesses operate within a larger system with a different set of values, they build the capacity for transformative social and environmental change and alter the perception and understanding of the value in local food production. As a result, a diversity of tactics operating across multiple scales (local, regional, national and global) is required in order to shift away from the conventional agriculture as a norm to agroecology as a more regenerative form of agriculture.   (https://www.researchgate.net/post/What_are_the_barriers_to_the_adoption_of_restorative_more_ecological_farming_practices_in_agriculture)
 

Private sector businesses keen to measure results based on clear indicators aligned with the Sustainable Development Goals (SDGs) are crucial to achieve an enabling environment for an agroecological transformation of the food system.

Besides being one of the most important driver of economic growth and job creation in developing countries, dynamic and diverse businesses in the private sector lead to improved incomes, widen the domestic tax base, and can contribute significantly to improving food security. 

Building and supporting favorable policy frameworks supported by governments is key to create an enabling environment for agroecological businesses. There are already existing  forward-thinking and innovative businesses who look beyond the production and distribution of seeds and bio-fertilizers.

The compilation of successful agroecological business showcases demonstrates private sector businesses that promote agroecological practices that help to maintain and strengthen biodiversity and ecosystem services, strengthen the capacity for adaptation to climate change, and empower small-scale food producers while still being economically viable.  (https://www.worldfuturecouncil.org/p/opa-2019/)

 

Considering the pre-existing literature as well as numerous succesful business showcases, some commonalities among business were identified. Consequently, an analysis was conducted to provide a general view on where agroecological businesses are staying at the moment and what the future could potentially offer:

Success Factors

One effective method to reduce financial risks applied by many businesses is through education. Private sector businesses, independent of their size, realized that educating farmers, entrepreneurs and employees about how to adapt to climate change and extreme weather events is essential for their long-term economic survival. Furthermore, informing these stakeholders about possible financial, social and environmental consequences of their actions has been identified as a crucial sensitization measure. In addition, farmers and entrepreneurs are briefed about the possibility of a diversified service/product offer in order to avoid having “all eggs in one basket”. Besides that, education of consumers, both formal and informal, is central for promoting agroecology. Consumers are key stakeholders inside the food system as their food choices strongly influence agroecological production. It is essential to sensitize people about the multiple benefits agroecology has to offer and how it can contribute to make our agriculture and food system more sustainable and fair.

The digital transformation does not only benefit large multinationals but does also facilitate the work conducted by small local agroecological businesses and consumers in developing countries. Technological innovations (such as XY) have rapidly developed and spread in developing countries supporting the work of small scale producers and simplifying the online purchase of products by consumers. developing countries’ production and processing and in selling and purchasing, scalability is further facilitated. Thanks to digital media an increase in awareness level and an expansion of co-creation of knowledge is facilitated which accelerates economic growth.

Many of the successful private sector businesses benefit from the implementation of a short food value chain (FVC). These short-chain sales offer a real advantage for smaller businesses to create added value and profitability and thus make their enterprises economically sustainable. Furthermore, the short FVC’s facilitates the establishment of a circular and solidarity economy, which brings about many social and environmental benefits. Moreover, the advantages for consumers are obvious as they get fresh and high-quality products to their tables and are in direct contact with the producers. This not only stimulates interest but also educates people on the value of the product. Short value chain initiatives have the potential of creating jobs and growth and consequently wealth, particularly in rural areas. The challenge for agroecological businesses is therefore to empower other operators to create local food systems based on local governance.

As expressed by Rose Cohen, Executive Director of Community Agroecology Network (CAN), the goal is to “create a ‘supply network’ rather than a supply chain; one in which the players know about each other rather than a chain where one end doesn’t know the other.” (https://www.theguardian.com/sustainable-business/agroecology-gaining-policy-support-food-shortage)

For operators retaining longer value chains, the use of quality labels (protected geographical indication, protected designation of origin, traditional specialty guaranteed etc.) is necessary in order to provide identification and enhance value, making it easier for consumers to choose the appropriate product/service.

According to FAO a sustainable FVC consists of all the stakeholders who participate in the coordinated production and value-adding activities that are needed to make food products and has to be:

  • profitable throughout all of its stages (economic sustainability);
  • provide broad-based benefits for society (social sustainability);
  • offer a positive or neutral impact on the natural environment (environmental sustainability)

(http://www.fao.org/sustainable-food-value-chains/what-is-it/en/)

The Sustainable Food Value Chain framework according to FAO 

The shorter value chain is often achieved by including a strong support for local stakeholders as well as a local economic development that creates virtuous cycles. This re‑localization implicate jobs and local dynamism, with strong commitment on the part of farmers who are bringing it about. In addition, it is often enriched by its local history and the human relations involved and stimulates interest and educates people about food and the value of products. Many agroecological businesses have a high initial demand for labor and can be more labor intense in general. This can be a serious constraint when manual labor cannot be substituted by mechanized labor. In situations where mechanization is possible, the investment required can also be a hurdle. However, if the provided work conditions are decent, this can also be an opportunity for job creation. (In: Agroecology as a means to achieve the Sustainable Development Goals)

It has been empirically analyzed whether organic farming may present opportunities for job creation over and above those provided by conventional agriculture. The results indicate that a greater proportion of hired labor on organic farms worked more compared to the average industrial farm, suggesting increased labor requirements and potentially more secure employment on organic farms. (Does organic farming present greater opportunities for employment and community development than conventional farming? A survey-based investigation in California and Washington).

A further benefit is that agroecological businesses offers the possibility to recruit vulnerable groups including youth and women for the newly created jobs, thus, helping them to become less dependent. Globally, millions of new jobs will need to be created to meet the aspirations of rural youth. Agroecological businesses provide a promising solution as a source of decent rural employment, one that offers a choice and alternative to urban or international migration. (Scaling up agroecology to achieve the sustainable development goals)

Although private sector businesses have to be profitable in order to be economically viable, many of our analyzed companies (section showcases) return some of their profits, produce or some kind of commitment to their customers, farmers, employees or to society in general. This dedication to social responsibility is understood to be mutually beneficial; the company gets good publicity for their commitment to and support of respective stakeholders, while funding goes to the people and places that need it most. Although these commitments generate additional value for the beneficiary, they can also be abused by the company for greenwashing purposes (for more information see “Threats, Risk of greenwashing”). Nevertheless, some businesses feel a stronger intrinsic motivation to commit themselves to corporate philanthropy and distribute funds among social and environmental dimensions instead of distributing them along the value chain among several intermediaries.

Society is demanding that companies, both public and private, serve a social and environmental purpose. To prosper over time, every company must not only deliver financial performance but also show how it generates a positive contribution to society and the natural environment. Although there are many tools available, based on a range of indicators, for assessing the sustainability of agricultural systems on conventional farm holdings, these methods are little suitable to agroecological farms and do not measure the performance of agroecological transition farms. (https://www.researchgate.net/publication/283493246_How_to_measure_the_agroecological_performance_of_farming_in_order_to_assist_with_the_transition_process

Because the basic idea behind agroecology is to employ ecological principles, it is logical to evaluate success based on how closely the behavior of the agrecosystem mimics natural systems. Nature is thus the best measure of success. To evaluate the social, economic and environmental sustainability of a given agricultural system, there is a need for appropriate indicators to evaluate agroecosystem health. Factors such as biodiversity, soil structure and biology, crop life history, nutrient cycling and landscape-level processes all must be evaluated as intrinsic to the agroecosystem. (New Dimensions in Agroecology)

Nowadays, companies must satisfy many of their stakeholders’ demands, including the ones from shareholders, employees, customers, and the communities in which they operate. While many profit-oriented companies have to engage in new partnerships or establish new work streams in order to keep up with the rising expectations, the private sector businesses following agroecological principles benefit from a well-established network and an already socially and environmentally sustainable business model.

Private sector companies keen to develop or increase their strategy in regards of Corporate Social Responsibility (CSR) often lack the required knowledge in the practical implementation and the therefrom derived consequences. Agroecological farming, however, is very knowledge intensive starting from the creation of nutritious humus, complementary bio-diversification, optimal crop rotation to long-term resilience generation. Studies show that the level of education on household level is positively associated with adoption level of agroecological practices. (David R. Lee (2005). Agricultural Sustainability and Technology Adoption: Issues and Policies for Developing Countries, American Journal of Agricultural Economics, Vol. 87, No. 5, pp. 1325-1334)
Agroecological businesses obviously benefit from a sound knowledge base in the field of alternative agriculture methods (e.g. sustainable or organic agriculture, agroforestry, agroecology etc.) even if they do not farm themselves directly. As experts in their specific fields, they can collaborate with other private sector actors and serve as consultants in the field of agroecology as well as for the derived social and environmental consequences.

The analyzed agroecological businesses share the same attitude and willingness to improve the status quo. In the face of peak oil, climate change, water scarcity and the social, public health and environmental costs of industrial and green revolution farming, some entrepreneurs realized that business as usual is no longer an option. According to Michel Pimbert, professor and executive director of the Centre for Agroecology, Water and Resilience at Coventry University, large corporations will not invest in agroecological innovations, as patents are a feature of industrial food and farming. (https://www.theguardian.com/sustainable-business/agroecology-gaining-policy-support-food-shortage) Consequently, instead of believing that changes will happen automatically, the businesses operating in the field of agroecology take the initiative to induce the desired alteration, necessary to create an enabling environment for their business and the derived environmental and socioeconomic consequences. Moreover, they realized the long-term necessity of healthy soils and biodiversity for a sustainable food system and therefore conserve natural resources for their development.

Barriers

Although more and more companies are interested in applying or working with agroecological principles, it is still a new business area without a long success story. Philanthropic foundations, impact investors, multilateral development banks and bilateral donors are increasingly interested in investing in transformative food systems that meet multiple SDGs. Nevertheless, nowadays only a few projects in the field of agroecology are sufficiently structured and organized to be fully “investor-ready”. The companies often lack access to resources such as trained specialists (e.g. experts in marketing, finance, etc.) and a reliable network of partners and supporting organizations. Besides that, investments in agroecological companies or projects are typically under-invested as, by today’s standards, they do not fit conventional risk-return profiles.

The inherent complexity of agroecological businesses means such investments have a limited track record in the area of sustainable investing, despite the fact that investments in agroecology by definition comply with, and even exceed environmental, social and governance (ESG) criteria. Liquidity and investment horizon uncertainties, moderate and slow returns, and a relatively high perception of risk and therefore risk tolerance are barriers to scaling up agroecological businesses.

Overall, the gap between the multitude of projects with a positive impact on ending poverty and other deprivations, improved health and education, reduced inequality, tackling climate change and working to preserve the oceans and forests that cannot be financed and the huge amount of capital available to global investors, is called funding gap. According to the United Nations Environment Programme (UNEP), the funding gap amounts to USD 5000-7000 billion (half in developing countries only) in financing needed to achieve the SDGs in 2030.

Although the sustainable business model might generate sufficient profits to survive, the generated funds might not be sufficient to expand or scale-up the current business. The procurement of additional money can be a big obstacle (as already mentioned in the point investment gap) and involve undesired changes, especially for small-scale businesses. On the one hand, debt financing (e.g. through loan, mortgage, leasing or factoring) is usually hard to get for inexperienced businesses and implicate high interest payments. However, most countries have tax systems that favor debt financing over equity financing, hence, leveraging the businesses comes with the benefit of tax deduction.

On the other hand, the acquisition of equity capital depends on the businesses’ country of residence, infrastructure, resources and business plan, and can therefore be equally complicated. Furthermore, external equity often involves an abandoning or split of decision power, which usually amounts up to a significant minority stake (< 49% of total share). However, most often the equity provider requires the inclusion of control or veto-rights, which empowers the equity provider to drag-along the rest of the business owner and force it to comply with his decision, even if it means liquidating the company. Nevertheless, the sustainable business could profit from the equity providers network and their management and consultant support.

Besides the large investment gap, one of the first and most obvious problem of why agroecological principles are not more widely adopted by farmers/businesses, is that the field of research and development is profoundly underfunded.

Researchers evaluated to what extent agroecology was supported by the research funding from the US Department of Agriculture’s (USDA) 2014 Research, Extension, and Economics (REE) budget. They found that public investments in agroecology research and development were limited in the USA with only roughly 10% of the total REE budget going to projects that contained any of the 5 Gliessman levels of agroecology. (DeLonge, Miles, and Carlisle (2016), Transforming food systems with agroecology)

Furthermore various publications propose that the current structure of funding at the USDA and other institutions is one of several key factors holding agricultural research back from tackling more ambitious sustainability and equity goals (McIntyre 2009; Levidow, Pimbert, and Vanloqueren 2014; Sanderson Bellamy and Ioris 2017). (Triggering a positive research and policy feedback cycle to support a transition to agroecology and sustainable food systems.)

Apart from that, a report based on a survey of 176 qualified experts with academic or professional experience in the field of sustainable agriculture, reveals that many scientists face difficulties in communicating their research findings outside of academic circles.
https://www.ucsusa.org/resources/opportunities-obstacles-and-needs-surrounding-public-support-agroecology

Nevertheless, a study on barriers to organic conversion conducted in Switzerland found that attitudes towards the concept of organic production are often formed on the basis of quickly-formed impressions rather than considered deliberation.

This shows that even if researches are clearly underfunded, dialogues between conventional and organic farmers should be encouraged in order to counteract feelings of ‘us versus them’ and to highlight the economic, social and environmental benefits of agroecology.

http://ifsa.boku.ac.at/cms/fileadmin/IFSA2016/IFSA2016_WS33_Home.pdf

From the beginning stages of field analysis to the final stages of food production, today’s entire agribusiness value chain is covered by some of the largest companies in the industry. Enormous companies such as Cargill, Nestle, ConAgra, or Archer Daniels Midland control very large shares of the international markets for grains, fertilizers, pesticides and seeds and therefore dominate the world’s food system.

Although the system is already very complex, investment firms such as hedge funds realized the potential to increase their turnover and rapidly created a global market for agricultural land, bringing other powerful actors into the food system. Because of the agribusiness companies immense size is terms of revenues, employees and sphere of influence, these companies started to squeeze out small farmers, promote industrial agriculture and create an unsustainable system of production and distribution.

As some of these companies started to acquire or merge with other large agribusiness players, their balance of power increases to a point where their activities and decisions even shape government food policies. 
As a result, a handful of agribusiness companies’ executives have the force to influence essential agricultural decisions, as it will become harder for governments to decline their requests for policy changes that will most probably further increase the expansion of agribusiness and industrial monocultures.

(Bringing agroecology to scale: key drivers and emblematic cases)

Many of the analyzed private sector businesses scored rather low in the criteria responsible governance (Gliessman Level 5) on the policy level. In order to highlight the benefits of alternative farming methods, private sector companies should further support and strengthen science-policy interfaces. Only a few of the analyzed companies are actively working on the integration of agroecology in climate change policy process or payments for ecosystem services in form of regulation or subsidies.

However, in order to spread and scale up agroecology and its positive effect on people, animal and environment a change on policy level is necessary. Policymaker can enable the required pre-conditions for farmers and entrepreneurs and shape the foundation for agroecology businesses’ sustainable development and growth rate. However, this task constitutes an even bigger challenge for regional small-scale businesses, especially the ones with unfavorable pre-conditions.

Opportunities

Private sector companies are trying to build on consumers’ increased sensitivity by transparently marketing the positive health and environmental benefits of their products. Issues of inequality and justice figure centrally here, as any transformation would have to address income inequality and access to healthy food. For the private sector, expansion has come through greater consumer awareness and interest in health and environmental issues, thus creating market demand.

According to a survey conducted by Accenture including 6000 consumers in 11 countries across North America, Europe and Asia, consumers remain primarily focused on quality and price. However, 83% of the participants believe it is important or extremely important for companies to design products that are meant to be reused or recycled. Nearly three-quarters (72%) of respondents said they’re currently buying more environmentally friendly products than they were five years ago, and 81% said they expect to buy more over the next five years.

Moreover, the 2019 U.S. Consumer Sustainability Survey undertaken by Computer generated solutions (CGS), found that more than two-thirds of Americans consider sustainability when making a purchase and are willing to pay more for sustainable products. Gen Z shoppers led the way, with 68% having made an eco-friendly purchase in the past year.

Jessica Long, a managing director in Accenture Strategy, described the change in consumer demand and purchase behavior as follows: “The shift in consumer buying, with more consumers willing to pay extra for environmentally friendly products, reinforces the need for companies to increase their commitments to responsible business practices. Companies across industries have started to lead with purpose, including embracing the circular economy as a greater opportunity to drive growth and competitive agility.”

Although agroecology as a scientific discipline is not prescriptive and does not provide recipes or technical packages, it is inspiring more and more people worldwide in a quest to find alternative production methods for a sustainable agriculture without agro-chemicals. The scientific evidence clearly highlights the positive social, environmental and economic benefits of agroecology if adopted correctly. Scientists also agreed that agroecology has the potential to be scaled up, confirming that experts in the field see the transformative potential of sustainable agriculture practices. (https://www.ucsusa.org/resources/opportunities-obstacles-and-needs-surrounding-public-support-agroecology)

For a wide selection of scientific evidence see: “References” at the bottom of this webpage.

Nowadays the public is about to realize and accept the consequences of the cheap prices and the “hidden costs”. An example for “hidden costs” is the use of petroleum-based fertilizer and pesticides to the effects of soil degradation, water pollution, climate change, and the obesity epidemic. By applying True Cost Accounting, businesses do not only look at the usual financial values within a company, but also calculates the impacts on natural and social capital. The impacts on the natural and social environment in which the company operates are purposely calculated in monetary terms, so that the amounts can be incorporated in the True Cost books (Bookkeeping). These “hidden costs” of production, which were externalized in the traditional accounting systems, are therefore made visible and internalized. The UN Food and Agriculture Organization estimates that the hidden annual environmental cost of world food production totals USD 2.1 trillion, while the hidden social costs are estimated to be even higher, at USD 2.7 trillion. (https://www.natureandmore.com/en/true-cost-of-food/what-are-the-true-costs-of-food)

Philanthropic investments or charities often did not solve the tackled problems on a longterm basis as local entrepreneurs often did not receive the money to implement the desired changes directly. Impact investing wants to jump start a successful and profitable business which can work independently and which solves social and environmental problems not only uniquely but on a continuous basis.

Impact investing refers to investments made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. 

Consequently, these investments provide capital to address social and/or environmental issues. Impact investing is growing with some significant investors getting involved and setting up their own impact investment funds, and yet the sector is still at its infancy. Overall, it is estimated that over 1,340 organizations currently manage USD 502 billion in impact investing assets worldwide: (https://thegiin.org/assets/Sizing%20the%20Impact%20Investing%20Market_webfile.pdf)

Catalytic first-loss capital has gained recent prominence in impact investing dialogues as more investors look to enter the market. Catalytic first-loss capital refers to socially- and environmentally-driven credit enhancement provided by an investor or grant-maker who agrees to bear first losses in an investment in order to catalyze the participation of co-investors that otherwise would not have entered the deal.

Blended finance is the strategic use of development finance for the mobilization of additional finance towards sustainable development in developing countries. In contrast to impact investing, which is an investment approach, blended finance is an approach to structure a transaction that brings in multiple type of investors (ex. Government agency, private equity investor and impact investor) which all invest together while achieving their individual objectives. It thereby creates a market of larger volumes of commercial capital and helps to direct private and commercial investment towards underserved areas, aiming at both, generating tangible development impact and financial returns.

Threats

The determination whether a company is “Agroecological” as defined by Gliessmann is not a simple binary analysis but rather the continuum of a transition, especially with the inclusion of the socio-economical levels (Gliessmann Level 4-5). Furthermore, the absentee of a clear definition of agroecology and similar alternative agriculture methods does not facilitate the determination and classification process. Nevertheless, companies’ and projects’ agroecological efforts can be measured with the help of different tools such as the Agroecology Criteria Tool (ACT).

As stakeholders of private sector businesses demand them to contribute to sustainable social and environmental dimensions to a greater extend, the potential for exploitation increases. Although some private sector companies might understand the principles and goals of alternative farming methods, it can be argued that most companies only have a superficial awareness level of the SDG’s and agroecology. Private sector businesses could comply with stakeholders’ demand and capitalize on the growing demand for environmentally sound products by including some of the environmental, social and governance (ESG) criteria, which are vaguely described and defined.

This is when greenwashing, which is a process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound, can be applied. In fact, greenwashing is considered an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly.

As a result, businesses can take advantage of the general ambiguity, greenwash their activities and then present themselves as sustainable companies although they might still be active in unsustainable projects or produce unsustainable products.

In order to survive on the market, even socially and environmentally sustainable businesses have to generate revenues and be profitable. If businesses cannot generate sufficient income because they are unable to meet or cannot pay their financial obligations, they enter a situation called financial distress. Mostly financial distress occurs because of too high fixed costs, illiquid assets, or revenues sensitive to economic downturns. If entrepreneurs do not manage that properly and ignore the signs of financial distress, it can be devastating for their business. There may come a time when severe financial distress cannot be remedied because the companies’ obligations are too high and cannot be paid. If so, bankruptcy might be the only option. (https://www.investopedia.com/terms/f/financial_distress.asp)

In order to avoid that, businesses have to cut costs which mostly means reducing the payroll costs by discharging employees or shortcutting the supply chain by omitting longer and expensive but also important stages, such as a proper quality management. As sustainable companies should put an equal priority on the social, environmental and economic results, the first two could be neglected because of the pressure to deliver sufficient financial results.

However, these businesses should avoid putting their social and environmental engagement as well as their possible unique selling proposition (USP) at risk only to generate short-term profits. Instead, businesses should seek other financial opportunities or help such as additional subsidies, fixed income capital, private equity capital or donations.

In case a sustainable business attracts the attention of larger non-sustainable companies, the smaller company is at risk of being acquired through the financially more powerful company. The reason for such an acquisition can range from the expectation of future profits through the acquiring company, plans of an expansion in another market/region, an undervaluation of the acquired company, a direct removal of a possible competitor, an acquisition of a sustainable company in order to greenwash the acquiring company and so on.

The acquisition of agroecological companies can be a major obstacle for scaling up agroecology as the power and influence of multinational pesticide, seed and chemical corporations over public policy, research, extension and markets is directly blocking agroecology, or attempting to co-opt it. Agroecology jeopardizes the revenues of pesticide and GMO seed manufacturers and distributors and might even fundamentally undermine their corporate power over food and farming systems. Hence, the more visible and widespread agroecology becomes, the bigger the agribusiness industry’s backlash will be and the more peasant farmers and rural communities who are practicing agroecology have to be protected from oppression. (http://www.panna.org/press-statement/agro-industry-influence-key-barrier-agroecology)

Although the possible lucrative compensation could convince the owners of the sustainable company to sell the business, the founder should ensure that the initial purpose of the agroecological business is kept alive. This can be done by either staying in the company even if acquired or by ensuring that the new managers follow the same goals and values. Otherwise, the company is at risk of losing its social and environmental dimensions.

To encourage businesses and farmers to adopt agroecological principles, fundamental changes are needed in agricultural development policies and institutions. Regulatory policy interventions can address the barriers faced by agroecological businesses of several types and are critical to address regulatory failures. Policy interventions can reach from awareness raising, setting-up collaboration platforms, creating agroecological business support schemes or favorable general fiscal frameworks. Where the barrier is that of inadequately defined legal frameworks, new or adapted product, waste, industry, consumer, competition and trade regulations may be needed. These could come in the form of restrictions on, or requirements relating to, existing activities. (EllenMacArthurFoundation_PolicymakerToolkit p.66-74)

Overall, there is a need to enhance the recognition among key decision makers of agroecology and its benefits in achieving sustainable agricultural and food systems. However, if they are not convinced of these benefits, it is unlikely that they will create the enabling institutional environment that is needed for agroecological businesses.

Besides that, public policies are ineffective and inefficient when their concept is not economically viable. Thus, the introduced agroecological policies should be guided by a business minded approach focusing on developing the agroecological sector as a well‐functioning competitive industry. (policy_toolkit_main_report p. 43)

5 Key takeaways from business showcases and pre-existing literature

  • Not only the non-profit sector is engaging in the area of agroecology but also profit-oriented private-sector businesses. Some of these forward-looking agroecological businesses lead the way to a transformation of the food system and demonstrate that even profit oriented businesses have the possibility to include social and evironmental dimensions in their business model.

  • While it is possible for small local businesses to be active on all levels of the ACT on a small scale (ex. farmer active in local community/village), it becomes more difficult to reach an identical score after expanding and upscaling their business model because it takes many resources to fulfill all levels of the ACT on a wider scale. Therefore, most medium or large companies are better off focusing on a “niche product” and specializing on their specific agroecological expertise. Nonetheless, there are exceptions such as SEKEM which scores outstandingly in all the criteria of the ACT after becoming more than a profit oriented business only, by being widely active in all social, environmental and economic aspects.
  • Even agroecological businesses which are by themselves not active in the cultivation are important as they help other stakeholders in the food value chain to realize and execute their agroecological ideas. This is where the collaboration between different actors of the food value chain becomes vital. By focusing on their specific task and strengths, they complement each other and enable a sustainable agroecological environment for all parties involved. The picture illustrates the overall ACT score if the two businesses Canopy Bridge, an intermediary (blue), and Mesula Meru Sustainable Land Ltd., a social enterprise (orange) would cooperate.
  • There are many barriers to the adoption of restorative, more ecological farming practices in agriculture as well as possible future threats which are hindering the transformation of the current food system. Nevertheless, there clearly are sufficient positive factors indicating a paradigm shift in the food system and supporting the spread of agroecological practices for businesses which raises hope for favorable future developments.

  •  Although the foundation for successfull agroecological businesses has to be set up by policymakers, these businesses often only have limited influence on policymaker’s decisions. Collaborations between agroecological businesses of different scales might help to be more active and convincing in the field of responsible governance such as integrating agroecology in climate change policy processes or the promotion of biodiversity-friendly agricultural regulations and subsidies.


Agroecological business education

These flipboxes provide the reader with answers to questions regarding agroecological farming methods as well as questions towards businesses following and operating in harmony with agroecological principles.

 

Conventional agriculture yield

What are the % changes in yield projections with conventional agriculture and climate change consequences?

The intergovernmental panel on climate change projected impacts to vary across crops and regions and adaptation scenarios, with about 10% of projections for the period 2030–2049 showing yield gains of more than 10%, and about 10% of projections showing yield losses of more than 25%, compared to the late 20th century. Overall, all aspects of food security are potentially affected by climate change, including food access, utilization, and price stability (high confidence). Global temperature increases of ~4°C or more above late-20th-century levels, combined with increasing food demand, would pose large risks to food security globally and regionally (high confidence). IPCC_summary for policymaker p.17-18

Yield gap

Why should entrepreneurs adopt alternative agriculture techniques if yields are lower compared to conventional agriculture?

The general assumption is that agriculture that is less harmful to people and wildlife directly will be indirectly more harmful because of yield losses that lead to food shortages in the short-term and agricultural extensification in the long-term.(https://www.mdpi.com/2071-1050/8/11/1118) However, a research article published in 2015 found that the yield gap between organic and conventional yields is smaller then thought after using a large meta-dataset. https://royalsocietypublishing.org/doi/full/10.1098/rspb.2014.1396 However, even the claim that yields are lower for agroecological projects is disproved by De Schutter's influential report which cites a study of 286 agroecological projects, which found that yields increased by 79% on average. https://www.theguardian.com/sustainable-business/agroecology-gaining-policy-support-food-shortage. It is essential to remember that at the end of the day, yield is an oversimplified success criterion and becomes largely irrelevant as economic parameter as profitability determines how much money the business generated, which in return determines a business's survival. https://www.mdpi.com/2071-1050/8/11/1118 Furthermore, today’s problems with hunger and obesity seem to have less to do with production method than a productionist culture, hence, yield increases do not appear to be a solution to the existence of hunger and micronutrient deficiencies, and yield increases in staple crops like corn and wheat certainly seem unlikely to solve problems of overconsumption like obesity.

Proven track-record of profitability

Is agroecology economically competitive with conventional agriculture?

It intuitively makes sense to assume that profitability is negatively influenced by external inputs. As agroecological systems economize on the use of external inputs, it seems reasonable to assume that from that perspective, agroecological businesses should be more profitable. Besides that, farmers pointed out in interviews that a cash-flow problem was standard during monoculture chemical farming because income was only earned when the monoculture was harvested, while expenses for saplings, seeds, chemicals, fertilizers, labor, etc. were incurred throughout the year. This resulted in a constant need for loans to cover expenses. Taking agroecology to scale the Zero Budget Natural Farming peasant movement in Karnataka India Various studies analyzed the financial performance of alternative agriculture methods (ex. agroecology) and conventional agriculture. They often concluded that agroecological farming methods are significantly more profitable than conventional agriculture and that it has room to expand globally. The higher profitability of alternative farms was mainly due to minor technological and supporting requirements and to greater market appreciation for organic products that granted a premium price respect to conventional prices. Moreover, greater profitability of alternative farming and the use of environmentally friendly inputs in production process make agroecological farms competitive and eco-friendly. https://www.pnas.org/content/112/24/7611 + A review of social and economic performance of agroecology + Development of the Concept of Agroecology in Europe: A Review + Economic and Financial Comparison between Organic and Conventional Farming in Sicilian Lemon Orchards + https://www.sciencedirect.com/science/article/abs/pii/S0743016718314608

Change in the balance of power

How would a general mind shift from conventional agriculture to agroecology affect the absolute market share in the agribusiness industry ?

The difference with industrial agriculture is that there is no one-size-fits-all approach to agroecological systems. Efforts to scale-up must be equally localized in design, but this doesn't necessarily mean they have to be small-scale or restricted to local markets. Even though agroecological farming nowadays is very location-specific, there is no reason why the establishment of large-scale agroecological farms would be unfeasible. Nevertheless, compared to the status quo, there would be a larger number of small-scale businesses and service providers focusing on agroecological principles instead of having the whole market share concentrated among a few giant corporations. Until that change in mind has been realized, the challenge for sustainable businesses in the area of agroecology is to find and penetrate the right niche market and to stabilize a part of the market share.

Private vs. public & non-profit sector

How and why are private sector businesses investing in agroecological principles different from NGO's, NPO's or philantrophic initiatives?

While NGO’s, NPO's or philanthropic initiatives are mainly funded by continuous money from donors, prizemoney or subsidies, agroecological entrepreneurs in the private sector can mostly not rely on these sources of income. Although they are advocating for a healthier and more sustainable environment and better socio-economic conditions, it is essential for the businesses' survival to generate a profit. In order to be economically viable and ensure a long-term survival or even growth, the company have to either reinvest their generated profit or use it to build up reserves for tough times. 

The presented showcases of private sector entrepreneurs seem to have found suitably balanced business models which do not only focus on either the economic, social or environmental part but integrate an appropriate composition of all three aspect.

ACT score

Why do some business showcases do not score any points in the Agroecology Criteria Tool (ACT) Level 1-3?

Private sector companies can work in completely different industries and countries, often started their engagement from different environmental, social and economic pre-conditions, vary in sizes in terms of financial power, network and area of influence and can follow diverse objectives. Intermediaries such as Canopy Bridge or grocery stores such as The Big Carrot do not directly operate in the cultivation by themselves. Consequently, they scored 0% in Gliessman’s Level 1-3. However, as they collaborate with different stakeholders (farmers, suppliers, consumers, scientific communities, governments etc.), their work contributes to and facilitates the implementation of agroecological principles. As their strengths lie in their specific domain as intermediary, investor or service provider and they therefore score well on the specific ACT Levels, they help other stakeholders in the food value chain to realize and execute their agroecological idea. This is where the collaboration between different actors of the food value chain becomes vital. By focusing on their specific task and strengths, they complement each other and enable a sustainable agroecological environment for all parties involved. 

Amplification of agroecology

Why are agroecological principles not adopted more widely by farmers/businesses?

Agroecology has a proven track-record of market growth and profitability (Crowder and Reganold 2015; Willer and Lernoud 2016), the ability to reduce ecological externalities from agriculture (Bommarco, Kleijn, and Potts 2013; Kremen and Miles 2012), conserve biological diversity (Kremen 2015;Perfecto and Vandermeer 2008), reduce public health risks (Reganold and Wachter 2016), maintain near parity in productivity (Ponisio and Ehrlich 2016; Ponisio et al. 2015), and advance climate change adaptation and mitigation (Altieri et al. 2015) and food system resiliency and food security over the long term (Hoy 2015, Schipanski et al. 2016). Triggering a positive research and policy feedback cycle to support a transition to agroecology and sustainable food systems. Nonetheless, there are a number of constraints that discourage the adoption and dissemination of agroecological practices thus impeding its widespread adoption. While some of these obstacles are exemplified in the barrier section above, a long list of suggestions ranging from creating an enabling environment, providing the right incentives to farmers, creating special markets, fund more research and education on agroecology can be found in the literature (Giraldo and Rosset 2017) Pathways for the amplification of agroecology. In order to further spread agroecology among businesses, it is essential to overcome a part or all of these constraints.

Support from policymaker 1/2

Why are interventions by policymaker crucial in order to create an environment that helps agroecological businesses to thrive?

The fundamental objective of politics is to provide public goods such as sustainability by collective action which cannot be achieved by individual citizens. Political agroecology goes beyond a specific proposal for a program because it is an approach for studying socioecological change in political terms. Without a profound change in the institutional framework in force it will not be possible for successful agroecological businesses to be founded and to grow and for the ecological crisis in the field to be combated effectively. Although changes on crop or farm level can be conducted on an individual levels, changes concerning the state and the world require political actions. Agroecology and Politics How To Get Sustainability About the Necessity for a Political Agroecology Overall, researchers agree that public policies can play a significant role as they can stimulate the adoption of innovative farming practices. Development of the Concept of Agroecology in Europe: A Review (Garini, Vanwindekens, Scholberg,Wezel and Groot [104])

Support from policymaker 2/2

Which measures can be implemented by policymaker to achieve a favorable environment?

A typical programme includes the devaluation of the exchange rate, increase in taxation, reduction in government expenditure, restructuring of foreign debt, elimination of subsidies, decreasing of wages, restriction of domestic credit and government financing through the market instead of through the Central Bank. According to the International Food Policy Research Institute (IFPRI), the three major types of macro-policy instruments that influence agriculture are trade and exchange rate policies, public expenditure and taxation. Macroeconomic Policies and Agricultural Development in Developing Countries: Lessons from Emerging Economies. Moreover, researchers identified four important groups of policy interventions that can synergistically transition our food system to a more sustainable one: (i) specifically supporting transformative systems through a combination of push, pull and enabling measures, while improving their performance; (ii) stimulating the pull effect of an increasing market demand for sustainable products; (iii) incentivizing incremental improvements in mainstream agriculture and food systems with regard to combined sustainability objectives; and (iv) raising legal requirements and industry norms in order to rule out particularly unsustainable practices. Sustainability in global agriculture driven by organic farming (Paper von Frank) Despite the overall importance given to the development of public policies in support of agroecology, the limited experience in this realm suggests that no one single policy is key, rather it seems that combinations of complementary policies are needed to incentivize the spread of agroecological initiatives (Giraldo 2018). Pathways for the amplification of agroecology.

Some best praxis policymaker interactions

Examples of public policies introduced by policymaker to support alternative agriculture and agroecological businesses.

After the break-up of the Soviet Union, Cuba lost 70% of agrochemical and fuel imports and 50% of livestock feed imports which they were not able to produce themselves at that time. In order become more independent and change the agricultural situation, scientists and farmers demanded public policies in the farming, education, and market sectors to strengthen agroecology. Examples include programs to promote biological control, urban agriculture, organic matter recycling, participatory plant breeding, backyard livestock, changes in the school curricula, acquisition of agricultural products by the government, and new stages of land reform policies that provide peasant access to unproductive land (Machín Sosa et al. 2010, 2013). Bringing agroecology to scale: key drivers and emblematic cases.
One of the most effective policy promoting agroecology has been public food procurement programs, such as Brazil’s National School Feeding Program (PNAE). The introduced national programs privilege local family farmers and offer up to 30 percent higher prices for agroecological farmers to supply school meal plans (Nehring and McKay 2014).
In India, the Community Managed Sustainable Agriculture program in the state of Andhra Pradesh, launched a scale-out plan to transition 6 million farms/farmers cultivating 8 million hectares of land from conventional synthetic chemical agriculture to alternative farming (ZBNF) by 2024, making Andhra Pradesh India’s first 100 per cent natural farming state. https://www.unenvironment.org/news-and-stories/press-release/andhra-pradesh-become-indias-first-zero-budget-natural-farming-state

Advantages and disadvantages of Agroecology for Farmers

According to Investopedia a business is defined as “an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or non-profit organizations that operate to fulfill a charitable mission or further a social cause.” In addition to that, an entrepreneur “is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards”.

Considering these definitions, it would be crucial to know whether a farmer which sets up a farm, in which they invest capital or engage in financial risk does that with the intention that their farm will generate back more funds than initially invested.
Farmers would typically own or manage a farm with the purpose of producing fruits and vegetables through growing plants on the farmland, raising livestocks to produce commodities such as meat, eggs, milk, fur, honey, leather, and wool as well as producing other goods through growing plants on the farmland. Consequently, a farmer setting up a farm, can then be said to be setting up a business. If the farmer is exposed to financial risk through the purchase of land, investing into property, plants and equipment has financial risk through investing into crops and/or livestock for future sale, then this farmer would by definition be an entrepreneur running a business.

As a result, it seems reasonable to argue that the majority of farmers are entrepreneurs operating a business. Therefore, it makes sense to compare the advantages and disadvantages of agroecology compared to conventional agriculture:

Agroecology vs. Conventional Agriculture

To learn more about agroecological businesses and their environment:

Business/Farm level:

Policy level:

Policymaker toolkits:
 

SEKEM INITIATIVE

Category:


Location/Scale:

Egypt (International)

Founder:

Dr. Ibrahim Abouleish

Period:

1997 – now

In a nutshell

The SEKEM Initiative was founded as a comprehensive development initiative to address some of the most pressing issues affecting Egypt. SEKEM started on a 70-hectare plot of desert land and became the first entity to develop biodynamic farming methods in Egypt.

The SEKEM vision entails a holistic approach focusing on sustainable, organic agriculture to restore and maintain the vitality of the soil and food as well as fostering biodiversity. Furthermore, it supports social and cultural development in Egypt by enabling and promoting knowledge transfer, education and conscious consumption. Over the years, SEKEM has broadened its scope and became the umbrella of a multifaceted agro-industrial group of companies and NGOs. Their holding structure is formed by three closely interrelated entities.

Firstly, the SEKEM Holding Company is composed of eight companies and multiple project-based initiatives, each responsible for SEKEM’s economic and ecological value proposition.

Secondly, the Egyptian SEKEM Development Foundation (SDF) which includes a medical center, a school open to pupils from any religious or ethnic background, a school and vocational training center, a nursery, the Mahad Adult Education Training Institute, the SEKEM Academy for Applied Art and Sciences and the Heliopolis University for Sustainable Development, all responsible for cultural aspects.

Lastly, the Cooperative of SEKEM Employees (CSE), responsible for human resource development, women empowerment, gender equality and the association of partnerships.

Context

In Egypt, agriculture involves 40% of the workforce and remains the least developed sector of the Egyptian economy. Cost of agricultural production has increased while the resource base has shrunk. Today, Egypt has become one of the world’s largest importers of food. Farmers in Egypt face a vast number of problems, such as water-scarcity, over-reliance on chemical inputs and low productivity. Although the total cultivated area is 3 million hectares, representing only 3 percent of the total land area, the government aims at increasing this number to 4.8 million hectares by 2030 through additional land reclamation.

Objective

SEKEM was found to realize the vision of sustainable human development and to tackle poverty, unemployment, food security, water and energy challenges and gender inequality in Egypt. SEKEM’s main objective is the development of the individual, society and environment through a holistic concept, which integrates economic, societal and cultural life.

Key Interventions

Farm Level:

  • SEKEM created jobs and employs today 2,000 people which are paid a fair salary
  • There is a network of more than 3,000 farmers who produce for the SEKEM group
  • Trained 477 farmers on biodynamic agriculture methods and registered them under the Egyptian Biodynamic Association (EBDA)

Regional/National Level:

  • Reclaimed 684 hectares of desert land, all of those 100% operated by biodynamic and sustainable agriculture methods
  • Since 2000, 978 students have graduated from SEKEM’s Vocational Training Centre
  • Contributed to the huge reduction of chemical fertiliser and pesticide use of 90% in Egypt’s cotton industry, while boosting yields by up by 30%
  • Planted 600,000 trees and sequestered 500,000,000 tonnes of CO2 through these trees and the soil enhancement
  • Offer free courses for illiterate employees, grant employees access to treatment in health centres and reduce fees on children’s education at SEKEM schools

Lessons Learned/challenges

Due to successful partnerships with banks and donors, SEKEM can realize essential parts of its sustainable development vision. Since May 2007, the German GLS Gemeinschaftsbank AG, the Dutch Triodos Ventures BV and since 2011, Oikocredit Ecumenical Development Cooperative are shareholders of the SEKEM Holding and support the finance department for future investments.

Nonetheless, additional public funds are required to finance financial and technical support to further facilitate knowledge transfer, trainings and the introduction of new technologies in the field of irrigation and renewable energy production. During the coming years, SEKEM will work on increasing the number of small farmers willing to transform their lands from conventional to biodynamic agriculture.

Relevant Links & references

PREMIUM HORTUS

Category:


Location/Scale:

Benin (National)

Founder:

Johannes Goudjanou and colleagues

Period:

2012 – now

In a nutshell

Premium Hortus is the first African greentech company for scaling up agroecology and sustainable development in West Africa. They are specialized in the e-commerce of agroecological products, organic production and producer support in Benin. Available as a web and mobile platform, Premium Hortus allows consumers (households, restaurants and hotels) to subscribe and choose from more than 60 varieties of organic certified products.

Produced in short food supply chains, the products are delivered to the costumers’ destination of choice. In addition, Premium Hortus provides farmers with education programmes that inform them about the latest innovations. They further provide workshops and trainings for companies, which range from drafting business plans to product introductions and the evaluation of their activities. This education programme is meant to train new ‘agroecologists’ who apply various methods of agroecology and access new markets.

Besides the benefits of increased agroecological production, waste is limited and otherwise recycled for organic composting, biogas, and the cosmetic industry. Premium Hortus is also collaborating with other companies and actors aiming at organizing summits and seminars on food security, agroecology and improved access to the markets. Due to the success of Premium Hortus in Benin, they started an expansion phase to Morocco, Togo and Cameroon.

Context

While Benin ranks among the poorest countries on earth, more than a third of Benin’s citizens live below the poverty threshold. Although Benin has had a rapid increase in its urban population, a third of the country’s families remain affected by food insecurity, while 16% of children are malnourished.

Overall, more than two-third of the population is working in the agricultural sector. Large quantities of fertilizer and chemical inputs are used and the distribution system remains obsolete, lacking modern technology. Consequently, the country suffers from significant water and soil pollution, biodiversity loss, low productivity as well as increased vulnerability to climate change and price volatility.

Objective

Premium Hortus’ main goal is to develop and promote agroecology and sustainable food by embedding local knowledge and combining it with modern information and communication technologies as well as business management skills. Premium Hortus can act as a role model for the promotion of agroecology and green innovation in Africa while fighting against climate change. Moreover, they lobby for the promotion of a circular and inclusive economy and create short circuits that benefit producers and consumers.

Key Interventions

Farm Level:

  • Trained over 400 green entrepreneurs and small farmers in business management with technical support in agroecology and access to markets
  • Provide certified natural bio-pesticides made from local plants to over 400 producers

Regional/National Level:

  • Helped to preserve the soil, water, biodiversity and health of more than 400,000 African households and reduced about 47% of greenhouse gases out of a total 1,681 kg/ha/year emitted by conventional agriculture
  • By creating an online selling platform, Premium Hortus supports marketing of the farmers’ products while simultaneously providing fast and secure online payments through QR Codes and Cryptocurrencies
  • Providing a credit assurance system (CALIM+) to customers, to support them during financially difficult times
  • Reducing waste through recycling and food donations/transfers through the platform

Lessons Learned/challenges

Premium Hortus provides access to more than 700 urban households subscribing to agroecological products. As a whole, their business model creates at least 500 jobs/year in rural farms of which 70% are carried out by women and young people. While farmers profit from lower production costs, increased revenues and improved living conditions, subscribers reduced their food waste by 60%.

As e-commerce has become an important topic nowadays, their digital business model possesses a big market potential, without noticeably increasing their fix costs. Nonetheless, a large scale-up might be difficult because of fierce competitors offering similar services and which know how to maintain marketplaces in profitable business sectors.

Relevant Links & references

Evidence
Comparative studies on different farming systems show that agroecological farming practices have the potential to sustainably increase yields, though these benefits may only manifest after a certain transition time. For example, a meta-analysis on studies from a diverse set of countries found that yields were 16% greater, on average, for agroecological practices as compared to conventional practices7. Similar findings are shown in meta-analyses on conservation agricultural practices, such as reduced tillage and mulching, which are often used as part of agroecological practices. For example, a large meta-analysis on studies from South Asia showed that conservation agriculture increases yields by 5.8%, on average, though yield gains are even higher in maize and wheat-based farming systems9. When comparing yields in conventional and agroecological systems, a distinction between short-term and long-term differences is important. In conventional farming systems, short-term yield gains can result in long-term yield losses across the agricultural landscape, for example, due to soil degradation or loss of biodiversity. In contrast, agroecological approaches aim to sustainably manage the natural resource base, which can result in higher yield gain over time10,11. Empirical evidence on differences in short-term and long-term yields is provided in a meta-analysis on conservation agriculture in Sub-Saharan Africa, which found that yield advantages in conservation agriculture may be small at first but gradually increase12. Similar findings are shown in a meta-analysis on agroecological practices13, which finds that increased diversity strongly correlates with more stable production and, therefore, long-term and livelihood resilience (see also section “Resilience”). In addition to the time dimension, also the choice of the baseline for comparisons and the metrics chosen to estimate yields, for example, single-crop yields versus more comprehensive metrics for “yield” (such as the land equivalent ratio, LER), are important determinants for the findings.

Success Factors
Key success factors to sustainably increasing yields in agroecological farming is the in ‘depth knowledge of cropping systems and ecology 2,3,6,14,15 required to diversify agricultural production (e.g. multiple cropping and crop rotation)16. Therefore, investing in improving and retaining human capital, i.e. the skills, knowledge and experience of employees of agroecological businesses, is critical (see for example, the SEKEM showcase). Long-term commitment and planning horizons together with beneficial work conditions, are hence crucial to optimize agroecological production and sustainably increasing yields.

Barriers
A key challenge is building the kind of detailed in-depth and context specific knowledge and expertise of agricultural practices needed. When these factors are lacking, agroecological approaches cannot compete effectively with conventional farming systems and its ready to use packages of seed, fertilizer, and pesticide. In addition, key stakeholders, including many policymakers and investors, still tend to focus on short-term gains to achieve rapid financial results. The resulting business environment presents significant barriers for agroecological businesses to attract investment and growth. In Europe, for example, policies have traditionally pushed for agriculture at large scale with a focus on maximizing single crop yields, using more synthetic inputs and requiring more financial investment2,17. These policies are slowly changing by increasingly taking into account social and environmental sustainability17–19.

Evidence
Current evidence suggests that agroecology increases agricultural productivity (i.e. the ratio between agricultural production input and output), yet more research is needed to capture context-specific differences and drivers of productivity advantages. Among the few studies to consider the productivity of Agroecology, a three-country study found that smallholder farming households practicing agroecology had higher productivity: 17% in Senegal, 32% in India, and between 26% and 48% in two different regions of Brazil8. The study reports that the main productivity benefits of agroecology are in the reduction of external input use (and their respective costs), which outweighincreased labour costs (that also have positive societal and economic effects). Increased farm profitability (i.e. contrasting total revenues and farm investment) in agroecology is also supported in a meta-analysis, which reports increased profitability associated with agroecological practices in a majority of studies analyzed7. Possibly as a result of these gains, financial reserves of farmers practicing agroecology increased. Likewise, a meta-analysis from South Asia shows that conservation agriculture practices, often used in agroecology, increased net-returns by between 15.7% (rice) and 33.8% (wheat)9.

Success Factors
Similar to increasing yields in agroecological systems, building human capacity (e.g. skills, knowledge), labour and investing with a long-term perspective are key success factors to sustainably increasing productivity in agroecological and other sustainable farming systems2,3. Building market knowledge, to understand the demand for agroecological produce, can support agricultural businesses to make informed investment and production decisions20. Additionally, as the productivity benefits of agroecology increase over time, and as an initial investment is needed, there is a need for agroecological businesses to build a solid and long-term capital structure (see for example the showcase on Adapta Sertão).

Barriers
When aiming to assess and increase productivity in agroecology, a key barrier is the uneven playing field between agroecological and conventional practices. Specifically, in many countries, preferential rules apply for purchasing agricultural inputs, such as machinery, seeds, or fertilizers, which artificially lower the costs of conventionally produced crops as compared to crops from agroecological production. In agroecology, a big part of the production costs pertains to labour costs, which are rarely subsidized. Hence, agroecology benefits little from regulatory incentives and payments that drive costs down in conventional agriculture. For productivity to further increase in agroecological farming systems, these structural barriers need to be addressed.

Evidence
Agroecological practices can fetch higher prices per unit produced when appropriate market linkages are established. Agroecology was found to increase the net-income of smallholder households by 14% in India, by between 26% and 49% in Brazil, and by 49% in Senegal, on average. The authors attributed these effects to differences in sales prices. A study from France, using a simulation model, concludes that agroecological farmers have a better medium-term economic results than conventional farms, on average21.

Success Factors
A key success factor to increase revenues in agroecological businesses is access to markets that reward agroecologically produced crops. In price-differentiated markets, sales of agroecological produce can result in higher revenues5,22–24,31. In this regard, linking producers with consumers is critical, and for larger agroecological businesses, establishing direct marketing channels can facilitate building trust and loyalty among consumers, which can result in price premiums (see EOSTA and the Big Carrots showcases as examples)5,23. Digital solutions can facilitate  the efficient matching of producers, traders and consumers (see for example Premium Hortus’s web and mobile platform)25.

Barriers
When agroecological businesses lack access to premium markets, as is often the case in segmented local markets of middle- and low-income countries, increased prices and revenues are difficult to realize. Furthermore, “agroecology”, unlike “organic”, is not an established (though costly) label that is easily understood by consumers, which may potentially limit access to premium markets. Agroecological businesses face a challenge to create demand for their products by building awareness of agroecological production and by increasing trust in the benefits of agroecological produce. It may take time for agroecological businesses to build interest and trust that results in a loyal customer base, which emphasizes, again, the need to secure long-term investments. Additionally, agroecological businesses can deliver wider economic benefits (e.g. jobs and employment), as well as environmental and social benefits (positive externalities), while conventional practices often come with substantial costs, which are not accounted for in their pricing (negative externalities). Realizing a relative increase of prices per unit sold in agroecology can be increased when positive externalities are remunerated, and negative externalities accounted for in prices.

Evidence
To be economically viable in the long-term, any agricultural businesses needs to be resilient to external shocks, including shocks from climatic change. The resilience in agricultural production can be fostered through re-designing agroecological systems through agroecology4,7,11,26,27. A diverse multi-cropping design, which is a key element of agroecological principles, can serve as a cushion over losses in selected crops, e.g. due to pests and diseases1,8,11,14,17,28. Having a diversity of crops and plants fosters ecosystem services like pollination and natural pest control, which decreases vulnerability to shocks3,6,7,29,31. Moreover, nutrient recycling in agroecology can help reducing dependence on external inputs and their volatile prices10,15,25,26. A recent study by FAO, FIBL and Biovision, demonstrated the benefits of agroecology as a resilience strategy13.

Success Factors
Although agroecology enhances resilience, any agricultural business, including agroecological businesses, are to some extent vulnerable to external shocks, yield, and price crashes. However, agroecological businesses can become less vulnerable to external shocks through reduced dependency on external inputs. A key success strategy for agroecological businesses is to build adequate financial capital and other reserves (e.g., including safe grain reserves13) to withstand periods of decreased revenues, while maintaining operations and retaining the investment made in building human capital. A sound capital basis is therefore critical. Agroecology, however, can offer a unique return to risk profile as compared to other investment opportunities, which allows investors to diversify their portfolio and thereby hedge against long-run risks (see showcases on SEKEM and BNP Paribas S.A. for examples).

Barriers
A key challenge is the prevailing policy environment that punishes rather than remunerates investments in the long-term resilience of farming systems. Agroecological businesses can be supported by facilitating access of agricultural enterprises to long-term funding opportunities, and by novel regulatory incentives that focus on long-term gains. However, agroecological businesses, in contrast to many large and well-connected actors in the food system, have limited policy influence to bring about such favourable policy changes.