4 Ways the European Green Deal will Reshape Agriculture

And why you should care.

The European Green Deal (EGD) is aiming for carbon neutrality by 2050. It’s an ambitious goal with significant implications for agriculture. Its implementation will drive major market trends for the next 25 years and will usher in a wave of agri-eco innovations.

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Focus on Sustainability

The European Green Deal aims to make Europe’s Common Agricultural Policy (CAP) the global sustainability standard for agriculture.

The Green Deal, adopts a number of measures, including soil law, controls on gene editing technology, and measures to reduce food and textile waste. Measures that target pain points experienced around the world of sustainable agriculture. These measures provide a clearly articulated approach to sustainable production and gives produces a roadmap to adopt sustainable practices. ?

This focus on sustainability allows growers to move with the market and provides the support to achieve the loft sustainability metrics of the Green Deal.

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Shifting Trade Dynamics

Value propositions for whole markets will change.

With clear sustainability signals from European consumers, businesses operating on the continent will focus on sustainable sourcing. This will include increased record keeping and accountability for growers who sell their products into these markets. Increased complexity of supplying the markets will reduce supply and increase cost to consumers and producers alike. The changing market will offer opportunities for growers around the world to adapt their business and secure increased market returns, whilst addressing sustainability challenges on farm.

The impact of this shift in policy will not be limited to Europe. Growers around the world will begin to adopt sustainable practices as a way to access higher paying markets. As the policies mature, other regions, such as the US and Australia will follow the lead of the EU and impose similar policies on their markets.

The market will be influenced by these broad, large scale changes. Industry will adapt to meet the change. ?

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Innovation Opportunities

With changing markets, comes innovation opportunities.

Changes in sustainability requirements and accountability for growers will offer innovators unique opportunities. Innovative businesses and ideas will be supported by the market to assist growers to improve the sustainability of their businesses, or allow them to more easily document their practices. This will include detailed carbon accounting, soil health reporting, input use efficiency techniques etc. This market will move quickly and asymmetrically, favoring larger, corporate farms with the capacity and resources to allocate to change management.

Growers and innovators alike need to understand the market forces to ensure that innovation is aligned to farm business outcomes.

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New Career Paths

With a changing focus for businesses, new positions will be created.

These positions will be focused around helping producers and supply chain stakeholders adapt to the changing requirements. This will include analysts, sustainable agri-specialists, agtech developers and policy and regulatory advisors. ?These positions will be highly impactful but difficult to fund. To date, much of the customer base for AgTech innovation has been centered around farmers. As farm gate margins are squeezed and profits evaporate for many of these farms, funding the adoption of this tech becomes challenging.

Successful AgTech businesses will build new models to fund long term sustainability that don’t rely on further reducing grower profits.

Risks

With such broad, impactful policy changes comes risk.

One of the biggest risks arising from the EGD is that it puts increasing pressure on already stretched growers. We have seen this in Australia with increasingly stringent compliance requirements from the large retailers. This pressure is felt more by smaller family farms who often don’t have the resources or skillset to easily comply with the increased requirements. This further cements the trend that we have seen around the world for agricultural consolidation and corporatization.

With high compliance requirements and increasingly high barriers to entry this trend will continue to accelerate.

Agriculture is an incredibly nuanced industry. Broad, high level policy decisions tend to view farmers as a homogeneous group which couldn’t be further from the truth. When playing around with global markets like this, particularly the global food market, leaders must take seriously the challenges of on ground implementation as well deeply considering the important edge cases.