03. February 2020
True Cost Accounting, EU’S Green Deal and the new market reality of food and farming
Keynote: Volkert Engelsman, Farm & Food 2020
Volkert Engelsman is CEO at Eosta. Farm & Food has invited him to speak at the congress in Berlin on January 20, 2020. Review his keynote: The EU has embarked on a Green Deal: A very green European investment bank policy. How does that affect the market reality of food and farming?
Blasting through our planetary boundaries
Let’s talk about the fact that we are blasting through our planetary boundaries. Climate change is obvious, biodiversity is obvious, since months and years, dramatically disrupted nitrogen cycles have also become more and more obvious. But we are not only blasting through our planetary boundaries, we are also blasting through the foundation of social justice. I think that the growing populism is a clear indication that we are beginning to see the first signs of a growing wealth gap between the haves and have-nots. Kate Raworth, the English economist, is advocating an economy that is no longer parasitizing like kuku’s young on people and planet but stays withing the boundaries of our planetary limitations.
We have the sustainable development goals as a good tool to guide us towards a more sustainable future. Johan Rockström has allocated these SDGs to people, planet and profit. It reveals and interesting logic. Because if you start at the bottom of the cake you see the SDGs allocated to the planet which are the logical effect of how we organize society. But the way we organize the people completely depends on how we organize profit and how we define our profit. It seems we have lost the connection between profit and purpose. Because nobody wakes up in the morning to say, lets exploit a few kids in the far east and then destroy a few ecosystems. And yet it is happening. Every day. And every day again. We talk about planet, people and profit but actually we mean profit at the expense of people and planet. After all it makes total sense to exploit labour and kill biodiversity and all sorts of other things to make money.
So maybe we should only talk about profit but include the costs of people and profit at the same time.
How do we do that?
There are a few examples. For instance, in Bhutan where people have embarked on the gross national happiness index. That sounds a little romantic but in fact it is not. It is a gross national product that also includes results in terms of ecology, social life, cultural life, spiritual life, etc. Jacinda Ardern, the prime minister of New Zealand, is embarking on a similar thing. She has also included in her gross national product a whole series of other indicators.
To those who say, these two countries are far, far away: We are doing similar things right under our noses: An increasing number of banks are including social and ecological indicators. On the one hand we can talk about three divides. The ecological divide, the social and the spiritual divide.
The ecological divide, representing the fact that we have alienated ourselves from nature. The social divide that separates us from the other. And the spiritual divide that separates us from who we are. And while this may sound very philosophical, this is a growing reality that seems to be trickling down into the DNA of our financial sector. With central banks performing climate stress tests, biodiversity stress tests, living wage stress tests, water, soil, smart agriculture stress tests… It basically means, that if we keep exploiting people and planet, there will be no access to capital because it forms a risk for the investor. Sooner or later that boomerang will come back. It no longer makes sense to chase after a short-term profit whilst ignoring long term damage to soil, water, biodiversity, climate, etc.
The French have figured out that it costs four billion Euros to clean up the ground water from agri-chemicals. Who is paying for that? We are not paying for it – Our kids will pay for that.
The Green Deal
Fortunately, the EU has embarked on a Green Deal including green bons and a very green European investment bank policy that sounds very promising.
You may think, what on earth has this Green Deal to do with my market reality of food and farming.
Well, things are changing in that market as well. Yesterdays consumer will blindly follow whatever claim the retailer makes and todays consumer has got a few questions to ask.
To give you a few examples of how to talk to this new consumer: we put QR codes and postal stamps on our fruits and vegetables we sell to the Rewes and Kauflands. That stamp reveals the story of the farmer that grows the product you buy. Because I believe in individualizing the product chain and putting the unique story of the farmer on centre stage.
But we do not only talk about his story, we also talk about his or her footprint on people and planet. Recently we began monetizing that impact. We applied four Ms to sustainability: We monitor, we manage, we market and finally we monetize sustainability. Which is a difficult thing. Because you cannot monetize everything. But we have decided to monetize a selection of sustainability indicators. Take for instance soil. An organic farmer builds soils to the extent of 250 Euros per Ha per year. And his conventional neighbour, chasing after short term yield benefit is destroying soils at the rate of 1150 Euros per HA per year. So, the benefit for society to buy organic product is 1400 Euros.
Now this is quite an academic exercise. But we also try to visualize this for the consumer. Our model says that organic is not too expensive, conventional is too cheap – as long as we keep externalizing the costs.
We also did this for water. Monetizing the impact of water pollution on society.
We want cheap food. But at the expense of our health? At the expense of soils, biodiversity, climate change? Who is picking up that bill?