Circularity in the agri-food system
In the last Milanese edition of Re-Think, Paola De Bernardi, Circular Economy Management professor at Turin University, spoke about the paradox and limits of the agri-food system, then suggested possible operational solutions.
One can consider the agri-food system as an ecosystem composed of multiple actors and a multi-dimensionality of intersecting economic realities. The literature increasingly speaks of a “food ecosystem,” in which natural resources, value chains and related stakeholders, enabled by digital technologies, are intertwined in complex and dynamically evolving systems.
According to Professor De Bernardi, the concept of “business as usual” is no longer an option for our agribusiness system. Agribusinesses feel very strong pressure from institutions, from the market (which directs its investment choices by excluding unsustainable activities), and also from consumers who are increasingly attentive to conscious consumption choices. Capitalism and the economic models that have so far created growth and wealth, now find themselves at a critical point called by some the point of no return, which requires a profound rethinking of basic assumptions and operating mechanisms.
What is the solution to this? There isn’t a predefined answer, but something else is beginning: the movement of regenerative capitalism. This system, considered by some to be an oxymoron, is a model in which business is not an addition to nature, but is intrinsically embedded in it. For agribusiness, this is critical so that life can thrive resiliently and renew itself indefinitely. In this context, De Bernardi explains that the circular economy is a milestone on the path of regenerative capitalism. The agribusiness system today can be considered only 8.6 percent circular: meaning that more than 90 percent of what is extracted, produced, and processed does not go back into circulation and is wasted. The risk for companies is a competition that becomes more and more polarized, which will see the emergence of advanced and sensible companies that approach the new consumer demands by producing sustainable and circular products, as opposed to those that will be slower on this path, which requires a lot of investment and costs.
Paola De Bernardi continued her speech by explaining that we are in a scenario where the global demand for food will continue to increase (a population increase to 10 billion is estimated in 2050, with the need to increase food production by 40-50%), significantly impacting greenhouse gas emissions and the risk of climate change. At that point, it will no longer be enough to increase productivity and system efficiency: a step change will be required.
In this area, the agri-food system has some critical issues. The first is waste: the latest Food Waste Index report highlighted how 931 million tons of perfectly edible food were thrown away in 2019. This paradox, summarizes De Bernardi, tells us that we are either starving or dying of obesity. The second major limitation is resource availability, since we are consuming more resources than we have available. As an example, the professor brought up overshoot day, which is the day on which we have already consumed all the available resources of our planet for the current year, thus living in debt for the remaining time. The third limitation of the agri-food system is climate change: in fact, this system wins in terms of its contribution to anthropogenic greenhouse gas emissions, on a global and European level. One-third of the emissions come from the agribusiness sector, but most are concentrated on livestock systems. The fourth limitation presented by Paola De Bernardi is global risks: systemic risks are highly interconnected with each other. An example is the pandemic situation, which brings with it recession, with rising inflation rates, prices getting higher and higher for any good, climate change…
We are in a situation where companies need to be aware of the risks and costs associated with the business models they are adopting, to change not only cultural approaches, but also the management, organizational and managerial ones. Paola De Bernardi illustrated different approaches to be applied within the company to implement this change. The process of transition to a circular agrifood economy involves changing the culture of food, in the various processes by which the agrifood products from the land reach the consumer. The involvement of the entire food system supply chain is clearly spelled out in the recent European farm-to-fork and Green deal strategies, of which the circular action plan is one of the main pillars. These policies highlight the need for a change in food production, processing, distribution and consumption behavior that must occur collectively, with joint governance at the local, national and international levels. This must happen through the adoption of a mix of measures (training, tax incentives, certification and circularity measures, subsidized financing, etc.) that have an impact on the resilience and sustainability of agrifood systems.
What are the underlying principles of a circular strategy?
• Producing food in a regenerative way
• Zeroing in on food waste and loss along value chains
• Valuing resources, energy and waste, generating new value with upcycled food and innovative production lines.
In this context, food supply chain companies take a central role in the transition processes to “food circularity,” innovating their business models and generating new market opportunities.
How to enable the innovation of circular business models? Through four levers of change in value chains:
• The development of a culture of food circularity – which does not only mean fighting “food loss and waste”
• The use of digital technologies as an enabling factor
• The development of market innovation, where consumers take a central and active role in the creation of new products and services
• The implementation of an effective legal and regulatory framework, but also of incentives to support companies in generating resilient and circular agrifood ecosystems.
In conclusion, De Bernardi indicated areas and strategies in which to apply circular economy. For example, regenerative agriculture, which allows soils to become fertile again and to be handled with different techniques than intensive agriculture. Or shortening the distance between producer and consumer, hence short supply chains: closing and shortening the producer-consumer relationship by valuing local communities, using, as much as possible, digital technologies. The central aspect is the valorization of scarce resources by bringing them back into circulation and waste. If you think of the grandmothers, great-grandmothers, or family economies of yesteryear, nothing was wasted; it is necessary to return to that kind of mentality.