Today, we’re thrilled to announce the release of our latest issue brief, Investing in Resilience: A Shared Value Approach to Agricultural Extension.
This issue brief is the third in a series supported by the Skoll Foundation and the Citi Foundation.
As world leaders gather in Paris this week for the latest round of climate change talks, there is increasing attention on the role of agriculture as “both a victim of and a contributor to climate change.”
Droughts, floods, rising temperatures, and other effects of a changing climate are already impacting agricultural systems worldwide. The world’s extreme poor are most affected by these disruptions, as most rely directly on agriculture for their subsistence and spend a higher portion of their income on food.
At the same time, agriculture accounts for roughly a quarter of annual global greenhouse gas emissions. The sector is also a leading force behind other environmental threats, such as deforestation, biodiversity loss, and soil degradation.
Simply put: agriculture must change.
We need to reduce agriculture’s contribution to climate change while building farmers’ resilience to climate variability and preserving our natural resource base for the future.
Transitioning to “climate-smart” agriculture will require massive investment — billions of dollars per year over the next several decades. Yet we see a massive deficit in financing for adaptation at the farm level, particularly for the world’s 450 million smallholder farmers. So how can we translate the global commitments made in Paris around climate change to action on the ground?
The potential of small-and-growing agricultural businesses
This is the topic we explore in our issue brief released today — “Investing in Resilience: A Shared Value Approach to Agricultural Extension.” The report focuses on the potential of local agricultural enterprises, such as farmer cooperatives or processors, to scale climate-smart practices among smallholder farmers.
Aggregating hundreds or often thousands of dispersed farmers, these enterprises represent a significant, but often overlooked, channel for delivering agricultural “extension” – that is, services that provide farmers with the information, technology, and skills needed to adopt better practices.
In a foreword to the report, Mark Lundy, agroenterprise development specialist at the International Center for Tropical Agriculture, wrote, “Root Capital describes how these businesses can help promote the adoption of climate-smart practices at the farm level, particularly in developing economies where public extension services are underfunded or non-existent.”
Eighty six percent of the 280+ enterprises receiving loans from Root Capital provide extension to their suppliers. Collectively, these enterprises source from more than half a million smallholder farmers in Africa, Asia, and Latin America.
By promoting the adoption of climate-smart practices, enterprise extension services can serve public objectives related to improved farmer livelihoods and climate change mitigation, as well as commercial objectives related to procurement and supply chain risk mitigation. In short, they can create shared value for entire supply chains.
“No issue exemplifies the urgency and power of creating shared value better than the productivity and prosperity of smallholder farmers,” wrote Mark Kramer, founder and managing director of FSG and senior fellow of the CSR Initiative at the Harvard Kennedy School of Government, in his foreword to the report.
However, most agricultural enterprises in developing markets do not fully realize the benefits of extention services. We have found that pervasive barriers related to knowledge, supply chain dynamics, capital, and talent stand in the way of enterprises’ ability to deliver effective extension.
This unrealized potential represents a missed opportunity, not just for individual enterprises and their suppliers, but for entire supply chains dependent on smallholder farmers.
“The predicament of smallholder farmers reflects the interdependence between business and society that is the essence of shared value,” wrote Kramer.
Next steps
Root Capital sees several opportunities for financial institutions, global agri-food companies, and climate-focused funders to bring their complementary perspectives and resources to bear, joining the existing community of practice dedicated to strengthening smallholder extension.
For our part, we will combine targeted lending and business advisory with action-oriented research. We will focus on the role that finance and financial management training can play, while working with other actors to address barriers that fall outside our area of expertise.
This issue brief is the first step in this journey. As a lender, we have much to learn about the science of climate-smart agriculture and the art of extension delivery, and we seek collaboration and shared learning with partners. Together with agricultural enterprises, we can advance rural prosperity and resilience in the face of climate change.