KANSAS CITY, MISSOURI, US — Sustainability continues to grow in importance to the farming and milling industries amid an evolving regulatory landscape and new policy energy under a new administration in Washington.
Of vital importance to growers and millers is how they can get paid for sustainable practices and best utilize tools such as carbon markets. To address the topic for attendees of their virtual spring conference, the North American Millers’ Association enlisted Debbie Reed, executive director of the Ecosystem Services Market Consortium, for an afternoon session April 19.
The ESMC, Reed explained, is a non-profit marketplace designed to reward sustainable farming and is driven by vision and impact. It was founded in 2017 to focus on the possibility of using market-based mechanisms to scale outcomes in agriculture. The idea was that carbon markets and other ecosystem service markets could be used to scale impacts on agriculture if farmers and ranchers are properly rewarded for actions beneficial to society.
“We are new and different,” Reed said. “When we started, we really tried to look at the opportunity through the lens of ‘Can we conceive and design markets to work for agriculture specifically?’ because we haven’t seen these markets scale for agriculture in the past or even currently today.
“Can we overcome the past market challenges that we know exist, that are responsible for not going to scale in the past, and can we do all of this through the lens of farmers and ranchers? If we cannot engage farmers and ranchers at scale in these markets, we can’t make them scale, make them viable, we can bring them to the market. So we’re really trying to do this through the lens of producers and what it would take to keep them in these markets.”
Several previous attempts at sustainability markets included rules based on points of pollution, thus featured little of the flexibility needed for agriculture operations. The ESMC has attempted to push market standards to account for the realities of farming and ranching and build in flexibility.
“You can’t tie the hands of farmers and ranchers and create menus of must-do’s and still be successful in partnering,” Reed said.
In the view of agriculture professionals, most protocols for such markets in the past were developed without their input or suite of members participating in the market, testing and building them out.
To address that, the ESMC in 2019 created a public-private partnership to reverse the dynamic. Membership now includes buyers, sellers and other interested stakeholders helping to build the markets and fully test it in time for a planned September 2022 launch in the United States.
“We’re learning what each of our roles are, and we’re building out the infrastructure, including relationship infrastructure, as we go,” she said.
The market is being built in a pre-competitive space for the benefit of all involved, whether it be a buyer, seller or a large non-governmental organization. As such, the non-profit is attempting to achieve a national scale harmonized market to cut through the noise and confusion of the patchwork of opportunities, contracts and funding associated with the various endeavors of the past.
The ESCM program features standards- and science-based third-party certification protocols designed to ensure standards so that, for example, buyers get what they have paid for and suppliers aren’t accused of greenwashing, Reed said.
The market also features stacked asserts for such credits as sole carbon, net greenhouse gas reductions, water quality and water quantity levels. All are responding to marketplace demand, she said, and a biodiversity credit was recently added in response to participants.
Flexibility is built into this market to accommodate evolving standards.
“We know we have to be flexible,” she said. “But we don’t need all farmers and ranchers and buyers to understand all the complex standards. We take that on as our role and just ensure that the voices of all of our players are heard in that space where the standards are being discussed and debated. We’re really just trying to be an agent of change, we’re not trying to own anything, we’re just trying to make these markets viable, make sure there is liquidity and transparency to we can scale the beneficial outcomes.”
In recognition that agriculture has become a data-driven economy, the ESMC is looking at how to address wide variances across markets in data-sharing and the governance of it.
“We understand that producers really generate the data and that is valuable data and that is everything that makes these markets work,” Reed said. “So, we’re trying to tie the data value to its use which is the generation of these credits and ensure whoever creates this data is equitably paid for the value of that data.”
A pre-market assessment of the estimated total volume and value of carbon and water quality markets completed by IHS Markit in 2018 indicated there was $13.9 billion demand from markets we operate in. Demand has gone up since that time, Ms. Reed said.
The ESMC currently has projects in the southern Great Plains, the Midwestern corn and soybean belt, the Great Lakes region, the northern Great Plains, Pacific Northwest, and coastal California. The next expansions planned are in the Southeast and Chesapeake Bay area. Canadian demand for the services has ESMC exploring a northward expansion.
NAMA moderators opened the session polling virtual attendees on whether their companies were considering participation in a carbon market or doing so already. The instant poll indicated 34% of attendees’ companies were considering, 17% already were doing so, and 49% indicated no consideration of participation in carbon markets.
Funding partners of the private-public partnership started in 2019 include the US Department of Agriculture, the Nature Conservancy, the United Soybean Board and General Mills. GM also is a Founding Circle member along with ADM, Cargill, Corteva Agriscience, Danone North America, Nestle, Noble Research Institute, the National Fish and Wildlife Foundation, Noble Research Institute, Nutrien Ag Solutions, Syngenta, Truterra and the Soil Health Institute.
Among the numerous Legacy Partner Members are companies such as Mars, McDonald’s, PepsiCo and Tyson and organizations such as the American Sugarbeet Growers Association, the National Corn Growers Association, the American Soybean Association, the National Association of Wheat Growers, the Sorghum Checkoff and the Fertilizer Institute.