The agricultural transition: Building a sustainable future

| Report

In 2020, we released our report Agriculture and climate change, which identified key actions the agricultural industry could take to support decarbonization.1Reducing agriculture emissions through improved farming practices,” McKinsey, May 6, 2020. For this report, our research has focused on how decarbonization measures have evolved, as well as on the key barriers to their adoption and the actions industry players and investors can take to support their uptake. At the same time, conversations about sustainable transitions have increasingly focused on agriculture’s effects on nature and society beyond climate change. For example, agricultural land covers half of all habitable land and is responsible for 70 percent of freshwater withdrawals.2 In addition, food systems are the primary driver of biodiversity loss around the world, and these systems have growing effects on biosphere integrity, human health, and food access.3 While climate change remains the focus of this report, decarbonization and the actions to achieve it cannot be considered separately from their broader impacts on nature and society. Trade-offs and other benefits associated with decarbonization actions are highlighted throughout the report.

Achieving a 1.5° pathway will require actions that extend beyond the farm throughout the value chain. Chief among these actions are reducing food loss and waste, adopting dietary shifts, and adapting how we use arable land, all of which are critical to decarbonization and will help the industry meet global food needs while maintaining the livelihoods of farmers (Exhibit 1).

Action in a handful of areas can allow global food and agriculture systems to decarbonize on track with a 1.5° pathway.

Changing how we farm, the focus of this report, is critical to a successful transition. Building on our previous work, we have defined 28 measures that can support decarbonization on the farm while creating potential value for the industry and farmers (Exhibit 2). Together, these measures have an annual emissions-reduction of approximately 2.2 GtCO2. Many of these measures can be implemented at little to no cost to the farmer and have benefits beyond emissions reductions, including yield and biodiversity uplift.

A marginal abatement cost curve (MACC) shows the relative costs of identified decarbonization measures. (continued)

Although a 1.5˚ pathway exists and can create value for farmers and the broader industry, meaningful barriers are preventing adoption of decarbonization solutions at scale. Farmers are central to the sustainability transition, but they do not yet have sufficient incentives to adopt new methods and technologies. Emissions tracing and other actions require new, innovative solutions to facilitate decarbonization. And there is much room to grow in helping farmers overcome challenges in scaling their operations and maintaining profitability.

The findings in this report can guide food and agriculture organizations as they transition to increased sustainability. Each intervention should be tailored to its specific context, but broadly speaking, change requires the following:

  • financial incentives to spur farmer action, whether through carbon markets, green premiums, subsidies, rebates, or other green-financing mechanisms
  • ecosystem collaboration and improved tracking and traceability to bring solutions to market and support monetization of on-farm practice changes and purchaser decision making
  • research and investment to bend the cost curve to reduce adoption costs of existing solutions and support the development and scale-up of new technologies

The food and agriculture value chain has a chance to create a more sustainable ecosystem that feeds a growing planet while maintaining the livelihoods of farmers. With tailored and concentrated action, industry players, policy makers, and investors can accelerate the path to this future while enabling their own growth.

Although the path to achieving 1.5˚C will not be straightforward, it can create real business value for farmers and players throughout the value chain, with additional environmental benefits beyond reducing climate change. Action will be required beyond the farm, but there is a real opportunity to drive on-farm decarbonization while capturing business value. A more sustainable future for agriculture that feeds a growing planet while maintaining the livelihoods of farmers is feasible. And industry players, policy makers, and investors can accelerate the path to the future while enabling their own growth.

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