Consultation: Private Sector Investment in Incentives for Sustainable Supply Chains and Ecosystem Services

Background: Incentives directed to the right actors at the right time are essential to promote sustainable supply chains, to maintain the beneficial services provided by local ecosystems[1] and to foster responsible land-management practices. Incentives, of course, come in many forms (financial and non-financial) from the provision of services (training, inputs, information etc.) to direct financial benefits (increased prices, access to finance, financial rewards for sustainable practices etc.), and even facilitating compliance with legal regulations.

In the promotion of sustainable agriculture, market-based incentives have proven valuable but alone are not sufficient. Given the expanding complexity and risk to global food systems and ecosystems as well as consumers’ (and retailers’) increasing demand for sustainable products, a more comprehensive “package” of incentives is needed. What is clear is that the incentives package must respond to the needs, constraints, and specific motivations of the actors in a particular region and supply chain.

This work is being led by the FAO’s Incentives for Ecosystem Services (IES)[2] project, which promotes the development of efficient packages of actions co-financed from public, private and civil society institutions. The IES approach enables improved coordination of planning and investment to provide multiple incentive measures to support farmers’ transition to sustainable agricultural production.

The private sector (PS) plays a key role in this process, but is not always brought in as an active partner soon enough (too frequently only viewed as a buyer/commercial actor). However, the PS can and does perform a much more complex and critical role in developing and delivering incentives. At the same time, the drivers and motivations the PS themselves have to invest in incentives are not always understood nor sufficiently addressed when developing an incentives program.

Objective: With this work the FAO would like to better understand, from your experience, your views on:

What motivates your company to invest in incentives to develop your supply chains and/or the supportive adjacent landscape

What challenges have you faced in providing incentives.

What incentives from your experience work best (and for whom along the value chain).

What supports your company to invest in incentives.

What has helped you provide incentives (i.e. related policies, government programs, NGOs, etc.)

We are also interested in examples (case studies) of how incentives (financial and non-financial) can be used to support sustainable production, ecosystem conservation, and farmers'/landowners' efforts to be sustainable suppliers and build sustainable supply chains and landscape.

With your input, a more comprehensive “framework of incentives” (and their sources) can be created which responds to the experiences and demands of all actors, including the private sector. The final result will be a toolkit that can support your work by presenting potential incentives (and implementation mechanisms), which can complement your investments and efforts. To achieve this however, we need your perspective on what works, what doesn’t and what is needed!

The following (14) questions are meant to guide your responses (but please feel free to answer as you feel best. We could also organize a 30 minute call if you would prefer- to arrange a call or for questions please contact Chris Wunderlich:

Thank you for your input and support!

[1] For information on ecosystem services:

[2] On sources of incentives:

Please provide your name, company and what sector(s) you are working in?

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1. What are the motivations for the Private Sector (PS) to invest in providing incentives for sustainable supply chains and ecosystem services?

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2. What risks/concerns does this investment raise for the private sector? How do you address those risks?

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3. Which ecosystem (environmental) threats and (lack of) best practices are impacting the PS and that you are looking to support/change with your investment? (e.g. soil degradation, water contamination, unsustainable practices to reach certification standards; shade coffee, reduced agro-chemical inputs)

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4. What kind of incentive(s) do you provide to support the desired best practices? To whom do you provide the incentive(s)?

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5. How do these incentives motivate farmers (and/or processors, producer groups and other supply chain actors) to implement best practices? Is the provision of incentives linked to/ motivated by the desire to enable farmers to comply with sustainable certification schemes? If so, how? And for which schemes?

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6. What are the challenges and bottlenecks for PS to provide incentives for best practices, sustainable supply chains and ecosystem (environmental) services?

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7. Is your company involved in and/or motivated by impact funds ? Can providing incentives support offsetting potential environmental/social impacts of your business? If so, how?

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8. What are the key barriers to farmers (as well as, processors, producer groups, and other supply chain actors) to adopting best practices? (e.g. Lack of finance to implement sustainable practices; limited technical capacity to implement sustainable practices; limited alternative livelihoods).

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9. What support do farmers (processors, producer groups and other supply chain actors) need to successfully enter supply chains? How can the PS investment provide these incentives? Is the PS investment sufficient to support them to overcome the barriers they face? (e.g. Finance and technical capacity to support sustainable practices; Improved water and soil conservation measures: Improved seed and breed varieties etc.)

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10. At which point along the supply chain is it most effective for PS to provide incentives (invest)? Do you invest in farmers (processors, producer groups and other supply chain actors) directly, and if so how, is this commodity dependent?

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11. What enabling conditions and policy support would further promote responsible PS investment and motivate stronger investment? (e.g. regulation/ requirements; Performance Indicators to monitor economic, social and environmental impacts in a simpler way to communicate in your company and externally the risk and return of investment; Spread burden of risk across other sectors – i.e. Co-financing by public sector? NGOs?)

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12. Can integrating PS finance with public investment reduce PS risk and offer your company a wider breadth of support? If so, how? Do you have specific examples of where this has worked?

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13. Do you have specific examples and/or case studies of your company investing in incentive programs? Can you provide links to reports/websites etc. discussing these examples?

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14. Do you have any additional comments and/or suggestions?

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