Simon Yevzelman

by Jacob Kennedy (University of Michigan) and Simon Yevzelman (TNC-Michigan)

Consumer Packaged Goods (CPGs) operating in the U.S. are increasing their sustainability commitments in response to a worsening climate outlook and a shift in consumer attitude. As customers and shareholders demand action, CPGs are setting sustainability goals to protect their supply chain. CPGs have turned to farmers to meet these goals. The benefits of regenerative agriculture are well understood and accepted, but adoption and implementation on farms should be hastened for the benefit of the planet and CPGs.

Protecting healthy soil by reducing tillage, incorporating cover crops, and robust integrated pest management (IPM) are practices at the core of regenerative agriculture, but all of these come at a transition cost to farmers. Many of these farmers are open to change but are weary of making investments to existing equipment and operations without the possibility of a premium price for their regeneratively grown product.

Ecosystem Service markets are one tool that can incentivize regenerative agriculture practices. Where policy changes are slow, the free market is fast. Creating a market to pay farmers for adopting regenerative farming practices can kickstart the urgent action needed to address climate change. The Nature Conservancy in Michigan (TNC) is betting their ecosystem service market pilot – the Sustainable Option Wheat Program – can catalyze adoption of regenerative practices.

Like regenerative agriculture, the concept of such markets isn't new. Early successes include General Mills Sustainable Wheat program in Canada and Kansas and King Arthur Regenerative flour in conjunction with Regenified. 

Sustainable Option Wheat: A Win-Win-Win Solution.

Building on demonstrated success of other outcome-based programs, Sustainable Option Wheat embraces a "payment for practice" model in which wheat farmers in the Saginaw Bay region earn grant funded financial rewards for regenerative practices recognized by The Natural Resources Conservation Service (NCRS). This feature challenges traditional paradigms in ecosystem service markets, which feature payment for outcomes. Typically, farmers are paidbased on a quantified outcome such as carbon sequestered, or tons of soil prevented from erosion. By instead focusing on payment for practices, Sustainable Option Wheat aims to provide farmers, via CPG’s, with monetary incentive to push the adoption of regenerative practices. At scale, farmers will see higher revenue and healthier soil, their communities will see improved water quality, and CPG’s can claim scope 3 emission reductions in line with their sustainability objectives.

The Nature Conservancy’s main goals for this program include:

    ●      Test a sustainability standards program on 6,000 wheat acres

    ●      Reduce sediment and nutrient runoff

    ●      Reduce 5,230 tons of CO2e

    ●      Demonstrate a replicable business model and export case study report

Entering its second pilot year, TNC engaged the University of Michigan Dow Sustainability Fellowship program to complete a deep review of the program’s success. The Dow Fellows team brought expertise in social science research, business analytics, community engagement, and nutrition that allowed for a holistic analysis of the program. Through stakeholder interviews and commodity market analysis, the team uncovered areas of opportunity to expand ecosystem service markets and scale regenerative agriculture.  

Discovery through Stakeholder Insights

Our Dow Fellows team interviewed Michigan farmers enrolled in the Sustainable Option Wheat Program. This farmer-driven feedback underscores the crucial role the program can play in advancing sustainable agriculture practices.

Key Highlights:

    ● Financial Incentives: While the current 20 cents/bushel compensation is appreciated, farmers expressed a desire for increased financial incentives to make broader program adoption more viable. Suggestions included per-acre payments, alternative options like tax deductions, and adjustments to account for input costs.

    ● Data Burden: While Sustainable Option Wheat offers support with data collection, farmers emphasized the need for streamlining processes and exploring compensation for data sharing, recognizing its inherent value.

    ● "Additionality" Concerns: Early adopters who have long practiced sustainable methods expressed frustration with the “additionality" concept, advocating for mechanisms to reward existing efforts alongside new program practices.

    ● Practice Adoption: Cover cropping is the most widely adopted Sustainable Option Wheat practice, while no-till faces challenges due to specific soil types and equipment requirements. Farmers suggested exploring alternative practices like split N application for wheat acres.

    ● Program Flexibility: A recurring theme was the need for greater program flexibility to accommodate diverse farm realities and equipment limitations. This could involve tiered participation options and alternative qualifying metrics.

    ● Overall Sentiment: Despite its challenges, the program holds significant promise for advancing sustainable agriculture. Farmers emphasized its potential to improve soil health, increase profitability, and reshape public perception of farming practices.

CPGs: Embracing Green Grain, Seeking Metrics

From CPG boardrooms arose a different perspective. Environmental goals and consumer demand for sustainably sourced products were driving forces, but concerns regarding cost-effectiveness and robust impact measurement also resonated. A strong preference for outcomes-based models emerged, where payments directly tied to demonstrably improved environmental outcomes held promise. Collaborative efforts with Measurement Reporting and Verification firms and data-driven approaches could unlock this potential, quantifying sustainability gains with greater accuracy.

Key Takeaways:

    ● Partnerships: Many CPGs view Star of the West not just as a supplier, but as a catalyst for sustainability initiatives. The collaboration with TNC offers a platform for industry-wide engagement and collective learning.

    ● Sustainable Priorities: Soil carbon, carbon farming, and emissions reduction top the agenda for many CPGs. However, challenges remain – Measurement, Reporting, and Verification (MRV) data collection burdens both CPGs and farmers, while the "additionality" concept and Scope 3 emissions pose technical and administrative hurdles.

    ● Transparency and Data: CPGs are willing to invest in programs with measurable outcomes and data-driven transparency. Premium payments for demonstrably sustainable practices are on the table, but brand alignment and consumer understanding are crucial considerations.

    ● Empowering Farmers: Ultimately, CPGs see Sustainable Option Wheat as a way toempower farmers, improve soil health, and enhance supply chain sustainability. By addressing data burdens, streamlining incentives, and fostering collaboration, the program can bridge the gap between farmer efforts and consumer demand for ethically sourced, sustainable products.

Star of the West: Bridging the Gap

Star of the West, the critical bridge between farmers and CPGs, underscored the need for expanded data analysis capabilities and resources to manage the program’s potential growth. Their insights pointed towards collaborative solutions, where TNC and CPGs could co-invest in strengthening Star of the West's infrastructure and capabilities.

Cultivating a Scalable Future

This fertile journey reveals key transformations needed to nurture ecosystem service markets like Sustainable Option Wheat. Increased flexibility in program requirements, coupled with MRV and data-driven approaches, could attract more farmers and provide CPGs with tangible environmental impact metrics. Building trust and transparency within the supply chain, along with collaborative investments in infrastructure and knowledge sharing, are crucial ingredients for success.

Next Steps for Sustainable Option Wheat:

    ● Implementing pilot program improvements based on stakeholder feedback.

    ● Piloting an outcomes-based model with MRV to quantify environmental benefits.

    ● Exploring alternative incentives beyond direct payments.

    ● Partnering with CPGs on co-investments in data analysis and farmer support initiatives.

    ● Facilitating a smooth transition to Star of the West by addressing resource limitations.

The Sustainable Option Wheat Program pilot project presents a promising model for incentivizing regenerative agricultural practices through an ecosystem service market. Stakeholder feedback from farmers and CPGs highlights key areas for refinement:

    ● Farmer incentives: Increased financial rewards, streamlined data collection processes, and flexibility in program requirements can attract wider participation.

    ● Impact measurement: Robust MRV systems and outcomes-based payment structures are crucial for quantifying environmental benefits and aligning with CPG sustainability goals.

    ● Collaboration: Partnerships between The Nature Conservancy, Star of the West, and CPGs can address data analysis needs, farmer support initiatives, and infrastructure constraints.

By addressing these priorities, Sustainable Option Wheat can evolve into a scalable and impactful program, bridging the gap between farmer efforts and consumer demand for sustainably sourced products. Its success has the potential to catalyze a broader shift towards regenerative agriculture, nurturing soil health, enhancing ecosystem resilience, and ensuring a more sustainable future for our food system.