The role of the private sector in climate-resilient food systems

By Shovon Kibria, Private Sector Engagement Specialist, UNDP 

Assessing progress towards the Paris Agreement, last year’s State of Climate Action report found “global efforts to limit warming to 1.5°C are failing across the board”. Its assessments were stark: 41 of 42 indicators –including power, buildings, industry, transport, forests and land, food, and agriculture – are completely off track and six are heading in the wrong direction.  

It was an alarming report. If we are to avoid the worst of climate change, industries such as agriculture and land use, which account for approximately one third of global greenhouse gas emissions, must be radically transformed.

The indispensable role of the private sector 

The costs of transitioning to a low-carbon, climate-resilient future are immense (although it the cost of inaction is even greater) and governments alone are unable to shoulder them. It is estimated that the agriculture and land use sectors alone require 26 times more than current levels of funding. 

Until now however, the private sector has not been fully engaged in climate action, and especially in climate adaptation. Here are four key reasons:

First is the disconnect between the objectives pursued by the public and private sector. The public sector tends to prioritize long-term societal benefits and environmental sustainability, while the private focuses on short-term returns and shareholder value. The differences can impede public-private collaboration for climate action, making it essential to reconcile going green with making a profit.  

Second is that businesses are often unaware of how they can contribute to government plans. There is uncertainty about what governments need, where they are investing, and just how the private sector can contribute.   

Third, the private sector frequently perceives the return on investment in climate adaptation as unclear or too low. Part of this is that they are often unable to capture the full environmental and social benefits of adaptation efforts, limiting the incentive to invest. Related to this is the lack of regulatory, legal and fiscal frameworks to reward investment in sustainability and adaptation.

Lastly, to guide investment decision-making, the private sector needs more robust climate data concerning current and future projections and vulnerabilities. 

There is no doubt these are significant challenges, but we have the answers. 

Turning challenges into opportunities

In 2019, a report from the Global Commission on Adaptation outlined a compelling economic rationale behind investing in climate action: every US$1 allocated to five key adaptation areas, could yield substantial net benefits ranging from $2 to $10. 

One study found the potential adaptation market could be as high as $2 trillion by 2026. 

This underscores not only a strong business case for investment but also positions businesses to be more climate conscious. For any business that depends on a supply chain, especially a global one, the impacts of climate change are not just a risk but an active disruptor of productivity and profitability.   

The challenge is how to stimulate private sector investment towards climate-resilient agriculture. 

One way is to leverage public finance to mitigate risks and costs. This includes the strategic use of grants, credit enhancement and what is known as “blended finance”, where public and private resources are pooled. 

Another powerful means is for governments to enact tax breaks and subsidies which provide clear incentives for private investment. These can be supported by conducive regulation, certification schemes, training, and performance standards.

Improving climate and agricultural production data is also critical. Here the private sector can also play an important role by financing upgrades of agricultural value chains, investing in market analysis and weather forecasting. 

Promising examples of progress 

The mutual interest of the public and private sectors in collaborating on climate action is only gathering pace. So too is the urgency for meeting the financing gap.

These demands have led UNDP and the Food and Agriculture Organization (FAO) to make private sector engagement and multistakeholder collaboration a key pillar of a multi-country programme, ‘Scaling up Climate Ambition in Land Use and Agriculture through NDCs and National Adaptation Plans’ (SCALA).

SCALA provides strategic guidance on private sector mapping, outreach and engagement planning, it assesses risks and business opportunities, designs de-risking strategies and formulates projects which are more attractive to private sector investors. 

Governments are taking advantage of SCALA. In Senegal, the programme has supported the identification of business opportunities, and potential national and international partners, in developing and implementing more environmental and socially sustainable farming practices following agroecological principles in key value chains, such as using compost instead of chemical fertilizer. It has laid the foundation for matchmaking with the private sector to generate potential investment. 

Guidance documents based on the country work are underway. These will provide a resource for other countries seeking to learn from their experiences. Least Developed Countries (LDCs) and Small Island Developing States (SIDS), are now receiving support for public-private collaboration through the SCALA Private Sector Engagement Facility. In Sao Tome and Principe a market study assessing the commercial viability of bio-inputs to produce organic vegetables was recently published. This study provides critical evidence for the government to reach its target of going 100 percent organic by 2030, and will be used both to inform the next cycle of its Nationally Determined Contribution (NDC) and key policies related to agriculture.

Investing in the future 

At COP28 in Dubai, 159 countries signed the UAE Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action “recognizing the profound potential of agriculture and food systems to drive powerful and innovative responses to climate change”. In parallel, more than 200 organizations, including multinational companies such as Danone and Nestlé, signed a call-to-action for the transformation of our food systems.

These developments offer me hope. Both governments and businesses worldwide recognize the immense power of the private sector in addressing the climate crisis. And they are committed to transformative change. 

Our role at UNDP, with partners like FAO, is to foster public-private conversations and the partnerships that will get us there. This collaboration will be our best shot at securing a safer, more sustainable future.