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How PepsiCo and ADM work with farmers to cut agricultural emissions

Regenerative agriculture can succeed when farmers see the economic value in it, they say.

GreenBiz 24 - Scope 3 ag panel

From left, Jim Andrew of PepsiCo, Michelle French of ADM, Mark Isbell of Isbell Farms and Keith White of National Black Growers Council. Source: PepsiCo

In September 2022, the $100 billion crop commodities powerhouse Archer-Daniels-Midland signed a 7.5-year-long contract with the $91.5 billion food and beverage giant PepsiCo. The goal: Get farmers in their shared North American supply chains to switch over 2 million acres to regenerative agriculture methods, such as planting cover crops to protect fields when they’re not in use or leaving soil untilled. 

The plan, the companies said, could cut 1.2 million metric tons of greenhouse gas emissions, and both companies can use those cuts toward their carbon reduction targets.

This sort of relationship — an unusually long contract in agriculture where even two years is a stretch — needs to become more common, said executives for both companies, speaking on a panel during GreenBiz 24.

"We have 7.5 years to get it right," said Jim Andrew, executive vice president and chief sustainability officer for PepsiCo. "We needed to work together over a long period of time to provide confidence [to farmers and other stakeholders]. … I think the real question is how do we get that whole village working together to really unlock fundamentally larger amounts of capital” to invest in regenerative agriculture."

That "village" includes farmers of all sizes, food companies, retailers and the consumers who ultimately buy what’s grown on millions of acres around the globe. "You have to have the whole value chain coming together," said Michelle French, director of global sustainability programs at ADM. "Everybody has to be willing to talk. You have to go out on a limb a little bit."

"What’s key is that as we work within the system … we make sure we have a mechanism to pass that economic value down throughout the supply chain, so that everyone is fully compensated for the work they do," said Mark Isbell, a partner in Isbell Farms, which grows rice in North Little Rock, Arkansas. 

Here are suggestions from the GreenBiz 24 panel about how to make that happen.

Reward early adopters

Don’t underestimate the social challenges farmers face when embracing field management techniques such as planting cover crops or choosing not to till soil, said Keith White, a fourth generation farmer from Walls, Mississippi, who cultivates soybeans, corn, wheat and peas.

Allowing covering crops to grow waist-high while neighboring fields look "neater" will raise eyebrows, but if a regenerative farmer can demonstrate increased profit, the conversation with neighbors is easier, he said, pointing to skepticism from his own family members. 

That’s one reason ADM and PepsiCo decided to compensate early adopters of regenerative agriculture and not just those contemplating a transition, even though it might not be considered additive. "We consciously made the choice that we were not going to say, ‘Oh, you’re already doing this, we’re not going to include you, we’re not going to pay you to act in this way.’ In fact, we want those growers who are the first adopters, because they are our best spokespeople," French said.  

Create new financing models and farmer incentives

Partnerships that blend private money with public funds, including more than $3.1 billion offered through the U.S. Department of Agriculture’s Climate-Smart Commodities program, will make transitions economically viable, said Scott Herndon, president of Field to Market, an alliance of growers, food companies, apparel makers and agribusinesses. "The majority of the money is going to farmers," he said.

It costs in excess of $1,000 per acre to grow crops, and any compensation that improves per-acre profit will make sustainable farming initiatives more successful, said Isbell.

"If you make one mistake, you may not see it right away, but you will see it when harvest time comes," added White. "When you can get more for doing less of everything you’re doing, it will make a difference."

ADM and PepsiCo pay more for regenerative practices, by offering a premium for acres where improvements can be demonstrated and by helping cover the costs of transition. In turn, they seek measures of the emissions reduction impact, so they can be counted towards emissions reduction targets. "We actually write contracts with implementers and third parties that specify how much of the money actually needs to end up in the farmers’ hands," said Andrew.

Offer ‘locally relevant’ technical assistance

ADM provides farmers with conservation agronomists who can help them customize an approach for their particular circumstances. For example, picking the right species of cover crop for the local soil conditions and irrigation patterns, said French.

Agronomy specialists can also provide advice about nutrients, which decrease the need for pesticides and fertilizers while increasing yields, said PepsiCo’s Andrew.

Don’t burden farmers with data chores

Collecting data to measure outcomes of regenerative agriculture is important for calculating financial incentives, but forcing farmers to spend hours gathering information is counterproductive, the panelists acknowledged.

Both ADM and PepsiCo provide technologies to ease the burden. ADM combines publicly available satellite imagery with artificial intelligence to evaluate the impact of conservation and restoration. PepsiCo uses drones, smartphones and AI. Andrew said the technology should be "affordable, accessible, and responsible and safe."  

Rethink how to calculate emissions cuts

Measuring a company’s indirect Scope 3 emissions from agricultural supply chains differs from the widely used practice of investing in carbon sequestration or removal, such as reforestation, and then retiring the credits generated, the panelists said. Under that system, only one company can take credit for those credits.

But no single food company is likely to buy everything a farmer grows, and commodity crops are usually handled by distributors such as ADM that, in turn, sell them to food and beverage companies.

Under land-sector guidance being finalized this year by the Greenhouse Gas Protocol, both ADM and PepsiCo can use emissions reductions from regenerative agriculture to count against their targets without fear of double counting, French said. This represents an "inventory" approach, she said. "If we work together, if we have transparency, if we have this funding pool, it’s really a better story for everyone along the way," French said.

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