A Regenerative Business Model

Are There Clear Metrics for Success?

PepsiCo, McDonald’s and Chipotle have all pledged to support regenerative agriculture as part of their climate smart initiatives. But, are they doing it? 

According to a Reuters article, only five years ago the term regenerative had to be explained in conversation. Big Food companies have played a crucial role in bringing awareness to regenerative agriculture.  As a result, consumers are more invested in where their food comes from and how it is produced. Yet so far, a universally accepted definition of regenerative ag doesn’t exist.  Without solid metrics it's proved difficult to chart regenerative progress or verify that food companies are honoring their pledges. 

However, the real challenge is that most of these food service companies have made verbal commitments to support the farm work they have relatively little sway over. How does a global franchise like McDonald’s that owns no farms actually support regenerative agriculture, especially when the metrics are a little blurry?

Building Regenerative Framework

If there is only commitment, but no framework to honor the commitment then the term regenerative might easily end up just like sustainability; a buzzword companies leverage to attract consumers. Publicly declaring that you will only source ingredients from farms that conduct soil testing is very different from funding soil cleaning projects for partnering farms or purchasing robotic technology that can reduce chemical usage.

A Farm Animal Investment Risk and Return study of 79 agri-food firms discovered that 63% of the firms they reviewed were defining regenerative agriculture in terms of emission reduction practices. Only 36% had quantitative targets in place to reach goals.  At the time of the study, PepsiCo, JBS, Sodexo and Nestle were the only four companies to have put a significant amount of money into reaching targets.

Beth Hart, chief sustainability officer at McDonald’s Corps says they are still innovating when it comes to sporting the farmers and the land they rely on to supply them with, quite literally, their daily bread- and lettuce and tomatoes and potatoes.  They recognize that they can’t march in and change the way a farm operates. They also realize they can’t bring operations to a halt until they figure it out.  Yet, they understand that well placed effort now means the Golden Arches can stay in business long into the future.

But, what is a well placed effort?

Is it emissions focused as defined by venture capital firms? Is it soil testing and education for farmers who were probably familiar with the term regenerative agriculture before it became mainstream? Is it precision technology, cover crops and water filtration?

And who is defining regenerative agriculture? The firms, the food franchises or the farmers?

Funding Regenerative Agriculture

Venture capital firms have been the biggest financial backing for regenerative initiatives and have also been criticized for their efforts since those investing tend to have little hands-on experience in agriculture. Unlike investing in startups or well established industries aiming for expansion, “regenerative” isn’t your typical industry; or even really an industry unto itself. Perhaps the best financial backing would come from inside the existing supply chains. 

Fostering better relationships between franchises like Chipotle and the farms who grow their ingredients could lead to more change in the actual soil than hoping a VC firm backed the kind of tech that can be used in Mexico, Cambodia and the U.S. and achieve the same results.  Knowing a company is making real efforts to shift agricultural practices might even satisfy consumers who are wary of spending more money on a greenwashed product.  Consumers don’t want to have to spend more money to have soil tested if there is no way to fix any problems the test uncovers.

While McDonald’s is still looking for ways to motivate and support farms and ranches all around the world in regenerative practice, Chipotle invested in a fleet of weed-cutting robots to help their farm partners reduce the use of fertilizers.  The investment was made to both support the startup company Greenfield Robotics and to equip farming partners with regenerative equipment.  Robots are able to pull weeds, plant cover crops and add nutrients to soil as needed. Chipotle has also used their own corporate VC fund to invest in solar energy for nitrogen fertilizer production. It sounds productive but without specific metrics or a clear definition of regenerative ag, is this meaningful progress?

PepsiCo recently announced a partnership with Syngenta to source only regenerative sunflower oil from South America and a new program called VivaOlivia intended to assist a drought riddled region of Spain in continuing to produce olive oil. This could be a sign of things to come for the snack industry which appears to be strategically supporting agricultural components of supply chains. 

PepsiCo has a definition of regenerative agriculture and general goals to spread awareness, source 100% of their key ingredients from regenerative farms and impact the livelihoods of the farmers and farm communities.  They have a set of standards that farms must adhere to aimed at improving water usage, building soil health and protecting biodiversity.  And, they are prepared to consistently fund these initiatives. They are a front runner as far as food manufacturers are concerned aiming to create scalable business models that other snack food makers and food franchises can follow.

A Regenerative Relationship

One thing seems clear, regenerative agriculture is less of a mechanism and more of a relationship. It may not need a universal definition.

Adopting food growing techniques that build healthy soil and protect water supplies could happen faster if the relationship between food manufacturing companies and farmers gets stronger. Before robots take over or food brands we know well begin opening up schools of regenerative agriculture, perhaps the focus should be on streamlining communication between Big Food and small farms.

As Beth Hart of McDonald’s says, cold snaps, floods and droughts are making it more difficult to reliably source fresh ingredients that match their menu.  A regenerative approach could prompt Big Food to change their own food offerings just as much as it could prompt farmers to sift methods. Quicker communication could preserve both points of the supply chain.