- There are key lessons that can be learnt from China for sustainable growth in the agricultural industry
- Solutions at scale and innovation are key
China offers various lessons on sustainable growth in the agricultural business. They are:
The long-term sustainability of agriculture relies on natural resources, which are affected by climate change. This is why the commercial case for sustainable production is falling behind the moral case for sustainable production, argues Lyu Yung, chairman of China National Cereals, Oils and Foodstuffs Corporation (COFCO), a Chinese state-owned food processing corporation.
One way to tackle the issue of sustainability is to link finance to climate change. As an example, you could lower interest rates on loan terms if the borrower meets certain targets set for sustainability. The saved interest that the borrower now holds can be reinvested into methods that increase sustainability performance. This has already been done in China. COFCO recently raised China’s first sustainability linked loan of $2.1 billion.
Financial innovation is necessary to achieve sustainable growth goals. Many private investors are hesitant to invest in sustainable agriculture as it is an uncertain market that comes with higher risks. In China, many small businesses have benefitted from non-conventional financing models. These come in various forms but one that is working well for businesses is the “Yunshuidai” credit system. Businesses can loan up to $500 000 depending on what the business has previously paid in tax. The conditions vary for the loan, but mainly depend on operation compliance and paying taxes. By increasing the uptake of innovative financing, policies and investment can be upgraded to enhance sustainability.
To promote sustainability, people need to work together. Sustainable change requires all stakeholders to be on board, from the farmer through to the board of directors. The Grain for Green project in China provided incentives in the form of grains, taxes and other benefits that encouraged farms to protect forested slopes as opposed to clearing them for agricultural space.
China has taken a firm stance on sustainability and climate change. This has been necessary as the country was a massive contributor to pollution and Chinese citizens are feeling the repercussions. China has made significant strides in reducing pollution and creating sustainable solutions that are beginning to take effect. China has invested more than $378 billion in 16 different types of sustainability programmes over the last two decades, which has impacted over 500 million citizens and is bigger than any other known national programme. China is a global leader in renewable energy solutions and low-carbon transport. The country’s focus on the environment is important in rallying its citizens to commit to sustainability.
5. Solutions of scale
The solutions needed to combat climate change can no longer be on the drawing board but need to be widely implemented now. China has been inventing products and implementing solutions – at scale – that can reduce the effects of climate change. The sustainability-linked loan is the largest in the global agricultural sector and could inspire other countries to implement these strategies on a large scale as well.
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