As the food and agriculture industry takes a closer inventory of its climate impact and companies start setting science-based targets, reducing Scope 3 emissions becomes top of mind. It's where 80 to 90 percent of the industry’s climate footprint lies. But how do you transform today’s agricultural system to one that sequesters rather than emits carbon along with delivering other ecosystem benefits?

Redesigning financial incentives is one part of the answer. And that work doesn’t just lie in the hands of agricultural lenders and other financial institutions. Food companies can play an essential role in breaking down the barriers that prevent farmers from adopting practices such as cover cropping, reduced tillage, and conservation strips.

To help companies get started, a working group at the industry collaborative Field to Market published a report last week. It looks at the intersection of corporate supply chains and farm finance, laying out the barriers and opportunities for financial innovation and providing examples for effective value-chain collaboration.

Where do you start when considering financial incentives for farmers? Many options exist, and this topic gets technical quickly. The authors did a good job here. They laid out five essential tools, illustrating their mechanisms, value for farmers, and supply chain impact. Here’s a preview of what you’ll find in the report:

  1. Blended finance combines public, corporate, and philanthropic funds to scale up investments.
  2. Sustainable finance creates financial products or services to encourage the development of new green activities or minimize the environmental impact of existing activities.
  3. Transition risk-sharing offers mechanisms that back farm risks associated with adopting new conservation practices, aiding in the initial transition period.
  4. Pay for performance programs incentivize farmers for the environmental outcomes they provide — instead of paying a farmer 75 percent of the cost of implementing a filter strip, payments would derive from the pounds of nitrogen and phosphorus reduced in farm runoff.
  5. Land tenure and leasing incentives facilitate moving from informal verbal to written farmland leases, incentivizing conservation by setting expectations on using certain practices or management.

Read the full article about emissions reductions for farmers by Theresa Lieb at GreenBiz.