Climate-smart commodities and growth in US agriculture

There has been a recent notable shift towards more sustainable business practices. This is a topic that transcends industry, meaning that businesses everywhere are re-evaluating their operations in light of increasingly alarming data about the environmental impact of large-scale production practices.

The US Department of Agriculture recently announced that they will invest $1 billion in partnerships to support a new era of farming led by “climate-smart commodities.” Furthermore, since sharing this news in early February 2022, the United States and United Arab Emirates have said that the Agriculture Innovation Mission for Climate (AIM for Climate) will target a total of $8 billion in climate-smart commitments by the upcoming COP27 session set to take place in November of this year. This continues the trend of onshoring and domestic growth we have seen globally since the onset of the COVID-19 pandemic and, as some sources indicate, it could also be an attempt to increase the competitive advantage of American producers.  

A “climate-smart commodity” has been defined as “an agricultural commodity that is produced using agricultural practices that reduce greenhouse gas emissions or sequester carbon.” This idea has recently gained traction in the news due to not only these significant investments, but also continued research that illuminates the importance of holding large corporations responsible for their own environmental impact. Examples of environmentally conscious practices include no-till farming, growing cover crops, agroforestry, rotational grazing, and reforestation, to name a few. In essence, this is a form of conservation, a natural pivot as the world shifts in preparation for a more sustainable future. The use of renewables in farms is on the rise as well. According to the US Department of Energy, a record amount of solar power was added to the nation’s supply last year. 

This is one of several recent pilot projects initiated by the US government to provide incentives to producers and landowners to implement climate-smart production practices and activities, bolstering the US’ fight against climate change and the government’s promise to take environmental threats more seriously. Ultimately, they are attempting to monitor and verify carbon and greenhouse gas benefits associated with these climate-smart practices and subsequently develop markets and promote resulting climate-smart commodities.  

As the most established commodity firms re-evaluate their own environmental impact and transition to more sustainable materials and practices, programs like this will ensure that such businesses are incentivized to continue on a trajectory that embraces sustainability. This will lead to the need for commodities businesses to consider hiring individuals that have specialized experience with sustainability practices in an effort to secure grants by outlining their long-term commitment to these practices. These individuals do exist but, in an already very niche market sector like commodities trading, they can be much more difficult to identify. To get ahead of the curve, merchants should begin considering their existing organizational structures and making room for key hires to help drive these changes. Specifically, being prepared to add headcount from a Research and a Learning & Development perspective. With the way this particular topic is trending, companies simply cannot afford to be left behind.  

Another challenge will be ensuring long-term compliance within the parameters of climate-smart practices, especially within agricultural commodities. Being one of the oldest industries in the world, agricultural commodities has an extensive history of best practices that are hundreds of years old. With this being the case, even with the financial incentives supporting these changes, there is sure to be pushback from local farming communities. Being mindful of not dismantling systems already in place, but rather simply ameliorating them to position themselves better for the future.  

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