The Markets Institute @ WWF’s Top Issues, Trends, and Tools for 2022
The Markets Institute at WWF identifies global issues, trends, and tools around the most pressing challenges of our time. Each year we release a list of what may be emerging developments for industry and other stakeholders to consider as they stay ahead of the curve and shift their thinking and actions faster.
The lists are identified through research, interviews, data analysis, gleanings from others, and discussions with our Thought Leader Group. This year, we’re including some of the biggest surprises from the last year to help set the stage, and, for the first time, putting forth several direct actions and ideas to address what may be coming. As always, we welcome feedback and discussion, so please get in touch. We hope you are staying safe and as healthy as you can in 2022. — Jason Clay, Executive Director Markets Institute, WWF
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Biggest Surprises of 2021
- Global food production increased by 48% in 19 years since 2000. As recently as five years ago there were a number of contentious discussions about whether we would need to double food production to meet the increased net food demand from 2000 to 2050. That question is put to rest.
- The attack on the US Capitol, the first in more than 200 years, cast a dark shadow over the year. The growing lack of civility and accountability, at the global and individual levels, raises serious questions about our ability to work together toward common causes, including climate change.
- Coming out of COP26, food is still not a key part of the discussion, and some negotiators seem to be more concerned about their country’s liability than solving the problem. We need less talk and more action.
- Climate change is faster, bigger, and less predictable than we thought: former permafrost is now being planted with crops, the Gulf Stream is ‘wobbly’ and destabilizing, the wildfires in Siberia were bigger than all others combined, and bottom trawling produces as many GHG emissions as deforestation.
- New modeling suggests that the impacts of climate change will continue to 2500. That is some 21 generations away. We need pathways that lay the groundwork for multi-generational solutions.
ISSUES
- Global scale solutions. Climate change is like the pandemic — solutions must be global. However, the pandemic’s impacts are immediate, while climate change occurs more slowly and indirectly. Governments need to work together if we are to address climate change globally. They can’t simply meet periodically to discuss commitments, strategies, or evolving understanding on new assessments of GHG emissions. Governments need to provide the regulations to address climate change and then enforce them when they are not met. While the performances and impediments will not all be the same, the sooner we address the metrics and methodologies of measurement, the sooner we can work toward significant reductions in global GHG emissions. We must be transparent so that everyone can improve. If we want to achieve the biggest impact, we need to target the sectors―and practices in each―that are causing the biggest impacts.
- Incomplete science. As Albert Einstein said, science is never finished. Research and events over the past year or so suggest the impacts of climate change are greater and more varied than anticipated. While the science in the 2014 IPCC report was the best at the time, it has proven to be incomplete and, in some cases, wrong. But the pandemic has shown that we can move quickly even when there is more to be learned. A lack of perfect science hasn’t been a justification for inaction or even delaying action during the pandemic. We need to take that attitude with climate change. We need better tools (and data) to predict outcomes and build consensus about measurement and metrics using imperfect data. But we also need to realize that the data will never be perfect, or finished, and extreme events and new discoveries will bring more issues to be addressed. We need to move in the right direction, regardless.
- The problem with averages. When it comes to measurement across different production systems and different landscapes, global averages may give an estimated scale of impact, but they don’t help home in on where to intervene for maximum impact. GHG emissions reductions are also calculated on global averages. While this may be adequate for sectoral assessments, it isn’t granular enough to identify specific regions, producers, or production systems producing the most emissions. For companies, addressing Scope 3 emissions is difficult because the data is so variable (there can be a 10x to even 100x difference in emissions or impacts just across production of a single type of crop). Even if data aren’t perfect, companies, governments, and producers need to know where to focus to reduce impacts most quickly and at the least net cost.
- Continuous improvement vs. transformational change. The political weight of the status quo is heavier than the perceived need for change. We need to reduce the absolute number of resources we use to produce food, feed a growing and increasingly affluent global population, and reduce absolutely the GHG emissions from the global food system. Continuous production improvement and efficiency can be the enemies of these kinds of transformational changes. Scarce resources are being invested to improve the programs and infrastructure we have, not necessarily what we need for the future. Rewarding producers for what they are already doing, or even for doing ‘less bad,’ is not the same as doing “good” or moving toward what we need. We need absolute reductions of water, land, and input use, not just of GHG emissions. Governments need to set the bar high and let companies find ways to exceed it.
- Accountability. For years we have relied on individuals, producers, companies, and governments to account for their own contribution to global climate change and make necessary changes because it is the right thing to do. This is clearly not enough. Adding fuel to the fire, polarization and partisanship are eroding the ability of people, institutions, and governments to work together. We will not be able to address the world’s biggest problems if we cannot coordinate solutions at a global level and be held accountable for carrying them out.
TRENDS
- Legal rulings for the future. Recently several courts have ruled for nature, for future generations, and for the right to prevent exploitation of natural resources regardless of market demand (Ecuador, Germany, NL, Chile). This is at odds with several current views, e.g., “possession is nine-tenths of the law,” or discounting, which prioritizes current costs and benefits over those occurring in the future. The rulings will need to be upheld, eventually in the highest courts of the land. We have not yet seen how far this movement can be taken in different countries or how far it needs to go before causing a seismic shift in how we think about public goods or rights.
- 1.5° C solutions and nature. There is growing interest in “Nature Based Solutions,” employing nature (healthy forests, grasslands, wetlands, mangroves, coral reefs, etc.) to achieve our climate goals or a 1.5° future. But it doesn’t end here. The unstated part of the equation is that if we don’t get the food system right, nature won’t be around to help. In the first 18 years of this century, global food production increased by 48%, trade tripled, and the amount of cropland increased by 9%; at least half of that was converted from natural habitat. If we don’t halt the sprawl of food production globally, we risk destroying so much nature that we’ll be unable to rely on it.
- The digital transformation. The speed of change occurring in the global digital transformation is phenomenal, and it has affected most sectors in developed and developing countries. Though the digital transformation has allowed people access to data, information, infrastructure, institutions, and services they didn’t have before, the digital divide is very real. Access to information alone doesn’t always address basic needs or alter deeply engrained societal systems. The benefits of tech are not shared equally and many key natural resource users such as farmers and Indigenous communities struggle to utilize the growing suite of digital tools, even those that are intended to help better manage the world’s resources. The rise of digital technology has been accompanied by a decline in the real incomes and purchasing power of most people on the planet. Having the technology doesn’t mean we’re making the most of it.
- Confidence in carbon markets. For many, the current buzz about carbon markets (mostly soil carbon, but also forests) is a bit of deja’vu from the early 2000s. That period of Wild West in carbon markets led to a distrust of the system and questioning the credibility of the carbon being bought and sold. There is a remarkably similar feeling this time in the frenzy around them, especially with regard to food, soil, and forests. It will take some time to establish discipline and to build confidence in both soil and forest-based carbon credits and their markets. We need credible markets for carbon, but we also need the carbon being sold to be credible as well. We can’t afford to let this tool be undermined, but we do have to get it right.
- Shifting cropping patterns. We are seeing global shifts in agricultural production, both to keep up with demand and to address increasingly common extreme weather events. Brazil stepped up―at considerable environmental cost―to help meet the growing demand for grains and animal proteins. Canada has experienced increasing production for short-cycle crops as higher temperatures and longer growing seasons are pulling production from the Midwest into the Northern Great Plains. Central America has seen declines in corn and coffee production accompanied by the migration of farmers and their families to urban areas and North America. Food was harvested in areas of former permafrost in Siberia, and Malawi’s earnings from soy were higher than those of tobacco last year, suggesting how production is spreading in Africa as well. To be clear, producers don’t all decide to change what they produce overnight. Tolerance to productivity declines varies a lot among producers depending on the crop, the margins, producer age, indebtedness, etc. The slow shift of production could mask the issue for a decade or more.
TOOLS
1. Multistakeholder Platforms. After a decade or two working together in multi-stakeholder platforms, we are seeing this tool become more focused to address specific issues in different sectors. More and more of these platforms are precompetitive in nature. The entities involved understand that none of them can solve key issues by themselves or address the transformational changes that are needed. Many are beginning to see the need to bring in government and NGOs as well. To achieve the changes needed going forward, government will need to take a closer look at how competition law is being applied — it is currently well beyond the issue of pricing and inclusion, it is used by many to discourage collaboration of any kind as that makes change and management much more complicated. For better or for worse, NGOs not only represent specific issues like human rights, DEI, and the environment, they also represent civil society more broadly. But to be credible and effective, platforms will need as much transparency as the value chains they are trying to address.
2. ESG Select Risk Screens. Platforms are creating screens as one type of tool that’s made available to all players to address key issues. Two types of screens are currently in evolving investments and feed ingredients:
- Investments. Financial institutions want to ensure those they finance are reducing risks — legal, operational, reputational, and GHG emissions. In the past, there might have been a line drawn at what was legal vs. illegal. Today climate change is blurring the lines. Deforestation and habitat conversion generate so many emissions that anyone who buys and sells products from conversion, and perhaps anyone who touches or transports those products over time, is incurring unnecessary risks. If FIs don’t initiate credible DCF screens, they could well become responsible for GHG emissions through their loans.
- Feed ingredients. Animal protein producers are realizing that feed is a critical source of GHG emissions in their supply chains. They also realize that there are legal, economic, and reputational risks associated with several feed ingredients, as well as vendors and geographies of production. Leaders across animal proteins are beginning to address these issues through ESG dashboards to screen ingredient sources and substitutions. Issues screened for are deforestation and conversion, GHG emissions, water use in drought-prone areas, slavery, bonded or child labor, overfishing or lack of fishery management, geographies with reputational issues, or exports from countries associated with illegality or fraud. While screens are intended to increase traceability and transparency, they may also reduce the ability of feed companies to easily substitute ingredients based on price.
3. GHG liability. When it comes to credible avoidance or reduction of GHG emissions or actual sequestration of carbon, it is essential to avoid double counting. However, given that many supply chains have intransigent players, it is difficult to remove GHG emissions, especially those from primary production. Perhaps we should rethink the issue of liability and reporting. Perhaps anyone from the primary producer to the end retailer should be liable for the embedded GHG emissions until low emissions commodities become the norm. Today there is no liability for buying or transporting products with high levels of embedded emissions. All liability is passed to producers, but with no incentives to change. If all value chain actors who touch high emissions products are liable for emissions and have to show it on their books, the situation would likely change much more quickly.
4. Genetic technologies. Genetic technologies have long been used to increase productivity and efficiency. Today they are being used to address the impacts of climate change (drought and disease), and genetics is positioned to become a valuable tool in making food production more resilient. Genetics will continue to be used for both plants and animals, though the emphasis will shift toward improving the nutrition and digestibility of both food (for humans) and feed (for animals). It will also help in addressing gut health and adapting plants and animals to evolving production environments. Going forward, gene editing will become more precise, like using scissors, to address issues with much greater speed for plants, animals, diseases, input use, adaptation, and more.
5. Biogas digesters and manure management. While biogas digesters are not new, what they can do has expanded considerably to help producers address both waste and GHG emissions. And as a result, they are no longer limited to confined dairy and beef operations. Not only do biogas digesters produce methane that can be used for renewable natural gas (RNG) and produce electricity; now the substrate can be used to produce liquid ammonia as well as NPK for fertilizer. Digesters can also produce potable water and organic matter, which can be aggregated regionally to supply larger markets or entice long-term contracts (LTCs), which can then be used as collateral to help obtain finance.
POTENTIAL ACTIONS AND FOOD FOR THOUGHT
Stop fossil fuel investments. If we want to achieve a 1.5°C future, we need a complete halt on fossil fuel investments, projects, and subsidies to focus on and force decarbonization in energy and transport. This will have to be led by government.
Ag subsidies. Governments need to shift existing funds to help producers and the food system innovate to address climate change.
Boardrooms of the future. The traditional corporate structure, led by boards and C-suites, is no longer fit for purpose with the skillsets and perspectives needed to address the values of diverse, vocal populations in the 21st century. They must reimagine a 2030 future for their business and start to engage key employees and local community members to tackle the challenges that lie ahead.
Renewed collaboration. We need to work together―countries, companies, producers, supply chains, and public/private partnerships. Through collaboration, we can start global discussions about the application of competition law, share information and learn faster, evaluate tradeoffs, and avoid unintended consequences.
Treat climate change as the threat it is. Monitor and publicize the impacts of climate change the same as we do COVID-19 — then we could manage what we measure. Let’s start with both economic damage valuation and climate change-related casualties, which, unfortunately, we’ve seen throughout the pandemic to be a compelling factor. But let’s also document what works so that others can learn faster. We are all in this together.
Invest in global science and climate change education as well as platforms for everyone to share information and learn more quickly.
Give more voice to those who will be impacted most. One idea to consider is advocating for reducing voting ages to 16―older than the minimum age for admission to regular work in developed or developing countries, according to the UN. This could encourage politicians globally to address issues critical for future generations.
Please note that the above list does not necessarily reflect WWF’s policy or programmatic positions but is instead an aggregation of observations and potential actions developed through WWF’s discussions with a broad group of stakeholders and thought leaders.
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