Researcher talks about the challenge of implementing circular production chains in agribusiness

There are several challenges faced by agribusiness in the search for the adoption of sustainable production systems. Examples include mitigating greenhouse gas emissions, increasing efficiency in the use of inputs, reusing currently discarded materials and reducing food waste. According to the Food and Agriculture Organization (FAO) of the United Nations, 35% of food production in Brazil is wasted. Embrapa estimates that, of the total that is no longer consumed, 10% is still lost in the field, 50% in handling and transport, 30% in the process involving marketing and supply and 10% among final consumers.

Whether in recognition of the seriousness of the challenge or under pressure from increasingly demanding customers, part of agribusiness has been debating ways to ensure the transition to more sustainable production systems. Communication with other players in the sector, including universities, has been strengthening. But a dilemma remains: who pays the bill?

How can we establish circular chains that reduce waste and increase integration and sharing of information between different actors in the sector, when the profitability of the old model remains high, and it is not clear who should pay the transition bill?

Costs x benefits

While the sector seeks answers to these questions, academia has been making its contribution. “There is a growing amount of research suggesting methodologies to enable a transition compatible with the principles of the circular economy”, says Bruno Varella Miranda, assistant professor at Insper and PhD in Agricultural Economics from the University of Missouri-Columbia.

In partnership with two other assistant professors at Insper, Guilherme Fowler A. Monteiro and Vinícius Picanço Rodrigues, Miranda is the author of a study that seeks to contribute to the debate. “We argue that the implementation of circular agro-industrial systems will only be put into practice when the benefits of adoption become clear and are greater than the costs of implementation”, says Miranda.

“A circular system involves higher governance costs, because more transactions need to be organized. On the other hand, the potential benefits that can derive from these new practices are not always clear, because they still seem to be dispersed throughout the production chain”, continues the professor.

Integration

The researcher recalls that, although many agents in the sector understand the benefits of rethinking processes and improving coordination between actors, the adoption of circular economy principles has been progressing more slowly than expected by the most optimistic analysts. Partly because this is a very heterogeneous sector.

“Not everyone involved sees change as a priority. Many fear change”, says the professor. “Technologies and practices compatible with the circular economy exist, but the producer or company has never used them, they do not know exactly what conditions they will find, what the new relationship with their suppliers and potential buyers would be like. Furthermore, there is resistance to sharing information with other participants in the production chain.”

With so many challenges, it should come as no surprise that the transition towards more sustainable agro-industrial systems is relatively slow. “In general, the adoption of a more sustainable model will be accelerated if an agent belonging to the production chain sees the benefits of the change and is able to appropriate such gains. In this case, this agent may decide to bear the costs of establishing a production chain with additional transactions, as we expect in the case of a transition to the circular economy.”

This will not always happen, however. Therefore, the professors discuss a second possibility in their work: that the transition be fostered by support organizations, such as cooperatives or associations linked to a specific industry, which would encourage the exchange of information and the building of trust between the parties.

Bruno Varella Miranda, who is the grandson of rural producers, is convinced that the currently predominant model, based on linear agro-industrial chains with a high level of waste, will be overcome, either through the sector's initiative or through pressure from society. “We still sell the idea in Brazil that we have water, land and sun in abundance, forever. But we will have to rethink the configuration of rural spaces in Brazil. The aging of the rural population around the world poses challenges for us. The establishment of more sustainable production models could provide us with the possibility of further dynamizing agribusiness, connecting it in new ways with urban Brazil.”

In line with Insper's proposal, which operates in connection with society's demands, Miranda says that the researchers' proposal is part of a broader scenario. “The study is part of a broader effort. Our biggest challenge, as researchers at Insper, is to ensure a fruitful integration between academia and the market, without there being a relationship of subordination”, she states. “Academia needs to look at society, to the same extent that the market has a lot to gain from listening to researchers, in order to avoid just repeating routines, without thinking about new possibilities.”