Innovation

The food that is purchased in most grocery stores has a long journey from the ground to the plate. Most produce is grown on large farms in rural areas of the country and is shipped hundreds or thousands of miles to an urban center. This model includes extensive transportation costs and is subject to food waste. The National Resource Defense Council estimates that 40% of food produced in the US is wasted, in part due to inconsistent refrigeration, extended time on loading docks, truck malfunctions, and other transportation issues.

BrightFarms has created an innovative business model for the agriculture industry. BrightFarms has paired down their supply chain while reducing the risk normally associated with agriculture start-ups. By placing greenhouses that produce food near the urban centers where that food will be eaten, the food travels shorter distances and is fresher and healthier when it arrives on consumers’ plates. When food has shorter distances to travel to reach the consumer, there is less loss of product in transport and fewer costs associated with transportation. BrightFarms achieves a leaner, more efficient supply chain by placing greenhouses near urban centers in which the produce will be consumed.

Small farms have historically been plagued with uncertainty and risk. Even small agriculture companies that rely on greenhouses and are therefore less subject to crop failures still run the risk that they will not be able to consistently sell their produce to grocery stores. According to a report from the National Resource Defense Council, if farms are unable to sell their crops, those rejected crops go to waste - many times, they cannot even be donated to food banks. Due to the significant risk of wasted crops, small agriculture companies struggle to find adequate financing, as financiers are less willing to roll the dice. If the farms are able to find financing and buyers for their produce, they may be likely pass along the cost of that risk in a higher price.

To combat this risk, BrightFarms has integrated what they call Produce Purchase Agreements — modeled off of Power Purchase Agreements pioneered by solar energy companies — into their business model. These agreements are contracts that guarantee that grocers shall purchase the food that the greenhouse produces at a fixed price over the long term, allowing BrightFarms to secure financing from investors. The Produce Purchase Agreements, or PPAs, allow for BrightFarms to create a stable business model where the additional cost that end-consumers pay is for fresh produce, rather than transportation, uncertainty costs, and food waste costs of other farms.

BrightFarms' business model is scalable regardless of how much they expand and can be easily adopted into other sectors. Although the concepts of local production and PPAs individually have been used before, BrightFarms was the first company to combine the two to create a cohesive, sustainable business model. Because this business model allows for BrightFarms to operate local greenhouses without the environmental costs of food wasted in transportation and CO2 emissions from shipping food hundreds or thousands of miles, and ensures that their produce will not be wasted for lack of buyers, BrightFarms' business model is a net positive innovation.

Inspiration

BrightFarms began as an agricultural consultancy company, providing information strategies to help clients establish rooftop hydroponic greenhouses in New York, run by Dr. Ted Caplow. When Ted partnered with Paul Lightfoot, a supply chain management specialist, the two joined their expertise. Ted and Paul integrated the concepts of urban greenhouses as a means of providing a closer link between food and consumer and the Power Purchase Agreement concept that had been used in solar energy companies to create BrightFarm’s business model innovation.

Ted Caplow, a PhD in Environmental Engineering, says he has long been interested in the combination of environmental responsibility and innovation. Ted was inspired to find solutions to the problem of urban areas' function as environmental drains; "They're almost like black holes, from a resource standpoint. Cities are these spots on maps where we pour food and water and power into that, and nothing comes out but garbage - it places a great deal of strain on country." Ted wanted to utilize the resources in and around cities that could end up reducing the drain that cities create, so he began urban rooftop farming programs.

Overall impact

BrightFarms’ greenhouses are positioned near or just outside of larger urban areas. BrightFarms has contracts with grocery stores to sell their food in those urban areas to which they are adjacent. Placing these greenhouses near where the food will be sold drastically reduces the food waste, gasoline use, and greenhouse gases that would otherwise occur as a result of trans-continental shipping. The resulting food that BrightFarms produces is fresher than traditional produce, with none of the emissions pollution and food waste of traditional farming and shipping.

Business benefit

BrightFarms' unique business model produces fresher foods than through traditional farming methods. BrightFarms foods are more valuable to consumers, because they are fresher and can be stored for longer due to the shortened supply chain. BrightFarms foods are more valuable to grocery stores not only due to added customer value, but also because they can be stocked for longer periods without spoiling.

Because BrightFarms saves money on operating costs that would usually be spent on transportation, the purchase agreements with grocery stores meet or beat prices for traditionally-grown food. The produce purchase contracts that BrightFarms creates with grocery stores means that BrightFarms takes on less risk than the average small agriculture business, which encourages reduced-risk investment opportunities in the company, which in turn encourages BrightFarms’ growth. BrightFarms has raised over $25 million in capital and has signed over $100 million in Produce Purchase Agreements since its creation.

Social and environmental benefit

BrightFarms brings fresh, nutritious foods to urban areas year-round without the environmental impacts of large traditional farms. BrightFarms’ business model reduces greenhouse gas emissions and food waste. Their farms create higher yields at lower cost with less time between harvest and consumption, providing more food in less space with less environmental impact. Instead of simply altering business practices to do less harm, BrightFarms is built around the ideas of creating a positive impact. BrightFarms produces food - virtually none of which is wasted - locally, using fewer resources, and sells that food to urban areas nearby that may not have access to foods that are as fresh as BrightFarms'.

BrightFarms' work addresses three broad UN Sustainable Development Goals: #2 Zero Hunger, #11 Sustainable Cities and Communities, and #12 Responsible Consumption and Production. Specifically, BrightFarms is working toward sub-goals 2.4 (ensuring sustainable food production systems and resilient agriculture practices), 11.b (increasing the number of cities working toward sustainability goals, including resource efficiency), and 12.3 (to halve food waste at the retail and consumer levels, and reduce food waste along production and supply chains).

Interview

Dr. Ted Caplow, Chairman of the Board