Innovation

The Netherlands has one of the highest population densities in the world meaning that the pressure for space has resulted in innovative efforts to help agriculture thrive. The drive for intensification has caused environmental, economic and social challenges in the agricultural landscape. Changes in farming practices are urgently required to conserve and stimulate biodiversity, and also to ensure sustainable production systems which depend on ecosystem services (e.g. clean water and healthy soils). Theme Manager for Food and Agriculture Sustainability, Jeen Nijboer put it this way, “if you are going to maintain nature properly and the resilience of the soil and disease pressure system are preserved, the agricultural sector will become independent on external inputs. Then they free themselves from working with more pesticides or the usage of more fertilizer to maintain the production level in order to be able to feed everyone. If you are able to restore that, you become more independent and offer a better perspective for the sector. The understanding and ability to get there, has to become fully present in the agricultural sector. So there is a change process going on”. However, such a system change is challenging, also due to the current socio-economic position of farmers.

The dairy sector in the Netherlands is famed for its production efficiency, but a current system issue is that dairy farmers make limited profits and therefore lack financial capacity and incentive to contribute to biodiversity restoration. To break this vicious cycle, new revenue models are needed which financially rewards farming with care for biodiversity and thereby make ecosystem-based dairy farming a profitable and attractive business. How can the dual challenge of nature restoration and future perspective for farmers with the entire sector together be tackled?

The collaboration of Rabobank (largest agriculture financer in the Netherlands), WWF (World Wide Fund of Nature, Netherlands) and FrieslandCampina (the largest dairy cooperative in NL) has resulted in the ‘Biodiversity Monitor for Dairy Farming’, a tool to measure farmers’ biodiversity-based performance on and around the farm, using an integrated set of Key Performance Indicators (KPIs). The KPIs reflect the impact of farming practices on the four pillars of biodiversity: functional agrobiodiversity, landscape diversity, species diversity, and regional diversity. So rather than measuring the resulting biodiversity impact itself, the KPIs measure biodiversity-based performance within a farmer’s span of control: “if we look at companies and how they monitor their progress, we have to look at Key Performance Indicators. That has an indirect impact on the end result and that is the diversity in flora and fauna. And farmers can then also steer towards that. Farmers need to have a bit of clarity; what can I influence, what can I steer on?”.

Widespread adoption of this standardized monitoring tool allows farmers to receive multiple rewards from different stakeholders for their biodiversity performance. This accumulation of rewards will make investments in biodiversity more rewarding for farmers and forms a new revenue model that stimulates ecosystem-based dairy farming. Financial rewards could be higher farmgate prices (from costumer), lower loan interests (from bank), lower land rental prices (from land leaseholder), licensing (from government), coupled income support (from EU), lower water taxes (from water board), etcetera.

Inspiration

An important condition which enabled the success of the Biodiversity Monitor development was the ‘coalition of the willing’. The aim of this collaboration is the development of a new business model that turns protection and recovery of biodiversity from a cost item into a source of income. The multi-stakeholder coalition of Rabobank, WWF Netherlands and FrieslandCampina came together to break some of the barriers and find ways to reconcile the environmental (biodiversity restoration), economic (good income and future perspective for farmers and financial risk conservation), and social (sector’s license to produce milk) objectives of stakeholders in the dairy landscape.

An enabling factor there was that these stakeholders all have intrinsic motivation for systems change. These stakeholders were motivated to join the initiative, in order to ensure sustainable dairy production systems, minimize financial risks, and safeguard societal support for the sector (license to produce). As one of the interviewees adds: “what really matters to me is that the farmers get much more appreciation when taking good care of nature and get a compensation for that”.

It started with constructive, appreciative dialogues and actions towards what is needed for a sustainable dairy sector: “in the first instance, it was about definitions, Key Performance Indicators and about calculation rules, which really took a while before that was all clear”. The (long) process of conversations and knowledge building under guidance of independent researchers, led to a shared understanding of the landscape conditions, challenges and opportunities. Consequently, this enabled collaborative development of the Biodiversity Monitor and an implementation action plan.

Overall impact

Although this project is still under development and has not yet achieved the final stage, we acknowledge the success of the process so far. Particularly the adoption of the monitor in the sustainability programs of FrieslandCampina and Rabobank is a success. Concerning markets, FrieslandCampina incorporated the biodiversity KPI (next to climate and animal welfare KPI) in the new sustainability certificate On the way to Planet Proof dairy, which adds 1-2 euro cents per litre milk for the certified farmers. Rabobank has developed a program to reward farmers with an interest discount when they score well on the KPI.

Also the innovative Delta Plan for Biodiversity Recovery (an ambitious plan signed by 20+ leading Dutch agri- and horticulture retail, agro-industry, nature and environmental organizations and science institutions) embraced the Biodiversity Monitor as key tool for monitoring and rewarding best practices. Interest from other sector stakeholders, such as provinces and water boards, to work with the monitor is growing. This coalition will continue building experiences, for example in the arable farming sector in the Netherlands and later on also in other countries.

The newly developed methodology and tools are a big success. Especially the use of KPIs to quantify impact instead of measures or best agricultural practices, is critical to enhance impactful change. "The biodiversity monitor as a result is based on the process to get there together; piece by piece you create mutual understanding that results in a monitoring system". The methodology has potential to be unrolled in other sectors, regions and globally: “if you are going to scale this internationally, you need to pay attention to the design of the process. There is a lot in the process, which starts with the fact that you, as a connector, partner with a party that really has an impact in the chain (as a Friesland Campina) that already knows and understands the supporters. And if you have a first framework, you will actually test it and develop it further with the farmers”.

Business benefit

“What makes me happy? That farmers get much more appreciation for taking care of nature and that they also get compensation for it, including by Rabobank”. The farmers will be rewarded for such positive results with stacked financial support from multiple supply chain stakeholders, what makes ecosystem-based dairy farming a profitable and fulfilling business. FrieslandCampina has already adopted the KPIs in their milk price reward scheme and Rabobank is conducting several pilots to differentiate interest loans based on KPI performance of farmers. These are important steps in the alignment of efforts towards the common goal of landscape scale biodiversity recovery and sustainable farming. The Rabobank benefits from financial risk minimalization and a corporate responsible image. “As a cooperative bank, we look at the long-term perspective. What society finds important always comes back into your chain in the end. If we don't do anything about it, you would have an agricultural system that is no longer going to be accepted by society and then a farmer has a sales problem. They no longer meet the requirements. We have a great interest in maintaining the perspective”. Also other stakeholders who might use the monitor in the future can benefit from e.g. sustainable soil management (land leaseholders), improved water quality (water boards), or enhanced conservation of nature reserves (government agencies).

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Social and environmental benefit

While direct financial beneficiaries will be for the dairy farmers, the dairy sector also benefits with the maintenance of their license to produce milk. “This story about this approach has a positive impact on the people in society who are critical of the agricultural sector. And it is just so important to be able to reverse that”. But the ultimate benefits are for nature. When a dairy farmer scores positive on KPI, it means that nature is benefiting in terms of functional agrobiodiversity, landscape diversity, regional diversity, and/or species diversity. As a farmer illustrated: “it just makes me happy when I walk through the fields and I see the restored nature. It stimulates the passion I have for nature. I don't have to scale up my business so much as long as I get a decent income from my business. In the end it's not about who has the most cows but who has the richest nature”.

Interviews

Mr. Jeen Nijboer, Theme manager Food & Agri Sustainability

Mrs. Margit van den Berg, Program manager Food System Transition