In August, the United Nations Intergovernmental Panel on Climate Change (IPCC) published what was dubbed ‘a code red for humanity’. The landmark report called for immediate action to mitigate climate change. The IPCC predicts that under the current emission scenario, the Earth’s temperature will reach 1.5 degrees above pre-industrial levels in the next 20 years.
In a timely effort, the Ceylon Chamber of Commerce (CCC) in partnership with the Australian Government-funded Market Development Facility (MDF) launched a series of events titled, ‘The Business Case for Climate Change Adaptation for Agribusinesses,’ bringing together business leaders of the agriculture industry to discuss best practices and business models to limit climate change.
Manjula De Silva, CEO of CCC and Momina Saqib, MDF Country Director in Sri Lanka sat down with ECONOMYNEXT to discuss the importance of climate resilience in the agriculture sector.
Can you talk about MDF and its approach?
Momina: Market Development Facility is an Australian Government-funded organization. Our objective is to improve the livelihoods of disadvantaged Sri Lankans through sustainable, business-led innovations. Our starting points are sectors and segments of the economy that show high growth potential, which is not being realized for a host of reasons. Within these segments, we look for businesses that recognize the opportunity and want to do things differently. We recognize the role of the private sector as an engine for growth and poverty alleviation and we try to play a facilitative role in enabling the private sector to unlock growth.
MDF nudges innovative firms to test new ways of doing business, which if successful, can be more profitable for the company while creating new income-earning opportunities for producers and workers in the supply chain. However, we only intervene if the company is interested in following a greener approach in the long term.
In Sri Lanka, we focus on agriculture, including high-value agriculture, agricultural technology and fisheries. We also work with market stakeholders to strengthen the country’s tourism sector.
Can you give us a brief overview of the agriculture sector and its importance to the economy?
Manjula: Agriculture contributes to a significant portion of our GDP in terms of employment, both direct and indirect.
This sector acts as a feeder to most industries that add value to agricultural products such as coconut, rubber, food processing and others.
In many ways, it is an important sector. When the agriculture sector prospers, demand for fast-moving consumer goods (FMCG) increases, white goods pick up, thereby impacting banking, insurances and leasing sectors. This is a sector with multiple linkages.
Let us talk about climate change and its impact on Sri Lanka. What are the potential challenges and risks?
Manjula: Picking up a few points from the recently concluded MDF-CCC climate change forum, the frequency of floods and droughts have increased significantly in recent times. Previously, there used to be a pattern to these occurrences. That cycle is no more.
Now, climate disasters alternate one after another. When one part of the island experiences extreme rainfall, the other goes through a drought.
All these changes have serious impacts on the agriculture sector and its productivity. On one hand, it impacts volume. On the other, it impacts the quality of output. As we all know, this is a global issue. Across the world crop yields have dropped, and we have seen that in Sri Lanka too.
These reasons are why it is becoming more important to look at climate change and find solutions to mitigate the impact.
Tell us about the CCC and MDF webinar series? How will it help agribusinesses and what outcome you are hoping to achieve?
Manjula: What we are trying to do is to bring experts and industry leaders together, so that they can learn from each other.
The events will also provide a platform for the industry to brainstorm innovative ideas, processes and best practices. Based on the discussions, CCC is hoping to make certain recommendations to the Government and other authorities, to advocate for the industry.
One thing that came up in our first online seminar is crop insurance. India and Bangladesh have already rolled out this solution. It is affordable and accessible, especially for smallholder farmers.
There have been pilot projects in Sri Lanka, but it has not moved beyond that.
The other is sustainable financing. It requires investment, especially for farmers, to adopt climate-resilient, sustainable practices.
Several banks in Sri Lanka have sustainable financing programs, where you can get funds at a concessionary rate. But we need to increase farmer awareness of these opportunities.
Why is MDF working with agribusinesses to encourage climate change adaptation and mitigation?
Momina: There are two important aspects – first, why does MDF engage with the agriculture sector in the first place. And second, why invest in climate change adaptation and mitigation.
For the first question, we see an opportunity for Sri Lankan agriculture to be more efficient and competitive, and in that process, create opportunities for the men and women that engage with the sector. Around a quarter of all Sri Lankans depend on the agriculture sector. This means growth of agriculture is critical to sustain livelihoods and improve standards of living. However, not all agriculture has the potential to be competitive – therefore, we have to be realistic and clear-eyed about where the opportunity lies in the increasingly competitive market.
Within this context, we see climate change adaptation and mitigation as a smart business strategy. On one hand, it is essential for businesses to be prepared and manage the risks posed by changing climate and the increased frequency of adverse weather. On the other hand, good environmental practices and sustainability are no longer just buzzwords, but the price of entry to high-value markets. This is the bar that Sri Lankan businesses need to surpass if they are to stay competitive.
What kind of climate-smart initiatives could agribusinesses pursue?
If you look at the farming system, one pathway is agricultural inputs. For instance, if we know the drought is going to be a problem, then this will involve looking at more resilient alternatives such as developing drought-resistant seeds, or better water management solutions. Agribusinesses will need to figure out what agri inputs and technologies to use, how to market those to farmers and build capacity around changing behaviour and improving adoption.
It’s not just agribusinesses that provide climate-smart initiatives. Extreme weather events are becoming more frequent in Sri Lanka. Farmers assume heavy financial risks when planting new crops and adverse weather is a threat to the entire service. Insurance companies have a role to play to develop and introduce appropriate insurance products. Similarly, banks and financial institutions have a role to play in financing adaptation investments.
In the last couple of years, a thriving agri-tech sector has emerged in Sri Lanka. Digital solutions also have a role to play in making farming more efficient and precise.
Are Sri Lankan companies ready for this transition?
Momina: Businesses, by their nature, innovate to stay competitive and deal with new challenges. With climate change particularly, transitioning is not a matter of choice but a necessity. We have businesses like Dilmah, CBL, Keells and Hayleys at the forefront of this transition.
Many others are also making investments in making their supply chains more resilient to shocks, but perhaps, it is not being communicated in the language of ‘climate change adaptation’. Overall, our impression is that businesses understand the risks very well and are interested in finding solutions. There are perhaps gaps in knowledge and execution which we aim to address.
What companies are you working with, in Sri Lanka?
Momina: We have more than 30 investments in Sri Lanka. A few stand out to be particularly relevant.
We are working with Keells, one of Sri Lanka’s largest supermarket chains, on improving knowledge of their farmer clusters and to help them understand consumer demand, so that farmer produce could better cater to the requirements. We prioritize working with firms that are interested in the long term, value-adding relationships with their network of farmers.
We are also working with technology companies to make precision farming possible. This will enable more optimal use of agricultural resources. An example is an agri-tech company called SenzAgro. They are a Sri Lankan firm that offers sensors to obtain data on soil conditions, weather patterns and agrochemical inputs. Based on information collected by these sensors, an advisory is delivered to farmers on crop management.
They have a well-tested solution that has delivered results for plantations. Our work with them is to take the benefits of their technology to smallholder farmers.
Why did the Chamber venture into this climate change and agribusiness initiative?
Manjula: Chamber has been involved in this topic even before it became mainstream. We started the Sustainability Awards 18 years ago. This started at a time where sustainability was not a hot topic.
We encourage the private sector to get involved. This might encourage smaller organizations to look forward to the Sustainability Awards and to share their case with us. Most bigger companies take part in the Awards, but in agribusiness, many small and medium-sized companies are involved.
Chamber has always engaged in environmental-related projects actively. The other area we are involved in is minimizing waste through recycling and reusing plastic. We received funding from USAID as part of the Clean Cities Blue Ocean (CCBO) project.
We are working on many fronts, including with many government institutions. We see this opportunity to work with the Australian Government’s Market Development Facility as one that has tremendous potential to create awareness among agribusinesses.
How can we balance the often-conflicting needs of development and sustainability?
Manjula: There is a perceived conflict in the short term, but not in the long term because, in the long term, a green development strategy will benefit your material development agenda in terms of providing a higher standard of living for people.
In the short term, it may not be feasible to switch to renewable energy sources 100% because you need to think about the energy needs of households and industry. Electric cars are a workable solution, but right now, it is an expensive one.
Similarly, when it comes to farming, we are in favour of the government’s move towards organic farming. But there has to be a balance in the short run to manage the transition, smoothly.