Business school teaching case study: The farming subsidy debate

The writer is a professor of accountable and sustainable enterprise at Oregon State UniversityShould agricultural giants problem the farm subsidies destroying biodiversity or work inside the system?That’s the query dealing with corporations corresponding to Singapore’s Olam, which sources and processes components and commodities — from cocoa to espresso to rice — throughout greater than 60 international locations.The stakes are excessive. Biodiversity loss threatens provide safety, company legitimacy, and long-term worth creation. It’s a explicit downside for companies corresponding to Olam which has cultivated a fame as a sustainability chief by its regenerative practices and clear sourcing. Its Dwelling Landscapes Coverage for instance adopts a internet optimistic method — placing again extra into meals and farming methods than it takes out. The goal is a “triple optimistic” affect: viable livelihoods for farmers, thriving rural communities with entry to companies and vitamin, and regenerated ecosystems that restore biodiversity, soil and water well being, and carbon storage. That enables farming to coexist with conservation, and native communities to take part in land-use selections. The corporate’s AtSource platform affords clients traceability and entry to social and environmental metrics. It helps due diligence and permits patrons to trace progress on soil, water, and group outcomes.UN companies estimate that world farm subsidies whole $540bn yearly, with 87 per cent dangerous for biodiversity. However agriculture is only one sector. When together with different sectors, corresponding to fossil fuels, fisheries and forestry, the prices from authorities subsidies that degrade nature are a lot larger — whilst governments pledge to satisfy world biodiversity targets. Which means voluntary company biodiversity initiatives battle to achieve traction when public finance steers agriculture in the wrong way.Forward of the UN biodiversity summit final 12 months, Olam Meals Substances joined scores of companies in urging governments to lift their ambition. The CFO warned: “If we don’t deal with nature, if we don’t deal with biodiversity, the enterprise that we function might not even exist in years to come back.” The joint name pressed governments to repurpose dangerous subsidies to align public finance with non-public biodiversity commitments. Danone, Unilever, Oatly and McCain have urged the EU to redirect its Widespread Agricultural Coverage in direction of funds for so-called ecosystem companies, or advantages to people from ecosystems, in an indication that company advocacy on subsidy reform is starting to emerge.Finally 12 months’s UN biodiversity summit, many corporations urged governments to be extra formidable © Jair F. Coll/BloombergBut taking a public stance is fraught with complexity. In a lot of Olam’s key markets, state programmes — notably administered costs, corresponding to fastened procurement costs for staple crops — are politically delicate. These defend farmers from volatility, however distort incentives, entrench monoculture and lock governments into expensive subsidy regimes. In India, minimal help costs on wheat and rice have contributed to groundwater depletion and biodiversity loss. In Nigeria, regulated meals costs have been used to safe political help however on the expense of long-term agricultural resilience. Firms that brazenly criticise such preparations danger being seen as difficult nationwide sovereignty. As an illustration, multinational beverage companies throughout Africa confronted pushback once they opposed sugar-sweetened beverage taxes, with governments and well being advocates framing their resistance as an assault on public well being coverage. Equally, in Europe, agrifood corporations corresponding to Danone have referred to as for CAP reform to raised align subsidies with sustainability objectives. This has encountered stiff resistance, as French political leaders and farm lobbies defend CAP helps as a key pillar of agricultural coverage. These episodes present how company activism, even when well-intentioned, can shortly provoke political resistance.Any firm selecting to step into the subsidy debate should be sure that its activism is rooted in a transparent enterprise case. For Olam, which didn’t reply to a request for remark for this text, it might relaxation on three arguments. First, redirecting enter subsidies and worth ensures in direction of outcomes-based funds would straight help the regenerative practices it already promotes, enhancing soil well being, boosting water retention, restoring pollinator habitat, and enhancing local weather resilience. In such methods, farmers are rewarded not merely for yields however for measurable environmental advantages. The UK’s new Environmental Land Administration scheme, for example, ties funds to outcomes corresponding to lowered river air pollution or restored hedgerows. With its detailed farm-level metrics, Olam’s AtSource platform is properly positioned to help related fashions. Second, energetic advocacy would align Olam with efforts to reveal nature-related dangers. Governments and buyers are shifting in direction of obligatory transition planning; early engagement might give the corporate a strategic edge. Check yourselfThis is the most recent in a collection of month-to-month enterprise college model instructing case research dedicated to responsible-business dilemmas. Learn the textual content and the articles from the FT and elsewhere prompt on the finish and linked to inside the piece earlier than contemplating the questions raised.The collection kinds a part of a wide-ranging assortment of FT “immediate instructing case research” that discover enterprise challenges.Third, subsidy reform would assist degree the enjoying discipline. Producers investing in regenerative agriculture face opponents propped up by subsidies that externalise ecological prices. Redirecting public finance might scale back this distortion.The dangers are important. Coming into the general public debate might pressure relations with governments in producer international locations, slowing permits or jeopardising market entry. It might alienate suppliers who concern compliance prices, and expose Olam to prices of hypocrisy if elements of its provide chain nonetheless profit from dangerous helps. A extra cautious path could be neutrality, by specializing in scaling regenerative pilots, enhancing traceability and deepening due diligence with out coming into politically delicate subsidy debates. However neutrality comes at a price. It means leaving probably the most highly effective lever — public finance — within the fingers of others. So long as subsidies proceed to reward ecologically damaging practices, company progress dangers being drowned out by state-driven regression. The monetary publicity is already seen: cocoa yields in West Africa have been hit by excessive climate, swollen-shoot virus, declining soil fertility and lack of pollinator habitats. These shocks have pushed provide shortages and file worth spikes. In its 2025 first-half outcomes, Olam expanded its stability sheet by almost S$488mn ($377mn), largely as a result of larger enter costs in cocoa and low elevated working capital wants — proof of how ecosystem dangers can cascade straight into monetary outcomes. Olam just isn’t alone. Nestlé and Mondelez have cautioned buyers that biodiversity loss — from pests and plant illness to ecosystem decline — poses materials threats to their cocoa and low provide chains. Over time, shoppers, non-government organisations and regulators might query corporations whose sustainability rhetoric outpaces their actions. A extra balanced course is feasible. Moderately than focusing on particular person governments, Olam might take a principles-based stance, calling for subsidy repurposing in direction of measurable outcomes in soil well being, water high quality and biodiversity restoration. Drawing on the info in AtSource, it might pilot outcome-based programmes and share the teachings by coalitions of companies and NGOs, framing itself as a constructive companion in shaping world innovation. Questions for discussionConsider these questions:Ought to corporations like Olam have interaction in public advocacy for subsidy reform, regardless of the political dangers, or deal with scaling voluntary initiatives inside current coverage frameworks?How ought to multinational companies weigh the strain between safeguarding authorities relationships in producer international locations and responding to rising investor and client expectations on biodiversity?Can outcome-based cost methods — corresponding to these piloted within the UK — be realistically scaled in rising markets, and what position might company information platforms like AtSource play in making them credible?Is there a viable “center path” between neutrality and full-scale activism, or should corporations finally select between political warning and political engagement?