Blog | 21 May 2024
The urgent need to address nature loss implications for agriculture and beyond
Carina Manitius
Economist, Economics & Sustainability
Our society and economy are deeply intertwined with nature, but human activity has pushed nature into crisis—one-third of the world’s forests are gone, the rate of species extinctions is accelerating, and scientists have issued stark warnings about the rapidly declining health of ecosystems. At the heart of this crisis is a profound irony: we are jeopardising the very systems upon which our life depends.
Perhaps no sector represents this better than agriculture. Agricultural production depends heavily on nature for essential services such as pollination, rainwater, and natural pest control, meaning the consequences of nature loss pose immense risks to the sector. This is especially true given that agricultural production is concentrated in regions which are experiencing some of the most severe nature loss. Advances in economic modelling and satellite data have enabled us to better understand the extent of this problem: Oxford Economics’ analysis suggests that an estimated 52% of agricultural production occurs in ecosystems that are classified as being imperilled (Fig. 1). This risk is particularly concentrated in imperilled ecosystems in Eastern China, which are estimated to account for nearly a third (29%) of global agricultural production.
Source: OE based on IFPRC
Note: The map only identifies regions that account for at least 0.1% of global agricultural production.
In our globalised world, disruptions to agricultural production in one region can reverberate across the globe, affecting consumers and industries worldwide. We’ve already begun to see examples of this in supply chains for food. In 2023, droughts in Spain led to reduced crop harvests, triggering shortages and price hikes in European food markets. Similarly, recent heavy rainfall in the UK is anticipated to drive up food prices later this year.
However, the agricultural sector produces more than just food. Oxford Economics estimate that 14% of production is used for non-food purposes (Fig. 2). The share of agriculture used for food vs non-food purposes varies by region. For example, the vast majority of agricultural production in imperilled ecosystems in the Midwestern US is for food purposes, whereas production in Central Asia is mostly used for non-food purposes. Non-food uses of agricultural products include cotton used to produce textiles, palm oil used to produce cosmetics, or seed oils used to produce paints and lubricants. This means that the risks of nature loss to agriculture extend beyond the food system to industrial supply chains as well.
Source: OE based on IFPRC
Note: The map only identifies imperilled regions that account for at least 0.1% of global agricultural production.
We’ve already seen examples of how risks to agriculture can extend to industrial supply chains, such as the 2022 Russian invasion of Ukraine. This caused the disruption of Ukrainian agricultural production, leading to issues for the European cosmetic industry, which relies on grains and oils produced in Ukraine. As the effects of climate change and nature loss create more shocks to production, these types of disruptions to supply chains will likely become more frequent, widespread, and severe.
Better understanding nature-related risks should therefore be a priority not just for the agricultural sector, but for industrial manufacturers and any other sectors that rely on agricultural output, especially given the complexity of global industrial supply chains, which can be difficult to trace.
Progress is being made in developing approaches, tools, and datasets which improve the traceability of supply chains to their impact and dependence on nature. This facilitates businesses in the long-term planning required for understanding and mitigating their nature-related risks and opportunities. As nature degradation intensifies, the need to proactively manage nature-related risks in supply chains will become even more urgent. Developing a better understanding of these risks should thus be prioritised in corporate boardrooms worldwide.
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