Regenerative agriculture

By Artem Zakomirnyi

As the global population grows by an estimated 18% to reach 9.7 billion people by 2050¹, the agriculture sector faces an unprecedented challenge: producing enough food to sustain humanity while grappling with diminishing resources and environmental concerns. To meet the expected demand, the agricultural sector will need to increase annual production to 12.45 billion tons by 2050² — a formidable target that necessitates innovative approaches to farming.

However, the world has already maximized the use of arable land, which is expected to decline slightly to 5.17 billion hectares by 2050³. Based on the previous references, we predict that this places the burden of increased production squarely on intensifying agricultural practices to achieve an average yield of 7.9 tons per hectare. While intensification can boost productivity, it comes at a steep environmental cost.

The environmental toll of intensive agriculture

Intensive farming practices have proven to be a double-edged sword. While they effectively meet short-term production goals to address the growing demand for food, these methods have significant long-term environmental consequences that threaten the sustainability of agricultural systems.

One of the most pressing issues is the contribution of agriculture to greenhouse gas (GHG) emissions. Poor soil and manure management, combined with the decomposition of organic matter, releases significant amounts of methane and nitrous oxide, two potent greenhouse gases. This positions agriculture as a major driver of climate change, exacerbating global warming.

Soil degradation is another critical challenge linked to intensive farming. Invasive practices such as excessive tilling and the overuse of chemical inputs deplete essential nutrients, erode soil structure, and diminish its fertility over time. This reduces soil fertility and requires a gradual increase of chemical inputs to maintain the yields at previous levels, driving GHG emissions even further.

Biodiversity loss further highlights the environmental toll of intensive farming. The widespread use of pesticides indiscriminately targets pests and beneficial organisms, leading to ecosystem imbalances and the decline of essential pollinators and other species. Such disruptions in biodiversity undermine the resilience of agricultural ecosystems to infestations and climate events.

Water resource depletion is another significant consequence of industrial agriculture. Intensive irrigation practices place immense pressure on freshwater supplies, drawing heavily from rivers, lakes, and underground aquifers. This unsustainable extraction threatens both local ecosystems and long-term water availability for agricultural and human needs, especially in regions that are naturally scarce in freshwater.

Additionally, soil compaction caused by heavy machinery and overgrazing reduces the soil's ability to retain water and nutrients, ultimately lowering productivity. Compacted soil becomes less hospitable for plant roots and microbial life, diminishing soil fertility.

Deforestation compounds these issues, as the expansion of agricultural land often comes at the expense of forests. Clearing forests destroys vital habitats, reduces biodiversity, and releases stored carbon into the atmosphere, contributing to climate change.

The cumulative environmental consequences of these practices underscore the urgent need for a paradigm shift in food production. Sustainable and regenerative approaches must replace the harmful practices of intensive farming to ensure agricultural productivity aligns with ecological preservation. This transition is essential for protecting the environment and securing a viable future for global food systems.

Regenerative agriculture: A sustainable solution

The agricultural industry is turning to regenerative agriculture practices in response to mounting environmental challenges. This approach emphasizes sustainable practices originating from traditional farming methods and restoring and maintaining soil health while promoting ecological balance. Although there is no universal definition or standardized practices for regenerative agriculture, most initiatives align around four core principles:

• Minimize soil disturbance: Reducing physical, biological, and chemical disruptions to preserve natural soil processes.
• Maximize crop diversity: Implementing crop rotation and diverse planting strategies to enhance ecosystem resilience.
• Maximize soil coverage with living roots: Using cover crops to protect and restore soil composition.
• Maximize livestock integration: Incorporating plant residues and manure as natural fertilizers and promoting rotational grazing to improve soil fertility.

The benefits of regenerative agriculture

Regenerative agriculture offers a pathway to mitigate the environmental impacts of farming while enhancing productivity. Its benefits include:

• Climate action: Mitigates GHG emissions and promotes carbon sequestration in soil.
• Soil health restoration: Replenishes soil fertility and productivity.
• Resource efficiency: Optimizes the use of land and water resources.
• Biodiversity recovery: Increases soil biodiversity, enhancing resilience to pests and climate variability.
• Improved farm efficiency: Boosts productivity while reducing dependence on synthetic inputs.

Unlocking the potential of regenerative agriculture

Regenerative agriculture is still in its early stages of development and is applied only to 1.5% of 5,3 billion hectares of agricultural land globally⁴. However, this emerging approach offers immense opportunities for transformation across the entire agrifood value chain. While growth potential is significant, achieving widespread adoption will require tailored solutions and coordinated efforts to address key requirements.

Leading agrifood players already stepped in the topic of regenerative agriculture, developing initiatives to support adoption of sustainable practices. These initiatives are often positioned as a part of sustainability efforts to reduce CO2 emissions.

The success of regenerative agriculture hinges on four foundational pillars: tailored financing schemes, collaboration and vision alignment among key industry players, the standardization of practices and policies, and the establishment of fair revenue and profit distribution mechanisms. Financing will play a critical role, with estimates suggesting the need for cumulative investments of $210–240 billion by 2030 to support this transition, according to the Food and Local Land Use Coalition (FOLU).

Addressing farmers’ challenges in regenerative agriculture

Despite its promise, the adoption of regenerative agriculture faces several hurdles, primarily for farmers. Key risks include harvest and productivity uncertainty, limited access to financing, and the lack of technical know-how or extension services. Farmers also grapple with offtake and price volatility and an unclear certification process for sustainable practices, which complicates the transition. Furthermore, trust issues arise due to conflicting or controversial information about regenerative agriculture’s long-term benefits and feasibility.

These challenges highlight the need for supportive frameworks that enable farmers to adopt regenerative agriculture practices confidently. Addressing these risks will require coordinated actions from policymakers, industry players, and communities.

Value creation and opportunities in the regenerative agriculture space

Regenerative agriculture offers compelling opportunities for market players and newcomers in the agrifood value chain. Key value drivers include improving soil health and land value, increasing long-term yields and farm efficiency. Additionally, there is a potential of generating premium revenue on agricultural produce – yet highly dependent on the consumer awareness and response, which currently remain low. Furthermore, regenerative agriculture can introduce a new revenue stream, enabling farmers to sell carbon credits generated through sustainable practices.

For industry players, regenerative agriculture presents opportunities to transform traditional agriculture value chain. New solutions such as innovative financing schemes, AgTech solutions, new farming practices and advisory services open up opportunities for industry players. Furthermore, the emergence of new value chain steps—such as certification, valuation, and assessment—opens avenues for new business line to evolve. Social impact initiatives led by philanthropic organizations also support the expansion of regenerative agriculture, creating a more equitable and sustainable agricultural ecosystem.

To unlock these opportunities and rip the benefits of regenerative agriculture, industry players and newcomers should focus on development of tailored solutions that would create favorable incentives for farmers across the globe.

Creating tailored solutions for regenerative agriculture

To scale regenerative agriculture, tailored solutions must account for each region's unique geographies, crop types, and operational realities. A comprehensive regenerative agriculture model involves eight operational elements:

1. Access to land to ensure farmers have sufficient and sustainable farmland.
2. Inputs provision, including natural fertilizers and seeds.
3. Equipment and infrastructure to support modern sustainable practices.
4. Tools and best practices to guide farmers in adopting Regenerative Agriculture principles.
5. Educated workforce equipped with the knowledge to implement and maintain sustainable farming techniques.
6. Secured offtake agreements to ensure predictable market access for farmers’ products.
7. Certification and validation processes to support transparency and recognition of sustainable practices
8. Comprehensive financing models that bring together all the operational elements and derisk regenerative transition for farmer

Embedding these elements into comprehensive tailored solutions is key for enablement of regenerative agriculture transit and wide-spread adoption of sustainable agriculture practices.

A strategic approach to regenerative agriculture implementation

Implementing regenerative agriculture requires a strategic approach tailored to specific climates, soil types and current quality, crop types, and farming systems. Decision-makers must address three core questions:

1. Where? Identify regions based on climate risks, regulatory frameworks, and local community roles.
2. What? Define the focus of the scheme, including crop-specific needs, land access, and input provision.
3. How? Outline the business model, detailing financing mechanisms, stakeholder collaboration, and legal structures.

By addressing these questions, stakeholders can develop comprehensive solutions that create sustainable value for all regenerative agriculture value chain participants.

Regenerative agriculture is more than a farming method; it’s a paradigm shift. By investing in tailored strategies, addressing farmer challenges, and fostering collaboration, regenerative agriculture has the potential to transform global agriculture into a system that feeds the world while healing the planet.

How Roland Berger supports clients in regenerative agriculture

Roland Berger supports investors, agrifood companies, governments, and philanthropies in developing and scaling regenerative agriculture practices. Staying close to farmers and industry players, We design practical and tailored solutions that create tangible business opportunities. By developing business models that integrate financing mechanisms, operational levers and collaboration between value chain participants, Roland Berger helps clients to achieve sustainable growth and create positive impact for the agrifood sector and farmer communities.

References:

1. UN, Department of Economic and Social Affairs
2. The Food and Agriculture Organization
3. The Food and Agriculture Organization
4. The Food and Agriculture Organization