Cargill’s Dilemma: Farmers versus Climate Science
Cargill Executive Chairman Greg Page is talking about the perils of climate change, but will farmers listen?
For the past few years, Cargill Executive Chairman Greg Page has been walking a tightrope. On the one hand, he has been rather outspoken about the need to take climate change seriously, partnering with Michael Bloomberg and Hank Paulson on the “Risky Business” project and penning op-eds with headlines like, “Agriculture must engage in climate change discussion.” On the other, he has been steadfast in his refusal to discuss the causes of climate change, saying “he doesn’t know — or particularly care — whether human activity causes climate change.”
The demand for food will, of course, continue to increase as the world’s population approaches 9 billion. While over the last several decades the green revolution allowed farmers to realize high yields without increasing agricultural land use, climate change threatens these high yields. The geography of agricultural production will likely need to shift and agricultural land use may need to once again increase in order to keep pace with demand.
Given Cargill’s role in the global food supply chain, it’s not hard to understand why Page is concerned about climate change. As noted in “Risky Business,” crop yields may decrease in the United States by up to 20% within the next 25 years and some individual states may see their yields decrease by up to 70%. Cargill’s cocoa operations, acquired from rival ADM in late 2015, are particularly vulnerable to climate change. Supply has been hit hard by recent dry weather conditions in West Africa, and in September the company faced a two hundred thousand ton shortfall. Climate change is already affecting Cargill’s commodities trading and distributing businesses, and it looms large over its downstream businesses as well. Cargill’s biofuels, animal feed, and livestock units are also extremely sensitive to shocks to the food supply system.
Page’s reticence about man’s role in climate change is, at first glance, a bit harder to understand. If the company has already acknowledged the clear and present danger posed by climate change, why not take the extra step and acknowledge scientific consensus on its root cause? The answer, it would seem, is about managing relationships with farmers. According to Page, “there are a lot of people who think that the minute that they acknowledge causality, the role of government in their lives will increase…[G]etting them to…say that the primary cause of those changes was the behavior of them and their 7 billion compatriots — that’s a big leap.” With its farmers, Cargill has generally emphasized the need for adaptation and innovation in order to keep up with a changing climate. For example, Cargill’s encouraged farmers to embrace data analytics in order to conserve water due to the increase prevalence of drought conditions. They have not, however, explicitly encouraged farmers to reduce their carbon footprints.
Tacitly, the company does seem to acknowledge the connection between climate change and human activity and has taken a number of concrete steps forward. In 2014, Cargill signed the Indonesia Palm Oil Pledge to cease deforestation in the country as well as the New York Deforestation Pledge which committed the company to completely halt deforestation in its global supply chains by 2030. In 2015, the company was one of 13 to sign the White House’s American Business Act on Climate Pledge and commit to reducing carbon emissions by 6 billion tons by 2030. The company has also developed internal targets for water and energy conservation as well as increased investment in renewable energy.
It is an open question whether or not Page and Cargill can continue to walk this fine line. By refusing to acknowledge the causes of global climate change explicitly, the company may be hurting its own credibility with the government leaders it needs to partner with on effective legal frameworks and sustainability targets. While Page is worried about moving too fast and alienating farmers, he may struggle to convince them that they have an important role to play in combating change if the company does not begin to speak more frankly about the nature of climate change. Convincing farmers that they need to be prepared to adapt to climate change is easy; convincing them that they have a proactive role to play in slowing climate change is hard. Cargill’s careful approach with farmers may indeed be sage, but they’re going to have to bring them around sooner rather than later.
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Additional References:
http://www.nytimes.com/2015/02/01/business/energy-environment/climate-changes-bottom-line.html?_r=0
http://riskybusiness.org/site/assets/uploads/2015/09/RiskyBusiness_Report_WEB_09_08_14.pdf
http://www.cargill.com/connections/five-ways-cargill-is-addressing-climate-change/index.jsp
Well summarized, and I completely agree with you. Looking the other direction when it comes to the cause of climate change absolutely hurts Cargill’s credibility on the topic and it will eventually catch up to them. In fact, they will likely begin to see the financial impacts of this decision as government regulations being increasingly involved in the farming industry. Cargill could very well lose bargaining power during regulation negotiations, and could lose partnerships with their existing partners, both inside and outside of their supply chain. Furthermore, it’s just silly to not acknowledge the root cause at this point.
It is Cargill’s responsibility to educate their farmers on the entire picture of climate change. How can anybody be inspired to fix something that they don’t see as a problem for which they are responsible? Until the individual farmers are convinced that it is their responsibility to do something about it, the impact they make will be restricted.
And convincing them that climate change is human-caused is not a big leap by any means. There is resounding scientific evidence and it’s very easy to convince a rationale person of this. Page’s position is, in my opinion, a cop-out excuse for not rocking the boat. If he doesn’t change his position and pursue the appropriate actions in the near future, I can easily see Cargill finding someone else who well.
Tom Joad, I think this post will go down as your seminal contribution to American literature! Cargill is a fascinating example of a company experiencing tension between the existing attitudes and opinions of its customers and its strategic vision for the future of the business / industry which must adapt in the face of the threat posed by climate change.
While there is likely some wisdom in being tactful with farmers (as the author correctly notes), Cargill’s current equivocation surrounding the root cause of climate change seems untenable to me. The U.N.’s Intergovernmental Panel on Climate Change at one point suggested that efforts to stabilize levels of greenhouse-gas emissions would require investments of about $13 trillion through 2030 (https://www.technologyreview.com/s/527196/how-much-will-it-cost-to-solve-climate-change/). In order to justify the eye-popping level of investment that would be required by farmers—and more broadly society—to curb greenhouse-gas emissions, Cargill needs to take a stronger stand. This level of spending only makes sense in the context of a strong causal link between greenhouse gas and global warming. Until Cargill and Executive Chairman Greg Page acknowledge this premise as a key part of the rationale for its sustainability strategy, it’s unlikely its efforts will be fertile (pun intended!).
Tom Joad, that was a great article. I totally agree with you. I have to admit that initially i was very confused as “risky business” in my mind is 100% associated with the famous movie staring Tom Cruise. Other than that, I find it astonishing that there are still people that deny the effects of human activities to the environment. Personally I believe creating awareness and realizing there is an issue is the first step to solve this issue. If people become more aware of this story, probably they will put pressure to cargil and Chairman Greg Page to change his view on the environment. Although this story is not encouraging, I remain optimistic. We have to keep working on creating awareness and humanity will find a solution.
This was a really fascinating post. It seems remarkable that Cargill has been able to take this particular position on climate change for as long as it has. I would argue that the message of we must adapt to climate change, but humans have no impact on climate change is unsustainable even in the short term, let alone the long term. This is an interesting case study in how to balance the role that customer base should play in company’s operations and policy. At this point, I can generally understand the reasoning behind why Cargill has tread so lightly to be sensitive to opinions of farmers. However, its position seems totally contradictory in that it is taking strong, public action as a business leader like signing on to White House initiatives and then demonstrating limited leadership within its industry. Going forward, Cargill needs to take a position aligned with its rhetoric. As one option, the management team could work to form a partnership with other agricultural industry leaders to present a unified position on climate change as being a result of human activity, and set a meaningful example for farmers and the rest of the industry.
Tom Joad,
Great Article – interesting to see how a food company that will be indirectly affected by Climate change is quite adamant on denying the science behind it. As MicMacMan points out – it would be prudent in the company’s interest to quickly start thinking about how farmers would have to react to climate change. I question the premise behind the fact that if Cargill takes a strong position on climate change – it would alienate their farmers. While obviously there will be some reaction to this – I doubt there will be any significant loss of market share. In fact Cargill could take this opportunity to build brand equity and positive image for itself. This could be a great opportunity for the company!