Sustainable Food Chains and Ecosystems: Cooperative Approaches for a Changing World (Cooperative Management) 3030396088, 9783030396084

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Cooperative Management

Konstantinos Mattas · Henk Kievit  Gert van Dijk · George Baourakis  Constantin Zopounidis   Editors

Sustainable Food Chains and Ecosystems Cooperative Approaches for a Changing World

Cooperative Management Series Editors Constantin Zopounidis, School of Production Engineering and Management, Technical University of Crete, Chania, Greece George Baourakis, Department of Business Economics and Management, Mediterranean Agronomic Institute of Chania, Chania, Greece

The Book Series on Cooperative Management provides an invaluable forum for creative and scholarship work on cooperative economics, organizational, financial and marketing aspects of business cooperatives and development of cooperative communities throughout the Mediterranean region and worldwide. The main objectives of this book series are to advance knowledge related to cooperative entrepreneurship as well as to generate theoretical knowledge aiming to promoting research within various sectors wherein cooperatives operate (agriculture, banking, real estate, insurance, and other forms). Scholarly edited volumes and monographs should relate to one of these areas, should have a theoretical and/or empirical problem orientation, and should demonstrate innovation in theoretical and empirical analyses, methodologies, and applications. Analyses of cooperative economic problems and phenomena pertinent to managerial research, extension, and teaching (e.g., case studies) regarding cooperative entrepreneurship are equally encouraged.

More information about this series at http://www.springer.com/series/11891

Konstantinos Mattas • Henk Kievit • Gert van Dijk • George Baourakis • Constantin Zopounidis Editors

Sustainable Food Chains and Ecosystems Cooperative Approaches for a Changing World

Editors Konstantinos Mattas School of Agriculture Aristotle University of Thessaloniki Thessaloniki, Greece Gert van Dijk TIAS School for Business and Society Utrecht, The Netherlands

Henk Kievit Faculty Center for Entrepreneurship, Governance & Stewardship Nyenrode Business University Breukelen UT, The Netherlands George Baourakis Department of Business Economics & Management Mediterranean Agronomic Institute of Chania Chania, Greece

Constantin Zopounidis Department of Production Engineering and Management Technical University of Crete Chania, Greece

ISSN 2364-401X ISSN 2364-4028 (electronic) Cooperative Management ISBN 978-3-030-39608-4 ISBN 978-3-030-39609-1 (eBook) https://doi.org/10.1007/978-3-030-39609-1 © Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

The role of cooperative management implies the formulation and execution of operating policies that are feasible, sustainable, and sound from a financial, social, and environmental perspective. Thus, the book series on “Cooperative Management” creates a helpful framework for creative and scholarly work on economics, policy, organizational, financial, and marketing aspects. The main objectives of this book are to advance knowledge related to sustainable food chains and ecosystems, as well as to provide the theoretical background for promoting research within various sectors such as the food industry, EU agricultural policy, trade, and hotel chain management. Papers appearing in this series are related to the abovementioned fields and demonstrate innovation in theoretical and empirical analyses, methodologies, and applications. Furthermore, this series encourages inter-disciplinary and crossdisciplinary research from a broad spectrum of disciplines, ranging from economic studies to policy studies, as well as research related to the resilience and ecosystem services of agro-food chains. The aim of this volume is to bring together studies from the agriculture and food sectors to make a contribution to issues regarding food chain sustainability and provision of ecosystem services. In light of global warming and the limitations of natural resources, it is crucial to build resilient agro-food chains that ensure food security and the integrity of ecosystems. Under this view, an analysis of the economic impacts of climate change on agriculture in Kazakhstan and Turkey is presented, while a framework is proposed to analyze agro-food chain resilience (in the olive oil chain) and its impacts in terms of ecosystem services. The positive economic influences of value-added food chains, which can contribute in preserving the sustainable development of small farms located in mountainous and less favored regions, will be demonstrated by applying an empirical mathematical approach. The volume also focuses on the profile of the agro-food manufacturing industry across the EU member states to highlight the changes in performance. In terms of European agriculture, the common agricultural policy (CAP) has suffered many revamping attempts to reorganize it, in order to promote an equivalent income support for European producers, to strengthen the competitiveness of v

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Preface

agricultural products, and to promote more sustainable agricultural practices. In this context, the impacts of the CAP reform (2003) on the selling points of agricultural supplies and the local economy will be illustrated. Moreover, a short retrospective view of the EU policy reforms in the olive oil sector is presented and the impacts related to these reforms are mentioned. Beyond the policy measures that foster the adoption of agricultural systems which combine food production with the protection and provision of agricultural public goods, the trade of agro-food products between developing countries and the EU remains the first priority. A comprehensive evaluation of agricultural exports from four Arab countries (Egypt, Tunisia, Morocco, and Sudan) will highlight the importance of the coordination and integration of export policies in order to raise their competitiveness in the European markets. In addition, a statistical analysis was performed on the hospitality industry to analyze the impact of the commission structure of online travel agents (OTAs) on hotels’ revenue management. Moreover, the level of OTAs’ use by hotels and the fairness of the commission rates, the bargaining power with OTAs, the efficiency of OTAs’ marketing strategies, and the effectiveness of commission rates on pricing policy are identified. Finally, an interactive and participatory tool able to implement governance for sustainability, namely the Sustainability Compass, is presented. Hence, this book will be of interest to scholars, practitioners, and policy actors working in the fields of economics, trade, environment, food, the hotel industry, and agricultural policy. We would like to thank Maria Verivaki, English professor, for the proofreading. We extend our appreciation to the authors and referrers of these chapters and Springer Academic Publications for their assistance in producing this book. Thessaloniki, Greece Breukelen UT, The Netherlands Utrecht, The Netherlands Chania, Greece Chania, Greece

Konstantinos Mattas Henk Kievit Gert van Dijk George Baourakis Constantin Zopounidis

Contents

1

The Economics of Climate Change in Agriculture: A Review on Kazakhstan and Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zhansaya Bolatova and Sait Engindeniz

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Food Chains and Ecosystem Services Through a Resilience Lens . . . Rosanna Salvia and Giovanni Quaranta

3

Analysis of the Development Potential of the Food Industry in the EU28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mirela-Adriana Rusali

35

An Overlook of the Economic Benefits of Value-Based Food Chains to Maintain Farms Operating in Less Favoured Areas . . . . . . . . . . . Jernej Prišenk, Aleksander Itskovich, and Jernej Turk

49

Statistical Analysis on the Impact of Online Travel Agents’ (OTAs) Commission Structure on Hotels’ Revenue Management . . . . . . . . . Vangelis Manousakis and Andreas Mattas

63

A Retrospective View of the EU Policy Reforms in the Olive Oil Sector and Future Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charoula Chousou, Efthimia Tsakiridou, and Konstantinos Mattas

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CAP’s Impacts on the Selling Points of Agricultural Supplies and Local Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Theodoros Markopoulos, Sotirios Papadopoulos, Charoula Chousou, and Konstantinos Mattas

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8

Making ‘Soft’ Economics a ‘Hard Science’: Planning Governance for Sustainable Development Through a Sustainability Compass . . . 103 Maurizio Sajeva, Mark Lemon, and Andrew Mitchell

9

Impact of Arabic Spring on the Competitiveness of Arab States’ Agricultural Exports to EU Markets . . . . . . . . . . . . . . . . . . . . . . . . . 135 Ibrahim Soliman and Hala Bassiony vii

Chapter 1

The Economics of Climate Change in Agriculture: A Review on Kazakhstan and Turkey Zhansaya Bolatova and Sait Engindeniz

1.1

Introduction

The Earth’s climate has been altered several times during certain periods in the history of its evolution due to natural causes. These alterations which were previously considered normal, are now seen as the detrimental result of human activity, and today the global climate change has become a source of threat for the whole world. Scientists now talk about a new type of climate change which is expected to create a huge impact on human life and the ecosystem. The carbon dioxide amounts and other greenhouse gases accumulate in greater concentrations in the atmosphere, due to the consumption of fossil fuels, energy production, deforestry, industrialization, and other man-made causes. Increasing greenhouse gases cover our planet like a blanket and prevent the escape of energy from the earth and the atmosphere, thus causing a dangerous over-heating which threatens natural climatic cycles (Fig. 1.1). The first evidence of the negative impact of human activity on the climate was discovered during the First World Climate Conference held in 1979. On the one hand, there was increased sensitivity of the public opinion on environmental issues during the 1980s, while international governments have also become more aware of the issues concerning the climate. The global climate change impacts on the welfare of present and future generations. In the same year, the administrative organs of the World Meteorological Organisation (WMO) and the United Nations Environment Programme (UNEP) founded the Intergovernmental Panel on Climate Change (IPCC) to research, study and evaluate scientific data in this area (UNDP 2006). In the last 20 years, global climate change, a narrowly specialized natural science issue, has turned into one of the most acute problems of the world economy and policy. An important element of this new reality is the fact that countries and people

Z. Bolatova (*) · S. Engindeniz Faculty of Agriculture, Department of Agricultural Economics, Ege University, Izmir, Turkey e-mail: [email protected] © Springer Nature Switzerland AG 2020 K. Mattas et al. (eds.), Sustainable Food Chains and Ecosystems, Cooperative Management, https://doi.org/10.1007/978-3-030-39609-1_1

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Z. Bolatova and S. Engindeniz

Temperature warming, rainfall, heat waves, drought etc.

Climate change

Society

Poverty, food safety, human migration etc.

Soil erosion, crops yield, livestock production, diseases etc.

Agriculture

Economy

Price, income, GDP, employment, food security, etc.

Fig. 1.1 The anthropogenic effect on climate change

have to adjust their economic activities. Climate change is closely intertwined in the tangle of global economic processes. Anthropogenic impacts on the climate system are evident and growing, with impacts observed on all continents. Our society negatively influences climate change from environmental pollution, with impacts on agriculture (crop yield, livestock production) to the economy (price income, GDP, employment, food security), consequently causing a trickling down effect towards the society in the form of an increase in poverty, food safety etc. This is the bound chain of our new reality (Fig. 1.1). However, many options are available for adoption to reduce greenhouse gas emissions, to ensure that the risks from climate change remain manageable. The main negative effect of climate change onto the world economy is its impacts on agriculture production. A little increasing or decreasing in temperature will impact on harvest and crop production in the three main agriculture crops by 10% (wheat, rice and corn). The melting of high hills, increasing sea levels and floodwater, hydrometeorological problems such as floods, drought, warm and cold waves, hurricanes and storms could impact on the economy. In 2010 hydrometeorological natural catastrophes cost USD 78 billion dollars (WB and UN 2012; Straub 2018). Clearly, climate change will affect agricultural production and its productivity throughout the world. If we want to ensure global food security, the agricultural sector needs to adapt to climate change. A lot of scientists worked on the effects of climate change on the production and economy of different countries. Every country has its own different variable climate (Olesen et al. 2011; Uleberg et al. 2014; Olesen and Bindi 2002; Rotter et al. 2012; WB 2009). The two countries examined here, Kazakhstan and Turkey, reflect significant impacts of climate change on regional, economic, and agricultural resource diversity. They are two of the world’s most agrarian countries. Primary among these concerns are economic growth, food security, agricultural productivity growth, and improved air quality. Many studies have been done on the economic impacts of climate change on the agriculture of different countries (Frances et al. 2017; Wade and Jennings 2016;

1 The Economics of Climate Change in Agriculture: A Review on Kazakhstan and. . .

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Fazal and Wahab 2013; Genina et al. 2011; Chandler et al. 2002; Olesen and Bindi 2002; Uleberg et al. 2014; Quasem et al. 2011; Muller et al. 2009; Chamhuri et al. 2009; WB 2007; Randhir and Hertel 2000; Nelson et al. 2014; Nordhaus and Boyer 1999; Reilly et al. 2003; Calzadilla et al. 2013; Dudu and Cakmak 2017; Clapp et al. 2017; Fankhausera and Stern 2016; Akalin 2014; Olesen et al. 2011). However, these studies should be increased in terms of sustainable agriculture. The purpose of our review was to analyze the global processes of climate change; to study the economic impacts of climate change on agriculture in Kazakhstan and Turkey; and to consider a system of measures to prevent global climate change in the context of the climate change economy. This review used different literature such as IPCC, WMO, WTO, FAO, UN, UNFCCC, UNDP, IMF, WB, OECD, KAZHYDROMET, TURKSTAT, IRRI, the Statistics Committee of Kazakhstan, and the Turkish State Meteorologic Service reports.

1.2

Global Climate Change

According to the IPCC report (2013), since the turn of the twentieth century, the Earth’s average surface temperature has increased significantly. The global temperatures are rising at a scale and pace that are very much dependent on our ability to prevent greenhouse gas emissions which is the main cause of global warming. Extreme weather conditions have become a more constant occurrence. Temperature increases impact on the rise in sea levels, ocean acidification and every country’s economy. The relationship between anthropogenic activity and weather patterns could also be problematic as populations adapt to changes of climatic conditions. Increasing temperatures will impact on evapotranspiration, and an increase in floods could decrease the amount of water availability for agriculture and public usage. Countries could suffer losses in their market economy as a 1  C increase from an average annual temperature of 22  C lowered growth in 2006 by 0.9%. For a low-income developing country, with an annual average temperature of 25  C, the effect of a 1  C increase in temperature is even larger: growth falls by 1.2% (Table 1.1). Countries whose economies are estimated to be significantly adversely affected by an increase in temperature produced only about 20% of global GDP in 2012 and 2016. During the last 70 years, the annual and seasonal surface air temperatures have been increasing in Kazakhstan. The country’s average annual temperature has been rising by 0.27  C every 10 years. Figure 1.2 shows the air temperature changes for 1941–2012 in Kazakhstan. The highest warming was in autumn by 0.32  C every 10 years. Winter and spring temperatures have increased a little more slowly by 0.29  C every 10 years. The slowest warming was 0.20  C in summer every 10 years. The contribution of this trend to the total average annual temperature dispersion is 37%. Seasonal contribution varies from 6 to 27%. In between the nineteenth to twentieth centuries, the weather has been cooler, but it is now hotter. During the last 45 years, the annual and seasonal surface air temperatures have been increasing in Turkey. Turkey’s annual mean temperature in 2015 has been 14.3

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Table 1.1 World’s warmest years on record

Temperature ( C) +0.21 +0.27 +0.22 +0.21 +0.28 +0.24 +0.30 +0.45 +0.56 +0.46

Years 1998 2005 2006 2009 2010 2013 2014 2015 2016 2017

2011

2008

2005

2002

1999

1996

1993

1990

1987

1981

1984

1978

1975

1972

1969

1966

1960

1963

1957

1954

1951

1948

1944

2 1.5 1 0.5 0 -0.5 -1 -1.5 -2 -2.5 -3

1941

Source: WMO (2017)

Fig. 1.2 Temperature anomalies of Kazakhstan from 1941 to 2011. Source: Ministry of Environmental Protection of the Republic of Kazakhstan and KAZHYDROMET (2013) 

C. This value is 0.8  C more than the 1981–2010 normal (13.5  C) (Fig. 1.3). It showed that 2015 was the fifth warmest year since 1971. All the seasons’ temperatures were above normal (1981–2010). Among them, winter and autumn temperature anomalies were particularly striking. The highest temperature has been in 2010 (2  C) and 2014 (1.5  C), while the coldest temperature was in 1992 ( 1.7  C) (Fig. 1.3). The temperature anomalies were apparent in every hemisphere and they impacted everything. The temperature anomalies have a significant influence on the food production and food security of developing countries. Climate change could influence food production as yield changes (diseases, insects, weeds) in agriculture. The hottest weather could have an effect on physical damage, loss of crop harvest, and drop in productivity while the cold weather could increase the amount of arable land in the mountainous regions (Olesen et al. 2011; Uleberg et al. 2014; Olesen and Bindi 2002; Rotter et al. 2012; WB 2009). A rise in the sea level would result in agricultural land loss, mainly in coastal areas. Increases in sea level could mainly affect the agriculture of rice production from flooding of low-lying lands such as Bangladesh, India, and Vietnam (IRRI 2007). However, Nordic agricultural production can be an important global producer in the future, with a more positive effect

1 The Economics of Climate Change in Agriculture: A Review on Kazakhstan and. . .

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2.5 2 1.5 1 0.5 0 -0.5 -1 -1.5 -2

Fig. 1.3 Temperature anomalies of Turkey from 1971 to 2015. Source: Republic of Turkey, Ministry of Forestry and Water Affairs & Turkish State Meteorological Service (2016)

(longer growing season, favorable climatic conditions) from climate change than elsewhere in the world. Global warming will negatively impact African and Central American countries because of their location. The main three agricultural products in the world are wheat, rice, and corn. These three agricultural products under current climatic change condition are reduced in terms of productivity, with decreased income for farmers, while they affect food security. The temperature increase results in 10% decline in wheat, rice, and corn production due to water scarcity, drought and hot weather in Kazakhstan (2009), Turkey (2007) and South East Asia countries, who are all major exporters of these crops. The biophysical effects of climate change on agriculture affect the production and product prices of countries, as well as product inputs, demand, product consumption and trade in the economic system, among farmers and other economic actors. Research has shown that agriculture is directly dependent on climate, as well as indirectly influencing global agricultural markets, as climate impacts on crop yield and products, affecting market prices. If the primary sector is agriculture, it could to a large extent affect the economy (GDP) as grain production declines in developing countries. According to scientific research, the agriculture sector is a key source for the global greenhouse gas emissions (14% or 6.8 Gt of the CO2 equation), but with a high technical mitigation potential (5.5–6 Gt of CO2 equation per year by 2030). There is 74% emissions from agriculture in developing countries (Quasem et al. 2011; WB 2007; Randhir and Hertel 2000). The WB (2009) report reveals that mitigation of agriculture could be potentially achieved through soil carbon sequestration (89%) and roughly 70% could be realized in developing countries. The ability to solve these problems is reducing the unfavorable effects of climate change on agriculture and adaptation. The social and economic structure has been worsened because of increases in food crises, food safety and population, hence affecting economic development. In the world, population increases every year and researchers search for new ways of finding nutrients and new ways to save food, because of the impact of climate change on society and health. Countries have to develop new social and economic systems. For example, countries in Sub-Saharan

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Z. Bolatova and S. Engindeniz Production million ton

20 15 10 5 0 -5 -10 -15 -20

Wheat

Barley

Corn

Coon

Sunflower

Normal

17.69

7

2.96

0.9

1.51

Drought

15.83

6.45

1.43

0.88

1.04

-7

-15.3

-5.4

-4.5

-7

Change %

Production million ton

Fig. 1.4 Agricultural product production changes in Turkey due to the drought in 2007. Source: FAO (2017a) 50 40 30 20 10 0 -10 -20

Wheat

Rice

Oilseeds

Coon

Sunflower

Normal

21.4

29

38.7

7.4

3.7

Drought

18.7

22

26.9

4.3

2.5

-6

-4

-12

-3

-5

Change %

Fig. 1.5 Agricultural product production changes in Kazakhstan due to the drought in 2009. Source: Committee of the Statistics of the Ministry of National Economy

Africa have tried to develop new social and economic programs ensuring food safety and security because they have the highest rate of malnutrition (17% in 2015) and every three people are at risk of chronic hunger (WB 2007). The destabilization of agricultural production depends on climate change which impacts agriculture, while agriculture could impact welfare. It is a bound chain. The effects of climate change will not be uniformly distributed across the earth and there will be winners and losers as usual. The rise in temperature in Kazakhstan and Turkey could cause a decline in crop yields and insufficient food production for domestic consumption, while their major exports could likely fall in volume (Figs. 1.4 and 1.5). Agriculture, which is one of the major sources of greenhouse gas emissions, can play an important role in mitigating the effects of climate change. Global warming will primarily influence economic growth through damage to property, lost productivity, and mass migration (IMF 2017).

1 The Economics of Climate Change in Agriculture: A Review on Kazakhstan and. . .

1.3

7

The Economics of Climate Change and Agriculture

The economics of climate change is a study of the economic costs and benefits of climate change, along with the economic impact of actions aimed at limiting its effects. The climate change effect on economic growth could have a negative effect (Stern 2006) on the financial, political and economic integration of the world’s economies. Climate change could cause less capital stock to be available due to the damage, and there would be a fall in the productive capacity of the world economy. It could translate into a downward shift in the world production function. Agricultural yields are sensitive to droughts which may reduce crop yields in areas where food production is important and decreases in production will increase the price level of products. This leads to possible inflation and inflation could affect mass migration. Higher global food prices could squeeze consumers’ income in the process. The climate change effect of yield shocks on more policy-relevant variables such as prices, consumption, food security, and economic welfare will be mediated by the global trade in agricultural commodities and will depend on the effects of terms of trade and cooperation (Randhir and Hertel 2000). Some publications have written about the welfare impacts of climate change. The productivity shocks on agriculture are important for policy because the simple integrated assessment models used to calculate the social cost of carbon use damage functions that parameterize changes in economic welfare with temperature (Nelson et al. 2014; Wiebe et al. 2015; Rose et al. 2014; NAS 2017). The global population could grow from some 7.3 billion today to almost 9.8 billion by 2050, with most of that increase coming in the developing regions. In low-income countries, the population may double to 1.4 billion (FAO 2017a). Feeding humanity will require a 50% increase in the production of food and other agricultural products. The open trade regime for food and agricultural products will also contribute to the effort to adapt and mitigate the effects of climate change. If countries may trade agricultural land, it could have the potential to be an important factor in reducing carbon emissions. For example, from 2000 to 2005, the burning of tropical forests accounted for 7–14% of all anthropogenic CO2 emissions because of forests acting as sinks that remove carbon from the atmosphere and place it in the ground. The destruction of those forests accelerates the pace of climate change. Biochar which is added to soil to enhance crop yields and nutrition is one potential means of reducing greenhouse gas emissions while simultaneously improving soil fertility. A lot of methods of agriculture try to reduce methane emissions from livestock, which account for 14.5% of global CO2 emissions. One possible solution is the use of feed additives, which could reduce these emissions by 25–30% (FAO 2017a). Climate change impacts on a business cause widespread concern, so that the supply of key commodities such as tea and cocoa has led some of the largest firms to adopt sustainable farming. Many of the world’s largest food companies believe this threat is compounded by the risk that being seen to contribute to climate change will

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increasingly become a public relations liability (McDonalds, Unilever, Kimberly Clark, Swiss Re and Prudential). There are three main studies about climate change scenarios (Nordhaus and Boyer 1999; Mendelsohn et al. 1998; Tol 2002a, b) while the Stern Review (2006) points to mean GDP losses between 0 and 3% of world GDP for a 3  C warming (from 1990 to 2000). Costs increase to 20% of GDP or more if a wider range of risks and impacts are considered. Based on simple extrapolations, costs of extreme weather alone could reach 0.5–1% of the world GDP per annum by the middle of the century. According to Mendelsohn (1999) and Dinar, assuming 2  C of warming is reached by 2060, most damages will come from agriculture. Few economies will gain from warming while the rest of the world will lose. The Ricardian model predicts much smaller losses and gains than the reduced form model, predicting a 0.04% net gain to 2060 GDP levels from 2  C warming. The market impact costs will vary from country to country across the globe. High latitude countries are expected to receive good harvest and countries with low latitude are expected to suffer from warming. These available estimates are usually based on a smaller increase in global temperatures than predicted in recent IPCC scenarios. Damages tend to be more for countries with higher initial temperatures and wıth lower levels of development. A moderate rise in temperature increases agricultural productivity in countries with low initial temperatures but this is decreased in hotter countries. The countries want to conclude an agreement on climate change that will lead to a liberalization of trade in agricultural products (IPCC 2013). Given these challenges, it is vital to ensure a coherent policy for climate change rules and trade regulations.

1.4

The Economic Impacts of Climate Change on the Agriculture of Turkey and Kazakhstan

Turkey and Kazakhstan are in the macroclimatic region of the world. Both countries have complex topographic features with proximity to water and are a transition zone for different pressure systems and air masses originating from polar and tropical zones. Annual average rainfall in Turkey is 630 mm, with 67% occurring during winter and spring, and in Kazakhstan 581 mm, with 60% in winter and spring. Effects of climate change have already started to be observed in both countries as in the form of changes in temperatures, precipitation, growing degree days, number of frost days and frequency of climatic extremes. The impact of climate change on agricultural production in both countries is significant because of agricultural production being highly dependent. A significant part of agricultural production accounts for rainfed land, which makes production significantly unstable to changes in precipitation. Further, although the share of agricultural value added in GDP has declined to 10% in recent years, its share in employment is still significant, at 25% in Turkey. As such, agriculture remains to be the most important source of income for

1 The Economics of Climate Change in Agriculture: A Review on Kazakhstan and. . .

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the rural population. Agriculture is the first and most vulnerable sector prone to drought, particularly under rainfed conditions. Turkey irrigates a total area of 5.5 million hectares which consumes over 72% of the nation’s water withdrawals. Agriculture employs 27% of the country’s workforce and generates 9% of GNP. In 2007–2008 the damage to the agricultural sector due to droughts was about two million dollars with 435,000 farmers severely affected, with major production losses for cereals and lentils. In the southeastern Anatolia Region, production losses were estimated at 90% for wheat and other grains and 60% for red lentil (FAO 2017c). After the Soviet Union’s breakup, Kazakhstan’s agricultural sector was affected by economic shocks, land reform, and reduced public support. The contribution of agriculture to GDP has declined sharply, although it remains an important element of economic development, accounting for 24.2% of total employment as of 2013. Agriculture as one of the priorities of the economic development of the country has a huge potential and great reserves. Crop production is the main sector of agricultural production. The primary production of spring wheat, oats, barley and other grain crops is located in the north of the country. The southern region of the country is favorable for the cultivation of cotton, sugar beet, rice, yellow tobacco, orchards, and vineyards. Climate change creates losses in cereal yields. Polluted soil affects the harvest. About 250 thousand ha of land is removed annually from agricultural turnover. The major land areas are exposed to soil degradation as a result of erosion, salinization, swamping, chemical pollution, and other processes. The area of degraded pastures reaches 60 million ha including the areas removed from agricultural use—15 million ha. The gross yield of grain and leguminous crops was high in 2007 and 2009, up to 20 million tonnes (for wheat, about 17 million tons). However, in the drought years of 2008 and 2010, the gross yield decreased significantly. In 2010 the gross yield of grain and leguminous crops was only 12.2 million tonnes, (for wheat, 9.6 million tonnes) because of the drought. At present, the total cultivated area in Kazakhstan is more than 21 million hectares, and more than 75% of this area is planted with the most valuable cereals (FAO 2017c). Kazakhstan’s livestock sector has a significant but not fully used potential for development. Livestock production has been the key economic activity in Kazakhstan for centuries and remains the main source of employment, food and rural incomes. In the period 1990–1998, the number of cattle decreased from 9.8 million to 3.9 million heads because of climate change impact. Kazakhstan and Turkey are one of the world’s largest exporters of grain, but the countries’ imports are dependent on several food products. There is much concern surrounding the consequences of increased emissions of CO2 and other greenhouse gases due to anthropogenic activities and associated climate change. The already extremely vulnerable ecosystems of Kazakhstan and Turkey find the need to address climate change issues particularly urgently. The drought of 2000–2001 revealed that the countries of Central Asia and Turkey are highly vulnerable to the incurred impacts, with structural factors, such as rural poverty and the unsustainable management of natural resources, being the main causes (FAO 2017a). Turkey and Kazakhstan during the drought period lost yields of main production and all of that affected the market and price of the crop. According to a FAO (2017a)

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report, drought influenced the yield of production in Turkey. If normally wheat production was 17.69 million tons, in drought time it changed to 7% (15.83 million tons ). The greatest impact was in barley: if normal production was seven million tons, in drought time it changed to 15.3% (6.45 million tons). Kazakhstan during the drought lost a lot of production. According to the Statistics Committee of Kazakhstan wheat production normally stood at 21.4 million tons, but in drought conditions, it was changed to 6% (18.7 million tons) in 2009. The greatest impacts from drought were in oilseeds, where normal production is 38.7 million tons, but it changed to 12% (26.9 million ton). The agriculture, natural grasslands, livestock, and water resources are most likely to be vulnerable to climate change in Kazakhstan and Turkey. The impacts on these sectors may be considered because of their location. Although endowed with fertile land, the country suffers from environmental issues such as water scarcity and harsh climate conditions. Agriculture in both countries is highly vulnerable to climate change, namely frequent droughts and water shortages that affect domestic production. To cope with climate change issues, the current approach is to focus on the development of low-carbon, renewable energy sources. As such, a number of key strategies and concepts have been adopted to outline strategic directions for national climate change mitigation and adaptation actions. The economies of Turkey are highly dependent on agriculture, contributing 10–38% of their GDP and 18–65% of employment, which makes them highly vulnerable to drought. The industry which relies on agricultural products for inputs is also hit by the cascading impacts. Research on climate change has intensified on a global scale as evidence on the costs of global warming continues to accumulate. At the end of 2006, the EU set an ambitious goal to reduce its greenhouse gas, by 2020, to 20% below the level of 1990; in the Kyoto Protocol, Turkey is the only country listed in Annex I of the United Nations Summit List in Rio de Janeiro, but the official goal of reducing CO2 emissions is still not established. Turkey is likely to face serious pressure to present its national climate change plan, as well as specific emission targets and associated pollution control policies. Turkey has not yet achieved stability in the use of energy and gaseous emissions, both in terms of GDP and per capita. Turkey is the fastest growing industrial user of energy sources (OECD 2004). Electricity consumption in Turkey increased from 1980 to 2005. Total CO2 emissions from fossil fuels are 223.4 Gg since 2004, and will reach 343 Gg by 2010 and up to 615 Gg by 2020. This indicates a gradual increase in the ratio of total CO2 emissions to GDP from TRY 0.632 million tonnes/billion in 2005 to TRY 0.689 million tonnes/billion in 2020 (Telli et al. 2008). UNDP (2006) provide a projection of a six-fold increase in greenhouse gas emissions by 2025 with respect to 1990 levels. The study foresees an annual increase of 5.9% in final energy consumption. Under this consumption of the base-run, given that the production technology parameters are constant, the CO2 emissions per real GDP also show an increasing trend, by showing an almost 10% increase in 2020, compared to the 2003 value. Turkey has strong economic growth and urbanization has led to a steady increase in electricity consumption and deepening dependence on imported fossil fuel, raising the share of renewables in total energy sources from 13.5% in

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2013 to 20.5% in 2023 (Telli et al. 2008). Turkey’s agriculture sector produces large amounts of residues that could be used to produce energy and offset fossil fuel use. FAO’s (2017b) bioenergy and food security assessment for Turkey shows more than 25 million tonnes of crop residues and animal wastes. Kazakhstan ratified the Kyoto Protocol in 2009 and started actively participating in the international negotiation process on climate change mitigation and further greenhouse gas emission reduction. Kazakhstan prepared a lot of programs for climate change such as “The Ecological Code” (adaptation to climate change), the Adaptation Strategy of the Republic of Kazakhstan, the Environmental Protection “Road Map for 2010”, and the Transition of Kazakhstan to the “Green Economy in 2013–2020” (water consumption, widespread adoption of renewable energy technologies). Kazakhstan has been developing a strategy on low carbon economic development in 2009; preparing a favorable environment for agriculture regulation takes on an important significance in climate change. The government also realizes specific programmes to solve desertification, secure and preserve potable water, and preserve forests. Drought mostly impacts the agricultural sector, which has been experiencing losses, due to drought for 11 years in the last 20 years. During the drought years (1998), some farmers collected only seeds or even decided not to harvest with an impact on the GDP of country (Ministry of Ecology in RK 2013).

1.5

Adaptation and Mitigation

Adaptation and mitigation have the potential to reduce the impact of climate change. In the next 30 years climate change will clearly influence everyone and everything and mitigation could only a lessening effect on stocks of greenhouse gases. Because of that adaptation is an important political response and the most vulnerable countries should find a way to adapt. Nowadays, every country has their own policy for climate change adaptation as in Turkey and Kazakhstan. Climate change impacts a lot of countries by drought or flooding; we all have to save water resources. Many countries are trying to adapt to climate change and save the agriculture productivity by pasture water supply, irrigation systems and their efficiency, use or storage of rain and snow water, new technologies, recycling and reuse of municipal wastewater (Singapore, Thailand, Kazakhstan). These countries try to reduce water wastage and leakage with the use of market-oriented approaches to reduce wasteful water use. There are limits to the ability to adapt to fundamental and rapid climate change, in the sense that the human and economic costs could become very large. Many countries spend half of their budget on adaptation and mitigation. Adaptation and mitigation are not alternatives and we should work with both of them. But the costs of each will influence the choice of policies. The importance of water and agriculture in Kazakhstan and Turkey are impossible to overestimate. Agriculture and water resources are considered together as closely depending on each other, more than 90% of water in irrigated agriculture, which produces about 30% of the regional GDP and provides employment for more

USD million (2013 price)

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Mitigation only 396 233

314

247

100 0

Adaptation only Overlap (both)

0 26 2013

0 39 2014

33 0 32 23 Average (2013- Average (EECCA) 14)

Fig. 1.6 Overview of climate-related development finance to Kazakhstan in 2013–2014. Source: OECD (2016)

than 60% of the population. The Kazakhstan assessments show that 70% of potential damage from unfavorable weather and climate conditions impact agriculture (Bizikova et al. 2011). In addition to transboundary problems from water distribution, there are also trends such as growth in domestic demand on water resources due to population growth and economic development (Aral Sea). The agriculture sectors of Kazakhstan and Turkey which have strategically important crops that are fully dependent on irrigation systems that have been declining due to poor water management and unsuitable agricultural practices (WB 2005). Kazakhstan and Turkey have strategic plans for adaptation and mitigation and every year finance a lot of sources for it. For example, in 2013–2014 Kazakhstan spent 727 million USD. In 2013, for mitigation it spent 396 million USD and the overlap was 26 million USD. This count decreased in 2014, but on average, adaption was 33 million USD (Fig. 1.6). Climate change damages every sector of our world and we need to prepare the sustainable management of irrigated and rainfed agriculture and diversity, and improve the sustainability of grazing and cultivation methods, by adapting the coastal areas of the Mediterranean, Caspian and Aral Seas for agriculture, as well as the need to develop adaptation measures in grain production.

1.6

Conclusion

Kazakhstan and Turkey have the same problem with climate change such as drought or flood and the increases or decreases in temperature impact on harvest and crop production as well as wheat and cereals production (a decline of 10%). During droughts, both countries lost a lot of cereals and vegetable production and its this impacted the economy of the countries. All damages from climate change influence the macro- and micro- economy. Climate change as a result of an increase in temperature from the unsustainable management of natural resources reflected the impact on agriculture to GDP, GDP to employment, and rural poverty.

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The damage to the agricultural sector of Turkey was USD 2 mllion and 435,000 farmers in 2007–2008, while in Kazakhstan the damage loss stood at USD 2.5 billion with major production losses of cereals and lentils. Production losses of both countries were estimated at 90% for wheat and other grains, and 60% for red lentil. Some suggestions were also presented in this study as follow: (1) Kazakhstan and Turkey should arrange new policies for climate change which will provide insurance for farmers and adapt all agriculture varieties to the stresses and bind the agriculture sector with the water sector for the mitigation; (2) The sustainability of grazing, cultivation methods, sustainable management of irrigated and rainfed agriculture should be diversified and improved; (3) Kazakhstan and Turkey should prepare an agreement for transboundary water resources, by adapting the coastal areas of the Mediterranean, Caspian and Aral Seas; (4) There is a need to develop adaptation measures of grain, as well as livestock production; (5) Both countries should prepare lectures or courses about climate change, with assurance of new technology in agriculture for farmers, children and students; (6) Agricultural support systems should be transformed into a supporting system based on climatic conditions, rather than product-based support; (7) Kazakhstan and Turkey should arrange regulation for water and soil contamination; (8) The policy and institutional arrangements for water management have to make provisions for the vulnerability of the sector to unfavorable impacts of climate change; (9) The scope of agricultural insurance should be extended and include drought or climate change influence; and finally, (10) The construction of the ponds and dams in areas with agricultural drought risks should be completed. Both countries should develop usage and storage methods of rain and snow water for agriculture.

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Republic of Turkey Ministry of Forestry and Water Affairs & Turkish State Meteorological Service. (2016). State of the Climate in Turkey in 2015, Ankara. Rose, E. J., Kyle, C. A., David, S. B., Feldl, N., & Koll, D. B. (2014). The dependence of transient climate sensitivity and radiative feedbacks on the spatial pattern of ocean heat uptake Brian. Geophysical Research Letter, 41, 1071–1078. https://doi.org/10.1002/2013GL058955 Rotter, R. P., Palosuo, T., Kersebaum, K. C., Angulo, C., Bindi, M., & Ewert, F. (2012). Simulation of spring barley yield in different climatic zones of Northern and Central Europe. A comparison of nine crop models. Field Crops Researches, 133, 23–36. Stern, N. (2006). What is the economics of climate change? World Economics, 7(2). Straub S. (2018). Hurricanes cause record losses in 2017. The losses quoted by Munich Re include both insured and non-insured losses but may calculate indirect economic losses (e.g. business interruption) in a different way than some other sources. Munich Re, Munich. Telli, C., Voyvoda, E., & Yeldan, E. (2008). Economics of environmental policy in Turkey: A general equilibrium investigation of the economic evaluation of sectoral emission reduction policies for climate change. Journal of Policy Modeling, 30, 321–340. The Organization for Economic Cooperation and Development (OECD). (2004). Economic Survey of Turkey. Retrieved from http://www.oecd.org/dataoecd/42/47/33821199.pdf The Organization for Economic Cooperation and Development (OECD). (2016). Country report. Financing Climate Action in Kazakhstan. The State of Food and Agriculture (FAO). (2017a), Drought characteristics and management in Central Asia and Turkey. ISBN 978-92-5-109873-8 The State of Food and Agriculture (FAO). (2017b). The State of Food Security and Nutrition in the World 2017 – Building resilience for peace and food security. Retrieved from www.fao.org/3/aI7695e.pdf The State of Food and Agriculture (FAO). (2017c). Country fact sheet on FAO, Kazakhstan. Tol, R. S. J. (2002a). Estimates of the damage costs of climate change - Part 1: Benchmark estimates. Environmental and Resource Economics, 21, 47–73. Tol, R. S. J. (2002b). Estimates of the damage costs of climate change – Part II: Dynamic estimates. Environmental and Resource Economics, 21, 135–160. Uleberg, E., Hanssen-Bauer, I., Oort, V. B., & Dalmannsdottir, S. (2014). Impact of climate change on agriculture in Northern Norway and potential strategies for adaptation. Climatic Change, 122, 27–39. https://doi.org/10.1007/s10584-013-0983-1 United Nations Development Programme (UNDP). (2006). Turkey and global warming. Wade, K., & Jennings, M. (2016). The impact of climate change on the global economy. Schroders. Wiebe, K., Lotze-Campen, H., Sands, R., Willenbockel, D., Tabeau, A., Mensbrugghe, D. V., Biewald, A., Bodirsky, B., Islam, S., Kavallari, E., & Mason-D’Croz, D. (2015). Climate change impacts on agriculture in 2050. Environmental Research Letters. The World Meteorological Organization (WMO). (2017). WMO Statement on the state of the global climate in 2017. Retrieved from http://ane4bf-datap1.s3-eu-west-1.amazonaws.com/wmocms/ s3fspublic/ ckeditor/files/2017_provisional_statement_text_-_updated_04Nov2017_1.pdf? 7rBjqhMTRJkQbvuYMNAmetvBgFeyS_vQ World Bank (WB). (2005). A better investment climate for everyone. Retrieved from http:// siteresources.worldbank.org/INTWDR2005/Resources/complete_report.pdf World Bank (WB). (2007). The impact of sea level rise on developing countries: A comparative analysis. Retrieved from http://documents.worldbank.org/curated/en/156401468136816684/ pdf/wps4136.pdf World Bank (WB). (2009). Climate change strategy for the South Asia region. Retrieved from http://go.worldbank.org/DEOKW48F50 World Bank (WB) and The United Nations (UN). (2012). Natural hazards, unnatural disasters the economics of effective prevention. Retrieved from https://www.gfdrr.org/sites/default/files/pub lication/natural-hazards-unnatural-disasters-2012-ru.pdf

Chapter 2

Food Chains and Ecosystem Services Through a Resilience Lens Rosanna Salvia and Giovanni Quaranta

2.1

Introduction

The last decades have seen profound structural changes in agriculture, agro-food systems and rural areas as a whole. If we consider European agriculture, the intensification of production in some specific areas has led to the marginalization of other areas, generally with less favourable production conditions and/or more distant from markets (Knickel et al. 2013, 2018). In a review of the main land and farming system dynamics and drivers in the Mediterranean Basin, Debolini et al. (2018) describe the abandonment of agricultural areas as the most prominent on-going trend, whose drivers are due to depopulation and population ageing, low profitability of farming, the industrialization of processes and the increase in input prices. Closely connected to geographical disparities, there are increasing “tensions” within the agro-food chains where the agricultural component is exposed to internal pressures that arise from asymmetric price transmission, changes in market relations and internal trends such as upstream (e.g. input suppliers) and downstream (e.g. retail) concentration and market integration. Furthermore, increasing complexity and changing consumer demands also affect the internal organization of the agrofood chain (Hubeau et al. 2017; Campbell 2005; Potter and Tilzey 2005). These phenomena have profoundly altered the quantity and quality of functions performed by agricultural ecosystems. Beyond their role of producing food and fibre, agricultural systems play other, potentially essential roles in the socioecological system they are part of. Socio-cultural and bio-physical functions such as ecological integrity, water resource sustainability, livelihood maintenance, nutritional viability, and food security, i.e. the wide range of public good-type services produced by multifunctional agricultural systems, constitute important socio-

R. Salvia · G. Quaranta (*) University of Basilicata, Potenza, Italy e-mail: [email protected]; [email protected] © Springer Nature Switzerland AG 2020 K. Mattas et al. (eds.), Sustainable Food Chains and Ecosystems, Cooperative Management, https://doi.org/10.1007/978-3-030-39609-1_2

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economic resources for the rural economy (Hodbod et al. 2016; Costanza et al. 1997; Huang et al. 2015; Huylenbroeck et al. 2007). A large number of studies have also investigated the social and economic effects related to the supply of private and public good-type ecosystem services (ESS) in agricultural ecosystems. The main effects which have been identified are: occasions for added value creation (Dissart and Vollet 2011); the creation of niche-market opportunities for local and quality products (Tempesta et al. 2010); opportunities for rural employment (Dissart and Vollet 2011); maintenance/stability of the rural population (Schaller et al. 2018); creation of local investments (Schaller et al. 2018); enhanced recreational opportunities (Sharpley and Vass 2006; RodríguezEntrena et al. 2017), enhanced quality of life and the viability of rural crafts and traditional skills (Sharpley and Vass 2006). In the Mediterranean basin, for example, the area’s long history of agriculture has produced an extraordinary variety of land uses and landscapes, which in some cases had dramatically altered the local environment (e.g. terraces and irrigation channels, hedges and agro-silvo-pastoral systems) (Pinto-Correia and Vos 2004). Many traditional Mediterranean agricultural systems combine food production with the provision of other ecosystem services. For example, silvo-pastoralism and agroforestry are known for their regulation of soil erosion and maintenance of soil fertility in combination with food production (Torralba et al. 2016). Traditional farming systems play a significant role in supporting biodiversity (Bugalho et al. 2011). Many of these traditional agricultural systems produce the highest quality agro-food products, which are recognized by the EU through the PDO and PGI labels (Fondazione Campagna Amica 2018). Under the general reconfiguration and restructure of the agro-food chains, these agricultural systems have responded by favouring simplification, aimed at increasing agricultural yields and gross margins (Pinto-Correia and Vos 2004). Resilience relates to the ability of a system to maintain its structure and functions and reorganize in the face of disturbance (Walker et al. 2004), including the capacity to recover from unexpected shocks and adaptation to ongoing change (Biggs et al. 2015). Although it is based in ecology, the theoretical constructs of resilience are assistive in understanding the dynamics and functions of many types of socialecological systems, which include agro-food systems (e.g., Babu and Blom 2014; Darnhofer 2014). Understanding resilience will be crucial because agro-food systems provide essential life-supporting services and are currently facing an array of potentially existential threats (population growth, climate change, degradation of natural resources, among others) (Himanen et al. 2016; Vroegindewey and Hodbod 2018). However, efforts to understand resilience mechanisms have often focused on only a part of the agro-food system (most often agricultural production), while neglecting to account for the whole system and the internal interactions between components (Tendall et al. 2015). In light of these considerations, the aim of the chapter is to propose a framework to analyse the links between the mechanisms put in place within an agro-food chain to foster its resilience and the effects on the ecosystem services that the agro-food ecosystem is able to provide. The framework, therefore, intends to look beyond the

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agricultural sector to include the role played by the other actors and components of the food chain. An empirical analysis conducted in a Mediterranean context, predominately characterized by an olive oil chain, shed light on the drivers’ underlying structural transformation (abandonment and intensification) and substantial changes in the organization of the value chain, in a bid to allow the system to compete in an increasingly global context. The rest of the chapter is organized as follows: the first section analyses the conceptual paradigm of resilience and its application within agroecosystems and agro-food chains, while the next section describes the proposed framework. The chapter ends with an application of the framework, related key findings and some concluding considerations.

2.2

Agroecosystem and Agro-food Chain Resilience

Resilience thinking has its origins in ecology, with Holling, (1973), who showed the importance of resilience and defined it as the ability “to manage and cope with change”, but it has been increasingly adopted as an approach to understanding social–ecological systems (SES) (Adger 2000; Carpenter et al. 2001; Folke et al. 2010), including agricultural and rural SES (see for example Darnhofer 2014; Lamine 2015; Scott 2013; Salvia and Quaranta 2015). Socio-ecological systems are understood as complex and integrated systems in which human beings should be considered part of nature (Berkes and Folke 1998). Cabell and Oelofse (2012), using the conceptual category of the social-ecological system, define the agroecosystem as an ecosystem managed with the intention of producing, distributing and consuming food, fuel and fibre. Its boundaries encompass the physical space dedicated to production, as well as the resources, infrastructure, markets, institutions and people that are dedicated to bringing food to the consumers. The agroecosystem works simultaneously at many nested scales and hierarchies, where it is clear that farmers do not operate in a void and the decisions they make are largely based on external influences (Darnhofer et al. 2010). In this respect, Darnhofer et al. (2016) highlight the importance of the farmer’s agency, the wider social forces that play influential roles, and the importance of a range of capacities: the capacity to conserve existing functions and structures (persistence), the capacity to deal with uncertainty through reorganisation and learning (adaptability), and the capacity to create a wholly new trajectory that involves a change in the very nature of the system (transformation). In order to measure resilience within agroecosystems, Cabell and Oelofse (2012) propose 13 indicators, showing their importance within the adaptive cycle, i.e. the four phases of cyclical change that are characteristic of SES: growth/exploitation, conservation, release, and reorganization/renewal (Gunderson and Holling 2002; Darnhofer et al. 2010). Adaptive cycles are nested (Gunderson and Holling 2002). This feature of hierarchical nesting has been termed panarchy (Gunderson and Holling 2002), which describes how interactions within and across scales can

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determine the overall dynamics of the system. System dynamics can be controlled by both top down and bottom up processes (Berkes and Ross 2016). The focal scale for resilience analysis is the farm community because of the direct and complex social and ecological linkages that are present at this scale. At a regional food system scale, Salvia and Quaranta (2015) use the adaptive cycle heuristic as a diagnostic tool to study dynamics of change in two regional agricultural sectors. Using a participatory approach, they show how the adaptive cycle can support the analysis of alternative management options, taking into consideration the trade-offs among natural, economic and social capitals. In the same vein, Wilson (2010, 2012), through an analysis of economic, social and environmental capitals, reflects on the relationship between resilience and the multifunctionality of agricultural and rural spaces. Wilson examines the placebased characteristics that contribute to strong or weak resilience, and is able to even trace the temporal evolution of rural systems and the unfolding trajectories of contrasting development paths: relocalised low intensity rural systems, deagrarianised rural communities and superproductivist rural systems. Wilson et al. (2016) identify examples of suboptimal ‘locked-in’ development paths in rural systems, highlighting the complex interrelationships between various lock-ins. A specific literature stream, originated within the supply chain management disciplines, deals with the resilience of supply chain systems (Kamalahmadi and Parast 2016). Although paying less attention to environmental and other sustainability issues (Bolwig et al. 2010), the importance of this analysis lies in the development of capacity to address disturbances affecting supply chains, at both the demand and supply level. According to Ponomarov and Holcomb (2009, p. 131) the supply chain resilience is “the adaptive capability of the supply chain to prepare for unexpected events, respond to disruptions and recover from them by maintaining continuity of operations at the desired level of connectedness and control over structure and function”. Stone and Rahimifard (2018) highlights how the concept of resilience when applied to agro-food chains tends to focus on optimising individual stages of a supply chain, which does not help prepare them to adapt to new or changing landscapes, nor does it take account of the risk that optimising one stage of the supply chain may be to the detriment of another. In response, the authors propose an adaptive definition of resilience that recognises that the complexity of cross-scale interactions in the system mean that system instability can be a permanent state rather than the response to a one-off shock and, therefore, resilience must be thought of as a continuous cycle of “conservation”, “release”, “reorganization” and “exploitation”. The authors propose a framework that combines the ecological science understanding of adaptive systems and “panarchy”, with resilience elements and strategies originating from supply chain management literature. The framework proposes that parallels can be drawn between the four stages of the adaptive cycle (conservative, release, reorganisation and exploitation) and the four phases of a disruption (readiness, response, recovery and adaptation), respectively (Ponomarov and Halcomb 2009). Stone and Rahimifard (2018) identify 40 resilience elements and organize them into “Core” elements and “Supporting” elements. The authors

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argue that “supporting elements” are indispensable for the “core elements” and enable a better understanding of resilience along the whole supply chain, reflecting social and environmental components of supply chains rather than only economic aspects. Linked to this is the need to design resilience strategies around the different phases of disruption in which a resilience element must be implemented.

2.3

Unifying Perspectives: Bridging Agroecosystem and Agro-food Chain Resilience

In an attempt to further develop the argument that resilience building needs to involve all actors in the agro-food chain for an agro-food system to maintain its multifunctionality, and therefore be able to guarantee the flow of ecosystem services, a unification of perspectives is required. Based on this assumption, and combining the reflections of Cabell and Oelofse (2012) and those of Stone and Rahimifard (2018), the characteristics that confer resilience to agro-food chains are outlined and organised according to the various phases of the adaptive cycle that the system moves through. Release Phase The agro-food system components are able to retain the elements, both tangible and intangible, that come from the past and reuse them in the next phase of reorganization, avoiding the risk of locks-in (Wilson et al. 2016) (Path dependency). There is a diversity of system components, i.e. the chain maintains a sufficient degree of heterogeneity: for example, a multiple type of farmers, processors, and/or distributors in terms of scales, production systems, capacities and skills, and other characteristics. Actors within the chain collaborate and work together to create benefits that could not be achieved individually. Information sharing and good levels of trust between the actors are all factors that help the system to reorganize itself more effectively and quickly. The degree of collaboration is strongly conditioned by the bargaining power within the agro-food chain. Functional to creating a collaborative climate is the degree of development of human and social capital, i.e. the strength and density of networks within the system. Visibility is another key element for agro-food chain resilience and corresponds to the ability to see structures, products and processes from one end of the chain to the other. This feature is influenced by the availability of an effective and efficient information flow along the chain, i.e. the possibility that information, such as trends in consumer tastes or the technology used by the competitors, reach the right actors at the right time. Reorganization Phase At this stage resilience is closely linked to the capacity of the chain components to develop autonomous trajectories tightly linked to local context (Socially self-organized), especially in terms of natural resources (Coupled with local natural capital). As in the previous phase functional and responsive diversity as well as human and social capital, combined with reflective and shared learning, are key elements for developing resilience, learning from the past and experimenting

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with new ways of developing. To be resilient, the agro-food chain must show agility, i.e. the speed/rapidity with which alternative options can be implemented to recover lost functionality or in response to changes in the competitive scenario or in consumer tastes. Exploitation Phase The strength and number of connections within a system and between systems are able to determine the ability to adapt, transform and react to changes, thus affecting the degree of resilience of the system (Gunderson and Holling 2002). A high connection implies a diversity of relationships between components, while a low connection implies a lack; a strong connection makes a system rigid, while a weak connection gives it flexibility. In an agroecosystem, it is preferable to have a large number of weak connections. The appropriate connection is one in which, for example, farmers collaborate with multiple suppliers and many outlets, including consumers, rather than just one. The connection thus conceived is consistent with a high degree of functional diversity and response. At this stage it is important that the agro-food chain be characterized by a high degree of adaptability, i.e. the ability to adapt incrementally or completely transform itself in response to an evolving environment. To be able to do so, the “adaptability” of a supply chain also depends on the presence of “co-learning”, i.e. joint learning at the system level, for which a high level of human and social capital is fundamental. Conservation Phase The components of the agro-food chain are adequately remunerated and do not depend heavily on subsidies or extra-agricultural jobs (Reasonable profitable). The supply chain redundancy concerns the extent to which the different nodes and components of the supply chain are replaceable. Diversity is linked to redundancy especially in relation to different sets of skills that can be used to achieve the same result. Another important feature is flexibility, which is the degree to which a supply chain can maintain its function and respond effectively to changes in the scenario through partnerships. It is the ability to set up alternative options, such as alternative infrastructure, logistics or personnel. The availability of human and social capital contributes to flexibility, as well as the remaining pool of ecological, economic, social, physical, institutional and cultural resources on which a community can draw when faced with a shock.

2.4

Building a Methodological Framework for Agro-food Chain Resilience Assessment and Its Relation with ESS

In this section, the characteristics of resilient agro-food chains described previously are operationalized by developing a framework that can be used by value chain actors to assess resilience in a given situation and outline the effects on ESS. Involving the key stakeholders through a participatory approach, the framework enables them to both understand and assess the uncertainties the chain is facing while analysing the actions and strategies adopted by the different components of the

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system in order to build resilience and understand the effects of the resulting dynamic relations and feedbacks in terms of ecosystem services and wider socioeconomic effects. By using this approach, not only is the assessment approach effective for understanding the resilience of an agro-food system, but the process itself can begin to build resilience through broad participation, by developing capacity for complex adaptive systems thinking and learning (Salvia and Quaranta 2015). This approach also provides the opportunity for actors to develop indicators that are contextually appropriate and for which monitoring is feasible. The proposed framework follows four main steps, depicted below. The different steps of the framework are artificially separated since they are closely related to each other and overlap. The steps are reiterated until a consensus among the stakeholders is reached. Identifying the Adaptive Cycle Phases of the Agro-food Chain The first step consists of a diachronic analysis of the agro-food chain and the wider socioecological system within which it is based. The analysis should be focused on identifying the main threats and shocks that have affected the agro-food chain and end with the identification of different time periods and their position within the adaptive cycle. The analysis is conducted by using the adaptive cycle heuristic as a guiding tool and with the active participation of key stakeholders. Describing, for Each Time Period, Resilience-Ideal Behaviour of All Components of the Agro-food Chain, and Operationalizing Them Through a Set of Criteria Using the time periods identified in the previous step, resilience-ideal behaviours are specified by a set of criteria (Table 2.1). Criteria are identified according to economic, social and natural capital and to the level of capital development (well or poorly developed) (Wilson 2010; Salvia and Quaranta 2015). They are adapted to the local context and agreed among the stakeholders. Assessment of the Distance Between Ideal and Actual Resilience Behaviour of the Agro-food Chain in Each Time Period The agro-food chain dynamics are described in terms of accumulation and release of the social, natural and economic capitals attached to each resilience ideal-behaviour. Assessment of the Effects of the Agro-food Chain Behaviour on Ecosystem Services and Socio-economic Effects A harmonious development of the three capitals is considered the key for the functioning of the socio-ecological system in which the agro-food chain is embedded. An optimal ‘balance’ between the three capitals specifying the resilience behaviour enables the socio-ecological system not only to persist but to thrive over time and to provide ecosystem services.

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Table 2.1 Criteria for resilience-ideal behaviour assessment

Strongly developed social capital

Exploitation phase Presence of tightknit agro-food chain and rural actors, open dialogue between stakeholders’ groups, high diversity, investment in educational infrastructure and institutions, measures to preserve local knowledge

Conservation phase Close interaction between rural people and between actors of the agrofood chains; high diversity; continued presence of indicators seen in previous phase

Weakly developed social capital

Outmigration; ageing population; poor communication between agrofood chain and rural actors; poor investment in education; weak support for local knowledge preservation

Continued presence of indicators seen in previous phase

Strongly developed economic capital

Agro-food actors collaborate with multiple suppliers and many outlets; the components of the agro-food chains are diverse (different scale, processes etc.)

The components of the agro-food chain are adequately and equally remunerated and do not depend heavily on subsidies. Presence of partnerships; diversity of agro-food chain components

Weakly developed economic capital

Agro-food actors rely on a small number of suppliers and outlets; the components of

Agro-food chain components are not adequately remunerated and/or differently remunerated;

Release phase Engagement of elders; incorporation of traditional cultivation and processing techniques with modern knowledge; investment in educational infrastructure and institutions; diversity of skills; collaboration between the actors of the agro-food chains No engagement of elders; no incorporation of traditional cultivation and processing techniques with modern knowledge; no investment in education; low diversity of skills; low collaboration along the chains Diversity of agrofood chain components (scales, production systems); balanced bargaining power within the agrofood chains; good flow of information along the chain; record keeping; baseline knowledge about the state of the agroecosystem Low diversity; strong bargaining power of part of the chain over others; no flow of information

Reorganization phase Extension and advisory services for farmers; collaboration between universities, research centres, and agrofood chain actors; cooperation and knowledge sharing

Absence of extension and advisory services for farmers; no collaboration between universities, research centres and agro-food chain actors; no cooperation and knowledge sharing Ability to organize into grassroots networks and institutions (co-ops, farmer’s markets etc.); high diversity

Inability to organize into grassroots networks and institutions; low diversity; low diversity (continued)

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Table 2.1 (continued) Exploitation phase agro-food chains are homogeneous

Strongly developed natural capital

Weakly developed natural capital

Polyculture planting and diversified cultivation practices, crop rotation and patchiness on managed and unmanaged land, good water and soil quality and availability Monoculture, low diversity, farm specialization and landscape simplification, soil and water degradation

Conservation phase highly dependent on subsidies; no partnerships; low diversity Continued presence of indicators seen in previous phase

Continued presence of indicators seen in previous phase

Release phase

Reorganization phase

Plant varieties and cultivation techniques adapted to local context. Controlled exposure to disturbances in the form of pest management

High diversity; good water and soil quality availability; plant varieties and cultivation techniques adapted to local context

Plant varieties and cultivation techniques not adapted to local context. Natural capital is vulnerable to disturbances

Low diversity; poor water and soil quality and availabity; plant varieties and cultivation techniques not adapted to local context

Source: authors, based on Salvia and Quaranta (2015), Wilson (2010), Cabell and Oelofse (2012), Stone and Rahimifard (2018)

2.5

An Application of the Framework

The framework has been tested in the Alento basin in Campania, Southern Italy. It covers an area of around 55,000 hectares and includes fertile plains as well as hilly and mountainous areas. Alento’s agricultural sector has been in decline for several decades, which has led to high rates of land abandonment and a severe reduction in utilized agricultural surface. Olive farming in particular has seen a significant reduction in inland hilly areas as production has moved to the more favourable plains. The reconstruction of historic shocks and disturbances to the SES and their impact on the local olive oil chain was based on available data and the direct involvement of local stakeholders from the olive sector (farmers, processors and distributors) as well as from the tourism industry. The stakeholders were carefully selected to represent as broadly as possible age range, gender balance and business size. In total around 45 stakeholders were involved in 11 informal round table meetings over a 9 month period (from June 2017 to February 2018). The stakeholders were first presented with a proposed outline of the phases of the SES’s adaptive cycles, as identified by the research group on the basis of documentary

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sources and a review of the relevant literature, and then invited to give their input to arrive at a definitive description of each phase. The time period chosen was the late 1940s to the present day for two reasons; firstly, because it covered the historical memory of local actors and, secondly, because it marked the departure from traditional agriculture towards significant modernisation.

2.5.1

The Assessment of Resilience Behaviour and Its Impact on the Ecosystem Services Along the Phases of Adaptive Cycles in the Alento Area

Three main phases have been identified by stakeholders, which contain the most significant social, economic, environmental and institutional changes that have profoundly shaped the Alento SES over the last 60–70 years. “Migration and Efficiency Imperative” (Release/Reorganization Phases) The first time period, 1950 to the end of the 1970s, is identified as a progression from a release to a reorganization phase. Paradigm shifts in the model of agricultural production, introduced under both EU and national policies (type and level of farm subsidies), profoundly shape the SES and begin its modernization. The Italian industrial strategy of the time linked farm subsidies to other production industries, especially chemical and mechanical industries. Connection to external markets is weak, despite the fact that emigration guarantees a flow of products towards extralocal and international destinations. The SES loses a substantial amount of the olive groves that are poorly suited to modernization but sees an intensification and modernization of olive production in the most favourable areas, i.e. on the plains. The system is reorganized by decoupling itself from its natural system (elimination of closed loop farming; external inputs), there is a loss of traditional know-how and the SES becomes increasingly dependent on the upstream (supply of inputs) and downstream (processing, bottling and distribution) of the olive oil chain. A reduction in available farmland favours increased crop specialisation, or rather the predominance of olive crops. Olive farming becomes more specialized (work calendar adapted to fit around families affected by outmigration) and reduces the diversity of the system. The specialization in the olive sector is transferred to the agri-industrial sector, which is predominately based on processing olives and the sector proves fairly profitable with the aid of subsidies. However, mills are conditioned by the local structure of production and have little incentive to innovate. The weakness of the olive oil supply chain relationships results in the production of a semi-finished product destined to be mixed, bottled and marketed outside the SES. This translates into reduced supply chain visibility and agility as well as a weak capacity for collaboration between the different components of the olive oil system

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that are geographically distant and operate at different scales (small at production level, large at distribution level). Effects on the ESS The production function remains fairly constant because the increased yields in the more intensively farmed areas make up for the reduced production in inland areas. The potential opportunities to create added value and/or niche markets are heavily undermined by the outsourcing of bottling and distribution. The abandonment of olive farming on sloping land, where terraces are most common, begins the slow decline of terrace maintenance and the loss of traditional terrace maintenance know-how. The provision of ecosystem services are not negatively impacted during this period, despite increased pressure on some areas of land from intensive farming practices and the impacts of land abandonment (soil erosion, collapsing of terraces, encroachment of forests posing greater fire risks) in areas of less favourable farm land. “Local Off-farm Jobs”: (Exploitation/Conservation Phases) The second period, 1980–2000, saw the growth and consolidation of modernization in agriculture and the emergence of the tourism industry. The construction of a series of dams in the local area increased the availability of water to farmers and boosted other local industries, particularly construction industries. Intensive olive farming practices increase on the plains. New, non-native olive tree cultivars were introduced in an attempt to increase yields (EU subsidies were coupled to production) and proved to have disastrous effects by producing a lower quality oil and bringing a range a phytosanitary problems and increased use of pesticides to the area. Agricultural production is highly dependent on subsidies and external inputs, which translates into an increased rigidity in the system. The positive feedback between subsidy regime, technologies and changes to natural capital (substitution of traditional cultivar) therefore determines a lowering of the SES’s capacity in terms of resistance. The specialization of the local manufacturing industry (olive processing accounts for half of the total agro-food sector) is high and leaves the agro-food system with low redundancy because of its high dependence on the agro-industrial sector. This aspect determines a high degree of vulnerability in the system. The production of low quality olive oil (undifferentiated product) is absorbed by big national brands. This gives the SES a weak position in panarchy as the value created mainly moves out of the SES. Effects on the ESS The continued reduction in numbers working in agricultural sector does not translate into reduced production. In fact, changes to land management mean that olive oil production remains high. Producers sacrifice quality in the name of containing costs, even though this has not been an explicit consumer demand. Adding value, creating rural jobs, local investment and stabilizing population are policy aims (in this phase designation of origin for olive oil is introduced) but do not create effective results. The fact that EU subsidies are coupled to production acts as a disincentive to farmers to innovate, the effects of which will be clearly seen in the next time period. The SES is poorly connected internally, both geographically (mountain/hilly areas

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versus the plains) and economically (lack of integration between sectors). There is, however, a tight connection between the production base and the processing sector. In this period, unlike the first, the lack of terrace maintenance, or in some cases their destruction to allow for mechanized farming methods, is manifested in severe processes of erosion and slope instabilities (it is in this period that at the regional level, a law for intervention in areas at risk of landslides, including areas within the Alento SES, was set up.) “Land Abandonment” (Release/Reorganization Phases) The third period, mid-1990s to the present day, sees the beginning of a structural crisis in the olive sector. The introduction of the Single Farm Payment Scheme under the 2013 CAP reform meant that subsides no longer bridged the gap between cost of production and market prices. In this period, the SES shows the simultaneous presence of alternative, and in many cases, divergent trajectories. On the one hand, in fact, the “productivist model” inherited from previous periods persists and continues to push for greater mechanisation and drives competitiveness by seeking to continually reduce production costs whilst, on the other hand, there are farm models pursuing scope economies (qualification of production; agri-tourism enterprises and on-farm sales or farmer’s markets). Social capital is weakened by population ageing and lack of generational change in farming. The outmigration of the most highly educated is somewhat balanced by positive examples of the return of young people to farming as “innovators”, who usually invest money coming from other sectors. A move to organic olive farming, especially in inland hilly areas, creates pockets of “resistance” inside the SES. Greater diversity in the system is helped by the creation of a territorial bio-district network in the late 2000s, which linked organic farms, producer organisations, the local administration, bio-restaurants, eco-tourism operators and consumers (via the GAS Gruppi di Acquisto Solidale—Solidarity Purchasing Groups). Redundancy in the agro-food sector is further reduced (olive processing accounts for almost 60%). The number of olive oil mills located in the hills and mountains is still quite high but they are technologically obsolete. The continued presence of local mills, which reduce the waiting time between harvesting and pressing, thus producing a better quality olive oil, could prove important should the olive system pivot towards high-quality, low environmental impact product certification status. Although the processing phase is quite well organized at a local level, the distribution, a high value added activity, remains for the most part outside the area. Effects on the ESS Farm diversification and the increased integration of farming and tourism activities slightly increase the opportunity to create added value and to create niche-market opportunities. The adoption of PDO (Protected Designation of Origin) and Organic product certification is hampered by high costs, bureaucratic red tape and scepticism that certification will result in increased market sales. Despite signs of budding economic diversification in this period, the consequences of depopulation and abandonment of farming seen over the past has deprived the socio-ecological system of the workforce and the skills necessary to

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maintain traditional land management practices. As a result soil erosion and the risk of landslides remain high and the impoverishment of landscape quality negatively impacts other sectors, especially the tourism industry. In addition to its environmental impacts, emigration has had serious repercussions on the social and economic capital of the Alento basin, jeopardizing the capacity of the agricultural system to produce high quality local food (Quaranta and Salvia 2014).

2.6

Key Findings

Loss of the Agro-food Chain’s Visibility The effects of the cost-price squeeze on farmers (falling commodity prices and rising cost of production) are exacerbated by the geographical distance of a part of the agro-food chain, which contributes to an imbalance in terms of the bargaining power of some parts of the chain over others. The visibility of the agro-food chain, or rather the knowledge of the status of operating assets and the environment (Pettit et al. 2013), recognised as an important feature of chain resilience as it is based on close collaboration between suppliers and clients, which in the proposed framework should represent an integral component in the functioning of the agro-food chain in the release/reorganisation phases, is consistently weak in the SES, shown by very poor information-sharing between production, processing, bottling and distribution. This aspect proved to be particularly crucial in the management of the relationship with end-consumers, predominantly in the domain of the distribution sector. The production base, driven exclusively by policy decisions (stimulus to increase productivity), was not able to grasp the changing nature of demand. The choice to switch to non-traditional cultivars, which led to an impoverishment of both the quality of oil and natural capital, given that the new cultivars were not coupled with the natural resources, is a clear example of the system’s inability to incorporate feedbacks coming from consumers, who were increasingly gravitating towards traditional local products. Another key factor to resilience, connectedness, which should be kept under close control especially in the exploitation phase, reflects the trend seen for visibility, or rather it is a direct consequence of this trend. The agricultural component, and therefore the connected socio-ecological system, is completely dependent on external actors, both downstream, for the marketing of the end product, and upstream, for agricultural inputs, highlighting a vulnerability that the socio-ecological system has only recently tried to mitigate. Colloboration Between Different Parts of the Chain To respond to the problem of unequal bargaining power in the chain and to bring back added value within the SES, relocalisation initiatives were started (the food district, solidarity purchasing groups, adoption of territorial quality branding) that rely on collaboration between the different actors in the agro-food chain, and also extend to include the cooperation of other territorial actors (tourism sector, schools etc.), in the case of the food district, and end-consumers in the case of the solidarity purchasing groups. Collaboration,

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therefore, which ought to be increased in the release/reorganisation phase, begins to be considered as a strategic tool to reduce the imbalances inside the agro-food chain, as similarly seen in other contexts (Leat and Revoredo-Giha 2013). In the case of Alento, this approach has resulted in improved economic performance in some firms, territorial/landscape requalification and the transfer of better skills. It has also sparked new partnerships with the tourism sector. In reality, however, as the case under study shows, access to this strategy is limited to younger, more dynamic firms that receive capital investment from external sectors. As a result, a large part of the firms operating in marginal areas are excluded for want of the necessary resources (human capital/financial capital etc.). As Lamine (2015, p. 55) points out “The frequent focus on alternative agrifood systems, which differ radically from the mainstream, does not help to develop pathways towards sustainability and resilience for less alternative institutions and actors”. Difficulty in Up-scaling and Exceeding Thresholds The agro-food chain and, more generally, the socio-ecological system under study thus shows an intrinsic difficulty in up-scaling and out-scaling processes. This is a common case in many marginal rural areas (Bock 2016) that have exceeded critical thresholds in terms of demographics, because of population ageing and out-migration trends (predominantly the young and most educated) and in terms of the deactivation of farming activities and, therefore, the strength of the production base. In light of this, relying solely on the territorial system’s capacity for innovation could prove ineffective. A more suitable approach could be in line with that suggested by Lamine (2015, p. 56): a “territorial agrifood system capable of dealing with the agriculture-food-environment reconnections should consider the diversity of initiatives in agrifood systems, as well as their possible complementarities and the conditions that favour these complementarities”. Role of the Consumer Consumer choices can play a key role in guiding the system. Solidarity purchasing groups and short chains in general have played a crucial role in the Alento SES as they connected the olive oil chain to urban areas where demand is high for quality products of trusted geographical origin. Consumers are active members in what has been defined as the “food from somewhere” (Campbell 2009) where efforts are being made to recognize the social and ecological feedbacks between bases of production and points of consumption.

2.7

Conclusion

The objective of the proposed framework is to analyse the dynamics of an agro-food chain, in our case an olive oil chain, in light of its capacity to be resilient and at the same time guarantee the supply of ESS. Agricultural ecosystems and their capacity to generate ESS are not found in a vacuum but are determined by and are the result of actions that involve other actors

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(economic, social and institutional), who may be at a spatial and temporal distance. The farmers who, through their choices, directly impact the ecosystem are not, therefore, solely responsible for the management of the ecosystem itself. To this end, analysing the resilience of the agro-food system by adopting a socio-ecological system perspective proves not only useful in analysing the different mechanisms put in place by the agro-food chain in the different phases considered to be key to the evolution of the SES, but also shifts the focus of the analysis. In fact, this approach, which identifies the characteristics and the trajectories of the socio-economic and institutional actors, the interdependencies and the methods of coordination they have implemented over time, and their implications for the other components of the SES, moves away from an exclusively economic interpretation to focus on their social and environmental implications (Ericksen 2008). Therefore, analysing strategies for agro-food chain resilience and its relationship to ecosystem services should be seen as a key objective for research and, especially, for policy making. The Common Agricultural Policy (CAP) has addressed this issue (the multifunctionality of agriculture) to some extent through different instruments aimed at protecting (e.g. Natura 2000) and provisioning (e.g. cross-compliance and agri-environmental schemes) agricultural public goods, as farmers have to be encouraged to pursue certain farming practices in order to maintain landscape features, restore specific habitats, or to manage natural resources such as water and soils. However, despite the fact that landscape preservation is included as an objective in the CAP, as the analysis carried out has shown, an approach based solely on agriculture can prove insufficient. Indeed, the CAP incentives cannot guarantee the survival of farming systems if not coupled and coordinated with mechanisms from within the whole of the agro-food chain. The experience of the Corporate Ecosystem Services Review promoted by the World Resources Institute, aiming at providing guidelines for Identifying Business Risks & Opportunities Arising from Ecosystem Change (https://www.wri.org/publication/corporate-ecosys tem-services-review), can prove useful in involving the whole chain in sharing responsibility. Furthermore, it is important to point out how adopting the framework, alongside normal chain analysis can prove useful in helping socio-ecological systems to learn from the past and use this shared and holistic knowledge to define new, sustainable trajectories for the future. Acknowledgement The study was partially funded by the iSQAPER project, funded by the European Union’s Horizon 2020 Programme for research & innovation under grant agreement no 635750.

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Chapter 3

Analysis of the Development Potential of the Food Industry in the EU28 Mirela-Adriana Rusali

3.1

Introduction

In the economic literature, industry has always been considered a key sector of economic development, including among recent academic studies (Albu 2012; Alexandri 2017; Chivu and Ciutacu 2014), with valuable information on the historical evolution of the sectors of the national industry, and analyses that highlight the positive effects of trade on international specialization in industry and economic growth, as well as competitiveness shortcomings under the impact of liberalization of the agro-food trade, and strategic approaches in the perspective of sustainable development. Sustainability of the food supply of the population in all the EU countries is a priority objective of the current CAP, with important implications both for ensuring food security and for developing the rural economy. In this context, the European economic model promotes sustainable development based on competitiveness, innovation and knowledge, where a key role lies with the small- and mediumsized enterprise sector, due to its great flexibility in adapting the business to new market requirements. Building on the reality that an economic sector with structural developmental inequalities loses out on the performance that it might have, conveying imbalances to the system it is part of, the present research aims to assess the development potential of the food manufacturing sectors in the EU, with the purpose of identifying existing gaps between countries indicating rebounds in the production potential and structural dysfunctions, implying the need for improvement of the food sector performance from the perspective of the final target of increasing the value added of products by efficient valorization of agriculture’s potential through the manufacturing industry and reducing the states disparities.

M.-A. Rusali (*) Institute of Agricultural Economics, The Romanian Academy, Bucharest, Romania © Springer Nature Switzerland AG 2020 K. Mattas et al. (eds.), Sustainable Food Chains and Ecosystems, Cooperative Management, https://doi.org/10.1007/978-3-030-39609-1_3

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The concept of value adding, similar to value creation, defined as a process that creates outputs more valuable than its inputs, is the basis of the efficiency and productivity of an economic sector (Cucagna and Goldsmith 2018). Value added is an indicator used when investigating the profitability based on the production potential of the business sector and a measure of the economic-financial performance of enterprises. Nevertheless, when assessing the development potential, it encompasses a complex endeavor, to which the paper contributes by providing analysis on the gross operating surplus statistics of the enterprises across the EU food industry, compared to its productivity and investment rate distribution.

3.2

Methods and Data

The research method used a twofold approach, namely, analysis on selected structural economic indicators at the level of food manufacturing sectors and subsectors in the EU in the current structure of the 28 states (EU28), i.e. number of enterprises, employment, production value, value added at factor cost, gross operating surplus, apparent labor productivity (value added/employment), value added share in manufacturing, employment share in manufacturing, turnover, investment rate (investments/value added), and comparisons between the countries included in the Euro area (EA-191), those not included in the Euro area (Non-EA72) and against the EU28 average (MEU28). In the paper the development potential is indicated by the gross operating surplus (GOS),3 representing profits of enterprise, which were computed by deducting the personnel costs from the value added, resulting from the economic activities that allow financing of investments. The analysis was based on estimates of the average values in the period 2007–2016 of the selected variables and indicators, and their growth rates have been calculated on the average values (Annual constant growth rate ¼ (Vt/Vto)^(1/t– t0) – 1). The estimates provided bases to assess the relative gaps between the member states by the ratio between the variable in the country or groups of countries and the average value of the variable in the EU28 (VC/MEU28), or the absolute gaps (VC-M EU28). Data was mainly provided by Eurostat—National accounts aggregates by industry (up to NACE A64 branches) and Eurostat—Annual detailed enterprise statistics for industry (NACE Rev. 2, B-E), at the division level and groups according to NACE -10 Rev.2, up to a 3-digit aggregation.

1

EU28 countries except for Denmark and the UK, subscribed to the Eurozone non-participation Clause, and for Non-EA-7. 2 Bulgaria, Czech Republic, Croatia, Hungary, Poland, Romania, Sweden. 3 GOS is defined in the context of structural business statistics, according to the Eurostat Glossary, as the surplus generated by operating activities after the labour factor input has been recompensed.

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Table 3.1 Structural overview of the food supply chain in the EU28

Turnover (billion euro) Value added (billion euro) Number of employees (mill. Pers.) Number of companies (thousand)

Agriculture 426 219 11.3 10,800

Food and drink industry 1090 212 4.3 288

Wholesale 1249 102 2 337

Retail 1110 162 6.2 809

Source: Eurostat data collated by Food Drink Europe (2016)

3.3 3.3.1

Main Findings and Discussions Overview

The food and drink industry is an important economic sector of the EU economy. Together with agriculture, the food and drink industry (processing and manufacturing) and the distribution sector (wholesale and retail) are the driving forces of the food supply chain in the Member States. In the period 2007–2016, on average, the food industry alone in the EU28 contributed with 12% to the manufacturing value added, 12.8% in the EA-19 countries and 11% in the Non-EA7. Moreover, the EU28 employed 15% of its employment capacity in manufacturing within the food indsutry, while for the EA19 it was 15.4%, and 14% in the Non-EA7. The EU food and drink industry is the leading manufacturing industry in terms of employment, with 4.3 million people (15.2%), turnover worth 1090 bill. Euro (15.6%) and value added worth 212 bill. Euro (13%) (Table 3.1). A total of 285 thousand small and medium enterprises (SMEs) in the EU28 (99% of food and drink companies) account for a 62.8% share of the food and drink employment, a 49.4% share of the food and drink turnover, and a 48.1% share of the food and drink value added. The distribution of value added within the food supply chain in the EU indicates that, while the largest number of business activities is involved in agriculture, the value added share supplied by agriculture in the whole food chain remains at about 25% (except for the year 2009, because of the financial crisis). One explanation could be found based on the following remark: the “fall in agriculture’s value added was due to a deliberate policy shift, as the value added in agriculture is influenced by the different treatment of agricultural subsidies following the Fischler CAP reform— introduction of the Single Farm Payment which is classified in the Economic Accounts for Agriculture as a subsidy on production and which replaced the system of direct payments, which were classified as subsidies on products. This statistical reclassification alone led to a sharp fall in the figure for gross value added in agriculture at basic prices from 2005 on” (Matthews 2015). The agri-food manufacturing industry (food, beverage and tobacco) generated 283.3 billion Euro in 2016, of which the greatest contributors were the countries in the Euro area (EA-19), sharing 74% on average in the period 2007–2016, while

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Table 3.2 Gross value added of the food, beverage and tobacco manufacturing industry in the EU28 (2007–2016) 2007 Bill. Euro 235.9 173.8 52.9 30.3 4.2

EU28, total EA-19 Non-EA7 UK Denmark

2016 Bill. Euro 283.3 212.1 33.7 32.9 4.1

Growth rates % 1.0 1.1 2.5 0.1 1.8

Average 2007–2016 Bill. Euro 251.2 177.8 33.3 29.5 3.9

Share in EU28 % 100 74 13 11 2

2016

2015

2013

2014

2012

2011

2010

2009

2008

-5

2007

2015

-5

2016

0 2014

0 2012

5

2013

5

2010

10

2011

10

2009

15

2008

15

2007

%, Percentage change on previous year

Source: Eurostat—National accounts aggregates by industry (up to NACE A64 branches)

GVA price index

Volume index of production -10

-10

-15

-15 Agriculture, forestry and fishing - EU28

Agriculture, forestry and fishing - EU28

Manufacture of food, beverages & tobacco - EU28

Manufacture of food, beverages & tobacco - EU28

Fig. 3.1 Volume index of production and gross value added price index, in the EU28 agriculture and agrifood industry, 2007–2016. Source: Eurostat—National accounts aggregates by industry (up to NACE A64 branches)

the UK and Demark together share as much as the group of countries not yet included in the Eurozone (13%) (Table 3.2). The processing and retail stages added additional elements and services to basic agricultural products as a result of the growing consumer demand for convenience products, thus increasing total value added in the food chain. The value added of agriculture has not grown to the same extent as other actors in the food chain, mainly the retail sector. Factors explaining this development are connected to the increased production costs of inputs caused by competition for limited resources, as well as to the narrow possibilities farmers have to add value to basic commodities or to get remuneration for them (DG AGRI Factsheet, 03/2017). The statistics on agri-food industrial production and value added show significantly different growth rates The evolution of production and gross value added (GVA) of the agri-food sector in the period 2007–2012 had larger fluctuations than the next one, with a minimum in 2009, as an impact of the financial crisis, and a boost in 2010, while more attenuated trends were observed in the agri-food industry (Rusali 2017). While in the agri-food sector the volume index of production has decreased from 2014 onwards, by 4% in 2016, lower than in 2013, the agri-food industrial production had an opposite trend, increasing with 2% in the same period (Fig. 3.1).

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4.0 3.0 2.0 1.0

-1.0 -2.0 -3.0

Luxembourg Ireland Belgium Malta Greece Austria Netherlands EU28 Bulgaria Estonia France Finland Romania United Kingdom Italy Hungary Slovakia Slovenia Czech Rep. Denmark Latvia Sweden Croatia Cyprus Poland Portugal Spain Lithuania Germany

0.0

Average 2007-2015

Growth 2007 vs. 2015

Fig. 3.2 Ratio of value added in the agri-food industry on value added in agriculture, by EU28 countries. Source: Eurostat—National accounts aggregates by industry (up to NACE A64 branches)

According to data presented in Fig. 3.2, the highest ratio of gross value added in the agri-food industry (food and beverages and tobacco) to the gross value added in the agriculture (agriculture, forestry and fishing) ratio was estimated in Ireland (3.9), and another 14 countries, including Belgium, UK, Luxembourg, and Germany. However, the ratio was still a subunit and below the EU-28 level (1.2) in 13 states, including Slovakia, Hungary, Finland, Bulgaria, and Estonia. However, a slight tendency to improve the ratio in 2015 vs. 2007 was at the EU28 level (0.1), underlining this trend in bottom-level countries, except Slovakia that had a decreasing ratio together with another 12 states (lowest ratio decrease, 2, in Germany). At the same time, the EU is the first exporter of food and drink products in the world, accounting for a €92 billion value of exports to non-EU markets, with a 17.8% share in the global export market, bringing a €27 billion trade surplus to the economy. During 2012–2015, while Ireland was the country with the largest decline of exports in the food industry (47%), followed by Slovakia and Finland (>9%) and Latvia, France and Denmark (recorded declines between 7% and 3.6%), Romania’s total food exports (intra-EU + extra-EU) increased by 56.9%, placing the country first in the EU28 ranking, followed by the UK (56.6%), Cyprus and Bulgaria (37%). Among the top 10 partners in the EU28 food market, in 2015, Germany, France, Netherlands, Italy, Belgium, Spain, UK, Poland and Denmark share 84% of the EU28 food manufacturing exports and 83% of food imports, while Estonia, Latvia, Slovenia, Cyprus and Malta had the smallest trade flows ( 1 are represented as Bold values

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