Brainstorm Green: Feeding the world sustainably and affordablyApril 18, 2012: 10:00 AM ET
Greg Page, CEO of Cargill and Mark Tercek, CEO of The Nature Conservancy sat down for a conversation with ONE.org's Michael Elliott at the Fortune Brainstorm Green conference in Laguna Niguel, Calif.
Below is an unedited transcript of the talk:
MICHAEL ELLIOTT: We've got the prospect of a terrific conversation in store for us. We have Greg Page from Cargill on my immediate right, and Mark Tercek from The Nature Conservancy two away from me. So, I said to Greg in the green room, three words to describe Cargill, because we know Cargill but just sort of kind of describe it in a few words, and he said, egg, food, and risk management. And I said, egg? Egg? He said, no, ag, ag. So, agriculture, food, and risk management. Though, as it turns out, you do a lot of eggs, too.
So, what brings you guys together, because it turns out that one of the world's leading food and agriculture companies, and one of the world's leading environmental NGOs have quite a lot in common, and you do stuff together. Mark, do you want to go first?
MARK TERCEK: Yes. Thanks for the good question. And I would say, as a starting point, thanks to Fortune for putting us on the agenda, because we're here to talk about agriculture, and if you think about the range of environmental issues, where environmental objectives and business issues collide, and where collaboration can really pay off, I think this is top of the list.
From our perspective in the ag space, as environmentalists, we see a need to do two things. One, we have to double food production. If you think about population growth, and the rising middle class, and improving diets, food production will have to be doubled over the next few decades. On the other hand, we have to do that while not undermining the ecosystems that ag production depends on. And so, a buzzword we use for this is sustainable intensification. We need to intensify agricultural output, but we need to do it in a sustainable way.
And so then it's interesting for an NGO like us who has been conserving land for 60 years; in the old days we might think about just protecting land. But going forward that model won't work. We actually have to think about what Greg and Cargill have been thinking about, how to ramp up productivity. But, likewise, if I put myself in Greg's shoes, Greg can't just think about ramping up productivity, he has to be really sure that that happens in a way that doesn't undermine the environmental ecosystem infrastructure that ag depends on.
So, that's why we collaborate and the challenges are great. Ag is the biggest thing we do to the planet. Greg will know better than me, but something like just shy of 40 percent of the world's land is in agriculture, and it's sort of a misleading number, because if you excluded deserts, and mountain tops, et cetera, it would obviously be a much higher percentage. So, it's really big, and it's obviously very important to get right, because we have all these people to feed. So, that's why we collaborate, and Cargill has been a really great partner.
MICHAEL ELLIOTT: Greg?
GREG PAGE: For us, we have to produce the world's food in a way that's acceptable to the people that buy it. And, importantly, also acceptable to other people in their supply chains. So, our most important customers are the brands that people know and trust, and they expect our behavior to reflect their values. And so, working with Mark and his team to grow food in a manner that is sustainable and repeatable over a long period of time, and to do it in a manner that's acceptable to the people that buy directly from us, and in turn the people that consume these products brings us together.
On the good news side, we have managed to double production of food in the world since 1975. We managed to do it on essentially the same number of acres, albeit they're different due to urbanization, but the total amount of cultivation is about the same as it was. We've cut the percentage of nominal global GDP that accrues to the major food crops from just short of 4 percent of global GDP to just short of 2 percent. So, clearly it raises the standard of living of a lot of people as the portion of their total economic pie that they have to pay to sustain their bodies has gone down. It's freed money up for education, for housing, healthcare, and so we want to do that in a way in the next 35 years that allows us to achieve those same promises.
MICHAEL ELLIOTT: I want to ask you in a second about the next 35 years, but seeing as one of the hallmarks of this conference, one of the things that makes it really great is that you put different stakeholders together, and discover that they can work together, and we're very kind of solution oriented rather than just kind of sitting around winching.
Give us an example, Mark, of one of the projects that you're doing together?
MARK TERCEK: Okay. So, I noted we've got to improve ag output, but do it sustainably. So, top of the list, therefore, is to grow output without expanding into forests, especially. So, we have to stop deforestation that results from agriculture. So, Cargill and TNC had a really positive experience in Brazil. The story goes sort of like this, activists put pressure on McDonalds to be able to demonstrate that their soy was sustainably produced in Brazil. That pressure on McDonalds, and McDonalds went to Cargill, and they said, hey, we need our soy to be sustainably produced.
And it was kind of murky in Brazil at the time how the soy was being produced, where it was coming from, et cetera. Although Brazil had a very good forest code that called for protection of the forest, it just wasn't enforced. Why wasn't it enforced? It was hard to enforce. There was a lot of confusion about who owned what land, what set asides had happened, and what hadn't.
So, we showed up with Cargill's support, and the government's support, and farmers' support using satellite technology we came out with the ability to monitor who was where. And farmers kind of liked it because they were all nervous about to what degree they were in compliance. And that's gone great guns now.
So, in fact, that kind of initiative and others have resulted in really slowing down deforestation in Brazil. It's a very important story. So, that's one of the things we have to do, stop deforestation that results from agriculture. The story in Brazil is pretty encouraging. And that's collaboration of the private sector, NGOs, and very local farmers, of course, small and big, and a very effective government coming together.
MICHAEL ELLIOTT: So, there are two or three points on that that I want to come back to later on, including the last one. But I said I would come back to you, Greg, before I forget this thought. You make a very powerful point about doubling food production in the last 35 years, since 1975, fantastic. Look at the challenges for the next 25 years with population heading towards 9 billion. Are the challenges of a different scale? Are they of a different quality? Can it be done?
GREG PAGE: Yes. It can absolutely be done. It can't be done without Africa. And so, we all collectively face a challenge of capitalizing agriculture.
MICHAEL ELLIOTT: Sixty percent of unexploited arable land on the planet?
GREG PAGE: Rain-fed, more importantly.
MICHAEL ELLIOTT: Rain-fed. Right.
GREG PAGE: And so, clearly, we're going to have to replace some production in other parts of the world that have been raising food with fossil water, and there are places where that will ultimately deplete. So, I think we can do it with a very, very small increase in the number of acres brought into production, provided that we raise the right crops with the right technology on the right land, which implicitly says we're going to have a global food system that involves some trade, since the endowment, the natural endowment is somewhat uneven.
MICHAEL ELLIOTT: One of the things that we should get onto this conference next year, incidentally, you've just given me an opportunity to do a plug, is the absolute crucial importance of putting together a global framework for investment in agriculture in Africa, which I hope world leaders are going to be talking about in a few weeks time at the G-8.
Talk to us about natural capital, Mark, because that seems to me to be something that underlies a lot of what both of you are talking about here?
MARK TERCEK: Yes, I mean natural capital, obviously really important in the ag space, but by natural capital we mean thinking of nature as infrastructure if you will. So, for too long I think environmentalists have done a bad job of helping people understand why it's important to protect nature. And we kind of talked about nature as a luxury good, something that's great to protect for affluent people to enjoy in their spare time, if they've very well off. That's exactly wrong. In fact, natural capital, green infrastructure, it's the underpinning of human well being, and it's actually poor, vulnerable people who most depend on natural capital.
So, how might natural capital work in the ag space? One of the big issues we deal with is nutrient runoff into, say, the Mississippi and the dead zones in the gulf. Well, why is that happening? There's lots of reasons, but a big part of it is the demise of flood plains. Flood plains are a great example of natural capital. So, in the old days between levees when there were floods, the floods would spread nutrients, good for farming, and those flood plains also purified and cleaned the water. Then we built levees. The water just rushes down. You have floods. You have nutrient runoff. So, we spend a lot of our time now up and down, say, the Mississippi, but really all over the place, trying to restore flood plains so that we can protect top soil, we can clean water, prevent nutrient runoff, et cetera. So, that's an example of natural capital.
Forests would be another. That's what I opened with. Forests, and somebody mentioned this earlier today, I mean, we used to think of forests as the timber valley, but that's a tiny slice of what forests do for human kind as infrastructure. Again, it protects topsoil, cleans water, et cetera. So, that's what we mean by natural capital.
MICHAEL ELLIOTT: You actually grew up on a farm, so you understand what natural capital means, right?
MARK TERCEK: I grew up on the edge of a farm. My dad was a John Deere dealer.
MICHAEL ELLIOTT: Your dad was a John Deere dealer, but didn't he do a little bit of farming, too?
MARK TERCEK: Yes, we had 40 cows to annoy four sons.
MICHAEL ELLIOTT: So, the concept of natural capital, and the importance of husbandry, of livestock, and of land is something that you grew up with, right?
MARK TERCEK: Sure. And I think one of the outcomes of the last five or six years is the value of the world's natural capital has become higher, denominated in dollars you see farm land in Iowa at $10,000 an acre. There is a built-in incentive for people to take added urgency about how they're caring for that topsoil, which from a food and ag standpoint, from a photosynthesis standpoint, is the great natural asset.
MICHAEL ELLIOTT: The other way of describing your company apart from agriculture, food and risk management, you told me, was the exploitation of photosynthesis? Sorry, go on.
MARK TERCEK: The commercialization of photosynthesis is how do you take carbon from the air and create products that people need to live?
MICHAEL ELLIOTT: Both of you have an extraordinary global approach to the challenges that you see in the commercial sector, or in the NGO space. And I'm just wondering if you can think of particular challenges to the way in which you have to do business, business in the NGO sense, too, that comes from the fact that we now have a global food market, a kind of global commons, a global sense of what natural resources really are?
GREG PAGE: I'll take a shot. So, one of the things that's quite evident is in the expression, whether it's the outcome of social media, or just the fact that the world is far more curious about the how and the where of their food, but we have said that in a world where nothing can be hidden you'd better have nothing to hide. So, I think what's really changed and is truly global is the whole issue of transparency. And the challenge is people only give about 14 seconds to anything. So, how do you talk about something as complicated as the nexus, given the title of this the nexus of Food, Water, and Agriculture. How do you get people to understand it in a way they feel like they've been dealt with transparently, but to do it in time sequences that fit with the way in which they learn and seek information?
MICHAEL ELLIOTT: So, if you're sourcing soybeans, or palm oil, or whatever it is from somewhere that the people challenge, people allege is being done in an environmentally unsustainable way, you'll hear about it in a couple of days, right?
GREG PAGE: And the only way ‑‑ Groucho Marx had a great line, do you believe what you see with your eyes or what I'm telling you? And we have to realize that it's what they see with their eyes. We had Oprah Winfrey's TV cameras come into one of our meat plants, and we brought numerous NGOs to our palm plantations, and we're not necessarily running agro tourism, but we do have to become increasingly transparent, because I think there's a very good story to be told by the best companies in all of those spaces. But, if you don't get out and tell it, you'll be defined in some other manner.
MICHAEL ELLIOTT: Mind you, I bet if there was a commercial opportunity in agro tourism Cargill would be in it.
GREG PAGE: It's $79 a night.
MARK TERCEK: About being global. I agree with transparency. It's really important for NGOs, too. The other thing about being global is you can kind of mix and match lessons and good experiences from one place and apply them elsewhere and learn. So, we've made so many mistakes in the U.S., but Latin America I think is a really interesting region for us right now. Again, we collaborate a lot with companies like Cargill there, but we've got these interesting series of projects. A few years ago in Keto the city was contemplating building a new water filtration plant, and our local team, it's a great story, headquarters had nothing to do with it. So, our local team said to the town municipal water company, the brewer, the Coke bottler, hey there's a cheaper way to keep your water clean than building a plant and cleaning dirty water. Instead do some upstream conservation.
So, a little fund was raised by those players in TNC, we paid to change ranching and ag practices upstream, pretty simple intervention. And it worked. And lo and behold today in Keto everybody who uses water pays a little fee. They would have paid a fee anyway. It would have been higher to pay for that plant, but instead it pays for upstream conservation. And a few great things happened. One, you have conservation that pays for itself, which is great.
In the case of this Keto example, that upstream area is the bio condor reserve. So, we would have wanted to protect it anyway. And then it's such an elegant model we said this should be replicable and now with a lot of people's help we have like 25 of those across Latin America. And so again, that's natural capital. You have users of an ecosystem service, to use the wonky word, but really they're just people who need clean water, are paying for efficient upstream conservation. By the way, it's also very beneficial to those communities upstream who are getting extra income to improve and alter their practices. Clean water results and it can be scaled up.
And so in Latin America it's spreading like gangbusters. For us it's great. So, now we're saying, okay, can we take this to Africa. It requires a community of payers, users and payers, so it doesn't work everywhere, but that's the kind of thing you can do.
Latin America is a great factory for us right now to try these things, because the government is in good shape, poised for great economic growth, ecosystem is really pretty intact. So, this is a good time for us to get it right, and then apply those lessons elsewhere.