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Environmental Partnerships
Combining sustainability and commercial advantage in the agriculture sector (02/004 ACL-1A)

by Neil Gunningham and Darren Sinclair

January 2002

RIRDC Publication No 02/004  RIRDC Project No ACL-1A

Executive Summary

Introduction

This Report explores the use of environmental partnerships as a means of improving environmental and commercial outcomes in the agriculture sector. Such partnerships are defined as follows: An environmental partnership is a cooperative agreement between, on the one hand, business, and, on the other hand, one or more second parties (government) and/or third parties (eg environmental organisations or commercial entities, including other parts of the supply chain), whereby business voluntarily undertakes to achieve certain environmental improvements in exchange for some benefit provided by other partnership participants.

The report argues that in some contexts, environmental partnerships can provide equitable and effective solutions to some environmental problems and that they offer an attractive, and as yet under-utilised, policy option. Suitably harnessed and designed, they could make a valuable contribution to resolving the broader environmental challenge facing Australian agriculture.

Policy context

The most compelling environmental challenges confronting the agricultural sector include: ! maintaining a clean and green image (or risk a discount or inability to sell one’s produce);
 

• maintaining food safety standards (or face consumer boycotts);
• demonstrating compliance with an ISO accredited environmental management system (or risk supply chain pressure as this becomes a de facto international trade standard); and
• complying with the environmental requirements of supermarkets and other retailers (or risk losing valued markets), and pressures from current or threatened environmental regulations.


Any failure to come to terms with these external pressures will involve increasing penalties, both internationally and domestically, and both in the market and outside. It will involve a threat to the long-term prosperity of Australian agriculture and even to the survival of some components of it.

Current environment protection policies have failed to provide sufficient incentives for environmental stewardship or to assist producers to manage risk in an environmentally benign manner. And parts of the farming community, lacking awareness of the need for sustainable practices, have maintained their traditional hostility to government intrusion in their affairs.

Environmental partnerships, however, offer a middle course between the two extremes of traditional regulation and self-regulation and voluntarism.

Benefits

In agriculture, there are three major benefits that may be derived from environmental  partnerships:
 

• First is a commercial benefit. Environmental partnerships may provide opportunities for greater on-farm productivity, while others, most notably with environmental groups and/or which use environmental labelling, may facilitate a greater market share, access to new markets, the ability to charge a price premium, or significantly, continued market access.
• Second, is a political benefit. Environmental partnerships may provide farmers with greater environmental credibility in promoting their position in range of policy fora. Necessarily, as a condition of entering such partnerships, agricultural sectors will have to take demonstrable action to improve their environmental performance.
• Finally, the broader attraction of environmental partnerships in agriculture lies in their ability to combine industry flexibility and ownership on one hand, with the credibility of external, third party engagement on the other hand, even where that third party is not a regulatory agency.


 Partnership models

The particularly structure and applicability of environmental partnerships will vary depending on the particular circumstances of an industry and of the key potential partners. The three major types of environmental partnership models are described below.


Industry and government partnerships

Probably the most common form of environmental partnership involves some form of agreement between an industry sector (or enterprise) and a government agency. Over the last few years, such approaches have become increasingly popular, and, in one form or another, their use has permeated worldwide. For example, there are over 300 negotiated agreements between industry and government in European Union countries although only a small minority of these involves agriculture.

From the perspective of the agricultural sector, such a partnership may provide several benefits: ! First, governments have considerable resources and expertise that may be used to assist the sector in improving its level of environmental performance. This could take the form, for example, of the provision of information, education, technical support and training. As such, government agencies could expand their current “environmental extension” service to the agricultural sector.
 

• Second, government agencies (at least those with regulatory powers) may be able to offer some form of "regulatory relief" to encourage voluntarily improvements in environmental performance. In effect, this would entail using partnership arrangements as an alternative to mandatory regulatory obligations, either for agricultural sectors as a whole, or for individual farmers.
• Third, government agencies may also provide a degree of external legitimacy to the environmental efforts of an agricultural sector (although this may not be as convincing to the wider community as the credibility provided by the involvement of an independent environmental organisation). There are two types of government-industry partnership models:
• Public voluntary partnerships – these are devised by an environmental agency and individual enterprises are invited to participate. As such, industry participation is purely optional. Industry “challenge” programs (eg the Greenhouse Challenge) are perhaps the best known.
• Negotiated agreements – these involve specific commitments to environmental protection elaborated through bargaining between industry and a public authority. Most commonly, they are entered into by an industry association and government against a backdrop of threatened legislation.


 Industry and environmental organisation partnerships

A still evolving environmental partnership model is the “green alliance” between an agricultural sector or an individual enterprise, and one or more environmental organisations. Such alliances involve collaboration between business and environmental groups to pursue mutually beneficial goals. Most commonly, business seeks to obtain the political goodwill and credibility which NGOs bring to the partnership – benefits which may translate into risk reduction, decreased costs or increased revenue through market advantages. In exchange, environmental groups will expect a commitment to improved environmental practices on the part of their industry partner.

However, even if there are sufficient mutual benefits to make the partnership seem worthwhile, it may still not eventuate, given a history of mistrust, and sometimes conflict, between the would-be partners. A number of factors contribute to the success of such partnerships, including:
 

• shared or reinforcing goals; trust; respect; clarity about the desired outcomes of the partnership;
• access to the skills and resources needed to adequately support mutually agreed upon activities;
• meaningful indicators of progress;
• reporting of results and accountability, buy-in to both parties; and
• and open sharing of information.


Industry and industry partnerships

There are now a multiplicity of groups involved in the chain of agri-food production, and/or as stakeholders who influence the decision-making process at farm level, including decisions on resource use and environmental practices. The increasing power and influence of various players in the supply chain also opens up opportunities for new environment protection strategies, including the formation of environmental partnerships. Supermarkets in Europe, particularly in the United Kingdom, are already providing environmentally preferred food products, and in the future it may be increasingly difficult to penetrate these markets without being able to demonstrate environmental as well as quality control processes. The experience of Tesco’s and the Tasmanian onion growers is an example of a path-breaking supply chain environmental partnership in an Australian context. The greatest prospects for industry to industry environmental partnership are:
 

• in areas where products are supplied directly to the consumer;
• where it is possible to differentiate between what is being supplied by different retailers; and
• where the consumer particularly cares about the environmental credentials of what is supplied.


Multi-party environmental partnerships

Environmental partnerships may also involve multiple partners, and this can often achieve more than can be achieved in bilateral arrangements. This is because one or more additional partners can provide valuable, and sometimes essential attributes that the initial two partners lack, thereby enriching the partnership and compensating for its initial weaknesses. However, notwithstanding the benefits which multi-party partnerships can provide, such arrangements also bring with them substantial costs which, in some circumstances, can outweigh their benefits. At the very least, each additional partner will increase the transaction costs and complexity of the partnership, and also the risk of disharmony and the breakdown of the entire arrangement. For these reasons it will not always be rational to seek to include additional partners.

Creating successful environmental partnerships

The Report identifies several factors conducive to the development of successful partnerships:
 

• a coincidence between public and private profit;
• the prospect of mutual gain for both/all partners;
• a focus on local issues with readily monitored results;
• exposure to green markets/companies which trade off their public image;
• disparities in power along the supply chain;
• the burning deck: getting partnerships off the ground; and
• leveraging commercial third parties


Key design features

While the circumstances identified above may be the most fertile in which partnerships can grow, experience suggests that they must also be structured in ways which maximise their chance of success. Here, a number of features can be identified as being of particular importance: ! adequate incentives for participation;
 

• clear environmental targets;
• adequate accountability and transparency; and
• encouragement of continual improvement, flexibility and innovation.


 Implications for government

Although environmental partnerships can play important roles in environmental protection, agricultural producers, NGOs and others, will not necessarily organise themselves into such partnerships, even when they might provide win-win outcomes. There may be an essential policy role for government in encouraging, facilitating, rewarding and shaping such partnerships, including:
 

• steering the boat rather than rowing – an emphasis on facilitation over intervention;
• kick-starting environmental partnerships to overcome start up costs and other initial barriers to their adoption;
• providing incentives – this will vary with the circumstances;
• introducing regulatory flexibility and encouraging the use of environmental management systems;
• reducing risk - a short-term role if the private insurance market fails to do so; and
• supplying information and assistance: this can form an inducement to enter into a environmental partnership.


 Conclusion

Beyond the specific policy prescriptions identified above, a number of broader points emerge from the various empirical studies and analyses conducted to date:
 

• First, as we indicated earlier, in the case of government and industry environmental partnerships, there are well known and readily identifiable benefits in including third parties in the process of developing and overseeing such agreements.
• Second, that environmental partnerships, like voluntary agreements more generally, are often best used when an environmental problem is in its early stages and it is premature to regulate it directly.
• Third, the weaknesses of voluntary environmental partnerships can often be compensated for, and their strengths enhanced, by combining them with most, but not all, forms of command and control regulation.
• Fourth, as the OECD notes, voluntary agreements more generally can play a useful role in “lubricating” the regulatory policy mix.
• Fifth, environmental partnerships do seem to generate major positive “soft effects” such as collective learning, generation and diffusion of information, learning by doing and demonstration effects, increased stakeholder participation and consensus building, which are arguably key objectives and virtues of many negotiated agreements.
• Finally, the evaluation of environmental partnerships requires a dynamic analysis: the second generation of such partnerships may be somewhat different from the first, and considerably more likely to provide public interest benefits.
 


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Last updated: 22 January 2002
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