Michael Schlup is the Regional Manager Africa, Bunge Environmental Markets and contributor to the Climate Change Capital Think Tank.

In the run up for the COP in Durban last year and reflective of the importance of agriculture for Africa and its sensitivity for climate change, the term “climate-smart agriculture” came to some prominence.

While this at first sight implies to be a no-brainer – of course agriculture should be smart about the changing climate – at second thought one wonders: What does it mean?

And, from the private sector’s perspective: What could climate-smart agriculture mean when looking to make a profit from being smart about the changing climate by doing business in agriculture?

Presumably, climate-smart activities would mean investing in adaptation, i.e. things that make agriculture more resilient towards drought, changing patterns of rainfall, higher or lower temperatures, changes in UV radiation or soil chemistry. Or promoting activities that absorb or avoid carbon, i.e. mitigate climate change. But what about investments in increasing yields – trying to outpace yields declining because of climate change by higher yields from using better technology, GMOs and different farming practices?

If the answer here is ‘yes’, is not all investment in agriculture ultimately climate-smart (assuming it is done in a model that is not unsustainably depleting limited resources)? Because increasing, stabilising and smoothening out yields is at the heart of private sector-led activities in agriculture – and this is particularly true for Africa, where yields are comparatively low per area of land under cultivation.

That leads to the core argument this contribution: Investment and expanding business in agriculture, when tied in a sustainable value chain, is always climate-smart. Or community-smart. Or just smart.

Therefore, the scope of interest for a private sector investor will be to make value chains sustainable. In the first instance, this means establishing value chains. Those value chains then, secondly, need to be persistent over time in order to justify making investments. And thirdly, sustainable value chains mean not depleting resources, not exploiting communities and tackling the risk of climate change.

How do you make value chains sustainable?

Making value chains sustainable can have many angles. It can be very direct, when the infrastructure to reduce harvest and storage losses is improved – a perpetual problem in Africa. It can be more indirect when smallholder farmers’ incomes from cash crops are increased by creating local markets for produce that can be grown with little extra effort or by providing access to international markets. In Africa, with its big share of smallholder farmers this is particularly important.

Even more indirectly we contribute to sustainable value chains when a farmer’s yields for his subsistence crops are improved e.g. by conservation agriculture practices or access to food banks: a hungry farmer does not contribute to the value chain but must grow food to feed his family. Africa has the highest share of subsistence or near-subsistence farmers worldwide.

And finally, making value chains sustainable can involve protecting or restoring ecosystem services needed for a functioning ecosystem to support sustainable farming, e.g. by protecting surrounding forests through increasing the efficiency of cooking with firewood, or by agroforestry practices both providing crops, soil fertility, energy resources, etc. The carbon markets have in the past few years pioneered investment into such projects in Africa.

A recent paper by Kristjanson et al. highlights more such possible interventions and their adoption as well as barriers. These barriers are a point of leverage for the private sector, because overcoming barriers and carrying that risk will carry potential for rewards.

We can measure the impact of all these interventions, which will both be important for tapping into emerging public sector sources of climate finance as well as leveraging private sector investment that understands that only sustainable value chains make for a good investment in the long-term.

The more directly the angle the simpler. But even for ecosystem services interventions, defining impacts is possible using tried and tested frameworks (such as the standards applied for sustainable carbon credit projects). And interestingly, understanding the link between ecosystem services and sustainable value chains, and being able to demonstrate it, means those ecosystem services are priced in the products and services of the respective value chain. And with the price there is a market and thus an incentive to invest.

Sustainable value chain investment opportunities are plentiful in developing countries today. We have only just started to unlock the potential for sustainable bioenergy on the African continent, for example, and there is tremendous potential for improvement for those able to manage the institutional and project-specific risks and challenges.

We occasionally invite bloggers from around the world to provide their experiences and views. The views here are those of the author, and not necessarily those of CDKN.

The image used is courtesy of CGIAR Climate and was taken by L. Dejene.