This loud, 2*3-meter, poster at our Biofach booth 2018 made many people react.
After a gentle smile, most Biofach visitors decided to agree – being honest.
Despite their efforts for premium product quality, biodiversity assessments, social engagement and sustainable development of resources, they do not feel fully compensated cash wise for the values created.
The opposite, they argue, competitors who are just meeting minimum requirements achieve same price levels and therefore have higher returns. Our visitors talked about money, ‘hard’ cash paid by buyers or consumers. Current market mechanisms lead to wrong incentives and thus creates 'fake profits'.
Why ‘fake profits’?
Because currently the yardstick for success is only based on the most efficient use of financial capital. ‘Hard’ cash, via policies incentivizing conventional farmers to increase yields instead of nutrition.
But these accounting profit numbers don’t provide us with the full performance picture, as there is no long-term value creation in e.g. fully depleting our soils. Only applying the financial yardstick stimulates short term behavior.
By introducing the concept of True Cost Accounting, we bring more transparency into the use of all capitals. With nature as most important one in agriculture. See here for also Tobias Bandels’ contribution in the new book “die Preise lügen” (https://www.oekom.de/nc/buecher/gesamtprogramm/buch/die-preise-luegen.html).
Our team is realistic enough to understand the need for a cash-driven approach.
So, what’s the short/medium/long-term economic benefit for interventions, is an underlying question for every service we propose. As an example: applying a TCA perspective turns some usual approaches around in a better direction, e.g. on sourcing raw material.
But we will consider current budget targets. ‘True’ costs are great for value chain analysis, marketing, to create self-esteem, but ‘hard’ cash is still needed for successful business.
For the Soil & More team the most important learning this Biofach was that our solutions require from every actor in the supply-chain a changing mindset.
Agricultural challenges can’t be tackled without changing (trading) behaviour, including us as consultants as well.
Usually consultants have a business case if there are problems, the fire-fighting modus. We need to develop with value chain actors a mindset about creating real cash, real profit and real values. Building bridges to satisfy a company’s short and long-term goals.
We foresee convergence occur, where real cash moves to values. And values move into cash.
This convergence will be stimulated by increasing consumer demand and by using more technology, at farms and throughout the entire value chain.
The future is about linking quick assessments, big data and remote learning to create uniform, ‘true’, monetized information to manage a demand-led production process.