Investing in Infrastructure for Values-Based Supply Chains

“For the master’s tools will never dismantle the master’s house.

They may allow us temporarily to beat him at his own game, but they will never enable us to bring about genuine change.”

— Audre Lorde The Master's Tools Will Never Dismantle the Master's House, 1979. 

Values-based supply chains constitute the vital connective tissue in regenerative food and fibre systems, working to rethread processing and distribution pathways that are transparent, equitable and values-led.

Values-based supply chains involve partnerships between producers, processors, distributors, retailers, and/or food service operators who share environmental, economic and/or social values (Hardesty et al. 2014). These supply chains require infrastructure that facilitates transparency to enable marketing based on the regenerative benefits generated and a clear line of sight, end to end, for all stakeholders involved.

In their extensive report published in 2022, Investing in Regenerative Agriculture Infrastructure Across Value Chains, the Croatan Institute found that the values-driven businesses working across our regenerative supply chains ‘often find themselves misaligned with conventional sources of capital that do not recognise the need to sustain and grow impact over the long term’ (p.62).

It is here we meet a bottleneck — the evolving suite of activity in these critical connective pathways of regenerative systems is not able to access enabling capital, so enterprises are predominantly starting from ground zero in terms of resources and infrastructure to build out the 'missing middle’.

Across Australia, there has been a long history of consolidation of distribution and processing (e.g. sale yards; abattoirs); offshoring of processing capability (e.g. wool; food manufacture) and centralisation of retail (e.g. the distribution centres supporting large retail chains).

Small and medium producers in particular are not well served or served at all by this infrastructure. In some sectors, this consolidation is accelerating. For example, recently international firms have bought up abattoirs in Victoria. We were told by several farmers that they explicitly exclude smallholders, which means smallholders have no option for poultry processing in Victoria. Processors that provide certified organic or source-identified/segregated services are scarce, often requiring transport over huge distances to access.

So what is needed here in terms of investment activity and focus?

Below, we dive into this critical pathway to regeneration across the following domains:

• Targeted investment to fit the diversity of needs and scale of operations.
• Investment in the social infrastructure & collaboration required to make values-based supply chains work.
• Funding advocacy - to help unlock public forms of finance and regulatory barriers.
• Integrated capital forms that work with the life cycles of a business to meet critical infrastructure needs.
• Investment in incubation and development.
• Investment, with careful consideration, in technology.

Targeted investment to fit the diversity of needs and scale of operations

Regenerative supply chains operate at different scales and infrastructure at each point needs to be appropriate to size with an eye on integration. For example, we need infrastructure that enables small diverse family producers to work collaboratively to supply big customers - i.e. public procurement of regenerative food for hospitals, aged care facilities and government agencies. However, this would require keen attention to scale matching and the incubation of specialist processing, distribution/aggregation enterprises, facilities and logistics systems, similar to publicly supported Farm to Institution ecosystems in the USA.

Regional food hubs can also support small producers to reach local markets. Retail food hubs, such as Baw Baw Food Hub in Gippsland, have identified the opportunity to better support mid-scale regional producers with a wholesale service but this would require the incubation of a distinct enterprise with specific infrastructure and capabilities.

At a farm level, Individual farms can be enabled to process and market food from their farm gate, if supported with scale-appropriate infrastructure to meet regulatory requirements. There is an opportunity for funders to incentivise multi-farm collaborations with facilities on one farm also benefiting other farmers — such as storage (e.g. silos) and aggregation points (e.g. coolrooms); compost facilities; farm retail; primary processing and secondary processing (e.g. commercial kitchens).

“Processing is by far the biggest and urgent need. We also need distribution centres and shared storage, and collaboration between farmers should be incentivised.”

— Tammi Jonas Farmer & President of the Australian Food Sovereignty Alliance Interview 2022 

Investment in the social infrastructure & collaboration required to make values-based supply chains work

There are unique infrastructure needs across different industries seeking to grow and meet the demand for regenerative products, from annual horticulture to fruit and nut orchards, various fibre crops through to meat, dairy, eggs and broadacre grains and pulses. Regenerative supply chains by their very nature need to support diversity. This leads to huge opportunities in co-locating infrastructure serving different industries and supply stages in regional centres, including optimising collaborative marketing and circular economy opportunities.

How might we better enable collaborative design and investment to bring different interests together in integrated regional sites? To develop lean yet integrated infrastructure models that can service diverse producers and markets?

One major barrier to this is the lack of investment in network development and collaboration to work up integrated projects and brainstorm collective solutions. Where there are examples of investments in shared infrastructure to support a collective of enterprises, for example, Food Connect Shed, this has often been coordinated by a lead social enterprise or farm off their own bat. Bec Scott, CEO & Co-Founder of STREAT, articulated this as a huge barrier to collaborative infrastructure projects (and collaborative projects in general) and a major risk to regenerative food supply networks because one or two anchor enterprises bear the risk — including the risk of burnout — for others.

It is very common in the industry for one or a small handful of businesses to be doing product and market development work or advocacy for regulatory change that benefits the whole industry. This issue was also recently highlighted by the Croatan Institute:

“In traditional lending, where the industries are fully developed, funders can finance a narrow section of the industry. However, the regenerative food system is missing the middle portion of the system that is necessary to scale the industry.

Furthermore, both upstream and downstream regenerative businesses are needed to stand up viable supply and demand. This causes a ‘chicken and egg’ type of challenge, where multiple pieces are needed concurrently to stand up the system.

It is crucial that funders and planners focus on the broader scope of the regenerative system. Ecosystems of infrastructure businesses that are mutually beneficial have proven to be a key factor for profitability and successful financing.”

— Investing in Regenerative Agriculture Infrastructure Across Value Chains 2022 | P.71

This is not just about building a critical mass of support and contribution around a project — it’s also about making sure that a full systems perspective is brought to investments.

“We need money that appreciates and values our holistic approach, our vision to transform the system. There needs to be a mechanism to coordinate investment in the multiple values we create.

We want to work with investors that have the capacity to look at what we do and recognise what’s next and how it fits with what the food system needs — not just a narrow lens on one bit.”

— Lynda Hoare Farmer and Baw Baw Food Hub Co-Founder | Interview 2022 

Another key aspect to this social infrastructure is that often new forms of investment are required to enable business structures that depart from the centralised corporate structures of mainstream processing and distribution centres. Some of the activity occurring to develop regenerative systems is carefully considering the design of cooperative structures, community equity and stakeholder governance like steward ownership. This shifts the dynamic from shareholders to, as Food Connect terms it, 'careholders', from distant corporate ownership to community and ‘steward ownership’.

This is where we need investment forms that are able to be creative and work with us to enable and develop these structures. Take a look at the Food Connect Shed case study as an example of where larger investors have underpinned community equity crowdfunding. Or the way Purpose has developed financial mechanisms to enable steward ownership.

“Once I was able to say the community have nearly bought half of the shed, the impact investors were more amenable as the community was taking some of the risk.”

— Rob Pekin Food Connect | Interview 2022

“Native Foodways has been set up in a way that ensures that 80% of its shares are Blak owned and always will be, and 20% is white but the 80% is there to be very clear that this is an Indigenous business and always will be Indigenous-owned and led and governed.

It's an acknowledgement of the inequity in capital distribution and that we need to work together to fix the system.”

— Mickey Kovaris Native Foodways I Interview 2022

Funding and active allyship for advocacy — to help unlock public forms of finance and regulatory barriers

In the Northern Hemisphere, the infrastructure supporting values- based supply chains is specifically enabled through public funding. In Australia, there is still a need to raise basic awareness and visibility among economic development agencies. For example, the USDA is investing $400 million to provide essential local and regional food systems coordination, technical assistance, and capacity- building services through its new Regional Food Business Centres. This comes on top of significant investment for infrastructure and other support to increase the resilience of regional food supply chains, e.g. $375 million announced in June 2022 in support for independent meat and poultry processing plant projects.

In response to international supply chain and input challenges, the Federal Government has released $500 million for a National Reconstruction Fund. The Minister for Agriculture wants ‘Australia to not only grow the wheat but also make the flour, biscuits and cakes and process and package meat for domestic and international markets... we want to encourage farmers to create more food products in Australia’ (Haynes, 2022). There is an opportunity to leverage this in a way that supports regenerative supply chains, but this will not happen without targeted advocacy and investment coordination.

A lot of this advocacy and communications work is being done by business operators who, to make sure that their 'bit works’, are spread thin trying to get all the other parts of the system operational.

One of the organisations working to fill this gap is the Australian Food Sovereignty Alliance (AFSA). The organisation provides services and resources to the food industry. This includes collective advocacy for regulatory change and support for farmers and others to navigate scale, inappropriate regulation and planning controls, particularly for animal industries. Work like this is done on a shoestring and could significantly boost reach and impact with funding. Regulation (and general misperceptions by government and investors) was cited as a major barrier in moving forward for the animal and hemp industries in Australia.

Multiple practitioners we interviewed called for funding for collective marketing and industry development support for regenerative farmers. While the need to work with the existing industry boards was acknowledged, there was some wariness about the risk of the needs of regenerative farmers being diluted through these mainstream bodies.

“The key to unlocking potential is collaboration and strength of relationships between enterprises. But the collaboration needs to be funded. Everyone’s so stretched and has no brain space for facilitating that. Out of that, we can be aggregating a group of activities.”

— Emma-Kate Rose Food Connect | Interview 2022 

“Government, by and large, is still focused on mass commodities’ growth, growing more markets and more commodities which is inherently unsustainable.

We need them to rethink profitability for farms, rethink that extractive growth trajectory...

so that instead they are reinvesting into better market access, as in better markets, more premium markets.”

— Carolyn Suggate ORICoop | Interview 2022

Integrated capital forms that work with the life cycles of a business to meet critical infrastructure needs

Infrastructure and equipment also need to be appropriate to the business life-cycle, and able to grow out as the business matures or scales up. Several interviewees expressed frustration at the inability to access government or philanthropic grant funding for equipment.

There are grant programs overseas that specifically fund equipment to grow local food systems. The Local Food Infrastructure Fund in Canada specifically resources things like greenhouses, fencing, irrigation systems, butchering equipment, kitchen equipment/ appliances, smokehouses, fridges and freezers, refrigerated trucks and composting equipment.

We heard this is particularly a problem for early-stage farmers and smaller nonprofits or start-up social enterprises. More established enterprises had workarounds such as funding programs (e.g. staff) from grants, prioritising surplus trading income to equipment or taking out loans from traditional banks for infrastructure. However, these stopgaps often place additional pressure on organisations and businesses as a whole.

We are hearing a lot from industry that philanthropy isn't prepared to fund individual infrastructure needs for business, but conventional forms of capital aren't patient or flexible enough to 'track with ecology' — imposing extractive terms that tip a regenerative system back into conventional modes.

This is a gap that needs to be filled — and while equipment that supports multiple enterprises should be incentivised, the barriers to farmers in particular in sharing equipment (e.g. harvesting equipment that everyone needs at the same time) should be acknowledged.

Corena is a great example of finance appropriate for small projects that could be adapted for regenerative food projects. The fund operates as a community based revolving fund that provides rolling interest-free loans with patient repayments and wrap-around support for climate emergency projects, based out of Melbourne.

Take a look at the case studies on Steward and RSF Social Finance as other examples to address this finance gap.

“I think decentralisation of infrastructure is going to be the fastest way. Yes, it’s hard and expensive but it’s where we get the most transparency back to the farm.

It’s how we get the economy to track with ecology.”

— Rebecca Burgess Fibreshed | Interview 2022

Funding Incubation and Development

The need for regional business incubators, enabling small-scale producers to share land/packing/processing facilities as they refine their product and test and build initial markets, was raised by several interviewees. Tess Sellar from Sellar Dairy noted the barrier to new farmers in small-scale dairy is particularly acute due to the cost of dairy processing infrastructure, whether it be a regional cooperative or on-farm facility (e.g. cheesery).

One example of a regional food incubator is the Food Centre in Wales, which provides incubator units and larger shared processing facilities for product development and start-up farmers and enterprises, coupled with training. Incubation infrastructure could either be consolidated in an integrated regional facility or distributed through portable processing infrastructure that can be placed on-farm and then moved on or added to when outgrown.

There is a significant opportunity to trial business incubation centres using existing under-utilised infrastructure (community halls with commercial kitchens) and portable infrastructure in shipping containers (e.g. the boning room sited at Jonai Farms).

There are a range of organisations around Australia working in the farmer incubation space including Farmer Incubator, Young Farmers Connect, Wilunga Farmers Market, Sprout Tasmania and SAGE Moruya. All are under-resourced, community-led, proven initiatives in need of funding and support.

Relatedly, a major identified risk to the sector was half-baked projects, products and services by people who don’t have the required system literacy or business and other skills to make them successful. This poses a risk to future projects' ability to attract funding and support. So quality assessment and vetting and capacity building support are crucial, alongside infrastructure investment. However, this needs to be co-designed to meet the needs of participants and the unique characteristics of the sector. All of which connects back to, and reinforces, the importance of funding the knowledge, specifically for investment readiness.

Investing with care in Technology

Technological infrastructure spans across different stages of the value chain, and always needs to be considered in conjunction with physical infrastructure. For example, the internet of things and other digital technology solutions could enable the storage and processing of different products, without the need to build separate facilities. The Open Food Network (OFN) e-commerce software is designed to enable collaborative marketing and logistics through networks of pick-up sites, often enabling activation of otherwise under-utilised infrastructure. OFN’s Open Road pilot project also explored the potential of logistics software to activate under-utilised infrastructure to support a distributed logistics network.

Technology has huge potential to support they growth of regenerative production and markets by improving farm management, market access and impact outcome verification. Among other things, it can also improve labour, water and energy efficiency of production across the value chain. It is already being put to work in a manner of ways, including to support learning, training, project management and collaboration.

Developments in mainstream ag tech can be deployed/adapted to support regenerative systems across areas including:

• Field and stock monitoring sensors and information management
• Pest and disease sensors
• Soil and water sensing and ecological monitoring and benchmarking, farm management systems
• Remote and other imaging systems
• Analytics and machine learning
• Internet of things
• Automation and robotics
• Digital marketplace
• Supply chain transparency
• Enterprise resource planning software
• Finance, insurance and marketing software tools; and social media.

Public and philanthropic investment must support technology projects where public good outcomes and access are explicitly protected. As with other regenerative infrastructure investments, technology investments need to account for the environmental and social good that is generated and not fall into the trap of replicating the current system and relying on business models that externalise costs. Additionally, they need to be considered holistically in conjunction with investments in physical infrastructure. 

A few working examples of tech developments in Australia include:

• Maia Grazing and RCS's Farm Eye - technological tools that support regenerative farm and grazing management, including impact outcome verification.
• Regen Farmers Mutual, ORICoop and Farming for the Future — all examples of projects supporting farmers with impact data in a way that protects their data sovereignty (in line with regenerative principles).
• Open Food Network — creates common digital infrastructure for regenerative farmers and supply chains, initially in Australia and now globally, with strong guiding principles that ensure it can’t be co-opted.

Navigating the Sexiness ofTech

Yes, we know, we've heard it too, louder than a swarm of bees on the move. The buzz about ag-tech is real loud, and if we may be so bold, a bit problematic.

Now we're not saying that technology doesn't have a big role to play in transitioning our food and fibre systems to restorative models. However, there can be a tendency for many of us to get all excited about a shiny new bells and whistles piece of tech without really delving into if it is actually solving the problem.

Although so many of the root causes of our systemic challenge are human challenges - relational, head and heart, cultural and economic structures - it’s easier to focus on the tech side of things. But if we're not shifting these broader systemic lock-ins then there's not much point to a pinging robotic something or other. And again, yes, tech can play a key role in making it easier to shift out of some of these structures, but not on its own. Always its utility will be determined and dependent on the hands it is in.

Not much of this realm is clear cut, and all of it is complex and ever-evolving — but questions around investment interest in tech over more human, relational and ecological activities, presented again and again in our research and conversations. This has prompted us to raise a bit of a red flag, and pose a few questions and thoughts in relation to investment in tech.

Firstly, we want to share some questions drawn from 78 Reasonable Questions to Ask about Any Technology that are in the book, Turning Away from Technology, by Stephanie Mills and originally derived from 76 questions that were written by Jacques Ellul:

1. Does it serve community?
2. Does it empower community members?
3. Does it serve to commodify knowledge or relationships?
4. What values does its use foster?
5. What is lost in using it?
6. Where must it go when it’s broken or obsolete?
7. What is the entirety of its cost — full cost accounting?
8. Does it concentrate or equalise power?
9. Does it break the bond of renewal between humans and nature?
10. Does it preserve or reduce cultural biodiversity?

And secondly, a few thoughts from folk we spoke with, read about and/or listened to along the way:

“There are trends toward more and more technology.

We have a long history of technology, creating new and unanticipated problems, unintended consequences, that must be met with even more and more technology. It becomes an addiction.

...Technology and the scientific reductionistic approach to anything, especially agriculture, always leaves something out because science is based on only the things we can measure.

...It would be very convenient, and comforting if technology was the answer, because then we wouldn’t really have to change our ways.”

— Charles Eisenstein Investing in Regenerative Agriculture Podcast with Koen van Seijen, Episode 171, 2022 

“The tech realm; it's so interesting to see where we are happy placing our risk. We seem to have a high tolerance for investing in new tech and even to fail on that tech, but an extremely low tolerance to invest in perhaps the root cause of the need for the tech.

What about technology to improve adaptive thinking?

Well that usually translates to better relationship skills or a matrix for balancing production and ecology. Whereas tech improvements like water monitoring for example - which we use and are definitely beneficial, don't actually address how we are using the water and the land management changes that might use less water.

Yet the money will go to developing the water monitoring because it's a 'thing' rather than say improving ecological decision making - which is a complex knowledge issue: essential but harder to monetise.”

— Rebecca Gorman I Interview 2022

“You've gotta be really careful when you get machinery involved. When you get these big rigs floating around, you can lose a lot of the sense of what's actually happening.

And so our whole crew, one sheep can stop a bloomin' $2 million seeding rig, and have it all sitting still. You can go mental and say we've just got to keep that machine rolling. Well, no.

It's got to be respected. So it's all gonna be working in harmony.”

— Ian Haggerty Prospect Pastoral Co | The RegenNarration Podcast with Anthony James, Episode 142, 2022

This article is an extract from Regenerating Investment in Food and Farming: A Roadmap.

Image credit (right): EDIGROCER — Edithvale Community Grocer