Moving Toward Sustainable Agri-Food Value Chains: Challenges and a Proposed Way Forward

Abstract

<p>Chain failure is widespread in agri-food value chains, due often to the presence of externalities within and beyond the chain. Since many of these externalities have intergenerational aspects, this situation results in poor sustainability outcomes. Chain failure can be overcome by the provision of chain goods that internalise the externality. Joint action by value chain partners is required to develop and implement chain goods, and this action is made more effective if the appropriate chain governance model is applied. Such action will influence the sustainability of agri-food value chains and hence the welfare of farmers supplying the agri-food sector. In this paper we outline a process toward making an optimal decision to correct for chain failure that is based on actions by a value chain governor rather than the typical application of taxes and subsidies. Investment within the chain and exploitation of consumers' beliefs in a sustainable future can also help to internalise externalities. The more tightly circumscribed are such externalities, the more likely it is that a solution can be found within the chain through appropriately-governed joint action by chain members, obviating the need for government intervention or at least facilitating chain-government collaboration. These solutions are likely to be more feasible within agri-food value chains than in society at large because of the shared interest of members in making the chain work better and making chain activities more sustainable.</p>