BUILDING PATHWAYS TO SUSTAINABLE CATTLE RANCHING IN COLOMBIA Why and how private sector should engage and support the sustainable transformation of cattle production in Colombia Cattle ranching is key to Colombia’s rural Investments in sustainability are not a trade-off but rather an opportunity to reduce risks, strengthen market access, and culture and economy, yet it is unsustainable create long-term value. This document presents the business and unprepared for new challenges case for private companies to engage at different stages of the Occupying 80% of Colombia’s agricultural land, the cattle dairy and beef value chains to promote and support sustainable sector generates income for more than half a million families production through silvopastoral systems (SPS). These systems and guarantees a significant share of nacional supply of beef are a sustainable, innovative approach to cattle ranching and dairy production. Strong demand for animal products that delivers a proven “triple win”—increased productivity, offers significant opportunities for the sector to contribute to environmental sustainability, and resilience—in the Colombian economic growth and poverty reduction. Colombian cattle cattle sector. ranching still largely occurs in a context of poverty, where cattle are managed under traditional extensive production models The predominant cattle ranching models have a negative impact on Colombia’s natural capital that are unsustainable, unproductive, and highly susceptible to climatic events. At the same time, private companies in the beef Cattle production contributes 21.8% of agricultural gross domestic and dairy value chains face increasing demands from consumers, product and directly employs more than 800,000 people, governments, civil society, advocacy groups, and non- excluding the large number of people employed in processing and governmental organizations (NGOs) to increase the sustainability commercialization.1 Yet the unsustainable growth of the ranching sector has damaged the environment, contributed to climate and reduce the environmental footprint of their products. Unless change, and represents a huge opportunity cost for the country current production models transition toward more sustainable and the stakeholders involved. approaches, the risks of supply chain instability will increase for these companies, affecting their business models and For the Colombian companies that process and market beef and profitability. By investing in sustainability, on the other hand, dairy products, this unsustainable pattern of development limits the cattle sector can generate opportunities for differentiation opportunities to enter new markets and improve their competitive in domestic markets, enhance access to export markets, and position, both nationally and internationally. To generate increase profitability for all stakeholders, including processors, opportunities for growth and provide gains for future generations retailers, and, above all, the many smallholder cattle ranchers in at home and abroad, it is paramount for the cattle ranching sector Colombia. to achieve higher levels of sustainability. Land-use and environmental challenges associated with the unsustainable expansion of cattle ranching - 66% of deforested land in the Amazon was transformed to grazing Unsustainable land land3 expansion has caused forest land and other - 7.9 million hectares of land dedicated to beef production are not strategic ecosystems suitable for that activity4 to be converted to pastureland and has been a leading - 13,523 cattle farms are located in the fragile ecosystems of the source of the rising paramos, which provide 70% of the drinking water in Colombia5 deforestation rate in Colombia2 - 364,000 hectares of pastureland are located in wetlands of global ecological importance, where ranching is very harmful High carbon emissions - 16% of national greenhouse gas (GHG) emissions come from the livestock sector, largely from cattle6 To shift into a trajectory of sustained and sustainable growth, cattle ranching must overcome key operational and reputational challenges Colombia has the third-largest cattle herd in South America, and although its products currently have a small presence in international markets, the prospects for developing a more competitive cattle ranching sector in Colombia are generally quite favorable.7 Realizing these prospects will require actions to strengthen the pillars of economic, environmental, and social sustainability in the ranching sector, especially actions to overcome the operational and reputational challenges resulting from current unsustainable production patterns. Key operational and reputational challenges created by unsustainable production patterns Challenge Description Impact Climate change increasingly threatens the sector through Between 2009 and 2019, Colombia experienced severe drops in beef and dairy production Stability of supply the rising frequency and intensity of climatic events. associated with climatic events: Traditional ranching systems are highly vulnerable to the Beef losses reached 12% in 2011. effects of climatic events such as El Niño and La Niña. These Milk losses reached 19% in 2019. events have strongly affected the stability of supply in the From 2010 to 2017, climate shocks affected 13.1 M hectares, displaced 4.7 M animals, and cattle sector, with far-reaching financial consequences. led to the death of 337,000 animals. Colombia’s cattle sector displays low productivity and Daily weight gain of Colombian cattle is 340 g/head/day. In Brazil, Argentina, and Uruguay, Supply growth OPERATIONAL high competition from international players, which it is around 530 g/head/day.8 places continuous pressure on local prices and causes Average milk productivity in Colombia is 4 L/cow/day, while the international benchmark growth in the sector to stagnate. Low productivity is often is 20 L/cow/day.9 caused by outdated approaches to farm and supply chain Poor management strategies are reflected in the low stocking rates prevalent in Colombia. management. Colombia uses 50% more land per head of cattle than Brazil.10 Beef and dairy supply chains in Colombia are characterized In 2018, formal milk aggregation in Colombia was 2,825 M liters. Formal aggregation is Costs of supply by logistical deficiencies, a high number of intermediaries, estimated to account for only 47% of all milk aggregation in Colombia.11 and a large share of products sold in informal markets. In 2018 across Colombia, 3,318,000 head were slaughtered in formal facilities. They This lack of supply chain coordination results in high represent about 70% of total production (including production for informal markets).10 transaction costs, poor information flow, and supply chain inefficiencies, which affect margins and profits. Competing neighboring countries have more efficient From 2009 to 2019, the average growth in imports was 25% for bovine meat products and Quality of production systems that supply products of superior 30% for dairy products.13 This growth is occurring even as local beef and dairy production supply quality.12 Imports of dairy and meat products are increasing remain relatively stagnant. in Colombia and will continue to increase under free trade agreements. In Colombia’s domestic markets, rising income levels, Driven by mounting pressure for change in Colombia, a few companies are starting to improved education, and information campaigns have implement a strategy to differentiate their brands by investing in sustainability. For instance: increased consumers’ awareness of issues related to animal Angus Azul, a beef producer in Colombia, has proactively shifted toward sustainable products, including healthy nutrition, animal welfare, food practices to avoid the reputational risks arising in a context of increasing hostility to safety, and environmental sustainability. animal products. In partnership with The Nature Conservancy (TNC) and the Colombia Private companies in animal product value chains are Mainstreaming Sustainable Cattle Ranching (CMSCR)* Project (GCS in Spanish), Angus Azul Brand value increasingly experiencing pressure for change from has signed a zero-deforestation agreement. It has also adopted a sustainability framework consumers, civil society, governments, and NGOs. to assess the environmental, animal welfare, and social sustainability of its suppliers. The Worldwide, these pressures are translating into shifts in brand now competes successfully with international, high-end sustainable meat products consumption and opportunities for an emerging plant- that enter the Colombian market. based industry, with large multinational companies Dejamu, a dairy production and processing company, started as a sustainable cattle ranch pledging to increase their annual sales of plant-based meat that implemented silvopastoral practices to reduce its carbon footprint. This company has and dairy alternatives (e.g., up to 1 billion to 2027, in the made ecological dairy production the core of its branding strategy. case of Unilever),14 intensifying the battle for the plates of climate-conscious consumers. REPUTATIONAL Governments are introducing policies and strategies to Several emerging policies promote sustainable practices and demonstrate that the promote sustainability in beef and dairy supply chains, in Colombian government is committed to transforming the cattle ranching sector. Some response to consumer demands and international pressure, examples are as follows: and in the interest of preserving the natural capital of their • The Nationally Determined Contribution (NDC) is a policy aimed at reducing national countries. Companies that do not take timely action to GHG emissions. It outlines specific responsibilities to improve the efficiency and comply with new regulations are expected to face a risk of productivity of cattle ranching by identifying and evaluating mitigation measures to be non-compliance penalties in the future. included in instruments such as the REDD+ strategy, the National Strategy for Low-Carbon Development, and other climate change adaptation plans. License to operate • The National Policy for Green Growth (CONPES, 3934/2018) defines specific actions for strengthening capacities, technology transfer, finance, and market access to promote sustainable agricultural production. • The Nationally Appropriate Mitigation Actions (NAMA) for Cattle Ranching is the leading strategy to guide the transition toward sustainable production practices on cattle farms in Colombia. • Voluntary Zero Deforestation Agreements in the beef and dairy supply chains were signed in 2020 by multiple stakeholders in the sector. • The policy and regulation to define the Agriculture National Frontier (Resolution 261- 2018), issued by the Ministry of Agriculture, UPRA, and other institutions, stipulates that economic activities related to agriculture, forestry, and other land uses (the AFOLU sector) can occur only on 35% of the national territory. Across AFOLU areas, agriculture sector instruments are required to promote more efficient, productive, and socially beneficial use of rural land. * The CMSCR Project was an alliance between the Federation of Colombian Cattle Ranchers (FEDEGAN), the Center for Research in Sustainable Agricultural Production Systems (CIPAV), The Nature Conservancy (TNC), The Fund for Environmental Action and Children (Action Fund), and the World Bank, with financial support from the Department of Business, Energy and Industrial Strategy of the United Kingdom (BEIS) and the Global Environment Facility (GEF). The project also had institutional support from the Colombia Ministry of Environment and Sustainable Development (MADS) and the Colombia Ministry of Agriculture and Rural Development (MADR). Beef production in Colombia, 2009–19 Drop in production during Milk aggregation in Colombia, 2011–19 Drop in production during (Thousand tons of weight) El Niño or La Niña events (Million liters) El Niño or La Niña events La Niña El Niño El Niño El Niño La Niña El Niño El Niño moderate Very strong Weak strong Moderate Very Strong Weak* -10% -12% -19% - 0,6% - 8% -11% -12% 280 80 75 260 70 240 65 220 60 200 55 180 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 8% 6% -3% La Niña El Niño La Niña Weak strong Strong * Warning of El Niño threat that did not materialize. * Warning of El Niño threat that did not materialize. Milk productivity evaluated based on milk Source: FEDEGAN based on data from ESAG – DANE Cattle Slaughter Survey, collection statistics. Consultants’ own analysis. Source: Price Monitoring Unit of the Ministry of Agriculture and Rural Development (MADR), Consultants’ own analysis. Meat imports (million US$) Investment priorities for companies Frozen meat Fresh meat Sustainability Resilience Reliability Efficiency 26 23 100 100 100 +25,1% 16 11 13 7 7 8 20 24 3 3 2 4 21 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 13 19 Imports of milk and other main dairy products (million US$) 31 Concentrated milk Whey 27 28 Cheeses Other +30,1% 140 151 114 116 109 108 87 45 54 35 30 29 11 9 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 three years ago Present Present (all industries) (food and beverage) Source: Trademap Source: Supply chain traceability survey. July 2020. Bain & Company. Investing in sustainability is investing in the stability and sustained growth of the sector. Supporting sustainability pillars is not a trade-off For processors, retailers, and other private companies deliver strong reputational benefits, as consumers are increasingly in Colombia’s meat and dairy supply chains, embracing concerned about the environmental footprint of their food sustainability principles—the three pillars of environmental, products. social, and economic sustainability, often referred to as “People, Because investments in social sustainability ensure the well-being Planet, and Profit”—in their supply chains does not necessarily of producers, they are also important for a company’s reputation. entail trade-offs that undermine profits. Often profits can increase At the same time, these investments improve socio-economic as a result of the reputational and operational benefits that stability in rural areas and strengthen relationships between accompany investments in sustainability. buyers and suppliers, which in turn help to increase profits.15 By investing in environmental sustainability, for example, Investments in environmental and social sustainability will enhance companies can strengthen the cattle sector’s resilience and economic sustainability. In addition, investments in innovation increase the security of their supply chains, which will counteract to support sustainability, such as product traceability, will help to the costs and productivity losses brought about by climatic increase production efficiency, improve the quality of produce, and events. Investments in environmental sustainability will also further reduce costs. Sustainability is a global trend in food and Although government pressure to invest in sustainability is intensifying globally, the initiatives driving the sustainability beverage companies, accompanied by transformation are led largely by the private sector. growing national awareness of the need Individual companies are increasingly anchoring their product for ethically and sustainably produced differentiation and marketing strategies in sustainability products principles. In parallel, multi-stakeholder organizations Sustainability and resilience have become investment priorities are bringing different parties together to develop global for companies across the globe. In countries like the USA, the frameworks for holistic approaches to sustainability in beef and market share of certified sustainable meat and dairy products dairy value chains, such as the Global Roundtable on Sustainable already surpasses 20%.16 Danone, which has committed to Beef (GRSB) and the Dairy Sustainability Framework (DSF). becoming a carbon-neutral company by 2050, is investing US$2 billion during 2020–22 to mitigate its climate impact and The efforts of private actors have several distinctive characteristics: promote regenerative agriculture along its supply chains.17 In Colombia, where sustainability and resilience standards are • Individual processors essentially focused on nascent, younger generations are expected to demand much sustainability in their own operations (for example, in higher quality standards for food products. Lessons learned energy or in water and waste management), although globally show that companies who are the first movers—the ones sometimes these efforts extend upstream to include that adopt sustainability standards early—have the opportunity sustainability requirements for their suppliers. to set those standards while strengthening their market position • At the supply chain and national level, measures and competitiveness.18 to promote sustainability have a stronger farm COVID-19 has disrupted supply chains, shaken component. global markets, and further shifted the food industry toward investing in sustainability • Downstream operators (retailers and/or foodservice operators) may impose specifications on their The pandemic has accelerated the shift to sustainability by suppliers. highlighting weaknesses in supply chains. Companies that adopted sustainable and resilient practices before the pandemic • At present, differentiation is the main objective, as operators seek to be (or to appear to be) best in class have benefitted from stronger supply chains, as they were able by offering sustainability in addition to price and to continue serving customers and meet increasing demand.19 quality advantages. In the medium and long term, What have we learned from sustainability initiatives however, sustainability will progressively become worldwide?20 a new de facto standard across the cattle ranching Interpretations of sustainability vary widely. Sustainability has sector, offering little potential for differentiation. undoubtedly assumed a dominant position in the marketplace. While the different interpretations of sustainability lead to a Silvopastoral systems are a promising, myriad of implementation approaches, some common trends innovative approach to cattle ranching that are emerging, including the following: responds to a broad array of sustainability • Real efforts to improve the number of sustainability challenges criteria covered in emerging initiatives. Silvopastoral systems (SPS) encompass a range of agroforestry • Growing demand for sustainability claims to be credible and practices that convert degraded extensive pastures into a richer and substantiated by clear metrics and measurements. more productive environment, where trees and shrubs are planted • Difficulty in comparing sustainability initiatives and claims. among fodder crops such as grasses and leguminous herbs. They allow the intensification of Forage species Tree species land use (higher stocking rate). Also they have the ability to Pastures Shrubs transform traditional cattle systems into more sustainable and resilient production models: Silvopastoral systems (SPS) Increase productivity per For animal are area + nutrition and agroforestry complementary arrangements uses Increase resource use Legumes Trees that combine: efficiency Provide environmental services (carbon capture and conservation of watersheds and biodiversity) Extending from 2010 to 2020, the CMSCR Project aimed to analyze and strengthen the evidence for the positive impact of SPS on the profitability, sustainability, and resilience of the cattle ranching sector. By intervening to transform over 4,000 cattle farms with an area of influence of 127,308 hectares, the CMSCR Project proved that adopting SPS can deliver remarkable wins for farmers and the environment. For private sector actors, promoting these systems along their supply chains can deliver considerable operational and reputational benefits. Investing in sustainability through SPS production models is a win-win strategy for private-sector stakeholders in the dairy and beef value chains Operational Reputational BENEFIT Stability Growth Lower costs Product Brand License of supply in supply of supply quality value to operate DESCRIPTION Avoid variability of supply Improved farm productivity Reduce the impact Improve key indicators of Demonstrate willingness to Avoid negative (in volume and quality) by increases volume of of incremental costs the quality of dairy and meat address sustainability and the publicity through enhancing resilience to collection. caused by fluctuations in products. opportunity to be a leader in compliance with climate shocks. production and supply. terms of sustainable activities. supply standards Improved relations Streamline collection that ensure social with producers ensure costs (per liter of milk) and environmental reliability of supply. by increasing the sustainability. amount of product collected per farm. Production losses caused Transformation of a Reducing fluctuations The transformation of a SPS enables companies to The transformation by climatic events can be traditional cattle production in supply makes it traditional system to SPS can comply with several global to SPS will help reduced as much as system to SPS can increase possible to reduce the increase the quality of dairy international sustainability companies to 30% in beef and milk productivity by as much cost of supplying beef and meat products. Data from standards. contribute to national 100% in dairy.21 as 36.6% and increase the and milk. SPS pilot farms show that SPS provide an opportunity priorities and animal stocking rate by SPS can reduce the the average protein and fat for differentiating products enhance the image SPS markedly improve 23%.23 content of milk increased by of Colombia as a the livelihoods of cost of milk production and supply chains based on Increased productivity by 9%/L, which directly 3%.24 their sustainability attributes— responsible producer producers, as profitability and supplier of beef can increase by as is driven by SPS grass benefits the producer’s Similarly, the transformation including the and fodder which allow bottom line. to SPS can improve forage and dairy products, much as $523/ha/year. sustainability standards that are for improved cattle quality. On pilot farms, both domestically More information on emerging globally—which will and abroad. I M P A C T the potential positive nutrition, animal wellness the digestibility of fodder increase brand reputation. impact of SPS from and optmized pest increased by 10% after the Differentiation will require the producer’s point of and disease control. adoption of SPS. Additional information of investments in procurement view can be found in the % 10 the environmental impact systems to ensure a sustainably business case brochure.22 produced supply, including driven by SPS technologies, including carbon capture enhanced traceability. potential, is preented in the Implementing SPS can help % 30 % business case brochure.22 3 companies increase their market share by capturing the % emerging segment of responsible 36,6 consumers. % % 100 % 10 23 % 3 Finding 1 2 synergies between stakeholders is essential to achieve large-scale transformation. Mainstreaming Sustainable Cattle Ranching Project (2021). “Building a climate-resilient cattle ranching sector in Colombia.” Brochure prepared by the World Bank. World Bank (2019), “Business Case: Mainstreaming Sustainable Cattle Ranching Project.” Available at http://documents1.worldbank.org/curated/en/324381569396107123/pdf/Mainstreaming-Sustainable-Cattle-Ranching-Project-Business-Case.pdf. Private investments and initiatives have the potential to bring sustainable transformation to 3 Study of production variables on a probabilistic sample of 101 farms during the dry and rainy seasons over 2.5 years (2017–19). Mainstreaming Sustainable Cattle Ranging Project, World Bank. 4 Study of production variables on a probabilistic sample of 101 farms during the dry and rainy seasons over 2.5 years (2017–19). Mainstreaming Sustainable Cattle Ranging Project, World Bank. large parts of the value chain. In Colombia, the 10 largest companies control about 50% of the production volume and 42% (14.4 M hectares) of the livestock area supporting the formal beef and dairy markets. As a result, the leadership of the top private companies is paramount to encourage a large- scale transformation to sustainability in the cattle sector. Strong collaboration between stakeholders will help to ensure the successful transformation of cattle ranching The Colombian cattle ranching sector will benefit greatly if private companies—both individually and collectively—work toward establishing general frameworks to enhance the sustainability of their operations and of the sector more broadly. SPS contribute to some of the Sustainable Development Goals Top 10 companies in the dairy value chain (Millions of liters) 355 259 220 115 105 97 79 69 67 59 Alpina Nestle Parmalat Gloria AURALAC AlquerÍa El Recreo Lácteos Alimentos Colanta Betania del Valle Top 10 companies in the meat value chain (Thousand heads) 286 285 Alignment of SPS with widely known sustainability approaches 225 217 Organic 100% Zero 139 136 122 104 103 89 agriculture grass-fed deforestation Sustainability criteria * 100% grass-fed * 100% grass-fed * Supply chains Camaguey animals animals guarantee zero FRIOGAN BLES Vijagual deforestation Central Ganad. Río Frío * No antibiotics, * Cattle not raised fertilizers, or other in confinement Guadalupe FRIGOSINÚ sources of chemicals are used * No GMO foods Red Cárnica Carnes d.Occ permitted Source: FEDEGAN * Animal welfare Public-private partnerships/alliances allow the partners to Private firms can play multiple roles and pursue multiple share risk based on collaborative agreements in which each strategies to promote sustainability along supply chains partner assumes part of the responsibility for the success of the through the expansion of SPS. For instance, private firms joint effort. Private companies in these partnerships typically can: contribute by providing technical assistance to implement SPS. • Place SPS production approaches at the heart of the Development agencies typically provide seed capital, and banks knowledge transfer and extension efforts in their supplier contribute by financing the farmers investment. development programs. • Support the provision of key inputs and finance to move Example of different roles played by partners in a sustainability initiative towards SPS—for example, by supporting farmers to Producers establish collective nurseries for fodder species, revolving Productive base funds to supply credit, and alliances with different players to Land for conversion Legitimacy facilitate financing. • Establish guaranteed buying programs to incentivize and secure the loyalty of the cattle farmers who have undertaken SPS-based transformation. Private companies • Advocate for public sector and donor support, as well as Market access Sustainability Government and multilaterals public policy action, to form public-private partnerships Capital initiative Capital Legitimacy to develop sustainable procurement processes, define Training Regulation Price sustainability metrics, pilot approaches to assess incentives Development plans compliance with sustainability standards, and pilot initiatives to finance the transformation to SPS. • Work collectively at the industry level to establish private NGOs Operation of projects Auditors / certifiers Training (when applicable) sector “norms”/standards that will move the entire sector Certifications Infrastructure development toward higher levels of sustainability. expertise Legitimacy Control Source: TechnoServe analysis Private sector action is important, but impacts can be expanded through public-private alliances and Colombia has broad experience with public-private partnerships partnerships. Examples include the Productive Alliance Alliances between companies and governmental, financial, and Program (PAAP), the Productive Supply Chains Project (under development agencies are important to help companies create the Productive Transformation Program of the Ministry of demand for sustainability and align with national and sectoral Commerce, Industry, and Tourism), various types of grant commercial and development priorities. programs, and the development of many other instruments that could support strong public-private sector engagement in the transformation of the ranching sector. The business case for private companies: Companies not investing in sustainability might end Investing in sustainability through up paying a hefty price silvopastoral systems is profitable When a company’s operations and/or products are linked to environmental damage, the ensuing negative publicity can Investing in sustainability comes with an array of benefits to the strongly affect profits. For example, McDonald’s sales dropped 11% cattle ranching sector, but little quantitative information has in the fourth quarter of 2014 following health and sustainability been available on the returns to private companies from such scandals.25 investments. To fill this gap, the World Bank commissioned a In the years to come, the beef and dairy sectors will face competition business case study of the potential profits that a company could from plant-based meat and dairy alternatives, which are expected earn from investing in sustainable practices, based on a detailed to gain an important share of the market as the number of climate- simulation to estimate the economic value created by the capital conscious consumers grows. Large and multinational companies, invested. along with a range of innovative companies, are designing products The simulation envisioned an investment of around COP$6 MM that can shift consumption toward more climate-friendly production in a sustainability program to support the adoption of SPS by options. Their efforts will increase the pressure on firms in the dairy 150 smallholder farmers managing a total of 600 hectares. The and beef sectors to enhance the sustainability of the products they program would provide technical assistance (accounting for offer to the market. 44% of program costs), seed capital to obtain productive assets Key take-aways: Silvopastoral systems are (26% of costs), and agricultural financing (30% of costs). The a promising innovative approach to invest in private company would finance the technical assistance costs sustainability and prepare the Colombian cattle over the course of five years (which is the basis for estimating sector for current and future challenges the return on investment for the company). A development Colombian cattle ranching still largely occurs in a context of poverty, agency would provide the seed capital, and a bank would provide where cattle are managed under traditional extensive production models the agricultural financing. The company’s investment creates that are unsustainable, unproductive, and highly susceptible to climatic economic value for the business by improving operational events. efficiencies—namely, through the cost savings from reduced The cattle ranching sector in Colombia has large potential for growth if its volatility in milk and beef prices. Volatility in milk and beef prices productive assets are managed to higher standards of efficiency. typically results from supply shocks that stem from climate Private companies in the beef and dairy value chains face increasing demands from consumers, civil society, governments, and NGOs to variability and other environmental impacts. The supply shocks reduce the environmental footprint and increase the sustainability of and corresponding price volatility were assumed to be mitigated their products. when a larger number of farmers in the supply chain had adopted The potential market value of sustainable products in Colombia is SPS on their farms. The company would also benefit from the already considerable. It will continue to grow as younger generations incremental volumes of milk and beef that could be supplied become increasingly aware of socially and environmentally responsible companies. Lessons learned from global stakeholders show that the owing to the improved productivity of beef and dairy cattle on companies that move first to implement sustainable supply chains will farms with SPS. This incremental volume, when monetized, benefit from the opportunity to set sustainability standards. creates economic value for the company while propelling its The private sector in Colombia will have to change course and move growth in the long term. toward a more sustainable supply chain strategy to access international markets and recover domestic market share. The simulation demonstrates that companies can make Investing in the social, environmental, and economic pillars of considerable profits by investing in technical assistance to shift sustainability does not have to entail trade-offs. Indeed, it can deliver the current cattle production model toward a SPS model. For milk sizable operational and reputational benefits. processors, the economic value created by these is estimated to SPS are an innovative, proven, and sustainable approach that addresses a range from 1.2 to 3.4 times the amount of capital invested. For broad array of sustainability issues while increasing the climate resilience meat and export meat processors, the economic value created is and productivity of cattle ranching systems. These systems can spearhead the efforts of private companies to lift their sustainability standards and estimated to range from 1.3 and 2.8 times the amount of capital achievements to the next level. invested. Collaboration among stakeholders through public-private alliances that Besides benefitting from operational efficiencies, Colombian allow risk to be shared in an equitable way will help to guarantee the companies can expect the domestic demand for sustainable success of sustainability investments. products to grow. To explore the potential market value of Colombia’s top dairy and beef companies have a big share of the formal market, which creates an opportunity for large-scale transformation in sustainable, domestically produced beef and dairy products, both the formal and informal market. a conservative scenario analysis was performed, based on the Companies such as meat and milk processors that invest in sustainability assumption that 5–15% of Colombian consumers would buy through SPS have the potential to generate returns of up to three times sustainable products. The results show that the market for their initial investment. sustainable beef and dairy products in Colombia is currently Investing in sustainability is no longer an alternative strategy, but worth COP$0.5–1.2 trillion. Going forward, this demand is only rather the only path for the private sector to remain competitive and expected to grow. ensure long-term value creation. References 1 FEDEGAN (2018), “Ganadería colombiana hoja de ruta 15 See https://www.ifad.org/en/web/latest/story/ 2018–2022.” [Road map for Colombian livestock.] Bogota. asset/42208116 2 Recently it has been acknowledged that land grabbing 16 The Nielsen Company (2018), “Was 2018 the Year of the is the main driver of land conversion rather than cattle Influential Sustainable Consumer?” https://www.nielsen. ranching per se. See Rasolt, D.H., (2020), “Deforestation com/‌us/en/insights/article/2018/was-2018-the-year-of- in Colombia.” Accessed October 9, 2020 at: https://www. the-influential-sustainable-consumer/ resilience.org/‌stories/2020-08-24/deforestation-in- 17 University of Cambridge Institute for Sustainability colombia/ Leadership (CISL) (2020). “Targeting Net Zero: A Strategic 3 Mongabay Latam article January 2017. Framework for Business Action. Cambridge, UK. 4 UPRA: Presentation on the situational analysis of the beef 18 See https://www.bain.com/globalassets/noindex/2020/ sector in Colombia. bain_brief_how_to_trace_a_path_to_resilient_ 5 UPRA: Presentation on the situational analysis of the beef sustainable‌_supply_chains.pdf. sector in Colombia. 19 Bain & Company (2020), “How to Trace a Path to 6 Government of Colombia (2017), Third National Resilient, Sustainable Supply Chains.” Communication of Colombia to the United Nations 20 This section draws on the following report: International Framework Convention on Climate Change. Bogota. markets for Colombian beef and dairy products 7 International markets for Colombian beef and dairy (prepared by GIRA Food for the World Bank, June 2020). products. Report prepared by GIRA Food, for the World 21 Mainstreaming Sustainable Cattle Ranching Project Bank. June 2020. (2021). “Building a climate-resilient cattle ranching sector 8 International markets for Colombian beef and dairy in Colombia.” Brochure prepared by the World Bank. products. Report prepared by GIRA Food, for the World 22 World Bank (2019), “Business Case: Mainstreaming Bank. June 2020. Sustainable Cattle Ranching Project.” Available 9 Source: Presentation at the International Dairy Forum by at http://documents1.worldbank.org/curated/ FEDEGAN, with IFCN and FAPRI information. en/324381569396107123/pdf/Mainstreaming- Sustainable-Cattle-Ranching-Project-Business-Case.pdf. 10 UPRA: Presentation on the situational analysis of the beef sector in Colombia (does it have a date?). 23 Study of production variables on a probabilistic sample of 101 farms during the dry and rainy seasons over 2.5 11 FEDEGAN (2018), “Ganadería colombiana hoja de ruta years (2017–19). Mainstreaming Sustainable Cattle 2018–2022.” [Road map for Colombian livestock.] Bogota. Ranging Project, World Bank. 12 International markets for Colombian beef and dairy 24 Study of production variables on a probabilistic sample products. Report prepared by GIRA Food for the World of 101 farms during the dry and rainy seasons over 2.5 Bank. June 2020. years (2017–19). Mainstreaming Sustainable Cattle 13 TRADEMAP. Ranging Project, World Bank. 14 See https://www.unilever.com/news/press- 25 TechnoServe (2019), Promoting sustainable practices in releases/2020/unilever-sets-bold-new-future-foods- the meat and dairy value chains. Study commissioned by ambition.html the World Bank. Prepared by: Jorrit Bob Tonko Becking, Mariángela Ramírez Díaz (World Bank Consultants), and Luz Díaz Rios (Sr. Agribusiness Specialist, World Bank). Design and infographics: Luz Ángela Ochoa Fonseca (World Bank Consultant). Photos: The World Bank. BUILDING PATHWAYS TO SUSTAINABLE CATTLE RANCHING IN COLOMBIA Why and how private sector should engage and support the sustainable transformation of cattle production in Colombia