FOOD PRODUCTION AND ENVIRONMENTAL QUALITY. Pat Snowdon Scottish Natural Heritage 1

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1 FOOD PRODUCTION AND ENVIRONMENTAL QUALITY Pat Snowdon Scottish Natural Heritage 1 Paper delivered at a seminar on "Mountain Quality - from local initiatives to a European project" Toulouse, 1-2 February 2002 This paper discusses the links between food production and the environment, using examples from research and practical initiatives in the UK. The paper consists of four main sections. First, the key issues are introduced. Second, the policy background is reviewed with particular emphasis on Scotland. Third, examples are provided of relevant initiatives at a national and local level. Fourth, recent research commissioned by the UK countryside agencies into environmental standards in food production is discussed. Finally, conclusions are drawn and relevant policy issues raised. A key thrust of the paper is that food production has environmental and socio-economic dimensions and that appropriate types of food production can generate important benefits for the environment and economies of mountain areas. 1. Introduction In recent years, there has been a major debate over the role of agriculture in Europe and the types of policies that are used to support farming and the wider rural economy. Much of this debate has focused on the multifunctional role of agricultural activity as a means of ensuring food production, maintaining wildlife and landscapes and in generating wider benefits associated with the economic and social fabric of rural areas. In many mountain areas, which are faced with peripherality and remoteness, the high quality of the natural environment has become regarded as a source of product differentiation and competitive advantage by contributing to product quality; for example, in the development of tourism, and also in locally distinctive products such as food. Food quality is a multifaceted concept relating to, inter alia, taste, origin (e.g. local-ness), health and safety, animal welfare and links to local culture, economy and the environment. Environmental aspects of food quality include associations with biodiversity, landscape and energy efficiency (through reduced food miles for example). The combination of these quality issues contribute to what may be termed more sustainable methods of food production. There has been increasing demand for food produced through such methods, as consumers have become more aware of the origins of their food, and issues pertaining to animal welfare and human health, and the impacts of agriculture and food distribution systems on the environment. 1 Scottish Natural Heritage is a government-funded agency that aims to protect, enhance and encourage enjoyment of the natural heritage, as well as environmental sustainability in all forms of economic activity.

2 The nature of food production impacts directly on the environment. It has been argued that a diverse range of foods produced in a sustainable way can increase biodiversity and enhance landscapes. Pan-European research has concluded that organic farming, for example, creates the following benefits for the following aspects of the environment: ecosystems (including biodiversity and landscapes); soil; ground and surface water; climate and air; and, resource use efficiency (i.e. farm inputs and outputs) (University of Hohenheim 2000) Recent studies in the UK have demonstrated that the public attaches considerable value to the distinctive landscapes supported by farming. From an economic perspective, farming is seen to provide public goods 2 in addition to its role in producing food. These public goods include the diversity of habitats and landscapes that have become dependent on particular farming practices. 2. Policy background The current period is a time of major reflection on the nature of policies affecting rural and mountain areas. An ongoing process of reform to the Common Agricultural Policy (CAP) is being driven by a range of factors including forthcoming enlargements to the European Union (EU), the current round of WTO trade negotiations on agriculture, the need to provide effective and integrated support to the rural economy, and concerns among consumers about the nature of food production. In recent years, there has been increasing consumer awareness of the links between food production and issues such as public health, the welfare of local communities and economies, and the condition of the environment. Concerns over health, following recent health scares, and (to a lesser extent) environmental implications of some farming practices has encouraged substantial growth in the production and consumption of organic food over the last decade. Consumers have become increasingly concerned about product traceability and demand has grown for products of identifiable (including local) origin. At the same time, there has been debate over the financial plight of many farmers and rural communities, including the need to increase the proportion of value-added that many farmers are able to obtain in the food production chain. In the UK, these concerns have been reflected in a substantial growth in farmers' markets 3. 2 An economic definition of public goods is goods that are non-rivalrous and non-excludable, i.e. they can be 'consumed' simultaneously by more than one person, and one person cannot exclude others from 'consuming' it. In practice, only a few things (e.g. air) are pure public goods. Other goods, such as landscape and biodiversity, display characteristics of public goods. 3 Farmers' markets are markets where local produce is sold direct to the consumer by the producer, according to criteria established by the National Association of Farmers' Markets (NAFM).

3 In Scotland, responsibilities for environment, agriculture and rural development are largely devolved matters under the Scottish Parliament. The environment portfolio has recently been incorporated into the department responsible for agriculture and rural development, forming the Scottish Executive Environment and Rural Affairs Department (SEERAD). The introduction of the 'second pillar' of the Common Agricultural Policy (CAP) through the EC Rural Development Regulation (1257/99) has introduced measures to encourage the marketing of quality agricultural products (for example under Article 33). However, the resulting Rural Development Plan for Scotland has not incorporated such measures, focusing at present on payments for agri-environmental measures, farm forestry and less favoured areas. Article 33 measures have, however, been incorporated into some EU Structural Fund programmes in the UK, including the Highlands and Islands Special Programme (Objective 1 transition) in Scotland and the England Rural Development Plan. In 2001, following a public consultation, SEERAD published a strategic document entitled "A Forward Strategy for Scottish Agriculture" which sets out aspirations and actions for Scottish agriculture. Two key issues noted in the document are: "High environmental standards in farming are vitally important to its success as a food supplier, to other rural businesses and to the general public." "Future support needs to be designed in a way which rewards the mix of benefits required by the Scottish public and does not mask market signals". The strategy states that there is a need to reflect new areas of consumer concern, including the environment, and adds that farming should be strongly embedded in rural areas, playing its part in the economic, social and environmental well-being of rural areas. On this basis, it is proposed that a system of Land Management Contracts be developed to reward multifunctional farming and to recognise the diversity of farming types across Scotland. This proposal is based on the french model of Contrats Territoriaux d Exploitation although decisions have not yet been taken on the form of such contracts in Scotland. The intention is to rewards farmers for adopting an integrated approach to farm management recognising economic, social and environmental benefits. Similar approaches are being tested in a number of integrated land management initiatives in England, such as the Peak District Land Management Initiative, which aim to demonstrate how land management can respond to the changing demands on agriculture in ways that maintain a healthy, attractive environment and support rural economies and communities. A variety of assurance schemes affecting farming have been established in the UK. Currently, the only reliable and independently accredited set of environmental standards are those for organic farming. However, these standards do not address all environmental impacts, in relation to landscape and biodiversity for example, and only apply to a relatively small proportion of

4 farmers at present. A significant development in recent years has been the bringing together of various farm assurance schemes under the promotional banner of British Farm Standard 'red tractor' logo. These schemes have been developed jointly by the farming and food supply industries and cover a range of activities, including fresh produce, meat, cereals and milk. However, the main drivers behind the schemes have been food safety and animal welfare requirements. Environmental elements are restricted to minimal standards and some scheme operators are concerned that stronger environmental conditions would compromise producers' competitive advantage. There are other assurance schemes that place greater emphasis on environmental standards - for example, a scheme planned by 'Linking the Environment and Farming' (LEAF) which will be based on the principles of integrated farm management - but such schemes have only been applied on a limited basis. There is also a growing number of local branding and labelling schemes, many of which result from producer collaboration to develop new markets (see Pentland Hills Produce in Section 3). Such schemes generally rely on self-certification and vary in the degree to which they use environmental standards. 3. Initiatives linking food production and environment This section reviews some examples of initiatives in the UK that demonstrate the links between food production and the environment. Eat the View Establishing links between land management practices and food production is at the heart of the Countryside Agency's 4 Eat the View campaign. Its main aim is to facilitate growth in the market for products which originate from systems of land management that support the diversity and character of landscapes and the environment in the countryside and strengthen the 'sense of place' of the areas in which they are produced, while also bringing benefits to the rural economy and local communities. The campaign is based on the premise that purchasing decisions made by consumers have an important influence on how land is managed. It is argued that developing stronger markets for such products increases the commercial viability of environmentally sustainable land management practices. Implementation of the Eat the View campaign is based mainly on providing advice to relevant institutions and individuals, facilitating local projects, and disseminating good practice. The Countryside Agency is also trying to collate information on the wide range of local but often uncoordinated projects and provide an integrated environmental and rural development perspective. 4 The Countryside Agency is a government-funded agency with statutory responsibility for conserving and enhancing England's countryside, providing social and economic benefits for its residents, and promoting enjoyment of the countryside.

5 Food Futures Food Futures is a UK-wide programme run by the Soil Association 5 and aims to promote links between food and public health, local economic benefits and the quality of the environment. It comprises 11 local programmes which focus on establishing practical projects to develop sustainable local food economies 6 which link local producers and consumers. Environmental issues relate to, inter alia, reducing food miles (and associated transport and packaging costs), reducing the use of harmful agro-chemicals, and increasing the diversity of landscapes, wildlife and varieties of produce available. Food Futures programmes have been established in three areas of Scotland: Dumfries and Galloway, the Forth Valley and Skye and Lochalsh. Specific projects include a community garden with links to a local café, producer's cooperatives among local farmers, and a promotional campaign (using 'buy local' car stickers and promotional material for shops) to develop a local food brand based on the high quality of local environment. A wide range of local food projects has been established across Scotland but there has been limited co-ordination at a national level. Scottish Natural Heritage is participating this year in research funded by a range of public sector agencies to review experience in the local food sector in Scotland and develop a set of recommendations for future development, including appropriate policy measures. Pentland Hills Regional Foods A group of farmers in the Pentland Hills Regional Park 7 to the south of Edinburgh have collaborated in a marketing initiative under the brand name of Pentland Hills Produce. Farming in the area is based largely on the breeding and rearing of traditional sheep and cattle. Each farm is responsible for, and bears the costs of, marketing its produce. The Regional Park has provided a part-time co-ordinator for the initiative and has covered some promotional costs. The emphasis of the group is to provide high-quality produce and to generate increased prices at the farm-gate. A code of practice has been established which sets out quality-related principles which are mainly concerned with the animal welfare, hygiene practices and the treatment of carcases; for example, 5 The Soils Association is the main certifier of organic standards in the UK. It first published organic standards in It was not until 1992 that common standards were introduced across the EU (Council Reg. (EEC) 2092/91). 6 A sustainable local food economies is defined by the Soil Association as: "A system of producing, processing and trading, primarily of organic and sustainable forms of food production, where the physical and economic activity is largely contained and controlled within the locality or region where it was produced, which delivers health, economic, environmental and social benefits to the communities in those areas" (Soil Association, undated). 7 The Pentland Hills Regional Park is publicly funded and aims to retain the essential character of the hills, enhance the landscape and habitats, encourage responsible public enjoyment, and integrate conservation and recreation with other land uses.

6 animals must be bred and reared on the farm of a member of the group, all carcases must be hung for a minimum period (21 days for beef), and all stock movements must be recorded and passed to the secretary of the group. These principles do not relate directly to environmental standards but all members must sign a member's agreement which requires them to maintain good relations with the Pentland Hills Regional Park by farming with respect to the landscape and the environment. In practice, a number of members have acquired or are switching to organic status under the initiative. If a member breaches accepted behaviour with the Regional Park or the rest of the group, provisions exist to remove them from the initiative. The activities of the group currently focus on the marketing of beef and sheep meat, either directly at the farm-gate or through a farmer's market in Edinburgh. Some members have begun local processing, producing sausages for example. Farmers have been able to obtain higher prices for their products by selling 'closer' to the customer, thereby retaining a greater proportion of value-added in the food production chain. The initiative provides important lessons concerning the operation of local food schemes. First, it has demonstrated the benefits of collaboration between farmers in sharing costs, resource and ideas on good practice. Second, the scheme has been simple and flexible, but has operated under a common umbrella or code of practice. Third, it has re-established links between farmers and consumers. As a result, farmers have taken pride in selling a quality product that consumers demand, while consumers have enjoyed purchasing a high-quality product with a local identity. Some challenges have been faced by the initiative. First, there are significant start-up costs involved in selling produce at farmer's markets, due to legislative requirements on health and safety, product labelling and packaging. However, in this instance, farmers have been able to learn from each other and share such costs. Second, some costs have been incurred due to the centralisation of the food production infrastructure. For example, transport costs have been increased due to the lack of a local abattoir. Third, there is potential for members of such groups to compete rather than collaborate. However, in practice in this case, individual farms have each found particular 'niche' markets and have also shared customers, thereby maintaining continuity of supply. Finally, members of the group have found it difficult to sell direct to restaurants due to competition from large-scale, lowcost suppliers which can ensure continuous supplies. Nevertheless, some products are due to be sold through this route (pers. comm. Murray 2002). It appears that the natural environment plays an important role in the initiative although it has not been the main driver behind the actions of the farmers. Farmers have marketed their products mainly on the basis of high quality relating to taste and local distinctiveness. However, they have benefitted greatly from the association with the Regional Park whose remit is wholly environmental and, in this context, the natural environment of the local area has been a central component of the marketing image of the products.

7 4. Environmental Standards in Food Production This section describes recent research commissioned by the UK countryside agencies 8 which has attempted to identify a set of benchmark environmental standards which could be used to develop environmental assurance schemes for farmers operating above environmental baseline standards 9. The research was based on the belief that farmers who manage the land in ways that deliver significant public benefits (e.g. environmental benefits) should be rewarded through the market. One of the main obstacles to the development of new markets for environmentally sustainable farm products is the lack of an effective means of differentiating these products in the market. Such standards are intended to be voluntary and are intended to provide farmers and consumers who wish to supply and consume goods produced under higher environmental standards with a means of distinguishing these products. It is assumed that the farmer would be rewarded for farming in this way through a combination of: Product differentiation (i.e. preferential purchase by consumers); Sale at premium prices; and, Payment of some other form of grant aid (e.g. through agri-environmental schemes) for complying with some or all of the standards identified. The research, carried out by Land Use Consultants in London, identified three categories of environmental standard. Universal standards which are generally applicable in all circumstances; Regional standards which reflect regional characteristics and priorities; and, Local standards which reflect local characteristics and priorities. These categories do not indicate different levels of importance. Rather, they are designed to encourage local distinctiveness rather than uniformity. Under these standards, three types of action may be required by the farmer: Restrictive standards which state operations to be avoided; Prescriptive standards (i.e. as in current agri-environment schemes prescriptions); and, Objective-led standards which state the desired objective, and invite the farmer to suggest how this objective will be achieved - this approach has already been adopted in the Scottish Environmentally Sensitive Areas. 8 The Countryside Agency, the Environment Agency, the Countryside Council for Wales, Scottish Natural Heritage. The research was carried out by Land Use Consultants in London. 9 Baseline environmental standards are those that do not assume premium prices and that do not incur major additional costs by farmers. In the UK, various items of legislation and some existing farm assurance schemes serve to implement baseline standards. Such legislation includes regulations on the control of water and air pollution, the use of fertilisers and pesticides, and the protection of sites of high environmental value. Relevant assurance schemes include the British Farm Standard (see Section 2). Some environmental standards are also achieved through cross-compliance on farm subsidies to livestock and arable producers.

8 Universal standards are largely restrictive in nature and apply to the whole farm. They focus primarily on standards related to air, soil and water, but also address landscape and biodiversity and some economic and social issues. On this basis, they may be divided into natural resources measures, countryside measures and rural society measures, as shown in Table 1. Regional standards fare largely prescriptive and focus on the conservation, creation and management of landcover and linear features (e.g. hedgerows, paths) in order to support biodiversity, landscape, cultural heritage and access to the countryside. Local standards are more objective-led due to their very specific geographic focus and also relate to the conservation, creation and management of landcover and linear features. Tables 1 and 2 illustrate the types of standards that could be included in such an environmental standards scheme. Table 1 Examples of universal standards Countryside Natural resources Rural Society Level 1 Level 2 Level 3 Maintain a minimum distance between arable fields and areas of permanent non-cropped habitat Retain hedgerow and field trees (unless dangerous) Avoid growing 'continous' crops Maintain existing informal public access on the farm Source: Landuse Consultants 2001 Undertake an energy efficiency audit Sell directly to consumers via the farm-gate or a farm shop Table 2 Examples of regional and local standards Landcover Unimproved grasslands (e.g. hay meadows) Coastal habitats (e.g. salt marsh) Upland moorland Woodland and scrub Linear features Hedgerows Walls Uncropped wildlife strips New permissive access routes Source: Landuse Consultants 2001 Prohibition of certain pesticides Limits on slurry application At least 10% of farm sales as direct sales to consumers Three different levels of standard have been introduced in order to allow different levels of environmental performance to be recognised (this will vary regionally) and to provide the opportunity for farmers to raise environmental performance over time by moving from level to another. This hierarchy of

9 standards involves giving a rating of *, ** or *** for universal standards and using the percentage of farm area and the length of linear standards to give a rating for regional and local standards relating to landcover and linear features respectively. This is illustrated in Table 3. Table 3 Levels of environmental performance within an Environmental Assurance Scheme Category of environmental standard Universal Regional Local Levels in the hierarchy Level 1 Level 2 Level 3 Complete all * rated Complete all * & ** rated Complete all * - *** rated Universal Standards Universal Standards Universal Standards 10% of farm unit (excl. 25% of farm unit (excl. 50% of farm unit (excl. set-aside) & 50% of set-aside) & 75% of setaside set-aside) & 100% of set-aside managed for managed for set-aside managed for conservation conservation conservation y length of linear features x 10% managed to meet regional/local standards y length of linear features x 25% managed to meet regional/local standards y length of linear features x 50% managed to meet regional/local standards The basic message from this table is that, for each level in the Environmental Assurance Scheme, a farmer is required to follow a set of Universal Standards and manage a set percentage of the farm and a set length of linear features reflecting regional and local circumstances. This type of approach could be compatible with regional and local branding schemes and would provide a single framework through which a farm in the Highlands of Scotland could be compared in terms of environmental performance with a farm in the central lowlands, at the same time meeting locally-specific environmental objectives. Entry to the scheme would be dependent on the farmer conducting an environmental audit including the development of a whole farm conservation plan 10. This would allow the farmer to evaluate and interpret his/her production systems in relation to environmental performance. This type of self-assessment has been evident in the 'autodiagnostic' approach used in some CTEs in France. The success of assurance schemes is largely dependent on the ability to deliver verifiable standards. This scheme is based on the verification of environmental outputs rather than the environmental outcomes that may result. This is because verification of the latter is problematic due to labour costs and the uncertainty of achieving such outcomes (e.g. presence of particular bird species) even when the appropriate environmental actions (i.e. outputs) have been carried out. Effective verification would require prechecks to ensure that the farm Conservation Plan meets the scheme 10 Further options include the use of Nutrient Management Plans. Integrated Crop Protection Plans, and Soil and Water Management Plans.

10 requirements and that all legislative needs are being met, annual visits to assess farm records and practices, and random checks at other times. Questions remain concerning the administration and financing of such a scheme and the levels of price premiums that it would be able to generate for farmers. Establishing a heavily bureaucratic system would be counterproductive, and it would seem to sensible to explore opportunities to integrate the scheme with existing administrative procedures; for example, farm conservation plans are already required through agri-environment programmes. Costs of verification, for example, could be met through a subscription, as is currently the case for organic farmers. Undoubtedly, some farms would incur some financial costs in meeting the environmental requirements of the scheme. In some instances, these costs may be met, at least partially, by agri-environmental payments. However, the success of any such scheme would rely largely on the willingness of consumers to pay higher prices for products with an assured environmental quality. 5. Conclusions There is evidence of substantial changes in consumer demand in recent years associated with growing concerns over the impacts of food production on a range of issues relating to public health, animal welfare, rural economies and communities and the environment. Strong links exist between food production and the landscapes and biodiversity that characterise rural and mountain areas. These links provide significant opportunities for developing quality products based at least in part on the environment in which they are produced. Such links have been recognised in the promotional images (e.g. in local food marketing initiatives) but, in general, have been incorporated to a limited extent in assurance schemes relating to food production. The role of the environment in developing quality products is closely tied to economic issues facing mountain areas. It is argued that the development of quality products based on local resources - including local knowledge, skills, and the environment - can play an important role in adding value in local economies, thereby generating additional income and employment (OECD 1993). Thus, the role of the environment in supporting quality products in mountain areas may be most effective if integrated with the other aspects of product quality (e.g. origin, production methods) in order to maximise benefits for local producers. At the same time, encouraging the production of environmentally sustainable food products is an important means of safeguarding the environment through appropriate land management practices. Therefore, an integrated approach is recommended whereby environmental assurance schemes incorporate standards that, without compromising environmental objectives, relate to, inter alia, access and enjoyment of mountain areas and local social and economic benefits. Important implications arise in relation to policies to support mountain areas and in encouraging the market to adopt environmentally and economically sustainable forms of food production. In particular, greater integration is desirable between environmentally-beneficial land management and local

11 business development. This could involve linking agri-environment measures with forms of locally-based development activities that have been promoted through the LEADER programme. The basis for such an approach can be seen in some parts of RDR. However, future reforms may be necessary as well as encouragement of individual Member States to exploit relevant opportunities that the RDR provides. Recent reforms to the CAP have paid greater emphasis to achieving higher environmental benefits from farming, particularly through agri-environment payments. Such payments may be regarded as a critical means of addressing market (and also policy) failure by increasing the supply of environmental public goods associated with many traditional land management practices. However, an interesting consideration is the extent to which farmers may be remunerated through the market for producing food and environmental goods through the same product (joint goods). This may be seen as a (partial) internalisation of the environmental value of food production within the market system, and could be seen to place farming activities on a more financially sustainable footing. A number of practical considerations may be drawn from the initiatives described in this paper. First, a key conclusion is the importance of ensuring a 'bottom-up' approach in which farmers collaborate in developing and marketing quality products. The exchange of best practice concerning product quality (e.g. associated environmental management) and product marketing for example can serve to reinforce the role of farmers in the marketplace. 'Top-down' actions are still important however; for example, in developing a strategic framework and ensuring that standards are applied fairly across different geographical areas. Second, major questions remain concerning the ability of the market to support price premiums through environmental assurance schemes. While premiums have been extracted for many organic products, careful planning and testing will be required if future assurance schemes are to generate higher prices for farmers. One important factor is the extent to which the market can distinguish between different levels of environmental performance as outlined in Section 4 of this paper. Third, there has recently been a significant growth in the number of local branding and marketing initiatives. As a result, there is a need to ensure consistency between different schemes in order to increase consumer confidence. Fourth, assurance schemes need to be able to reflect local and regional diversity. Some regional objectives have been adopted in some UK agrienvironment programmes (e.g. the Rural Stewardship Scheme) and in the french CTEs. It is important that policy initiatives concerning food production are able to support the environmental and socio-economic diversity of mountain areas.

12 Finally, strengthening the links between the environment and food production (through assurance schemes for example) has potential to generate significant benefits for the environment by providing incentives for farmers to engage in appropriate land management practices. References Countryside Agency (2001) Farmers' markets in the south-east of England: their economic, environmental and social performance, Research Notes, CRN 37, August 2001 Land Use Consultants (2001) Environmental Standards in food Production: draft final report, report for the UK countryside agencies Murray, F. (2002) Personal communication, Pentland Hills Regional Park, Edinburgh OECD (1993) Niche Markets as a Rural Development Strategy, Paris: OECD Soil Association (undated) Local Food Routes - a Summary Report of Food Futures, Bristol: Soil Association University of Hohenheim (2000) Organic Farming in Europe: Economics and Policy, Vol.6, The Environmental Impacts of Organic Farming in Europe, University of Hohenheim, 2000