Sustainable Value Chains – Framework Conditions for Successful Cooperation

Sustainable Value Chains – Framework Conditions for Successful Cooperation

A student project analysed an organic food value chain by interviewing stakeholders including production, processing and retailing as well as politics. The objective was to find out how relationships within value chains have to be build out to promote a sustainable value chain. The most important result was that cooperation at eye level between all stakeholders is necessary to strengthen biodiversity and ecosystem services in a sustainable organic value chain.

 Organic farming has great potential to contribute to an environmentally sound and sustainable agricultural production. It integrates the objective of conserving natural resources into its core principles, and therefore has a variety of positive effects on the environment. It can also play a vital role in the efforts regarding climate protection and climate adaptation.

The HiPP Contract Innovation Lab of Contracts2.0 focuses on services that can be achieved in organic value chains in addition to those already generated by requirements of organic farming associations. An innovative contract-based approach along organic food value chains could provide support or incentives for farmers to contribute to strengthening biodiversity and ecosystem services in addition to producing food, i.e. integrating them into sourcing and quality strategies within food production.

Exploring the Potential of Sustainable Organic Value Chains

As part of a study project in parallel to the work in the HiPP CIL, students from Leibniz University Hannover, Germany, discussed ways of making organic value chains more sustainable. The students conducted a case study in which stakeholders along the value chain of an organic grain mill were interviewed on the topics of sustainability, biodiversity and ecosystem services. The stakeholders included farmers, mill managers, retail partners as well as staff of the Ministry of Food and Agriculture and Ministry of the Environment of Lower Saxony. Within these interviews, the following subjects were discussed:

  • Strengths and weaknesses of a sustainable organic grain value chain,
  • Framework conditions to set up a more sustainable value chain from the perspective of the various stakeholders,
  • A theoretical cooperation model which describes the mutual demands and commitments of the stakeholders.

The following sections focus on the description of the cooperation model and the necessary framework conditions that underpin this model.

What are the Necessary Framework Conditions?

Important framework conditions for creating a sustainable organic value chain promoting biodiversity and ecosystem services, are communication, trust and cooperation of all internal and external stakeholders. This includes information exchange, knowledge exchange, the communication of ecological values, and education.

Examples are fair prices and price transparency. For example, the studied grain mill introduced a so-called “base price model” for long-term pricing to counteract market fluctuations. This guarantees farmers greater security in the sale of their products.

Another point that was addressed is the buying behaviour and the appreciation of organic products by consumers. On the one hand, consumers must be convinced and informed that organic or regional products could be more expensive and it is worth paying this extra effort. On the other hand, farmers must be made aware of the added value of sustainable projects, both ecologically and economically.

Last but not least, political funding and financing plays an important role. This funding can support pilot projects testing pathways to sustainable organic value chains. An example of such a promotion of regional initiatives is the producer association “Kostbares Südniedersachsen”. Here, public funding has been successively discontinued and replaced by retailers’ initiatives. This is a rare example, because until now such approaches have been financed predominantly by food processors from their own funds.

In addition, policies contribute to the adherence to the principles of a sustainable value chain and production security for the various stakeholders through guidelines and operation standards, such as the “Act on Corporate Due Diligence Obligations in Supple Chains”.

Developing a Cooperation Model to Identify Needs and Commitments of the Stakeholders

The outputs generated through the interviews were visualized in a cooperation model. The following figure shows the complex interlinkages between the stakeholders within this cooperation model of the sustainable grain value chain. The individual needs and commitments of the stakeholders are shown and describe the most important topics of cooperation among the various stakeholders.

The model also shows that the stakeholders mainly share the same beliefs. An example is the desire for closer cooperation and the development of joint projects as well as a transparent, reliable and trustworthy communication.

Fig. 1: Framework conditions for a possible cooperation model between stakeholders within a sustainable grain value chain and their cooperation, mutual needs and demands as well as offerings and commitments (Hoffmann et al. 2021).

According to this cooperation model and the underlying interviews, different recommendations for action are made to the respective stakeholders. In the area of finance, these refer, for example, to the topics of price transparency, pricing and funding. Farmers demand more price transparency from processors (Figure 2) or listing and promoting additional services provided by them on their products (Figure 3).

Fig. 2: Pricing structure for milk (© Initiative ‘Du bist hier der Chef’, available at: https://tinyurl.com/2p8cyvs5

Fig. 3: Promotion of a nature conservation measure on noodle packaging [“For this pasta an insect friendly meadow was created”] © Hoffmann et al. 2021

Another field of action is the marketing and purchase of regional products via producers, processing companies and food retailers as well as the communication between all stakeholders along the value chain. For this reason, all stakeholders, from farmers to retailers, demand a direct exchange of information among themselves, within their own companies, and also with external stakeholders such as nature conservation associations, advisory bodies and scientists. Besides promoting additional environmental measures on products and at the point of sale, it is important to communicate the environmental value of organic products to all stakeholders in a sustainable value chain.

Outlook

The considerations described refer exclusively to regional grain value chains. More work could be done to value chains with direct marketing or inclusion of international supply chains to see if the model is transferable. Moreover, the developed model is theoretical and thus the results do not allow any conclusions about the concrete arrangement and funding of the additional services and the necessary framework conditions.

Written by: Louisa Hoffmann, Kristina Bastian, Maike Barsties, Madeleine Brockmann, Michel Graas, Sara Grzywatz, Lara-Sophie Hinz, Pauline Kehl and Clara Lütgendorf (Leibniz University Hannover – LUH)

Supervision: Birte Bredemeier, Sylvia Herrmann (LUH)

To cite: Hoffmann et al. (2021): Nachhaltige Lebensmittelproduktion und Ökosystemleistungen. Masterprojekt an der Leibniz Universität Hannover, Sommersemester 2021.

Collective Action for Biodiversity – Update  from Innovation Lab NRW

Collective Action for Biodiversity – Update from Innovation Lab NRW

The Innovation Lab North Rhine-Westphalia (IL NRW) focuses on developing the theoretical underpinnings of a concept featuring the collective approach for the implementation of agri-environmental measures (AEM). This article sums up the development in the IL NRW, discusses the main barriers of the current system and outlines the challenges regarding a potential application of the collective approach in Germany.

collective approach in Focus

The Innovation Lab NRW (IL NRW) gathers various stakeholders in regular meetings to discuss the way forward towards a more attractive and more effective funding scheme for voluntary agri-environmental engagement. In this regard the collective approach, especially for biodiversity-related measures, seems to be a promising option. It has the potential to increase the effectivity of interventions, while reducing barriers which deter farmers from participating in agri-environmental schemes. In agreement with the participants of the Innovation Lab NRW this innovative contractual solution is in focus regarding the development of a suitable concept, which could serve as a blueprint also for other areas in Germany.

The Innovation Lab North Rhine-Westphalia splits up into the Contract Innovation Lab (CIL NRW) and the Policy Innovation Lab (PIL NRW). The CIL NRW summons regional stakeholders (mainly farmers, advisers and regional administrative representatives) and deals with Contract related issues and implementation barriers, while the PIL NRW addresses supra-regional/national policy makers and other relevant stakeholders (NGO´s, Associations etc.) and discusses the broader policy environment accompanying the funding programs.

A Survey Reveals Farmers´ Motivations and Main Concerns

There have been five CIL-workshop and three PIL-workshops conducted to this date. After switching to a digital format due to the Covid-19 situation the attendance of farmers at the CIL-workshops dropped considerably, while the participation of administrative and advisory representatives in the PIL workshops seem to have even grown. To make sure farmers´ perspectives are included in the further development of a concept that should be especially attractive to practitioners, a survey was conducted asking specifically farmers of the region for their opinion on a favourable future agri-environmental funding programme. Altogether 74 farmers from North Rhine-Westphalia (NRW) completed the survey, making also good use of the open comment section available for each multiple-choice question, contributing to a rich pool of “in between the lines” ideas and opinions.

Fig. 1: Most important aspects for an increased uptake of AECMs (own survey, completed by 74 farmers of NRW-region)

When asking about the most important aspects that influence the decision to join a scheme, the argument of a less bureaucratic handling of agri-environmental contracting tops the notion of a sufficient financial compensation, making this the most important barrier (see figure 1).

Another important aspect is the need for greater flexibility when implementing measures. Rather than adhering to strict deadlines, there should be some room for pragmatic decision-making especially for some weather-dependent treatments (e.g. sowing or mowing) when meteorological circumstances indicate adverse outcomes. Sometimes also small spatial discrepancies (regarding not only to little but also too much area used for the measure) can lead to rather drastic sanctions. Some farmers noted that especially this strict handling of even minor discrepancies (mostly caused unintentionally) prevents them from joining a scheme. They simply do not want to invite hassle.

Experience from Pilot Projects as a Base for Discussion

Within Germany there are already a few regional pilot projects operating, implementing the collective approach to a varying extent. The last CIl NRW-Workshop mid-September 2021 featured the presentation of a collective action project in Rhineland-Palatine and another one in Saxony-Anhalt. This way the CIL NRW participants were allowed a glimpse into the practical implementation of this approach along with its merits and challenges. Altogether 22 participants joined this 5th (digital) CIL-workshop representing farmers, (regional) agricultural and environmental administration as well as nature conservation organisations. In the discussion part of the workshop, aided by the whiteboard app Mural (see title picture), participants tried to identify the must-have components of an “ideal” collective contract.

Components of the Ideal Contract

There was agreement, that the necessary controls/checks should be reduced to a minimum, since they constitute a considerable hassle for the farmers which costs them time and nerves. The way a pilot project (Saxony-Anhalt) organizes the checks within their collective (checks are carried out, during a time when potential mistakes or failures can still be corrected) is seen as a favourable option by many farmers. To exploit the full potential in terms of farmer support that a collective approach, in theory, has to offer, practitioners feel that a close contact to an assigned field officer/advisor, who “speaks the language of the farmers” would be very helpful.

Another important topic was also the possibility to develop a feasible and fair sanctioning mechanism within a collective. The potential participation in making up the collective´s own general rules or statues has been welcomed by the farmers. The buffer effect, which a collective could potentially introduce to lower the risk of excessive sanctions for the individual farmer, is also a very well perceived advantage of being part of a collective.

What about Trust?

Picking up on the argument (“when joining a collective, one is depending on other farmers doing their part”) often used by opponents of a collective, the results of the survey allow for a more optimistic perception of the group effort. Regarding a possible influence of the collective approach on the reliability of the correct implementation of measures, half of the participants say that they feel that their feeling of reliability would rather increase (see Figure 2).

This seems to indicate a general trust towards fellow farmers or at the very least a trust in the mechanisms of social control. This corresponds with results of a study asking Dutch farmers similar questions (see related blogpost).

Fig. 2: Influence of  the collective characteristic on reliability. (own survey, completed by 74 farmers of NRW-Region)

How can Policy Help to Create a Conducive Environment for Collective Action?

The PIL NRW-workshop in November 2021 discussed administrative issues, which are relating to the main barriers regarding a potential implementation of agricultural collectives in Germany. Setting the broader goals and developing a shared vision regarding a certain region and its stakeholders can be challenging when diverse interests have to be taking in account. Ecological necessities need to be aligned with agronomic and economic aspects in order to legitimize the work of the collectives in the eyes of all actors involved. Another important guard rail for this process is the imperative to administer the measures without excessive bureaucracy.

Concerning the documentation and control processes practitioners as well as administrators stressed the need to simplify processes, in order to make participation in agri-environmental programmes more attractive. But contrary to the intention, the New Delivery Model of the Post 2023 CAP will not necessarily offer the longed-for simplification. As one PIL member puts it: “The wish for flexibility is the enemy of simplification”. Under these circumstances the role of the collective in supporting the individual farmer and alleviating the bureaucratic burden, becomes all the more important.

Self-governance and a Robust Set of Indicators to Report the Targets Reached

When thinking about efficient control mechanisms, another thought comes to mind:  Allowing more responsibility to lie with the farmers by increasing the trust in the self-governing and self-regulating capacity of the collectives could be helpful to not only minimize cost (or at least avoid unnecessary effort) but also to strengthen the bonding social capital of the group (social coherence; trust of farmers in the collectives to represent their interests). To exploit the full potential of a collective implementation with regard to the ecological but also the socio-economic momentum of this approach an adjustment in EU regulation (809/2014) could be considered. Having said this, it is important to ensure that the targets agreed upon between the collective and the administration are indeed attained. This is where some work has still to be done: Coming up with a documentation system (supported by robust indicators and reference framework) which provides each level (collectiveà regional/national administrationàEU) with the respective information, while the level of abstraction increases with the level of governance and the control mechanisms are accordingly adapted.

Another finding from the discussion with administrative representatives is, that the IT-System used to administer the implementation of measures, needs a serious overhaul in order to enable a user- friendly documentation. Furthermore, the use of new technologies (GIS, remote sensoring, Sentinal data, etc.) should be supported to facilitate an accurate (and potentially real-time) documentation from farmers to the administration, which could help to reduce the abundance of on-site checks and increase flexibility, while making sure the frame of reference is the same for all actors involved.

Outlook

A question, which needs to be openly discussed, when thinking about rolling out/scaling up the collective approach: what is the advised impelemention depths to enable the full potential of the collective idea. The “exclusiveness” of the Dutch model (to take part in AECM programs at all, farmers need to join a collective) induces some hesitation within German adminstratitive structures as well as with some farmers. Building/maintaining parallel structures, on the other hand, also holds some  disadvantages. This issues needs to be recognized and adressed, before real progress can be made. 

The survey addressing farmers of NRW showed a peculiar result regarding the question of how likely it is, that they would join a collective (see figure 3).

Fig. 3: Willingness to join a collective (own survey, completed by 74 farmers of NRW-Region)

The relatively evenly distributed answers seem to indicate some reservations and/or potential lack of knowledge when it comes to this novel contractual solution. A closer look into the open comments relating to this question in the survey, reveals that those reservation are mainly grounded in the fear of an additional bureaucratic hassle (justified or not), that curbs the enthusiasm to join a collective. It seems that a bit more effort has to be made towards informing farmers (as well as administrative staff) about this approach and supporting the initiation of pilot projects to test it on the ground. This would also generate “publicity” for the approach and could increase a “bottom up” demand for an innovative handling of agri-environmental programs from the stakeholders involved.

Written by: Christine Hamon, German Farmer´s Association 

Testing MCDM Model to Evaluate the Potential of the Collective Approach

Testing MCDM Model to Evaluate the Potential of the Collective Approach

The Multi-criteria Decision Making (MCDM) method is an excellent tool to assess different options by evaluating conflicting criteria in order to make an informed decision. In Contracts2.0 we are applying this method on evaluating the performance of two case studies implementing the collective approach. Their results show different levels of fulfilling the (sub-)objectives, contributing to the main objective of providing environmental public goods to a varying extent. Comparing the different results can help to identify the weaknesses of certain options and support the design of effective agri-environmental schemes.

This week, C2.0-partners from University of Ljubljana, working on an ex-post analysis of existing collectives, presented a paper about a multi-criteria decision support system which can inform the design and evaluation of novel contractual models by analysing the potential of existing contracts. This paper was presented at the 16th International Symposium on Operational Research in Slovenia from 22nd to 24th September 2021.

Comparing the Performance of the Collectives

The presented research is exploring the sensitivity of the multi criteria decision making model for comparing the potential of different types of coordinated agri-environmental measures (AEM) or collactives. The Dutch Contracts2.0 collective case studys Limburg and Oost Groningen were chosen as subjects for this study. The results are presented with the help of a web chart (Fig.1 and 2). The test model suggests that the two collectives mainly differ in the attributes “social” and “economic” aspects.

Fig. 1: Web chart for the NL_Limburg – attributes

Fig. 2: Web chart for  NL_Oost Groningen – attributes

Collectives show different Performance Levels

Fig. 3 shows a more detailed breakdown of the differences by criteria. If we take a closer look at the economic factor in both cases, we see that the NL_Limburg case has both criteria for the “economic” attribute very poorly assessed. The SWOT analysis (from which the original information about the characteristics of these two cases stems from) showed that there is practically no cost reduction for farmers in NL-Limburg case arising from joining the collective. In contrast, the NL_Oost Groningen collective provides an organized group purchase of seedlings and seeds to ensure a better price and thus receiving a better economic assessment.

Fig. 1: Web chart for the NL_Limburg – attributes

Weaknesses of the Model Need to be Addressed

In this test model, the equal weight for factors and individual decision-making approach was used, which eventually, reflected in the lack of sensitivity of the test model and should be corrected in the final decision model.

The final decision model will compare nine different case studies implementing the collective approach to AEM. It will not use an equal weight for factors, instead the analytical hierarchy process pair wise comparison method for calculation of weights assigned to factors will be made with a combination of Delfi method. Delfi method includes several expert’s view and can reflect a group decision making effort so at the end a consensus for assigning weights to factors will be made.

The final decision model will be applied for selected case study sites in order to identify the contracts with the highest probability to provide the desired provision of environmental public goods (EPG) and ecosystem services along with marketable agricultural private goods. It will show weaknesses and strengths for each individual case study and it will give insight into the factors that can have greatest effect to the provision of EPG. This will then be applicable as a new knowledge for the design of the novel contracts for EPG that the Contracts2.0 project is all about.

For more detailed information have a look at our paper, which we presented at the 16th International Symposium on Operational Research.

Written by: Janja Rudolf & Andrej Udovč, Biotechnical faculty, University of Ljubljana (Slovenia)

Farmers’ Perceptions of Payment by Results scheme in UK

Farmers’ Perceptions of Payment by Results scheme in UK

Earlier this year, researchers from the UK ‘Contracts2.0’ team spent some time working with Natural England and the Yorkshire Dales National Park’s Pilot Results Based Agri-environment Payment Scheme (RBAPS) to study farmers’ perceptions of this results-based pilot project. Another focus of the joint study was to identify the changes to the management practices as well as the habitat quality of the farmland resulting from the participation in this results-based scheme.

 We found that farmers had very positive experiences of the payments by results scheme and, overall, habitat quality was at a comparable level to control sites in conventional agri-environmental agreements. This can be seen as a success considering the relatively short timescale of the project and the additional empowerment of farmers within PBR approaches. Interestingly, many farmers chose to maintain many of their existing management practices, rather than aim to improve the habitat quality as we might expect in a results-based system. Farmers recognised a relationship between their existing habitat quality and the cultural & environmental heritage of the landscape, where unique elements of the area such as ancient flower meadows resulted in sufficient payments. Farmers also noted some important factors outside of their control which impacted management, from the weather conditions to the valuable advice and support received from local project officers.

Our report was submitted to the UK Government’s Department for Environment, Food & Rural Affairs, as a part of the supplementary evidence relating to the ongoing RBAPS trial and development of the new Environmental Land Management Schemes (ELMS) in England.

Project Outline

We conducted detailed interviews with farmers involved in the RBAPS pilot in January 2021. The interviews lasted on average for approximately 1 hour 30 minutes, with the shortest interview being just over 1 hour and the longest being 2 hours and 30 minutes. The interviews took place either online via video call (on Skype, Microsoft Teams, Zoom or WhatsApp) or over the telephone. To ‘map’ the farmers’ land management timelines and to compare any changes to management before and during the pilot, we used an interactive online platform called Mural to show farmers the timeline as we were making it. The RBAPS pilot in Wensleydale and Coverdale is focused on Grassland habitats for breeding waders and species rich hay meadows. The upland environments of many of England’s National Parks, and across the UK’s CIL area in the Contracts project, are in many ways ideal landscapes for the delivery of these types of environmental public goods, alongside numerous others.

Figure: Example of a Land Management Timeline made during the interview on Mural

Land Management Approaches in Results-Based Schemes

Motivations and Objectives in Results-based Approaches

One of the most important factors we identified through our in-depth interviews was a distinction between farmers who aim to ‘improve’ habitat quality and those who aim to ‘maintain’ it through results-based schemes. This distinction between ‘improvers’ and ‘maintainers’ appeared both in terms of motives for habitat quality and the management strategies the farmers employed. The objective of maintaining habitat quality might appear to run counter to the conventional assumption in results-based approaches that farmers will be incentivised to ‘do more to get more’. Though initially surprising, farmers explained that their reasoning for maintaining habitats were many-sided and varied from the short-term scope of the pilot to the existing relatively high standard of their habitats, detailed further below. 

Figure: Tracing Farmers’ Land Management Goals in PBR

Environmental Heritage in Protected Areas

Where we found that many farmers were content to maintain the quality of the habitats that they already had, several farmers said that some long-existing cultural environmental features of these habitats, which are unique to protected landscapes, were reasons for their existing good standard. So, where farmers have sought to maintain existing habitats, alongside pragmatic factors of management, they also emphasised the already high-value heritage features of their habitats. These include features more common in National Landscapes, such as

  • long-existing uncultivated hay meadows with rare and ancient seeds,
  • local & traditional land and animal management practices such as making small hay bales
  • locally unique cultural and environmental landscape features such as hay barns

To illustrate, hay barns, for example, are not only highly valued by tourists as beautiful, picturesque features of the Yorkshire Dales National Park, they also hold an important traditional role in practices of small hay bale making, as they enable farmers to house the hay close to the place it was made and where it will be needed for livestock in winter months. Furthermore, this process is one of the most environmentally friendly practices of producing storable forage: the ‘tedding’ (or drying process) redisperses seeds across the meadow. Traditional small bale hay making also avoids issues of soil compaction, where larger bales necessitate heavier machinery, and remove the use of plastic, which is needed to wrap grass for fermentation in silage or haylage production. Therefore, we can see that many of these ‘environmental heritage’ features have both environmentally and culturally valuable qualities which are unique to England’s protected landscapes. 

 

Figure: Hay Barns in Wensleydale (Image © James LePage)

Administration and Support in a Results-Based Pilot

Another factor which was universally identified by farmers as a huge benefit of the results-based approach was the scheme administration. Beyond the highly valued simplicity and flexibility offered by results-based contracts (in contrast to the demanding and complicated paperwork of England’s existing action-based schemes) farmers also emphasised the key role that the National Park Authority (NPA) officers played in scheme support and delivery. Farmers highlighted that the role of the NPA’s local officers in scheme design, information provision, training, and dialogue was fundamental to scheme uptake and success. For the broader developments of results-based schemes, local or regional organisations such as NPAs are, in many ways, well placed to be important intermediary facilitating bodies for these roles.

Issues out of their control: Adverse weather

Farmers also emphasised their habitats’ vulnerability to the impact of the weather, including extreme flooding or conversely, unexpected dry spells. Almost all the farmers made several comments about the negative effect of the weather, particularly when this was combined with differing assessment timings, upon their habitat scores. This vulnerability has important consequences for ‘pure’ results-based schemes, and indicates that ‘hybrid’ schemes, which combine results and action-based, might help to reduce some of the risk to farmers from issues outside of their control.

Disseminating our results

Following our interviews and analysis, we complied a detailed report which was submitted to DEFRA alongside Natural England’s main summary of the Pilot to date. We were also delighted to present some of our recent research into participant farmers’ opinions on payments by results as a part of a national conference ‘Farming with Nature’. This conference, convened by the University of Cumbria, aimed to explore how nature can be delivered within our farmed ‘National Landscapes’, namely England’s main protected areas such as National Parks and Areas of Outstanding Natural Beauty (AONBs). This approach was a key recommendation from the Landscapes Review.

Future Directions for Wensleydale RBAPS

The pilot is currently running under another extension funded by DEFRA and is exploring alongside the participating farmers how future schemes might work better: Either as ‘hybrid’ schemes which combine elements of action and results-based approaches, or at varying scales which might plan agreements at farm or even landscape levels, rather than individual field parcels.

For more information read our full report regarding Farmers’ Experiences of Results-based contracts in Wensleydale or contact me at Jennifer.dodsworth@abdn.ac.uk or @JennyferDods on Twitter.

Featured Image:  © James LePage

Implementing innovative contract models – results from the Policy Delphi

Implementing innovative contract models – results from the Policy Delphi

The second round of our online Policy Delphi study – focusing on opportunities to implement innovative contract models in the current policy arena – was closed during the summer, and the first results are just fresh out of the oven.

A key characteristic of the Delphi method is that it runs in several consecutive rounds. This allows the researchers to use the findings from the preceding rounds to design questions in the forthcoming rounds. This allows to dig a little deeper into the most exciting (often controversial) topics, which is exactly what happened in Contracts2.0. The results of our first Delphi round were analysed to identify converging and contested topics, which were then turned into questions and statements to test in the second round of the survey. 32 experts from 15 European countries participated in the second round, with almost half of them indicated to have direct policy experience at national or subnational level.

Based on the answers from the first round on how the ideal contract would look like to incentivize farmers for more sustainable farming we could synthesize three prototypes: a) a mixed contract combining action-based and result-based elements, signed bi-laterally between farmers and funding agencies for a medium duration (5-7 years); b) a result-based contract, signed between a group of farmers (collective) and the funding agency, with flexible duration (from short to medium or long term); and c) a value-chain contract, signed between farmers and other actors of the value chain (e.g. food processors, retailers, certifiers), which builds on an existing AECM contract and provides a price premium for more sustainable products. As the figure (above) suggests, the majority of the respondents would choose a mixed, action- and results-based contract for an European level contract prototype, but still almost one-quarter of the respondents would suggest alternative contracts, mainly ones which offer more flexibility to choose collective (landscape-level) agreements or different contract lengths from shorter to longer term.

We also asked what the best way is to implement these novel contracts, and there seems to be an agreement about agri-environmental-and climate measures still being the main target area, where innovative contract characteristics can be implemented as top-ups or additional payments to more mainstream conventional (i.e. action-based) contracts. In terms of funding novel contracts through the Common Agricultural Policy, responding experts underlined the outstanding importance of the Pillar 2 payments. Within Pillar 2 policy instruments, almost 70% of the participants pointed to agri-environmental and climate measures, while voluntary interventions in Pillar 2 for investment, knowledge exchange and cooperation, as well as for ecological constraints were listed by 34.5%. Eco-schemes, which is a part of the new green architecture affiliated with the Pillar 1 payments, were also mentioned by 34.5% of the respondents – with this proportion, eco-schemes seem to be the most promising instrument within Pillar 1 with a considerable potential to integrate innovative contracts.

As we learned from the first round of the Delphi study, available budget is a strong constraint for implementing innovative contracts (beside others, like increased transaction costs or higher uncertainties). Financially supporting environmentally friendly farming through different instruments of the CAP, as suggested by the findings shared above, can be a strategy to alleviate the budget burden. However, it raises further questions such as additionality and potential double-payments received for the same result from different schemes. Fostering coherence within the CAP and between the CAP and other policy areas is a key step forward and will also be a focal topic of the third round of our Delphi study.

written by Eszter Kelemen & Boldizsár Megyesi (ESSRG)

 For more information see the Report of the 2nd Round of the Delphi Study.

For infos on tools and techniques for initiating a policy dialogue on innovative approaches check our Practice Abstracts no. 10

Policy Innovation Labs – The new age of policymaking?

Policy Innovation Labs – The new age of policymaking?

The development of innovative approaches to strengthen the provision of public goods is at the heart of Contracts2.0. The corresponding contractual solutions are co-designed by a diversity of stakeholders and practitioners in our regional Contract Innovation Labs (CIL).  To support the wider acceptance or the scaling up of these novel contracts, the Contracts2.0-Policy Innovation Labs (PIL) aim to lobby for the implementation of the innovative approaches into the respective policies on regional, national and EU-Level. The following article reveals how this is done in case of Contracts2.0 and what kind of general approaches are available to drive policy innovation.

The phrase “policy-making” can evoke a certain image in one’s mind. As something that is made by experts, technocrats and politicians, it is often associated with a rather hierarchical, strictly top-down process.

The remoteness of those who produce policies from those who will be affected by them is a major challenge for all levels of public policy — local, national and international.

So how does one bridge the gap between policy-makers and “policy-takers”, and make the process a bit less hierarchical? That’s where policy innovation comes in, as governments across the world try to experiment with the way in which policies are created, gradually moving away from the traditional ways of conjuring solutions behind closed ministerial doors. This novel approach to policy creation flips the entire process over, and the results have been quite promising.

 Types of policy innovation

The realm of policy innovation abounds in methods and tools that all seek to resolve the same policy problem in various ways. Although the list of such methods is indeed very long, some of them have been successfully applied in practice to generate new policy ideas:

Policy experimentation for developing and testing policies has gained traction in recent years with increasing support for Randomised Control Trials (RCTs) by organisations such as the World Bank, and various initiatives to improve public service delivery and institutional efficiency. Chances are, if you’ve recently read about a major policy breakthrough, especially in the developing world, its effectiveness was probably established through RCTs.

Although experimentation in policymaking is often conflated with ‘innovation’, out-of-the-box thinking and trying out new or different ideas, in essence, it is a systematic process requiring rigorous evidence collection/generation and evaluation. It allows policymakers to assess the impact of potential policies by employing techniques such as piloting and prototyping. This enables them to gauge the cost-effectiveness of policy interventions to see if they require adjustment or even termination before they are rolled out or scaled up.

Despite the potential benefits, governments are often reluctant to innovate or veer too far from the status quo, fearing loss of investment or policy failure. However, with experimentation and evidence, there is immense potential for learning from failure as well and examining what does not work at the same time as trying to figure out what does. That is the model at the heart of the UK Cabinet Office’s What Works Network that has been replicated, amongst others, in Canada, the US, Finland, Colombia and the UAE. The pilot Accelerator Labs at UNDP are also experimenting with local innovations to achieve the Sustainable Development Goals.

Behavioural insights provide an inductive approach to policymaking research, borrowing from economics, psychology and cognitive science, and are often used to create incentives and ‘nudge’ people to follow an established policy. The behavioural approach is underpinned by experimentation and use of evidence related to typical patterns of behaviour in a cost-benefit context. This approach enables policymakers to create the environments to induce public to make decisions working towards the desired outcomes without changing any costs or benefits that they are faced with. While this kind of policy design can have ethical issues, nevertheless, it can be a useful tool for more effective policies.

While experimentation and behaviour-inducing policies are driven by evidence, strategic foresight is applied in cases where the future policy context is unclear and can only be modelled through tools such as trend analysis, horizon scanning and scenario planning. This allows policymakers to map plausible “futures” and situations that could arise as well as the corresponding challenges and opportunities. The Covid-19 pandemic has reinforced the necessity for such anticipatory measures, and the need to prepare and innovate for crises. This approach enables policymakers to ‘stress-test’ existing or potential policies and systems to anticipate risks and evaluate whether they can sustain future shocks.

In contrast to the technocratic (or top-down) types of policy creation involving exclusively expert knowledge and political will, there are also approaches that attempts to come up with new policies in a less hierarchical and more bottom-up way. There are many variations within this approach, but the gist remains the same: policies are to be made together (or co-designed) with those whom they will affect. This goes far beyond a mere consultative function, since direct and meaningful involvement of all parties is key.

 Policy Innovation Labs (PIL)

One of such novel approaches to policymaking that uses co-design is the Policy Innovation Lab (PIL), which engages various stakeholders in an innovative co-creation of policies. Taking a holistic view of whatever problem is at hand, this approach brings together policymakers, scientists, community representatives and whoever is at least tangentially related to the particular context of the problem.

This multi-actor composition is designed to address the issues of ineffective policymaking and low levels of policy acceptance (i.e. popularity among those that it is designed to affect) by bringing stakeholder engagement to a new height and placing it at the heart of the policy formulation process.

The PIL-Approach in Contracts2.0

The PIL approach is also used in Contracts 2.0, an EU-funded project that aims to inform and improve policymaking with regards to the increased provision of environmental public goods in agriculture. In nine European countries (Hungary, Germany, France, Italy, Spain, Belgium, Netherlands, Denmark and United Kingdom) Contracts2.0 established Contract Innovation Labs (CILs), in order to co-design innovative contracts with regional farmers and other stakeholders. The resulting output of the CILs (“dream contracts”) is then fed into the Policy Innovation Labs (PILs). The PIls aim to facilitate the implementation of the novel approaches into the policy framework. They do so by taking a constant feedback from relevant stakeholders (e.g. regional/national policymakers, practitioners and public administrators, scientists, NGOs and associations) into account, to ensure that potential pitfalls are avoided.

The outlined mechanism of interactions within and between CILs and PILs represents an effective bottom-up approach to policymaking by placing stakeholder contributions at the most important stages of the policy cycle (e.g. agenda setting, policy formulation). The multi-stakeholder approach ensures that the different points of view are taking into account. The project framework envisages that the policy requirements formulated in the CILs and refined into policy recommendations by the PILs would be taken up or in some way implemented by policymakers, thus completing the policy cycle (from formulation to effectuation).

How to ensure success?

However, the mid-term evaluation of the Contracts 2.0 project and its PIL-approach identified some weak spots, which could prevent the PILs from exploiting their full potential. Some of the assessed PILs report problems regarding an active and consistent pattern of participation of relevant stakeholders in the PIL Workshops. Another risk to the success of the PILs is the potential intertia of administrative institutions and the clinging to the status quo. Features which stand in the way of a recognition let alone adoption of novel policies or recommendations.

While the PIL method is indeed well-designed and has the potential to generate great policy insights, it is important to motivate policymakers to commit to a more consistent support of the co-designing and the implementation of innovative policies. The success of this approach also depends very much on the personality of the involved stakeholders and policy makers, to go out of their way and try something new. The lab coordinators need to address this issue via a tailor-made flow of information and a well-structured discussion culture to facilitate the implementation.

A very important aspect of the PIL-approach in Contracts2.0 is the Cross-PIL-collaboration and integration of research (from the scientific work packages), which enables the exchange of experiences and knowledge across borders, setting off synergies and avoiding duplication of effort. This approach needs to be strengthened in the near future to help inform not only national policymaking but also support the development of a set of more holistic recommendations (e.g. #CAP-Refom) for the development of a conducive common framework while allowing enough flexibility for the individual Member states.

Perhaps in the future governments will rely more on this method of policy innovation, and establish their own autonomous Policy Labs (e.g. similar to that established in Northern Ireland). This way, the bottom-up approach would make its way to the top of national policy-making.

(Written by our guest authors: Ifrah Hassan & Daniel Borsos (School of Public Policy, Central European University)

Further Reading:

Experimentation: https://www.centreforpublicimpact.org/assets/documents/CPI-A-brief-intoduction-to-Policy-experimentation.pdf

Behavioural Insights: https://oecd-opsi.org/guide/behavioural-insights/

Northern Ireland’s government-backed Innovation lab: https://www.finance-ni.gov.uk/articles/evaluation-innovation-lab