Critical performance indicators (KPIs) provide farmers with insight into their sustainability performance, for example in the areas of climate, environment and biodiversity. These insights can help farmers to further improve this performance. In addition, KPIs can also be used by, for example, chain parties, banks, land management organizations and governments to manage and reward better sustainability performance of farmers. This guidance and reward can be implemented in many ways. Wageningen University & Research has made an overview of how this is already happening in practice and what other potential applications of KPIs there are.
These applications are described in three fact sheets for different target groups: market parties, regional authorities and the central government. It goes into more detail about the different ways in which these users can use KPIs, the legislation and regulations that are relevant when using KPIs and practical examples where KPIs are already being used. The underlying report Application of critical performance indicators for agriculture contains extensive information about the KPI system that is currently being developed on behalf of the Ministry of Agriculture, Nature and Food Quality (LNV). This report discusses the background, reason and operation of KPIs. The report also provides an overview of the different applications.
KPIs as a measuring instrument for market parties
The fact sheet for market parties describes, among other things, applications in which farmers receive rewards based on their KPI score from, for example, chain parties or banks for their sustainability performance. These rewards are therefore not only aimed at the production of agricultural goods such as crops, dairy and meat, but also at improving, for example, water quality, construction of landscape elements and reduction of greenhouse gas emissions.
These rewards can take different forms. For example, you could consider increasing the premium for agricultural products that meet specific sustainability conditions. You can attach favorable conditions to loans such as interest discounts. Or, for example, you can arrange access to (lease) land for farmers who are actively committed to sustainable agricultural practices.
Various market parties already use KPIs. In the Foqus planet sustainability program of dairy cooperative FrieslandCampina, member dairy farmers are encouraged to make their business operations more sustainable. The cooperative rewards farmers with a premium for their milk if they meet specific sustainability criteria, measured on the basis of nine KPIs. These KPIs include themes such as climate, biodiversity, animal health and welfare, and grazing. Farmers choose how they want to make their business operations more sustainable. The results achieved determine the amount of the additional price/milk price they receive.
Application of KPIs by regional authorities
Regional authorities (provinces, water boards and municipalities) can apply KPIs in different ways. In addition to using KPIs as a basis for rewards, they can also be used by regional governments to increase insight (awareness). KPIs provide guidance to provide insight into the concrete impact of sustainability efforts on an agricultural company. KPIs also provide different users, such as regional governments, with a basis for adding up individual business performance of different companies (for example, the performance of companies in a certain region). Provinces can, for example, use KPIs to monitor and evaluate the progress of area programs. KPIs can therefore potentially play an important role in the provincial plans for the transition of the rural area (PPLG).
A number of provinces already use KPIs. In the 'Sustainable Farming Drenthe' project, dairy farmers in the province of Drenthe are rewarded for making their business operations more sustainable in the areas of water, soil, climate and nitrogen. This reward is based on scores achieved on an integral set of 11 KPIs, such as grazing, home-grown protein and nitrogen soil surplus. Higher KPI scores result in a higher reward, with a maximum of €5000 per year per participant. Similar initiatives have been set up in the province of North Brabant (Brabant Biodiversity Monitor) and the municipality of Midden Delfland.
Application of KPIs by the central government
The central government can potentially use KPIs in various ways. This could contribute to a more targeted agricultural policy. Possible applications include increasing insight, an aid in conversion programs, as a basis for rewards or as a basis for exemption or pricing. There are currently no practical examples of applications of KPIs by the central government. The central government is currently investigating how KPIs can be used in policy. It is important to properly develop the legal frameworks and assurance requirements for each application. As the consequences for the farmer increase (such as exemption and pricing), the guarantee requirements will become more stringent.
Robust set of KPIs
Wageningen University & Research is working on the development of a KPI system on behalf of the Ministry of Agriculture, Nature and Food Quality, together with the Louis Bolk Institute and Boerenverstand. The development of this KPI system aims to develop a common language to measure and value sustainability on agricultural companies.
This process must produce a robust integral set of KPIs relating to themes such as emissions, soil quality and animal welfare. A set that can ultimately be made operational for all agricultural companies in the Netherlands and covers all relevant sustainability goals.