Exploring business models for a farming transition with Black Soldier Fly
To propose sustainable opportunities to traditional farmers in the Netherlands to face challenges such as increasing CO2 emissions, nitrogen deposition, and rising prices in production, this study investigated a sustainable business model for Black Soldier Fly production in the feed supply chain. First, the value chain and stakeholders in the emerging BSF farming industry were identified. Information collected through secondary research was then analyzed through the Triple Layered Business Model Canvas tool. The proposed model could be applied by traditional farmers in order to innovate in the transition to more sustainable protein production. To reach such sustainability engagement with all stakeholders can help strengthen the value propositions, in a multi-stakeholder value model. Finally, the risks and opportunities of the proposed BSF-production business model are discussed.
Alternative protein production, Business innovation, Sustainable food production, Triple Layered Business Model Canvas
The Netherlands is one of Europe’s largest livestock industries, with more than 100 million cattle, chickens and pigs. The country is also the EU’s biggest meat exporter (The Guardian, 2019). However, this industry has been facing some challenges in recent years caused by agricultural and farming practices, such as excessive nitrogen deposition. The overabundance of nitrogen can be harmful to both nature and public health (Ministry of Agriculture, Nature and Food Quality, 2019). To address this issue, the Dutch government has implemented measures that require farmers to reduce their nitrogen emissions (RIVM, 2020). This includes limiting the number of animals that can be raised on a given piece of land. On the other hand, the rising of energy and production costs raises the costs of output, raise prices of agricultural products, and reduce farm profitability (Sands and Westcott 2011), making it more difficult for the sector to opt for more sustainable practices.
One possible solution for farmers is to find alternative protein sources that do not release nitrogen, are cheaper in production and require less energy input. Insects are seen as a promising option for providing high-quality protein in large quantities (Makkara et al., 2014). Insects have low substrate requirements, fast growth rates and high feed conversion rates and are therefore considered to be efficient (Oonincx et al., 2010). In addition, they can be used as a feed component for livestock instead of soybean protein (Van Huis et al., 2013). One insect species that have been identified as a potentially profitable candidate to revolutionize agribusiness is the black soldier fly, BSF (Hermetia illucens). BSF larvae are a highly nutritious animal feed ingredient for livestock. Additionally, BSF could be used for organic waste management as they efficiently convert food waste into valuable protein (Barragán-Fonseca et al., 2022). Insect farming provides an innovative business model, that would improve the performance of agri-food systems, from an economic, environmental and social perspective (Madau et al., 2020).
To effectively use these opportunities, it is necessary to develop strategies to enable traditional farmers to re-design their existing farm model. For this reason, the goal of this study is to develop a business model that allows the identification of the key stakeholders and addresses the environmental and societal challenges in the BSF value chain. The proposed model could be adapted to a traditional farm, providing the farmer with an extra income for the production of alternative proteins, as well as supplying their own ingredients for their livestock feed in a sustainable (economical, environmental and social) way.
In this study, the value chain and stakeholders in the emerging BSF farming industry are identified, in order to create a sustainable business model for BSF production. For that, we conducted a qualitative exploratory study through secondary research (such as academic papers, newsletters from companies in the sector, grade reports from students who have worked in companies within the sector). The collected information was analyzed through the Triple Layered Business Model Canvas tool in order to bridge business model innovation and sustainable business model development according to, Joyce and Paquin (2016). This tool provides an economic, environmental and social perspective from the classic Canvas Model. Finally, the risks and opportunities of the proposed BSF-production business model are discussed.
The BSF value chain refers to the process by which BSF larvae are raised and processed as ingredients into feed for animals. This process can efficiently supply protein in a circular production system (Dicke, 2018). BSF larvae can be raised on organic waste, such as food scraps and agricultural by-products (Huis et al., 2020). That is possible due to their ability to convert side streams into biomass rich in fat and protein (Surendra et al., 2020). The value chain typically includes several stages, including insect production; harvesting and processing; byproducts obtention (such as frass which can be used as fertilizer in sustainable agriculture (Barragán-Fonseca et al., 2022)); distribution and sale; fodder (insect feed is consumed by animals such as chickens, fish and pigs); food (animal products such as eggs or meat are purchased by wholesalers, retailers, supermarkets and consumers).
Insect farmers represent the 'focal firm' of the here described insect industry value network. The focal firm is defined by Frostenson and Prenker (2015) as a company that rules the supply chain, provides direct contact with customers, and designs products or services that are offered. The insect farmer is at the centre of the value chain and plays a critical role in ensuring the success and sustainability of the overall business model. The success of the BSF business model is heavily dependent on the insect farmer's ability to produce a consistent and high-quality supply of larvae.
Feed producers are the customer of the processed insects. They are intermediary actors of the BSF business model. The producer must adapt to the focal firm's innovation before it reaches the end customer. Regarding the market for insect protein, currently, the aquaculture sector is the most relevant (Sogari et al, 2019). The intangible resources of feed producers are nutritional and customer knowledge. The end customer is influencing the demand and products of the feed producer. They create demand on the customer's side. Besides, the feed producers act as a consultancy for their customers (farmers) regarding the best feed for their animals' efficient growth. Their customers are not demanding insects in the feed yet, so they have no pressure to bring this product to the market yet (Fanter, 2020).
Waste management companies provide the substrate on which the BSF can be grown (Surendra et al 2020). In this way, companies also help to reduce greenhouse gas emissions and other environmental impacts associated with waste disposal. Moreover, they can generate revenue by selling processed waste as feedstock.
Animal farmer represents the target segment in this model, including the aquaculture, pig and poultry sectors since these are the relevant markets for BSF. Until 2015, only 25% of farmers indicated an intention to use insects as feed (Verbeke et al. 2015). Nevertheless, an increased use of insects in Europe as a replacement for conventional animal-derived proteins for aquaculture and soybean is expected to (Gasco et al. 2020). The main resources of these actor segments are the animals and knowledge about consumer demand. The farmer creates demand for the feed producer. This demand is triggered by the end-consumer, costs and/or legal requirements. Currently, the dependence of animal farmers on 'insects as animal feed' is minimal. The dependence will increase if the demand rises and could be stronger as soon as insect feed has to be produced at a consistently high volume due to demand (Fanter, 2020).
EU government is the current legislative framework. The European Food Safety Authority (EFSA), represent a source of scientific advice and communication on safety risks associated with the food and feed chain. The EU government's core activity as a stakeholder in the insect-feed sector is the development and adjustment of laws and directives to enable the agro sector to produce safe and competitive food. Recently, the European Food Safety Authority (EFSA) has expanded the acceptability of insects as a feed source, not only for fish but also for poultry and pigs in the European Union (EFSA, 2017). This expansion of the use of insects as feed opens up new possibilities for the use of insects as a protein source in the animal feed industry.
To visualise the relationships between the involved actors a simplified Network tool was drafted. The figure is helpful to describe the BSF model particularly because collaboration between the involved actors is necessary in order to achieve the common goal.
Farmers provide organic waste to feed BSF larvae to rear it on their farms. They obtain insect products and byproducts. Waste management companies, provide the necessary infrastructure for the breeding and processing of larvae. In addition, they collect organic waste from farmers and other sources. Feed producers, process the larvae to obtain protein powder and fats as feed ingredients for livestock and fish. Animal farmers, use such products as feed for their livestock and fish, potentially reducing their dependence on traditional protein sources. Finally, EU government agencies, regulate and monitor the BSF production industry, providing incentives for sustainable and environmentally-friendly production methods.
According to Jonker and Faber (2021), organizations are rarely able to organise value creation, delivery and capture on their own, because without exception, organisations work in a chain of suppliers, buyers and partners. In contrast to conventional business model innovation, which focuses on economic value creation for customers and direct stakeholders, sustainable business model innovation ties the concerns of a broad spectrum of stakeholders and multiple forms of value together in reorganizing their business models (Chesbrough, 2010; Jonker & Faber, 2021). A sustainable business model for a farm balances economic, social, and environmental sustainability to meet the needs of the present while preserving the ability of future generations to meet their own needs. For this case study the triple-layered business model canvas is used as it includes ecological and social values (Joyce & Paquin, 2016). The proposed sustainable business model for BSF is based on the conversion of organic waste into high-quality protein using the BSF larvae (Fig 1).
The Triple Layered Business Model Canvas tool provides a comprehensive framework for designing and analyzing a business model that incorporates social, environmental and economic sustainability. Using this tool to describe the BSF business model highlights the interdependence and synergy between the three sustainability layers. The economic layer emphasizes the importance of generating revenue, reducing costs, and creating value for customers and investors (Joyce & Paquin, 2016). The environmental layer focuses on reducing waste, promoting resource efficiency, improving ecosystem health, and promoting biodiversity. This aligns with the concept of the circular economy, which emphasizes the importance of reducing waste and promoting resource efficiency (Kirchherr et al, 2017). Finally, the social layer emphasizes the importance of creating value for local communities highlighting the role of local community engagement in promoting sustainable business practices (Palomares-Aguirre et al, 2018). By considering all three layers, the tool provides a holistic approach to designing and analyzing a sustainable business model that can deliver long-term benefits for the economy, the environment and society.
To address environmental and societal challenges, businesses and their partner organizations may need to develop new competencies and activities; constrain or shift their position in the value chain; or even adjust their organizational purpose. This requires an understanding of organisational boundary alignment, which is a highly challenging process for businesses (Velter et al., 2020). Velter et al. (2021) conducted a case study that delved into how a company engaged in boundary work, and the study revealed that there is no set formula for developing a sustainable business model. Rather, it involves a collaborative process of exploring and negotiating value opportunities within each stakeholder's organizational boundaries.
The market for BSF and its applications is growing rapidly, driven by increasing demand for sustainable and environmentally friendly protein sources. The insect industry has grown in the global market, mainly in Europe and the United States and is on track to become a successful protein resource that will lead the global market (Kim et al., 2020). It is expected to reach a volume of 730,000 tons and USD 8 billion in 2030 (Alliedmarketresearch, 2019). The forecasts of the market research institutes show an optimistic double-digit market growth for the next few years.
However, there are also several risks associated with the implementation of the BSF-based business model. Among them, the cost of larvae production at a commercial scale are substantially higher than other protein sources, such as soy and corn (EFSA, 2020). Additionally, there still is uncertainty about ensuring consistent quality and supply volumes for customers, as well as regulatory issues surrounding their use as a feed ingredient (EFSA, 2020).
Adopting a BSF-based business model holds promise for promoting sustainable agriculture and reducing environmental impact. Specifically the increased demand of protein as feed and food due to a growing world population and global meat production will fuel the debate for alternative protein sources. Political, economic, social, and cultural challenges must be considered, along with stakeholder engagement, to choose the right approach. Realizing the triple transition towards sustainability requires the development of new business models. We have seen however that one important aspect to reach sustainability potentially is the engagement with all stakeholders to be able to develop multi-stakeholder value propositions. More research and development are needed to address the commercialisation risks.
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