How your company can help eliminate harmful subsidies

The opinions expressed by Trellis expert contributors are their own, not those of Trellis.x

Earlier this month, more than 130 businesses and financial institutions, including Danone, H&M Group, Unilever and Rabobank, called on governments to reform the incentives that too often make environmentally damaging business practices cheaper than sustainable alternatives.

The request represents a shift in the conversation about corporate sustainability. For years, businesses have been encouraged to understand their environmental impacts, improve supply chains and invest in sustainable production. Leading companies are responding, but they face a fundamental challenge: in many markets, subsidies, tax breaks, trade rules and other policies reward the very practices they are trying to avoid.

The intent of the rules is not, of course, to cause harm. Some are designed to stabilize food supply, others to support farmers’ livelihoods. But there are unintended consequences. Agricultural subsidies can encourage intensive monoculture at the expense of soil health and water supply, for instance. And the scale is considerable: Governments provide an estimated $2.6 trillion annually in environmentally harmful subsidies.

Changing that dynamic requires government leadership, but businesses can help. In 2022, governments committed to a 23-point plan to halt and reverse nature loss by 2030. Target 18 of the Kunming-Montreal Global Biodiversity Framework requires countries to eliminate and reform harmful subsidies by 2025, but many countries are yet to fully assess their own policies. As we approach the opening of the UN Biodiversity Conference (COP17) on Oct. 19, here are three ways companies can work with governments to accelerate that work.

Map exposure to existing incentives 

Start by examining your value chain: How do government subsidies and other incentives influence priority commodities, sourcing regions and production decisions?

For a food company, this might mean assessing agricultural support that favors intensive production. For an apparel business, the focus could be incentives that impact the costs of conventional and more sustainable fibers.

Existing nature assessments and supply chain mapping provide a starting point. Working with procurement and finance colleagues, sustainability teams can identify the policies that affect their businesses, where knowledge gaps remain and which incentives warrant closer examination.

The United Nations Development Program’s Biodiversity Finance Initiative offers practical support. Its guide, The Nature of Subsidies, provides a step-by-step assessment method, and its country work shows what reform can look like for supply chains. If one of your sourcing countries is on that list, there is a process to join now.

Link reform to investment decisions 

Governments need to understand not only which incentives cause harm, but what better alternatives could achieve.

Targeted support for regenerative agriculture might enable longer-term sourcing agreements, for example. And incentives for water efficiency could make sustainable production more commercially attractive. Sustainability teams can work with finance and procurement colleagues to begin to quantify the investments these and other redesigned incentives might unlock.

Being specific is what makes the case useful. A government weighing reform wants to know what investment it would release, in which landscapes and over what period. A 10-year incentive supports a sourcing shift that a one-year scheme never will, so the time horizon matters as much as the money. Indeed, producers are already moving. Two-thirds of farmers in a recent Barclays survey named rising input costs as their biggest challenge, and 56 percent said they were cutting or switching fertilizer use. Redesigned support that backs those shifts is where corporate investment and public incentives meet.

For examples of what redesigned incentives look like in practice, see two 2025 reports: Repurposing Agricultural Support from the World Bank and UK government; and Scaling Up Biodiversity-Positive Incentives by the Organization for Economic Cooperation and Development.

Join national policy discussions

Reform must be government-led, but policymakers need insights from businesses and producers to understand how incentives operate in practice. Companies can work with government affairs teams, industry associations and suppliers to engage on these issues. Here are three things that will make that work count.

• Go to the ministries that own the budget lines. Environment ministries signed Target 18, but subsidies are set by finance, agriculture and trade departments. That’s why the open letter asks for cross-ministerial national platforms. 
• Frame the case in the country’s terms. Jobs, fiscal savings, water security, public health and climate commitments carry more weight than an industry’s own interests. 
• Bring producers with you. The reforms that have lasted were endorsed by farmers, fishers and other producers. England’s post-Brexit reforms of agricultural policy, for example, were designed in collaboration with producers. Industry associations can help here: they carry collective weight with less exposure than any single company, and most have yet to speak on nature the way they now do on climate.

Several resources can help, too. The World Economic Forum’s Rebalancing Subsidies: A Strategic Guide for CEOs sets out how business leaders can engage policymakers and build coalitions. A playbook for funders on reforming harmful subsidies, created by the International Institute for Sustainable Development, provides a map of where reform can stall and what makes it last. And Business for Nature’s incentive reform work sets out what governments are being asked to do and how companies can add their voice.