New Approach for Assessing and Improvement of Environmental Management and Strategies in ...

14 Pages·2013·0.53 MB·English

by  Hrabrin Bachev

Volume 13 Issue 7 Version 1.0 Year 2013
Type: Double Blind Peer Reviewed International Research Journal
Publisher: Global Journals Inc. (USA)
Online ISSN: & Print ISSN:
Abstract - We suggest a new framework for assessing and improvement of environmental management and
strategies in agri-business incorporating interdisciplinary New Institutional Economics. It includes: specification
of “managerial needs” and spectrum of governance modes of eco-management at different level of decision-
making; specification of critical socio-economic, natural, technological, behavioral etc. factors of managerial
choice, and feasible spectrum of (private, collective, public, international) managerial strategies; assessment
of efficiency of diverse management strategies taking into account the potential to protect eco-rights and
investments, assure desirable level of environmental conservation and improvement, minimize overall
(implementing, thirdparty, transaction etc.) costs, coordinate and stimulate eco-activities, meet preferences
and reconcile conflicts of individuals etc.
Keywords : "environmental and natural resources; governance; strategies; institutions, market, private, public
modes; agri-business".
GJMBR-A Classificatio n : JEL Code: O 13

NewApproachforAssessingandImprovementofEnvironmentalManagementandStrategiesinAgri-Business

Strictly as per the compliance and regulations of:

© 2013. Hrabrin Bachev. This is a research/review paper, distributed under the terms of the Creative Commons Attribution-
Noncommercial 3.0 Unported License http://creativecommons.org/licenses/by-nc/3.0/), permitting all non-commercial use, distribution,
and reproduction inany medium, provided the original work is properly cited.
New Approach for Assessing and Improvement
of Environmental Management and Strategies
in Agri-Business

Hrabrin Bachev
Abstrac t-We suggest a new framework fo r assessing and individual agents associated with agri-food production.
improvement of environme ntal management and strategies in Conservation of natural environment and its individual 13
agri-bus ine ss incorporating interdisciplinary New Institutional components (air, waters, lands, biodiversity, climate, 20
Economics. It includes: specification of “managerial needs” ecosystem services) requires an effective social order r
a
and spectrum of governance modes of eco-management at e
(governance). It (is to) is to induce appropriate behavior Y
different level of decision-making; specification of critical
and coordinated actions at group, regional, national,
socio-economic, natural, technological, behavioral etc. factors 1
and transnational levels of diverse (agrarian, non-
of managerial choice, and feasibl e spectrum of (private,
collective, public, international) managerial strategies; agrarian) agents (Figure 1). I
n
assessment of efficiency of diverse management strategies o
Figure 1 : Structures of environmental management in si
taking into account the potential to protect eco-rights and r
investments, assure desirable level of environmental con- agri-business Ve

servation and improvement, minimize overall (implementing, VII
third-party, transaction etc.) costs, coordinate and stimulate
A i r Climate ue
eco-activities, meet preferences and reconcile conflicts of s
s
individuals etc. I
Keywords : "environmental and natural resources; Waters Bio diversity Lands XIII
governance; strategies;institutions, market, private, me
public mo de s;agri-business". Transnational u
ol
I. Introduction National V
Modern agrib usiness significantly af fects the state Collective ) A
(
a nd risks of natural environment being a major
h
factor of environmental degradation and con- Individual arc
servation. Most studies in the area focus on specific se
aspect of eco-management; form of governance, type Consumers Businesses Farm 1 Farm N Residents Ignrtoeurepsst Re
s
of organization, management level, location; pure and s
e
n
formal forms. Uni-sectoral and uni-disciplinary analyses Individual agrarian agents (owners or resources, usi
dominate; “normative” rather than a comparative institu- B
entrepreneurs, labor) may have quite diverse strategies
tional approach is employed; and significant transaction nd
in terms of natural resources conservation. According to a
costs not taken into account. This paper suggests a
their ideologies and environmental ethics, awareness of nt
holistic framework for assessing and improvement of e
eco-risks, managerial and technical ability, some m
environmental management and strategies in agri- e
individual agents may have direct natural resources g
business. First, it defines eco-management and specify na
conservation goals. Accordingly these green individuals a
managerial needs and forms of governance. Second, it M
will pursue natural resources conservation strategy in
identifies critical socio-economic, natural, technological, of
everyday life and activity. Besides, there have been
behavioral etc. factors of managerial choice. Third, it al
developed a great number of farms and agri-business n
assesses comparative efficiency of alternative modes enterprises with a primary or a major m issio n en- our
and strategies. Forth, it specifies stages for analysis J
and improvement of agro-eco-management identifying vironmental conservation and improvement. bal
Nevertheless, most agrarian structures in mo- o
needs and forms for effective public intervention. Gl
dern world have other goals pursuing other strategies –

II. Agro-Eco-Management Modes and e.g. agri-firms are profit-oriented with a primary strategy

Strategies tmo emmabxeirm-oizriee npterodf itasn dfo cr asrrhya sretrhaoteldgeyr sto, cinocorepaesraet ibveesn eafirtes

Agro-eco-management means management of for members etc. Howeve r, there have been increasing
environment preservation and improvement activities of consumer demands for environmental conservation, and
for related organic eco- and specific products from.
Author :Institute of Agricultural Economics,"Tzarigradsko Shose" Blvd,
Sofia, Bulgaria. E-mail : [email protected] Consequently, many market oriented farms change their

© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
behavior in order to meet this growing market demand etc.) and integral management of natural resources and
while keeping traditional (profit-making) strategy. eco-risks at national and progressively at transnational
Finally, in modern societies there are a great scale. The later include water and garbage mana-
number of formal and informal norms and restrictions gement, biodiversity conservation, climate change etc.
related to exploitation of natural resources. For instance, issues demanding effective regional, nationwide, inter-
in EU there is a huge body of environmental legislation national, and global governance. Thus effective con-
and various environmental conservation programs. servation of natural resources will be achieved by
These institutional rules impose individual agents and coordinated collective actions and implementation of
farming structures mandatory norms and/or offer in- multisectoral and multilevel strategies of individual,
centive to join voluntary schemes aiming at limiting eco- family, partnership, private juridical, public juridical, state
pressure, securing sustainable exploitation of natural etc. agents with diverse immediate goals, positions,
resources etc. This new public order modifies individual capability and interests.
3
01 strategies and behavior and eventually leads toward Individuals behavior (actions, restriction of
2 conservation of natural resources. actions) are affected and governed by a number of
r
ea Thus achieving the effective natural resources distinct modes and mechanisms of management which
Y
conservation in agri-business will always be result of include: First, institutional environment (“rules of the
2 implementing of multiple voluntary or induced by mar- game”) - that is the distribution of rights between
ket, community, public policies etc. individuals, farms, individuals, groups, and generations, and the system(s)
n I businesses, consumers, and public strategies. of enforcement of these rights and rules (Furuboth and
o
si In certain cases, agro-eco-management is en- Richter; North). A part of the rights and rules are
r
Ve tirely archived through individual actions of autonomous constituted by formal laws, regulations, standards, court
VII agents (within the “Sector Agriculture”. For instance, a decisions etc. In addition, there are important informal
good care and sustainable use of privately owned rules and rights determined by tradition, culture, religion,
e
u agricultural lands and water sources are typical in a ideology, ethical and moral norms. Enforcement of
s
s
I family farm since they are integral part of the strategy for rights and rules is done by state, community pressure,
XIII sustainable development of that family enterprise. Simi- trust, reputation, private modes, and self-enforcement.

e larly, many group farms have a primary goal for Institutions and institutional modernization create
m
u sustainable development or are set up as a green farms. dissimilar incentives, restrictions and costs for main-
ol
V Even when the individual strategies of farm’s com- taining and improving environment, intensifying eco-
) A cpooinnecnidtse (ew.igth. htihreed olavbeorar,ll fafamrmily /gsrtorautpe gmy,e mthbee re) fdfeoc tnivoet einxdcuhcainngge parnivda tceo oapnedra tcioonll,e icntcivree aseicnog- iencitoia-tpivreosd,u cdtievvitey-,
(
h management (internal order) is able to achieve the goals loping new eco- and related rights, decreasing eco-
c
ar for sustainable growth. divergence between social groups and regions,
e
es However, the effective eco-management often responding to ecological and other challenges etc.
R
necessitates concerted (collective) actions and eco- The institutional “development” is initiated by
s
s
e strategies of a number of farms as it is in the case of the public (state, community) authority, international
n
si sustainable use of a common pasture and limited water actions (agreements, assistance, pressure), and the
u
B
supply, protection of local biodiversity, effective provi- private and collective actions of individuals. It is
d
n sion of agro-ecosystem services etc. Furthermore, associated with the modernization and/or redistribution
a

t modern farming activity is often profit-oriented and of the existing rights; and the evolution of new rights and
n
e
m frequently associated with significant positive and/or the emergence of novel (private, public, hybrid)
e
g negative externalities. Implementation of individual stra- institutions for their enforcement. In modern society a
a
an tegies of different farmers not always leads to overall great deal of individuals’ activities and relations are
M
conservation of natural resources. That requires a regulated and sanctioned by some (general, specific)

of “common” strategy and managing relations (coopera- formal and informal institutions. However, there is no

nal tion, reconciling conflicts, recovery of costs) between perfect system of preset outside rules that can manage
r
u different farms, and increasingly between farmers and effectively the entire eco-activity of individuals in all
o
J non-farmers. In all these instances, environmental possible circumstances of their life and relations
bal management goes beyond simple (technical, agrono- associated with natural environment.
o
Gl mic, ecological) “relations with nature” and embraces Second, market modes (“invisible hand of
the governance of relations and collective actions of market”) – various decentralized initiatives governed by
agents with diverse interests, power positions, aware- free market price movements and market competition –
ness, capabilities etc. in large geo-graphical, sectoral, (spotlight exchanges, classical contracts, production
and temporal scales (Bachev, 2010). and trade of organic products and origins etc.).
What is more, modern environmental mana- Individual agents use (adapt to) markets profiting from
gement is associated with growing needs for “addi- the specialization and mutually beneficial exchange
tional” actions (monitoring, coordination, inve-stments (trade) while their voluntary decentralized actions govern
© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
the overall distribution of efforts and resources between economic, natural) conditions of each eco-system,
activities, sectors, regions, eco-systems, countries etc. community, industry, region, and country. “Governance
Nevertheless, there are many instances of lack m a t t e rs” and depending on the (efficiency of) system of
of individual incentives, choices and/or unwanted ex- management “put in place” individual communities
changes related to conservation of natural environment and societies achieve quite dissimilar results in eco-
(missing markets, monopoly and power relations, conservation and improvement. Consequently, the
positive or negative externalities). Consequently, free extend of conservation of natural resources in agri-
market “fails” to manage effectively the entire eco- business (type of exploitation of natural resources and
activity, exchanges, and investments of individuals. impact on environment) would differ quite substantially
Third, private modes (“private or collective in different stages of development and among
order”) – diverse private initiatives and special diverse agrarian structures, eco-systems, regions, and
contractual and organizational arrangements (voluntary countries.
3
eco-actions, codes of eco-behavior, eco-contracts, eco- 1
cooperatives etc.). Individual agents take advantage of III. Needs a nd F actors o f E co- 20
economic, market, institutional etc. opportunities and Management a nd S trategies i n ar
e
Y
deal with institutional and market deficiency by Agri-Business
selecting/designing mutually beneficial private modes 3
for governing their behavior, relations and exchanges. According to (awareness, symmetry, strength,
Private mode negotiates own rules or accepts (imposes) harmonization costs of) interests of agents associated I
n
existing private or collective order, transfers existing with natural resources there are different needs for sio
rights or gives new rights to counterpart(s), and management of actions. For instance, a specific farm er
V
safeguards absolute and/or contracted rights. In often is to be involved in several systems of governance
modern society a great part of agrarian activity is in order to assure an effective supply of services from VII

managed by voluntary initiatives, private negotiations, ecosystems of which it belongs or affects (Bachev, ue
“visible hand of the manager”, or collective decision- 2010). Iss
making. Nevertheless, there are many examples of Most environmental activity and exchange in XIII
private sector deficiency in governing of socially agri-business could be managed through a great variety e
desirable activity such as environmental preservation, of alternative forms. For instance, supply of eco- um
eco-system services etc. preservation service could be governed as: voluntary ol
V
Forth, public modes (“public order”) – various activity of a farmer; though private contracts of the )
finotremrvse notfi opnu binlic m(caorkmemt uannidty , pgriovvaetern mseecntot, rsin t(egrnuaidtaionncael), fcaornmtrearc t wbiethtw eiennte rtehset efda/ramffeerc taendd saugpepnlties;r / pinrotecrelisnskoerd; ( A
h
regulation, taxation, assistance, funding, provision, though cooperation/collective action with other farmers rc
a
property right modernization). Role of public (local, and stakeholders; though (free)market or assisted by a se
e
national, transnational) governance has been increasing third-party (certifying and controlling agent) trade with R
along with intensification of activity and exchange, and special (eco, protected origins, fair-trade) products; ess
growing interdependence of socio-economic and eco- though a public contract specifying farmer’s obligations sin
u
activities. In many cases, effective management of and compensation; though a public order (regulation, B

individual behavior and/or organization of certain activity taxation, quota for use of resources/emissions); within a nd
through market mechanism and/or private negotiation hierarchical public agency or by a hybrid form. t a
n
would take a long period of time, be very costly, Commonly natural and institutional environment me
could not reach a socially desirable scale, or e v o l v e very slowly over a long-term periods. In the e
g
be impossible. Thus a centralized public intervention specific natural, socio-economic and institutional envi- na
a
could achieve willing state faster, cheaper or r o n m ent, the choice of management mode would M
more efficiently. Nonetheless, there are a great number depend on a number of key factors (Figure 2): of
of bad public involvements (inaction, wrong intervention, - personal characteristics of individual agents – al
n
over-regulation) leading to significant problems of preferences, believes, ideology, knowledge, capability, ur
o
sustainable development around the globe. training, managerial experience, risk-aversion, bounded J
Efficiency of individual management modes is rationality, tendency for opportunism, reputation, trust, bal
quite different since they have unlike potential to: power etc. Glo

provide adequate eco-information, induce eco-friendly

behavior, reconcile eco-conflicts and coordinate eco-

actions of different parties, impact environmental

sustainability and mitigate eco-risks, and minimize the

overall environment management (conservation, third-
party, transaction) costs, for agents with different
preferences and capability, and in the specific (socio-
© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
Figure 2:Factors for mana gerial and strategy choices (contracts, firms), and collective decision making
for agro-eco-management (cooperative, association), and in a nationwide hierarchy

(a single private or state company). Then ecological

requirements for sustainability and technological oppor-
tunities for economies of scale and scope (maximum
environmental conservation/enhancement and produ-
ctivity of resources, “internalization of externalities”) and
maximum welfare (consumption, conservation of natural
resources) would be easily/-costlestly achieved.
However, when transaction costs are signi-
ficant, then costless contracting, exchange and pro-
tection of individual right is impossible. Therefore, initial
3
1 distribution of property rights between individuals and
0
2
groups, and their good definition and enforcement are
r
a critical for overall efficiency and sustainability. For
e
Y Formal and informal institutions - often the instance, if “right for clean and conserved natural
4 choice of ma nagement mode is (pre)dete rmined by environment” is not well-defined, that creates big
institutional restrictions as some forms for carrying out difficulties for efficient eco-management – costly dis-
I agrarian, environmental etc. activities could be socially putes between polluting and affected a gents; not
n
o
si unacceptable or illegal. Furthermore, institutional envi- respecting interests of certain groups or generations etc.
r
e ronment considerably affects the level of management What is more, in conditions of well-defined rights, eco-
V
VII costs and thus the choice of one or another form of management is usually associated with significant
organization. For instance, in conditions of well-working transaction costs. For example, agents have costs for
e
u public system of regulations (quality standards, identification and protection of various rights (unwanted
s
s
I guarantees) and laws and contract enforcement, a take overs from others); studying out and complying
XIII preference is given to spotlight and classical (standard) with diverse institutional restrictions (norms, standards,
e contracts. On the other hand, when rights on major rules); collecting needed technological, environmental
m
u agrarian and natural resources are not defined or not etc. Information; finding best partners and prices;
Vol well defined, and absolute and contracted right negotiating conditions of exchange; contract writing and
) A ecrffeeactteiv edlyif fiecnuflotiercse d(b, lothcekn) heifgfehc ttirvaen seaccot-iomna ncaogstesm ceonut ld- rtoerginisgtr,a ctioonnt;r oellninfogr,c minge anseugrinogtia atendd tsearmfegs utahrrdoiunggh; dmisopnui--
(
h costly unsolvable disputes between polluting and ting through a court system or another way; adjusting or
c
ar affected agents, disregards of interests of certain termination along with evolving conditions of production
e
es groups or generations etc. and exchange etc.
R
s - natural and te chnological factors - eco- Therefore, in the real world with not completely
s
ne managem ent strongly depends on the type of eco- defined and/or enforced rights, and positive transaction
usi challenge (sp atial and temporal scale, risks) and natural costs, the mode of agro-eco-governance is crucial and
B
d recourses endowment as well as on development of eventually (pre)determine the extent of degradation,
an farming, environmental, monitoring, information etc. conservation and improvement of natural resources

nt technologies. (Bachev 2010). That is because different modes have
e
m unequal efficiency (benefits, costs) for governing the
e
g IV. Efficiency of Agro-Eco- same eco-activity in the specific socio-economic and
Mana M anagement a nd Strategies natural environment. Moreover, often high transaction
costs deteriorate and even block organization of
of The problem of “social costs” does not exist in otherwise efficient (mutually-beneficial) for all parti-
nal conditions of zero transaction costs and well defined cipants eco-activity and exchange.
our private property rights (Coase). Then the stahe of The effective modes for ag ro-eco-management
J
maximum efficiency is always achieved independent of optimize the total (transaction and conservation costs)
al
b initial distribution of rights between individuals and for agrarian activity – minimizing transaction costs and
o
Gl mode of governance. All information for the effective allowing (otherwise m utual beneficial) eco-exchange to
potential of activity and exchange would be costlessly be carried out in a socially desirable scale, and allowing
available to everybody. Individuals would costlessly achievement of minimum/optimum environmental requi-
coordinate activities; define, adapt and implement rement and/or exploration of pure technological
strategies, define new rights, and protect rights, and economies of scale and scope of farm, environmental
trade resources in mutual benefit with the same (equal) conservation etc. activities.

efficiency over free market (adapting to price Usually, there are a number of alternative
movements), and private modes of different types modes for governing of eco-conservation activity.
© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
Different management modes are alternative but not (current and potential) members, modernization,
equally efficient modes for the organization of eco- restructuring, liquidation.
activities. Each form has distinct advantages and Finally, the pubic forms also command high
disadvantages to protect eco-rights and investment, internal (internal adminis tration and coordination) and
coordinate and stimulate socially desirable eco-behavior outside (for other private and public agents) costs – for
and activities, explore economies of scale and scope, establishment, functioning, coordination, controlling,
save production and transaction costs. For instance, the mismanagement, misuse by private and other agen ts,
free market has a big coordination and incentive reorganisation, and liquidation. What is more, unlike
advantages (“invisible hand”, “power of competition”), market and private modes, for public organisations
and provides “unlimited” opportunities to benefit from there is no automatic mechanism (competition) for
specialization and exchange. However, market mana- selection of ineffective forms. Here it is necessary public
gement could be associated with a high uncertainty, “decision making” which is associated with huge costs
3
risk, and costs due to lack of (asymmetry) of infor- and time, and often affected by st rong private interests 1
0
mation, low “appropriability” of some rights (“public (power of lobbying groups, politicians and their 2
r
good” character), price instability, a great possibility for associates, bureaucrats, employees in the public forms) a
e
facing an opportunistic behavior, “missing market” rather than efficiency. Y
situation etc. Principally the „rational” agents tend to use 5
The special contract form (“private ordering”) and/or design such m odes for governing their diverse
permits a bet ter coordination and intensification of eco- activity and relations which are the most efficient in the I
n
activity, and safeguard of agent’s eco-rights and eco- specific institutional, economic and natural environment sio
investments. However, it may re quire large costs for – forms maximizing their overall (production, ecological, er
V
ssptmeecinfitcsa twiointh (caonnds tawnritt incgh)a ncgoenstr ainct cpornodviitsioionnss,, eandfojur-- foin vaenraclli al,( ptrraondsuacctitoionn, eetcn.v)i rboennmeefintsta al,n dt ramnisnaimctiizoinng ethtce.i)r VII

e
cement and disputingof negotiated terms etc. costs. However, a result of such private strategies and u
s
The internal organization allows a greater optimization of management/activity is not always the Is
flexibility and control on activity (direct coo rdination, most socially effective distribution of resources and the XIII
adaptation, enforcement, and dispute resolution by a socially desirable (maximum possible) conservation of e
m
fiat). However, extension of internal mode beyond natural resources. It is well-known that agricultural u
family and small-partnership boundaries (allowing activity is often associated with significant undesirable Vol
achievement of minimum technological or ecological negative environmental effects – soils degradation, )
requirements; exploration of technological economies of waters pollution, biodiversity termination, air pollution, ( A
scale and scope) may command significant costs for considerable green-house gases em ission s etc. h
c
development (initiation, design, formal registration, Therefore, the system of agro-eco-management r
a
e
restructuring), and for current management (collective is to be improved, and that frequently nece ssitates s
e
R
decision making, control on coalition members oppor- public (state) involvement in agrarian and environmental
s
tunism, supervision and motivation of hired labor). management. Nevertheless, public intervention in (eco) es
n
The separation of the ownership from the management is not always more effective, since public si
u
management (cooperative, corporation, public farm/- failure is practically possible. Around the globe there are B

d
firm) gives enormous opportunities for growth in many examples for inappropriate, over, under, delay, or n
a
productivity, environmental and management efficiency too expensive public intervention at all levels. Often the t
n
– internal division and specialization of labor; achieving public intervention either does not correct market and me
ecosystem’s requirements; exploration of economies of private sector failures, or “correct| them with higher ge
sc ale and scope; introduction of innovation; diver- overall costs. na
a
M
sification; risk sharing; investing in product promotion, Thus the criterion for assessing the efficiency of

brand names, relations with customers, counterparts agro-eco-man agement and strategies is to be whether of

and authorities. However, it could be connected with socially desirable and practically possible environmental nal
r
huge transaction costs for decreasing information goals are realized with the minimum possible overall u
o
asymmetry between management and shareholders, costs (direct, indirect, private, public, production, J
al
decision-making, controlling opportunism, adaptation environmental, transaction etc.). Accordingly inefficiency b
o
etc. The cooperative and non-for profit form also suffers is expressed either in failure to achieve feasible (techni- Gl
from a low capability for internal long-term investment cally, politically, economically) environmental goals
due to non-for-profit goals and non-tradable character (conservation of natural resources, overcoming certain
of shares (so called “horizon problem”). What is more, eco-problems, diminishing existing eco-risks, decree-
evolution and maintenance of large collective organi- sing eco-losses, recovery and improvement of natural
zations is usual associated with significa nt costs – for environment etc.) or achieving of set up goals with
initiating, informing, “collective| decision-making and more costs comparing to another feasible form of
internal conflict resolution, controlling opportunism of management.
© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
Modern socio-economic, institutional and (more coming (through monitoring, controlling, stimulating

often) natural e nvironment in changing very fast and cooperation) of possible opportunism during contract
often unpredictably. Consequently, any strategy for execution stage; and permanent efforts/costs for
effective management of natural resources conservation protection from unwanted non-contractual exchange
is to be adaptive strategy. Accordingly, dominating and though safeguarding, diversification, cooperation, court
other feasible (market, private, public, hybrid) forms are suits etc.
to be assessed in terms of their absolute and Part of the transaction costs for ecomana-
comparative (adaptation) potential of protect eco-rights gement could be determined relatively easily e.g. costs
and investments of agents, assure socially desirable for lic ensing, certifications, tests, purchase of infor-
level of environmental conservation (enhancement), mation, hiring consultants, payments for guards and
minimize overall costs, coordinate and stimulate eco- lawyers, bribes etc.

activities, reconcile conflicts, and recover long-term However, assessment of another (significant)
3
1 costs for organizational development in the specific part of transaction costs in eco-activity is often
0
2 economic, institutional and natural environment. impossible or very expensive (Bachev, 2011). That is
r
a why comparative structural analysis is to be employed
e
Y V. (The Most) Effective Forms for (Williamson). This analysis would align eco-activities/-
6 Agro-Eco-Management transactions (which differ in their attributes) with the

governance structures (which differ in their costs and
I Usually “evolution” of natural and inst itutional competence) in discriminating (mainly transaction cost
rsion eTnhveirreofnomree, ntot ias gqrueitaet eslxotewn ta tnhde ienf fliocinegn cpye orifo dthse osfy stitmeme. economizi ng) way.
e Frequency, uncertainty, assets specificity, and
V of agro-eco-management will depend on the level of
VII transaction costs. appropriability are identified as critical dimensions of
eco-activity and transaction - the factors responsible to

e Transaction costs have behavioral origin:
u the variation of transacting costs between alternative
Iss namely individual’ s bounded rationality and tendency for modes of managem ent.
XIII opportunism (Williamson). Agrarian agents do not In the specific socio-economic and natural
e possess full information about the system (eco-benefits environment, depending to combination of critical
m and costs, effects on others, formal requirements,
u factors of eco-activities/transactions, there will be
ol development trends etc.) since collection and proce- different most-effective forms of management (Figure 3).
V
ssing of such information would be either very expensive
)
A or impossible (multiple spilovers effects and costs in

( large geographical and temporal scale, future events,
h
c partners intention for cheating etc.). In order to optimize
r
a
se the decision-making and activity the agents have to
e
R spent costs for “increasing their imperfect rationality” –

ss for monitoring, data collection, analysis, forecasting,
e
sin training, consulting etc.
u
B Besides, economic agents are given to (pre-
d
n contractual, post-contractual, and non-contractual)
a
opportunism. Accordingly, if there is opportunity for
t
n
e some of transacting sides to get non-punishably an
m
e extra benefit/rent from voluntary or unwanted exchange,
g
a
n he will likely take advantage of that. Usually it is very
a
M costly or impossible to distinguish opportunistic from

of non-opportunistic behavior because of the bounded

al rationality of agents. What is more, in the real life there
n
ur is widespread non-contractual opportunism, namely
o
J unwanted “exchange” or stealing of rights from a private

bal and/or public agents without any contracting process
o
Gl (because of lack or asymmetry of information, capability
for detection and protection, weak negotiating positions

etc.).
Therefore, individual agents have to protect their
rights, investments and transactions from the hazard of

opportunism through: ex ante efforts to find a reliable
counterpart and to design efficient mode for partners
credible commitments; ex post investments for over-

© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
Figure 3:Principle modes for environ mental management in agri-business

Critical dimensions of transactions
A p p ropriability
High Low
Generi c modes Assets Spe cificity
Low High
Uncertainty
Low High Low High
Freq uency
High Low High Low High Low Hi gh Low
Free market   3
Special con tract form   01
Internal organization   r2
Third-party involvem ent   ea
Y
Public intervention 
-the most ef fective mo de; - necess ity for a third pa rty invo lvemen t 7
Ec o -activity and transactions with g ood appro- The high interdep endency (specificity) of eco- n I
o
priabilityof rights, high certainty, and universal character investments with other farm’s assets and activity is the si
r
of investments could be effectively managed by free reason a great part of agro-eco-management to be Ve

market through spotlight or classical contracts. For executed by different type of farms –family, cooperative, VII
instance , there are widespread market modes for selling agri-firms, public, hybrid. Despite that there are cases
e
diverse ecosystem services and eco-products - eco- when farms and other agents are specialised in eco- su
s
visits, organic, fair-trade, origins, self-production or self- management and are entirely engaged in (aimed at) I
pick up of yields from customer, eco-education, eco- “keeping natural resources in a good condition” or XIII

tourism, eco-restaurants etc. “recovery or amelioration of natural environment”. Here e
m
Frequent transactions with high appropriability agricultural activity either does not exist (e.g. prolonged u
ol
could be effectively managed through a special follow up) or it is practiced as far as it is required by V

contract. For example, eco- contracts and cooperative purely agronomic, ecological and other (e.g. ) A
agreements between farmers and interested businesses educational, rehabilitation etc.) needs. According to the (

or communities are widely used including a payment for extent of appropriability of results and the universal h
c
ecosystem services, and leading to production methods character of investments, these farms could be market- ar
e
(enhanced pasture management, reduced use of oriented (selling eco-services to landlords or other es
R
agrochemicals, wetland preservation etc.) protecting buyers), community (funded by communities, interests
s
s
water from pollution, mitigating floods and wild fires etc. groups) or public (e.g. for conservation of important ne
When uncertainty is high and assets dependency eco-systems like national parks, natural phenomenon usi
B
(specificity) is symmetrical the relational (“neoclassical”) etc.).
d
contract could be used. Since detailed terms o f Very often the effective scale of specific an

transacting and results are not known at outset (a high investment in agro-ecosystem services exceeds the nt
e
uncertainty), a framework (mutual expectations) rather borders of traditional agrarian organizations (family m
e
than a specification of obligations of partners is farm, small partnership). For instance, much of eco- g
a
n
practiced (opportunisms is (self) restricted due to investments, which are done in one farm (protection of a
M
symmetrical dependency of investments of partners). A waters and air, biodiversity etc.) benefit other farms or
special contract forms is also efficient for rare non-a grarian agents. Often, dependency of eco-inve- of
transactions with low uncertainty, high specificity and stments of a farm is unilateral from the agent benefiting nal
r
appropriability. Dependent investment could be succe- from the positive result. Besides, the positive impact of ou
J
ssfully safeguarded through contract provisions since it eco0investment often depends on the minimum scale of
al
is easy to define and enforce obligations of partners in activity and frequently requires collective action ob
all possible contingencies (no uncertainty exists). (co0investment). Consequently, eco-activity/assets of Gl
Transactions and activity with high frequency, many farms happen to be in a high mutual-dependency
big uncertainty, and great assets specificity have to be with the eco-activity/assets of other farms and other
managed within internal organization. For insta nce, a non-agrarian agents in a large spacial and often
good portion of eco-investments are strongly specific to temporal scale.
(certain land plots, eco-systems etc.) a farm and can be This if specific capital (knowledge, technology,
effectively implemented and “paid-back” within the equipment, funding) cannot be effectively organized
borders of the particular farm. within a single organization, then effective external
© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
form(s) is to be used – e.g. joint ownership, interlinks, assistance) intervention to make such eco-activity
cooperative, joint investment in labels and origins, possible or more effective.
lobbying for public intervention etc. For instance,
environmental cooperatives are very successful in some VI. Public Modes and Strategies for
European count ries where there are strong incentives for Management of Natural
cooperation due to the mutual-dependency of farms
Resources in Agriculture
eco-activity, evolving “market” for eco0services, and
widespread application of long-term public eco- In modern agri-business there are a great
contracts for eco-coalitio n. There is rapid development variety in forms and efficiency of public intervention in
of diverse association of producers around specific eco-management. In asse ssment of public modes for
capital invested in eco-products and services, trade- agro-eco-management it has to be taken into account

marks, advertisement, marketing channels etc. the overall (public and private) costs for implementation
3
01 Nevertheless, costs for initiation and main- and transaction for achievement of s ocial eco-g oals in
2 taining collective organization for overcoming unilateral comparison with another p ract ically possible fo rm of
r
ea dependency are usually great (big number of coalition, intervention. Discrete structural analysis is to be applied
Y
different interests of members, opportunism of “free- which would assist assessment of efficiency and design
8 riding” type) and it is unsustainable or does not evolve of forms and strategies of public intervention.
at all. That strongly necessitates a third-party invo- Interventions with a low uncertainty and assets
n I lvement (non-governmental or state organizati on) to specificity would normally require a smaller public
sio make such organization possible or more efficie nt. organization - more regulatory modes, improvement of
r
e
V The transaction costs analysis let us identify general laws and contract enforcement etc. When

VII situations of market and private sector failures. For uncertainty and assets specificity of transactions
instance, serious problems usually arise when condition increases a special contract mode would be necessary
e
u
s of assets specificity is combined with high uncertainty – e.g. employment of public contracts for provision of
s
XIII I athneds elo wca fsreeqsu, ean ctyh,i radn dp awrth e(pn raivpaptero apgriaenbtil,i tyN iGs Olo,w p. uInb alicll pacritvivaitteie ss,e rtveicmepso, rapruyb lilca bfourn dcinogn tr(ascutb sfiodri esc)a roryf inpgr ivoautet

me authority) involvement in transactions is nece ssary special public programs, leasing out public assets for
u (through assistance, arbitration, regulation, funding) in private management etc. When transactions are
ol
V order to make them more efficient or possible at all. characterized with high assets specificity, uncertainty

() A Eormigeinrgse, nocreg aannidc ufanrpmreincge daenndte ds ydsetevmel oopfm feanirt- toraf dsep,e cairael ao nrgda nfrizeaqtuioenn cyw,o tuhlden binet enrneacle smsoadrye –ande. gb. igpgeerrm paunbelnict
h good examples in that respect. There is increasing public employment contracts, in-house integration of
c
r
a consumer’s demand (price premium) for these products crucial assets in a specialized state agency or public
e
s
e but their supply could not be met unless effective company etc.
R
s trilateral management (including independent certify- Initially, it is necessary to be specifies ways to
s
ne cation and control) is put in place. correct existing/emerging eco-problems in market and
usi Respecting others rights or granting out private sector (difficulties, costs, risks, failures). The
B
d additional rights could be managed by “good will” or appropriate public involvement wou ld be to create
an charity actions. For instance, a great number of environment for: decreasing uncertainty surrounding

nt voluntary environmental initiatives (“codes of behavior”) market and private transactions, increasing intensity of
e
m have emerged driven by farmers’ preferences for eco- exchange and cooperation, protecting private rights and
e
ag production, competition in industries, and responds investments, and making private investments less
n
a to public pressure for a sound environmental mana- dependent. For instance, State establishes and enforces
M

gement. However, voluntary and charity initiatives could quality, safety and eco-standards for inputs and pro-
of
hardly satisfy the entire social demand especially if they duces, certifies producers and users of natural re-
al
n require considerable costs. Besides, environ-mental sources, transfers water management rights to farms
r
ou standards are usually “process-based”, and “environ- associations, sets up minimum prices etc. All these
J
al mental audit” is not conducted by independent party, facilitate and intensify private eco-initiatives and (market
Glob which does not guarantee a “performance outcome”. and private) eco-transactions and in crease efficiency of
Most environmental management requires large economic organizations.
organizations with diversified interests of agents (provi- Next, practically possible modes for increasing
ders, consumers, destructors, interest groups etc.). appropriability of rights and results of activity and
Emergence of special large-members organizations for investment have to be considered. Low appropriability is
dealing with low appropriability is slow and expensive, often caused by unspecified or badly specified private
and they are not sustainable in long run (“free riding” rights (Bachev, 2004). In that case, most effective
problem). Therefore, there is a strong need for a third- government intervention would be to introduce and

party public (Government, local authority, international enforce new private property rights – e.g. rights on
© 2013 Global Journals Inc. (US)
New Approach for Assessing and Improvement of Environmental Management and Strategies in Agri-
Business
natural, biological, and environmental resources; rights give no incentives to over-perform beyond a certain
on issuing and trading ec o-bonds and shares; tradable (regulated) level.
quotas for polluting; private rights on intellectual In other instances, using incentives and
agrarian property and origins etc. That would be efficient restrictions of tax system would be most effective form
when privatization of resources or introduction and for public intervention. Different sorts of tax preferences
enforcement of new rights is not associated with are widely used to create favorable conditions for

significant costs (uncertainty, recurrence, and level of certain (sub) sectors and regions, forms of agrarian
specific investment are low). organization, or specific types of activities. Environ-
Such public intervention effec tively transfers mental taxation on emissions or products (inputs or
organization of transactions into market and private outputs of production) is also applied to reduce the use
management, liberalizes market competition and indu- of harmful subs tances. Eco-taxes impose the same
ces private incentives (and investments) in certain eco- conditions for all farmers using a particular input and
3
activities. For instance, tradable permits (quotas) are give signals to take into account the “environmental 01
2
used to control the overall use of certain resources or costs” inflicted on society (big communities). Taxing is
r
level of a particular type of pollution. They give flexibility effective when there is close link between activity and ea
allowing farmers to trade permits and meet their own environmenta l impact, and when there is no immediate Y
requirements according to their adjustment costs, need to control pollution or meet targets for reduction. 9
specific conditions of production etc. That form is However, “appropriate” level of charge is required to
efficient when a particular target must be met, and stimulate a desirable change in behavior. Furthermore, I
n
o
progressive reduction is dictated through permits while some emissions (nitrogen) vary according to conditions si
r
trading allows compliance to be achieved at least costs of application and attempting to reflect this in tax system e
V
(through private management). What is more, the often result in complexity and high administrating costs. VII
tradable rights could be used a market for In some cases, a public assistance and support
e
environmental quality to develop. The later let private to private organizations is the best mode. Public u
s
s
agents to realize new eco-strategy purchasing permits financial support for eco-actions is the most commonly I
from the market and taking them out of market turnover used instrument for improving environment performance XIII
and utilization. In that way the environmental quality of farmers. It is easy to find economic justification for e
m
could be practically raised above the initially “plan ned” public payments as a compensation for provision of u
(by the Government) level, and would not have been “environmental service” by farmers. However, share of Vol

achieved without additional private eco-initiatives. farms participating in various agri-environmentalsupport )
In other instances, it would be more efficient to schemes has not been significant. That is a result of ( A
put in place regulations for trade and utilization of voluntary (self-selection) character of this mode which h
c
resources, products and services – e.g. standards for does not attract farmers with highest environment ar
e
labor safety, product quality, environmental perfor- enhancement costs (most intensive and damaging es
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mance, animal welfare; norms for using natural environment producers). In some countries the low-rate
s
resources, introduction of foreign species and GM of farmers’ compliance with the environmental contracts es
n
crops, and (water, soil, air, comfort) contamination; bans is a serious problem. Later cannot be solved by si
u
on application of certain chemicals or technologies; augmented administrative control (enormous enfor- B
regulations for trading ecosystem service prot ection; cement costs) or introducing bigger penalty (p olitically nd
a

foreign trade regimes; mandatory eco-training and and juridical intolerable measure). Principally, it is t
n
licensing of farm operators etc. estimated that agri-environmental payments are efficient me
The large body of environm ental regulations in in maintaining the current level of environmental capital ge
a
developed countries aim changing farmers behavior, but less successful in enhancing environmental quality. n
a
M
and directing toward new strategies restricting the Another disadvantage of “payment system” is

negative impact on environment. It makes producers that once introduced it is practically difficult (“politically of

responsible for “environmental effects” (externalities) of unacceptable”) to be stopped when goals are achieved nal
r
their products or management of products uses (waste). or there are funding difficulties. Moreover, withdraw of u
o
This mode is e ffective when a general improvement of subsidies may lead to further environmental harm since J
al
performance is desired but it is not possible to dictate it would induce the adverse actions (intensification, b
o
what changes is appropriate for a wide range of return to conventional strategies). Other critics of Gl
operators and eco-conditions (high uncertainty and subsidies are associated with their “distortion effect”,
information asymmetry). When level of hazard is very negative impact on “entry-exit decisions” from polluting
high, outcome is certain and control is easy, and no industry, unfair advantages to certain sectors in the
flexibility exists (for timing or nature of socially required country or industries in other countries, not considering
result), then bans or strict limits are the best solution. total costs (such as transportation and environmental
However, regulations impose uniform standards for all costs, “displacement effect” in other countries).
regardless of costs for compliance (adjustment) and
© 2013 Global Journals Inc. (US)