Sustainable productivity

CAP Strategic Plans are designed to achieve multiple objectives. One of these is to foster agricultural productivity. However, improving agricultural productivity must not be achieved at the expense of environmental and social aspects. Therefore, various approaches exist to measure productivity gains while considering the environmental and social dimensions.

Traditionally, farm productivity is defined as the ratio between the amount of output produced from agricultural activities and a given amount of inputs (land, labour, capital, intermediary consumption, etc.) used in the production process. It can be simply seen as the ratio of outputs to inputs.

Farm productivity can vary according to the production processes implemented for transforming inputs into outputs (i.e. with various degrees of farm efficiency and/or technological progress). Higher farm productivity can consist of using a lower quantity of inputs to produce the same quantity of outputs or of using the same quantity of inputs to obtain a higher quantity of output.

However, the production process implemented by farmers will also produce environmental and social outputs (also called externalities). Sustainable productivity is defined as farm productivity that accounts for not only the agricultural output, but also the (negative and positive) environmental and social outputs of agricultural production. It provides a complete picture that is useful when drawing comparisons between farms and/or production processes or when assessing the influence of certain agricultural subsidies.

CAP Strategic Plans can foster farm productivity by supporting modernisation, technologies and innovative solutions (e.g. farm precision farming), knowledge transfer and even infrastructure.

Some CAP interventions are expected to have a direct effect on farm productivity (depending on how they are designed by Member States in the CSP), e.g. support for investments (INVEST), cooperation intervention (COOP), sectoral types of interventions, coupled income support (CIS), etc.

Other CAP interventions can influence farm productivity, although this is not their primary objective e.g. decoupled income support interventions (DIS), areas facing natural or other specific constraints (ANC) or areas with specific disadvantage (ASD), eco-scheme and ENVCLIM interventions.

Hence, these CAP measures can have an influence on several aspects at once, whether economic, social and/or environmental. For instance, interventions supporting practices, innovations, or investments that target higher farm efficiency or technological progress can help reduce the amount of inputs used for a given output. They can also help improve animal welfare and employment conditions by supporting investments in equipment to enhance livestock housing conditions and reduce arduous work or long working hours. However, as some conflicts can exist between the economic, social and environmental dimensions, these interventions may also have negative effects, for example, by encouraging increased use of inputs. This is why it is recommended to consider their effects on sustainable productivity.

In the context of the CAP, the increase in productivity is embedded in Specific Objective 2 (SO2), as defined in Regulation 2021/2115, which aims at “enhancing market orientation and increasing farm competitiveness both in the short and long term, including a greater focus on research, technology and digitalization”.

Implementing Regulation (EU) 2022/1475 recommends that Member States examine the CAP Strategic Plans’ contribution to capital, labour and land productivity when assessing their effectiveness towards Specific Objective 2 (SO2).

In addition, Annex I of Regulation (EU) No 2021/2115 defines indicators for the multi-annual assessment of the performance of the policy. Impact Indicator I.6 is associated with SO2 and measures the changes in total factor productivity in agriculture by comparing agricultural output to the total inputs used.

Member States are not required to consider the CAP effects on sustainable productivity. However, it is recommended that the analysis also takes into account the environmental and social effects of the different CAP interventions that contribute to improving productivity.

When assessing productivity, several methods enable the accounting for environmental and/or social outcomes associated with agricultural outputs, albeit with varying degrees of complexity. For instance, a reduction in greenhouse gas emissions (GHG), or any other type of pollution, can be considered a gain to be reflected in the measurement of farm productivity.

Step 1 – Drafting the intervention logic

The starting point of any evaluation is the review of the intervention logic. It should represent the CAP interventions with direct and indirect effects on productivity (and therefore linked to the impact indicator I.6 ‘total factor productivity in agriculture’). The guidelines provide an example of intervention logic that reflects the theoretical CAP impact on standard productivity, as well as on certain social and environmental dimensions.

Step 2 – Formulating evaluation questions

The guidelines recommend establishing questions for assessing the effects of a specific CAP intervention or a set of different CAP interventions (as a whole), as this will determine the quantitative approach.

EQ1. To what extent has a specific (targeted) CAP intervention affected farm productivity?

This evaluation question can be asked by Managing Authorities willing to assess the role of a specific and targeted CAP intervention. It should refer to specific interventions that are not taken up by all farms (i.e. there are some counterfactual farms) and that clearly affect farm production, such as investment support, agri-environmental payments and support to organic farming.

EQ2. To what extent have a set of different CAP interventions affected farm productivity?

This evaluation question can be asked by Managing Authorities willing to assess the contribution of a set of different CAP interventions. The corresponding approaches suggested by the guidelines enable an assessment of the effects of a relatively large array of interventions, including those which benefit a large share of farms, even if at different levels (e.g. BISS).

Step 3 – Measuring sustainable productivity

Depending on the scope of your evaluation, the technical resources or the data available in your country, you might want to consider the CAP impact on:

Step 4 – Selecting the key variables for assessing productivity

Based on the indicators and corresponding methods selected, the assessment of productivity requires data that contains information on farms’ production processes, namely outputs and inputs.

To conduct analyses at the national and regional level (NUTS 1 or NUTS 2), one can use aggregated data from sources such as Eurostat (e.g. Economic Accounts for Agriculture (EAA)) that provide detailed and harmonised information about outputs and inputs of the whole agricultural industry in countries or by regions, national statistical agencies, and international organisations like the Food and Agriculture Organisation (FAO) and the Organisation for Economic Co-operation and Development (OECD).

At the farm level, the most useful and commonly used data source is the Farm Accountancy Data Network (FADN). Other local data may also be used to assess productivity e.g. data obtained from a specific bookkeeping agency or from a group of farms, or data collected from dedicated surveys.

The calculation of sustainable productivity requires environmental and social indicators.

At the national level, several sources can be combined to obtain the necessary information for sustainable productivity assessment (e.g. a country’s GHG emissions from the agricultural sector).

At the farm level, the FADN or other bookkeeping databases are usually not sufficient to assess sustainable productivity, as they generally do not contain much information on environmental and social outputs (in some Member States, scarce environmental or social information is available in the national strand of the FADN). Therefore, at present, there are two strategies to assess farm-level sustainable productivity:

1. Using bookkeeping databases and approximate environmental and social outputs with available information in the bookkeeping databases.
2. Complementing bookkeeping databases with outside information. Where possible, the bookkeeping database could be merged with other databases with information for the same farms, or at least for some of them.

At the farm level, the FSDN (Farm Sustainability Data Network) will expand the FADN to social and environmental sustainability dimensions and enable a more robust assessment of sustainable productivity. However, FSDN data is not expected to be available until 2027.

Technical Annex 1 of the guidelines provides a list of FADN variables and upcoming FSDN variables that can be used for assessing the CAP contribution to sustainable productivity. Technical Annex 3 gives more detail on environmental and social indicators.

Step 5 – Assessing the CAP's impact on sustainable productivity

The assessment of the CAP's impact on sustainable productivity is challenging for several reasons, including that the impact can vary according to the nature of the different CAP interventions and that several factors other than CAP affect productivity.

However, different models exist to assess the impact of CAP interventions on sustainable productivity and overcome these methodological problems. The models recommended in the guidelines can be classified into three main categories: