Why is ESG so important to agriculture?

Why is ESG so important to agriculture?


Feb 3, 2023

Blog Environment Why is ESG so important to agriculture?

In the modern age, ESG framework is more crucial than ever  . The world is in a constant state of flux due to the pandemic, climate change, and social awareness, which means consumers want to know their money is going to responsible businesses. Getting to grips with ESG is necessary to retain the public’s, stakeholders’, and investors' positive regard and secure the planet's longevity.

With 24% of global CO2 emissions attributable to the food system, the agricultural industry has a lot to answer for. Feeding the world’s population is a mammoth task that falls into the hands of agriculture, but the intimidating size and complexity of the food system make lowering emissions challenging. These are the two fundamental objectives of the agricultural industry, but realizing these goals in tandem feels, for farmers and governments alike, near impossible.

The balancing act doesn’t end there. One worry is that making supply chains more eco-friendly will raise the price of food across the board. For those who are already in food poverty, the situation could worsen, and those on the brink could be pushed into insecurity. 

Overhauling the agricultural network will entail costs. A crucial question, then, is how to distribute them. Some businesses aim to keep prices low by shifting the additional expenses to farmers. Others may offshore their supply chains to lower-cost regions to maintain pricing. But these initiatives are driving businesses to “greenwash” and take shortcuts, while doing little to make their supply chains more sustainable. Pushing the environmental agenda for marketing and PR reasons does little for business integrity or the globe, and ultimately undermines consumer trust.

Investors are paying attention

Sustainable goals are obvious to investors, as well as to corporate brands and retailers. Only 13% of international investors think ESG is a fleeting fad, which demonstrates investors are taking it seriously. Instead of utilizing simple screening methods on businesses, financiers are moving toward specialized and sophisticated strategies like theme and impact investing. The most common implementation method for ESG is integration, and investors are taking a comprehensive approach to fully incorporating ESG into the investment process.

It’s also clear that customers won’t support businesses that don’t prioritize the environment. Unsustainably sourced palm oil has been a retail red flag for consumers for years now, and as people become more aware of damaging supply chains, this trend will only grow.

The price of ESG non-compliance

While the consequences on business can be brutal, the environment is the true victim of ESG non-compliance. Pollutants like ammonia from animal waste and synthetic fertilizers have profoundly concerning impacts on both humans and the environment. They’re a significant source of pollution-related fatalities. For example, fertilizer degrades water quality which can impact the health of local populations. As such, agribusiness may soon be subject to regulatory reforms and litigation due to its severe impact on air and water pollutants.

Agriculture is also closely associated with deforestation, which has severe knock-on effects on biodiversity. Regulatory changes that slow down the loss of primary forests are in the works, which is slowing the sector's growth. Additionally, the effect of pesticides on biodiversity, such as the danger neonicotinoids bring to bee populations, may result in tighter rules limiting their use.

According to the World Economic Forum, agriculture occupies around half of the habitable land. Similarly, 70% of freshwater consumption is attributed to agriculture, according to the UN Food and Agriculture Organization. The impact on the environment is real, and these challenges must be addressed. 

What steps can farmers take toward ESG?

The entire food system requires a significant, long-term overhaul. Only a firm commitment from the business community and a carefully coordinated strategy can bring about this transition. Key corporate stakeholders must support this initiative, and for many investors in the sector, this means a realistic "reset" of their agreement with their firms over their latitude to bring about long-term change.

Alternative proteins, novel farming methods, and minimizing food waste are emerging as potential future paths, while a wide range of fundamental market improvements are being examined. Prioritization is therefore becoming increasingly necessary.

Some examples of enhanced farming practices that businesses can implement include:

  • Controlled Environment Agriculture – i.e., crops grown in controlled environments, like greenhouses and vertical farms, to maximize output and minimize environmental impacts.
  • Agricultural Biotech – biotechnology is being used in agriculture to address feed-related emissions, including creating new, low-carbon feed options and alternative fertilizers.
  • Precision Agriculture Technologies – such technologies allow greator control over farming and subsequently less energy is required. Includes guidance systems, soil moisture mapping, canopy mapping, yield mapping, and variable rate irrigation.
  • Improving Crop Breeding – new developments in molecular biology can increase yield by lowering the cost and speeding up the mapping of available plant codes.
  • Improving Rice Cultivation – sulphate-containing fertilizers can be used in rice fields to lower the amount of the pollutant methane produced from waterlogged rice paddies. 
  • Decreasing Food Waste various measures to reduce food waste are currently underway, including streamlining expiration labels, establishing reduction targets, and improving food storage in developing nations.
  • Packaging Innovation and Coatings making adjustments to packaging is a key area of climate crisis mitigation, which the aim of keeping food safer and fresher for longer.
  • Upcycled Foods this simply refers to repurposing the edible portion of discarded food and transforming it into something for human consumption, like using apple pomace flower for biscuits.
  • Reducing Enteric Fermentation huge amounts of methane is generated by cows, but in tests conducted in New Zealand, the microbial methane inhibitor 3-NOP reduced methane emissions by 30% while possibly accelerating animal growth rates.
  • Regenerative Agriculture Practices regenerative agriculture aims to improve soil health by replenishing its organic carbon.

ESG Trends in Agriculture Industry

ESG is a burgeoning area of focus for the agricultural industry – one that businesses all along the supply chain must pay attention to. BCC Research’s report on ESG Trends in the Agriculture Industry breaks down the vital information needed for those hoping to implement such practices. It helps assist businesses and investors in prioritizing strategic actions, making navigating these frameworks smoother. 

Download your complimentary report overview to gain insight into the contents of the report.

BCC Research also offers memberships that offer access to a range of reports on the environment. This is incredibly useful for organizations looking to adopt a 360-degree approach to sustainable markets. To enquire about membership, simply get in touch below. A helpful member of the team will get in touch to discuss the benefits of this in more detail.

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    Olivia Lowden

    Written By Olivia Lowden

    Olivia Lowden is a Junior Copywriter at BCC Research, writing content on everything from sustainability to fintech. Before beginning at BCC Research, she received a First-Class Master’s Degree in Creative Writing from the University of East Anglia.

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