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.
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.
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.
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:
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.
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