Reasons to document your sustainable development
Your first question might be: what exactly is an ESG report? ESG stands for Environment (E), Social (S), and Governance (G), and to make an ESG report is a way to document the sustainable development of your business. In this article, we explain how ESG reports can be beneficial to you and how it works.
Farmers deliver essential food, feed and fuel to the world. Sustainability can be defined as minimizing impact on the planet while meeting the needs of consumers and communities. Your agricultural business, like every business, is deeply intertwined with environmental, social, and governance concerns and the subjects represent possibilities to pursue as well as risks to avoid.
If you own and farm land it is an advantage to begin to document your sustainable efforts and areas of actions in an ESG report sooner rather than later. ESG-reporting can help point out business opportunities as well as risks for farmers and landowners. At the same time, it serves as documentation of current sustainability efforts and progress. The documentation functions as a sustainability assurance and risk assessment to your stakeholders.
What are the components of the ESG report?
The E in ESG, environmental criteria, includes the resources your company takes in, the waste it discharges, and the consequences for living beings as a result. For an agricultural enterprise important areas to focus on include water and air quality, nature and biodiversity, soil fertility, and optimal resource use. Not least, E encompasses carbon emissions and influence on climate change.
S, social criteria, addresses the relationships your company has and the reputation it fosters with the people and institutions in the communities where you farm the land and do business. For agriculture, S translates into areas such as employee well-being and working conditions, livestock health and welfare, as well as local anchoring and interaction with the local community.
G, governance, is the internal system of practices, controls, and procedures your company adopts in order to govern itself, make effective decisions, comply with law, and meet the needs of external stakeholders. Working actively with company strategy, a thorough risk management scheme, and third-party certifications, like Global GAP, are ways of establishing good governance of your company.
A strong environmental, social, and governance (ESG) proposition can create value for you in five essential ways:
Top-line growth: A strong ESG proposition helps companies tap into new markets and expand in existing markets, while it also drives consumer preference.
Cost reductions: Resource efficiency is a step in the sustainable direction while also optimising economic outcome.
Productivity uplift: A strong ESG proposition can help attract and retain quality employees which is very desirable as employee turnover lowers productivity significantly. At the same time, it can enhance motivation and instill a sense of purpose.
Investment and asset optimisation: When it comes to ESG, it’s important to bear in mind that a do nothing approach is usually an eroding line, not a straight line. While investments to update your operations can be substantial, continuing to rely on less sustainable stables, equipment, or practises can be the most expensive option in the end. The rules of the game are shifting all the time: Bans or limitations on less sustainable production will likely introduce new constraints. Consumer preferences shifting market shares towards greater sustainability will affect market value of production facilities including farms that are not up to date.
Regulatory and legal interventions: Company behaviour considered unsustainable by society is prone to taxes and penalties, like carbon emissions. On the other hand, measures towards greater sustainability are sometimes subsidised by the government or the EU like subsidies for investing in green technology or eco-schemes, part of the EU CAP reform, which aim to encourage the adoption of sustainable agricultural practices.
|A strong ESG proposition might look as follows:|
|Top-line growth||Attract customers with more sustainable products: Some very big players in the food sector like Orkla, Nestlé, and Unilever are already requesting more sustainable farming methods like conservation agriculture or regenerative agriculture from their suppliers. Achieve better access to resources including financing.|
|Cost reductions||Lower energy consumption. Reduced pesticide use.|
|Productivity uplift||Boost employee motivation. Attract talent through greater social credibility.|
|Investment and asset optimisation||Enhance investment return by better allocating capital for the long term (e.g., more sustainable buildings, equipment, and processes on farm property). Ensure your farm’s market value. Avoid investments that may not pay off because of longer-term ESG issues.|
|Regulatory and legal interventions||Documenting responsible conduct and sustainable development. Earn EU subsidies and/or government support.|
The benefits of ESG reporting are many, and at Agroganic, our consultant Kirsten Marie Risbjerg has great experience on the topic and is ready to assist you with creating your ESG proposition. Contact us here to learn more about what ESG can do for you and how we can help you.