Agri sector moves to develop ESG strategy

As consumers hold companies to higher standards, farmers need to ensure they have an environmental, social and governance (ESG) strategy in place or risk losing market share.

ESG issues are the broad set of metrics to measure how countries and companies are contributing to sustainability. This includes environmental health, social equity and economical progression in order to create communities that are healthy, resilient and thriving, for this and the next generation. For the agriculture sector, this holds both challenges and opportunities.

Marlene Louw, senior economist at Absa AgriBusiness, said broader ESG issues were gaining increased policy and commercial importance. This was likely to shape the way business was conducted in the future since consumer and investor pressures were mounting to address the broader problems related to ESG.

The exact nature of ESG policies for the agriculture sector was still being debated. Agbiz and Agrifusion recently hosted a workshop in Pretoria to compile a roadmap for the industry to streamline reporting.

Agbiz policy analyst Thapelo Machaba said collaboration and standardisation were critical factors driving effective ESG reporting and advocacy efforts.

“Through a scoping exercise with key industry players we have determined themes that form part of the sustainability narrative, and where role players should focus their attention.”

Climate change mitigation required farmers to measure and report their carbon footprints.

Louw said export-focused products were likely to be required to report on their carbon footprint in company reports and on food labelling.

However, substantial financing opportunities existed and Louw noted that reporting and reducing held a benefit beyond its climate impact since farmers could benefit from financial and insurance products that had been developed for producers farming in an environmentally friendly way.

“By gauging your carbon footprint, it provides a baseline from which you can work to reduce carbon emissions and receive cost benefits from service providers that can reward you for responsible and sustainable production.”

But ESG strategies could add to the already heavy burden of bureaucracy for farmers. Machaba said that while there were existing audits and certifications that addressed similar aspects, they may not explicitly fall under the ESG umbrella, requiring a more integrated approach to map all the different elements. “This will require externally verified frameworks and robust data management systems over traditional tools like Microsoft Excel and notebooks.”

Stakeholders were cautioned to begin with the end in mind, tailoring ESG reporting to meet the needs of the intended audience.

Agbiz will now compile a position paper to be presented at their upcoming congress in June. –