ESG Compliance in Agriculture: Challenges and Opportunities

Category: Business

Stakeholders are establishing ethos to bolster environmental, social and governance (ESG) performance in the smart agriculture industry. Forward-looking players are enriching the lives of producers and consumers through sustainable innovation to minimize environmental footprint. State-of-the-art technologies, including precision farming, automation, sensors and cloud computing, have become the next big thing in the agriculture industry. ESG investors are expected to drive capital flows to help farmers overcome livelihood and other barriers to adopting environmentally friendly smart technologies.

Governing bodies and watchdogs have vouched for building resilience for people, agriculture food system and sustainability to augment agricultural productivity and incomes. An unprecedented spike in the global population and shifting diets have spurred the demand for smart agriculture to manage cropland, forests and livestock.

A feature story on the World Bank website claimed that acute food insecurity in 2023 could overtake the food crisis witnessed in 2007-2008. With agriculture being prone to climate change, weather variability, soaring temperature and invasive crops have elicited challenges and opportunities for investors and other stakeholders. The World Bank infers that agriculture produces around 19–29% of total greenhouse gas (GHG) emissions.

Learn more about the practices & strategies being implemented by industry participants from the Smart Agriculture Industry ESG Thematic Report, 2023, published by Astra ESG Solutions

Environmental Perspective

The agriculture sector is witnessing a seismic shift with an increased focus on minimizing emissions, preventing deforestation and bolstering productivity. Climate-smart agriculture has become paramount to avoid or reduce GHG emissions, reflecting expectations from stakeholders that businesses should deliver not only profits & revenue but also ESG performance. Extreme weather events showed the repercussions of climate change on agriculture.

Farms are expected to count on bespoke solutions to foster their sustainability strategies. For instance, Argus Controls uses a proprietary control algorithm to automate the growing process and forecast specific needs, including watering, lighting and feeding cycles. With sustainable production gaining a stronghold, the North American cannabis cultivation and manufacturing experts unveiled Sustainable Cannabis Coalition (SCC) in January 2021 to propel sustainability practices in the cannabis industry.

Social Perspective

Farmers and investors are responding to the need for sustainable agricultural practices to underpin economic and nutrition livelihoods, employee safety & well-being and reinforce diversity, equity and inclusion. AGCO Corporation initiated the FOCUS 2.0 program with a 40-step blueprint to create a robust safety culture. It reduced its total case incident rate (TCIR) by 14% in 2022 vis-à-vis the preceding year, the company mentioned in the 2022 Sustainability Report.

The American agricultural machinery manufacturer underscored employee engagement through programs, including Voices. Predominantly in 2022, almost 20,000 employees shared their voices in the annual Voices Survey. The company noted that its engagement score stood at 69% and is on course to take the tally to the 75% target by 2025. The U.S.-based company collaborated with the Faça Um Bem Incrível” (Make a Great Good) social project in Brazil that redirects fresh produce which would otherwise go to waste. The initiative fostered over 150 rural workers and 20 local food producers.

Is your business one of participants to the Smart Agriculture Industry? Contact us for focused consultation around ESG Investing, and help you build sustainable business practices

Governance Perspective

The need for the Board to provide sustainability strategy, goals and policies has fueled the significance of sound governance, transparency, ethics & compliance, diversity and good corporate behavior. For instance, Cargill formed an ESG Committee to underscore governance and accountability. It has teamed up with the World Economic Forum, the World Business Council for Sustainable Development (WBCSD) and Tropical Forest Alliance (TFA) to undergird operation and stakeholders’ engagement.

The company has strengthened its ethics & compliance portfolio to set a foundation for sustainable growth. Cargill completed over 80,000 hours of mandatory online compliance training in 2022 on bribery and corruption, monitoring government donations & gifts and entertainment expenses. In January 2022, the company celebrated Ethics Week to foster employee ethics.

ESG investors expect farmers to overcome hurdles to adopt smart farming strategies. Accordingly, organic and inorganic strategies will be pronounced in the near terms. For instance, farmers in Sri Lanka augmented land under irrigation by 15% during the dry season, largely due to their training in the alternate wetting and drying (AWD) techniques. These dynamics validate Grand View Research’s valuation of the global smart agriculture market at USD 14.44 billion in 2021 which could witness a double-digit CAGR of 10.8% between 2022 and 2030.

About Astra – ESG Solutions by Grand View Research

Astra is the Environmental, Social, and Governance (ESG) arm of Grand View Research Inc. – a global market research publishing & management consulting firm.

Astra offers comprehensive ESG thematic assessment & scores across diverse impact & socially responsible investment topics, including both public and private companies along with intuitive dashboards. Our ESG solutions are powered by robust fundamental & alternative information. Astra specializes in consulting services that equip corporates and the investment community with the in-depth ESG research and actionable insight they need to support their bottom lines and their values. We have supported our clients across diverse ESG consulting projects & advisory services, including climate strategies & assessment, ESG benchmarking, stakeholder engagement programs, active ownership, developing ESG investment strategies, ESG data services, build corporate sustainability reports. Astra team includes a pool of industry experts and ESG enthusiasts who possess extensive end-end ESG research and consulting experience at a global level.

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