By Emma Hipwell
As it exists today, agriculture is a leading contributor to climate change, second only to the energy sector. Food production contributes up to around 37% of GHG emissions worldwide. So why do we seldom hear anything about necessary, industry-level changes like we do with other sectors?
The food industry has always been in discussions, at least from a consumer perspective, regarding sustainability. The rise of conversations about veganism and vegetarianism is often drawn back to ethical, sustainable consumption. The most commonly discussed issues with sustainability in this industry are diet changes and food waste. Food waste in rich countries like Canada is generally shown to occur at the post-consumption level and is thus considered up to the consumer. How, then, can the sustainability issues of the food industry be addressed from another angle? The rise of ESG and Impact Investing may offer some solutions.
For investors, ESG in the food industry is important from two angles. Not only do the traditional investment pressures of enforcing a sustainable portfolio apply, but for food companies, better social conceptions of their ESG practices have been shown to drive sales. With sustainable eating becoming an increasingly attractive way for individuals to reduce their environmental footprint, few industries have consumers quite as conscious of environmental and social concerns as when it comes to food products. Implementing transparency and sustainable practices certainly has lucrative potential for food companies. So where can this begin?
Today, we’re seeing increasing interest from Agritech investors and venture capitalists in more sustainable methods like regenerative farming and no-till movements. These movements run contrary to conventional industrial practices. Practices like tilling tend to increase yields short run, but in the long run breaks down the capacity of the soil to support plant life and act as a carbon sink. Regenerative agriculture not only increases soil productivity in the long run but also renders it less vulnerable to environmental shocks occurring with increasing frequency. The rise of these movements, given the demonstrated level of investor interest in these kinds of solutions, kindles hope. However, there are some impediments to implementing these solutions at a large scale.
What are some obstacles to using an ESG approach to encourage sustainable change in agricultural production?
Food is a unique industry: Even if a company has a terrible ESG profile, divesting from food is problematic given that it is an essential industry of complex supply chains. Industrial innovation in farming in the past century has allowed for a level of efficiency understood to be crucial to supporting growing populations and addressing world hunger. Even if the essential nature of the industry didn’t mean change was risky, complex global supply chains increase the challenge of choosing which companies to threaten with divestment.
ESG offers a hopeful solution for encouraging sustainable practices in the agriculture industry, but this is challenging by both the essential and complex nature of food production. Navigating these obstacles will be necessary over the next decade if ESG promises to address food’s impact on climate change.
Info Sources & Further Reading
1. https://www.ft.com/content/cc3f4c51-6c60-45dc-9c53-6f6e71c03da3?
2. https://www.ft.com/content/06626f2e-f32a-4021-a94b-6cd2cecd9747
3. https://www.ft.com/content/99204d14-a585-4743-ba95-c5fca64cb4a4
6. https://ourworldindata.org/environmental-impacts-of-food
7. https://www.weforum.org/agenda/2022/10/vegan-diets-sustainable-food/