Vertically integrated Darling Downs grain-fed beef operator, Stockyard Group, has upped the ante on its existing efforts to achieve long-term sustainability via an industry-first loan structure with one of Australia's big four banks.
The deal centres on providing incentives - such as reduced finance rates - when metrics are met for lowering emissions, improving animal wellbeing and achieving best-practice employee occupational health and safety.
Penalties will apply if the company under-performs in meeting its targets.
Stockyard, which breeds and backgrounds cattle and runs the 20,000-head Kerwee Feedlot, near Jondaryan, for its premium Wagyu and Angus brands, struck the three-year, sustainability-linked re-financing arrangement with the Commonwealth Bank of Australia (CBA) last month.
The company's managing director, Lachie Hart, said cost savings achieved through the loan would be directly invested back into projects and capital improvements to help meet ongoing finance and sustainability targets above a base-line measure.
He said Stockyard was already aligned to major industry programs, including the Australian Beef Sustainability Framework and the Carbon Neutral 2030 strategy.
This is believed to be the first example of such a structure being applied in the agricultural industry. It recognises that the red meat sector can be rewarded for existing sustainability credentials and efforts to continually improve in this space.
- Stockyard Group managing director Lachie Hart.
These are supported by ALFA, which actively encourages its feedlot members to adopt sustainable practices.
Oversight
Mr Hart said integral to the success of the CBA initiative was the appointment of independent third-party auditor, Enrnst and Young.
"It will be checking and verifying our performance against set - and internationally recognised - benchmarks," he said.
Mr Hart, who has previously chaired the Australian Meat Industry Council and been a director of the Red Meat Advisory Council, said the arrangement with the financier aligned with the broader industry's strategic intent to achieve carbon neutrality by 2030.
"Similar sustainability benchmark-based loans have been available in the commercial sector in this country for many years," he said.
"But this is believed to be the first example of such a structure being applied in the agricultural industry.
"It recognises that the red meat sector can be rewarded for existing sustainability credentials and efforts to continually improve in this space."
Stockyard's three-year CBA loan facility is focused on five key metrics, mostly applying to its Kerwee feedlot.
These will be reviewed annually and are grouped into three broad sustainability performance targets for:
- Reducing Scope 1 and 2 greenhouse gas emissions;
- Improving animal wellbeing outcomes; and
- Promoting best-practice workplace health and safety outcomes.
Mr Hart said Stockyard already had a strong commitment to continuously progressing its welfare standards for animals and employees, and was using systems that benefited the environment, the local community and the wider red meat industry.
He said fund managers, large private equity funds and pension funds were increasingly seeking to make solid investments into businesses that had these "green" credentials.
Mr Hart said the targets set by CBA were designed to be ambitious and would "stretch" Stockyard's sustainability improvement objectives and performance.
"The targets show that we have a clear commitment to tie important sustainability outcomes to our financing costs," he said.
"It is an opportunity for us to access internationally-recognisable ESG credentials to assist with securing capital and customers in the future.
"We are also investigating what is needed to address Scope 3 emissions, which will encompass working with our cattle or grain suppliers to see how much influence we can have on their business emissions improvements."
Emissions
Mr Hart said Stockyard was leading the way in terms of industry standards in the emissions space.
He said the company had an existing goal to be carbon neutral by 2030, and this aligned with the broader agricultural industry target to be carbon neutral by the same year.
Practices to achieve this at its Kerwee Feedlot include:
- Setting up an on-site solar energy array to provide 100 per cent of the site's electricity needs;
- Capturing bio-gas from covered sediment ponds to generate energy;
- Catching and recycling rainwater and wastewater;
- Expanding irrigation to use effluent more efficiently; and
- Seeking government funding to trial emission-reducing feed additives in a ration, including the asparagopsis seaweed.
Mr Hart said such a multi-faceted approach was key to meeting sustainability targets.
Financial arrangements
CBA business banking group executive, Mike Vacy-Lyle, said the landmark deal with Stockyard would be a game-changer for the feedlot business and wider red meat industry in this country.
"It demonstrates the bank's ability to develop innovative finance solutions to support the sustainability of the industry through improved ESG outcomes," he said.
"We know many farmers across the country are already adopting best-practice sustainability and environmental stewardship, and we want to partner with agribusinesses to help them innovate and accelerate transition plans."
Brand benefits
It is not an immediate priority for Stockyard to embed stronger sustainability messaging in marketing its premium Wagyu and Angus beef brands, which are recognised and sold in more than 20 countries across the world.
Mr Hart said this may change as the company got close to being carbon neutral, at which point Stockyard may need to buy some credits.
"But our primary ambition in the short-term is to make real changes in our own business," he said.
"Consumers are not yet demanding a carbon-neutral beef product, but are seeking more transparency and accountability in supply chains.
"They want to have trust in us to supply Stockyard-branded beef produced in a sustainable way.
"And, as a family operation, it is our responsibility to pass on a viable, responsible and sustainable business for future generations.
"This CBA loan facility will allow us to use interest savings to ensure we can achieve that ambition."
