Agribusinesses are attracting increasingly intense scrutiny of their corporate responsibilities on issues ranging from greenhouse gas emissions to staff training and indigenous reconciliation.
And there's good reason for some to be feeling uncomfortable, according to a report compiled by business services giant, KPMG.
The study into the farm business sector's performance on environmental, social and governance (ESG) obligations found the sector fell notably short in some of its social and governance responsibilities, although generally embraced environmental initiatives.
The results, commissioned by prominent farm sector business, Elders, featured some diverse findings, such as only 20 per cent of private agribusinesses had a net zero emissions target, but 80pc of listed agribusinesses have pre-2050 net zero goals.
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A key finding of the KPMG's report was that despite some of their own ESG shortcomings, agribusinesses increasingly saw ESG monitoring as a business opportunity, rather than a cost or threat.
They were using their maturing reporting processes to help re-think their operations and reinvest.
Elders managing director, Mark Allison, said ESG goals and feedback had become "critical for all business leaders", regardless of how many other big issues like inflation or the threat of recession were demanding their management attention.
"Agribusinesses which focus on a sustainable future and are not afraid to invest collaboratively in their operations and will drive greater long term value through their ability to embrace market opportunities, including tapping a potential $480 billion in global sustainable loan offerings," he said.
The report findings, released at this month's Agribusiness Australia CEO Summit, coincided with a US non-profit organisation launching an ESG assurance program to help local farmers beef up their sustainability reporting capacity.
Farmland standard launch
Accreditation outfit, Leading Harvest, will offer farmers and agriculture supply chain customers universal certification via its Farmland Management Standard.
Leading Harvest has already run a year-long pilot program and signed up some big names in corporate farming, including several Australian farming and horticulture operations owned by prominent Canadian pension fund manager, PSP Investments.
Its initial ESG focus will involve 540,000 hectares across six states.
The management standard provides farmers and major customers, such as supermarket chains and other retailers, with a way to verify sustainability outcomes which impact communities and the environment.
Verification addresses soil and water health, biodiversity, energy use, safe working environment metrics, and more, to provide the sort of sustainability assurances the market would increasingly require.
"Our overarching mission is to harmonise sustainability reporting to create more efficiency for producers, more transparency for consumers, and to improve environmental and social outcomes," said Leading Harvest president, Kenny Fahey.
"It's clear there is a real need for a product like the Farmland Management Standard.
"The past year's pilot confirmed the need for a standard that demonstrates the great sustainability work currently being undertaken and also drives a process for continuous improvement in one, comprehensive certification to satisfy the market demands."
Current participants include PSP's Altora Ag, Australian Food and Fibre, Southern Premium Vineyards and Stahmann Webster; goFARM Australia, Warakirri Asset Management, and US farm sector investors with Australian interests, Manulife Investment Management and RRG Capital Management.
A business priority
According to KPMG's report for Elders, ESG performance evaluation had become one of the most important priorities for companies today as responsibility expectations shifted under pressure from numerous stakeholders, including consumers, investors, financiers and employees.
The "environment" criteria of ESG considers how a business performs as a steward of nature and how its operations impact the environment.
"Social" criteria examines how a company manages relationships with staff, suppliers, customers and the community it operates in.
"Governance" refers to business' leadership, executive pay arrangements and the transparency of internal business controls.
The report noted 89pc of all Australian Securities Exchange-listed companies now reported carbon emission targets; 90pc regarded climate as a financial risk, and 90pc monitored social risks to their business.
In Britain, the US and New Zealand it was mandatory for listed entities to disclose climate risk, while canola growers worldwide who supplied the European Union must meet sustainability benchmarks to access premium EU markets.
It said Australian farmland managers were responsible for maintaining more than 50pc of the continent's land mass - or about $6.5 trillion of natural assets.
Collectively agribusinesses are increasingly setting ambitious ESG targets ... to achieve sustainable long term growth
- KPMG report
"This places significant responsibility on agribusinesses servicing the production sector or those relying on production outputs," the report said.
"It also provides opportunities for agribusinesses to collaborate with producers to enhance their natural resource management and improve climate change adaptation.
"Collectively agribusinesses are increasingly setting ambitious ESG targets, such as improved soil health and water management and emissions reduction, to achieve sustainable long term growth."
Mr Allison said traditionally, investing in sustainability would have been viewed as detrimental to profits, but now, with technological aids to help input efficiency, farmers and related businesses could boost productivity and profitability while also enhancing farmland sustainability.
Carbon targets
More than 65pc of the 35 leading listed, international and private agribusinesses surveyed for the report had interim carbon targets and 85pc were promoting their investments in sustainability.
However, KPMG found only half were reporting on nature-related and biodiversity risks and opportunities.
Meanwhile, although 83pc of agribusinesses had workforce and business diversity and inclusion policies, less than a third of those had targets for the year ahead and only 3.3pc had a formal reconciliation action commitment to relationships with indigenous Australians.
Consolidated Pastoral Company's real jobs program was cited as an example of a reconciliation and engagement initiative which was upskilling indigenous people and establishing future job creation infrastructure and career progression strategies.
KPMG identified several areas for the sector to consider to accelerate agribusiness ESG responses.
These included prioritising nature and biodiversity to help prepare for future regulatory requirements; focusing on initiatives to build a workforce for the future, empowering local and aboriginal communities, and conserving resources and minimising waste to promote a circular economy which could lift efficiency, cut costs and generate new revenue streams.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
