Sustainability and the value chain

GLOBALLY, AGRICULTURE AND food companies are developing sustainability programs to build resiliency within their business, meet sustainability targets, and communicate environmental and social progress to stakeholders. The sustainability of an agri-food value chain starts with farmers and their approach to managing their operations. Moving along the value chain, each enterprise plays a role in advancing sustainability, from improving internal efficiency to setting targets that affect the actions of upstream and downstream businesses in their value chain.

Sustainability is a broad topic and can hold different meanings depending on the context and balance across the sustainability pillars — social, economic, and environmental. Within the agricultural commodity sector and related value chains, there is currently an emphasis on sustainability-related targets and actions specific to climate change and land use conversion. Complementary, there is general recognition that farmers need to be economically and socially sustainable to adopt practices that result in climate-friendly outcomes, such as increasing the concentration of carbon stored in soils.

WHAT IS CURRENTLY DRIVING SUSTAINABILITY DEMANDS IN VALUE CHAINS?

Effects of climate change and biodiversity loss — Climate change can impact agricultural production by increasing the frequency and intensity of extreme weather events, changing precipitation patterns, pest and disease pressures, and warm annual average temperatures. These impacts and the subsequent risks and disruptions to value chains have motivated many food and agriculture companies to act and work towards decarbonizing their value chains while building their capacity to adapt to future changes. This action includes supporting the adoption of on-farm practices that can result in greenhouse gas (GHG) mitigation.

Within the private sector, there is also a growing understanding of the costs associated with inaction in mitigating climate change and protecting biodiversity. According to the Taskforce on Nature-related Financial Disclosures, over 50 per cent of the world’s economic output is moderately or highly dependent on nature. Supporting and investing in the sustainability of sectors directly engaging with natural ecosystems, such as agriculture, is therefore critical to a strong economy.

Private sector standards and guidance — recent developments in regulations and guidance for the private sector are beginning to provide some direction for how companies should account for, report, and set targets for GHG reductions along their value chains, including agriculture production.

For example, companies with substantial value chain GHG emissions from agriculture and forestry (i.e., greater than 20 per cent) now have a framework for setting GHG targets through the Science Based Target Initiative’s (SBTI) Food, Land, and Agriculture Guidance. The Greenhouse Gas Protocol, a well-established international organization, has drafted guidance for companies with value chain GHG emissions from agriculture and forestry to measure and track progress towards GHG targets. These frameworks are beginning to create a uniform standard for companies to effectively include agriculture in their GHG inventories, track progress, and transparently communicate that progress to their value chain and other stakeholders.

To standardize how companies report on their climate actions, regulatory bodies such as the United States Securities and Exchange Commission (SEC) and the Canadian Securities Association (CSA) have proposed regulations that could require publicly traded companies to report GHG emissions from their operations, energy use, and value chains. These proposed regulations signal a rising demand for the private sector to measure, report, and reduce their GHG emissions as demonstrated progress in climate change mitigation becomes a tangible component of sustainable business and investment decisions.

Shareholder, stakeholder, and value chain demands and interests — Shareholders of agriculture and food companies are increasingly interested in ensuring their investments are sustainable. This interest is driven, in part, by commitments that many financial institutions, including banks and pension funds, have made to improve the environmental and social impacts of their investments and lending portfolios. According to a 2022 report by Price Waterhouse Cooper, sustainable investments will represent 21.5 per cent of total managed assets globally in 2026, up from 14.4 per cent in 2021.

Agriculture and food companies are responsible to various stakeholders, including agricultural communities, investors, consumers, and employees. For example, when asked about key drivers of sustainability reporting among companies, Katherine Balpataky, senior director of corporate partnerships at ALUS, noted that she is starting to see “companies take landscape impacts seriously. Companies are looking at pressures on food stability; things like climate change, extreme weather events, soil health, and water and how this relates to farmer livelihoods; and they’re acknowledging they have a role to play in helping farmers adapt to these changes. Managing risks relates to sustainability reporting because investors want to see companies have plans to build resilience in the system”.

WHAT DO SUSTAINABLE VALUE CHAIN PROGRAMS LOOK LIKE?

Currently, many companies and value chains are responding to the multiple drivers by developing programs to achieve positive sustainability outcomes at the farm level. When asked about the current design of sustainability programs, Rebecca Johnson, sustainability specialist at Viresco Solutions, described how companies often approach program development with a few key objectives, including reducing GHG emissions, improving traceability within their value chains, and supporting and communicating the good stewardship that farmers have and continue to implement on their farms.

The landscape of sustainability programs is expanding, and programs are evolving in their sophistication as companies and value chains develop approaches to align with international standards. Programs can vary in the sustainability pillars they cover, the types of data required to demonstrate progress, and their integration within value chain logistics.

Some sustainability programs focus on validating an existing level of sustainability and encouraging continuous improvement. For example, Soy Canada identified an increasing demand from international customers for demonstrated sustainability of soybean production and proactively responded by developing the Sustainable Canadian Soy Program. Currently, the interest for this program is primarily from users of food grade and Identity Preserved (IP) soybeans.

Other sustainability programs focus on demonstrating outcomes from practice adoption to meet targets, scale action within value chains, and improve landscape resiliency. Johnson highlights that programs focused on accounting outcomes often start with farmer-focused information sessions and data collection to establish baselines and monitor progress. She also notes that these programs are often flexible in practice adoption depending on farmers’ interests and constraints and that incentives and verification data (e.g., photo cover crop adoption) are becoming integral components of program design.

FORECASTING OF SUSTAINABLE VALUE CHAIN PROGRAMS

While there is a significant focus on climate action in agriculture, the capacity and interest in sustainable value chains are expected to evolve to include other ecosystem services that farmers provide, such as enhancing biodiversity. This evolution is starting to be observed through emerging frameworks for conducting nature-related financial disclosures and corporate target setting to reduce impacts on nature. Likewise, Balpataky suggests, “the loss of pollinators is an obvious link for farming, but it’s much more than this — it’s soils and the health of the whole system. I think biodiversity will become more important in the coming years.”

Approaches to measuring and monitoring environmental outcomes, such as reductions in GHG emissions from practice adoption, are rapidly becoming more advanced and accurate. This trend signals a rising demand for insights on practice adoption and application of technologies such as remote sensing and digital platforms to estimate outcomes.

Moving forward, the challenge is to design and implement programs that enable win-win opportunities for all participants along the value chain, including farmers.

Lisa Ashton is the sustainability and environment lead at Grain Farmers of Ontario. •