Including sustainability in the agriculture industry
Since the term environmental, social, and governance (ESG) emerged in 2005, sustainability and ESG strategies have become increasingly prominent in company profiles. Nevertheless, many firms still don’t understand what sustainability or following ESG principles mean, even after the concept has been ingrained in business culture for almost 20 years. Michael Seyfert, president and chief executive officer of the National Grain and Feed Association (NGFA), recently moderated a panel of ESG and sustainability leaders at the NGFA’s 127th annual convention in La Quinta, California, with the goal of offering insight and sharing examples of various implementation practices within agricultural businesses.
According to Megan Rock, chief sustainability officer at CHS Inc. in Inver Grove Heights, Minnesota, sustainability is nothing new. “The core of sustainability is really doing more with less, being efficient, and passing farms and businesses down from generation to generation; nowadays, we just have these fancy ratings systems and terms like ESG and corporate responsibilities.”
The panelists agreed that customer demand for products from companies dedicated to tackling social and environmental issues is the primary reason behind the growing popularity of sustainability and ESG initiatives across many industries. According to Ms. Rock, investors have begun to recognize this influence and are supporting these initiatives.
According to her, “lending and financing institutions now view social and environmental risks as material risks, and they want to know that the businesses and organizations they’re investing in are not contributing to the issue.”
According to Ms. Rock, in order for sustainability initiatives to be effective, they must take into account both the environment’s long-term effects and those on individuals and communities.
“It is imperative to have a strong community presence, achieve financial stability, demonstrate employee appreciation, and responsibly manage the land, water, and air that we all depend on,” the speaker stated.
Another panelist, Erin Condon, of CGB Enterprises Inc. in Van Buren, Ark., where she serves as the director of culture, diversity, and inclusion, discussed the value of mentorship programs as a strategy and benchmark for social inclusion initiatives.
Talking about her company’s two mentorship programs, one of which has helped nearly 100 women not only refocus their vision for future career success but also provided insight into some of the challenges women face in climbing career ladders, Ms. Condon said, “It’s been the most rewarding work that I’ve gotten to do both professionally and personally.”
Leveraging Inclusion by Fostering Talent was the other program that Ms. Condon spoke about. (LIFT). This program came about as a result of managers reporting that they were having problems with employees of color declining promotions that were being extended to them. According to Ms. Condon, the LIFT program helps these people recognize their attitude and develop confidence so they can accept the promotions they are due.
“The most important reality is that we’re doing the right thing for our employees, but we’re also seeing significant retention that will happen over time, which will certainly affect our bottom line,” the speaker stated. She also mentioned that program success could be verified using employee retention data.
Speaking at the panel, Steve Wittbecker, chief sustainability officer at CoBank in Greenwood Village, Colorado, cautioned against placing undue pressure on American farmers, saying instead that we should remember the intrinsic social contributions that agriculture makes to the world by producing food for people to eat.
“Policy makers need to be aware of the full continuum of impact,” he stated, “because I worry that other exporters will cut more rainforest and do the work less effectively and efficiently than we do here in the United States; therefore, the environmental footprint gets even bigger.”
The panelists noted that motivating workers and manufacturers to support ESG objectives was a major obstacle. They stated that the company’s efforts must go beyond simply creating a policy change, sending it by email, and then waiting for staff members to carry it out on their own. They argued that a direct approach was frequently necessary for genuine change.
“Having conversations at our various facilities—not just talking, but also listening a lot—is the best way to make this evolution and explain what we’re doing, why it makes sense for us, and how it’s right for our culture,” Ms. Condon stated.
Mr. Wittbecker expressed the expectation that manufacturers would be able to support the adoption of these approaches with incentives.
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“Economy and sustainability must coexist,” Mr. Wittbecker stated. “Profits still matter.” “We need to figure out how to do this correctly because it can’t be on the backs of the producers, farmers, and ranchers to put forth the effort without the reward if the government incentives are there and if the consumer is willing to pay more for a sustainably sourced product, and if that can be passed through the supply chain and back to the producers.”
The integrity of ESG ratings verification presented another difficulty. While some standards have been developed by groups such as the Sustainability Accounting Standards Board and the Global Reporting Initiative, US corporations are currently not required to use them. The applicability and dependability of these ratings can be problematic because there are 140 or so providers in the nation that issue ESG ratings using their different methods.
“You read it and accept it with the knowledge that it’s created by the organization to tell their story,” Mr. Wittbecker stated. He also mentioned that although his company does not currently use ESG data in its underwriting processes, sustainability evaluation has always served as a standard for its lending policies.
“In the end, I would have to say that’s always been a part of underwriting,” he remarked. “Good leadership, good governance, being good for your people, being a steward for the environment on your inputs and outputs.” “You’re a better borrower and you’re benefiting from being a better borrower if you’re doing those things well.”
“There will be more consistency because it will require an audit, so more reliability and comparability will exist there,” he added. “You have the Securities and Exchange Commission coming out with some proposed disclosure rules, and I hear that’s going to be codified here in April.” “These ESG rating organizations are also consolidating a lot, which will aid in the development of their frameworks and contribute to some consistency.”
In closing, the panelists offered some guidance to businesses on how to embrace ESG and sustainability.
“This is a new way of doing business, and with that come new opportunities,” Ms. Rock urged the audience to embrace these ideas with an open mind.
It can’t be a side dish subject that only a particular committee discusses and considers, Ms. Condon remarked. “Because it addresses the long-term success of our people and organizations, it is the way of the future and must be incorporated into every aspect of our operations.”
While present rules would probably evolve, Mr. Wittbecker encouraged attendees to be adaptable, expressing hope that the SEC’s impending codification will assist provide organizations ready to start their sustainability journeys direction. He invited participants to express their viewpoints and experiences in the interim.