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ESG Reporting and Agriculture – LexBlog


I recently moderated a panel of experts on ESG (Environmental, Social, Governance) reporting. Companies (from large publicly traded organizations to closely held family businesses) are facing pressure by governments, investors, stakeholders, and the public in general to stave off further climate change. How do these changes impact agriculture?

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Some companies are voluntarily setting public ESG goals to satisfy the public’s desires. (This reminds me of voluntary changes made by livestock producers to give consumers what they want.) ESG reporting can be beneficial to a company, providing good press, happy customers, and identifying gaps in an organization’s operations. But, of course, there are risks, including potential litigation, failure to achieve performance goals, significant costs, and highlighting negative climate practices. There is an alphabet soup out there of acronyms for different reporting and disclosure frameworks: Global Reporting Initiative (GRI) Standards, Task Force on Climate-related Financial Disclosures (TCFD), and SASB Standards are three of the significant programs used today. The U.S. Security Exchange Commission (SEC) has released a proposed rule requiring ESG and climate disclosures.

What does all of this have to do with farming? A lot, it turns out. Modern agriculture is frequently targeted as a cause of climate impacts, but farmers are the first conservationists. Ag can play a big role in the ESG conservation. Agriculture gives us renewable energy in the form of biofuels, solar, and wind. Livestock and row crop farming offer an opportunity to capture, sequester, and store carbon, preventing it from entering the atmosphere. Major buyers of agricultural products, including McDonald’s, Cargill, Tyson, and General Mills, are creating new initiatives to promote environmentally friendly agriculture and soil health. Farmers are using technology to make data-driven decisions and can document the environmental impact of those practices. So, agriculture can have a direct role to play as investors and consumers look for companies with demonstrated ESG achievements. But farms stand to play an indirect role too, based on “Scope 3” greenhouse gas reporting requirements proposed by the SEC. Scope 3 emissions are all indirect emissions that occur in the value chain of the company required to do the reporting, including upstream and downstream emissions. This could, arguably, include farms back up the supply chain.

While local family farms are not likely to be required to register or file their own ESG report in the immediate future, agricultural entities looking ahead should consider how ESG fits into their operations.


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