Betting on the Farm: Sustainability Reporting Reaches the Ag Sector
Susan Baker Martin with Jonas Kron
Twenty years after the launch of Ceres catalyzed sustainability reporting in the industrial sector, several efforts are underway to bring sustainability measures and reporting to agriculture and food production, and not a moment too soon. The agricultural industry’s industrialized processes are wreaking havoc on our planet and our health. Agriculture accounts for one third of all anthropogenically produced greenhouse gases emitted and it does so inefficiently, to boot: fifty years ago, ten calories of energy produced 23 calories of food; today, the same ten calories produce just one calorie of food sold in supermarkets.
Food reform is a complex task that will require voluntary and regulatory action along the entire food supply chain. Change, which has been a long time coming, seems to be in the air, though – members of Congress have been spotted with Michael Pollan’s The Omnivore’s Dilemma in their hallowed corridors, and who can guess how many organic gardens Michelle Obama’s White House efforts will inspire?
This article examines a few of the newest initiatives to establish consistent metrics for measuring the sustainability impacts of agriculture, the prerequisite, of course, for setting goals and evaluating progress toward them.
The Stewardship Index for Specialty Crops
In 2007, the Natural Resource Defense Council (NRDC) began to explore ways to build a sustainability model for the food industry that could garner broad support. Tapping into existing certification programs looked desirable, but was rejected upon closer examination because their uptake rates were unremarkable. Thirty environmental and public interest groups, growers, trade associations and buyers including Heinz, Sysco, and Wal Mart bought into a metric-based sustainability model and formed a coordinating council to develop the Stewardship Index for Specialty Crops (SISC). The coordinating council identified 15 areas to address that are material to fruits, vegetables, nut and horticulture farming and processing, including pesticide use, GHG emissions, water quality, worker health and safety, and fair pricing. SISC has recruited 180 organizations (including Trillium Asset Management Corporation) to sit on ‘metric review committees’ charged with recommending sustainability measures for each category. It’s an ambitious undertaking, but many growers who joined the process are motivated to make this inclusive stakeholder initiative productive. Some have remarked that current reporting systems burden growers with an array of redundant and often conflicting requirements. If industry can solve the problems and demonstrate improved performance using its own verifiable measures, the thinking goes, then growers can avert increased regulatory pressures.
One practical contribution of the SISC’s is an interactive tool that gives growers access to a desk-top score card of pesticide-related risk to animals, workers and human health; multiple scenarios using different pesticides; soil properties and weather conditions. An apple farmer considering various pest management options, for example, could use the tool to choose the best options for reducing or eliminating pesticides. A long-term goal is to allow users to make marketing claims that consumers can see are backed by measurable performance.
Field to Market
Field to Market, a project of the Keystone Alliance for Sustainable Agriculture, began in 2006, and like SISC brought a diverse group of stakeholders to help define and encourage the use of sustainable processes in their crop sector. Field to Market’s goals are to (1) identify criteria for sustainable agriculture that are open to a diversity of technologies, and (2) support the processes that will lead to broad performance improvements against these criteria. Participants include Cargill, General Mills, Kellogg Company, National Corn Growers Association, The Nature Conservancy, University of Arkansas, University of Wisconsin-Madison, World Resources Institute and the World Wildlife Fund.
Again, the issue is getting the metrics right. For example, water use for crops and livestock may need multiple metrics, to account for irrigated and non-irrigated systems, and other variables that affect the amount of water used per unit. Otherwise, a single metric for water could muddy the factors behind the enormous variability in water embedded in the entire lifecycle of a crop.
Field to Market is measuring the environmental impact of growing corn, cotton, wheat and soybeans – ‘king’ crops that cover nearly three-quarters of all U.S. cropland. Each crop’s impact on land use, soil loss, water use, energy use and climate impact is measured. The program has released preliminary data that gives insight, albeit limited, into the environmental footprint of agriculture. For example, according to its metrics, the overall impact of growing corn, cotton and soybeans has shrunk by meaningful levels over the past 20 years. Interestingly, however, while wheat’s impact on soil, land, energy and water held steady for the most part over the last 20 years, the climate impact increased noticeably. This can be attributed to increased use of nitrogen-based fertilizers, and indicates that much more attention is needed to reduce the carbon footprint of wheat.
GRI Food Sector Supplement
The Global Reporting Initiative (GRI) operates with a vision that economic, social and environmental reporting should be as routine as a company’s financial reporting. More than 1,500 companies are now organizing their sustainability reports using the GRI framework. The forthcoming Food Sector supplement, developed with twenty stakeholders ranging from Archer Daniels Midland and Bunge to the World Fair Trade Organization and the Union for Conservation in Nature, will provide companies with another tool for addressing the environmental and social impacts of food processing.
As these efforts reveal, we are just at the beginning of creating something reasonably close to a sustainable agricultural system that can affordably feed our growing population without destroying soil fertility, depleting water resources, exposing workers to dangerous chemicals, and polluting waterways. How much of a contribution these initiatives can make remains to be seen.
Direct Impact Investing – The Carrot Project
Eric Becker, C.F.A.
Investors interested in making an immediate and direct impact on organic and sustainable agriculture need look no further than the newly launched “Strolling of the Heifer Fund for New England Farmers.” This loan fund is the brainchild of the nonprofit Carrot Project. The project’s focus is to support small- and midsized family farms by joining together community-based lenders, investors, nonprofits and farmers to create alternative financing programs that keep farmers in business. Investors accept lower rates of interest, thereby creating pooled capital that can back loans to qualifying farmers.
This spring, the Carrot Project partnered with The Strolling of the Heifers and Chittenden Bank, both based in Vermont, to build a $150,000 pool of investor funds, including clients of Trillium Asset Management Corporation. Initial loans of $1,000 to $10,000 will go to Vermont and Western Massachusetts farmers and over time expand throughout New England.
Farmers in the Northeast are often denied financing because of inadequate credit history, collateral or cash flow. Other small farmers have difficulty finding lenders because banks avoid making small loans due to their higher administrative costs. This is the entry point for The Strolling of the Heifers. Fund administrators provide technical support and financing options. In a nutshell, lenders get to know the borrower, as it used to be, thereby creating a lower risk environment for investors.
The loan fund supports farms that use (or aspire to use) sustainable or organic methods, market some portion of their products to local markets, have 250 or fewer acres in active production, and earn annual gross revenues no greater than $250,000.
This investment vehicle gets to the heart of rebuilding a U.S. agricultural system that offers stability to local farms and communities, provides healthful food, and has a reduced impact on the environment.