A great balancing act is required for the agriculture sector globally in order to meet three pressing needs; closing the food gap by achieving a 60% increase in calories produced, supporting economic development for 24% of the global population engaged in the agriculture sector, and reducing the sector’s environmental impact.
Globally, agriculture contributes around 24% of greenhouse gas (GHG) emissions, however it is the largest emitting sector in Aotearoa New Zealand, contributing 50% to the country’s gross emissions.
A number of tensions between sustainable food production and food security are emerging.
On the one hand we have Western, middle-income countries driving the sustainable food agenda with an increase in veganism, plant-based diets and a general shift away from eating high quantities of meat protein. This market is demanding more sustainable food products but is unwilling - or unable - to pay for it. Supply chain disruptions, inflation and other macroeconomic and social forces mean goods are becoming increasingly expensive, forcing food producers to balance security and equity with sustainability efforts. Meanwhile, we know that 60% more food is required to feed the global population by 2050 and that two billion people suffer from malnutrition, while 1.9 billion people are classified as overweight or obese. At the same time, one million agriculture workers currently live in poverty, while a 53% increase in wheat prices is forecast to create another food crisis across Asia and Africa. Adding to this complexity is the urgent need to transition to net zero, with just two business cycles to limit warming to 1.5°C.
The opportunity to align with net zero is being driven by risk exposure, as well as an awareness of changing investor and consumer sentiment.
New legal obligations to disclose climate-related-financial risks for big companies is pricing in climate risk to the business model and creating transparency among investors. Most large food producers have set out detailed, time bound plans on their transition to net zero, signaling strong intent towards limiting global warming to 1.5°C.
Other sectors have started reducing their emissions with strong policy settings creating the right market signals for investment into technology to either reduce or replace high emitting processes. Post Paris Agreement (2015), there was massive investment into renewable energy which saw a quantum shift to replace coal and gas with wind, solar, nuclear and storage capabilities. In the lead up to COP26 in 2021 the market accelerated to replace Internal Combustion Engine vehicles with electric or hydrogen powered engines as a part of ambitious net zero targets. We’re also seeing financial institutions derisking their portfolios by disinvesting in high-ESG risk companies as compliance to the climate related financial reporting requirements.
There is significant potential for food producers in Aotearoa New Zealand to meaningfully contribute to lowering and offsetting GHG emissions, while remaining profitable and climate resilient. An increasing number of banks and lenders in Aotearoa New Zealand have introduced sustainability-linked loans to assist primary industries to lower emissions and improve environmental outcomes, and early adopters are realising competitive advantages. Simply put, inaction from this sector is no longer an option.
There are many opportunities to transition away from high emissions across the food production value chain.
Upstream and downstream emissions (scope 3) come from procured products, transport of supplies and inputs and business travel, and transport of products, usage of sold products and product disposal.
Opportunities for transition exist in logistics, packaging, regenerative farming practices, biofuel production and shortened, more sustainable supply chains. Scope 1 and 2 emissions are those associated with primary processing & secondary manufacturing, and there are opportunities to reduce emissions by switching away from fossil fuel energy to renewables and adopting a total utilisation approach to waste management.
Agriculture is no different to other sectors, but it requires businesses to adopt a net zero mindset, starting with a commitment to more ambitious targets and goals. Detailed pathways are needed to show how the targets and goals will be reached and a strategy will help avoid missing interim reduction targets. Enterprise and innovation are crucial, but often overlooked. Enterprise focuses on gaining employee support and rallying partners across the supply chain. Providing space for innovation in the workplace comes at a cost, but could be well rewarded with new products, services and methods of production. Finally, being open and transparent with measuring and reporting will ensure accountability, encourage knowledge sharing and sector/organisation benchmarking.
Collaboration is the real key to help deliver net zero transformation at the necessary pace and scale.
But, collaboration needs a perfect combination of the three I’s - investment, innovation and incentives which are fundamental for change. Government must take an enabling role, establishing the policy and regulatory environment to reach net zero, while sharing the costs for research and development, innovation and supply chain improvements. Businesses should be driving transformation, acknowledging their responsibility and recognising the opportunities they can create. Making early commitments with targets allows businesses to enjoy an early mover advantage and provides the platform for innovation. Behaviour change is underpinned with clear incentives, which can include risk as much as reward. Currently the biggest risks come from consumers influencing net zero transformation through purchasing power, and Generations Y and Z - the future workforce, investors and shareholders - who have clear expectations of how business should tackle ESG issues.
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