Sustainability in the agricultural sector: What are ESG criteria?
You have probably heard about ESG criteria lately. This acronym refers to the Environmental, Social and Governance factors used by companies; and investors are increasingly interested in them. In this article, we dive deep into this issue and we focus on some of its applications in the agricultural sector.
What are ESG standards?
Sustainability, as a broad concept, has become a key factor for the assessment of the appeal and potential growth of companies. This acronym stands for three words:
The E stands for Environmental and concerns the relationship between companies and the environment.
The S stands for Social and it represents the impact that business activities have in communities or their social environment, both internally and externally.
The G stands for Governance and makes reference to corporate governance aspects and the governance approach regarding issues such as transparency, business culture or tax strategy, among others.
Why are ESG criteria important?
Although the concept of ESG criteria was present in what is known as Socially Responsible Investing (SRI), it has adopted a much more comprehensive approach nowadays.
During the last years, and in particular since 2020, investors’ interest in social and environmental impact has increased. However, the investment in ESG does not only arise from the need of positioning themselves for potential investments.
Nowadays, companies are seeking ways to adapt to current times, in line with a vision of adopting strategies which would allow them to strengthen their business resilience in a truly sustainable way.
On the one hand, the environment on which companies have an impact is the same environment in which they need to keep conducting activities. Being able to transition into models which would contribute to the fight against climate change and have a responsible impact on society at the same time has become a priority.
On the other hand, due to the large amount of data available nowadays, companies can implement a more precise monitoring of these key factors in order to increase productivity and decrease environmental impact at the same time.
The three words for which ESG stands for have a feedback effect on business actions, and only those organizations capable of striking a balance between these three key factors will be able to make their way into a not so distant future. New talents which are accessing the job market for the first time are also paying special attention to these factors when choosing where they want to grow professionally.
Sustainability in the agricultural sector: How can ESG criteria be measured?
Some companies have begun to take the first steps towards ESG indicators monitoring in the agricultural sector. Its measurement is not simple due to the fact that each of these factors is complex and encompasses a large number of elements.
Data collection is a key starting point to monitor these indicators. However, understanding which aspects are important to measure and how to appropriately use those data to that end is equally important. A suitable approach will lead to a better understanding of production processes, a more efficient control of them and the implementation of necessary improvements.
A good starting point might be reviewing indicators within the following broad areas:
Sustainable productivity
Within this area, several factors can be measured, such as soil erosion, deforestation, crop yields o water access. Based on them, we will be able to predict, for instance, which resources will be available for future crops and what return can be expected.
Resilience
Climate change makes crops more vulnerable to greater risks when there are extreme weather conditions. Being aware of the flood risk which plots face, for instance, can be helpful to develop preventive measures to ensure successful harvests.
Climate change mitigation
Two key indicators of this aspect are greenhouse gas emissions and, on the other side, the level of soil carbon sequestration and storage. So, how much gas emissions are the result of our activity and how much carbon are we able to remove from the atmosphere?
Transparent processes
A growing trend is the incorporation of public food traceability policies as a good governance practice. By improving the transparency of the different stages of the production process that a product has to go through, the increasing consumers’ demand of having a better understanding of what they consume is satisfied.
Positive relationships with people
Within the social aspect, the focus is increasingly centered on the impact that companies have on people.
From an internal point of view, comprehensive policies that foster gender equality, diversity inclusion and recognition, and a work life balance will be increasingly taken into account.
From an external point of view, many companies have begun to assess their impact on communities which are external to the organization and to develop measures which foster social development. Prominent among them are local work promotion and the inclusion of vulnerable sectors in some stage of the production process or in training activities.
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These are just some examples of ESG criteria measurements. Monitoring various key indicators allows companies to efficiently improve their practices, achieving a sustainable development in the long-term, and seeing the first results in the short-term and medium-term.
If you would like to learn more about how to start applying ESG criteria to your company or organization, do not hesitate to contact us here or by our social media.
