This article gives an introduction to sustainable agricultural practices, and some recommendations regarding how investors can play a role in encouraging their adoption. The UN's 2nd Sustainable Development Goal (SDG), Zero Hunger, includes the promotion of sustainable agriculture, specifically in target 2.4 which calls for sustainable food production systems and implementation of resilient agricultural practices. Whilst increasing productivity and production these must also help maintain ecosystems, strengthen capacity for adaptation to climate change and extreme weather, and improve land and soil quality. However, what does this mean in practice, and what are the methods of farming which, if implemented correctly, actively contribute towards this goal?
While a range of definitions for sustainable agriculture exist, and while a number of other terms are used in discussions surrounding the topic (e.g. regenerative agriculture, organic farming, etc.), for the purposes of this article the definition of sustainable agriculture is linked to the definition of sustainability as outlined in the 1987 Brundtland Report: “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Sustainable agriculture can, therefore, be understood as farming which ensures that the nutritional and other resource (e.g. textile) needs of current generations can be provided for in a manner that will not prevent future generations being able to grow the crops and support the livestock required for their own needs.
What, then, does this entail, and what specific practices can be used to meet this goal? For agriculture to be sustainable (specifically environmentally sustainable), soil erosion must be prevented, soil must be kept in good condition and contain the required nutrients to allow for continued growth of crops and pasture, and farms must ensure they are resilient to climate change, and that they are not contributing towards the climate and biodiversity crises that put agriculture on the whole at risk. In regard to specific practices available to farmers, these include:
(i) Crop and livestock rotations - by rotating the types of crops grown on areas of land, farmers can prevent the excessive depletion of certain nutrients from soils, and allow these to recover while other crops (i.e. that do not draw these nutrients from the soil) are grown. Similarly, livestock rotation can allow areas of pasture to recover and allow for un-grazed land to provide resources for local wildlife populations (e.g. food sources, shelter, etc.)
(ii) Use of cover crops - by planting certain crop types during fallow periods, farmers can return certain nutrients to soils, prevent soil erosion (i.e. by ensuring root structures remain in place), and suppress unwanted growth (thus limiting the need for biocide use).
(iii) Agroforestry - by integrating woody vegetation (i.e. trees and/or shrubs) into farmland, farmers can help prevent soil erosion (again due to the presence of permanent/longer-term root structures), support biodiversity, and create areas of shade (which can enhance climate resilience by lowering ground temperatures, enhancing water retention, and protecting the welfare of livestock in light of the increasing frequency and intensity of extreme weather events.)
The Role of Investors
While the world of investing may seem far removed from that of farming, there are ways in which investors that wish to contribute towards the development of sustainable food and farming systems can play a role. Firstly, investors can use their signalling power in capital markets to show firms involved in food systems (e.g. agri-business firms, major food retailers, etc.) that there is a demand for investments in companies that are deploying or developing sustainable farming methods; where the markets show a demand, firms will create the supply.
Secondly, more active investors can utilise engagement methods to drive the use of sustainable farming methods and practices. They can, for example, engage with companies directly involved in the growing of crops and the production of livestock to encourage their adoption, and introduce resolutions at AGMs designed to encourage their adoption (e.g. to tie executive remuneration to successful implementation). Investors can also engage with food retailers to encourage these companies to themselves support the use of such practices among their suppliers (e.g. by prioritising suppliers implementing relevant practices).
What, then, does a company demonstrating a commitment to the implementation of sustainable farming methods look like, and how can investors identify such companies? One company that has demonstrated such a commitment is Kraft Heinz, which has outlined its intent to implement sustainable farming practices, and has published a Sustainable Agricultural Practices Manual outlining preferred practices. This document demonstrates that Kraft Heinz aims to, for example, limit soil erosion by establishing permanent wind breaks of trees and bushes, and utilising cover crops to protect land during fallow and intercrop
periods. As a result, Kraft Hein has been deemed by us at Ethical Screening to be aligned with SDG 2.4. For investors who are seeking potential investment opportunities in companies that are supporting SDG 2.4, or any other SDGs, Ethical Screening is in a position to provide this information.
The Kraft Heinz Sustainable Agricultural Practices Manual: https://www.kraftheinzcompany.com/esg/pdf/KHC_InOurRoots_2021.pdf