FOR agribusinesses to have long-term success, they need to have environmental and social governance (ESG).
That was the message of a national webinar hosted by Agribusiness Australia last week, where viewers heard from agribusiness executives on how ESG is a key part of their business.
ESG was mentioned in Agribusiness Australia's 2020 State of the Industry report, released in July, which claimed that ESG is the foundation of sustainability and socially responsible investing (SRI) and is tipped for strong capital growth in the agriculture sector.
"ESG is more important than ever in the operation of agribusinesses and will contribute considerably to the critical success of the advancement of the sector," the report wrote.
"Businesses that implement and adhere to ESG risk management will see greater opportunities for investment into the next decade as stakeholders focus more on these factors."
National Angus stud, Lawson Lawson managing director Harry Angus spoke about reducing carbon emissions from a livestock production perspective.
He said that traditionally, sustainable practices have often come at a commercial expense, but he has found sustainability and profitability can go hand in hand.
"The key with livestock production is that emissions are 100 per cent correlated with inputs," Mr Lawson said.
"For example, we set up a feed efficiency system to precisely measure how much the cattle eat."
He said in reducing emissions with minimal financial impact and to still have productivity, it's important to target the area that produces the most emissions.
For Lawson Angus this was fertile, moderate-sized cows as they are the biggest feeders.
"I think lifting productivity and sustainability in farming systems go hand in hand," Mr Lawson said.
Implementing sustainable practices can be one of the most challenging aspects; that's where communication is important.
"We need to target the message depending on the audience - when communicating to farmers, focus on productivity and with consumers, focus on sustainability," he said.
"Tell the audience in a way that they'll understand it and respond to."
As farmers are trying to cope with higher average temperatures, more extreme hot and cold temperatures, less rainfall and more severe storms and droughts as a result of climate change, Mr Lawson said livestock enterprises had become less resilient to adverse environmental events.
"We need to farm in a much more variable climate going forward," he said.
"From an economic point of view we need to address it so our farming systems can cope with more variation and tougher seasons.
"While the industry has bred more productive animals, they have become less drought tolerant."
Bayer CropScience managing director Joerg Ellmanns said there had been a perception that to have sustainability, innovation needs to be wound back.
"But we need to demonstrate that our innovations are to strive for sustainability," Mr Ellmanns said.
"Without innovation we will not be able to tackle the challenges of climate change and others.
"Innovation also means we need to stop unsustainable practices and replace them with sustainable ways of doing things, some of which we are already doing."
Mr Ellmanns said the company has made commitments to combine innovation with sustainability.
A collaborative report by the World Resources Institute, the World Bank, and the United Nations (UN) said that there will be 10 billion people to feed by 2050.
This has to be done without clearing more land for farming, but returning large tracts of land to its wild state in order to prevent further degradation of the planet and irreversible damage.
In order to achieve this target, Ms Ellmanns said the world needed to farm in different ways and welcome new and emerging innovations such as vertical farming, which was utilised in Asia.
He said humans also needed to address food waste, as according to the UN's environmental program, about 30pc of food was wasted in westernised countries.
Viewers also heard from National Australia Bank (NAB) Natural Value associate director James Bentley, who provided insight on how agricultural investors see ESG.
He said ESG had become more of a priority for investors and they saw it as an avenue for capital growth and an opportunity for businesses to leverage carbon neutral markets.
Ultimately, according to Mr Bentley, if the industry continues to operate the way it has and doesn't adopt sustainable practices it will be increasingly financially detrimental, which has started to happen.
"We have reached a point that as we continue to degrade our environment, we are now facing increasing costs," Mr Bentley said.
"If we degrade our soils further, for example, part of our future food production system will be more at risk."
From an investment perspective, he said companies assessed ESG based on risk, such as climate, which had become more of a priority.
This was supported in NAB's recent Full Year Result Investor Presentation, which identified sustainable agriculture as part of the bank's long-term business strategy and "commercial response to society's biggest challenges".
This involves collaborating with other industry bodies to assess sustainability alongside financial performance in agribusinesses.
