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Reporting Sustainability in Agrichemicals

14 October 2021 Alan Bullion

With the climate change summit COP 26 coming up shortly in Glasgow, sustainability is in the news and agrochemicals and their application will play a vital role in achieving the objectives which are expected to be set.

In our new report for IHS Markit, Sustainability in Agrochemicals 2021, we place particular emphasis on examining how company practices have evolved and the type of information and targets that companies are using to demonstrate their sustainability.

The term sustainability is one with a number of definitions but perhaps the one which is most used is that coined by Gro Harlem Brundtland in her 1987 report "Our Common Future". In her presentation to the United Nations General Assembly, she defined sustainability as "development that meets the needs of the present, without compromising the ability of future generations to meet their own needs".

The leading role of the UN has continued and almost all companies which publish their sustainability credentials make reference to the seventeen United Nations Sustainable Development Goals (SDGs) which were first developed in 2015. Although all of these development goals are relevant in some way to agrochemicals, the ones which are most commonly reported on by companies are:

SDG 2: Zero Hunger

SDG 6: Clean Water

SDG 12: Sustainable Consumption and Production

SDG 13: Climate Change

SDG 14: Life Below Water

SDG 15: Life on Land

Whilst looking at company activities for our new report, we found that there was a distinct difference in the detail and breadth of reporting between large publicly listed companies and smaller companies. The larger companies issue regular sustainability reports on a number of topics in response to pressure not just from growers and consumers but also from investors who regard sustainability issues as a financial risk and are looking for actions to mitigate the risk.

Whilst we see some smaller companies starting to look at sustainability in its wider sense, the majority focus either on the inferred, intrinsic benefits of their products and services or on the basic sustainability aspects such as environmental management systems certification or internally controlled emissions from their own operations.

The larger companies have started to standardise their approaches to reporting by using standard reporting frameworks. Among these are the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Carbon Disclosure Project (CDP) and ratings systems for suppliers such as the EcoVadis programme.

The GRI was founded in 1987, after the Exxon Valdez oil spill, to increase corporate transparency. Its guidelines were first issued in 2000 and these were developed into the first global standards for sustainability reporting, the GRI Standards, in 2016. There are now nearly 40 different standards on aspects such as Waste, Water and Effluents, Energy, and Biodiversity which are intended to help organisations to prepare a sustainability report.

The SASB is a non-profit organisation founded in 2011 to develop a common language about the financial impacts of sustainability. They now publish standards for 77 industries that identify the Environmental, Social and Governance (ESG) issues that are most relevant to the financial performance of that industry. It has been reported that more than half of S&P Global 1200 companies now disclose using SASB Standards.

The CDP was set up in 2000 and started with a focus on climate change. It has now expanded to include aspects such as water security and deforestation. Over 9,600 companies have reported through CDP by completing a questionnaire. The results are then scored and given a grading with those companies ranked at A (the best) being published for each category annually.

EcoVadis was founded in 2007 and claims to be the world's largest and most trusted provider of business sustainability ratings, creating a global network of more than 75,000 rated companies. It is one of a number of such ranking lists which companies use to verify their credentials and are often promoted in reports and on web-sites. Other schemes commonly seen are the Dow Jones Sustainability Index (DJSI), Sustainalytics, and MSCI amongst others.

A recent review in the Harvard Business Review stated that the number of companies filing reports according to GRI has increased a hundredfold in the past two decades and we expect that these standard frameworks will continue to be the default for companies - especially the larger ones - wishing to report their sustainability performance.

In the report, we examine the details of company reports, we look at performance against the targets that they have set and we highlight specific actions where we see best practice. In addition to looking at the major companies in traditional pesticides and biocontrol products as well as supply chain companies, there are chapters on fertilizers and the very topical subject of carbon trading and carbon capture initiatives in agriculture.

Looking forward to what the next five years may bring, political and public demands for more action on sustainability (especially on greenhouse gas emissions and climate change) are likely to continue growing. Additionally, investors will increasingly see climate change as a risk to the livelihood of businesses and expect companies to take action to manage this risk.

This is likely to mean that more companies in the supply chain for agrochemicals, as well as those from the biocontrol sector, will be expected to devote more time to provide evidence of how the use of their products and services can have a positive environmental impact. The longevity, credibility and benefit of carbon credits and capture schemes in agriculture will be a key topic in the medium term as these schemes continue to grow in number.

If you are interested in more details of the Crop Science report, Sustainability in Agrochemicals 2021, please contact Alan Bullion at alan.bullion@ihsmarkit.com

Posted 14 October 2021 by Alan Bullion, Director of Special Reports & Projects, Agribusiness, Energy & Natural Resources

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