Agricultural Commodity Firms as Champions of Sustainability

The softs and agricultural sector of the commodities markets is undergoing rapid change in line with the global pivot towards renewable energy and a more sustainable future. Agriculture personally affects more people and has a heavier impact on peoples’ personal lives than other commodities, as the basis for all food. This means that it will play a large role in how we change business practices over the next several years with a more environmentally conscious focus.  

What’s happening? 

Agricultural trading firms are in a unique position in the market, where they can have direct influence on the implementation of sustainability programs. They are responsible for the movement of large amounts of commodities across the globe – for example, almost half of all global coffee is traded exclusively by the world’s five largest coffee traders. This makes traders remarkably capable of driving sustainability initiatives within the regions they operate in.  

This is coupled with the fact that there is a general mounting pressure from stakeholders in all businesses to do more for the environment. Therefore, we are seeing a trend emerge where trading houses are signing agreements to reach certain sustainability targets, binding them to their goals and satisfying their stakeholders.  

More investment capital is being funnelled into sustainable practices and companies that are sticking to their ESG goals, rather than companies whose profit comes at the cost of the local environment. As a result, agribusinesses are quick to realise that if they do not implement and stick to a strong ESG framework, there will be a smaller pool of capital investment for financing their operations available to them. This is partly because investors too, are under pressure to act sustainably due to legal and reputational repercussions.  

Challenges 

Many firms are now publishing timelines detailing how and when they will reach various sustainability milestones, such as when they will reach carbon neutrality. These are a good way for customers and clients to hold such businesses accountable and track their progress. However, government regulations around environmental standards are still evolving. Therefore, the legal benchmarks required for businesses to hit are dynamic and continuously adapting to reflect new information and suggestions from the scientific community. Various governments are updating and implementing their own sustainability standards and regulations, presenting a challenge for businesses as they attempt to keep up with such changes, maintain profit, and reach their own sustainability goals.  

Greenwashing presents a challenge here – the practice of making overstated, inflated claims about ESG initiatives and compliance. Environmental standards are not regulated across industries or nations, making it difficult to set benchmarks for businesses. Off the back of the drive for ESG, some companies are citing compliance according to low or outdated standards. This adds a degree of uncertainty for potential investors.  

Recruitment and Growth 

Agricultural sustainability teams and roles will grow exponentially as the role of sustainability officers and enforcers becomes even more important. Therefore, businesses need to organise and improve their sustainability teams to optimise them for success. Executives must lead the way as sustainability becomes and operational and strategic imperative, in such a manner that is right for their business.  

Companies should start by identifying which specific sustainability issues are reasonable for them to tackle, both from an operational point of view and a branding one. Sustainability is a very large umbrella, and it’s difficult to prove how a business is working to combat climate change without specific goals and evidence of the tangible steps they are taking.  

Proco Commodities remains available to discuss market conditions across the whole commodities supply chain space. Feel free to get in touch with me to discuss how we can help design and implement the best framework for your company through hiring and retaining. 

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