The ESG is environmental, social and governance reporting. This is a concept adopted by large corporations to set standards for how they operate so their end consumers feel good about doing business with them. This can take lots of different forms, from requiring its vendors to avoid excess printing of documents, adopting diversity and inclusion programs, to commitments to stated goals on energy reduction and consumption of more “green” sources.
The idea is to make great soundbites, build brand loyalties and build a better company. The concerns come in when those goals are not made. Were they even attempted? Or was it all a smoke show? Can a consumer sue for the company not living up to its stated ESG goals or policies? For traded companies, the SEC is going to make rules.
How does it impact ag? Ag provides carbon capture, renewable energy, biofuels and conservation practices that corporate America would love to latch on to and say they were involved with it. Farmers already use production data and soil regeneration techniques that can be quantified and laid in spreadsheets in boardrooms and in talking points.
ESG might frame who these companies deal with. The tell if you will. The end purchase of your product or services telling your operation that we are not going to do business with you unless you have an aligned ESG program. Sounds a lot like quality assurance programs farmers are already doing. Here is another example, at least one large ag lender has a policy regarding paper use reduction and waste. That will prevent a large litigation firm who notoriously requires paper copies of all documents and pleadings (to increase litigation costs) from ever doing business together. Pay is the other end from tell. Companies may pay producers who adopt ESG polices a premium to ensure a line of products that meet their ESG goals. Really it is no different than a niche marketing premium like organic, waxy corn, or food grade soybeans.
While I don’t think its coming in 2023, farm operations can plan now on the eventual ask or incentive from the companies where its end product lands. A forward-looking ag operation in northeast Iowa is going to pay attention to Quaker Oats, Tyson, Hormell Cargill and ADM adopt as ESG policies. It probably wouldn’t hurt those same operations to look at the ESG policies of the companies that they do business with. Are green painted tractors made by a company that shares your views, Are blue planters governed by a corporate mission statement that you agree with?
