Why some companies are turning to regenerative agriculture to curb emissions

It’s the world’s easiest riddle: Why is a CFO thinking about their company’s emissions in 2024?

A looming sense of climate doom, a feeling of goodwill for humanity, some savvy business acumen? Sure. But more likely: The SEC climate rule.

Even before the Securities Exchange Commission adopted its final climate rules, many companies had already started making bold carbon reduction commitments,

Kristen Sullivan, Deloitte’s US sustainability and ESG services leader and an audit and assurance partner, told CFO Brew.

The trouble: A lot of that is mainly just talk for now.

In a 2023 report from Net Zero Tracker, the report’s authors found under 5% of companies passed a basic checklist based on the United Nations’s Race to Zero campaign for their net zero commitments, like setting interim targets and covering all emissions.

“People are now falling well short of their commitments, scratching their heads and thinking, ‘Oh my goodness, how do I do this?’” Ewan Lamont, head of sustainability solutions for agricultural technology company Indigo Agriculture, told CFO Brew. “We’re going to have to rethink what we’re doing because sustainability has gone from this voluntary, brand-building exercise to an absolute must-have,” in light of new regulations, he explained.

Some companies are turning to nature-based solutions like regenerative agriculture, a method of farming that prioritizes soil health. Sullivan speculates an increased focus on nature-based solutions at COP 27 in 2022 helped ground the idea “you can’t make meaningful progress around climate and climate action without a holistic consideration of the broader nature opportunity.” And while regenerative agriculture is an old practice, it’s really been in “the last 18 months to two years” that it’s started to find more receptive ears, she added.

While big names, including General Mills, Nestlé, and Nespresso, have invested in regenerative agriculture, by and large, the good (and bad) news is that it’s still an early adopters’ game, Lamont said. “Now, we’re starting to see the market turn from fringe, tree-hugging to… mainstream,” he added.

Something in the soil. “There are some pretty simple changes you can make to the way in which you grow your crop, which will dramatically reduce the emissions that your farming operation produces,” Lamont said.

We’ll pause: We know you’re a financial professional, not a farmer. But for a CFO whose supply chain touches any kind of agri-food system, this is firmly a Scope 3 issue. In analyzing the potential of regenerative agriculture for your company’s emissions commitments, your job will be about analyzing the cost of not adopting these kinds of practices—and we’ll get to that in a second—but first, a quick science lesson.

Take a crop like rice, which Lamont notes is “one of the biggest crops in the world, [and] hugely polluting from a methane-emitting perspective.” Rice crops contribute 8% of all man-made methane in the atmosphere, per a 2023 report from the United Nations’s Food and Agriculture Organization.

Meanwhile, alternate rice-growing solutions, rooted in regenerative agriculture practices, can simultaneously improve yields and reduce emissions.

“From a CFO’s perspective, if I need to bring down my emissions, I can do that in my agri-food chain, but I’ve still got to account for the emissions I still have,” he said. “I’m always going to be emitting somewhere, so we’re going to have to suck out carbon, and this is the superpower of agriculture.”

The CFO’s role. “Step 1 of all of this is a really systematic, well-documented, standards-driven materiality determination,” Sullivan said. For snack and beverage companies in particular, it’s about looking at risks that “if not tended to or addressed today will become much more financially material, much more license-to-operate influential,” and asking yourself what near-term interventions will have the greatest impact, she continued.

“When you think about dependencies of a beverage company or a snack company, on those inputs, what’s going to put those inputs at risk? And I think that’s where this whole materiality process that includes a very clear governance structure, a set of controls of: What’s the universe of risks and opportunities we’re going to look at as an organization?” Sullivan said. “That whole process is really the first step to then unlock these avenues of opportunity, like regenerative agriculture.”

The key, in both Sullivan and Lamont’s eyes, is really just getting started. “This is happening. It’s not a pipe dream. It’s happening today,” Lamont said. “So quite aside from the branding opportunity, saving the planet, the climate implications of what’s going on, and being a good corporate citizen, and making sure that we’re part of the solution for the next vision of agriculture, this is a huge threat to your business.”