Sustainability: Not A Four-Letter Word
Sustainability seems like the agricultural community’s newest buzzword, and in some circles, it takes on a negative connotation associated with high costs and little return. However, sustainability brings with it promising growth opportunities for agribusinesses positioned throughout the value chain.
“Sustainability in some businesses is a bad word,” says Mike Boehlje, professor of agricultural economics at Purdue University. “We’ve got to start thinking positively about the issue, and follow the lead of companies that are accepting sustainability as a business opportunity, rather than simply something they have to do.”
Many leaders throughout the agriculture industry have recognized that sustainability isn’t just a fad and are exploring how sustainable practices align with their business strategies and future industry demands. For example, a group of input supply companies, producers, processors and food and retail companies are working together on a project called Field to Market: The Keystone Alliance for Sustainable Agriculture. One of the group’s main goals is to create a set of indicators that will measure the environmental, health and socio-economic outcomes of agriculture.
“Field to Market focuses on the performance of sustainable agriculture, not the process,” Boehlje says. “The metrics they create will help companies measure the various environmental and financial impacts of their sustainability practices.”
Armed with the tools needed to measure sustainable agriculture’s return on investment, agribusiness managers can more easily evaluate projects that are under consideration. They will feel more confident in the decision-making process and have the ability to select projects that will deliver the most value to both the company and its customers.
Consider The Customer
Companies at each level of the supply chain can create value through sustainability. But companies will need to approach sustainability differently depending on the customers they serve.
If the business focuses on customers who are concerned about sustainability, managers can incorporate their practices into marketing, sales, and promotion campaigns in order to attract environmentally conscious consumers.
“Consumers are asking questions about sustainability, and there is evidence that some of them are willing to pay a premium for products that have more sustainable features,” Boehlje says.
Businesses not selling directly to consumers should focus on how sustainability features and practices can benefit their value chain partners. Growers may not be willing to pay more for a sustainable product, so managers will need to communicate how their product can improve the farmer’s business by either lowering cost, improving productivity and/or increasing efficiency.
In the future, sustainability concerns will be driven increasingly by value chain partners, rather than by government regulation, according to Boehlje. Many food and retail companies are asking their supply chain partners for information about the environmental impact of their products—documentation about the processes the products go through and about the chemicals used therein. If suppliers ask for information, what can the agribusinesses do to give it to them? Boehlje suggests keeping an eye out for opportunities for joint ventures with other firms throughout the supply chain—the increasing importance of sustainability may offer opportunities for competitive advantage.