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AGRICULTURAL PRODUCTSResearch Brief

Sustainable Industry Classification System™ (SICS™) #CN0101

Research Briefing Prepared by the

Sustainability Accounting Standards Board®

June 2015

www.sasb.org© 2015 SASB™

TM™

AGRICULTURAL PRODUCTS

Research Brief SASB’s Industry Brief provides evidence for the disclosure topics in the Agricultural Products industry. The

brief opens with a summary of the industry, including relevant legislative and regulatory trends and

sustainability risks and opportunities. Following this, evidence for each disclosure topic (in the categories

of Environment, Social Capital, Human Capital, Business Model and Innovation, and Leadership and

Governance) is presented. SASB’s Industry Brief can be used to understand the data underlying SASB

Sustainability Accounting Standards. For accounting metrics and disclosure guidance, please see SASB’s

Sustainability Accounting Standards. For information about the legal basis for SASB and SASB’s standards

development process, please see the Conceptual Framework.

SASB identifies the minimum set of disclosure topics likely to constitute material information for

companies within a given industry. However, the final determination of materiality is the onus of the

company.

Related Documents

• Agricultural Products Sustainability Accounting Standards

• Industry Working Group Participants

• SASB Conceptual Framework

INDUSTRY LEAD

Anton Gorodniuk

CONTRIBUTORS

Andrew Collins

Henrik Cotran

Sonya Hetrick

Eric Kane

Jerome Lavigne-Delville

Nashat Moin

Himani Phadke

Arturo Rodriguez

Jean Rogers

Levi Stewart

Evan Tylenda

Quinn Underriner

SASB, Sustainability Accounting Standards Board, the SASB logo, SICS, Sustainable Industry Classification

System, Accounting for a Sustainable Future, and Materiality Map are trademarks and service marks of the

Sustainability Accounting Standards Board.

I N D U S T R Y B R I E F | A G R I C U L T U R A L P R O D U C T S

http://www.sasb.org/standards/download/

http://www.sasb.org/sectors/consumption/

http://www.sasb.org/approach/conceptual-framework/

Table of Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Industry Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Legislative and Regulatory Trends in the Agricultural Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Sustainability-Related Risks and Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Greenhouse Gas Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Energy & Fleet Fuel Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Water Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Land Use & Ecological Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Food Safety & Health Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Fair Labor Practices & Workforce Health & Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Business Model and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Climate Change Impacts on Crop Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Leadership and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Environmental & Social Impacts of Ingredient Supply Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Management of the Legal & Regulatory Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Appendix

Representative Companies : Appendix I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Evidence for Sustainability Disclosure Topics : Appendix IIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Evidence of Financial Impact for Sustainability Disclosure : Appendix IIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Sustainability Accounting Metrics : Appendix III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Analysis of SEC Disclosures : Appendix IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

References

I N D U S T R Y B R I E F | A G R I C U L T U R A L P R O D U C T S

INTRODUCTION

Agriculture’s impacts on the planet are significant.

As global population growth and lifestyle changes

increase the demand for food, the challenge for

the Agricultural Products industry is to meet this

demand without jeopardizing natural resources or

human health. The key issues facing the industry

include climate change impacts on crop yields,

environmental externalities resulting from

agrochemicals and unsustainable farming

practices, ecological impacts of land use and

water withdrawal, workforce health, food safety,

and responsible supply chain management.

Meanwhile, consumer attitudes toward topics

such as organic foods, genetic engineering, and

agricultural subsidies are shifting because of rising

incomes, increased urbanization, and the

industrialization of agriculture.

The rise of industrialized farming techniques and

technology—including mechanization, genetically

modified crops, and chemical application—has

altered the industry, driving immense increases in

productivity over the past several decades. For

example, the Green Revolution in India

transformed the country from a net food importer

of many agricultural commodities to one of the

largest exporters in the world.1 Since 1960, world

wheat and rice production has tripled, and maize

production has risen nearly fivefold; per capita

agricultural production has risen by 30 percent

between 1980 and 2010.2 Global food production

must increase by approximately 60 percent by

2050 from 2005–2007 levels to feed an estimated

population of 9.1 billion people. Ninety percent of

the rise in crop production is expected to come

from greater crop yields and increased production

intensity, with the rest predicted to come from an

enlargement of arable land.3 Intensive agricultural

production can have impacts on biodiversity, soil,

and water and can cause deforestation.

This places agricultural products companies in the

sensitive position of having to balance the need to

increase productivity and yields, in order to feed a

growing population and generate revenues, with

the need to lower negative externalities and

thereby protect their long-term environmental

and social assets and maintain their license to

operate.

Management (or mismanagement) of material

sustainability issues, therefore, has the potential

to affect company valuation through impacts on

profits, assets, liabilities, and cost of capital.

Investors would obtain a more holistic and

comparable view of performance with agricultural

products companies reporting metrics on the

material sustainability risks and opportunities that

could affect value in the near- and long-term in

their regulatory filings. This would include both

positive and negative externalities, and the non-

SUSTAINABILITY DISCLOSURE TOPICS

ENVIRONMENT

• Greenhouse Gas Emissions

• Energy & Fleet Fuel Management

• Water Withdrawal

• Land Use & Ecological Impacts

SOCIAL CAPITAL

• Food Safety & Health Concerns

HUMAN CAPITAL

• Fair Labor Practices & Workforce Health & Safety

BUSINESS MODEL AND INNOVATION

• Climate Change Impacts on Crop Yields

LEADERSHIP AND GOVERNANCE

• Environmental & Social Impacts of Ingredient Supply Chains

• Management of the Legal & Regulatory Environment

I N D U S T R Y B R I E F | A G R I C U L T U R A L P R O D U C T S | 1

financial forms of capital that the industry relies

on for value creation.

Specifically, performance on the following

sustainability issues will drive competitiveness

within the Agricultural Products industry:

• Reducing greenhouse gas (GHG)

emissions at crop milling and processing

facilities as well as from crop cultivation;

• Reducing total electricity and fuel

consumption;

• Improving water efficiency to reduce

water-related risks, especially in locations

of water scarcity;

• Preserving ecological resources and

biodiversity by limiting the contamination

and degradation of land and water

resources;

• Ensuring the safety and quality of

products, as well as responding to

growing health concerns of the

population;

• Ensuring worker health and safety and

following fair labor practices;

• Adapting to changing climate by

innovating in farming practices and

developing more resilient crops;

• Ensuring that the highest environmental

and social standards are met within

supply chain; and

• Ensuring that business strategy is in line

with the long-term interests of society.

INDUSTRY SUMMARY

The Agricultural Products industry is engaged in

growing, processing, trading, and distributing

vegetables and fruits, and producing and milling

agricultural commodities, including grains, sugar,

I Industry composition is based on the mapping of the Sustainable Industry Classification System (SICSTM) to the Bloomberg Industry

consumable oils, maize, soybeans, and animal

feed. Agricultural products companies are also

involved in wholesale and distribution of

products, such as grains and beans. I Agricultural

products are sold directly to consumers and

businesses for use in consumer and industrial

products. Vertically integrated agricultural

products companies operate farms, crop-

processing facilities, and storage and distribution

networks.4

The Agricultural Products industry generates close

to $640 billion in annual revenue globally. Sugar,

grain, and oilseed milling represents the largest

segment, accounting for $350 billion in revenue,

followed by the agricultural products wholesalers,

with almost $190 billion in revenue. The largest

companies listed on U.S. exchanges, Archer

Daniels Midland (ADM) and Bunge, are vertically

integrated and operate in both milling and

wholesale segments.5 The next largest companies

traded on U.S. exchanges are Ingredion, Seaboard

Corporation, Darling International, and

Andersons. As of May 2015, there were 15

companies listed on U.S. exchanges for which the

Agricultural Products industry is the primary SICS

industry. These companies generate

approximately $150 billion in revenue.6 Bunge,

ADM, Dole, and other companies in the industry

also own, either directly or through subsidiaries,

and manage farms and sugar plantations. At the

same time, companies may source a substantial

part of their agricultural commodities from

thousands of third-party growers from various

countries, which complicates their ability to

control some of the issues discussed in this brief.7

The Agricultural Products industry has a global

nature. While the U.S., China, India, the E.U.,

Russia, and Brazil are major producers, products

Classification System (BICS). A list of representative companies appears in Appendix I.


are traded internationally. Thirty-eight percent of

the world’s land area is used for agricultural

purposes.8 According to the United States

Department of Agriculture (USDA), the total

cropland acreage in the U.S. was 390 million

acres in 2012, spread over approximately 1.5

million farms.9

The industry produces low-cost agricultural

commodities and competes largely on prices. Key

factors affecting the industry include weather,

grain-based biofuel production, government

agricultural policies, exchange rates, and demand

from emerging markets.10 Weather has the most

direct influence over crop yields, both via gradual

climactic variations and via acute impacts such as

floods, droughts, and storms.11 To limit their

exposure to volatile agricultural commodities

prices and to enhance margins, companies in the

industry engage in hedging activities through

exchange-traded futures contracts.12

Performance of companies in the Agricultural

Products industry is dependent on crop yields and

agricultural commodity prices. As mentioned

above, extreme weather conditions may

significantly reduce growers’ yields and, therefore,

sales. While growers can partially offset reduced

sales by passing some costs on to consumers via

higher commodity prices, in the milling segment,

where crop prices are directly related to costs of

goods sold (COGS), low crop yields put a pressure

on margins as well as reduce sales. Therefore,

millers and producers may be able to increase

their efficiency though cost management. Where

cost of energy is a large portion of COGS,

companies can benefit from equipment upgrades

and new processing techniques, as well as by

relying on renewable energy sources and energy

independence.

As the global middle class expands, demand for

food and food products is expected to grow,

driving increasing production.13 Demand for

staple foods, including rice, maize, wheat, and

vegetables, collectively represents two-thirds of

the world’s food energy intake and is generally

noncyclical.14 However, certain products used in

industrial or fuel applications can exhibit greater

demand fluctuations. Long-term global consumer

trends indicate increasing expenditures on higher-

value foods such as meat, dairy, vegetables, and

fruit, and declining spending on staple crop

items.15 This shift is occurring at all income levels

and is primarily driven by emerging markets, with

their increases in income, urbanization, and

female employment.16

Consumer preference for organically grown crops

is also driving growth in the industry worldwide.

The USDA established national standards for

organic production and processing in 2002. In

2012, U.S. sales of organic foods reached $28

billion, from approximately $11 billion in 2004.

The top two organic food categories are produce

and dairy, which represent 43 and 15 percent of

organic food sales, respectively. However, total

organic-certified cropland made up only 0.8

percent of total U.S. cropland in 2011. The

highest adoption has been for fruits and

vegetables, and the lowest for feed grains. In the

U.S., 10 percent of carrot and lettuce acreage and

5 percent of fruit acreage were under organic

management as of 2011, while 0.3 percent of

corn acreage and 0.2 percent of soybean acreage

were organically managed. Growth in demand for

U.S. organic food has outpaced growth in organic

farmland during most years since the late 1990s,

creating a potential demand-supply gap and an

opportunity for further growth in organic-certified

cropland.17 Growth in organic production is a

global phenomenon, including in many emerging

markets, where specialty crops such as coffee and

bananas can achieve high sales in developed

markets.18 Organic foods are typically sold at


higher prices than conventional produce because

of the demand-supply gap, greater labor-input

costs, and inefficient marketing and distribution

chains, as well as the lower volume of products

available.19

Government agricultural policy has a direct

financial impact on the industry. Production of

some crops is heavily subsidized by governments

worldwide in the form of direct payments and

crop insurance subsidies. Many governments,

including those in the U.S. and the E.U., have paid

or continue to directly pay farmers to cultivate

certain crops. Also, government biofuel mandates

support the demand for some crops, especially

maize. This is the case with U.S. federal mandates

for ethanol use in transportation fuel.20

Barriers to entry for small farms are low relative to

those for industrial-scale farms, which require

significant capital inputs for machinery and land.

Profitability is strongly correlated with farm size;

operating profit margins and rates of return on

assets can be negative for small farms, while large

farms are more likely to have positive profit

margins.21 Given these low margins, many small

farms are able to survive only by receiving off-

farm income. On average, 71 percent of such

income is from earned sources (e.g., a wage or

salary job or self-employment) and the remainder

is from unearned sources (e.g., social security,

pensions, dividends, interest, and rent).22

Industry-wide, operating and net profit margins

for U.S. publicly listed companies in 2014 were

approximately 4.8 percent and 2.7 percent,

respectively, close to their 10-year averages.23

Costs vary depending on the type of crop and the

degree of mechanization possible; for example,

labor costs for vegetable farming represent a

considerable share of costs, while labor costs in

II This section does not purport to contain a comprehensive review of all regulations related to this industry but is intended to

grain production are lower because of

automation. Key cost drivers include the prices of

fertilizers and crop chemicals, seeds, water, labor,

electricity, and fuel and oils.24

A shift toward large, industrial agriculture has

been observed in the U.S. and elsewhere. The

proportion of production from small, family-

owned farms is relatively low today. This shift

underlies some of the industry’s sustainability

issues, as large farms have adopted more

intensive farming techniques that have the

potential to magnify environmental and social

externalities.25

LEGISLATIVE AND REGULATORY TRENDS IN THE AGRICULTURAL PRODUCTS INDUSTRY

Regulations in the U.S. and abroad represent the

formal boundaries of companies’ operations, and

are often designed to address the social and

environmental externalities that businesses can

create. Beyond formal regulation, industry

practices and self-regulatory efforts act as quasi-

regulation and also form part of the social

contract between business and society. In this

section, SASB provides a brief summary of key

regulations and legislative efforts related to this

industry, focusing on social and environmental

factors. SASB also describes self-regulatory efforts

on the part of the industry, which could serve to

pre-empt further regulation.II

Global Scope of the Agricultural Products

Industry

Given the global nature of agricultural goods’

production and trade, agricultural products

companies are subject to multiple regulatory

highlight some ways in which regulatory trends are impacting the industry.


frameworks. In the U.S., the industry is regulated

at the federal, state, and local levels. Broadly,

regulation addresses the release of substances

into air, water, and soil during farming and

processing, the safety of consumer foods, and the

health and safety of workers.

Regulations may impact the industry across

operations, supply chains, and end markets.

Environmental and human health regulations are

becoming increasingly strict in most markets.

Environmental laws in Latin America are evolving

rapidly toward higher degrees of regulation and

enforcement, as several countries have large

agricultural sectors that use an abundance of

insecticides, pesticides, fertilizers, and inoculants

are widely used. Brazil, reportedly the world’s

largest market for pesticides, has banned several

substances and, like most other countries in the

region, requires the registration of all pesticides

and the submission of health and safety data.26

Meanwhile, several Latin American countries’

constitutions enshrine access to water as a basic

human right. While the overall region is rich in

freshwater, much of it is concentrated

geographically and/or seasonally.27 Over the past

half century, water management in Latin America

has shifted from the construction of large

infrastructure projects for irrigation and electricity

generation to the provision of drinking water and

sanitation services to a focus on water

conservation, environmental protection, and

pollution control.28

Legislative and regulatory efforts in other major

markets are also relevant. In the E.U., the industry

is regulated by the European Commission through

the Common Agricultural Policy (CAP). The

Commission works with the agricultural ministers

of the 28 E.U. countries and the European

Parliament to set agricultural policy. The CAP was

established in 1962 and was most recently

reformed in June 2013. The CAP focuses on three

priorities: viable food production, sustainable

management of natural resources, and balanced

development of rural areas throughout the E.U.

The June 2013 CAP reform drives sustainable

farming by, for example, linking 30 percent of

direct farmer payments to environmentally sound

farming practices.29

Environmental Regulations

Agriculture can have significant impacts on

environmental resources, especially water and

land. Irrigated crop production requires large

amounts of water, while water contamination

arises from the use of fertilizers and pesticides as

well as from land erosion. In the U.S., the Clean

Air Act (CAA) and Clean Water Act (CWA)

regulate air and water emissions from operations.

The National Ambient Air Quality Standards

regulate emissions of particulate matter, including

agricultural dusts. Ambient air emissions from

farming practices are covered by Section 110 of

the CAA, which requires each state to develop a

State Implementation Plan (SIP) for identifying the

sources of air pollution and determining the

required restrictions for meeting federal air quality

standards. Grain terminal elevators with a

permanent storage capacity of more than 2.5

million U.S. bushels and grain storage elevators

with a capacity of 1 million U.S. bushels are

prohibited from discharging any gases with an

opacity more than 0 percent and/or particulate

matter in excess of 0.023 grams per dry standard

cubic meter. Moreover, loading and unloading

emissions are covered by the regulations.30

The CWA’s Oil Spill Prevention, Control, and

Countermeasures (SPCC) Program requires certain

facilities, including some farms, to develop and

implement plans to prevent oil discharges from

reaching U.S. waters or adjoining shorelines.31

SPCC covers farms that store, transfer, use, or

consume diesel fuel, gasoline, lube oil, hydraulic


oil, adjuvant oil, crop oil, vegetable oil, or animal

fat; store more than 1,320 U.S. gallons of oil or

oil products in aboveground containers or more

than 42,000 U.S. gallons in completely buried

containers; and could be “reasonably expected to

discharge oil to water of the U.S. or adjoining

shorelines.”32

Additionally, under the EPA’s Greenhouse Gas

Reporting Program (GHGRP), facilities emitting

more than 25,000 metric tons of carbon dioxide

equivalent (CO2e) must report their total GHG

emissions. The GHGRP is designed to collect data

to inform future policy decisions, including

programs to reduce emissions.33 Although there is

currently no federal carbon dioxide (CO2)

emissions reduction regulation in the U.S., certain

states and regions have implemented carbon cap-

and-trade programs to reduce emissions. The

most prominent example is California’s GHG

reduction law, commonly known as AB 32, which

took effect in 2012. The program introduced an

emissions cap that will be reduced by

approximately three percent annually for

industrial and other major emitters. Facilities must

either reduce emissions or offset them by

obtaining emissions credits.34 Milling and

processing facilities could be subject to the

aforementioned limits because of the relatively

high energy intensity of the processes.

Proposed bills to reduce emissions have included

the McCain-Lieberman Climate Stewardship Act,

which aimed to create a cap-and-trade system but

provided an exemption for residential and

agricultural areas; the Global Warming Pollution

Reduction Act of 2007, which aimed to increase

performance standards for electricity generation

and motor vehicles; and the American Clean

Energy and Security Act of 2009, which aimed to

establish an emissions trading plan similar to the

E.U.’s trading scheme but provided an exemption

for agriculture. Meanwhile, states are taking

action; more than half have climate action plans

and a growing number have set emissions

targets.35

In the Agricultural Products industry, GHG

emissions are not limited to those from facilities

but also include nonpoint emissions from livestock

and soil management activities as well as from

deforestation in developing countries, which is

often the result of increased land use for

agriculture. GHG from fertilizer application, soil

management such as tilling, and land clearing can

also be significant; typical estimates range from

11 to 15 percent of global emissions.36 Manure

management systems that emit methane (CH4)

and nitrous oxide (N2O) in amounts greater than

the reporting thresholds are the only agricultural

sources covered by the EPA’s GHGRP. Other

agricultural categories are exempt given the

difficulty and cost of measuring GHG emissions.

At the same time, emissions estimates, rather

than their direct measurement, would be a

burden to a large number of small entities and

would not provide enough certainty, according to

the EPA.37

In the U.S., environmental regulations are largely

implemented at the state and local levels and are

based on federal guidance. Some agricultural

operations are exempt from EPA regulations if

they are regulated under the Federal Insecticide,

Fungicide, and Rodenticide Act (FIFRA).38 The

United Nations Programme on Reducing Emissions

from Deforestation and Forest Degradation (UN-

REDD), launched in 2008, works with indigenous

peoples and other forest-dependent communities

to implement results-based payments using an

online forest monitoring tool.39

Bioenergy mandates heavily influence the industry

by driving demand for agricultural products,

primarily maize. The 2005 U.S. Energy Policy Act

and the 2007 Energy Independence and Security


Act require progressive growth in biofuel use in

U.S. transportation fuels.40 In the E.U., biofuels

are expected to contribute to the region’s goal of

using 10 percent renewable energy as a share of

the total transportation sector energy use by

2020. The E.U.’s directives ensure the use of

biofuels that generate net GHG savings without

adversely impacting biodiversity and land use.41

Regulations on Food and Worker Safety

The Global Food Safety Initiative (GFSI), an

international food safety organization, provides

food safety guidance frameworks for crop

farming and perishable plant products, including

within supply chains. GFSI maintains benchmarks

for food manufacturers and farm assurance

standards with the goal of ensuring consumer

confidence in food safety. Agricultural products

companies, as well as retailers, manufacturers,

and food service companies, can obtain

certification through a third-party audit against

certain schemes recognized by the GFSI.42

The U.S. Food Safety Modernization Act (FSMA),

passed in 2011, gives the FDA increased authority

over how foods are grown, harvested, and

processed. Shifting the FDA’s focus from

responding to contamination to preventing it,

FSMA requires farmers and food processors to pay

a $500 annual fee to fund increased FDA

inspections, enforcement, and food safety

research. (The Tester-Hagan amendment exempts

local farmers and processors that make less than

$500,000 per year and that sell more than 50

percent of their products directly to consumers in

the same state and within a 400-mile radius.) The

passage of FSMA was prompted by several high-

profile outbreaks of food-borne illnesses in the

U.S.43

The industry is also required to adhere to specific

employee health and safety and other labor

standards. In the U.S., worker health and safety

standards are enforced by the Occupational Safety

and Health Administration (OSHA), part of the

Department of Labor, and by the EPA. The U.S.

Fair Labor Standards Act establishes standards for

a minimum wage, overtime pay, record keeping,

and youth employment, while the Migrant and

Seasonal Agricultural Worker Protection Act

provides standards for pay and working

conditions for seasonal and migrant

farmworkers.44

The USDA oversees numerous aspects of the

country’s agriculture, including plant health, crop

insurance, quality assurance, biotechnology, and

regulations on the inspection, distribution, and

exportation of grain.45 The FDA’s Animal and

Plant Health Inspection Service regulates the

import and export of plants, while the Grain

Inspection, Packers and Stockyards Administration

regulates the export of grains, oilseeds, and

agricultural commodities.46

In the U.S., crop chemical use is controlled by

FIFRA. Aspects of the law include labeling and

registering chemicals, permissible crops and sites

for application, environmental impacts, and

chemical tolerance levels on products for human

consumption.47

Evolving Industry Trends

Regulations regarding the importation and/or

cultivation of genetically modified crops vary

across countries. In the U.S., the FDA and the

USDA have actively worked to introduce

genetically modified organisms (GMOs) and have

not imposed labeling requirements. Meanwhile,

the E.U. has generally followed the precautionary

principle to prevent and/or delay the approval of

GMOs.48 Elsewhere, GMO regulations tend to

depend on a country’s relations with the U.S. and

the E.U.; countries that trade with and are


influenced by the U.S. (e.g., Latin America) tend

to support GMO crops, while former colonies of

Europe (e.g., African countries) and countries that

trade with the E.U. tend to be less supportive.49

Nevertheless, the public perception of GMOs, as

well as the regulatory environment, is constantly

changing. For example, the bulk of Brazil’s export

crops use GMOs, but food products for domestic

consumption that contain 1 percent or more

GMO derivatives must be prominently labeled as

transgenic. Several Andean nations have restricted

the use of GMOs: Peru has a 10-year moratorium,

and Bolivia and Ecuador have enacted bans. All

the major Latin American countries have signed

the Cartagena Protocol on Biosafety, which seeks

to protect biological diversity from the potential

risks posed by GMOs.50

Another source of changing regulations on trade

policy and agricultural products is the U.S. Food,

Agriculture, Conservation, and Trade Act

(commonly called the Farm Bill). The Farm Bill, the

primary agricultural legislative tool of the federal

government, expires and needs to be renewed

every five years.51 It includes provisions for rural

development, trade and foreign agriculture,

agricultural research, conservation, and renewable

energy. One of the most significant changes made

in the 2014 Farm Bill was the removal of direct

subsidy payments to farmers.52 The presence or

absence of subsidies, as well as the ability to

obtain crop insurance, may provide various

incentives for farmers using more efficient and

effective techniques and equipment that reduces

environmental externalities.

Agricultural policy also addresses key

environmental and social issues. The 1990 Farm

Bill defined “sustainable agriculture” as a system

that will satisfy food and fiber needs, enhance

environmental quality and the agricultural natural

resource base, make the most efficient use of

nonrenewable resources, sustain the economic

viability of farm operations, and enhance the

quality of life for farmers and society.53

SUSTAINABILITY-RELATED RISKS AND OPPORTUNITIES

Industry drivers and recent regulations suggest

that traditional value drivers will continue to

impact financial performance. However,

intangible assets such as social, human, and

environmental capital, company leadership and

governance, and a company’s ability to innovate

to address these issues are likely to increasingly

contribute to financial and business value.

The Agricultural Products industry is a mainstay of

developed and emerging markets alike. A dynamic

regulatory environment, shifting consumer

preferences, extensive use of land and other

natural resources, and the impact of climate

change on agriculture underlie key sustainability

trends within the industry.

Broad industry trends and characteristics are

driving the importance of sustainability

performance in the Agricultural Products industry:

• Use of natural resources: Agriculture is

directly dependent on natural capital

inputs such as land, energy, and water.

Regulations, resource constraints,

population growth, and climate change

impacts drive the importance of efficiently

using such resources. The inefficient use

and inept management of such critical

resources can lead to higher costs or

unstable supplies, affecting the value of

agricultural products companies.

• Environmental and social

externalities: Inadequately growing and

processing agricultural products can have


wide-ranging negative environmental and

social externalities. These include GHG

emissions; air, land, and water pollution;

food spoilage; and poor working

conditions. Mitigating such impacts is

important to protect and enhance

shareholder value, given the increasingly

stringent environmental and safety

regulations and the shifts in consumer

preferences. These trends could lower the

demand for, or constrain the supply of,

agricultural products while also potentially

increasing the costs of production.

• Food supply risks from climate change

impacts: Through various channels,

climate change is expected to affect crop

yields worldwide. Without adequate risk-

mitigation efforts on the part of

agricultural products companies and their

suppliers, this could have implications for

the food supply of a growing population,

as well as for industry revenue and

profitability.

• Management of extensive supply

chains and governance risks: The

industry’s social license to operate

depends on strong corporate oversight of

supply chains and on regulatory influence.

Companies in the industry can have vast,

geographically diverse supply chains. In

the eyes of consumers and regulators,

there may be little difference between the

responsibilities of the agricultural

products companies and those of the

actors in their supply chains. Each

component of the supply chain could be

affected by emerging environmental and

social regulations, customer pressures,

and physical impacts from climate

change, posing governance challenges for

the industry.

As described above, the regulatory and legislative

environment surrounding the Agricultural

Products industry emphasizes the importance of

sustainability management and performance.

Specifically, recent trends suggest a regulatory

emphasis on environmental externalities, which

will serve to align the interests of society with

those of investors.

The following section provides a brief description

of each sustainability issue that is likely to have

material implications for companies in the

Agricultural Products industry. This includes an

explanation of how the issue could impact

valuation and evidence of actual financial impact.

Further information on the nature of the value

impact, based on SASB’s research and analysis, is

provided in Appendixes IIA and IIB.

Appendix IIA also provides a summary of the

evidence of investor interest in the issues. This is

based on a systematic analysis of companies’ 10-K

and 20-F filings, shareholder resolutions, and

other public documents, which highlights the

frequency with which each topic is discussed in

these documents. The evidence of interest is also

based on the results of consultation with experts

participating in an industry working group (IWG)

convened by SASB. The IWG results represent the

perspective of a balanced group of stakeholders,

including corporate professionals, investors or

market participants, and public interest

intermediaries.

The industry-specific sustainability disclosure

topics and metrics identified in this brief are the

result of a year-long standards development

process, which takes into account the

aforementioned evidence of interest, evidence of

financial impact discussed in detail in this brief,

inputs from a 90-day public comment period, and

additional inputs from conversations with industry

or issue experts.


A summary of the recommended disclosure

framework and accounting metrics appears in

Appendix III. The complete SASB standards for the

industry, including technical protocols, can be

downloaded from www.sasb.org. Finally,

Appendix IV provides an analysis of the quality of

current disclosure on these issues in SEC filings by

the leading companies in the industry.

ENVIRONMENT

The environmental dimension of sustainability

includes corporate impacts on the environment.

This could be through the use of natural resources

as inputs to the factors of production (e.g., water,

minerals, ecosystems, and biodiversity) or through

environmental externalities and harmful releases

in the environment, such as air and water

pollution, waste disposal, and GHG emissions.

The Agricultural Products industry generates, and

is influenced by, a variety of environmental

externalities, which create regulatory and

operating risks resulting in financial impacts to

companies. Crop cultivation and agricultural-

products processing release GHGs into the

atmosphere. Climate-related regulations aimed at

curbing GHG emissions may affect the industry,

including through adjustments to farming

practices. The industry is reliant on water for both

crop irrigation and product processing. Increasing

global water scarcity, due to climate change and

supply and demand factors, can result in lower

water availability; higher water-related costs, such

as irrigation pumping; and reduced crop yields.

Finally, environmental pollution and habitat

degradation caused by agrochemical use, land

clearing for cultivation, and certain farmland

management practices create regulatory risks and

may adversely impact crop yields.

Since the Agricultural Products industry’s value

chain is highly dependent on environmental

factors, the management of strategic natural

resources such as water, energy, land, and

biodiversity is a key sustainability and business

challenge.

Greenhouse Gas Emissions

Agriculture is a significant contributor to global

GHG emissions, particularly extremely potent

non–CO2 emissions. In the Agricultural Products

industry, direct GHG emissions occur during

different stages of value creation. Unlike other

GHG-intensive industries such as manufacturing

and energy production, which burn large

quantities of fossil fuels and generate CO2, the

majority of emissions in crop cultivation stem

from land management practices, including

fertilizer application, land clearing, and crop

burning, and occur primarily in the form of CH4

and N2O.54 As mentioned in the issue of

Legislative and Regulatory Trends in the

Agricultural Products Industry, the monitoring and

control of such nonpoint emissions is more

challenging than that of point sources.55

Proposals for regulations that include emissions

from crop cultivation sources have been set forth

in the U.S., while international organizations,

including the United Nations (UN), are developing

resources to assist policymakers in regulating

agricultural GHG emissions.56 These actions

suggest that future GHG regulations could affect

crop cultivation, with direct and indirect impacts

(the latter through the supply chain) for the

Agricultural Products industry. A heavy reliance on

biofuel manufacturers as the main consumers of

corn and soy is likely to incentivize growers to

reduce their emissions from cultivation. As

regulations of lifecycle emissions from renewable

fuels become more stringent, biofuel


manufacturers are likely to switch to farms with

lower environmental impacts.

In addition, some of the industry’s major activities

that result in point-source emissions fall under the

scope of current GHG regulations in the U.S. and

abroad. Sugar, grain, and oilseed milling is the

largest segment of the Agricultural Products

industry globally.57 Milling grain is an energy-

intensive process; energy is used for steam

creation and may be generated from coal, natural

gas, wood, fuel oil, or electricity. The use of such

fuels within companies’ operations can result in

Scope 1 GHG emissions, which are subject to

regulation in some regions. Many companies in

the industry also utilize sugar bagasse (the fibrous

portion of the sugarcane that remains after the

juice is extracted) and other types of biomass for

electricity generation at milling and processing

facilities.58 While emissions from most renewable

sources, such as agricultural crops or waste,

biodiesel, and fuel ethanol, are currently excluded

from compliance obligations, the regulatory

environment may become more stringent in the

future, with a potential to materially affect

agricultural companies.59

Less significant sources of GHG emissions in the

industry include energy use for operating

agricultural machinery, including irrigation pumps.

These are primarily CO2 emissions.60 Moreover,

companies in the Agricultural Products industry

may own and operate large fleets of vehicles and

vessels. Emissions related to crop transportation

are discussed in the issue of Energy & Fleet Fuel

Management, below.

Agricultural companies involved in crop cultivation

are reducing their nonpoint emissions by

switching to more advanced farming practices

that help them reduce the amounts of fertilizers

and pesticides used without affecting yields. At

the same time, the use of renewable sources of

energy and the reduced reliance on grid electricity

may deliver substantial cost savings as well as

decreased risk of exposure to evolving regulations

and volatile energy prices.

Company performance in this area can be

analyzed in a cost-beneficial way through the

following direct or indirect performance metrics

(see Appendix III for metrics with their full detail):

• Gross global Scope 1 emissions;

• Biogenic CO2 emissions; and

• Description of long-term and short-term

strategy or plan to manage Scope 1

emissions, emission-reduction targets, and

an analysis of performance against those

targets.

Evidence

The broader agricultural sector, including livestock

production, is the largest contributor to non-CO2

anthropogenic GHG emissions, generating about

54 percent of such emissions in 2005 globally.61

Methane (CH4) and N2O are the primary GHGs

generated from agriculture and are, respectively,

25 times and 310 times more potent GHGs than

CO2.62 Emissions from crop cultivation stem

primarily from agricultural soil management and

land use changes, and to a lesser extent from

agricultural machinery.

Agricultural soil management, which includes the

use of fertilizers and tillage practices, contributed

74.8 percent of the total U.S. N2O emissions in

2012.63 This is largely due to the amount of

nitrogen-based fertilizers that are applied to

increase crop yield.64 From 2005 to 2030, global

agricultural N2O emissions are expected to rise by

35 percent, to 2,483 million tons of CO2e—or

35.8 percent of agriculture’s total GHG

emissions—after rising by 11 percent between

1990 and 2005. The rise in synthetic fertilizer use


and agricultural acreage is the primary driver of

this increase.65

Land management practices correlate with N2O

emissions and CO2 sequestration. Techniques such

as slow-release fertilizers, conservation tillage,

manure application, nitrification inhibition, and

fertilizer-application timing can significantly

reduce the amount of nitrogen emissions.66

Carbon can be sequestered within organic matter

in soils; however, there are trade-offs involved.

Although soil sequestration can be used to store

CO2, it may result in a rise in N2O emissions, given

the increased volume of decomposing organic

matter.67

Land clearing for crop production is another

major GHG source globally, particularly in

developing countries with considerable forest

resources. Mature forests store significant

amounts of carbon absorbed from the

atmosphere in wood, leaves, and soil.

Deforestation contributes to 15 percent of global

GHG emissions.68 Worldwide demand for palm

oil, an important oilseed crop produced by many

companies in the Agricultural Products industry,

has led to widespread forest clearing and

peatland burning to create plantations in

Indonesia. As a result, Indonesia is now one of the

top GHG emitters in the world.69

According to the USDA, reforestation represents

the greatest potential carbon sink because of the

large tracts of land currently under cultivation and

the storage potential of forests. Reforestation

offset 13.5 percent of total U.S. GHG emissions in

2012.70 However, the expected rise in food

demand in the coming years makes wide-scale

reforestation difficult.71 International groups are

working to address GHG emissions from land

clearing. UN-REDD works to reduce deforestation

and forest degradation in developing countries,

including from forest conversion to cropland,

which is one of the leading causes of

deforestation.72 If the Agricultural Products

industry is able to reduce its nonpoint GHG

emissions by switching to more sustainable

farming practices, it is likely to mitigate

aggravating climate change impacts and to ensure

greater productivity in the long term.

Analysis by the U.K. Committee on Climate

Change suggests that most options for

agricultural abatement of emissions are cost-

saving. Only three options (new species of

nitrogen-fixing plants, anaerobic digestion on pig

farms, and covered lagoons and slurry tanks on

beef and dairy farms) entail a positive cost.73

Using production data from farms in and around

southwest Minnesota, researchers from the

University of Minnesota and Colorado State

University showed that limiting nitrogen fertilizer

application to optimal levels and minimal tillage

practices could reduce GHG emissions by 65

percent.74

Whether biofuels actually reduce GHG emissions,

compared with fossil fuels, depends on the effects

of land use change—i.e., whether natural lands

are converted to farmland. The U.S. Energy

Independence and Security Act of 2007, which

expanded the Renewable Fuel Standard (RFS),

requires conventional renewable fuels (e.g.,

cornstarch ethanol) to reduce lifecycle emissions

relative to fossil fuels by at least 20 percent,

biodiesel and advanced biofuels to reduce

emissions by 50 percent, and cellulosic biofuels to

reduce emissions by 60 percent after accounting

for indirect land use change.75 In 2010, the

European Commission encouraged governments,

industry, and non-governmental organizations to

set up voluntary schemes to certify biofuel

sustainability under the criteria established by the

Renewable Energy Directive. To meet E.U.

standards, biofuels must lower GHG emissions by

at least 35 percent when compared with fossil


fuels, an amount that will rise to 50 percent in

2017 and to 60 percent in 2018.76

The biofuels industry is one of the main

purchasers of corn and soy in the U.S. As of 2013,

approximately 43 percent of the corn grown in

the U.S. was used for ethanol and dried distillers

grains, a coproduct of ethanol production used to

feed livestock and poultry.77 In 2013, 13 percent

of the oil from the soybean crop was used for

ethanol, as was 24 percent of the oil from

crushed soybeans.78 Lower-carbon ethanol may

present an opportunity for companies in the

Agricultural Products industry to grow revenues

because of market price premiums and/or

increased market share due to greater demand

from biofuel producers. If agricultural products

companies can reduce the carbon-intensity

coefficient associated with corn production, it will

likely reduce the carbon intensity of ethanol,

benefiting both farmers and producers. For

example, in its FY2013 Form 10-K, Pacific Ethanol

stated, “[t]he lower carbon-intensity rating of

ethanol we produce or resell is valued in the

market by our customers and has enabled us to

capture premium prices for our ethanol.”79 In

addition, more ethanol could be demanded under

compliance with the federal RFS—and in

California, with the state’s Low Carbon Fuel

Standard—if the ethanol emissions are lower than

CO2 emissions.

The industry also contributes to CO2 emissions

through the fossil fuels used to power agricultural

machinery. A study published in Environmental

Research Letters found that emissions from diesel-

fueled irrigation pumps in arid regions of China,

the world’s second-largest crop irrigator,

contribute approximately 33 megatons of CO2e

annually, or about the same amount of emissions

generated by the country of New Zealand.

Pumping water for irrigation in China represents a

substantial portion of direct energy use on

farms.80

GHG emissions present a regulatory risk, as

policymakers worldwide continue to advocate for

more-stringent emissions reductions. Currently, a

number of organizations and policymakers are

working to include agricultural sources of

emissions into institutional climate change

frameworks. For example, as part of its 2007

Climate Change and Emissions Management Act,

Canada’s Alberta Province established voluntary

N2O emissions-offset options for crop farmers. In

the U.S., agricultural GHG emitters, including

animal and crop agriculture, have opportunities to

participate in voluntary emissions reporting and

reduction programs; in 2006, the USDA created

technical guidelines for a voluntary GHG reporting

program for agricultural and forestry sources,

which the Department of Energy adopted.81

Several climate bills proposed in the U.S. Congress

would create a carbon credit system to account

for emissions based on agricultural land

management. Emitters would receive tradable

carbon credits for emissions offsets. However, the

incentive-based crediting systems do not force

emitters to comply, as there is no penalty for not

doing so.82 The USDA predicts that gross

agricultural revenue from offsets will reach $2.4

billion per year by 2020 and $29.7 billion per year

by 2050.83

New GHG regulations may also bring various

opportunities to companies in the industry. The

Climate Action Reserve, a nonprofit carbon-offset

registry for North America, provides opportunities

for farmers to earn revenue by reducing the

application of synthetic nitrogen fertilizer to corn

crops.84 The California Air Resources Board is

considering a protocol to allow rice farmers in the

Sacramento Valley and the Mississippi River Valley

to earn revenue for reducing GHGs.85


In fact, while the proposed GHG cap-and-trade

schemes in the U.S. would not directly regulate

agricultural emissions related to land

management and cultivation, the availability of

carbon credits could encourage crop producers to

utilize GHG mitigation practices.86 The California

Air Resources Board estimates that by 2020,

agriculture, including livestock production, could

contribute as much as 10 percent, or 17 million

metric tons of CO2e, toward the state’s GHG

reduction target.87

To reduce nonpoint GHG emissions, companies

may seek innovative ways of increasing the

efficiency of fertilizers. For example, planting

crops that utilize nitrogen more effectively would

require less nitrogen-based fertilizer to achieve

equivalent yields, resulting in lower N2O

emissions. At the same time, this would

noticeably reduce costs for growers.88 Cargill’s

AgHorizons business, which provides farmers with

agronomic solutions to improve yields while

reducing required inputs, created detailed field-

management plans for fertilizer and chemical use

for more than a million acres in Canada. The

company also developed variable-rate nutrient

maps for 500,000 acres in the U.S. that would

help crop producers identify soil fertility levels and

determine where fertilizer application is the most

beneficial. The maps allowed farmers to reduce

the amount of GHG per bushel of crop

produced.89

A significant portion of direct emissions of

companies in the Agricultural Products industry

occurs at their milling facilities. As discussed

earlier, sugar, grain, and oilseed milling is the

largest segment of the industry in terms of

revenues generated.90 Milling is a very energy-

intensive process; for example, wet-corn milling

accounts for 15 percent of the energy of the

entire food industry. Most of this energy, in the

form of electricity, steam, or fuel, is used for

drying and grinding; fuel is usually used for steam

generation or direct drying.91

Such emissions pose current and near-term

regulatory risks for the industry. According to the

EPA’s GHG Reporting Program, direct emissions

from the U.S. processing facilities of agricultural

products companies amounted to 27 million

metric tons of CO2e in 2013, not including

emissions from the transportation of agricultural

products.92 In 2013, ADM reported to CDP

(formerly the Carbon Disclosure Project) almost

14.8 million metric tons of Scope 1 emissions

globally.93 The same year, Cargill reported

approximately nine million metric tons of Scope 1

emissions, and Bunge, a vertically integrated

producer of grain and oilseed products, reported

1.5 million. Most of the emissions from all three

companies occurred at their U.S. facilities and

were in the form of CO2.94

California’s Cap-and-Trade Program, adopted in

2011, aims to curb GHG emissions by establishing

limited GHG allowances for covered entities and

by providing an exchange mechanism for the

distribution and pricing of these allowances.

Entities that emit 25,000 metric tons or more of

CO2e are subject to mandatory reporting

regulation and record-retention requirements.

Emissions from sources like agricultural crops and

waste, biodiesel, and fuel ethanol do not count

toward the compliance obligation, but do count

toward the reporting threshold.95 Companies in

the Agricultural Products industry generate a

significant share of their energy from biomass-

derived fuels. While emissions associated with

biomass fuels may not currently represent a

material risk from the compliance perspective,

evolving climate change regulations may become

more stringent. Therefore, companies that focus

on reducing their total Scope 1 emissions,

including those from biomass sources, may be

better protected from regulatory risks.


Besides the regulatory risks associated with GHG

emissions, companies have an incentive to reduce

the cost of purchased fuel and natural gas, which

account for a substantial part of their operating

expenses. The 2011 Annual Survey of

Manufacturers by the U.S. Census Bureau found

that the cost of purchased fuel in wet-corn milling

accounted for six percent of the total cost of

materials and more than nine percent of total

value added. The average numbers for all

manufacturing industries were 1.3 percent of

materials and 1.8 percent of total value.96 In its

FY2014 Form 20-F, Adecoagro stated that fuel

constituted 11 percent of its cost of production.

Further, the company disclosed risks associated

with increasing energy prices and interruptions of

the energy supply due to “new laws or

regulations, imposition of new taxes or tariffs,

interruptions in production by suppliers,

imposition of restrictions on energy supply by

government, worldwide price levels and market

conditions.”97 Given the volatility in energy prices,

companies have an opportunity to significantly

reduce their cost of revenue through energy

efficiency.

Some companies have achieved energy-cost

savings through emissions reductions. In 2013,

Associated British Foods, a diversified agriculture,

food, and retail company, reported that it was

able to reduce its CO2 emissions by seven percent,

from 3.36 to 3.14 million metric tons. The

reduction was achieved through the increased use

of renewable fuels in the total energy mix and the

reduced use of heavy fuel oil. The company puts

strong emphasis on carbon emissions reduction

and energy efficiency improvements and is

working toward energy- and carbon-savings

targets under the U.K. government’s Climate

Change Agreements.98

In general, company financial disclosures allude to

institutional and policy efforts to address GHG

emissions, including some of the key channels of

impact discussed above. In its FY2013 10-K,

Bunge stated, “[t]he imposition of regulatory

restrictions on greenhouse gases could … affect

land-use decisions, the cost of agricultural

production, and the cost and means of processing

and transport of our products, which could

adversely affect our business, cash flows, and

results of operations.”99

Value Impact

More stringent GHG regulations that include crop

cultivation in their scope present risks and

opportunities for the Agricultural Products

industry. Regulation could require cultivation

practices that produce less GHG emissions, such

as reduced nitrogen fertilizer use, which in turn

could adversely impact yields. Diminished yields

could reduce salable products, resulting in lower

revenues. At the same time, regulatory

compliance can increase the costs of doing

business, lowering operational efficiency,

particularly for those companies not adept at or

face difficulties in managing GHG reductions.

Conversely, GHG reductions could be monetized

through carbon-offset credits. By reducing GHG

emissions at the crop cultivation stage, companies

in the industry may benefit from stronger demand

from producers of renewable fuels who seek to

minimize the lifecycle emissions of their products.

Given that fuel used in milling processes accounts

for a large portion of total costs, companies that

invest in energy efficiency and manage their

energy mix effectively can substantially reduce

their operating expenses and improve their profit

margins. Firms that currently derive most of their

energy from biogenic sources may benefit from

the lower risks associated with energy

independence, less volatile fuel prices, less

frequent supply disruptions, and regulations that

exempt biogenic emissions from compliance. On


the other hand, if the regulatory environment

were to change toward requiring an accounting

of these emissions as Scope 1, agricultural

products companies may be materially impacted.

To meet more stringent regulatory norms,

agricultural products companies may be required

to increase their capital expenditures toward new

equipment.

While regulatory development in this area is an

inherently slow and politically charged process

whose outcome is nearly impossible to predict,

the probability and magnitude of the impact of

GHG emissions on the industry are likely to

increase in the near to medium term, given the

trend toward greater regulation of GHGs.

Energy & Fleet Fuel Management

Sugar, grains, and oilseed milling requires

substantial quantities of energy, which is sourced

from the direct combustion of fossil fuels and the

electrical grid. At the same time, extensive fleets

of companies in the wholesale segment require a

substantial amount of fuel to operate. Fossil fuel

and electrical energy consumption can contribute

to environmental impacts, including climate

change and pollution. The industry’s energy-

intense production has direct regulatory

implications due to Scope 1 GHG emissions from

on-site fossil fuel use. The financial risks from the

direct use of fossil fuels were discussed earlier in

the issue of Greenhouse Gas Emissions.

Furthermore, impacts from purchased electricity

consumption, including emissions from utilities,

have the potential to indirectly affect the

operations of agricultural products companies.

Sustainability factors—such as increasing GHG

emissions regulations, incentives for energy

efficiency and renewable energy, and risks

associated with nuclear energy and its increasingly

limited license to operate—are leading to

increases and volatility in the prices of

conventional electricity sources while also making

alternative sources cost-competitive.

The trade-off between on-site versus grid-sourced

electricity and the use of alternative energy can

play an important role in influencing both the cost

and reliability of a company’s energy supply, as

well as the extent of its direct versus indirect

emissions. As climate change regulations become

stricter, companies may become accountable for

their Scope 1 emissions from biogenic sources of

energy. Therefore, it is becoming increasingly

important for companies to manage their overall

energy efficiency, their reliance on different types

of energy and the associated risks, and their

access to alternative energy sources.

Moreover, companies involved in the distribution

and wholesale of agricultural products may

operate extensive logistics networks and own

trucks, railcars, and ships, and therefore consume

a significant amount of fuel. Transport fuel can

exhibit pricing volatility, given global demand-

supply dynamics and regulatory pressures related

to GHG emissions and other environmental and

social externalities, making this an important

aspect of operations to manage. While GHG

emissions from mobile sources are typically not

regulated directly, the cost of transportation fuel

can represent a substantial portion of operating

expenses.





• Operational energy consumed,

percentage grid electricity, percentage

renewable; and


• Fleet fuel consumed, percentage

renewable.

Evidence

Energy is a critical input for the activities of the

Agricultural Products industry, including

processing and transport. The significant costs of

purchased fuels, whose combustion contributes to

the industry’s Scope 1 GHG emissions, were

discussed earlier in the issue of Greenhouse Gas

Emissions. Similarly, the industry accounts for a

significant share of purchased electricity

consumption relative to other industries and has

relatively high costs associated with such

purchases. According to the U.S. EPA Annual

Survey of Manufacturers, companies in the

Agricultural Products industry purchased almost

24 million megawatt-hours (MWh) of electricity

for heat and power in 2011—approximately three

percent of the total electricity purchased by all

manufacturing industries. The total cost of

purchased electricity was more than $2 billion for

the industry and accounted for 2 to 6 percent of

the value added and 1 to 4 percent of the total

cost of materials, depending on the activity. In

comparison, the average for all manufacturing

industries was two percent of the value added

and 1.6 percent of the total cost of materials.

Wet-corn milling, for example, is the most energy-

intensive process when considering value added,

while sugarcane and oil refining is the least

intensive among the industry’s different

activities.100

The Energy Information Agency (EIA) estimates

that the retail prices of electricity in the U.S. will

increase at a modest pace through 2035. In 2014,

the average retail electricity price per megawatt-

hour was $110 for commercial use, $72 for

industrial use, and $127 for residential use. The

III 1 cwt = 50.8 kg.

EIA’s 2014 Annual Energy Outlook forecasts the

2035 retail electricity prices for commercial,

industrial, and residential uses to be $118, $82,

and $142, respectively.101

Companies report their Scope 2 emissions from

electricity and steam purchase to the CDP. For

example, in 2013, ADM had almost 3 million

metric tons, Cargill more than 6 million metric

tons, and Bunge just under 1.5 million metric tons

of Scope 2 emissions. In the same year, global

facilities of the three companies purchased 4.8,

9.6, and 1.7 million MWh of electricity,

respectively.102

A report on the manufacturing industries by the

U.S. Census Bureau estimated that in 2005,

production of one hundredweight (cwt)III of flour

required 4 to 7 kilowatt-hours of energy. Using

2005 energy prices, the energy cost of milling one

ton of wheat was $4 to $7.IV In milling operations,

electrical motors account for about three-quarters

of electricity consumption. Therefore, improving

the energy efficiency of equipment can help

reduce operational costs.103 Maximum-capacity

usage in the overall process can reduce energy

consumption by 5 to 10 percent, using high-

efficiency motors and total efficient maintenance

can deliver 2 to 5 percent in energy savings, and

optimizing air flow and avoiding leaks in

conveying systems can reduce energy use by 10 to

20 percent.104

Companies can generally achieve significant

energy-cost savings by reducing inefficiencies at

their milling facilities. For example, GE provided

its industry clients with equipment and

technologies to help reduce their energy use.

Modifying the cleaning process of a wet-corn

milling plant improved its cleaning quality and

process efficiency, which saved the client

IV Daily wheat flour production is about 1 million pounds for average mills and 2 to 3.2 million pounds for the largest mills in the U.S.


$300,000 in energy costs and $61,000 in cleaning

costs. The return on investment of this project

was more than 400 percent, with annual savings

of $290,000.105

Aside from increasing electricity prices, the

interruption of an energy supply could present

significant risks to companies in the Agricultural

Products industry, particularly in developing

countries, where the existing electricity grid may

not be able to meet growing demand. According

to Adecoagro’s FY2014 Form 20-F, several of the

company’s facilities in Argentina are subject to a

quota system aimed at reducing energy use at

industrial facilities to ensure adequate supply for

residential buildings during peak months of the

year. The company therefore experiences frequent

electricity disruptions during certain work shifts.

Adecoagro tries to minimize these risks by

utilizing off-grid sources of energy, such as

firewood and liquefied natural gas, and by

stocking required supplies in advance of high-

demand periods.106

To reduce the risk of energy-supply disruptions,

some companies in the industry invest in projects

that will help them achieve energy independence.

These projects may also improve profitability by

hedging against volatile energy prices. For

example, Bunge operates cogeneration facilities at

its sugarcane mills. By burning sugarcane bagasse,

the company generates enough electricity to meet

the energy requirement of its mills. At most of its

mills, the company also generates extra revenue

from selling surplus electricity to the local grid. In

2014, Bunge’s cogeneration capacity was around

314 megawatts, 112 megawatts of which the

company was able to resell to third parties,

according to its FY2014 Form 10-K.107

The largest companies in the industry are vertically

integrated and operate extensive logistics

networks for crop transportation. For example,

according to ADM’s FY2014 Form 10-K, the

company owns approximately 13,500 railcars,

2,100 barges, 1,300 trailers, 300 trucks, and nine

oceangoing vessels. It also leases approximately

14,600 railcars, 500 barges, 300 trucks, and 32

oceangoing vessels. The company further stated

that its transportation operations are heavily

dependent on the costs of diesel and other fuels

and may be adversely affected by greenhouse gas

regulation or taxation.108 Bunge operates and

manages approximately 200 ships, which it uses

to transport approximately 35 million tons of

grains and oilseed and 2.5 million tons of

vegetable oils annually.109

Powering such large fleets requires a lot of fuel;

companies can realize substantial cost savings by

reducing fuel consumption across all

transportation means. For example, by optimizing

routes from mills to customers’ locations for

shipments, Cargill was able to reduce emissions

by 252 metric tons of CO2 during fiscal year 2013,

which also indicates a reduction in fuel

consumption and therefore fuel costs.110 In its

2014 Corporate Responsibility report, ADM stated

that investments in fuel efficiency, such as

installing auxiliary power units in its trucks, have

helped the company save 458,000 gallons of fuel

since 2008. Moreover, the company’s oceangoing

vessels emit 27 percent less CO2 than

conventional bulk carriers do. ADM’s riverboats

deploy double-hull protection around the fuel and

lubricant bunker tanks, which delivers a 10 to 12

percent fuel savings annually.111 To reduce fuel

consumption, 25 percent of Bunge’s fleet has run

at eco-speed as of July 2013.112

Reducing fuel consumption can therefore have a

direct impact on expenses and can help expand

profit margins. The SmartDrive Commercial

Transportation Fleet Fuel Efficiency Study, issued

in 2011 by transportation technology company

SmartDrive Systems, found that truck drivers who


use eco-driving techniques can improve fuel

efficiency by an average of 22 percent. That 22

percent improvement means fleet operators could

save up to $12,553 in fuel costs per vehicle every

year. The study evaluated 695 Class 8 tractor-

trailers, heavy-duty trucks, and drivers in a broad

range of locations. Eco-driving best practices

include accelerating and decelerating smoothly,

reducing excess idling, avoiding hard turning, and

maintaining a consistent speed.113

Value Impact

Energy management primarily impacts current and

future costs of operation. Climate regulation and

other sustainability factors could result in higher

electricity and fuel prices, increasing operating

costs for agricultural products companies.

Likewise, companies have an opportunity to

generate cost savings through improved energy

efficiency of equipment at milling and processing

facilities and of vehicles and vessels, greater use

of electricity produced onsite, and renewable

energy. In addition to impacts on operating costs,

there could be one-time effects on cash flows

through capital expenditures for energy-related

projects. Active energy management can also

reduce a company’s risk profile and its cost of

capital in the face of volatile electricity prices and

electricity supply risks.

The probability and magnitude of these impacts

could increase in the future as emerging

governmental regulations on environmental

impacts continue to influence energy costs.

Water Withdrawal

The Agricultural Products industry is reliant on

water for crop cultivation and product processing,

with crop yields dependent on receiving requisite

amounts of water. The industry generally

accounts for relatively large water withdrawals

compared with those for other uses in a

community or region. Increasing water stress

worldwide is therefore a critical issue for the

industry.

While water has typically been a freely available

and abundant commodity in many parts of the

world, it is becoming a scarce resource. This is

due both to increasing consumption from

population growth and rapid urbanization and to

the potential for climate change to reduce

supplies. Furthermore, water pollution can render

water supplies unusable or expensive to treat.

Based on recent trends, it is estimated that by

2025, important river basins in the U.S., Mexico,

Western Europe, China, India, and Africa will face

severe water problems as demand overtakes

renewable supplies. Many important river basins

can already be considered “stressed.”114

In the U.S., allocation of surface waters and

groundwater varies according to each state’s

regulatory system. Historically, there were three

allocation systems: the riparian in the East, where

water is abundant; the prior appropriation in the

West; and the hybrid system in a few states.

According to the prior-appropriation system, the

most senior appropriator has the highest priority

on water rights and may not have to reduce its

water use during a shortage.115 The recent

drought in California, however, prompted state

officials to impose water-use limits on farmers

with the strongest water rights.

The water risk for an agricultural products

company is determined by its degree of vertical

integration, the type of crop(s) it processes or

grows, and its operational presence in regions of

elevated water stress. For companies with no

direct cultivation operations, water risk is present

primarily in the availability of water for product

processing.


Significant volumes of direct water consumption,

particularly in water-stressed regions, introduces

operating risks due to reduced availability, higher

water prices, and competition with other water

consumers for water resources, potentially

creating social tensions. Growing water scarcity

can therefore affect operating costs, revenues,

and the productivity of the assets of agricultural

producers. These factors can be exacerbated by

inefficient irrigation practices.V

Methods to improve water efficiency in irrigation

and processing and agricultural management

practices to mitigate adverse effects on crop yields

offer the industry opportunities to manage risks,

reduce costs, and preserve assets over the long

term.





• (1) Total water withdrawn and (2) total

water consumed, percentage of each in

regions with High or Extremely High

Baseline Water Stress; and

• Discussion of water withdrawal risks and

description of management strategies and

practices to mitigate those risks.

Evidence

Agriculture accounts for the majority of

freshwater consumption worldwide—

approximately 70 percent of global freshwater use

is directed toward crop irrigation and livestock

watering. In the U.S., agriculture consumes

approximately 37 percent of total freshwater

withdrawals.116 In Organization for Economic

Cooperation and Development countries,

V Crops are also dependent on rainfall. Climate change raises the probability of extreme weather events, including droughts and

agricultural water withdrawals account for 44

percent of freshwater withdrawals, while in

developing nations they may reach more than 90

percent.117

The industry’s reliance on irrigation to support or

enhance crop growth presents an operating risk,

especially in areas of water scarcity. Substantial

increases in water costs or inadequate supplies

could result in higher operating costs and reduced

crop yields, which could lower potential revenues.

Irrigated land is, broadly speaking, more

productive than non-irrigated land: Global

irrigated cropland totaled 304 million hectares in

2008, accounting for more than 40 percent of

crop production on less than 20 percent of

cultivated land.118 The rise in global crop

cultivation for food and energy over the past 50

years has driven the increased use of irrigation to

enhance productivity. During that period, global

cultivated land area rose by 12 percent, while

irrigated farmland nearly doubled.119 The UN Food

and Agriculture Organization estimates that

harvested irrigated land will grow by 17 percent

by 2050, leading to an 11 percent increase in

water use after accounting for projected

improvements in water efficiency.120

The rise in the industry’s water requirements

places strain on irrigated lands and other

consumers. Exacerbating the issue, agricultural

water efficiency tends to be low; by one estimate,

60 percent of the 2,500 trillion liters used globally

per year is lost from runoff or

evapotranspiration.121 High water requirements

and inefficiency contribute to a growing problem

with water stress, as 15 to 35 percent of water

use in irrigation may be unsustainable, with

withdrawals exceeding the natural supply.122

floods, which can adversely affect crop yields. This aspect is covered in the issue Climate Change Impacts on Crop Yields.


Global climate change is expected to increase the

frequency and intensity of droughts and other

extreme weather events. Droughts and irregular

rainfall can increase the need for irrigation in

order to limit the impact on crop yields. At the

same time, increased water stress due to droughts

can reduce the availability of water supplies for

irrigation. With the possibility of more frequent

and more intense droughts brought on by climate

change, local or regional governments could

begin restricting water use, or water utilities could

increase water rates, affecting large consumers of

water. For example, 2014 was the hottest year in

California since 1895, with average temperatures

4.5 degrees Fahrenheit above the 20th-century’s

average.123 Nine million acres of farmland are

irrigated in California, which represents 80

percent of all human water use.124 The state’s

four-year drought prompted the governor, Jerry

Brown, to issue an executive order for mandatory

statewide water restrictions—the first of its kind

in U.S. history.125 Water agencies failing to reduce

water use by 25 percent will be penalized with

$10,000-a-day fines. On June 12, 2015, California

ordered the largest water cuts in history by

farmers with the state’s senior-water rights in the

Sacramento, San Joaquin, and Delta watersheds.

Earlier, thousands of farmers with less secure

water rights were ordered to stop pumping from

the San Joaquin and Sacramento watersheds.126

A study by the University of California, Davis, with

assistance from California Department of Water

Resources, estimates that the 2014 drought in the

state led to a reduction of 6.6 million acre-feet in

surface water available to agriculture and resulted

in an increase in groundwater pumping by more

than 5 million acre-feet. The study further

concludes that the resulting net water shortage

could cause an $810 million loss in crop revenue

VI Based on the World Business Council on Sustainable Development (WBCSD) Corporate Water Tool, version 2012.

and a $203 million loss in livestock and dairy

revenue. Additional pumping costs were

estimated to amount to $454 million. Overall, the

2014 drought’s cost to the state was $2.2 billion,

including $1.5 billion in direct costs to agriculture.

Moreover, California lost 17,100 seasonal and

part-time jobs.127

The effects of climate change are likely to

exacerbate the existing water stress on arable

lands; approximately 28 percent of global

cropland is in areas of high water stress,

according to the World Resources Institute.128 For

example, almost 90 percent of irrigated maize

farmland in the U.S. is in areas of high or severe

water stress.129 Globally, 56 percent of irrigated

crops and 21 percent of rain-fed crops are grown

in areas of high or very high water stress.130 On an

individual company basis, water intensity varies

with factors including the type of crop(s)

processed and the scale and location of farming

or processing operations, which determine the

extent of the impact on operations from

increasing water stress.

Companies operating in regions of high water

scarcity could be at a greater risk for crop failure

or water-related disruptions to product-processing

operations. Bunge consumed approximately 64

million cubic meters (16.9 billion gallons) of water

in 2013. While only 12 of its more than 200

processing facilities are located in areas of water

stress of any degree,VI Bunge indicates that some

of its crop origination occurs in areas of water

stress, including Argentina, India, South Africa,

Australia, and the U.S.131

Companies recognize the costs and risks to

operating results from increasing water scarcity.

Chiquita Brands reports that the average water

footprint of a kilogram of bananas is 400 to 600


liters, and approximately 90 percent of this

footprint lies in the cultivation phase. The

company found that the “increasing irregularity

and intensity of rainfall and droughts caused by

climate change have already led to an increased

need for irrigation, and potential cost increases,”

adding that “water scarcity will probably lead to

new regulatory frameworks for water allocation

and higher water prices.”132 Similarly, ADM stated

in its FY2013 Form 10-K, “[a]ny major lack of

available water for use in certain of the

Company’s processing operations could have a

material adverse impact on operating results.”133

According to the Agria Corporation’s FY2014

Form 20-F, “[t]he Australian rural sector is

particularly susceptible to drought, which has the

potential to result in a material adverse impact on

that country’s agricultural revenue.”134

Companies in the industry have already

experienced direct adverse impacts from water

shortages, underscoring the importance of water

efficiency. A drought in the South-Central region

of Brazil in 2010 and 2011 caused a decline in the

sugarcane harvest, resulting in lower capacity

utilization at BRF’s sugarcane mills and weaker

financial results in Bunge’s sugar and bioenergy

segment.135

The 2012 drought in the U.S. caused ADM to

nearly lose access to water at some of its

processing facilities in Decatur, Illinois, as the city

aimed to “lessen the strain” on its water supply.

(ADM used to withdraw 14.8 million gallons per

day from Lake Decatur). As a result, the company

agreed to pay the city $2.5 million to develop

alternate water sources in consideration of future

water shortages. The agreement allowed ADM to

build two underground collector wells to provide

water to its North Water Treatment Plant.136

Several agricultural companies are working to

address this issue. In 2013, Chiquita Brands set a

goal of reducing the use of freshwater in its

operations by 15 percent by 2020 relative to a

2007 baseline. In its FY2013 Form 10-K, the

company also reported that it works with third-

party growers to reduce their water and pesticide

use.137 Adecoagro reported that it was working to

increase the efficiency of water use and

simultaneously decrease the risk of soil erosion.

The company’s efforts include rainwater

harvesting for certain irrigated crops such as rice,

precise leveling of the land to reduce irrigation

requirements, and the use of pivot spraying

systems and soil moisture sampling for crops such

as corn and sunflower seeds.138 Meanwhile, berry

company Driscoll collects data in real-time on

water use from its California Central Coast

farmers.139

In addition, food and beverage companies have

sent signals to agricultural producers by

developing policies and setting goals to source

ingredients sustainably. Coca-Cola, PepsiCo, and

Unilever have agricultural policies; General Mills

and Kellogg have time-bound sustainable

sourcing pledges. Meanwhile, General Mills is

providing interest-free loans to broccoli and

cauliflower growers in Mexico’s Irapuato region to

increase the adoption of drip irrigation,

contributing to 1.1 billion gallons in annual water

savings.140

Value Impact

Water use can have diverse financial implications.

A stable water supply is crucial to crop cultivation

and agricultural products processing. Rising water

stress related to climate change or other factors

increases the risk of crop failure, directly lowering

revenues of crop producers and raising raw

material costs for crop processors. Furthermore,

limited access to water could directly affect a

company’s ability to operate processing facilities

or could require investment in alternate sources of


water. Disruptions to operations or crop failure

could affect cash flow, and, in turn, negatively

affect a company’s credit profile, impacting its

cost of capital.

All the aforementioned impacts indicate that the

value of water rights for agricultural products

companies could significantly increase in the

future. As evidence shows, climate change

impacts may prompt regulatory authorities to limit

companies’ ability to withdraw necessary amounts

of water, especially in regions with high or

extremely high baseline water stress. These

actions are likely to significantly increase the cost

of doing business, as exacerbating water stress

and irregular rainfall also introduce the need for

increased irrigation. To balance the need for

additional irrigation and regulatory limitations,

companies will have to increase their capital,

operating, and R&D expenditures to improve their

agricultural processes and to secure alternative

water sources.

Unsustainable agricultural practices with respect

to water withdrawal and use are likely to have a

negative reputational impact on the Agricultural

Products industry. As food and beverage

companies are becoming more concerned about

the environmental performance of their suppliers,

agricultural products companies that fail to

manage the issue may experience lower demand

for their products.

Given the increasing water scarcity and the

potential for increases in water prices, the

probability and magnitude of the impact of water

management on financial results in the

Agricultural Products industry are likely to

increase in the near term.

Land Use & Ecological Impacts

Land and ecosystems are key natural resources for

the Agricultural Products industry. The vast global

land footprint of crop cultivation, combined with

intensive modern agricultural practices, has

diverse ecological impacts that generate

regulatory risks and can adversely affect crop

cultivation. The primary channels by which the

industry can affect ecological resources are

through the discharge of agrochemicals, including

pesticides and fertilizers, to the environment and

through species’ habitat degradation and

biodiversity loss resulting from the use of

agrochemicals, monoculture cultivation, forest

fragmentation, and land clearing.141 Monoculture,

the practice of growing the same crop over large

areas each year, is typically pursued by

agricultural products companies to try to achieve

economies of scale and/or to produce high

volumes of profitable crops, while land clearing is

pursued to meet growing worldwide consumer

demand.142

Genetic engineering in agriculture and the

development of herbicide-resistant and insect-

resistant crops allow for an increased use of

fertilizers and pesticides. While there are positive

impacts on crop yields, the use of these chemicals

also has environmental and social consequences.

Several studies link exposure to pesticides to

human health hazards. Pesticides are also known

to have adverse impacts on land and biodiversity

by killing beneficial insects and soil

microorganisms. Moreover, excessive application

of nitrogen- and phosphate-based fertilizers may

result in the eutrophication (nutrient loading) of

water systems.

The deterioration of soil quality and the

biodiversity loss due to the use of pesticides and

fertilizers can diminish agricultural productivity,


which can have an adverse impact on crop yields

and the supply of raw materials. Water, air, and

soil pollution resulting from the use of

agrochemicals also presents a regulatory risk,

given the potential bans on the use of pesticides

or restrictions on land use in ecologically sensitive

areas.143

As the global population continues to grow, the

agricultural industry will face further challenges in

keeping its land productivity high to satisfy

increasing demand. For these reasons, agricultural

products companies are faced with the challenge

of maintaining high yields in the long term while

also reducing environmental externalities

associated with fertilizer and pesticide use,

monoculture cultivation, forest fragmentation,

and land clearing. Companies in the industry can

mitigate their operating risks from the

abovementioned factors and ensure their long-

term growth and profitability by addressing

environmental externalities through reduced

pesticide and fertilizer use, increased utilization

efficiency, and protection of biodiversity, water

quality, and sensitive lands. Company

performance in this area can be analyzed in a

cost-beneficial way through the following direct

or indirect performance metrics (see Appendix III

for metrics with their full detail):

• Descriptions of strategies to manage land

use and ecological impacts;

• (1) Volume of wastewater reused and (2)

volume of wastewater discharged to the

environment;

• Number of incidents of non-compliance

with water quality permits, standards, and

regulations;

• Amount of fertilizer consumption by (1)

nitrogen-based, (2) phosphate-based, and

(3) potassium-based fertilizers; and

• Amount of pesticide consumption by

hazard level.

Evidence

The use of agrochemicals and the ecological

impacts created by agricultural products

companies have global reach, because of the

international nature of many of these companies’

operations. While the factors discussed below are

most relevant for companies that own land and

have direct control over their farmer suppliers,

they are still important for companies without

direct control for which supply chain factors may

be more applicable.

The world’s population is expected to reach 9

billion people by 2050, and the UN Food and

Agriculture Organization estimates that 70

percent more food—or one billion tons of wheat,

rice, and other cereals and 200 million tons of

beef and other livestock—will be needed from

farmers to support this growth. It is a complicated

problem to solve, as most of the available

farmland is already being cultivated. Moreover, in

many cases, cultivation practices can diminish

land’s productivity through soil erosion and water

waste.144

While the “green revolution” and increased use

of fertilizers and pesticides helped boost the

world’s overall cropland productivity by 150

percent between 1961 and 2009, a recent UN

report found that in many areas of the world, the

growth rates fell after 2009, mostly because of

poor farming practices. According to the report,

25 percent of the world’s farmland is highly

degraded, 8 percent is moderately degraded, and

36 percent is stable or slightly degraded with soil

erosion, water degradation, and biodiversity loss.

Poor land use practices have led to pollution of

soil and aquifers in Western Europe, which has

resulted in further biodiversity loss.145

Modern agriculture is dependent on the

application of fertilizers, pesticides, and other


chemicals to boost yields and prevent crop losses.

This practice can generate significant

environmental externalities, including biodiversity

loss, and can lead to regulatory action, including

fines or restrictions on the use of certain

agrochemicals. The use of these substances

presents a challenge for the Agricultural Products

industry, as companies must balance agricultural

productivity with unintended impacts on the

environment. Crop losses due to pests and disease

without the use of pesticides range from 30 to 50

percent, depending on the crop, while fertilizer

application averaged 133.5 kilograms per hectare

of arable land between 2009 and 2011.146

Furthermore, crops are sometimes cultivated in

regions outside their natural range, and more

intensive application of agrochemicals is required

to sustain their yields. This increases the risks

stemming from environmental pollution, which

are addressed below.147

The industry uses various types of fertilizers, and

some may be more harmful to the environment

than others. For example, the application of

nitrogen- and phosphate-based fertilizers and

manures can lead to eutrophication in rivers,

lakes, and oceans, including algal blooms that can

release toxins and cause severe hypoxic water

conditions, which can injure or kill aquatic life.148

While nutrients contribute to eutrophication of

waters, nitrates in drinking water also carry a

hazard to humans and animals. A well-known

example of eutrophication is the large “dead

zone” in the Gulf of Mexico, created in part by

agricultural runoff from the American Midwest,

which enters the gulf via the Mississippi River.149

In terrestrial ecosystems, levels of biologically

available nitrogen have doubled since 1960, while

flows of phosphorus have tripled.150 Nitrate is the

most prevalent groundwater contaminant

worldwide.151

According to the Center for Sustaining

Agriculture and Natural Resources at Washington

State University, the breeding of herbicide-

resistant crops resulted in a 527-million-pound

increase in herbicide use in the U.S. while driving

insecticide applications down only by 123 million

pounds. Therefore, 404 million pounds, or seven

percent, more pesticide was used in the U.S.

between 1996 and 2011. Glyphosate-resistant,

Roundup Ready (RR) crops provide farmers with a

very flexible and forgiving weed-management

system. An increase in the use of glyphosate

accounted for the largest share of the increase in

total herbicide use.152 Besides the environmental

externalities of increased herbicide use, there is

potential for impacts on human health. Not all

pesticides can be removed from food before it

gets to consumers, leaving so-called pesticide

residue.

In 2015, a report by the International Agency for

Research on Cancer classified glyphosate,

malathion, and diazinon as “probably

carcinogenic to humans.” According to the

report, there was “limited evidence of

carcinogenicity” in humans for non–Hodgkin

lymphoma.153 The findings prompted strong

criticism from agriculture companies, particularly

Monsanto, which is one of the largest sellers of

glyphosate in the world.154 Debate about the

carcinogenicity of widely used herbicides like

glyphosate could prompt future regulatory action

limiting its use, with the potential to impacts the

productivity of agricultural products companies.

For companies in the Agricultural Products

industry, regulatory risks exist because of

concerns over potential biodiversity harm from

pesticides use. In 2013, the E.U. adopted a

proposal to ban three common pesticides used to

control insect populations. A report issued in

2014 by three E.U. farming associations said that

the ban could lead to a surge in pests; affect


production of crops, including apples, carrots, and

peas; and reduce farming profits by £1.7

billion.155 Studies have linked the pesticides to a

significant decline in bee colonies in North

America and Europe, and regulators are

concerned because bees are responsible for

approximately 80 percent of the pollination of

flowering plants, including many crops. The

California Beekeepers Association has said that

supplies of vegetables and fruits may be harmed if

the decline in bee populations continues.156

Water quality is also affected by pesticide residue,

which adds to the eutrophication of fresh and

coastal waters and to development of toxins that

eventually could result in the death of various

aquatic species. At the same time, as discussed

above in the issue of Greenhouse Gas Emissions,

soil cultivation eventually results in the release of

N2O.157

Recent studies link pesticides with invertebrate

biodiversity loss. Researchers at the Helmholtz

Centre for Environmental Research in Leipzig,

Germany, found that highly contaminated streams

in Germany, France, and Australia had up to 42

percent fewer species than uncontaminated

waters. Another study suggests that pesticides

may accumulate in the environment because their

half-life generally ranges between one and four

years, meaning that chemicals applied once a year

will accumulate.158

Companies in the industry discuss the risks

associated with agrochemicals in their financial

disclosures. In its FY2014 Form 10-K, Anderson

stated, “[a]ll products containing pesticides,

fungicides and herbicides must be registered with

the EPA and state regulatory bodies before they

can be sold. The inability to obtain or the

cancellation of such registrations could have an

adverse impact on our business.”159 In its FY2014

Form 10-K, Fresh Del Monte Produce stated,

“[o]ur business depends on the use of fertilizers,

pesticides and other agricultural products…A

decision by a regulatory agency to significantly

restrict the use of such products that have

traditionally been used in the cultivation of one of

our principal products could have an adverse

impact on us.”160

Concerns over the externalities of excessive

fertilizer could lead to regulatory action requiring

farmers to reduce fertilizer loads. For example, the

EPA’s Chesapeake Bay Program controls

reductions in nitrogen and phosphorus runoff

from nonpoint sources, including agricultural

fields. The program emphasizes practicing

nutrient management, where fertilizer loads are

calculated to meet the requirements of the crops

in order to reduce excess fertilizer application.161

Farmers may receive small financial penalties for

not following the requirements.162

Contamination of water from pesticide and

fertilizer runoff can increase the risks to

agricultural products companies that are

associated with the issue of Water Withdrawal,

discussed previously. Integrated pest management

(IPM) is a mitigation measure supported by the

EPA that can be used to prevent contamination of

water sources.163 IPM utilizes a variety of insect-,

weed-, or disease-control strategies to reduce

pesticide use while also minimizing pollution from

the use of chemical pesticides. IPM can help

companies improve food safety, reduce

occupational hazards and environmental risks

related to pesticide use, and reduce the pollution

and contamination risk of water sources.

Moreover, it can help businesses to minimize pest

management costs, which are estimated at 4.1

billion annually.164 Optimizing the use of

pesticides contributes to the long-term

sustainability of crop production and maintains

biodiversity. For example, the use of IPM helped

farmers in southern India protect their water


resources while doubling yields and reducing

fungicide use by 78 percent.165 Another approach

to reducing pesticide use is that taken by

Indofood Agri Resources, which reports that it is

breeding barn owls to control rodents instead of

using chemical pesticides.166 Meanwhile, ADM has

a program to audit its participating soybean

growers on the responsible use of fertilizers as

well as other environmental, legal, and agronomic

standards.167

Some cherry producers utilize in-the-field

microclimate information obtained from

monitoring equipment and scouting—one of the

IPM techniques. This allows them to change their

spraying schedules to meet the current

conditions, helping them to reduce the amount of

fungicide and insecticide used by 25 percent,

saving $40 per acre in pesticide costs.168 Since

pesticide costs are estimated to be 34 percent of

a farmer’s variable costs, these costs savings are

significant.169

Del Monte Foods applies principles of IPM to

reduce pesticide use, helping the company

minimize the risk of contaminated runoff from

fields, protect the health of farmers, reduce

biodiversity loss, and decrease the risks of

pesticide residue on harvested and processed

crops. Some of the practices include application

of pest-resistant crops, rotation of crops, and

avoidance of sewage sludge and biosolids as

fertilizers. The company’s new seed treatment

provides 30 days of protection for sprouting

green beans and reduces the use of broadcast

insecticide by 3,700 gallons per year. Moreover,

through its green bean breeding program, Del

Monte is developing white-mold-resistant varieties

of the crop, which could allow it to reduce the

use of fungicide sprays by more than 50 percent

over 18,000 acres in the Midwest.170

The world’s soil resources are becoming depleted

at an accelerating pace. A review paper by the

top U.S. soil scientists highlights farming practices

such as deep plowing and monoculture as the

main reason for erosion and nutrient removal.

Several risks are associated with this trend and

require improved land management practices.

First, soil health is a primary factor for higher

yields crucial to support a growing population.

Moreover, the top three meters of Earth’s soil

store around 2,300 gigatons of carbon, which is

more than all the world’s plants and atmosphere

combined. Therefore, soil depletion significantly

contributes to climate change.171

Furthermore, land use requirements of agriculture

are a driving force behind deforestation and land

being converted to cultivated fields, which in turn

adversely impact biodiversity. Approximately 38

percent of the world’s land area is used for

agricultural purposes, while agriculture is

responsible for approximately three-quarters of

global deforestation.172 With food demand

projected to grow by 50 percent by 2030, land

clearing for agricultural purposes is likely to

continue. In fact, past trends indicate that an

additional 10 million square kilometers will be

cleared by 2050.173 Agricultural producers are

susceptible to biodiversity changes primarily

because biodiversity loss can alter agricultural

systems’ susceptibility to pathogens and pests,

and can affect the risk of crop failure due to

changing environmental factors.174 Deforestation

and land use can directly influence biodiversity,

primarily through monoculture cultivation and the

physical loss or fragmentation of habitat.175 In

addition, land requirements for crop cultivation

can present operating risks to companies if their

operations are in or near ecologically sensitive

areas.

In 2006, driven by a damaging Greenpeace

campaign, major Brazilian soy companies


established a moratorium on forest conversion to

prevent deforestation for soy expansion in the

Amazon. The moratorium drove down the soy

expansion through deforestation from 30 percent

to around 1 percent. The soy production almost

doubled while deforestation decreased, as farmers

planted already deforested lands.176 In 2008,

Brazil’s Central Bank accepted a resolution

(Resolution 3.545/2008) forbidding government

banks to finance “agriculture and ranching in

properties that had fines pending with the

environmental authorities.”177 Similar policies,

either enforced by governments or established by

the private sector, could materially affect industry

players and would prompt companies to adapt

their operational practices in consideration of

environmental externalities.

In 2013, major agriculture companies such as

Cargill, ADM, Bunge, and Monsanto were

criticized for their contribution to deforestation of

500,000 hectares of land in Brazil, Argentina, and

Uruguay and for planting GMO soybeans in these

countries. Moreover, the herbicide use on their

crops was found to cause health issues, including

neurological diseases.178

By maximizing the efficient utilization of land,

companies can reduce their need for expansion

and increase yields. For example, by growing

plants closer together, Del Monte was able to cut

pesticide and fertilizer use in its spinach

production by 82 and 18 percent, respectively,

while reducing cultivated acreage by 42 percent.

According to the company, benefits attributed to

the high-density agriculture outweigh the initial

investment in research.179

Companies in the industry discuss the risks

associated with land use and ecological impacts in

their financial disclosures. Adecoagro

acknowledges the importance of biodiversity and

land resources to its business, stating, “[n]atural

resources are the main foundation of our

activities, with land being the most relevant

natural resource in our operations.” The

company’s environmental management plan,

which includes biodiversity factors, is designed to

“enhance land productivity and therefore increase

land value.” Furthermore, in regard to the

accessibility of lands for cultivation, the company

stated, “[t]here are ecosystems that we do not

consider appropriate for the use of agricultural

development, such as heavy forest and key

wetlands.”180 Similarly, Bunge stated, “[o]ur

operations are also subject to laws relating to …

restrictions on land use in certain protected areas,

[and] forestry reserve requirements.”181 The

anticipated growth in agricultural production to

meet rising food demand will continue to

emphasize the need for efficient management of

existing land resources.

Crop cultivation is highly species-concentrated; of

the approximately 7,000 plant species cultivated

by humans over the history of agriculture, just 12

species supply nearly 75 percent of global food

today. While the common modern agricultural

practice of monoculture may decrease production

costs, given its economics of scale and reduced

competition from other plant species, genetically

similar plants are also more susceptible to insects,

plant diseases, and other variations in growing

conditions. This can lower yields and increase the

risk of widespread crop failure, potentially

canceling out the benefits of lower production

costs.182

The industry’s environmental externalities,

whether from land use changes or pollution, can

generate substantial costs at an industry-wide

level. According to the World Resources Institute,

ecological damage, including erosion, water

contamination and eutrophication, and air

emissions cost the U.K.’s agriculture industry $2.6


billion in 1996, or 9 percent of the industry’s

average annual revenues.183

Value Impact

Ecological externalities of agricultural production

can impact companies through two primary

channels. First, pollution of water and land

resources presents a risk of regulatory fines or

restrictions on the use of agrochemicals or land

resources, which could have an impact on

operating expenditures or production revenues.

Second, externalities can adversely affect crop

yields, reducing the value of a salable product.

Moreover, companies unable to prudently

manage agricultural productivity and mitigate

long-term environmental impacts may experience

devaluation of their land.

Unsustainable land management practices are

likely to have a negative reputational impact on

the Agricultural Products industry. As food and

beverage companies are becoming more

concerned about the environmental performance

of their suppliers, agricultural products companies

that fail to manage the issue may experience

lower demand for their products.

Overapplication of fertilizer has negative

externalities and could lead to future regulation,

bringing on additional expenses and scrutiny,

which can harm a company’s social license to

operate and may even put that license at risk

altogether. With fertilizer as the leading source of

GHG emissions from agricultural activity, any

regulation on GHG emissions will increase the

cost of using fertilizer. As the use of various types

of fertilizers may lead to different environmental

externalities, the amount of fertilizer consumption

by type can help analysts assess a company’s

exposure to regulatory risks.

Companies in the Agricultural Products industry

that expand their R&D expenditures and adopt

the most advanced land use practices may not

only protect themselves from the financial risks

associated with environmental externalities of

crop cultivation but may also capture growth

opportunities. Adoption of IPM may allow

companies to minimize the amount of fertilizer

and pesticide used, which is likely to reduce the

cost of doing business. At the same time,

reducing the use of pesticides is likely to help

companies mitigate regulatory risks, as the use of

highly hazardous pesticides furthers the potential

for increased scrutiny, given their heightened

human and environmental health effects.

As population growth continues, it is becoming

more challenging for agricultural companies to

balance higher demand for food with more

stringent environmental regulations. Therefore,

the probability and magnitude of impacts on

companies in the industry are likely to increase in

the future.

SOCIAL CAPITAL

Social capital relates to the perceived role of

business in society, or the expectation of business

contribution to society in return for its license to

operate. It addresses the management of

relationships with key outside stakeholders, such

as customers, local communities, the public, and

the government.

As main suppliers to the food and beverage

industries, agricultural products companies are

subject to consumer-driven demand fluctuations.

Concerns over food quality and safety can result

in regulatory action and damage to brand

reputation, as well as affect a company’s social

license to operate.


Food Safety & Health Concerns

Agricultural products are sold directly to

consumers in raw form (e.g., vegetables) or are

further processed into a wide variety of foods.

Maintaining product quality and safety is critical,

as contamination by pathogens, chemicals, or

spoilage presents serious human and animal

health risks. Sources of such contamination

include bacteria that inhabit the surfaces of fruits

and vegetables; molds that develop in grains

during unusually wet or dry growing periods; poor

farming practices, such as the disposal of solid

waste on land; damage and stress during

harvesting or storage; malfunctioning or

improperly sanitized equipment during

processing; misuse of cleaning materials; and

rodent and insect infestations.184

Pesticide application may leave residue on the end

products. While there is no consensus on the

health hazards from pesticide residue, general

public perception tends to be negative. Pesticide

residue on food is regulated by several

government agencies, but independent studies

show that current testing processes may not be

robust enough to properly identify health risks.

The problem is exacerbated for GMOs, as

genetically modified crops tend to withstand

larger amounts of pesticides during cultivation

Companies can be impacted by food safety issues

through product recalls, damaged brand

reputation, and increased regulatory scrutiny.

These factors can lower revenues in both the

short and long term, through lost sales and via

consumer aversion to at-risk products and other

shifts in consumers’ perceptions of food safety.

Furthermore, regulation can lead to higher costs

or lost revenues through trade restrictions.

To reduce the risks associated with the issue,

agricultural products companies should ensure the

highest quality of products at each stage of

production. Obtaining food safety certification

helps companies in the industry communicate the

quality of their products to buyers. Agricultural

products companies increasingly work toward

ensuring robust evaluation of health and

environmental risks and finding effective ways to

communicate the safety of their GMO crop to

consumers and regulators. To satisfy the growing

demand for organic products, firms are switching

to organic farming methods within their own

operations as well as securing suppliers of non-

GMO crops.





• GFSI audit conformance: (1) major non-

conformance rate and associated

corrective action rate and (2) minor non-

conformance rate and associated

corrective action rate;

• Percentage of agricultural products

sourced from suppliers certified to a GFSI

scheme;

• Number of recalls issued, total amount of

food product recalled; and

• Description of strategies to manage the

use of GMOs.

Evidence

Data from the Centers for Disease Control and

Prevention suggest that each year in the U.S there

are 48 million episodes of foodborne illnesses,

128,000 hospitalizations, and 3,000 deaths. The

annual cost of foodborne diseases in direct

medical expenses and lost productivity is $5 billion

to $6 billion.185 The World Health Organization—

whose slogan for World Health Day 2015 was

“from farm to plate, make food safe”—


recognizes access to safe food as key to good

health.186 Food safety concerns are prevalent

throughout the Agricultural Products industry. In

2012 there were more than 600 food recalls in

the U.S. and Canada, most of which were

voluntary.187

Agricultural products companies address a broad

range of risks related to food safety in their SEC

filings. For example, in its FY2013 Form 10-K,

Bunge stated, “[w]e are subject to food and feed

industry risks which include, but are not limited

to, spoilage, contamination, tampering or other

adulteration of products, product recalls,

government regulation, including regulations

regarding food and feed safety, nutritional

standards and genetically modified organisms

(GMOs), shifting customer and consumer

preferences and concerns, and potential product

liability claims. These matters could adversely

affect our business and operating results.”188

Agricultural products must meet government food

safety standards as well as high quality and safety

levels to maintain consumer confidence. In its

FY2014 Form 10-K, Del Monte reported, “[o]ur

[quality] specifications require extensive sampling

of our fresh produce at each stage of the

production and distribution process to ensure

high quality and proper sizing, as well as to

identify the primary sources of any defects. Our

fresh produce is evaluated based on both external

appearance and internal quality, using size, color,

porosity, translucence and sweetness as

criteria.”189 Cargill, in its FY2014 Annual Report,

noted that all food production facilities would

receive Food Safety System Certification (FSSC

22000) in 2014 and that certain grain-handling

and animal-feed facilities would be certified by

2015.190 Demand for agricultural products is

determined by companies’ ability to obtain

aforementioned certification, as many food and

beverage companies are seeking certification for

their ingredients. For example, Kraft Foods is

requiring ingredient suppliers in most of its

product categories to achieve GFSI certification by

2015.191

Product recalls are a primary channel through

which a company’s sales and reputation can be

adversely impacted by safety and quality concerns.

In a survey of 36 Grocery Manufacturers

Association members, 86 percent of whom

represented food companies such as Del Monte

Foods and Blue Diamond Growers, 81 percent of

respondents reported that the financial risk of a

recall was “significant” or “catastrophic,” while

58 percent of respondents had issued one or

more recalls in the 2007–2011 period. The

average financial impact of a recall, including

sales losses and direct recall costs, was typically

$30 million to $49 million, although 5 percent of

recalls had a financial impact of more than $100

million.192

Recalls may happen for numerous reasons,

including packaging defects, food contamination,

spoilage, and mislabeling. A 2006 outbreak of a

lethal strain of Escherichia coli (E. coli), 0157:H7,

in contaminated Dole brand baby spinach, caused

the confirmed illness of 205 people and three

deaths. The contamination originated during

spinach production at facilities operated by

Natural Selection Foods, Dole’s supplier.193 The

outbreak caused the FDA to issue a nationwide

advisory against consuming raw or packaged

spinach. The leafy-green industry ultimately lost

an estimated $350 million, as consumption of

bagged spinach plunged by more than 70 percent

in a matter of weeks.194 An Ernst and Young

survey of top food industry executives found that

the greatest risk to financial value from product

safety issues is damage to brand reputation.195 In

2008, a Salmonella outbreak led to more than

1,400 illnesses in the U.S. and caused an


estimated $250 million in losses to the tomato

industry.196

Trade restrictions and import bans due to

concerns about food safety have been impacting

agricultural products companies for decades. In

2015, Malaysia banned the import of two

varieties of California apples over concerns they

were tainted with the Listeria bacteria.197 Two

decades earlier, the U.S. banned imports of the

1998 Guatemalan raspberry crop given concerns

over cyclosporiasis. In 1996, Guatemala had

supplied $22 million worth of raspberries to the

U.S., nearly 40 percent of the imported

raspberries eaten by Americans, and Guatemalan

growers’ voluntary decision to keep their 1997

crop off the U.S. market cost them $12 million in

exports.198

Product demand may also be affected by

consumer perceptions about the safety of

pesticide residue as well as about genetically

modified products in general. In a 2013 study of

1,000 Americans conducted by Lindberg

International on behalf of Stonyfield Farms, 71

percent reported that they were worried about

pesticides in their food and 74 percent wanted to

eat foods produced with fewer pesticides.199

Similarly, a 2014–15 survey of 2,000 consumers

conducted by Healthline found that 85 percent of

consumers want the government to conduct more

testing on the impact of GMO products and

pesticides in food.200

In the U.S., limits on pesticide residue on food

and feed products and commodities are set by the

EPA. Testing of the food supply for pesticide

residue is a responsibility of the FDA and USDA.

Specifically, findings of the Food Safety and

Inspection Service (FSIS) and the USDA’s

Agricultural Marketing Service are used to provide

data on dietary exposure to pesticides over time

and to enforce the residue-tolerance levels set by

the EPA. In 2014, a report by the Government

Accountability Office concluded that testing

programs used by the FDA and FSIS are not

statistically significant, as they fail to select

random samples in the process. Moreover, some

of the pesticides with tolerance levels set by the

EPA are not being tested by the FDA.201

Converting crops to organic farming methods

could provide a revenue opportunity for

agricultural products companies. Global demand

for non-GMO food and beverage products,

estimated at $400 billion in 2012, is expected to

double by 2017 at a compound annual growth

rate of 15 percent. If this occurs, non-GMO

products will make up 14.5 percent of total

worldwide food and beverage sales. Companies

such as Coca-Cola and Nestlé have introduced

non-GMO versions of their products to satisfy

consumer demand in Europe, while in the U.S.,

verification by the Non-GMO Product is

backlogged because of a surge of verification

requests from manufacturers.202 In its FY2014

Form 10-K, Adecoagro stated, “[t]he use of GMOs

in food has been met with varying degrees of

acceptance in the markets in which we

operate…It is possible that new restrictions on

GMO products will be imposed in major markets

for some of our products or that our customers

will decide to purchase fewer GMO products or

not buy GMO products at all, which could have a

material adverse effect on our business, results of

operations, financial condition or prospects.”203

Ingredion acknowledges the risk of negative

public perception toward genetically modified

foods in its financial disclosure: “The sale of the

Company’s products which may contain

genetically modified maize could be delayed or

impaired because of adverse public perception

regarding the safety of the Company’s products

and the potential effects of these products on

animals, human health, and the environment.”204


Government approval of the use of GMO plants is

varied; major producers, including producers in

the U.S. and Brazil, currently allow the use of

GMO crops in foods. Meanwhile, while not

stating that GMOs are unsafe for human health,

more companies are asking suppliers to develop

non-GMO options so they can be ready in case

labeling requirements become more

widespread.205 Whole Foods has pledged to label

all GMO-containing foods that it sells by 2018,

while more than 20 U.S. states have by 2016, and

Vermont will become the first state to require

mandatory labeling.206 Future GMO regulations

and consumer acceptance of GMOs are primary

risks to GMO product sales.207

As major food retailers such as Walmart, Costco,

and Whole Foods are seeing increased consumer

demand for healthier and more natural

ingredients, they are calling for food companies

to use sustainably sourced ingredients.208 This

trend has caused ripple effects through the supply

chain. For example, Coca-Cola’s Sustainable

Agriculture Guiding Principles recognize that “a

healthy agricultural supply chain is essential to the

well-being of the communities in which we

operate, and is critical to the success of our

business.”209 Chipotle—which aims to procure

organic, locally grown ingredients and meat from

“naturally raised” animals—in 2013 became the

first U.S. chain to label and move toward the

elimination of GMO ingredients.210 Hershey, the

largest chocolate manufacturer in North America,

in 2015 pledged to switch to non-GMO sugar and

soy lecithin in its chocolate kisses and bars.211

As this trend among food and beverage

companies continues, agricultural products

companies will be able to increase their

profitability by charging a premium for organic

crops. Those companies in the Agricultural

Products industry that are able to secure suppliers

that grow non-GMO crops are likely to obtain a

competitive advantage. For example, ADM, in

partnership with Unilever, pays a 10-cent-a-bushel

premium to Iowa soybean farms for enrollment in

the Field to Market program.212

Value Impact

Food quality and safety issues can lead to

consumer-driven demand changes and regulatory

action. Product recalls can harm brand reputation,

reduce revenues, and lead to costly fines.

Companies that experience frequent or high-

profile recalls may experience weaker financial

performance, including reduced revenues and

costs associated with recalling the product. Poorly

performing companies may also open themselves

to the risks of lawsuits resulting in costly

litigations and settlements. Companies that

maintain a strong quality and food safety

performance may better avoid costly recalls, and

could strengthen their reputation and gain market

share from competitors.

Conformance with the GFSI scheme provides a

good indication of companies’ performance on

the issue, where major non-conformances may

indicate systemic governance risks, which could

affect risk premiums. High non-conformance rates

and low corrective action rates could indicate risks

to food safety, which could lead to recalls, lost

contracts, and remediation costs. Major non-

conformances typically signal a risk of high-impact

food-safety events, while minor non-

conformances may indicate routine, low-impact

manufacturing and operational challenges.

Moreover, minor non-conformances may expose

findings that, if not corrected, could turn into

major non-conformances that present higher-

magnitude repercussions.

Social trends indicate that customers are

becoming increasingly concerned with the health

impacts related to the consumption of GMO


products. As a response to these concerns and

changing consumer preferences, food and

beverage companies look for opportunities to

increase the amount of organic product offerings.

Therefore, agricultural products companies able

to convert their practices to growing non-GMO

crops may capture a larger share of the rapidly

growing GMO-free products market.

HUMAN CAPITAL

Human capital addresses the management of a

company’s human resources (employees and

individual contractors), as a key asset to delivering

long-term value. It includes factors that affect the

productivity of employees, such as employee

engagement, diversity, and incentives and

compensation, as well as the attraction and

retention of employees in highly competitive or

constrained markets for specific talent, skills, or

education. It also addresses the management of

labor relations in industries that rely on economies

of scale and compete on the price of products

and services. Lastly, it includes the management

of the health and safety of employees and the

ability to create a safety culture within companies

that operate in dangerous working environments.

In the Agricultural Products industry, human

capital is an important input. The industry’s labor

force is characterized by a high degree of

seasonal and transient employment and by the

legal employment of children, and workers are

exposed to acute and chronic health hazards.

Agricultural occupations are dangerous: acute

physical risks stem from exposure to large

machinery and heavy vehicle hazards, while

exposure to agrochemicals can create chronic

health risks. Safety culture is critical to proactively

guarding against accidents. In addition, the

nature of the industry’s workforce, including

employment of migrant and child workers,

exposes it to labor-related risks.

Fair Labor Practices & Workforce Health & Safety

Agricultural products companies have diverse

operations ranging from crop cultivation to grain

milling. The industry’s human capital across these

operations can be adversely affected by labor

issues in poorly managed operations. Data

indicate that the industry has relatively high injury

and fatality rates. The physically demanding

nature of the work increases the risk of accidents,

and the merged nature of working and living

conditions for many subsistence farmers and

waged workers increases the environmental

spillovers from occupational risks.213 Common

hazards include falls, transportation accidents,

heat-related illness or injury, asphyxiation,

machinery accidents, and hearing loss.214

Furthermore, workers in both farming and milling

are exposed to toxic substances such as

agricultural pesticides—whether because of spills,

inadequate protective equipment, direct spray, or

drift from nearby fields—that can be harmful with

long-term exposure.215 These issues create

regulatory risks, including from violations of

safety standards, as well as lower productivity,

higher health costs, litigation, and reputational

risks.

In addition to the hazardous nature of the work,

other labor issues of concern in the Agricultural

Products industry include fair pay, the rights of

migrant workers and children in farmwork, and

working and living conditions. In many countries,

only some categories of agricultural workers are

protected by national legislation, insurance, or

workplace injury benefits, and legislation is not

consistently enforced.216


Child labor is common in farming for many

reasons, including historical precedent, limited

access to education, poverty, inadequate

agricultural technology, and traditional beliefs

about the role of children in farming.217 For

example, in colonial America, children played an

integral role in the agricultural and handicraft

economy, either working on the family farm or

being hired out to other farms, and child labor

was not controversial.218

Migrant workers are also common in farming;

each year up to 3 million farmworkers in the U.S.

travel to plant, harvest, and pack fruits,

vegetables, and nuts. Also, 52 percent of all

farmworkers are unauthorized, with no legal

status in the U.S.219 Reasons for migrant work

include economic instability, political unrest,

population growth, land reform issues, and

limited job opportunities in farmworkers’

countries of origin, as well as demand for low-

cost labor to fill jobs that are no longer attractive

to U.S. citizens because of low wages and/or poor

workplace conditions.

Workplace conditions are generally poor, as

farmworkers with low levels of literacy and

language skills are often unaware of their rights

under occupational health and safety laws. In the

U.S., only 2 percent of farmworkers are unionize

and only 5 percent have completed education

past high school. Also, workers may be reluctant

to demand improvement in their working

conditions because unemployment is high and

wages are low, and they may not seek help from

government agencies given fears of

deportation.220 Managing the industry’s human

capital assets is an important issue, especially in

regard to health, safety, and child labor.

Developing a strong safety and labor culture,

VII Here, “agriculture” is defined by the U.S. Department of Labor’s Bureau of Labor Statistics. Occupational Injuries and

including improved workforce training and

incident reporting, can minimize or avoid negative

consequences related to workforce management.





• Percentage of farms and facilities certified

for fair labor practices;

• (1) Total recordable injury rate (TRIR), (2)

fatality rate, and (3) near miss frequency

rate (NMFR) for (a) direct employees and

(b) seasonal and migrant employees; and

• Description of efforts to assess, monitor,

and reduce exposure of direct, seasonal,

and migrant employees to pesticides.

Evidence

Workers in the Agricultural Products industry are

exposed to various safety, health, environmental,

biological, and respiratory hazards.221 The higher-

than-average injury and fatality rates in the

Agricultural Products industry present regulatory

and reputational risks for companies. In 2011,

570 U.S. agriculturalVII workers died from work-

related injuries (276 of those were caused by

vehicular accidents). This is seven times higher

than the overall fatality rate for workers in the

private sector.222 Worldwide, according to the

International Labour Organization, more than

170,000 agricultural workers are killed each year,

and many accidents, deaths, and occupational

diseases go unreported.223

According to data from the Bureau of Labor

Statistics, the nonfatal illness and injury rate for

the crop production industry (North American

Industry Classification System 111) was 5.5 per

100,000 full-time equivalent U.S. workers in

Illnesses and Fatal Injuries Profiles database queried by industry for Agriculture, Forestry, Fishing and Hunting (GP2AFH).


2013, compared with the U.S. national average of

3.5 for all industries and 2.8 for the wet-corn

milling industry (NAICS 311221).224 The industry

experienced 224 total fatalities in 2012, the

highest number per 100,000 full-time equivalent

U.S. workers.225 Tractor overturns are the leading

cause of death for farmworkers.226

Apart from acute impacts, fieldworkers, farmers,

and agricultural product plant workers may be

exposed to harmful agricultural pesticides, which

can have chronic health impacts. A study of acute

pesticide exposure cases in the U.S. between

1998 and 2005 found that the majority (87

percent) experienced health impacts of low

severity, 12 percent of medium severity, and 0.6

percent of high severity.227 Exposure to pesticides

occurs through spills or splashes, inadequate

protective equipment, direct sprays, breathing in

pesticide “drift,” eating with pesticide-

contaminated hands, eating contaminated fruits

and vegetables, or eating in a pesticide-

contaminated field.228

Respiratory risks to agricultural workers are

presented not only by endotoxins and chemical

toxicants but also by organic and inorganic

dusts.229 Harvesting, drying, handling, storage,

and processing of various grains produce dust.

Grain dust can lead to respiratory difficulties, and

is an explosion risk.230 Under its 1987 Grain

Handling Facilities Standard, OSHA regulates

companies that process agricultural products that

create dust. Agricultural facilities must control

fugitive grain dust, defined as combustible dust

particles of a certain size.231 In 2008, an explosion

at a sugar refinery in Georgia that killed 14

people and injured 36 led OSHA to propose an

$8.7 million fine, which was the third largest in

the agency’s history.232

Companies that fail to provide adequate

protection to their workers and to reduce the risk

of accidents may face regulatory penalties.

Typically, regulatory fines are assessed following

health and safety violations that result in an

injury. For example, OSHA fined CHS $211,000 in

April 2014 for repeatedly failing to reduce worker

exposure to grain dust in the workplace. In April

2015, negligence at one of the Cargill’s

operations in the U.K. led to the death of a truck

driver who was buried in eight metric tons of

animal feed. The company was fined £600,000.233

In 2013, Bunge Canada was fined CAD$115,000

for violation of the Occupational Health and

Safety Act that led to the serious injury of one of

its workers.234

While individual cases may not result in significant

penalties, chronic violation of worker safety

procedures may have a significant impact on a

company’s financial performance through

increased premiums for workers’ compensation

insurance, wage replacement, labor strikes, work

stoppages, and/or decreased employee morale.

According to the industry group Agricultural

Safety and Health Council of America,

occupational injuries in agriculture result in $8.3

billion each year in medical costs and lost

productivity.235 In addition, companies that pay a

living wage and protect workers’ rights to

collective bargaining and freedom of association

may experience lower turnover and higher

productivity. Furthermore, poor enforcement of

labor standards regarding the employment of

children and migrant workers presents an

additional reputational and regulatory risk.

Agriculture is by far the largest global employer of

child laborers, as defined by the International

Labour Organization’s Convention No. 138 on

Minimum Age (1973) and Convention No. 182 on

Worst Forms of Child Labour (1999).

Approximately 98 million children ages 5 to 17

are employed in crop and livestock production, or


59 percent of the total number of child

laborers.236

As companies are increasingly being held

accountable for labor issues in their global supply

chains, they are demanding more products made

without the use of child labor or slave laborers. In

2012, Whole Foods Market suspended sales of

Hershey’s artisan chocolate after activists accused

Hershey’s of ignoring child labor abuses by its

suppliers.237 In 2014, a U.S. appeals court ruled

that ADM and two other companies could be held

accountable for allegedly allowing child labor in

their cocoa supply chains.238

In the U.S., lax agricultural labor standards and

enforcement are ongoing issues. Under the U.S.

Fair Labor Standards Act (FLSA), agricultural

workers are not entitled to overtime pay if they

work more than 40 hours in one week; they also

may not be entitled to the FLSA minimum wage if

they are local hand-harvest employees, they are

working for their families, or their employer uses

less than “500 man days” of labor in a year

(where a “man day” is defined as a day in which

a worker worked for at least one hour).239 Hired

farmworkers, who make up approximately one-

third of those working on farms, have historically

faced high unemployment rates, given the

seasonal nature of agriculture as well as their

often-limited English-language skills and low

levels of education. In 2010, the unemployment

rate for U.S. hired farmers was 13.5 percent,

compared to an 8.1 percent national average for

all jobs.240 The median income from farmwork

that year was between $2,500 and $5,000, and

61 percent of the farmworker population lived

below the federal poverty line.241

Under the FLSA, children of any age may work on

a farm owned or operated by their parents;

children ages 12 and up may be employed at the

same farm as their parents or at any outside farms

with their parents’ consent, and children ages 14

and up may work outside school hours without

their parents’ consent.242 In other industries,

children must usually be 16 years old to work.243

A 2010 Human Rights Watch report found that as

many as 400,000 children work on commercial

farms in the U.S., some routinely working for

more than 10 hours per day and often for wages

well below the federal minimum.244

The FLSA does not provide the same wage and

workday requirements for children in agricultural

occupations as it does for children in other

occupations. Several attempts to update

agricultural labor standards have been made in

recent years, but none have become law. In 2011,

the U.S. Labor Department proposed updated

labor regulations for children employed in

agricultural and related occupations. The proposal

aimed to strengthen outdated standards for

youths employed in pesticide handling, grain

storage and transportation tasks, and the

operation of power-driven equipment.245 Per U.S.

labor laws, child workers under the age of 16 are

allowed to handle all but the most dangerous

pesticides, and the EPA’s rules governing when

employees can return to fields after pesticide

application do not take into account that children

are likely to be more susceptible to the chemicals’

effects.246 In February 2014, the EPA announced

proposed changes to its worker protection

standards, which govern pesticide exposure in

agricultural occupations. The proposed changes

include provisions focusing on vulnerable groups,

such as minority populations and child workers.247

Moreover, several companies in the Agricultural

Products industry have been criticized for not

allowing their workers to unionize. For example,

Dole, Del Monte, and Chiquita Brands appeared

in various issues of the “Working for Scrooge”

reports by the International Labor Rights Forum as

being the worst companies related to the right to


associate. One of the subsidiaries of Chiquita

Brands was accused of using violence to

undermine union membership and failing to

provide a minimum wage, safe work conditions,

and access to social security. Dole was accused of

paying to intimidate its workers in Colombia,

while its subsidiary in the Philippines allegedly was

systematically violating workers’ rights to

organize.248

In the U.S., according to the Human Rights Watch

report, undocumented migrant workers may be at

an elevated risk for health and safety abuses in

the workplace because they may be disinclined to

report incidents for fear of retaliation by their

employers. A shareholder resolution filed in 2014

with ADM specifically addressed the health and

safety of migrant workers in the company’s direct

operations and supply chain. The resolution was

withdrawn after the company agreed to address

the issues raised.249

Companies in the industry have implemented

internal labor standards for their international

operations, where laws protecting child labor can

often be weak or poorly enforced. Chiquita

Brands reports in its FY2013 Form 10-K, “[a]ll

owned banana farms in Latin America have

achieved certification to the Social Accountability

8000 labor standard, which is based on the core

International Labor Organization conventions. We

were the first major agricultural operator to earn

this certification in each of the Latin American

countries where we have owned farms.”250 The

Social Accountability 8000 labor standard is an

auditable certification standard that covers human

rights and socially acceptable practices in the

workplace. On the positive side, the standard can

help businesses implement and receive

recognition for using best practices in ethical

employment; on the negative side, it can be used

as a cover by businesses seeking to avoid further

scrutiny from activists.251

Value Impact

Violations of health, safety, and labor standards

could result in monetary penalties and costs for

corrective actions. High injury rates, particularly

fatality rates, may lead to significant reputational

harm and indicate weak governance structures

and safety culture. Further, a near-miss rate can

be a useful tool for management to stem

potential problems before they become

punctuated and potentially high-magnitude

events.

While the certification of farms to fair labor

practices may lead to a direct increase in the cost

of goods sold, such practices may open additional

markets, meet customer demands, and benefit

worker productivity, leading to increased revenue.

Implementation of fair labor practices can help

build brand image while promoting worker moral,

which can increase productivity, reduce worker

turnover, and enhance community relations.

The industry’s use of migrant and child labor

could lead to more stringent government

regulation that may impact the cost or availability

of labor. Therefore, the probability and

magnitude of aforementioned impacts are likely

to increase in the future.

BUSINESS MODEL AND INNOVATION

This dimension of sustainability is concerned with

the impact of environmental and social factors on

innovation and business models. It addresses the

integration of environmental and social factors in

the value-creation process of companies,

including resource efficiency and other

innovations in the production process. It also

includes product innovation and efficiency and

responsibility in the design, use-phase, and

disposal of products. It includes management of

environmental and social impacts on tangible and


financial assets—either a company’s own or those

it manages as the fiduciary for others.

The Agricultural Products industry plays a crucial

role in meeting global food and nutrition demand.

Therefore, companies’ adaptability to a changing

climate will determine the industry’s success in

maintaining productivity sufficient to satisfy

societal needs. Climate change is expected to

alter global average temperatures and

precipitation patterns; to lead to increased

frequency of severe weather, including droughts,

floods, and storms; and to facilitate the spread of

plant diseases and pests. The Agricultural

Products industry’s value chain originates with

crop cultivation, which is in turn heavily

influenced by climate. Thus, adaptation to the

effects of climate change is a fundamental driver

of the long-term sustainable growth of the

industry.

Climate Change Impacts on Crop Yields

Anthropogenic climate change can have a

significant impact on the Agricultural Products

industry, primarily in regard to increased

difficulties or, conversely, opportunities with crop

cultivation. Global average temperature increases

are expected to contribute to changes in

precipitation patterns, temperature variation, and

the number and range of crop diseases and

pests.252 In higher latitudes, agricultural

production may rise as the growing season

lengthens and temperatures moderate. However,

low latitudes could experience falling yields as

drought, flooding, extreme temperatures, and fire

become more frequent.253

Impacts on crop yields directly affect the quantity

of salable agricultural products. Through strategic

changes such as alternative planting methods,

seed modification, and crop selection—which, in

some cases, may require long lead times to be

successfully implemented—companies in the

Agricultural Products industry can mitigate the

long-term negative effects of climate change on

crop yields while maximizing the opportunities for

increased yields.254

The adaptation potential for the industry is

dependent on a variety of factors. Companies can

better manage climate change’s effects through

proactively addressing its potential impacts,

including by implementing adaptive farming

strategies. By increasing research and

development spending toward breeding more-

adaptive crops, agricultural products companies

may be able to ensure higher yields in the long

term.





• Amount of crop losses, percentage offset

through financial mechanisms;

• Average crop yield and five-year standard

deviation per major crop type by major

operating region; and

• Identification of principal crops and

discussion of risks and opportunities

presented by climate change.

Evidence

As discussed in the earlier issues, companies in

this industry are facing various challenges related

to the environmental externalities of agricultural

processes. While a growing world population will

continue to create demand for agricultural

products, soil deterioration and changing climate

patterns can affect yields, with the potential for

significant impact on the results of operations of

agricultural companies. For example, annual rice-


yield growth is currently just about one-third of

what it was during the “green revolution”, while

demand for rice is rising by 2 percent annually in

Asia and by 20 percent in Africa.255 Continued

increases in yield are important to meet the

growing demand for agricultural products.

Climate change is a major variable in agricultural

productivity. The effects of climate change have

the potential to both positively and negatively

affect crop yield, largely depending on crop type

and region. Companies that are maintaining or

increasing crop yield may successfully mitigate the

effects of climate change. At the same time,

companies with decreasing yields may be more

exposed to the effects of climate change.

Reduced average yields as a result of climate

change can affect crop prices. Studies published

by the Institute of Development Studies, the

International Food Policy Research Institute, and

the UN Food and Agriculture Organization predict

that changes in expected average temperature

and precipitation worldwide will be a significant

driver of increasing market prices for the staple

crops maize, rice, and wheat in the next 20 years.

An Oxfam research study examined the possible

impacts of the increased frequency of severe

weather events, another likely outcome of climate

change, on the yields of maize, rice, and wheat in

the world’s major exporting regions of these

crops. The study found that these events, which

include droughts and intense precipitation, will

have more serious impacts on crop yields than

gradual changes in climatic means (temperature

and precipitation). Crops can be damaged at

specific developmental stages, and severe weather

events can physically disrupt farming procedures,

lowering efficiency and productivity.256 For

example, the severe heat wave in the U.S. in 2012

led to higher prices of maize and wheat.257

Climate change can affect crop yields through

several channels, including impacts on water. For

example, rice farming is a very water-intensive

process and consumes almost one-third of global

freshwater.258 The impacts from climate change

on precipitation and water availability present a

serious risk to the industry, given the sensitivity of

crops, such as rice, to water availability. For

different crops in general, climate change factors

that decrease yields include increased days

without precipitation and the increased intensity

of precipitation when it does occur. Less-balanced

precipitation can lead to drought conditions,

while a rise in precipitation intensity can lead to

flooding, which may increase erosions and reduce

soil nutrient content.259 This highlights the need

for adaptation to changing environmental

conditions.

Furthermore, crop responses to rising

temperatures vary widely, but it is generally

observed that temperatures above a plant’s

optimal growing range can reduce yields,

especially during the plant’s reproductive

phase.260 By one estimate, a rise in temperature of

between 1 and 2 degrees Centigrade could lower

average yields by between 10 and 15 percent

globally.261 This is due in part to proliferation of

weed and pathogen species in higher latitudes, as

well as to decreased soil moisture from the

increased presence of perennial herbaceous

plants.262

Several companies in the Agricultural Products

industry have experienced drought-related crop

losses that led to significant material impacts.

Fresh Del Monte, in discussing its 2014 asset

impairments in its FY2014 Form 10-K, included a

$1.3 million charge from the effects of the

continued drought in Chile on its non-tropical

fruit plantations.263 In 2013, Adecoagro marked

down the value of its corn, soybean, and

remaining crops by $5.9 million, $16.6 million,


and $2.7 million, respectively, because of drought

conditions that decreased yields by 21 to 31

percent versus historical averages.264

Interestingly, rising atmospheric CO2 levels, a

consequence of human activities, may actually

enhance crop growth because CO2 is used by

plants during photosynthesis. However, weeds

will likewise benefit from this trend, making

herbicides less effective.265 Farmers in the U.S.

currently spend approximately $11 billion

controlling weeds.266

Research by California’s Air Resources Board

found that by 2050, average temperatures in the

state may rise by as much as 3.6 degrees

Fahrenheit, while the Sierra Nevada snowpack,

which supplies much of the state’s water, may

decline by as much as 40 percent.267 By some

estimates, diminished water availability could lead

to productivity losses of up to $1,700 per acre in

California, the U.S.’s most productive agricultural

region. In California, higher temperatures and

water stress are expected to contribute to

declining crop yields, increased pests and invasive

weeds, and soil erosion and are predicted to lead

to revenue losses of as much as $3 billion per year

by 2050, the most of any sector, because of

reductions in irrigated acres. If action to reduce

GHG emissions is taken, losses may fall to $1.5

billion.268 Similarly, a 2014 Stanford University

study found that an expected warming of 3.5

degrees Fahrenheit in Europe could reduce wheat

and barley yields by more than 20 percent, while

maize yields may fall by 10 percent.269

Studies indicate that farms must adapt to climate

change via the adoption of new crop

management technologies and strategies.270

Agricultural products companies can adapt to the

effects of climate change by implementing

alternative cultivation methods, including

switching varieties of crops and growing crops

suitable to the local environment.271

Adaptation may require research and

development of innovative technologies or

varieties of crops. Rice provides 544 kilocalories of

energy per capita, more than any other food

source in the world.272 The mission of the

International Rice Research Institute (IRRI) is to

reduce poverty and hunger through rice

science.273 In recent years, IRRI developed

drought-tolerant varieties of rice that can be

planted in dry fields and can subsist on rainfall,

much like corn and wheat. Salt-tolerant varieties

of rice were created for countries like Bangladesh,

where rising sea levels bring saltwater into rice

fields; saltwater may poison rice before farmers

are able to detect it. None of these varieties is

actually genetically modified. A flood-tolerant rice

created by IRRI helped farmers in 128 villages in

the Indian state of Odisha increase their yields by

more than 25 percent.274

Major companies currently disclose varied risks

related to climate change in their financial

statements. For example, in Bunge’s FY2013 Form

10-K, the company discussed risks related to

climate change including “changes in rainfall

patterns, water shortages, changing sea levels,

changing storm patterns and intensities, and

changing temperature levels that could adversely

impact [its] costs and business operations, the

location and costs of global agricultural

commodity production, and the supply and

demand for agricultural commodities.” Bunge

concluded, “[t]hese effects could be material to

our results of operations, liquidity, or capital

resources.”275

Agricultural products companies invest in research

and development to improve their products,

making them more climate-resistant. For example,

Wilmar International performs genetic crosses to


breed drought-resistant palm, which can produce

a higher oil yield and content, while reducing

plant stature. The palm is being developed for the

dry African climate.276 In its 2014 CDP report,

Bunge stated that utilizing improved and drought-

tolerant sugarcane varietals and enhancing

irrigation and other agronomic practices help the

company to mitigate adverse weather conditions

and to ensure the long-term supply of sugarcane

for its industrial operations.277

Shareholder resolutions filed with major food

products companies indicate investor interest in

the effects of climate change on agricultural

production. In 2011, Calvert Asset Management

filed a resolution with the J.M. Smucker Company

requesting that the company detail how it will

respond to risks and opportunities presented by

climate change to coffee cultivation in the

company’s supply chain. Nearly one-third of its

shareholders voted in favor of the resolution.278

Value Impact

Climate change may significantly disrupt the

cultivation of crops worldwide through a variety

of physical impacts. It will likely increase the risk

of crop failure and lower yields. This directly

lowers revenues of primary crop producers and

raises the price of sourced crops. The amount of

crop losses provides insight into both the

progressive and the punctuated effects of events

related to climate change. A company’s crop yield

per hectare directly affects the bottom line: as

crop yield per hectare increases, so, too, does the

potential for generating revenue, an increase in

yield can reduce expenses through gained

efficiencies.

The increased risk of crop failure may also lead to

a rise in crop insurance costs. Adapting to climate

change could require R&D expenditures to

advance new methods of cultivation or to grow

new crop varieties. These costs could reduce

operating income in the near term, but they could

also strengthen a company’s growth potential.

Agricultural producers able to successfully adapt

to climate change challenges are likely to ensure

competitive advantage and strengthen their risk

profile, which can have a positive long-term

impact on the cost of capital. The probability and

magnitude of climate change impacts are likely to

increase, particularly in the absence of successful

GHG mitigation.

LEADERSHIP AND GOVERNANCE

As applied to sustainability, governance involves

the management of issues that are inherent to the

business model or common practice in the

industry and are in potential conflict with the

interests of broader stakeholder groups

(government, community, customers, and

employees). They therefore create a potential

liability, or worse, a limitation or removal of the

license to operate. This includes regulatory

compliance, lobbying, and political contributions.

It also includes risk management, safety

management, supply chain and resource

management, conflict of interest, anti-competitive

behavior, and corruption and bribery.

Governance risks can impact agricultural products

companies through a variety of channels,

including through the supply chain and

management of the regulatory environment.

Many companies in the industry source a portion

of their raw crop inputs from farmers and other

companies. The largest industry players have

extensive global supply chains with thousands of

individual suppliers. The sustainability challenges

addressed elsewhere in this brief can affect the

prices and availability of sourced crops, creating

financial risk for firms in the form of higher


operating costs, and can also adversely affect

brand reputation.

Special interest groups and corporations advocate

on behalf of the industry regarding regulatory

policy. Sustainable management of regulatory and

political influence includes consideration of the

long-term social and environmental externalities

that can result from this influence.

Environmental & Social Impacts of Ingredient Supply Chains

Agricultural products companies source a portion

of their inputs from farmers or other corporations

globally. Managing sustainability risks, including

environmental and social issues, within supply

chain farms and companies is critical to securing

raw materials and to reducing the risk of price

increases. For agricultural companies that are not

vertically integrated, many of the issues discussed

above may be relevant as a result of impacts on

their suppliers.

Specific factors that can affect the supply of raw

materials include reduced crop yields due to

climate change, increasing water scarcity, land

management, labor conditions, and the

environmental impacts of cultivation. Lower crop

yields or higher costs related to sustainability

factors among suppliers could directly increase

purchase costs, while a purchaser’s association

with suppliers that perform poorly on

environmental or social issues could result in

reputational damage. A damaged reputation is

likely to affect demand from food and beverage

companies, whose customers are increasingly

concerned with the environmental and social

footprint of products. Companies recognize these

risks and engage with key suppliers to implement

sustainable agricultural practices.

Corporate disclosure regarding key supply chain

risks and opportunities will enable investors to

better identify risk exposure and to effectively

measure the efficacy of a company’s efforts to

strengthen its supply chain and to sustain long-

term value for shareholders.





• Percentage of agricultural raw materials

sourced from regions with High or

Extremely High Baseline Water Stress;

• Description of management strategy for

environmental and social risks arising

from contract growing and commodity

sourcing; and

• Percentage of agricultural raw materials

that are certified to a third-party

environmental and/or social standard.

Evidence

Some companies source a significant portion of

their raw materials from suppliers, including

farmers and distributors. The primary channels of

financial impact from the supply chain are the

price and availability of crop inputs. For example,

according to Bunge’s FY2014 Form 10-K, the

company purchased a third of its sugarcane from

third-party suppliers.279

Companies purchase a wide variety of crops for

resale or as raw materials to produce vegetable

oils, milled grains, ethanol, and other

commodities. Crop yield is the main factor

affecting the supply of these materials. Some key

inputs to the industry are grown in concentrated

regions: wheat in North America and South

America, maize in North America, and rice in Asia.

This concentration can amplify the effects of

lower yields on prices.280


As mentioned in the Climate Change Impacts

issue above, lower yields are likely to result in

higher crop prices. As the frequency of severe

weather event increases, farmers are likely to

experience additional difficulties in cultivation

procedures and bare-crop losses. Therefore,

companies in the industry that work closely with

suppliers on increasing their climate change

adaptability will be better protected from volatility

in crop prices and from disruptions in crop

supplies. An analysis of the SEC reports of the

largest players in the industry shows that most

companies disclose that extreme weather events

as a result of climate change may impact—and in

some cases have impacted—their performance,

either directly or through their supply chain.281

The industry’s crop sourcing is a key sustainability

issue raised in corporate responsibility reports.

This is due in large part to the fact that

agricultural products are mostly grown in

emerging markets, where environmental and

social regulations may not be as stringent. Poor

performance on environmental and social factors

among suppliers of these products can result in

reputational damage. The noteworthy

externalities associated with the production of

some crops, including palm oil, cocoa, cotton,

and bananas, have garnered public attention. For

example, ADM reports that key factors examined

in the palm oil supply chain include “biodiversity

and the environment, by refraining from

expanding cropland into sensitive animal habitats

and high-conservation-value forest land, and

human rights, by maintaining labor standards that

prohibit worker exploitation and discrimination,

and by helping to ensure that the land used for oil

palm does not diminish tribes’ legal or customary

rights without their free, prior, and informed

consent.”282

Indonesia is one of the world’s largest suppliers of

palm oil.283 The country has lost 46 percent of its

forests since 1950, fueled by palm oil production.

In 2011, Indonesia imposed a moratorium on the

issuance of new permits for land development in

protected primary forest and on peatlands. The

moratorium did not have a negative effect on the

growth of Indonesian palm oil production, and at

the same time, it reduced the share of palm oil

that was sourced unsustainably.284

In 2011, Wilmar International was criticized for

the alleged destruction of the environment and

for human rights violation in Indonesia.285 Cargill,

which has 25 percent of the global palm oil

market, sources 95 percent of its third-party crude

palm oil in Indonesia from members of the

Roundtable on Sustainable Palm Oil (RSPO). RSPO

members, which are committed to not clearing

land via burning, are often criticized by the

Rainforest Action Network (RAN) for a lack of

carbon or climate standards as well as “problems

with the implementation of social safeguards.” To

improve the palm oil industry in Indonesia, RAN

focused its campaign on Cargill, which in 2014

committed to adopt a global palm oil policy that

addresses widely recognized gaps in the RSPO

standards and improves the transparency and

traceability of its supply chain.286 Cargill agreed to

monitor its suppliers for compliance with ceasing

deforestation, exploitation of indigenous peoples,

and other egregious practices.287

A 2014 shareholder resolution filed with ADM

addressed the need for strong supply chain

management in the face of environmental and

social risks, highlighting investors’ concern with

the issues. The resolution was withdrawn after

ADM agreed to address the issues.288 Moreover,

the company states on its website that it will

terminate any contract with a supplier that

violates U.S. national labor laws.289 In another

example, Bunge, as part of its Global Labor Policy

in Brazil, stated, “[w]e cross-reference our

agricultural suppliers against the Brazilian


government's list of farms that have been found

to commit labor abuses and violate environmental

laws to ensure that farms with serious labor or

environmental infractions are excluded from our

agricultural supply chain.”290

For those companies with extensive global supply

chains, active management of sustainability

concerns is needed to reduce reputational

damage and ingredient supply impacts. In 2010,

one of Cargill’s and Bunge’s suppliers, Guarani

farm, was found by the Brazilian Ministry of Labor

and Employment to be in violation of fair labor

practices. Reportedly, Guarani’s workers were not

receiving regular wages and were forced to work

14-hour days without time off on weekends.

Moreover, workers were not provided with

adequate housing, access to drinking water,

hygiene facilities, or legally required protective

equipment.291

During the 2014 FIFA World Cup, Coca Cola was

criticized for sourcing its sugar from Bunge,

which, in turn, buys it from the land that was

allegedly stolen from Guarani people of Brazil.

The land grab resulted in a dramatic increase in

suicides among the Brazilian Guarani, who have

the highest suicide rate in the world.292 While in

some cases, companies in the Agricultural

Products industry are primarily involved in

business-to-business transactions and their

reputations may not be directly impacted by end

consumers’ perceptions, they may still be

significantly affected through the loss of clients.

As many agricultural companies’ clients operate in

food and beverage industries that are themselves

end-consumer-facing, they have a high degree of

concern for their reputation and brand value.

When poor performance on environmental and

social issues is found within their supply chains,

food and beverage companies may discontinue

sourcing from specific agricultural companies.

In additional evidence of food and beverage

companies focusing on the sustainability of their

supply chains, in 2013, General Mills announced a

commitment to sustainably source 10 key

ingredients, which make up 50 percent of its raw

material purchases, by 2020.293

Value Impact

Agricultural products companies rely on stable

supplies of agricultural inputs. Climate change

and environmental degradation could increase the

probability of crop failure or lower yields, and in

turn raise purchase costs. In addition, issues such

as labor abuses can similarly raise purchase costs

if supplies are constrained or truncated because

of labor issues. Supply chain interruption can

cause a loss of revenue and market share if

companies are not able to find alternatives to key

suppliers, and can raise purchasing costs if

supplies are found elsewhere at a higher cost.

Recurring supply chain disruptions can create

operational risks, and the resulting financial

consequences may harm a company’s credit

profile over time, impacting its cost of capital.

Having to source a greater amount of products

from water-stressed regions may indicate higher

input costs, increased competition for quality

resources, and/or disruptions to the supply chain.

Sourcing from certified suppliers gives agricultural

companies assurance that the inputs to its

products have been developed in accordance with

a high standard for social and environmental

principles, reducing the risk that a company will

face a loss in brand image due to its sourcing

practices.

Evolving regulations focused on addressing

environmental externalities are likely to become

more stringent, increasing the probability and

magnitude of the aforementioned impacts in the

future.


Management of the Legal & Regulatory Environment

The interaction of companies with the regulatory

environment includes political contributions and

lobbying, which can be directed towards issues

with sustainability implications, such as crop

insurance subsidies and the RFS program in the

case of the Agricultural Products industry.

Corporate lobbying is particularly relevant for U.S.

markets, where financial contributions and

lobbying by registered lobbyists are legally

recognized ways of engaging with policymakers.VIII

While commonly used by a number of companies

and industry associations across different

industries, political lobbying and contributions

have been criticized for unduly influencing

government policy, thereby creating negative

social and environmental externalities or policy

outcomes that may not align with society’s best

interests in the long term.

In the Agricultural Products industry, corporate

lobbying is often directed towards crop-insurance-

subsidies policy and the RFS program that is likely

to support demand for certain crops. These

actions can benefit the industry by lowering risks

and improving profitability in the short term.

Nonetheless, the potential for long-term adverse

environmental impacts from some of these

policies or the ways they are designed may

ultimately create policy reversals or unfavorable

changes; these could include, for example,

lowering of government subsidies or

conditionalities introduced for obtaining subsidies.

In some instances, government subsidies support

overproduction, which may lead to environmental

VIII In other countries, where there may be more legal restrictions on, or less formal recognition of, interactions of corporate interests and government officials or lawmakers, weaker institutional environments for enforcing related laws, and/or general social acceptance of bribery, influence of government policy through bribery and corruption may be more prominent

degradation through expanded acreage into

marginal lands or more harmful intensive farming

practices.294 Crop insurance mitigates weather

and environment-related risk, which could

increase significantly in the future because of

climate change. However, this is an area where

despite short-term gains, lobbying could create

adverse sustainability impacts in the long term—

subsidies for crop insurance, without appropriate

measures to incorporate long-term sustainability

considerations, may reduce incentives to practice

farming techniques such as conservation tillage,

cover-cropping, and more efficient irrigation. This

could ultimately impact company results by

impacting crop yields. Support of policies that

affect or delay corporate action on both climate

mitigation and adaptation as well as ecological

impacts could be detrimental to shareholder value

in the long term.

In addition to lobbying in support of crop

insurance subsidies, a heavy reliance on the

biofuel industry—one of the main purchasers of

corn and soybean crops—prompts agricultural

companies to lobby for support of the U.S. EPA’s

RFS program, which creates demand for biofuels

based on such crops. While fuel-cycle GHG

emissions of biofuels may be lower than those

from fossil fuels, there are negative externalities

related to agricultural feedstock production for

biofuels—such as ecological impacts from the use

of fertilizers and pesticides in intensive agriculture

and water consumption for crop irrigation

discussed earlier in this brief, as well as possible

influences on food prices. Such externalities are

prompting proposals for a shift in regulatory

support from crop-based biofuels to advanced

concerns. Bribery and corruption to influence policies may also be concerns in U.S. markets, but such instances may be less prevalent in countries such as the U.S. with strong enforcement of related laws. For U.S.-listed companies in the Agricultural Products industry, the disclosure topic of bribery and corruption was not found to be likely to constitute material information.


biofuels that use alternative feedstocks and have

lower environmental and social externalities.

The Agricultural Products industry therefore faces

risks from its reliance on corn and soybean

demand created by fuel mandates. As climate

change regulations continue to evolve, the

demand for ethanol and other food crop-based

biofuels may decrease if government support for

such biofuels is reduced or withdrawn, putting a

substantial share of agricultural companies’

revenue at risk.

Agricultural products companies could benefit

from a clear strategy for engaging policymakers

and regulators that is aligned with long-term

sustainable business outcomes and that accounts

for societal and environmental externalities.

Companies putting in place strategies to manage

such externalities from their operations in addition

to engaging with their regulatory and legislative

environment directly, could be better positioned

to deal with any policy changes that take into

account externalities. By engaging with regulators

and by managing sustainability issues relevant for

their industry, focused on positive societal

outcomes, companies will likely be better

prepared for medium- to long-term regulatory

adjustments.





• Discussion of positions on the regulatory

and political environment related to

environmental and social factors and

description of efforts to manage risks and

opportunities presented.

Evidence

In 2013, the U.S. Farm Bill was the sixth-most

lobbied measure in Congress, with more than 350

organizations spending money to influence the

bill.295 Agricultural product companies were a

significant contributor, spending $21.8 million in

2013 and $21.1 million in 2014, as well as

investing additional funds into the campaigns of

many representatives who crafted the bill.296

Lobbying was heavily focused on the Federal Crop

Insurance Program (FCIP), which is replacing direct

payments to farmers as a primary vehicle for

agricultural subsidies.297 The direct payments

system has been criticized for being provided to

farmers without regard to their needs. While the

FCIP is arguably a less transparent and more costly

system, it is nevertheless rapidly gaining

popularity.298

As discussed earlier, crop insurance subsidies is an

area where short-term gains obtained through

lobbying could be overturned due to adverse

sustainability outcomes in the long term,

ultimately impacting company results. The FCIP

insures U.S. farmers against weather-related crop

failure. The program paid out a record $17.3

billion in insurance proceeds in 2012 after

drought triggered widespread crop failure across

the U.S.299

The amount of subsidies provided through the

FCIP has increased in the past decade. In 2001,

the USDA subsidized approximately 30 percent of

crop insurance, or $2 billion. In 2011, the agency

paid $7.4 billion in subsidies, or nearly 62 percent

of total insurance premiums.300 In 2012, taxpayers

covered 60 percent of the crop insurance

premiums and absorbed 75 percent of the

insurance payouts.301 The subsidies are technically

unlimited, and the USDA is not required to

disclose who the recipients are. The level of


insurance chosen by the producer is positively

correlated with USDA subsidies.302

Government subsidies, which covered 60 percent

or $14 billion of the farmers’ crop insurance

premium costs in 2014, may reduce the incentives

for farmers to protect themselves from climate

change and extreme weather events.303 It has

been argued that the FCIP program may reduce

incentives to practice farming techniques such as

conservation tillage, cover-cropping, and more

efficient irrigation.304

Research indicates that crop insurance can also

contribute to environmental degradation by

encouraging planting in marginal and/or drought-

stricken lands. According to a 2014 report by

Ceres, a nonprofit organization of investors,

companies, and public interest groups advocating

for sustainable business practices, the FCIP “sets

premium formulas that encourage riskier decisions

such as expanding production onto marginal land

and planting maize on the same plot year after

year.”305 According to researchers at the

Environmental Working Group, from 2008 to

2011, crop insurance and high agricultural

commodity prices contributed to the conversion

of 23 million acres of grassland, shrubland, and

wetlands to farmland in the U.S. Midwest.306

Lobbying for insurance that limits or does not

provide incentives to mitigate climate or

ecological impacts can benefit producer income in

the short term, but it can negatively affect long-

term productivity by advancing unsustainable

agricultural practices.

Another regulatory area of focus for the industry

is government incentives for biofuels. Corn and

soybeans are the two largest crops in the U.S.307

Demand for corn for ethanol production, created

in large part by the RFS program and other

regulatory support for biofuels, has pushed up the

price of corn and incentivized an increase in corn

acreage.308 As of 2013, approximately 43 percent

of the corn grown in the U.S. was used for

ethanol and dried distillers grains, a coproduct of

ethanol production used to feed livestock and

poultry.309 In 2013, 13 percent of the oil from the

soybean crop was used for ethanol, and 24

percent of the oil from crushed soybeans was

used for ethanol.310 These percentages have

grown over time; in 1980, only 0.3 percent of

U.S. corn was used for fuel ethanol.311 With 2015

corn segment revenues expected to be at $47.5

billion and soybean segment revenues at $32.5

billion, a significant share of agricultural

companies’ sales depend on the demand for

biofuels.312

Agricultural products companies such as ADM,

Cargill, and POET Ethanol Products have joined

together to lobby for corn ethanol. Although the

largest subsidy, the $6 billion annual volumetric

ethanol excise tax credit expired in 2011,

mandates for biofuels have existed since 2005

under the RFS.313 There is some disclosure among

agricultural products companies of their lobbying

efforts. Bunge reports that it “supports market

based approaches to promoting economically and

environmentally efficient first generation biofuels”

such as corn and soybeans.314 ADM reports that,

among other policies, it lobbies to maintain the

RFS program.315 From 2007 to 2013, ADM spent

$10.9 million on lobbying, while POET Ethanol

Products spent $5.1 million.316

Currently more than 60 countries have biofuel

targets or mandates, but calls for a repeal of corn

ethanol mandates are growing, as increasing

demand for corn inflates food prices,

disproportionately affecting the poor.317 At the

2011 G20 summit in Paris, a joint

recommendation by the UN Food and Agriculture

Organization, International Monetary Fund, the

Organization for Economic Co-operation and

Development, the World Trade Organization, and


the World Bank, among other international

entities, called for governments to adjust biofuels

mandates when food markets are pressured.318

The environmental externalities that can be

created by government subsidies and policy

support for corn- and other food crop-based

biofuels are other reasons why there is increasing

pressure for the RFS program to shift support

from traditional biofuels to advanced biofuels that

might have lower externalities.319 As with crop

insurance subsidies, subsidies and other policy

support for traditional biofuels also have the

potential to distort incentives and lead to the

expansion of crop production in areas with poor

soil and water scarcity.320 The potential for

environmental degradation caused by expanding

acreage of corn for ethanol is currently not fully

taken into account in programs such as the RFS.

Were such concerns accounted for, biofuels

produced from corn grown with environmentally

sustainable practices may become favored.

By and large, renewable fuel policies reflect

concerns about food-crop-based biofuels

production by progressively increasing the volume

of biofuels from non-food crop sources blended

with transport fuels. Some governments have

even moved to cap the production volume of

crop-based ethanol.321 In June 2014, the E.U.

agreed on a plan to limit the use of food-based

biofuels for transportation to seven percent of

total volume, down from the original target of 10

percent. The decision came after a failed 2013

attempt to implement a five percent cap on fuels

produced by food crops including corn and

rapeseed. Research that found the production of

fuel from food crops contributed to the

displacement of other food crops, food price

inflation, and destruction of natural habitats

drove the E.U. to impose the limit.

Changes to biofuels policies that limit, reduce, or

remove support of corn ethanol could have acute

or progressive impacts on the demand for corn

production and corn prices, depending on the

nature of the policy change. In its FY2014 Form

10-K, ADM acknowledged, “[g]overnmental

policies affecting the agricultural industry …

including policies related to … renewable fuels,

and low carbon fuel mandates, can influence the

planting of certain crops, the location and size of

crop production.” The company further indicates

that changes in the RFS program may have a

significant impact on its financial performance.322

Corn ethanol lobbying interests have been in

support of adding corn ethanol to the list of

advanced biofuels, which would largely eliminate

the need to shift production in the biofuels

industry to utilize non-food feedstocks.323 Such a

shift could introduce long-term sustainability

challenges, including food security issues. Policies

progressively reducing the amount of food crop-

based biofuels or encouraging use of sustainably

produced feedstocks might allow agricultural

products companies to adjust to policy changes

with fewer disruptions. Companies could continue

to have the opportunity to generate revenues

from the biofuels markets through provision of

alternate feedstocks such as woody biomass and

crop waste, which could supply cellulosic ethanol

without the need for additional cropland.324

The adoption of sustainable agricultural

production is likely to be a significant driver of

long-term profitability in the industry. Industry

efforts to preserve or enhance policies that delay

or affect corporate action on sustainability issues

may not be aligned with the public’s best interest

and could prove detrimental in the long run.


Value Impact

The financial impact of managing the political and

regulatory environment manifests itself over the

long term, as regulations governing

environmental and social externalities of

agriculture will likely become more stringent over

time. Lobbying, campaign contributions, and

other politically influential spending or activities

that promote policies creating perverse incentives

related to the industry’s social or environmental

impacts could erode companies’ social license to

operate over the long term. While successful

lobbying could result in positive short-term gains,

these benefits could subsequently be reversed to

reflect the balance of corporate and public

interest in these issues, leading to a more

burdensome regulatory environment. Lobbying

can therefore create regulatory uncertainty,

increasing the risk profile of companies and their

cost of capital.


APPENDIX I FIVE REPRESENTATIVE AGRICULTURAL PRODUCTS COMPANIESIX

IX This list includes five companies representative of the Agricultural Products industry and its activities. This includes only companies for which the Agricultural Products industry is the primary industry, companies that are U.S.-listed but are not primarily traded over the counter, and for which at least 20 percent of revenue is generated by activities in this industry, according to the latest information available on Bloomberg Professional Services, accessed May 26, 2015.

COMPANY NAME (TICKER SYMBOL)

Archer Daniels Midland Company (ADM)

Bunge (BG)

Ingredion (INGR)

Seaboard (SEB)

Adecoagro S.A. (AGRO)


APPENDIX IIA EVIDENCE FOR SUSTAINABILITY DISCLOSURE TOPICS

Sustainability Disclosure Topics

EVIDENCE OF INTEREST

EVIDENCE OF

FINANCIAL IMPACT

FORWARD-LOOKING IMPACT

HM (1-100)

IWGs EI

Revenues &

Costs

Assets & Liabilities

Cost of Capital

EFI

Probability & Magnitude

Exter-

nalities

FLI

% Priority

Greenhouse Gas Emissions 50* 82 7 High • • Medium • • Yes


33 - - Medium • • Medium • Yes

Water Withdrawal 88* 96 1 High • • • High • Yes


46 93 3 High • • • High • • Yes

Food Safety & Health Concerns 71* 100 2 High • • • High • • Yes


38 89 6 Medium • • Medium No


75* 85 4 High • • High • • Yes


29 85 5 Medium • • • High • • Yes


0 89 8 Medium • Medium No

HM: Heat Map, a score out of 100 indicating the relative importance of the topic among SASB’s initial list of 43 generic sustainability issues. Asterisks indicate “top issues.” The score is based on the frequency of relevant keywords in documents (i.e., 10-Ks, 20-Fs, shareholder resolutions, legal news, news articles, and corporate sustainability reports) that are available on the Bloomberg terminal for the industry’s publicly listed companies. Issues for which keyword frequency is in the top quartile are “top issues.”

IWGs: SASB Industry Working Groups.

%: The percentage of IWG participants who found the disclosure topic likely to constitute material information for companies in the industry. (-) denotes that the issue was added after the IWG was convened.

Priority: Average ranking of the issue in terms of importance. 1 denotes the most important issue. (-) denotes that the issue was added after the IWG was convened.

EI: Evidence of Interest, a subjective assessment based on quantitative and qualitative findings

EFI: Evidence of Financial Impact, a subjective assessment based on quantitative and qualitative findings

FLI: Forward-Looking Impact, a subjective assessment of the presence of a material forward-looking impact


APPENDIX IIB EVIDENCE OF FINANCIAL IMPACT FOR SUSTAINABILITY DISCLOSURE TOPICS

MEDIUM IMPACT H IGH IMPACT

Evidence of

Financial Impact

REVENUE & EXPENSES ASSETS & LIABILITIES RISK PROFILE

Revenue Operating Expenses Non-operating Expenses Assets Liabilities

Cost of Capital

Industry Divestment

Risk Market Share

New Markets Pricing

Power Cost of

Revenue R&D CapEx Extra-

ordinary Expenses

Tangible Assets

Intangible Assets

Contingent Liabilities & Provisions

Pension & Other

Liabilities


•

•

•


•

•

•

Water Withdrawal •

• • • •

•


•

• • • • •

•


• • •

• • •

•


•

• • • •


• • •

•


• • •

•


•


APPENDIX III SUSTAINABILITY ACCOUNTING METRICS | AGRICULTURAL PRODUCTS

TOPIC

ACCOUNTING METRIC CATEGORY

UNIT OF MEASURE

CODE


Gross global Scope 1 emissions Quantitative Metric tons (t) CO2-e

CN0101-01

Biogenic carbon dioxide (CO2) emissions* Quantitative Metric tons (t) CO2-e

CN0101-02

Description of long-term and short-term strategy or plan to manage Scope 1 emissions, emission-reduction targets, and an analysis of performance against those targets

Discussion & Analysis

n/a CN0101-03


Operational energy consumed, percentage grid electricity, percentage renewable

Quantitative Gigajoules (GJ), Percentage (%)

CN0101-04

Fleet fuel consumed, percentage renewable Quantitative Gigajoules (GJ), Percentage (%)

CN0101-05

Water Withdrawal

(1) Total water withdrawn and (2) total water consumed, percentage of each in regions with High or Extremely High Baseline Water Stress

Quantitative Cubic meters (m3), Percentage (%)

CN0101-06

Discussion of water withdrawal risks and description of management strategies and practices to mitigate those risks


n/a CN0101-07


Description of strategies to manage land use and ecological impacts


n/a CN0101-08

(1) Volume of wastewater reused and (2) volume of wastewater discharged to the environment** Quantitative Cubic meters (m3) CN0101-09

Number of incidents of non-compliance with water-quality permits, standards, and regulations

Quantitative Number CN0101-10

Amount of fertilizer consumption by: (1) nitrogen-based, (2) phosphate-based, and (3) potassium-based fertilizers

Quantitative Metric tons (t) CN0101-11

Amount of pesticide consumption by hazard level*** Quantitative Metric tons (t) CN0101-12


Global Food Safety Initiative (GFSI) audit conformance: (1) major non-conformance rate and associated corrective action rate and (2) minor non-conformance rate and associated corrective action rate

Quantitative Rate CN0101-13

Percentage of agricultural products sourced from suppliers certified to a Global Food Safety Initiative (GFSI) scheme

Quantitative Percentage (%) by spend

CN0101-14

Number of recalls issued, total amount of food product recalled****

Quantitative Number, Metric tons (t)

CN0101-15

Description of strategies to manage the use of genetically modified organisms (GMOs)


n/a CN0101-16

* Note to CN0101-02—Disclosure should include discussion of whether the registrant’s biogenic CO2 emissions are carbon neutral. ** Note to CN0101-09—Disclosure shall include a description of the risk related to wastewater discharge and the wastewater treatment and management method(s) used. *** Note to CN0101-12—Disclosure shall include a description of any uses of WHO Class Ia and Ib pesticides. **** Note to CN0101-15—Disclosure shall include a description of notable recalls, such as those that affected a significant amount of product or those related to serious illness or fatality.


SUSTAINABILITY ACCOUNTING METRICS | AGRICULTURAL PRODUCTS (CONTINUED)

TOPIC

ACCOUNTING METRIC

CATEGORY

UNIT OF MEASURE

CODE


Percentage of farms and facilities certified for fair labor practices

Quantitative Percentage (%) CN0101-17

(1) Total recordable injury rate (TRIR), (2) fatality rate, and (3) near miss frequency rate (NMFR) for (a) direct employees and (b) seasonal and migrant employees

Quantitative Rate CN0101-18

Description of efforts to assess, monitor, and reduce exposure of direct, seasonal, and migrant employees to pesticides


n/a CN0101-19


Amount of crop losses, percentage offset through financial mechanisms

Quantitative U.S. Dollars ($), Percentage (%)

CN0101-20

Average crop yield and five-year standard deviation per major crop type by major operating region Quantitative Metric tons (t) CN0101-21

Identification of principal crops and discussion of risks and opportunities presented by climate change


n/a CN0101-22


Percentage of agricultural raw materials sourced from regions with High or Extremely High Baseline Water Stress


CN0101-23

Description of management strategy for environmental and social risks arising from contract growing and commodity sourcing


n/a CN0101-24

Percentage of agricultural raw materials that are certified to a third-party environmental and/or social standard


CN0101-25


Discussion of positions on the regulatory and political environment related to environmental and social factors and description of efforts to manage risks and opportunities presented


n/a CN0101-26


56I N D U S T RY B R I E F | A G R I C U LT U R A L P R O D U C T S

APPENDIX IV: Analysis of SEC Disclosures | Agricultural Products

The following graph demonstrates an aggregate assessment of how representative U.S.-listed Agricultural Products companies are currently reporting on sustainability topics in their SEC annual filings.

Agricultural Products



Water Withdrawal







0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

TYPE OF DISCLOSURE ON SUSTAINABILITY TOPICS

NO DISCLOSURE BOILERPLATE INDUSTRY-SPECIF IC METRICS

82%

-

96%

93%

100%

89%

85%

85%

89%

IWG Feedback*

*Percentage of IWG participants that agreed topic was likely to constitute material information for companies in the industry. (-) denotes that the issue was added after the IWG was convened.



Water Withdrawal







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1 Koichi Fujita, “Green Revolution in India and Its Significance in Economic Development: Implications for Sub-Saharan Africa” (working paper, JICA Research Institute), accessed June 5, 2015, http://policydialogue.org/files/events/Fujita_green_rev_in_india.pdf.

2 Steve Goreham, “World Agricultural Output Continues to Rise, Despite Predictions of Decline,” Washington Times, November 26, 2013, accessed June 4, 2014, http://communities.washingtontimes.com/neighborhood/climatism-watching-climate-science/2013/nov/26/world-agricultural-output-continues-rise-despite-p.

3 U.N. Food and Agriculture Organization, Global Agriculture Towards 2050, High-Level Expert Forum, October 12–13, 2009, accessed July 24, 2014, http://www.fao.org/fileadmin/templates/wsfs/docs/Issues_papers/HLEF2050_Global_Agriculture.pdf.

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5 Data from Bloomberg Professional service, accessed on May 26, 2015, using the BICS <GO> command. The data represent global revenues of companies listed on global exchanges and traded over the counter (OTC) from the Agricultural Products industry, using Level 4 of the Bloomberg Industry Classification System.

6 Author’s calculation based on data from Bloomberg Professional service, accessed on May 26, 2015, using Equity Screen (EQS) for U.S.-listed companies that generate at least 20 percent of revenue from their Agricultural Products segment and for which Agricultural Products is a primary SICS industry.

7 From the SEC filings of companies in the Agricultural Products industry.

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11 “Climate Impacts on Agriculture and Food Supply,” U.S. EPA, September 9, 2013, accessed July 24, 2014, http://www.epa.gov/climatechange/impacts-adaptation/agriculture.html.

12 From the SEC filings of companies in the Agricultural Products industry.

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18 “Growth Patterns in the U.S. Organic Industry,” USDA, Economic Research Service, October 24, 2013, accessed July 24, 2014, http://www.ers.usda.gov/amber-waves/2013-october/growth-patterns-in-the-us-organic-industry.aspx#.U9E1OfldV8E.

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https://www.oxfam.org/sites/www.oxfam.org/files/rr-cereal-secrets-grain-traders-agriculture-30082012-en.pdf

https://www.oxfam.org/sites/www.oxfam.org/files/rr-cereal-secrets-grain-traders-agriculture-30082012-en.pdf

http://wdi.worldbank.org/table/3.2

http://www.agcensus.usda.gov/Publications/2012/Full_Report/Volume_1,_Chapter_1_US/st99_1_001_001.pdf

http://www.epa.gov/climatechange/impacts-adaptation/agriculture.html

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22 USDA, Economic Research Service, Structure and Finances of U.S. Farms: Family Farm Report, 2014 edition, p. 42.

23 Author’s calculation based on data from Bloomberg Professional service, accessed on June 9, 2015, using Equity Screen (EQS) for U.S.-listed companies and those traded primarily OTC that generate at least 20 percent of revenue from their Agricultural Products segment and for which Agricultural Products is a primary SICS industry.

24 USDA, National Agricultural Statistics Service, 2012 Census of Agriculture: United States Data, table 1, “Historical Highlights: 2012 and Earlier Census Years,” May 2, 2014, accessed June 5, 2014, http://www.agcensus.usda.gov/Publications/2012/; Neville, Industry Report 11115 Corn Farming in the US; Outlaw, Industry Report 11120 Vegetable Farming in the US.

25 Linda Labao and Curtis W. Stofferhan, “The Community Effects of Industrialized Farming: Social Science Research and Challenges to Corporate Farming Laws,” Agriculture and Human Values 25, no. 2 (June 2008): 219–40.

26 Paulo Prada, “Special Report: Why Brazil has a big appetite for banned pesticides,” Reuters, April 2, 2015, accessed June 2, 2015, http://www.reuters.com/article/2015/04/02/us-brazil-pesticide-specialreport-idUSKBN0MT1Q820150402.

27 Roger R. Martella Jr. and J. Brett Grosko, eds., Central and South America Overview: Emerging Trends in Latin America (Chicago: American Bar Association, 2014), pp. 365–95.

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34 “Cap-and-Trade Program,” California Environmental Protection Agency Air Resources Board, 2014, accessed December 28, 2014, http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm.

35 “State Climate and Energy Program,” U.S. EPA, accessed June 5, 2015, http://www.epa.gov/statelocalclimate/state/index.html.

36 Rani Molla, “How Much of World’s Greenhouse-Gas Emissions Come from Agriculture?” Wall Street Journal, September 29, 2014, accessed June 5, 2015, http://blogs.wsj.com/numbers/how-much-of-worlds-greenhouse-gas-emissions-come-from-agriculture-1782.

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38 Megan Stubbs, “Environmental Regulation and Agriculture,” Congressional Research Service, February 22, 2013, accessed June 5, 2014, http://www.fas.org/sgp/crs/misc/R41622.pdf.

39 “UN-REDD Moves toward Implementation,” International Institute for Sustainable Development Reporting Services, April 15, 2015, accessed June 5, 2015, http://nr.iisd.org/news/un-redd-moves-towards-implementation.

40 Stubbs, “Environmental Regulation and Agriculture.”

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44 “Compliance Assistance: Wages and the Fair Labor Standards Act (FLSA),” 2014, U.S. Department of Labor, Wage and Hour Division, accessed July 28, 2014, http://www.dol.gov/whd/flsa; “Employment Issues,” 2012, Migrant Legal Action Program, accessed July 28, 2014, http://www.mlap.org/employment_issues.htm.

45 “Regulations and Directives,” USDA, January 2, 2014, accessed June 5, 2014, http://www.usda.gov/wps/portal/usda/usdahome?navid=REGS_DIRECTIVES&parentnav=LAWS_REGS&navtype=RT.

46 “Regulations and Requirements,” USDA, Foreign Agricultural Service, 2014, accessed July 24, 2014, http://www.fas.usda.gov/topics/exporting/regulations-and-requirements.

47 “Federal Insecticide, Fungicide, and Rodenticide Act,” U.S. EPA, June 27, 2012, accessed June 5, 2014, http://www.epa.gov/oecaagct/lfra.html#Summary of the Federal Insecticide, Fungicide, and Rodenticide Act.

48 Diahanna Lynch and David Vogel, “The Regulation of GMOs in Europe and the United States: A Case-Study of Contemporary European Regulatory Politics,” Council on Foreign Relations, April 5, 2001, accessed June 4, 2015, http://www.cfr.org/agricultural-policy/regulation-gmos-europe-united-states-case-study-contemporary-european-regulatory-politics/p8688.

49 “Restrictions on Genetically Modified Organisms,” Law Library of Congress, March 2014, accessed June 4, 2015, http://www.loc.gov/law/help/restrictions-on-gmos/restrictions-on-gmos.pdf.

50 Martella and Grosko, eds., Central and South America Overview, pp. 365–95.

51 “What Is the Farm Bill?” National Sustainable Agriculture Coalition, 2014, accessed June 9, 2014, http://sustainableagriculture.net/our-work/fbcampaign/what-is-the-farm-bill.

52 USDA, “2014 Farm Bill Highlights,” March 2014, accessed July 24, 2014, http://www.usda.gov/documents/usda-2014-farm-bill-highlights.pdf.

53 Mary V. Gold, “Sustainable Agriculture: Informational Access Tools, USDA, 2009, accessed June 9, 2014, http://www.nal.usda.gov/afsic/pubs/agnic/susag.shtml.

54 U.S. EPA, “Agriculture,” chap. 6, in Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2012, accessed June 29, 2015, http://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2014-Main-Text.pdf.

55 “Economic Incentives,” EPA, National Center for Environmental Economics, July 25, 2014, accessed July 25, 2014, http://yosemite.epa.gov/EE%5Cepa%5Ceed.nsf/webpages/EconomicIncentives.html.

56 Gilbert E. Metcalf and John M. Reilly, “Policy Options for Controlling Greenhouse Gas Emissions: Implications for Agriculture,” Choices 23, no. 1 (2008), accessed June 29, 2015, http://www.choicesmagazine.org/2008-1/theme/2008-1-10.htm; U.N. Food and Agriculture Organization, Mitigation of Climate Change in Agriculture, “Supporting Policy and Decision Making,” July 23, 2014, accessed July 25, 2014, http://www.fao.org/climatechange/micca/70793/en.

57 Bloomberg Professional service, accessed on April 14, 2015, using the BICS <GO> command. The data represent global revenues of companies listed on global exchanges and traded over the counter from the Agricultural Products industry, using Level 4 of the Bloomberg Industry Classification System.

58 From an internal analysis of the SEC filings of companies in the Agricultural Products industry.

59 “Summary of California’s Cap and Trade Program,” Center for Climate and Energy Solutions, accessed May 20, 2015, http://www.c2es.org/us-states-regions/action/california/cap-trade-regulation.

60 U.S. EPA, “Agriculture,” Inventory of U.S. Greenhouse Gas Emissions and Sinks.

61 U.S. EPA, Office of Atmospheric Programs, Climate Change Division, Global Anthropogenic Non-CO2 Greenhouse Gas Emissions.

62 Ibid.; Kari Hamerschlag, “California’s Climate Change Policy Leaves Agriculture in the Dust: Major Missed Opportunities for Synergies in Climate Change Mitigation and Adaptation,” Environmental Working Group, September 2009, accessed June 29, 2015, http://www.ewg.org/research/california%E2%80%99s-climate-change-policy-leaves-agriculture-dust.

63 U.S. EPA, “Agriculture,” Inventory of U.S. Greenhouse Gas Emissions and Sinks, p. 4.


http://www.worc.org/userfiles/file/Local%20Foods/QA_Tester_Amendment.pdf

http://www.mlap.org/employment_issues.htm

http://www.usda.gov/wps/portal/usda/usdahome?navid=REGS_DIRECTIVES&parentnav=LAWS_REGS&navtype=RT

http://www.fas.usda.gov/topics/exporting/regulations-and-requirements

http://www.epa.gov/oecaagct/lfra.html%23Summary%20of%20the%20Federal%20Insecticide,%20Fungicide,%20and%20Rodenticide%20Act

http://www.cfr.org/agricultural-policy/regulation-gmos-europe-united-states-case-study-contemporary-european-regulatory-politics/p8688

http://www.cfr.org/agricultural-policy/regulation-gmos-europe-united-states-case-study-contemporary-european-regulatory-politics/p8688

http://www.loc.gov/law/help/restrictions-on-gmos/restrictions-on-gmos.pdf

http://sustainableagriculture.net/our-work/fbcampaign/what-is-the-farm-bill

http://www.usda.gov/documents/usda-2014-farm-bill-highlights.pdf

http://www.usda.gov/documents/usda-2014-farm-bill-highlights.pdf

http://www.nal.usda.gov/afsic/pubs/agnic/susag.shtml

http://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2014-Main-Text.pdf

http://yosemite.epa.gov/EE%5Cepa%5Ceed.nsf/webpages/EconomicIncentives.html

http://www.choicesmagazine.org/2008-1/theme/2008-1-10.htm

http://www.choicesmagazine.org/2008-1/theme/2008-1-10.htm

http://www.fao.org/climatechange/micca/70793/en

http://www.c2es.org/us-states-regions/action/california/cap-trade-regulation

http://www.ewg.org/research/california%E2%80%99s-climate-change-policy-leaves-agriculture-dust

http://www.ewg.org/research/california%E2%80%99s-climate-change-policy-leaves-agriculture-dust

64 U.S. Department of State, U.S. Climate Action Report, 2010: Fifth National Communication of the United States of America under the United Nations Framework Convention on Climate Change, p. 31.

65 U.S. EPA, Office of Atmospheric Programs, Climate Change Division, Global Anthropogenic Non-CO2 Greenhouse Gas Emissions.

66 John Horowitz and Jessica Gottlieb, “The Role of Agriculture in Reducing Greenhouse Gas Emissions,” Economic Brief no. 15, USDA, Economic Research Service, September 2010.

67 Ibid.

68 “Deforestation,” World Wildlife Fund Global, accessed May 8, 2015, http://wwf.panda.org/about_our_earth/deforestation.

69 “Archer Daniels Midland Palm Oil 2011,” Ceres, 2014, accessed June 17, 2014, http://www.ceres.org/investor-network/resolutions/archer-daniels-midland-palm-oil-2011.

70 “Climate Change,” USDA, April 23, 2014, accessed June 10, 2014, http://www.ers.usda.gov/topics/natural-resources-environment/climate-change/background.aspx#.U5eZa_ldV8E.

71 Organization of Economic Co-operation and Development, Sustainable Management of Water Resources in Agriculture, 2010, accessed June 10, 2014, http://www.oecd.org/agriculture/44921825.pdf.

72 Food and Agricultural Organization, U.N. Development Programme, and U.N. Environmental Programme, U.N. Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries, Framework Document, June 20, 2008, accessed July 25, 2014, http://www.un-redd.org/Portals/15/documents/publications/UN-REDD_FrameworkDocument.pdf.

73 “Fourth Carbon Budget Review: Technical Report,” Committee on Climate Change, p. 116, accessed June 5, 2015, http://www.theccc.org.uk/wp-content/uploads/2013/12/1785b-CCC_TechRep_Singles_Chap6_1.pdf.

74 John J. Sheehan et al., “Scenarios for Low Carbon Corn Production,” Colorado State University and Colorado State University, March 2014, accessed June 11, 2015, http://soilcrop.agsci.colostate.edu/scenarios-for-low-carbon-corn-production.

75 “Economics of Biofuels,” U.S. EPA, accessed June 5, 2015, http://yosemite.epa.gov/EE\epa\eed.nsf/webpages/Biofuels.html.

76 “Commission Sets Up System for Certifying Sustainable Biofuels,” European Commission, June 10, 2010, accessed June 5, 2015, http://europa.eu/rapid/press-release_MEMO-10-247_en.htm?locale=en.

77 Robert Wisner, “Corn Balance Sheet,” Iowa State University Ag Decision Maker, April 13, 2015, p. 1, accessed June 8, 2015, https://www.extension.iastate.edu/agdm/crops/outlook/cornbalancesheet.pdf.

78 Ibid.

79 Pacific Ethanol Inc., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 31, 2014), p. 4.

80 Jinxia Wang et al., “China’s Water-Energy Nexus: Greenhouse-Gas Emissions from Groundwater Use for Agriculture,” Environmental Research Letters 7, no. 1, March 14, 2012, accessed June 29, 2015, http://iopscience.iop.org/1748-9326/7/1/014035/article.

81 U.S. Department of State, U.S. Climate Action Report 2010, Fifth National Communication of the United States of America under the United Nations Framework Convention on Climate Change, p. 31.

82 Metcalf and Reilly, “Policy Options for Controlling Greenhouse Gas Emissions.”

83 “The Impacts of the American Clean Energy and Security Act of 2009 on U.S. Agriculture,” USDA, December 18, 2009, p. 28, accessed June 5, 2015, http://www.usda.gov/oce/newsroom/archives/releases/2009files/ImpactsofHR2454.pdf.

84 Climate Action Reserve, “New Agriculture Offset Protocol Expands Opportunities for Farmers to Participate in the Carbon Market,” June 28, 2012, accessed June 5, 2015, http://www.climateactionreserve.org/blog/2012/06/28/new-agriculture-offset-protocol-expands-opportunities-for-farmers-to-participate-in-the-carbon-market.

85 “Potential New Compliance Offset Protocol Rice Cultivation Projects,” California Environmental Protection Agency Air Resources Board, December 2, 2014, accessed June 5, 2015, http://www.arb.ca.gov/cc/capandtrade/protocols/riceprotocol.htm; Robert Parkhurst, “California takes giant step toward approving first crop-based carbon standards,” Environmental Defense Fund, December 18, 2014, accessed


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http://www.ers.usda.gov/topics/natural-resources-environment/climate-change/background.aspx%23.U5eZa_ldV8E

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http://www.un-redd.org/Portals/15/documents/publications/UN-REDD_FrameworkDocument.pdf

http://www.theccc.org.uk/wp-content/uploads/2013/12/1785b-CCC_TechRep_Singles_Chap6_1.pdf

http://soilcrop.agsci.colostate.edu/scenarios-for-low-carbon-corn-production

http://soilcrop.agsci.colostate.edu/scenarios-for-low-carbon-corn-production

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http://europa.eu/rapid/press-release_MEMO-10-247_en.htm?locale=en

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86 Roger Claassen and Mitch Morehart, “Agriculture Land Tenure and Carbon Offsets,” USDA, Economic Research Service, Economic Brief no. 14, September 2009.

87 Hamerschlag, “California’s Climate Change Policy Leaves Agriculture in the Dust.”

88 U.N. Framework Convention on Climate Change, “Reduction of N2O emissions from Use of Nitrogen Use Efficient (NUE) Seeds That Require Less Fertilizer Application,” November 23, 2012, accessed July 25, 2014, http://cdm.unfccc.int/filestorage/k/a/CDM_AMSUBMZB9DC6JS34K8QQ261WRQUTG0IOO.pdf/EB70_repan26_AMS-III.BF_ver01.0.pdf?t=UjV8bjlhN2IwfDDopMy9Mn_5sLIvN1r5Kind.

89 “Investor CDP 2014 Information Request: Cargill,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/02/2802/Investor%20CDP%202014/Pages/DisclosureView.aspx.

90 Author’s calculation based on the data from Bloomberg Professional service, accessed April 14, 2015, using the BICS <GO> command. The data represent global revenues of companies listed on global exchanges and traded over-the-counter from the Agricultural Products industry, using Level 4 of the Bloomberg Industry Classification System.

91 Christina Galitsky, Ernst Worrell, and Michael Ruth, “Energy Efficiency Improvement and Cost Saving Opportunities for the Corn Wet Milling Industry,” Lawrence Berkeley National Laboratory, July 2003, http://www.energystar.gov/ia/business/industry/LBNL-52307.pdf.

92 Author’s calculations based on data from the U.S. EPA’s GHG Reporting Program Data Sets from “Summary GHG Data 2013 (as of August 18, 2014) (XLS),” http://www.epa.gov/ghgreporting/ghgdata/reportingdatasets.html.

93 “Investor CDP 2014 Information Request: Archer Daniels Midland,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/12/912/Investor%20CDP%202014/Pages/DisclosureView.aspx.

94 “Investor CDP 2014 Information Request: Cargill,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/02/2802/Investor%20CDP%202014/Pages/DisclosureView.aspx; “Investor CDP 2014 Information Request: Bunge,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/07/2407/Investor%20CDP%202014/Pages/DisclosureView.aspx.

95 Center for Climate and Energy Solutions, “Summary of California’s Cap and Trade Program,” accessed May 20, 2015, http://www.c2es.org/us-states-regions/action/california/cap-trade-regulation.

96 Author’s calculation based on data from “Annual Survey of Manufactures: General Statistics—Statistics for Industry Groups and Industries, 2011,” U.S. Census Bureau, released December 17, 2013.

97 Adecoagro Ltd., FY2014 Form 20-F for the Period Ending December 31, 2014 (filed April 30, 2015).

98 “Corporate Responsibility Report 2013,” Associated British Foods.

99 Bunge Ltd., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed February 28, 2014), p. 20.

100 Author’s calculation based on data from “Annual Survey of Manufactures.”

101 Bloomberg New Energy Outlook Dataset, Wholesale Power and Fuel Prices, February 5, 2015. Forecasts are tied to the trajectories predicted in the EIA’s 2014 Annual Energy Outlook, http://www.eia.gov/forecasts/aeo.

102 “Investor CDP 2014 Information Request: Cargill,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/02/2802/Investor%20CDP%202014/Pages/DisclosureView.aspx; “Investor CDP 2014 Information Request: Bunge,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/07/2407/Investor%20CDP%202014/Pages/DisclosureView.aspx; “Investor CDP 2014 Information Request: Archer Daniels Midland,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/12/912/Investor%20CDP%202014/Pages/DisclosureView.aspx.

103 Jeff Gwirtz, “Electrical Energy Savings in Flour Milling: Energy-Efficient Motors, Automated Controls and Reducing Consumption during Times of Peak Energy Use Are Just a Few of the Steps That Can Be Taken,” World-Grain.com, September 1, 2008, accessed May 14, 2015, http://www.world-grain.com/Departments/Milling%20Operations/2008/9/Electrical%20energy%20savings%20in%20flour%20milling.aspx?p=1.

104 Tuncay Lamci, “Energy Saving in Flour Milling,” Grain and Feed Milling Technology, April 27, 2012, accessed June 29, 2015, https://gfmtfeatures.wordpress.com/2012/04/27/energy-saving-in-flour-milling.

105 “Water and Process Solutions for the Corn Milling Industry,” GE Power and Water, Water and Process Technologies.


http://blogs.edf.org/growingreturns/2014/12/18/california-takes-giant-step-toward-approving-first-crop-based-carbon-standards/

http://blogs.edf.org/growingreturns/2014/12/18/california-takes-giant-step-toward-approving-first-crop-based-carbon-standards/

http://cdm.unfccc.int/filestorage/k/a/CDM_AMSUBMZB9DC6JS34K8QQ261WRQUTG0IOO.pdf/EB70_repan26_AMS-III.BF_ver01.0.pdf?t=UjV8bjlhN2IwfDDopMy9Mn_5sLIvN1r5Kind

http://cdm.unfccc.int/filestorage/k/a/CDM_AMSUBMZB9DC6JS34K8QQ261WRQUTG0IOO.pdf/EB70_repan26_AMS-III.BF_ver01.0.pdf?t=UjV8bjlhN2IwfDDopMy9Mn_5sLIvN1r5Kind

https://www.cdp.net/sites/2014/02/2802/Investor%20CDP%202014/Pages/DisclosureView.aspx

http://www.energystar.gov/ia/business/industry/LBNL-52307.pdf

http://www.epa.gov/ghgreporting/ghgdata/reportingdatasets.html




http://www.c2es.org/us-states-regions/action/california/cap-trade-regulation

http://www.eia.gov/forecasts/aeo/




http://www.world-grain.com/Departments/Milling%20Operations/2008/9/Electrical%20energy%20savings%20in%20flour%20milling.aspx?p=1



https://gfmtfeatures.wordpress.com/2012/04/27/energy-saving-in-flour-milling/

106 Adecoagro, FY2014 Form 20-F for the Period Ending December 31, 2014 (filed April 30, 2015).

107 Bunge Ltd., FY2014 Form 10-K for the Period Ending December 31, 2014 (filed March 2, 2015).

108 ADM, FY2014 Form 10-K for the Period Ending December 31, 2014 (filed February 20, 2015).

109 Sustainable Shipping Initiatives, “Member Case Study: Bunge,” accessed June 11, 2015, http://ssi2040.org/wp-content/uploads/2013/09/bunge.pdf; Andrew Benjamin, “Bunge: Introduction to Ag Freight,” presentation at IAOM, Manila, 2012, accessed June 11, 2015, http://iaom.info/content/wp-content/uploads/01bunge12.pdf.

110 “Investor CDP 2014 Information Request: Cargill,” CDP, 2015, accessed May 13, 2015, https://www.cdp.net/sites/2014/02/2802/Investor%20CDP%202014/Pages/DisclosureView.aspx.

111 “Investing to Improve the Fuel Efficiency, Emissions Profile of Our Transportation Network,” ADM, 2014 Corporate Responsibility Report, Advances and Innovations, Transportation, accessed May 13, 2015, http://www.adm.com/en-us/responsibility/2014crreport/advancesandinnovations/pages/transportation.aspx.

112 Sustainable Shipping Initiatives, “Member Case Study: Bunge.”

113 “SmartDrive Fuel Efficiency Study: Commercial Transportation,” SmartDrive, 2011, accessed October 18, 2013, http://www.smartdrive.net/documents/smartdrive-trucking-fuel-study_2011.pdf.

114 JPMorgan Global Equity Research, “Watching Water: A Guide to Evaluating Corporate Risks in a Thirsty World,” March 31, 2008, accessed June 19, 2014, http://pdf.wri.org/jpmorgan_watching_water.pdf.

115 “Water Law: An Overview,” National Agricultural Law Center, accessed June 12, 2015, http://nationalaglawcenter.org/overview/water-law.

116 “Irrigation Water Withdrawals for the Nation, 2005,” U.S. Geological Society, March 17, 2014, accessed June 11, 2014, http://water.usgs.gov/edu/wuir.html.

117 U.S. Food and Agriculture Organization, “The Post-2015 Development Agenda and the Millennium Development Goals: Water,” accessed May 15, 2015, http://www.fao.org/post-2015-mdg/14-themes/water/en.

118 U.N., “Facts and Figures,” World Water Development Report 4, 2012.

119 Barbara Pomfret, “Water Scarcity and Food and Drink Production,” Bloomberg L.P., January 21, 2014.

120 U.N. Food and Agriculture Organization, “Global Agriculture Towards 2050,” High-Level Expert Forum, October 12–13, 2009, accessed July 24, 2014, http://www.fao.org/fileadmin/templates/wsfs/docs/Issues_papers/HLEF2050_Global_Agriculture.pdf.

121 Sophie Wenzlau, “To Combat Scarcity, Increase Water-Use Efficiency in Agriculture,” Worldwatch, March 1, 2013, accessed July 25, 2014, http://www.worldwatch.org/combat-scarcity-increase-water-use-efficiency-agriculture-0.

122 Millennium Ecosystem Assessment, Ecosystems and Human Well-Being: Synthesis (Washington, D.C.: Island Press, 2005), p. 67, accessed June 29, 2015, http://www.millenniumassessment.org/documents/document.356.aspx.pdf.

123 Tom Randall, “California’s New Era of Heat Destroys All Previous Records,” Bloomberg, April 10, 2015, accessed May 18, 2015, http://www.bloomberg.com/news/articles/2015-04-10/california-s-new-era-of-heat-destroys-all-previous-records.

124 “Water Use in California,” Public Policy Institute of California, accessed June 12, 2015, http://www.ppic.org/main/publication_show.asp?i=1108.

125 Randall, “California’s New Era of Heat Destroys All Previous Records.”

126 Fenit Nirappil and Scott Smith, “California Orders Large Water Cuts for Farmers,” June 12, 2015, accessed June 12, 2015, http://abcnews.go.com/US/wireStory/california-orders-large-water-cuts-farmers-31729089.

127 Richard Howitt, Josué Medellín-Azuara, Duncan MacEwan, Jay Lund, and Daniel Summer, “Economic Analysis of the 2014 Drought for California Agriculture,” University of California, Davis, with assistance from the California Department of Water Resources, July 15, 2014, accessed June 12, 2015, https://watershed.ucdavis.edu/files/biblio/Economic_Impact_of_the_2014_California_Water_Drought_1.pdf.

128 Pomfret, “Water Scarcity and Food and Drink Production.”

129 Ceres, Water and Climate Risks Facing U.S. Maize Production, June 2014, p. 8, accessed June 29, 2015, http://www.ceres.org/resources/reports/water-and-climate-risks-facing-u.s.-corn-production-how-companies-and-investors-can-cultivate-sustainability/view.


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130 Eliza Roberts and Brooke Barton, Feeding Ourselves Thirsty: How the Food Sector Is Managing Global Water Risks, Ceres, May 2015, accessed June 8, 2015, http://www.ceres.org/issues/water/agriculture/water-risks-food-sector/food-water-risks.

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132 Chiquita Brands Inc., 2009–2012 Corporate Responsibility Report, p. 34, accessed June 29, 2015, http://www.chiquita.com/getattachment/4dedce2f-c4ac-4183-9e14-c87a6202e511/2012-Corporate-Responsibility-Report.aspx.

133 ADM, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed February 26, 2014), p. 12.

134 Agria Corporation, FY2014 Form 20-F for the Period Ending June 30, 2014 (filed October 23, 2014).

135 Bunge, 2013 Carbon Disclosure Project Water Response.

136 Allison Petty, “Decatur OKs Deal with ADM to Lessen Strain on Water Supply,” Herald-Review.com, March 5, 2013, accessed June 29, 2015, http://herald-review.com/news/local/decatur-oks-deal-with-adm-to-lessen-strain-onwater/article_0ae928a4-854e-11e2-8c9f-0019bb2963f4.html.

137 Chiquita Brands Inc., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 4, 2014), p. 7.

138 Adecoagro, FY2014 Form 20-F for the Period Ending December 31, 2014 (filed April 30, 2015), p. 79.

139 Roberts and Barton, “Feeding Ourselves Thirsty.”

140 Ibid.

141 Edwin D. Ongley, “Introduction to Agricultural Water Pollution,” chap. 1 in Control of Water Pollution from Agriculture (U.N. Food and Agriculture Association, 1996), accessed June 12, 2014, http://www.fao.org/docrep/w2598e/w2598e04.htm#agricultural impacts on water quality;“Environmental Quality Overview,” USDAm 2014, accessed June 13, 2014, http://www.ers.usda.gov/topics/natural-resources-environment/environmental-quality.aspx#.U5uAvPldWSo.

142 R.J. Cook and D.M. Weller, “In Defense of Crop Monoculture,” Fourth International Crop Science Congress, 2004, accessed June 16, 2015, http://www.cropscience.org.au/icsc2004/symposia/2/1/1128_cookrj.htm; Matt McGrath, “Demand for Agricultural Products Drives ‘Shock’ Tree Loss in Tropical Forests,” BBC News, September 11, 2014, accessed June 16, 2015, http://www.bbc.com/news/science-environment-29144568.

143 Iulia Maria Anescu and Hazel Goedhart, “EU Pesticide Band and the Potential Impact on the Chemicals Industry,” Sustainalytics, accessed June 29, 2015, http://www.sustainalytics.com/eu-pesticide-ban-and-potential-impact-chemicals-industry; Alico, FY2013 Form 10-K, p. 15.

144 “U.N.: Farmers Must Produce 70% More Food by 2050 to Feed Population,” Guardian, November 28, 2011, accessed May 15, 2015, http://www.theguardian.com/environment/2011/nov/28/un-farmers-produce-food-population.

145 Ibid.

146 “What Are Pesticides?” European Crop Protection Association, 2014, accessed June 12, 2014, http://www.ecpa.eu/page/what-are-pesticides; “World Development Indicators: Agricultural Inputs,” World Bank, 2014, accessed June 4, 2014, http://wdi.worldbank.org/table/3.2.

147 “Monocultures Towards Sustainability,” LEISA Magazine, December 2000, accessed June 29, 2015, http://www.agriculturesnetwork.org/magazines/global/monocultures-towards-sustainability/monocultures-towards-sustainability-editorial.


149 Ibid.

150 Ibid., p. 2.

151 U.N., “Facts and Figures,” World Water Development Report 4, 2012.

152 Charles M. Benbrook, “Impacts of Genetically Engineered Crops on Pesticide Use in the U.S.: The First Sixteen Years,” Environmental Sciences Europe, 2012, accessed May 20, 2015, http://www.enveurope.com/content/24/1/24.


http://www.ceres.org/issues/water/agriculture/water-risks-food-sector/food-water-risks

http://www.ceres.org/issues/water/agriculture/water-risks-food-sector/food-water-risks

http://www.bunge.com/citizenship/enviro_water.html

http://www.chiquita.com/getattachment/4dedce2f-c4ac-4183-9e14-c87a6202e511/2012-Corporate-Responsibility-Report.aspx

http://www.chiquita.com/getattachment/4dedce2f-c4ac-4183-9e14-c87a6202e511/2012-Corporate-Responsibility-Report.aspx

http://herald-review.com/news/local/decatur-oks-deal-with-adm-to-lessen-strain-onwater/article_0ae928a4-854e-11e2-8c9f-0019bb2963f4.html

http://herald-review.com/news/local/decatur-oks-deal-with-adm-to-lessen-strain-onwater/article_0ae928a4-854e-11e2-8c9f-0019bb2963f4.html

http://www.fao.org/docrep/w2598e/w2598e04.htm%23agricultural%20impacts%20on%20water%20quality

http://www.ers.usda.gov/topics/natural-resources-environment/environmental-quality.aspx%23.U5uAvPldWSo

http://www.ers.usda.gov/topics/natural-resources-environment/environmental-quality.aspx%23.U5uAvPldWSo

http://www.bbc.com/news/science-environment-29144568

http://www.sustainalytics.com/eu-pesticide-ban-and-potential-impact-chemicals-industry

http://www.sustainalytics.com/eu-pesticide-ban-and-potential-impact-chemicals-industry

http://www.theguardian.com/environment/2011/nov/28/un-farmers-produce-food-population

http://www.theguardian.com/environment/2011/nov/28/un-farmers-produce-food-population

http://www.ecpa.eu/page/what-are-pesticides

http://wdi.worldbank.org/table/3.2

http://www.agriculturesnetwork.org/magazines/global/monocultures-towards-sustainability/monocultures-towards-sustainability-editorial

http://www.agriculturesnetwork.org/magazines/global/monocultures-towards-sustainability/monocultures-towards-sustainability-editorial


http://www.enveurope.com/content/24/1/24

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154 Daniel Cressey, “Widely Used Herbicide Linked to Cancer,” Nature, March 24, 2015, accessed May 20, 2015, http://www.nature.com/news/widely-used-herbicide-linked-to-cancer-1.17181.

155 Tom Heap, “EU Pesticide Bans ‘Could Hit UK Crops,’ ” BBC News, October 21, 2014, accessed June 16, 2015, http://www.bbc.com/news/uk-29699449.

156 Anescu and Goedhart, “EU Pesticide Band and the Potential Impact on the Chemicals Industry.”

157 U.N. Food and Agriculture Organization, “Potential Environmental Impacts of the Supply of Concentrate Feed Commodities,” accessed May 15, 2015, http://www.fao.org/wairdocs/lead/x6123e/x6123e06.htm.

158 Sharon Oosthoek, “Pesticides Spark Broad Biodiversity Loss,” Nature News, June 17, 2013, accessed June 29, 2015, http://www.nature.com/news/pesticides-spark-broad-biodiversity-loss-1.13214.

159 Anderson Inc., FY2014 Form 10-K for the Period Ending December 31, 2014 (filed March 2, 2015), p. 8.

160 Fresh Del Monte, FY2014 Form 10-K for the Period Ending December 26, 2014 (filed February 18, 2015), p. 17.

161 “Chesapeake Bay,” U.S. EPA, accessed July 27, 2014, http://www.epa.gov/oaqps001/gr8water/xbrochure/chesapea.html.

162 Michelle Perez, “Regulating Farmers: Lessons Learned from the Delmarva Peninsula,” Choices Magazine, Q3 2011, accessed June 16, 2015, http://www.choicesmagazine.org/choices-magazine/theme-articles/innovating-policy-for-chesapeake-bay-restoration/regulating-farmers-lessons-learned-from-the-delmarva-peninsula.

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166 Indofood Agri Resources, 2014 Sustainability Report, December 31, 2014, p. 3.

167 ADM, 2014 Corporate Responsibility Report, December 31, 2014, p. 12.

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171 Sarah Yang, “Human Security at Risk as Depletion of Soil Accelerates, Scientists Warn,” University of California, Berkeley, College of Natural Resources, May 7, 2015, accessed May 19, 2015, http://ourenvironment.berkeley.edu/2015/05/human-security-at-risk-as-depletion-of-soil-accelerates-scientists-warn.

172 Secretariat of the Convention on Biological Diversity and U.N. Environmental Programme, Global Biodiversity Outlook, 2001; “Emissions from Forestry and Land Use,” Consultative Group on International Agricultural Research Climate Change, Agriculture, and Food Security, accessed June 29, 2015, http://ccafs.cgiar.org/bigfacts2014/#theme=food-emissions&subtheme=indirect-agriculture.

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http://www.iarc.fr/en/media-centre/iarcnews/pdf/MonographVolume112.pdf

http://www.nature.com/news/widely-used-herbicide-linked-to-cancer-1.17181

http://www.bbc.com/news/uk-29699449

http://www.fao.org/wairdocs/lead/x6123e/x6123e06.htm

http://www.nature.com/news/pesticides-spark-broad-biodiversity-loss-1.13214

http://www.epa.gov/oaqps001/gr8water/xbrochure/chesapea.html

http://www.choicesmagazine.org/choices-magazine/theme-articles/innovating-policy-for-chesapeake-bay-restoration/regulating-farmers-lessons-learned-from-the-delmarva-peninsula

http://www.choicesmagazine.org/choices-magazine/theme-articles/innovating-policy-for-chesapeake-bay-restoration/regulating-farmers-lessons-learned-from-the-delmarva-peninsula

http://www.epa.gov/opp00001/factsheets/ipm.htm

http://www.epa.gov/agriculture/ag101/croppesticideuse.html

http://www.saiplatform.org/uploads/Library/Technical%20Brief%204.%20Integrated%20Pest%20Management%20A%20guide%20to%20protecting%20water%20quality-2.pdf

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http://www.nrcs.usda.gov/wps/portal/nrcs/detailfull/ga/energy/?cid=nrcs143_023640

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http://delmontefoods.com/cr/default68d2.html?page=cr_Agriculture

http://ourenvironment.berkeley.edu/2015/05/human-security-at-risk-as-depletion-of-soil-accelerates-scientists-warn/

http://ccafs.cgiar.org/bigfacts2014/%23theme=food-emissions&subtheme=indirect-agriculture

http://www.oecd.org/agriculture/44921825.pdf





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177 Philip Fearnside, “Controlling Brazil’s Amazonian Deforestation,” Mark News, October 20, 2014, accessed June 29, 2015, http://www.themarknews.com/2014/10/20/controlling-brazils-amazonian-deforestation.

178 “Syngenta, Cargill and Others Accused of Contributing to Rural Conflicts and Environmental Destruction Through Soybean Plantations In South America” (in Spanish), RepRisk, June 24, 2013, accessed May 21, 2015, http://www.reprisk.com/news/detail/?id=49546.

179 “Corporate Responsibility: Advancing Agricultural Practices,” Del Monte.


181 Bunge Ltd., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed February 28, 2014), Section 1A, p. 11.

182 “Biodiversity and Food Production,” Harvard School of Public Health, 2012, accessed June 29, 2015, http://chge.med.harvard.edu/topic/biodiversity-and-food-production.


184 “Food Safety,” USDA, accessed June 10, 2015, http://www.epa.gov/agriculture/tfsy.html.

185 “Understanding Foodborne Diseases,” U.S. Department of Health and Human Services, National Institutes of Health, June 25, 2014, accessed June 16, 2015, http://www.niaid.nih.gov/topics/foodborne/pages/default.aspx.

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187 Jessica White-Cason, “Understanding Food Recalls: The Recall Process Explained,” August 12, 2013, accessed June 29, 2015, http://www.foodsafetynews.com/2013/08/understanding-food-recalls-the-recall-process-explained/#.VXiqjEaulB8.

188 Bunge Ltd., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed February 28, 2014), Section 1A, p. 20.

189 Fresh Del Monte, FY2014 Form 10-K for the Period Ending December 26, 2014 (filed Feb. 18, 2015), p. 11.

190 Cargill, 2014 Annual Report, p. 9, accessed June 10, 2015, http://www.cargill.com/wcm/groups/internal/@ccom/documents/document/na31674913.pdf.

191 Kraft Foods, “Kraft Foods Supplier Quality and Food Safety Forum,” June 2014, p. 12, accessed June 10, 2015, http://www.kraftsupplier.com/pdf_documents/Supplier%20Forum%2006042014%20and%2006052014.pdf.

192 Grocery Manufacturers Association, Covington & Burling, and Ernst & Young, Capturing Recall Costs: Measuring and Recovering the Losses, October 2011, accessed June 29, 2015, http://www.gmaonline.org/file-manager/images/gmapublications/Capturing_Recall_Costs_GMA_Whitepaper_FINAL.pdf.

193 U.S. Food and Drug Administration, “FDA Finalizes Report on 2006 Spinach Outbreak,” March 23, 2007, accessed June 29, 2015, http://www.fda.gov/newsevents/newsroom/pressannouncements/2007/ucm108873.htm.

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195 Grocery Manufacturers Association et al., Capturing Recall Costs.

196 Dan Flynn, “TV Was Kind to Tomatoes in ’08 Salmonella Outbreak,” Food Safety News, November 8, 2010, accessed June 29, 2015, http://www.foodsafetynews.com/2010/11/tv-was-kind-to-tomatoes-during-08-salmonella-outbreak/#.VXjKSkaunz4.

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http://news.mongabay.com/2015/0123-brazil-deforestation-soy-amazon-cerrado.html

http://www.themarknews.com/2014/10/20/controlling-brazils-amazonian-deforestation/

http://www.reprisk.com/news/detail/?id=49546

http://chge.med.harvard.edu/topic/biodiversity-and-food-production


http://www.epa.gov/agriculture/tfsy.html

http://www.niaid.nih.gov/topics/foodborne/pages/default.aspx

http://www.who.int/campaigns/world-health-day/2015/whd-toolkit-en.pdf?ua=1

http://www.foodsafetynews.com/2013/08/understanding-food-recalls-the-recall-process-explained/%23.VXiqjEaulB8

http://www.foodsafetynews.com/2013/08/understanding-food-recalls-the-recall-process-explained/%23.VXiqjEaulB8

http://www.cargill.com/wcm/groups/internal/@ccom/documents/document/na31674913.pdf

http://www.kraftsupplier.com/pdf_documents/Supplier%20Forum%2006042014%20and%2006052014.pdf

http://www.gmaonline.org/file-manager/images/gmapublications/Capturing_Recall_Costs_GMA_Whitepaper_FINAL.pdf

http://www.gmaonline.org/file-manager/images/gmapublications/Capturing_Recall_Costs_GMA_Whitepaper_FINAL.pdf

http://www.fda.gov/newsevents/newsroom/pressannouncements/2007/ucm108873.htm

http://usatoday30.usatoday.com/money/industries/food/2007-09-20-spinach-main_n.htm

http://usatoday30.usatoday.com/money/industries/food/2007-09-20-spinach-main_n.htm

http://www.foodsafetynews.com/2010/11/tv-was-kind-to-tomatoes-during-08-salmonella-outbreak/%23.VXjKSkaunz4

http://www.foodsafetynews.com/2010/11/tv-was-kind-to-tomatoes-during-08-salmonella-outbreak/%23.VXjKSkaunz4

http://www.straitstimes.com/news/asia/south-east-asia/story/us-gala-granny-smith-apples-now-barred-malaysia-20150118%23sthash.gL1pVeEo.dpuf

http://www.straitstimes.com/news/asia/south-east-asia/story/us-gala-granny-smith-apples-now-barred-malaysia-20150118%23sthash.gL1pVeEo.dpuf

198 Juanita Darling, “U.S. Ban Spoils Guatemala’s Berry Reforms,” Los Angeles Times, December 15, 1997, accessed June 29, 2015, http://articles.latimes.com/1997/dec/15/news/mn-64297.

199 Hank Schultz, “Survey Reveals Consumers Want to Avoid Pesticides, But Are Unsure How Label Certifications Help Them Do That,” Food Navigator USA, October 29, 2013, accessed June 10, 2015, http://www.foodnavigator-usa.com/Regulation/Survey-reveals-consumers-want-to-avoid-pesticides-but-are-unsure-how-label-certifications-help-them-do-that.

200 David Heitz, “Consumers Concerned about Pesticides, GMO Foods, Survey Shows,” Healthline, March 18, 2015, accessed June 10, 2015, http://www.healthline.com/health-news/healthline-survey-gmos-pesticide-031815#2.

201 Gretchen Goetz, “GAO Finds Fault with Government Tests for Pesticide Residues,” Food Safety News, November 10, 2014, accessed June 29, 2015, http://www.foodsafetynews.com/2014/11/gao-finds-fault-with-government-tests-for-pesticide-residues/#.VV4OekYQizx.

202 Maggie Hennessy, “Global Non-GMO Market Could Reach $800bn by 2017; Demand not Unanimous,” Food Navigator USA, November 7, 2013, accessed June 29, 2015, http://www.foodnavigator-usa.com/Markets/Global-non-GMO-market-could-reach-800bn-by-2017-demand-not-unanimous.

203 Adecoagro, FY2014 Form 10-K for the Period Ending December 31, 2014 (filed April 30, 2015), p. 3.

204 Ingredion Inc., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed February 24, 2014), Section 1A, p. 16.

205 Annie Gasparro, “The GMO Fight Ripples down the Food Chain,” Wall Street Journal¸ August 7, 2014, accessed June 11, 2015, http://www.wsj.com/articles/the-gmo-fight-ripples-down-the-food-chain-1407465378.

206 Ibid.


208 WUSA-9, “Consumers Demand Healthier Ingredients,” April 4, 2015, accessed June 29, 2015, http://www.wusa9.com/story/news/local/2015/04/04/consumers-demand-healthier-ingredients/25292195.

209 “Sustainable Agricultural Guiding Principles,” Coca-Cola Company, 2013, accessed June 4, 2015, http://assets.coca-colacompany.com/bb/28/0d592b834e9d8fd9afcccb1829b6/sustainable-agricultural-guiding-principles.pdf.

210 Diane Brady, “At Red-Hot Chipotle, Sustainable Ingredients Are the Marketing,” Bloomberg Business, October 22, 2013, accessed June 4, 2015, http://www.bloomberg.com/bw/articles/2013-10-22/at-red-hot-chipotle-sustainable-ingredients-are-the-marketing.

211 Joanna Fantozzi, “Hershey’s Chocolate Is Going All-Natural and Mostly GMO-Free,” Daily Meal, February 24, 2015, accessed June 29, 2015, http://www.thedailymeal.com/news/eat/hershey-s-chocolate-going-all-natural-and-mostly-gmo-free/022415.

212 Roberts and Barton, “Feeding Ourselves Thirsty.”

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215 Corn Refiners Association Inc., “Food Safety Information Papers: Pesticides,” accessed June 15, 2015, http://www.corn.org/wp-content/uploads/2009/12/pesticides.pdf.

216 “Agriculture: A Hazardous Work,” International Labor Organization.

217 “Child Labour in Agriculture,” International Labor Organization, accessed June 15, 2015, http://www.ilo.org/ipec/areas/Agriculture/lang--en/index.htm.

218 Walter Trattner, “Crusade for the Children: A History of the National Child Labor Committee and Child Labor Reform in America,”History.com, accessed June 15, 2015, http://www.history.com/topics/child-labor.

219 Eduardo González Jr., “Migrant Farm Workers: Our Nation's Invisible Population,” accessed June 15, 2015, http://www.extension.org/pages/9960/migrant-farm-workers:-our-nations-invisible-population#.VX81FUaul1Q.


http://articles.latimes.com/1997/dec/15/news/mn-64297

http://www.foodnavigator-usa.com/Regulation/Survey-reveals-consumers-want-to-avoid-pesticides-but-are-unsure-how-label-certifications-help-them-do-that



http://www.healthline.com/health-news/healthline-survey-gmos-pesticide-031815%232

http://www.foodsafetynews.com/2014/11/gao-finds-fault-with-government-tests-for-pesticide-residues/%23.VV4OekYQizx

http://www.foodsafetynews.com/2014/11/gao-finds-fault-with-government-tests-for-pesticide-residues/%23.VV4OekYQizx

http://www.foodnavigator-usa.com/Markets/Global-non-GMO-market-could-reach-800bn-by-2017-demand-not-unanimous

http://www.foodnavigator-usa.com/Markets/Global-non-GMO-market-could-reach-800bn-by-2017-demand-not-unanimous

http://www.wsj.com/articles/the-gmo-fight-ripples-down-the-food-chain-1407465378

http://www.wusa9.com/story/news/local/2015/04/04/consumers-demand-healthier-ingredients/25292195/

http://assets.coca-colacompany.com/bb/28/0d592b834e9d8fd9afcccb1829b6/sustainable-agricultural-guiding-principles.pdf

http://assets.coca-colacompany.com/bb/28/0d592b834e9d8fd9afcccb1829b6/sustainable-agricultural-guiding-principles.pdf

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258 “A Second Green Revolution,” Economist.

259 Brooke Barton and Sarah Elizabeth Clark, “Water and Climate Risks Facing U.S. Maize Production,” Ceres, June 2014, p. 28.

260 Ibid., p. 27.

261 “Adaptation,” Consultative Group on International Agricultural Research Climate Change, Agriculture, and Food Security, 2014, accessed June 16, 2014, http://ccafs.cgiar.org/bigfacts2014/#theme=adaptation.

262 U.S. Climate Change Science Program, Synthesis and Assessment Product 4.3, The Effects of Climate Change on Agriculture, Land Resources, Water Resources, and Biodiversity in the United States.

263 Fresh Del Monte, FY2014 Form 10-K for the Period Ending December 26, 2014 (filed February 18, 2015), p. 32.



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271 Seaman, “Farmers and Climate Change Adaptation.”

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274 Folger, “The Next Green Revolution.”

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279 Bunge, FY2014 Form 10-K for the Period Ending December 31, 2014 (filed March 2, 2015).

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281 Internal analysis of FY2014 Forms 10-K and 20-F filed by companies in the Agricultural Products industry.

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285 “Wilmar International and Others Contribute to the Unsustainable Palm Oil Industry in Indonesia,” RepRisk, October 24, 2011, accessed May 27, 2015, http://www.reprisk.com/news/detail/?id=24985.

286 Ibid.; Ranjeetha Pakiam, Eko Listiyorini, and Michelle Yun, “Wilmar to Cut Off Palm Suppliers Caught Burning in Indonesia,” Bloomberg, June 30, 2013, accessed June 29, 2015, http://www.bloomberg.com/news/articles/2013-06-30/wilmar-to-cut-off-palm-oil-suppliers-caught-burning-in-indonesia.

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288 “Archer Daniels Midland Palm Oil 2011,” Ceres.

289 ADM, “2013 Corporate Responsibility Report: Supply Chain—Palm.”

290 “Farm Labor,” Bunge, 2014, accessed July 28, 2014, http://www.bunge.com/citizenship/farm_labor.html.


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