ESG Consideration for Agritech Companies

60

A stable climate, free of excessive emissions, is the foundation of productive agriculture. When the environment thrives, so does food production. Soil remains fertile, water supplies are reliable, and crops grow without the looming threat of erratic weather patterns. However, as it is well-known,  this balance is under threat. The agricultural sector is both a contributor to and a victim of climate change. It also holds immense potential to reverse this trajectory by embracing sustainable practices.

This transformation begins with adopting business practices that actively promote climate recovery. ESG (Environmental, Social, and Governance) considerations provide a structured framework for achieving this. The ESG consideration facilitates environmental concern, fosters social equity, and ensures strong governance. With the framework, agriculture can reduce its environmental footprint while driving sustainable growth.

Agritech companies are uniquely positioned to lead this charge. They are the bridge between traditional agriculture and innovative sustainable solutions using their ability to integrate technology into farming. Through precision agriculture and renewable energy, agritech companies should set the standard for aligning sustainability with profitability. Therefore, as the global community shifts toward a net-zero future, agritech companies must step up as participants and trailblazers in reimagining agriculture for a safer climate.

This article kicks off a series exploring how agritech companies can embed ESG principles into their operations. Each article will focus on one aspect of the ESG framework. In this first piece, we examine environmental considerations and unpack how agritech can play a central role in mitigating climate change while enhancing agricultural resilience.

Source: iStock

Understanding ESG as a Foundation for Sustainable Agritech

Before we go deeper into the environmental considerations of ESG, it’s important to understand what ESG entails. For those unfamiliar with the concept, this section serves as an introduction. For those already acquainted, consider it a refresher to provide context for its application within the agritech sector.

ESG—short for Environmental, Social, and Governance—is a framework designed to guide businesses toward more sustainable and ethical practices. It’s a transformative approach to aligning business objectives with global sustainability goals. For agritech companies, ESG offers a roadmap to navigate challenges such as resource depletion, climate change, and social inequality while driving innovation and growth.

To incorporate the ESG framework into business practices, several key areas where the ripple effect will be most felt must be identified. Three key areas stand out as areas where sustainability must take root. These areas include: 

• Operations: Sustainable operations in agritech involve optimising farming technologies to minimise waste, conserve energy, and reduce greenhouse gas emissions. For instance, precision agriculture tools can improve water use and fertilisation efficiency, directly reducing the environmental footprint.

• Procurement: Agritech companies rely on supply chains for materials like sensors, machinery, or software components. Therefore, the materials must be sustainably sourced by minimising vehicular emissions across the supply chain, for example. This is particularly important in underdeveloped regions relying on the importation of these materials. So, a supply chain that prioritises ethical practices and minimises emissions directly supports ESG goals.

• Finance: Financial sustainability is equally crucial. Agritech companies can direct investments into innovations like renewable energy systems or soil health solutions, ensuring profitability aligns with environmental stewardship.

These three pillars—operations, procurement, and finance—are integral to business success. However, without sustainability injected into them, they risk contributing to climate degradation. ESG provides the framework to transform these aspects into levers for positive environmental and social change.

Now that we understand its relevance, let’s explore each component of ESG and how it applies to agritech companies:

• Environmental (E): This focuses on minimising environmental harm and promoting resource efficiency. Agritech companies can lead by developing technologies that reduce chemical use, improve energy efficiency in irrigation systems, or combat soil erosion. These efforts mitigate climate risks and ensure the longevity of agricultural practices.

• Social (S): This dimension addresses the human aspect—how businesses impact employees, communities, and society at large. Agritech firms have a unique role in uplifting rural farmers, ensuring equitable access to farming technologies, and creating inclusive ecosystems. Supporting local economies and fair labor practices is crucial to building trust and collaboration in agricultural value chains.

• Governance (G): Governance focuses on ethical leadership, transparency, and accountability. For agritech companies, this means embedding sustainability into their core strategies, avoiding greenwashing, and setting measurable goals. Robust governance ensures that agritech firms remain credible leaders in the shift toward sustainable agriculture.

As stewards of agricultural innovation, agritech companies are positioned to drive systemic change. ESG is an imperative and adopting it can redefine agriculture to be profitable and sustainable. It allows us to utilise the resources of today without jeopardising tomorrow’s and still drive profits.

Source: iStock

Environmental Consideration in Agritech

Environmental consideration, the first pillar of the ESG framework, focuses on how businesses impact the planet through their operations, supply chains, and products. For agritech companies, this dimension directly intersects with the industry’s reliance on natural resources, making it a critical area for immediate and sustained attention.

Key Environmental Factors

• Carbon Footprint and Emissions

Agritech operations, from manufacturing precision tools to deploying machinery on farms, contribute to carbon emissions. Assessing and minimising this footprint requires shifting toward renewable energy sources, optimising machinery efficiency, and reducing fuel-intensive logistics. Carbon sequestration technologies, such as carbon-capturing soil amendments, are also emerging solutions agritech firms can adopt to balance emissions.

• Water Management

According to studies, agriculture consumes 70% of global freshwater resources, and poor water management contributes to depletion and pollution. Agritech companies must prioritise innovations like smart irrigation systems, which deliver water precisely where it’s needed, and real-time monitoring tools to detect overuse or contamination. These approaches reduce water wastage and support sustainable farming.

• Resource Efficiency

Efficient use of resources—land, fertilisers, and energy—is central to reducing environmental impact. Agritech solutions like precision farming and data analytics help optimise inputs, ensuring maximum productivity with minimal waste. This extends the lifespan of arable land and prevents over-reliance on chemical inputs that harm ecosystems.

• Waste Management and Circular Economy

Agritech companies should also address waste generated during production and use. For instance, biodegradable packaging for products, recycling programs for outdated equipment, and upcycling agricultural by-products into useful materials can reduce landfill contributions. Circular economy models, where waste is repurposed into new value chains, are gaining traction in the sector.

Metrics and Benchmarks

To make environmental considerations actionable, agritech companies must establish clear metrics and benchmarks:

• Greenhouse Gas Emissions (GHG): Tracking and reporting GHG emissions across operations is now a standard practice, enabling companies to set reduction targets.
• Energy Use Intensity (EUI): Measuring energy use per unit of output highlights inefficiencies and areas for improvement.
• Water Footprint: Calculating the total water used and lost in production helps identify strategies for conservation.
• Biodiversity Impact: Evaluating the effects of agritech solutions on local ecosystems ensures that advancements do not come at the expense of nature.

Source: iStock

Actionable Strategies

• Adopting Renewable Energy

Solar-powered devices, wind energy for operations, and bioenergy solutions can drastically cut carbon emissions. Agritech companies can also partner with renewable energy providers to make sustainable power more accessible for farmers.

• Integrating Nature-Based Solutions

Nature-based solutions (NbS), such as agroforestry and cover cropping, are effective at enhancing soil health and sequestering carbon. These techniques align seamlessly with agritech tools like drones and GIS mapping, which monitor and optimise NbS applications.

• Regenerative Practices

The shift toward regenerative agriculture—a system prioritising soil health, biodiversity, and carbon storage—is a growing trend. Agritech companies can develop tools that measure and enhance regenerative metrics, such as soil organic matter and nutrient cycling efficiency.

• Lifecycle Assessments (LCA)

Performing LCAs on agritech products helps companies understand the environmental impacts of their innovations from cradle to grave. This analysis informs sustainable design choices and end-of-life management for products

Conclusion

Environmental consideration is an opportunity for agritech companies to redefine their role in building a sustainable food system. By leveraging technology to address challenges like emissions, water scarcity, and waste, these firms can significantly reduce their ecological footprint while enhancing resilience. The next sections in this series will examine the Social and Governance aspects of ESG, offering a holistic view of how agritech companies can embed sustainability into every facet of their operations.