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Sustainability Costs Now A Business Risk For Agricultural Sector: KPMG

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Fuseworks Media
Fuseworks Media
Sustainability Costs Now A Business Risk For Agricultural Sector: KPMG

Major global retailers are defining what is sustainable for food producers on the basis of their marketing positions

Standards adopted are often driven by perceptions of what will play well with predominately urban consumers rather than being based on robust scientific research

If NZ's agricultural producers fail to meet the retailer's standards they are likely to lose the ability to sell into higher value global markets

Answering the question "What is sustainable?" may appear straightforward but it is the case that many of us have very different interpretations of sustainability. When it comes to producing sustainable agricultural products, farmers, growers and producers have to contend with multiple definitions of sustainability which are adding cost to production without necessarily benefiting the environment, says KPMG New Zealand.

The latest KPMG Agribusiness Green Paper - Sustainability in the agribusiness sector released today reveals the reasons why New Zealand agribusiness needs to act quickly to respond to the societal changes that are taking place in key markets around the world.

Ian Proudfoot, KPMG NZ's Head of Agribusiness says, "As a small island nation we depend on our agricultural exports to sustain our economy and hence it's vital for New Zealand suppliers to understand global trends and respond efficiently to the consumers 'sustainability' needs to profit in the long term. Whether we like it or not, it's the customers' perception of the products that create demand and right now consumers are demanding 'sustainable products'."

He says that sustainability is no longer a moral or a 'green' issue but a business risk issue that our agricultural companies cannot afford to ignore.

To satisfy their predominately urban consumers perceptions of sustainability, major retailers like Marks and Spencers and Walmart have defined business practices that they believe to be sustainable to support their brand positions and are only working with suppliers that fit their 'sustainability' criteria.

"One of the main challenges NZ suppliers face is that the requirements of each retail chain is different and not always consistent, mainly because the requirements have been driven by the marketing positions of the retail chain rather than being based on best practice science and research," says Mr Proudfoot.

This approach of substituting 'sustainable' requirements into an existing supply chain may appear worthwhile on the face of it but could have unintended financial, social and environmental consequences creating supply chains that are less sustainable than the initial 'unsustainable' supply chain.

Jamie Sinclair, Director of Sustainability Services at KPMG says, "For example, food producers in the UK and Europe still use the food miles argument for substituting produce from New Zealand for locally grown production, despite scientific research that shows that the carbon footprint of NZ produce in store can be lower than domestic product due to production systems used here in NZ."

The discussions that KPMG has seen around what constitutes sustainable on farm and processing practices are made more complex for the sector due to the lack of a consistent view of what is sustainable. Debates in the last year around the intensification of dairy farms in the McKenzie Basin, the use of genetically modified organisms in our pastoral production systems and the use of crates and stalls in the production of pork and poultry products all need to be conducted having a regard to what our customers consider sustainable.

Ian Proudfoot concludes, "The lack of consistency around what practices are considered sustainable makes it even more important that discussions on these important issues to New Zealand agriculture take place with regard to the developments that are occurring in global markets around sustainability and are based on scientific analysis rather than emotion and individual opinion."

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