ESG reporting requirements, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), have the potential to fundamentally reshape Europe’s agricultural sector, a new study by Aarhus University has found.
The study, ESG reporting meets farmer – implications of the European corporate sustainability reporting directive for the agrifood sector, which was published in the British Food Journal, analysed the level to which the CSRD and other related sustainability requirements are impacting the Danish agriculture sector, particularly with regard to increased demand for data.
‘It is no longer enough to deliver milk, grain, and meat,’ it notes. ‘Now you must also deliver sustainability. […] And the conclusion is clear: the pressure to provide ESG data is spreading like ripples in water, and it may have major consequences.’
‘Licence to operate’
Researchers from the Department of Agroecology at Aarhus University interviewed 13 stakeholders in the Danish agricultural sector, including ESG managers and advisors, and found that farmers are facing increased reporting obligations that are being adopted not out of enthusiasm, but rather because they are viewed as a ‘licence to operate’.
This increase in bureaucracy means that many small farms are finding it hard to keep up.
“Although the CSRD is formally aimed at large companies, it also affects farmers indirectly,” commented Aarhus University’s Niklas Witt, one of the lead authors on the report. “Large food companies must report across the entire value chain, and that starts on the farm.
“We’re seeing a trend where especially smaller farms may be pushed out. If you have 40 cows, it’s difficult to comply with all the requirements. Larger farms have more resources, small farms don’t.”
Since the study was completed, the EU has implemented the Omnibus package to reduce the scope of CSRD, however the pressure for data ‘isn’t going away’, according to the researchers.
Strategic use
As they note, increased reporting can support the green transition, but only if the data is used strategically – otherwise reporting is seen as merely a costly and ineffective exercise that doesn’t deliver the required impact.
“The question is whether it becomes an engine for sustainability or a wall of bureaucracy,” Witt added. “Our research suggests the answer depends on whether we can make data collection simple, credible, and strategic.” Read more here.
