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Posts Tagged ‘risk management’

Defining Sustainability

Sustainability is a holistic, long-term approach to business.  It maximizes the economic and environmental stability, equity, and health of the farm, business, and family.

A sustainable approach to farming is more than talking about environmental actions or maximizing profits.

Sustainability focusses on business processes and practices, rather than a specific food, fibre, or feed output.  It integrates economic, environmental and societal values to create a Triple Bottom Line (i.e. understanding and accounting for three “bottom lines”: economic, social, and enviornment, instead of simply looking at a cash flow analysis for actions in your operations).  This is very different from a purely profit-driven approach, where businesses benefit economically, but often at the expense of the environment and society.

Agricultural Context

Sustainable Agriculture is…

“the efficient production of safe, high quality agricultural product, in a way that protects and improves the natural environment, the social and economic conditions of the farmers, their employees and local communities, and safeguards the health and welfare of all farmed species.” (Sustainable Agricultural Initiative Platform, 2010)

There is a growing global demand to increase sustainability in agriculture.  What this means on-farm differs depending on where the farm is (the Place), what the farm produces (the Product), and where the product is sold and for what price (the Price). Regardless of what is purchased, grown, or sold, there are broad perspectives that can increase the sustainability of every agri-business by addressing the TBL of economic profitability, environmental stewardship and social responsibility.

Consumers are increasingly concerned with how their food is grown and processed.  The single largest share of impact within the supply chain is the food production itself. Food processors and retailers need long-term and ever-increasing supplies of quality raw materials. Unpredictable weather extremes and global water scarcity make agricultural production and food processing more volatile.  Sustainable practices help ensure businesses along the entire supply chain have reliable sources of product.  At the same time, reliability creates new opportunities for enhanced branding to meet consumer demand.  Sustainable sourcing is a point of differentiation in the marketplace.

While these components are discussed separately below, their goals overlap; impacting and influencing each other.  For example, economic decisions will impact the environmental and social components; the environmental actions taken will impact the economic output and social well-being.

Economic Profitability

To be sustainable, a farm must be economically viable.  While the environmental and social pillars of sustainability may not always translate into immediate economic profit, sustainable practices will have a positive economic impact on the farm.

For example, the diversification of crops can help reduce financial risk.  Over time, diversification of crops can reduce financial risk while improving water quality and increasing other environmental benefits that raise the value of the farm itself.

These factors must be taken into consideration when managing a farm business.

Production and machinery costs are directly affected by sustainable practices.  Fertilizer and pesticide applications can be applied responsibly and, in some cases reduced, based on crop rotation, variety selection or market availability for end-product.  Sometime overall yield may decrease, but differences between production cost and revenue can be improved, leading to increased profitability for the farm.  Likewise, management, marketing skills, and experience of decision-makers will have direct economic effects on the business.

Indicators of your farm’s economic profitability may include:

  • increasing net worth or savings,
  • debt is consistently decreasing, and/or,
  • farm is consistently profitable year after year.

Environmental Stewardship

Stewardship is a familiar concept to farmers.  For many, this is what comes to mind when they think of sustainable agriculture.  Environmental stewardship uses ecologically-sound practices that have a neutral or positive impact on the natural resources and non-renewable resources used on-farm.  It can mean reversing damage that has already occurred, like soil erosion or draining of wetlands.  It can also be enhanced by taking steps to prevent the future degradation of land and water resources through conservation practices, like:

  • naturalizing riparian zones,
  • using smart cattle watering practices,
  • establishing proper cover crops.

These are factors that have direct impacts on your cost of production and economic profitability components of sustainability.

Another key to successful environmental stewardship lies in soil health.  Maintaining adequate soil organic matter, biological activity and nutrient balance are essential to feed crops in the long-term production of the business.

There are many ways to enhance soil fertility and improve soil health, such as including legumes in crop rotation, using manure or compost instead of and /or in complement to synthetic fertilizers, and maintaining a working knowledge of the fertility of the fields so as to properly manage them.

Other stewardship concepts include:

  • protecting water quality,
  • year-round soil cover (residue or cover crop),
  • integrating crop and animal systems to maximize efficiencies, nutrients and energy,
  • controlling invasive plants.

Some traditional practices conflict with sustainable practices, because they severely damage the soil structure and resiliency of a field to adapt to extreme weather events, climate change, and the stresses of intensive crop production.

All practices, new and traditional, must be considered when implementing sustainable farming practices.

Social Responsibility

Social responsibility relates to the quality of life for everyone who interacts with the business: employees, customers, neighbours, local community members, and the farmer.  The most prominent examples of this in rural Ontario are agricultural cooperatives, farmers’ markets, on-farm events and twilight tours.  Other examples occur within the business itself, like fair treatment of workers and good business practices.

Some indicators of social responsibility include:

  • support for other local businesses and families within the community, circulating money within the local as well as the global economy,
  • the rural community population is stable or increasing,
  • post-secondary school graduates return to the community after graduation, to succeed on family farms or with associated businesses.

Summary

Sustainable agriculture is defined by three interactive components: economic profitability, environmental stewardship, and social responsibility.  It is important that sustainability is embraced at all levels; farm practices can have compound impacts across the entire supply chain in very complex ways.

Sustainability is a goal. However, a farm should never expect to “achieve sustainability”.  As farm practices become more sustainable, farmers gain a deeper understanding of the natural resources they steward and how this affects their business.

A competent working knowledge of sustainability creates further opportunities for new sustainability practices.  This in turn increases the farmer’s ability to respond to market pressures and environmental conditions, and help develop a robust and resilient business. The profit in sustainable practices is both tangible and intangible. It includes economic gain, environmental stability and social benefit.

Sustainability, like our seasons, is a never-ending journey, which is why it is so important to continue to work towards this goal.

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Vancouver, British Columbia, June 17, 2013 – Parliamentary Secretary for Agriculture, Pierre Lemieux, on behalf of Agriculture Minister Gerry Ritz, today announced up to $15 million for the launch of a new Growing Forward 2 program to encourage the development and adoption of new private sector or producer-funded agricultural risk management tools.

“Through Growing Forward 2, our Government has committed to helping our agricultural industry position itself to take advantage of future opportunities, respond to challenges, and continue to be a productive and profitable sector of the Canadian economy.” said Mr. Lemieux. “Bringing the farming industry and the private sector together to develop new agricultural risk management tools will result in our farmers having more and better ways to manage the risks of farming.”

The announcement was made at the second annual International Agricultural Risk, Finance and Insurance Conference. The AgriRisk Initiatives program will facilitate industry-led research and development, as well as implementation and administration of new insurance-based tools for use in the agriculture, agri-food and agri-products sector.

AgriRisk Initiatives (ARI) projects are intended to foster greater collaboration and partnership between agricultural stakeholder groups and the private sector, and to increase participation of the private sector financial services industry in providing risk management tools to the agricultural sector.

Applications for ARI research and development (R&D) project funding are now being accepted. Through ARI, the federal government will allocate up to $3 million per year over five years to fund R&D projects on potential new, industry-led risk management products and services. Approved R&D projects can be eligible for up to $500,000 in support per year. Typical activities eligible for funding include: research and development costs, data collection and analysis, legal and actuarial costs, and consultations. For more information on AgriRisk Initiatives and to apply online, visit http://www.agr.gc.ca/agririsk.

Additional ARI support to help build private sector administrative capacity to deliver new agricultural risk management tools will be announced in the summer.

Growing Forward 2 is a renewed commitment by the federal, provincial and territorial governments to ensure productivity and profitability for Canada’s agricultural sector. With a focus on innovation, competitiveness, and market development, Growing Forward 2 programs will help the industry seize future opportunities and realize its full potential as a major driver of the Canadian economy. For more information on the national Growing Forward 2 initiatives, visit http://www.agr.gc.ca/GrowingForward2.

For more information, media may contact:

Media Relations
Agriculture and Agri-Food Canada
Ottawa, Ontario
613-773-7972
1-866-345-7972

Jeff English
Press Secretary
The Office of the Honourable Gerry Ritz
613-773-1059

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