Climate Change
Issue Overview
Impacts of Climate Change on Agriculture
Although climate change is likely to affect agriculture differently from region to region, the scientific consensus is that it will have major, generally negative impacts on food systems. As highlighted in the IPCC Report on Climate Change and Land, climate change has already affected food security in many areas, and the impacts will become more severe as the world continues to warm. Water scarcity, heat waves, storms, and sea level rise are already compromising agricultural productivity and will continue to destabilize agricultural supply chains unless we take action.
Climate change harms agricultural production in the following ways:
- Warmer mean temperatures and hotter extremes result in reduced crop yields and increased animal loss from heat stress and disease.
- Increased probability of drought and precipitation deficits increases crop stress and reduces livestock yield.
- Increased frequency, intensity and/or amount of heavy precipitation degrades and inundates farms and livestock operations.
In addition to harming agricultural production in the short term, some climate impacts can have long lasting or irreversible effects:
- Salt water intrusion and the rise in sea levels in some coastal regions of the world result in a reduction in usable cropland.
- Disruption of the movement of water in the atmosphere as a result of the dieback of tropical forests could cause major shifts in precipitation in key agricultural areas.
- Climate change reduces biodiversity, such as by reducing the populations of pollinating insects, which can threaten agricultural resilience and crop productivity.
Impacts of Agriculture on Climate Change
While climate change affects agriculture, the conversion of natural habitats and the practices used in agricultural and livestock operations also contribute to climate change. Agriculture, forestry, and other land use changes are the largest greenhouse gas (GHG) emitting sector after energy. Currently, the sector accounts for 23% of net anthropogenic GHG emissions: 11% come directly from agricultural production and an additional 12% from land use change. According to the IPCC Report on Climate Change and Land, emissions from crop and livestock are expected to increase by 30-40% between now and 2050, despite both efficiency improvements and dietary changes.
Direct contributions from agricultural production include:
- Land use change from commodity crop and subsistence agriculture. Agriculture drove up to 88% of forest loss in Latin America and up to 81% in Southeast Asia between 2000-2015.
- GHGs generated during livestock production and manure management. Methane from the digestion of carbohydrates by cattle is the largest single source of agricultural greenhouse gases, and methane is twenty-five times more potent in the atmosphere than carbon dioxide over a 100-year period.
- Production of nitrous oxide from synthetic fertilizer used to grow crops for both human consumption and, disproportionately, for livestock feed.
- Methane produced during the cultivation of rice in flooded conditions.
- Fossil fuel emissions from powering machinery and irrigation pumps.
The contribution of agriculture as a source of emissions varies widely by country due to the efficiency and type of agricultural systems. For example, the amount of GHGs emitted for the production of each pound of beef in developed countries in 2016 was less than half the amount emitted in developing countries the same year.
To learn more, read Climate Change and Agriculture Production: An Overview of Risks and Opportunities.
Investor Engagement
A trajectory of increased agricultural emissions will not limit average global temperature rise to less than 2 degrees Celsius above pre-industrial levels, the key goal of the Paris Climate Agreement, and it will certainly not limit it to no more than 1.5 degrees Celsius, as recommended by the Intergovernmental Panel on Climate Change (IPCC). To limit the rise to 1.5 degrees Celsius, global carbon dioxide emissions will need to reach net zero by 2050. Delays in implementing climate change mitigation efforts will substantially decrease policy and economic options and increase the difficulties of transitioning to a low-emission economy.
Major investments in systemic change to supply chains are necessary to achieve substantial reductions in agricultural emissions. While public financing is often discussed as a solution in the international community, the private sector was responsible for between two-thirds and three-fourths of all climate change mitigation finance globally between 2010-2012. Undoubtedly, both public and private financing will be necessary. Investors recognize the need to engage when it comes to agricultural emissions, and many are stepping up to the plate to address these issues.
Climate Change Mitigation Opportunities and Natural Climate Solutions for Food Companies
In order to limit average global temperature increase to no more than 1.5 degrees Celsius, food companies must widen their focus beyond direct operations and work with their suppliers to report and reduce greenhouse gas (GHG) emissions across supply chains.
One area of opportunity has been coined “natural climate solutions.” These solutions harness the power of nature to reach critical climate goals, including the implementation of smart practices around agriculture, soil and land. Food companies can reduce their GHG emissions and contribute to more efficient utilization of resources in the following ways:
- Conserve forested lands
- Expand agroforestry on annual cropland
- Manage livestock feed, herds, manure and grazing land
- Reduce methane from irrigated rice
- Use fertilizers more efficiently
- Manage croplands to maintain or increase soil carbon
- Reduce food loss and waste
- Expand alternative protein options
Conserve and Restore Forested Lands
Conserving and restoring forested lands is essential in order to slow climate change and mitigate its worst impacts. One third of all anthropogenic GHG emissions to the atmosphere since 1750 have come from land use change (deforestation and agriculture). Of particular importance is the conservation and restoration of tropical forested land. Tropical forests store 55% of global forest carbon stocks, more than that of boreal forests (32%) and temperate forests (14%) combined. If tropical deforestation was a country, its annual GHG emissions would be the third-largest in the world, only lower than China and the U.S.
Reforestation, or the reconversion of land to forest, has been increasingly publicized as a natural climate solution to be employed at scale in order to greatly decrease the amount of carbon dioxide in the atmosphere. Many companies are exploring substantial reforestation projects as a means to offset their carbon emissions and meet their climate goals. However, factors such as the varying complexity and cost of implementing appropriate reforestation projects for each ecosystem, along with the increased competition for land (which could substantially drive up food prices), temper the potential for reforestation to be used as a “silver bullet” solution".
Expand Agroforestry on Annual Cropland
Investing in sustainable tree crops and adding an agroforestry component to annual cropping systems contribute to carbon sequestration, the process involved in carbon capture and long-term storage of atmospheric carbon dioxide or other forms of carbon. Additionally, adding trees on farms can increase the yields of annual crops, add income and nutrition from yields of tree crops and sometimes provide fodder for animals. By expanding agroforestry systems, companies can play a critical role in reducing their GHG emissions.
Manage Livestock Feed, Herds, Manure and Grazing Land
Since 2000, livestock production has accounted for 66% of agricultural GHG emissions. Ruminant meat, especially, is emissions-intensive, and cultivating it is even more emissions-intensive in developing countries because production and supply chains tend to be inefficient. Climate change mitigation options for livestock production in developing countries include improved feeding practices, dietary additives, animal breeding, improved manure storage and handling, anaerobic digestion of manure, and more efficient use of manure as nutrient for crops. In many areas, livestock producers may also have the opportunity to sequester carbon by restoring degraded grazing lands and incorporating trees into pastures. AGlobally, animal science is producing innovations in animal breeding, methane inhibitors, and alterations to ruminant microbiomes that could reduce emissions further, even where production is already relatively efficient.
Reduce Methane in Irrigated Rice
Rice is the staple food for more than 3.5 billion people worldwide, roughly half of the world's population, and the second most produced cereal crop in the world. Most rice is grown in flooded conditions that cause high methane emissions. Simple changes to production, such as alternate wetting and drying of irrigated rice, switching to short growth duration varieties of rice, and improving nutrient use efficiency through urea deep placement, can significantly reduce methane emissions, while preserving yields and saving growers money on fertilizer and water inputs.
Improve Soil and Nutrient Management
Many soil management best practices can reduce GHG emissions and sequester carbon. For example, optimizing nutrient use by applying the right type of fertilizer at the right rate, time and place contributes to higher yields and reduces fertilizer-induced nitrous oxide emissions. Reducing tillage while increasing organic matter inputs to soils also has the potential to sequester carbon in soils, if such practices are maintained long-term.
Reduce Food Loss and Waste
An estimated 25-30% of all food produced globally is never eaten - it is either discarded or lost at some point along the food value chain. The annual global economic, environmental and social cost of food waste is estimated at $2.6 trillion. Reducing the amount of food lost and wasted would reduce these costs as well as the food system’s contribution to climate change. Companies can reduce food loss and waste by changing food storage, handling and manufacturing processes, designing packaging to extend shelf life, changing date labeling on packaging to reduce post-consumer waste and introducing new product lines made from food that would otherwise have been wasted.
Expand Alternative Protein Options
With two-thirds of U.S. consumers reducing meat consumption, alternative proteins present an opportunity for food companies to reduce GHG emissions and claim space in a new market. Alternative protein options include plant-based products (e.g., Impossible Foods, Beyond Meat.), emerging products (e.g., Protix, AgriProtein) and lab-grown products (e.g., Mosa Meat, Memphis Meats). The global plant-based meat market alone is expected to grow at an annual rate of 15% between 2019 and 2025, and companies such as Tyson, Cargill, Kellogg's and Kraft are investing in and acquiring many emerging plant-based businesses. Increasing research and development efforts and adding alternative protein options can help companies do their part to mitigate climate change.
Measuring and Disclosing GHG Emissions from Food Supply Chains
Scope 1 emissions from companies' facilities and vehicles and scope 2 emissions from purchased electricity, steam, heating, and cooling for facilities account for 9% and 5%, respectively, of large food and beverage companies’ emissions. Supply chain emissions, called scope 3 emissions, account for the remaining 89, the bulk of which come from purchased goods and services and, significantly, from agricultural production. In 2018, emissions from 24 large U.S. food companies that fully disclosed scope 3 emissions accounted for roughly 692 million tons of carbon dioxide equivalents, comparable in magnitude to greenhouse gas emissions from 1609 million barrels of oil.
Nonetheless, despite the fact that scope 3 emissions represent an enormous portion of total company emissions, recent research found that less than a half of the top 50 food and beverage companies in the U.S. and Canada publicly disclose scope 3 emissions. By not fully disclosing scope 3 emissions, companies grossly under-represent their emissions footprint and may not adequately account for substantial material risk, particularly in light of the growing necessity to assess and address the impacts of climate change.
Learn more: Measure the Chain: Tools for Assessing GHG Emissions in Agricultural Supply Chains
Commodity Exposure to Climate Change Issues
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Beef
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Cocoa
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Corn
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Dairy
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Fiber Packaging
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Palm Oil
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Soybeans
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Sugarcane
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Wheat
Priority Commodities
Among the most commonly sourced commodities profiled in Engage the Chain, climate change impacts are most significant in the production of beef, dairy, soy and palm oil. Of particular note are the deforestation and land use changes related to the production of beef, palm oil, and soybeans, which all also contribute to global climate change.
The following section summarizes how the production of beef, dairy, soy and palm oil contribute worldwide to climate change. It is important to consider that the scale of the impacts depends on the practices used by individual livestock operations and feed growers, as well as on regional and local conditions.
Beef
Global beef production has a significant impact on climate change:
- Cows contribute directly to greenhouse gas emissions when they digest their feed and produce large amounts of methane and manure. Fertilizers and energy used for growing the animals' feed, as well as deforestation associated with the production of soy meal, also contribute to total GHG emissions.
- 43-51% of the global emissions from the livestock sector are related to beef cattle.
- Globally, beef production is expected to increase by 9 million metric tons by 2028.
Dairy
Global dairy production has a significant impact on climate change:
- Dairy cows release methane, a greenhouse gas 25 times more potent than carbon dioxide, when they digest their feed (enteric fermentation).
- Dairy operations contribute GHGs during manure management (anaerobic decomposition of organic matter in manure).
- Globally, yearly consumption of milk is expected to increase by 304 million metric tons by 2030.
Soy
Global soy production has a significant impact on climate change:
- At least 8.1 thousand square miles in the Amazon and Cerrado biomes in Brazil were deforested between 2006 and 2017 to grow soy. The carbon emissions associated with the Cerrado deforestation for soy in that period, 210 million tons of carbon dioxide equivalents, are comparable to 488 million barrels of oil.
- Despite efforts made to reduce deforestation in the Amazon (such as more intense monitoring and the Soy Moratorium in Brazil), the risk of land conversion for soy production continues to be significant. In fact, after a noticeable deceleration in deforestation rates between 2004 and 2012, there has now been a serious uptick. Land conversion and deforestation to grow soybeans in other biomes, such as the Cerrado (where 60% of Brazilian soy is grown), is also expected to remain a material business risk.
Palm Oil
Global palm oil production has a significant impact on climate change:
- The rapid and poorly managed expansion of palm oil production is causing massive large-scale deforestation and associated significant GHG emissions from clearcutting and burning tropical forests.
- Palm oil production has been a major driver of deforestation in Indonesia and Malaysia. In Indonesia, from 2000 to 2010, the total harvested palm area grew dramatically, tripling to 6 million hectares. Of this, 500,000 hectares were observed to be from peat swamp deforestation. The draining and burning of these carbon-rich peat soils can emit up to 30 times more greenhouse gases than simply clearing the forest. Due to its high deforestation rate, Indonesia is now one of the world's biggest emitters of greenhouse gases, emitting 5% of global GHG emissions.
Business Risks from Climate Change
Operational
Beginning in 2012, GlaxoSmithKline found that more extreme and variable weather caused by climate change was having a major impact on British blackcurrant harvests.
IMPACTS
- Reduced agricultural productivity
Operational
Campbell’s Soup Company has struggled with extreme weather in California, a key growing region for its carrot supplies. In 2014, California's record-setting drought followed by intense rains led to a 28 percent decline in profits for its carrot division.
IMPACTS
- R&D spending for more resilient varieties
Litigation
In late 2015, a Peruvian farmer filed suit against RWE, a large European energy company, for its alleged contributions to global warming based on its total emissions over two centuries. The complaint claims that global warming is causing glaciers near the farmer's home to melt, which in turn is causing lakes in the area to flood and threaten his property.
IMPACTS
- Legal fees and monetary settlements for violating laws and regulations
Priorities for Investor Engagement
Ceres’ Work to Drive Implementation of No-Deforestation Commitments: Corporate no-deforestation commitments are a critical step to ending deforestation in supply chains. Hundreds of companies have set 2020 as a deadline to meet their pledges, but have yet to disclose their progress in meeting these critical targets. As the deadline approaches, Ceres is supporting investors looking to drive corporate action at scale by providing information on progress, helping investors define outcome-based metrics and other key performance indicators to follow up on corporate commitments, and supporting a collective action ask from investors to companies.
Read Ceres’ Investor Brief on Disclosure of No-Deforestation Progress.
Ceres Investor Network on Climate Risk and Sustainability: This network is comprised of more than 130 institutional investors who collectively manage more than $17 trillion in assets. It works to advance leading investment practices, corporate engagement strategies and policy solutions to build an equitable, sustainable global economy and planet. The network engages directly with portfolio companies on environmental, social and governance (ESG) risks and opportunities through investor engagement tactics via multiple working groups, including the Shareholder Initiative for Climate and Sustainability (SICS).
Explore Ceres' Climate and Sustainability Shareholder Resolution Database.
Ceres-PRI Investor Initiative for Sustainable Forests (IISF): A joint initiative led by Ceres and PRI to transform industry practices to eliminate deforestation from cattle and soy supply chains. The IISF is led by an advisory committee of institutional investors across different geographies. Working groups within the broader initiative focus on individual commodities and enable investors to engage with companies in a collaborative manner alongside other investors.
Read more about the Investor Initiative for Sustainable Forests.
Climate Action 100+: An investor-led initiative which engages the world’s largest corporate GHG emitters on taking necessary action on climate change. To date, more than 360 investors with more than U$34 trillion in assets under management have joined the initiative. More than a dozen companies on the Climate Action 100+ list are in the food and beverage sector, and investors are focused on ensuring these companies set robust scope 3 GHG reduction targets that include commitments to end deforestation in their supply chains.
Read more about Climate Action 100+.
Please contact Courtney Foster (cfoster@ceres.org) for more information on any of these investor engagement opportunities.