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. Erratic weather, the effects of temperature shifts and sea level rise threaten current agricultural systems, and will continue to impact global food production 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 -- at the same time, the conversion of natural habitats and the practices used in agricultural and livestock operations contribute to climate change. Agriculture, forestry, and other land use change (LUC) is the largest greenhouse gas (GHG) emitting sector after energy. The sector accounts for roughly a quarter of net anthropogenic GHG emissions -- representing 12 billion tons of GHG emissions.

Direct contributions from food production include:

  • LUC from commodity crop and subsistence agriculture, particularly in Latin America and Southeast Asia, where the production of beef, soy, palm oil and cocoa have led to 87 percent of all tree cover loss between 2001 and 2015.
  • GHGs generated during livestock production and manure management (methane from the digestion of carbohydrates by cattle is the largest single source of agricultural GHGs, 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 use (to grow crops for both human consumption and, disproportionately, 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 system. For example, in 2010, emissions from agriculture accounted for 9 percent of greenhouse gas emissions in the United States; yet accounted for 29 percent of emissions in developing countries.

To learn more, click here to read Climate Change and Agriculture Production: An Overview of Risks and Opportunities.

Investor Engagement

A trajectory with increased agricultural emissions will not limit global warming to less than 2oC above pre-industrial levels, the key goal of the Paris Climate Agreement, and it will certainly not limit global warming to no more than 1.5oC, as recommended by the Intergovernmental Panel on Climate Change (IPCC). To limit global warming to less than 2oC, global greenhouse gas emissions will need to be 40 to 70 percent lower in 2050 than in 2010, combined with large increases in carbon sequestration. Delay 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 agriculture emissions. While public financing is often discussed as a solution in the international community, the private sector was responsible for 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.

Food Companies and Climate Change Mitigation Opportunities

In order to meet the collective Paris Agreement commitment to limiting average global temperature increase to well below 2 degrees Celsius, food companies must widen their focus beyond direct operations to work with their suppliers to report and reduce greenhouse gas emissions across supply chains. Food companies can cut back 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 in Irrigated Rice
  • Improve Soil and Nutrient Management
  • Reduce Food Loss and Waste
  • Expand Alternative Protein Options

For more information on climate change mitigation opportunities, click here to read Climate Change and Agriculture Production: An Overview of Risks and Opportunities.

Conserve Forested Lands

Conserving forested lands is essential in order to mitigate climate change. One third of all anthropogenic greenhouse gas emissions to the atmosphere since 1750 have come from deforestation. Of particular importance is the conservation of tropical forested land. Tropical forests store 55 percent of global forest carbon stocks, more than that of boreal forests (32 percent) and temperate forests (14 percent) combined. If tropical deforestation was a country, emissions would exceed those of the United States and be on par with those of China.

Expand Agroforestry on Annual Cropland

Investing in sustainable tree crops and adding an agroforestry component to annual cropping systems contributes 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

Livestock emissions account for a third of agriculture and land use emissions. Ruminant meat, especially, is emission-intensive, but providing it is even more 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, more efficient use of manure as nutrient for crops, and sustainable intensification. In many areas, livestock producers also have the opportunity to reduce emissions through improved management of grazing lands for nutrients, fire management, and increased biodiversity and the growth of fodder species. Globally, animal science is producing innovations in feed, rumen, and breeding that could reduce emissions further.

Reduce Methane in Irrigated Rice

Reducing methane in irrigated rice is another way to dramatically reduce GHG emissions. 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 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 greenhouse gas 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 the amount of greenhouse gas emissions. Soil management practices are described in packages of techniques that include conservation agriculture, no-till cultivation and rotational agriculture. Low emission practices include diversification of annual crops, avoidance of burning crop residues, integration of crop and livestock systems, and utilization of improved seed varieties that are resilient to certain diseases, pests or climate fluctuation.

Reduce Food Loss and Waste

An estimated 30-40 percent of all food produced globally is never eaten -- it is either discarded or lost at some point along the food value chain. The global economic, environmental, and social cost of food wastage is estimated at USD $2.6 trillion. The impact of the food system on climate change can also be decreased by reducing the amount of food lost and wasted. Companies can reduce food loss and waste by selecting crop varieties that have longer shelf lives, planning cultivation schedules for maximum shelf life, and improving physical handling to reduce the deterioration of products.

Expand Alternative Protein Options

With 60 percent 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 (i.e. Impossible Foods, Beyond Meat etc.), emerging products (i.e. Protix, AgriProtein etc.), and lab-grown products (i.e. Mosa Meat, Memphis Meats etc.). The plant-based protein market alone nears $1.0B annual growth, which has encouraged companies such as Tyson, Cargill, Kellogg's and Kraft to invest in and acquire 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 percent and 5 percent, respectively, of typical company emissions. Supply chain emissions, called scope 3 emissions, account for the remaining 86 percent, the bulk of which come from purchased goods and services and, significantly, from agricultural production. In 2016, emissions from 15 large U.S. food companies that fully disclosed scope 3 emissions accounted for almost 630 million tons of carbon dioxide equivalents. This is nearly twice the total emissions of the state of California.

Nonetheless, despite the fact that scope 3 emissions represent an enormous portion of total company emissions, recent research found that less than a third 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.

Commodity Exposure to Climate Change Issues

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 also contribute to total greenhouse gas emissions.
  • More than half of the global emissions from the livestock sector are related to beef and cattle milk (beef accounts for 41 percent; dairy cows for 20 percent).
  • Globally, consumer demand for beef is expected to increase by 9 million metric tons over the next decade.

Dairy

Global dairy production has a significant impact on climate change:

  • Dairy cows release greenhouse gases, especially methane, when they digest their feed (enteric fermentation).
  • Dairy operations contribute greenhouse gases during manure management (anaerobic decomposition of organic matter in manure). 
  • Globally, consumer demand for fresh dairy products is expected to increase by 104 million metric tons over the next decade.

When calculating a “greenhouse gas footprint” for beef or dairy in any particular operation, it is important to consider how the animals are raised as changes in their type of feed and other management practices affect the amount and type of greenhouse gas emissions. 

Soy

Global soy production has a significant impact on climate change:

  • The three main ecoregions most affected by soybean production in South America are the Amazon Basin, Atlantic Forests, and the Brazilian Cerrado, where carbon dioxide emissions from land conversion in those regions are estimated to equal half of the United Kingdom's total emissions in 2009.
  • While the Soy Moratorium in Brazil and other factors have helped to reduce soybean production in the Amazon, land conversion and deforestation in Brazil to grow soybeans in areas not covered by the Moratorium, such as the Cerrado (where 60 percent of soy is grown), is 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 percent 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 Investor Network on Climate Risk and Sustainability: The Ceres Investor Network on Climate Risk and Sustainability comprises more than 130 institutional investors, collectively managing more than $17 trillion in assets, advancing leading investment practices, corporate engagement strategies and policy solutions to build an equitable, sustainable global economy and planet.

Explore Ceres' Climate and Sustainability Shareholder Resolution Database