Environmental and Social Due Diligence in the Agriculture Industry
Due diligence basically refers to the exercise of due and reasonable care while conducting any business or performing any activity. When we talk of due diligence in the business domain, it involves careful analysis of the various aspects related to a business undertaking, such as legal, financial, social, fiscal, and environmental. Due diligence requires a business or a company to perform risk audits associated with these various aspects, which allows them and their investors to protectthemselves against any unidentified and hidden risks before they put their money into action.
Environmental and Social Due Diligence, in particular, is an important aspect of the decisions taken by businesses, companies, or investors to assess and manage the environmental and social risks involved with a business operation, project, or investment. It helps the investors and the decision-makers to identify the risks associated with a business activity and, thus, allows them to take appropriate actions in advance to mitigate the same. One may think of it as a preventive action that is taken by businesses and companies to prevent future losses and liabilities, thereby reducing any unnecessary costs.
In simpler words, we can say that environmental and social due diligence plays a key role in the decision-making process before a business owner or a company decides to invest its money into a new project or undertaking.
Need for Environmental and Social Due Diligence in the Agriculture Industry
Environmental and Social Due Diligence in the agriculture industry is becoming increasingly important as a result of countless variables affecting the industry's sustainability and viability. Agriculture is a complex industry with adirect impact on the environmental and social aspects, making it even more necessary to identify and manage the risks involved.
The agriculture industry also faces a multitude of risks, such as climate and weather-related uncertainties, crop failures due to natural disasters or crop diseases, unfair wages, exploitative practices with the labour, trade tensions, etc., all of which affect the productivity and efficiency of the agriculture industry.
Mitigating and managing these risks within the agriculture industry spans a spectrum of strategies that involve conducting environmental and social due diligence in the agriculture industry.
Let's discuss some of the reasons that make environmental and social due diligence in the agriculture industry an important aspect:
Environmental Risks are becoming an increasing concern in the agriculture industry because of its increased dependency on natural resources; for instance, the agriculture industry accounts for a significant portion of energy consumption and water use worldwide, and the overuse or inefficient use of these non-renewable resources can lead to scarcity or depletion of resources affecting the ecosystems and social communities.
Apart from depleting the resources, unsustainable practices can lead to various adverse effects on the environment, such as deforestation or conversion to farmland, contributing to the loss of biodiversity; the use of fertilisers or pesticides can result in environmental pollution and eventually cause health hazards as well. Therefore, addressing these concerns becomes essential for the long-term sustainability of the agriculture industry.
In large-scale agriculture operations, some critical issues pertaining to social aspects may crop up, and it becomes imperative to conduct environmental and social due diligence in the agriculture industry in time, lest they may cause a huge loss of reputation and money. Some of these particular concerns relate to the exploitative labour practices that are prevalent in the market, such as low wages and poor and unsafe working conditions that may lead to labour and social unrest in the future.
Food Safety and Accessibility
The agriculture industry plays a critical role in determining the availability and distribution of food resources; therefore, the decisions taken can have far-reaching impacts and consequences on society. To avoid resentment, social unrest, and related concerns, which can have dramatic consequences for your business operations, environmental and social due diligence in the agriculture industry must be prioritised.
Conducting environmental and social due diligence in the agriculture industry becomes even more imperative in light of the legal rights involved that often get violated consciously or inadvertently by the entities involved such as land acquisitions for newer projects can lead to land disputes or displacement of locals, which may cause legal troubles; encroachment on indigenous rights; issues relating to gender disparities and unequal pay, etc. are concerns which are required to be accommodated while making big investment decisions.
What does the Data say?
As per the data and the statistics available, the agriculture industry in India has successfully reached INR 80,550 Billion in the year 2022 and is expected to reach INR 158,991 Billion by 2028, thereby exhibiting a growth of 12.2 per cent during 2023-2028. According to the Union Ministry of Agriculture and Farmers' Welfare, the food production in 2022 was around 314.51 metric tons which is higher by 3.77 metric tons of food grains produced in the year before that. Furthermore, the Union budget has granted INR 1,25,036 crore in 2023-2024 towards agriculture, which is 5 per cent higher than last year, accounting for 2.8 per cent of the total Union Budget.
This growth can be attributed to numerous factors such as population growth, favourable technological advancements and innovation, and implementation of various government schemes and initiatives, such as the National Programme on Organic Farming and the Paramparagat Krishi Vikas Yojana, etc. that have been introduced by the Government of India to promote the growth of bio-agriculture in the nation by providing financial assistance to the stakeholders, thereby facilitating the growth of the industry.
These statistics and the research are testimony to the fact that the Agriculture Industry in India offers lucrative opportunities, and with its significant share of the market, it rightly warrants essential monitoring. Therefore, paying attention to environmental and social due diligence in the agriculture industry is going to serve you well because this sector is only going to grow and get modernised with time.
Nevertheless, we acknowledge that comprehending ESDD requirements can be challenging, and their compliance will require expert knowledge and professional guidance, especially when certain obligations fall beyond your field of expertise. Therefore, businesses and enterprises involved in the agricultural sector might feel the need to outsource their environment and social due diligence to avoid any inadvertent failures or mistakes on their part.
How Can Businesses Prepare for the Future of Environmental and Social Due Diligence in the Agriculture Industry?
In light of the anticipated growth in the agriculture industry and the fact that it provides employment and livelihood opportunities to around 58 per cent of the population of the nation, this industry has an even higher potential for growth and thus requires strict monitoring.
To further this growth, new practices are being promoted to enhance the productivity and sustainability in this industry. For instance, in 2021, DuPont India, in collaboration with the Indian Council of Agricultural Research (ICAR) and the Indian Agricultural Research Institute (IARI), is going to develop improved crop varieties that will be climate-resilient and will reduce the impact on the environment.
Considering the robust growth trajectory and the avenues for opportunities within this industry, businesses and enterprises are actively strategising to invest in the industry in order to capitalise on these prospects. To gain a competitive edge over your competitors, you can start preparing for the future of environmental and social due diligence in the agriculture industry today:
- Consider adopting a long-term perspective of growth. We understand many businesses are under the impression that the cost of environmental and social diligence in the agriculture industry is financial; however, the benefits are non-financial, but they must realise that is not the case, especially in the long run.
- Make efforts to incorporate environmental and social due diligence in their financial plans and accommodate the cost associated with it in order to be able to save future unnecessary costs. These efforts may not yield immediate returns, but they can contribute to the long-term resilience of your business.
- By comprehending and understanding the technique to strike a balance between profit-making and environmental and social due diligence needs so that, they can not only achieve risk mitigation but can also generate revenue benefits out of it. Build adaptability into your business strategy and be prepared to accommodate new regulations and compliances.
- Ultimately, make efforts to translate the guidelines and procedures into practice to ensure your investors and customers that you hold these values in high regard just like them.
Challenges faced while complying with Environmental and Social Due Diligence in the Agriculture Industry
We discussed the numbers to see the growth prospective in the industry and understood the necessity for conducting environmental and social diligence in the agriculture industry; however, all this is easier said than done. The agriculture industry has a vast and extensive outreach that businesses need to make conscious efforts to promote environmental sustainability and ethical practices. However, complying with environmental and social due diligence in the agriculture industry can be a complex and challenging endeavour. Here are some specific challenges that businesses may face:
Diverse Regulatory Landscape
The agriculture industry, in particular, tends to face a web of challenges and to mitigate and overcome these challenges, varied regulatory frameworks are adopted to pave the way for more sustainable growth in the industry. Therefore, the agriculture industry is subject to a myriad of local, national, and international regulations related to environmental and social practices. Ensuring compliance with environmental and social due diligence in the agriculture industry and evolving regulatory frameworks can be daunting.
Many businesses involved in the agriculture industry, especially smallholders, may not have adequate resources and may lack the financial and human resources needed to conduct comprehensive environmental and social due diligence in the agriculture industry. This can deter their zeal to meet regulatory requirements and adopt sustainable practices.
Complex Supply Chains
Agriculture supply chains can be long and intricate as they comprise several operators involving producers, processors, suppliers, and distributors, making it difficult to maintain traceability and ensure responsible sourcing. Achieving transparency and accountability throughout the supply chain is a considerable challenge while conducting environmental and social due diligence in the agriculture industry.
Conducting environmental and social due diligence in the agriculture industry requires modern tools and software for data collection and data analysis, which may not be at the disposal of the small stakeholders. The cost of adopting new technologies and providing training can be prohibitive; therefore, businesses may need to invest in outsourcing these services to skilled personnel to meet reporting requirements.
Resistance to Change
One of the most recalcitrant problems that are faced by businesses while conducting environmental and social due diligence in the agriculture industry is resistance to change. With changing times, there is a need to incorporate the changing ways of doing business. We understand that changing conventional agricultural practices and convincing stakeholders to adopt sustainable alternatives can be difficult and can face resistance from farmers, traditional supply chain partners, etc., but the businesses need to pivot to incorporate environmental and social concerns in their long-term plans.
Addressing these challenges requires a concerted effort from all stakeholders in the agriculture industry, including businesses, investors, and the concerned decision-makers. Allow us to collaborate with you and provide you with innovative solutions that are crucial to overcoming these obstacles and promoting sustainable and responsible agricultural practices.
Benefits of Outsourcing Environmental and Social Due Diligence in the Agriculture Industry
The need to incorporate these environmental and social concerns can feel unrewarding, especially when you don't see any short-term or immediate gains or profits. But with time, the commercial realms are changing and the businesses need to adapt swiftly, lest you will be left behind in this commercial race.
On your path to adaptability and change, you are expected to prioritise and accommodate the environmental and social effects of your commercial decisions. Allow us to help you revamp your way of doing business and handle all this for you while you focus all your attention and resources on your core business operations. At Enterclimate, we promote the ambition to experience unprecedented growth and, at the same time, endeavour to make a real change in the world.
Businesses and enterprises can reap the following benefits by investing in environmental and social due diligence in the agriculture industry:
Access to Experts
As discussed, navigating through the environmental and social due diligence in the agriculture industry can be complex and overwhelming, especially if you do not possess the requisite qualifications and knowledge. By outsourcing your ESDD requirements to us, you can get all-time access to our specialised experts, who hold the relevant industry-specific experience and are aware of the best practices and trends being followed in the industry.
On the face of it, outsourcing the environmental and social due diligence in the agriculture industry may seem like an added cost; however, let us tell you that, in fact, it is the opposite. Rather than hiring a full-time in-house team to take care of your ESDD requirements, you can simply choose to outsource these services. This helps you save the cost of maintaining additional staff and pay them regular remuneration, health benefits, etc. whereas the latter can be paid on a need basis. You can get the job done at a lower cost, and that too with greater efficiency.
Every organisation has limited resources and limited time on its hands. If you try to master it all and do everything on your own, it might lead to phoney compliance, which can have adverse consequences for you. A better strategy would be to do what you do best, focus your valued attention on your core operations, and allow us to help you with your ESDD requirements. Our team of experts brings years of experience in delivering services related to environmental and social due diligence in the agriculture industry and can definitely do a better job.
Reduced Delivery Time
Time is money! Outsourcing environmental and social due diligence in the agriculture industry allows you to finish the entire process much faster than it would take for you to do it on your own. It allows you to delegate the task to someone who specialises in the service, while your employees can devote all their time, attention, and resources to the tasks at hand. This division of labour also results in increased efficiency, productivity, and better decision-making.
Outsourcing non-core operations like performing environmental and social due diligence in the agriculture industry can allow you to have access to data collection and data analysis tools, which are studied by experts in that field. Their insights and guidance can help you make reasoned and well-informed decisions.
Enterclimate has been constantly helping its valued clients in their business journey and in reaching the pinnacle of success. Our bespoke team of experts has showcased a proven track record of delivering 99.6% proficiency in conducting environmental and social due diligence in the agriculture industry.
Our team of experts has vast knowledge and extensive experience, and they are committed to contributing to your business growth, helping you make an impact that counts, and, at the same time, helping you discharge your obligations pertaining to environmental and social due diligence in the agricultural sector as well, which tend to get overshadowed by innumerable legal and fiscal obligations.
We are well-equipped to offer the latest strategies and insights for all your business needs and provide you with innovative solutions and approaches that can contribute to your long-term sustainability and economic viability. Enterclimate has a profound global presence in environmental and social due diligence across various industries and sectors, thereby allowing us to leave a permanent mark on our clients.
Our services for environmental and social due diligence in the agriculture industry provide a wide assortment of provisions for your unique business needs. Our ESDD offerings include:
Every business operation has certain risks and liabilities attached to it, which often tend to get overlooked in the zeal and enthusiasm to undertake new projects. This necessitates an impartial assessment; thus, our bespoke team of experts can help your enterprise identify environmental and social risks and other adverse effects associated with your operations and business activities, and where necessary can help you prioritise them on the basis of severity and likelihood.
Given its huge size, the agriculture industry is monitored by various laws and regulations that are mandatorily required to be complied with. With constant amendments and changes, the process of compliance gets overwhelming for laymen. Our team of experts specialises in these regulatory compliances and licensing; thus, it can help you stay updated and ensure each and every compliance for you to avoid attracting any adverse consequences.
Social Impact Assessment
Legally and socially, your enterprise can be held responsible for the projects undertaken, operations conducted, and the decisions made. Social Impact Assessment (SIA) helps to identify, analyse, assess, manage, and monitor the expected as well as unexpected social impacts and effects of your undertakings, which often get overshadowed by the legal, fiscal, environmental, and economic effects. Our services are designed to handle SIA compliances as well and can help your enterprise to have a mitigation strategy in place to avoid any adverse consequences.
Vetting Standing Plans and Gap Analysis
If you already have incorporated environmental and social due diligence plans and strategies, however, you need someone to take a look at them and identify any potential gaps and loopholes that can be financially and socially risky for you, we can help you delve into the heart of your requirements and identify those gaps and further help you strategise to mitigate them well in advance, to avoid future penalties.
Data Analysis and Reporting
There is no denying that conducting environmental and social due diligence in the agriculture industry with the same rigour and quality with which you conduct financial due diligence is now essential; however, reporting these performances is equally, if not less, significant. Reporting this performance may require your enterprise to review data sources, a move that also can make reporting more meaningful by placing it in a financial context, and that is where our experts can step in and guide you to tread on this path of sustainability.
Market Intelligence and Peer Benchmarking
Our team of experts can help you make informed decisions in line with emerging market trends and opportunities. Our solutions and strategies are designed keeping in mind the best practices prominent in your industry and after comparing the performances of your competitors. Our team develops these insights and strategies that are tailor-made for you as per your business needs and goals for the future.
Other Key Services:
In addition to the above-mentioned services, you can opt for various other services that are provided by our bespoke team of experts, such as:
Environmental and Social Due Diligence in the agriculture industry can be extremely intricate and complex for a layman. With our expert guidance and advice, you can seamlessly navigate through these complex terrains. Our experts shall be at your service to guide you through the entire process and answer all your doubts and queries.
Assistance in Documentation
Do you also dread applications getting rejected only because a particular document was improper or missing? It can be frustrating to start from scratch after putting in long hours of labour simply because of a piece of paper. Conducting environmental and social due diligence in the agriculture industry and fulfilling these obligations requires filing various documents that have to be prepared as per the prescribed standards and formats. One may find it all very overwhelming, so allow our experts to guide you through all this.
Wouldn't it be great if you could get all the information and updates in just one place, without running from pillar to post? Allow us to be your one point of contact for every problem that your business may face, and let us be your ultimate One-Stop Solution Platform for your ESDD and any other business need.
With Enterclimate as your service provider, you can keep track of everything through our interface and stay abreast of everything that's going on.
If you would like to know more about Environmental and Social Due Diligence Services, please reach out to us.
Begin your Environmental and Social Due Diligence journey with a single step by reaching out to us at 7838390340, and we will assign a dedicated expert to discuss your needs and answer your queries.
We are excited to tread on this path with you and help you flourish in your industry. Join us today, and let's build a lucrative, environmentally and socially responsible future together.
Frequently Asked Questions
Environmental and Social Due Diligence (ESDD) is an important aspect of the decisions taken by businesses, companies, or investors to assess and manage the environmental and social risks involved with a business operation, project, or investment. ESDD in the agriculture industry is a preventive action that involves a systematic identification and assessment of the environmental and social risks and liabilities involved with the business activities.
Environmental and Social Due Diligence (ESDD) is becoming increasingly important for agriculture enterprises as a result of countless variables affecting the industry's sustainability and viability. Agriculture is a complex industry with a direct impact on the environmental and social aspects, making it even more necessary to identify and manage the risks involved by conducting ESDD comprehensively.
While conducting environmental and social due diligence in the agriculture industry, there are many social factors that are to be considered, some of which are labour rights, safe working conditions, minimum wages, health benefits, human rights, equal pay, indigenous rights, land acquisition rights, etc.
While conducting environmental and social due diligence in the agriculture industry, there are many challenges that may arise, such as issues related to regulatory and compliance, resistance to transition to sustainable practices and technologies, lack of knowledge and expertise, resource and time constraints, etc.
Environment and Social Due Diligence Assessment impacts agricultural financing and investments as it requires analysing the risk analysis of a portfolio that can make an agriculture finance institution increasingly more competitive than its unprepared peers. In fact, many studies have positively correlated a strong ESDD performance to higher financial returns.
The agriculture industry is one of the largest consumers of natural resources like water, soil, fossil fuels, etc. According to the data furnished by the Food and Agriculture Organisation (FAO), agriculture accounts for around 70% of water abstraction, and moreover, agricultural practices tend to deteriorate soil health by causing soil erosion, salinisation, desertification, etc. These adverse effects on the environment and natural resources pose such high risks that need to be mitigated, and by complying with their ESDD requirements, the businesses involved in the agriculture industry can address these concerns by identifying them well in advance and making strategies and plans to manage them effectively.
In addition to conducting environmental and social due diligence in the agriculture industry, agricultural enterprises need to generate comprehensive reports on their ESDD compliances, showcasing their commitment to these sustainability goals and highlighting the policies and strategies adopted by them, thereby ensuring transparency and accountability in communicating these efforts to the concerned stakeholders such as clients, investors, regulatory bodies, etc.