To create some sense of standardization and encourage corporations to do more for the environment, several governments around the world have sustainability reporting standards that companies must abide by. Two significant updates of country- and climate riskvel disclosure standards coming up soon that will impact businesses are 1) The Corporate Sustainability Reporting Directive (CSRD) developed by the European Union and 2) The U.S. Securities and Exchange Commission (SEC)’s proposed rule regarding the addition of climate-risk in existing financial disclosures. As the details of the changes are ironed out, businesses must begin to prepare to abide by these changes. An industry that expects significant and perhaps uncomfortable changes due to these regulations is agriculture. In-depth interviews conducted with representatives in the sustainability departments of five agricultural companies revealed some of the less explored challenges and opportunities presented to the agricultural value chain as a consequence of the regulations. While some companies view this constantly updating landscape as an opportunity to bring together teams across the organization and develop a comprehensive data governance system, others with less significant data infrastructure are struggling to build capacity in order to be compliant. Some additional anxieties included lack of clarity on finer parts of the regulations such as extent of penalties, enforcement timelines and lack of standardization in the double materiality assessment methodology.

The numerous requirements have additionally had cascading impacts across the agricultural supply chain. Companies stressed the difficulty of obtaining good quality data from all their suppliers globally, and more so if these suppliers are not themselves subject to the disclosure requirements. Two such groups are growers and transporters. A concern that emerged was of an unintended consequence of the regulations that could hurt medium-to-small supplier businesses. As regulations become stricter, more agricultural companies may begin to prioritize the sustainability data sophistication of a potential supplier in their selection process, shutting out smaller suppliers. Growers have already expressed discontent with the SEC’s proposed rules, worrying that the burden and cost of data collection will be pushed to suppliers. The range of data requested from the transportation sector tends to be less demanding, yet it is difficult to obtain data since most fleet companies are privately held, and hence not held to the same disclosure standards. In the face of these difficulties, agricultural companies are stepping up and finding ways to make it easier for their suppliers to provide them with reliable and valid data. Some are holding informational sessions on GHG Protocol methodologies while others are coaxing suppliers using regulation as a lever. Several companies have also created apps to enable better data management and employ NGOs to verify farm-level data on their behalf.

Another theme that emerged was that regulatory pressure is increasingly becoming an influence in the formation of sustainability strategies with more and more sustainability professionals using compliance needs to drive change within the organization. The research also revealed that there are organizational changes that are taking place to accommodate the demand for data, opening new positions and modifying existing job roles across teams in the organization. An additional finding was that as materiality assessments become inbuilt into the disclosure process, companies will have to conduct or improve upon their existing materiality framework and widen their scope to be in compliance.

The upcoming disclosure regulations will provoke some growing pains through the agricultural value chain as the industry aims to deepen and widen the scope of current data governance structures. Even with these uncertainties, the agriculture industry remains optimistic as it transitions into a more transparent supply chain.