Opportunities to enhance corporate reporting on soil health and risks

The promotion of soil stewardship practices by agribusinesses is of vital importance given the role of soil health in supporting food and fibre production, promoting water quality and carbon sequestration. Worryingly, soil health is under threat from physical risks including erosion, acidity and other chemical constraints and a lack of biological activity. At present, however, international sustainability reporting initiatives and corporate environmental reporting practices have largely overlooked corporate exposure to soil-related risks and the impact of corporate activity on soil health.

Motivated by the current lack of recognition of the importance of reporting on soil health and risks, this project sought to explore corporate agribusiness and agri-investor attitudes and perspectives on the opportunities associated with advancing soil reporting. These attitudes and perspectives were obtained through in-depth, semi-structured interviews involving a range of senior representatives from Australian-based corporate agribusinesses, agri-investment funds and other investment institutions with exposure to agricultural assets.

Research participants acknowledge the role of soil health in sustaining agricultural resilience. In some cases, agri-investment models are centred around opportunities to grow farm productivity and land values through investments in soil stewardship. There is also enhanced investor focus opportunities to develop carbon offsets through soil carbon sequestration.

Given the emerging soil-related investment opportunities, participants were supportive of the need to enhance soil reporting. In this regard, ISSB’s general approach of framing sustainability-related disclosures around governance, risk management strategies, metrics and targets was seen as generally appropriate for soil. Furthermore, if soil reporting is to maximally relevant, the information needs to be clearly linked to financial concerns like farm productivity and input costs.

Notwithstanding the important role of soil metrics, given the variable nature of soils, investors and agribusinesses alike acknowledged that reaching consensus on a set of standard soil metrics would be challenging. Some flexibility on metrics will be needed with investors and other financial statement users supported to appreciate soil complexity and the contextual nature of soil through the provision of relevant narrative information.
Due to the limited understanding of complex soil matters by many agri-investors, there was a preference for a simple and easy to understand ‘traffic-light’ style of soil reporting. The focus here being on enabling investors to observe soil health trends and the relative performance of an agribusiness against comparable peers.

Respondents were mindful of the already growing sustainability reporting burden experienced by corporate agribusiness entities and how soil reporting might add to the pressures. Accordingly, there was support to ensure that: (i). soil requirements are embedded within existing sustainability frameworks, (ii) soil disclosures are linked to other sustainability and climate-related risks, and (iii) soil reporting should be focused on information that is already captured by agribusinesses for their own management perspectives.

These results provide important insights for key sustainability reporting initiatives including the ISSB’s advancement of general sustainability-related disclosure requirements and the GRI’s sector standard for agricultural entities. Whilst the results are of immediate relevance to agribusiness entities and agri-investors, they have broader appeal given dependence on agricultural produce and activities across other sectors.