Dr Michael Hayden, School of Business, asks if farmers can balance economic and environmental sustainability? 

     

    Michael Hayden - School of Business - MU
    The challenge for farmers and food producers is to balance economic sustainability with environmental sustainability. The economic importance of the Irish agricultural industry is well documented, as is the high level of CO2 emissions that it generates. Given the rising input costs of fuel, feed and fertiliser for food producers, the financial viability of enterprises may understandably be a top priority, with environmental sustainability a secondary priority.

    A phrase used in the industry, "it's hard to be green when in the red", summarises this challenge. Despite the current uncertainty in economic conditions in the short-term, the long-term focus on environmentally sustainable food production should not be forgotten. Furthermore, such events as the pandemic and the war in Ukraine has increased the complexity of the dynamic environment that food producers operate in, especially in terms of disruption to food supply chains and concerns around food security, thereby placing renewed focusing on the necessity for a sustainable food supply.

    Is Irish farming economically sustainable?

    Economic sustainability in agriculture is primarily concerned with the long-term financial benefits of food producers. The Department of Agriculture, Food and the Marine has reported that the national output of the agricultural industry accounted for 8.8% (€14.2 billion) of total exports in 2020. The agri-food sector also makes a significant contribution to employment, accounting for 7.1% of total employment - or 163,600 jobs - in rural areas.

    But despite this impressive performance, many farm enterprises in Ireland are economically vulnerable, with a high reliance on subsidies to provide financial support. This is particularly the case for beef, sheep and tillage farmers as the 2021 Irish Farm Report shows. Some 87% of beef farmers, 75% of sheep farmers and 63% of tillage farmers acknowledge that their farm enterprise does not provide an adequate income.

    The 2020 National Farm Survey reported specifically on the economic sustainability of farm enterprises, noting that 34% of Irish farms are deemed economically viable, 33% economically sustainable and 33% economically vulnerable. These statistics highlight the significant economic challenge facing many farm enterprises.

    Turning Irish farms green

    The green agenda is at the forefront of national and international policy development in agriculture and food production. This is primarily driven by the UN Sustainable Development Goals, as many of them relate to agriculture and food production. COP26, which took place in Glasgow in 2021, placed a renewed focus on environmental sustainability by asking governments signed up to the UN Framework Convention of Climate Change to pledge to an increased reduction in CO2 emissions.

    In this context, a particular focus on addressing the CO2 emission in agriculture was called for. At EU level, the European Green Deal sets outs plans through its Farm to Fork Strategy on how to improve sustainability and the environmental impact of the agricultural industry. The targets set out under the EU Green Deal are currently being incorporated into policy development in the area of CAP reform.

    At a national level, the Irish Government introduced a Climate Action and Low Carbon Development Bill last year which includes ambitious targets to reduce the environmental emission of its agricultural industry. Coupled with this, Teagasc's Farm to Fork Strategy and Bord Bia's Origin Green both focus on improving sustainability in Irish agriculture.

    Can we have farms which are sustainable on both fronts?

    Policies and initiatives coming down the line from both national and international environmental sustainability policies will undoubtable have a direct impact on farm practices and consequently the economic performance of farm enterprises. Farmers need to work in collaboration with professional advisors such as agricultural consultants and rural accountants to create more sustainable farm enterprises to meet the challenge of balancing economic sustainability with environmental sustainability.

    Research shows that agricultural consultants and rural accountants are one of the primary advice sources, and a trusted advice source, for farmers and small business owners. Farmers need to work with advisory services to learn about sustainability initiatives which can help them to improve both environmental and economic sustainability.

    Farmers need to engage with advisory services as they can assist by conducting a cost benefit analysis of environmental sustainability initiatives. For example, they can help to calculate the payback or return on investment of initiatives that reduces the carbon footprint of farm enterprises. They can also help business owners avail of financial supports to meet the cost of such initiatives.

    To maintain a sustainable food supply, a financial management perspective acknowledges that economic sustainability should not be sacrificed for environmental sustainability. Instead, work practices need to change to meet the dual agenda of economic and environmental sustainability.

     Dr Michael Hayden is Assistant Professor in MU's School of Business. This piece originally appeared in RTE Brainstorm, September 2022.