As Australia embarks on its plans to deliver net zero emissions by 2050, PwC Australia is working with the Macdoch Foundation and the National Farmers Federation to conduct one of the biggest research programs of its kind to establish the link between enhancing natural capital and farm profitability.
Farming for the Future will aim to test and quantify, on a wider scale and across different agricultural sectors and regions, the limited evidence to date that Australian producers have experienced increased profits by investing in their natural capital.
The multi-year research and change program will see the participation of more than 1,500 farms across Australia to establish the link between natural capital management and farm profitability. It will develop practical and accessible information and an easy-to-use benchmarking tool for producers, to help them make decisions about their own natural capital in order to run more resilient and profitable businesses.
"This landmark project will engage producers, agricultural industry bodies, retailers, food and fibre companies, brands, financial institutions, banks and insurers to accelerate the transition to a more resilient agricultural sector," said PwC Australia Partner Martin Stokie.
"The potential for significant gains will flow with greater investment into improving on-farm natural capital as opposed to continuing to battle against an increasingly harsh landscape," said Macdoch Foundation Chief Executive Officer Michelle Gortan.
"This landscape is likely to become even harsher in the coming years – and producers are feeling the pressure."
National Farmers Federation Chief Executive Officer Tony Mahar said: "Australian farmers are on the front-line of the impacts of climate change. They are also in the box seat to benefit from the opportunities of a reduced emissions future. The NFF is pleased to be partnering with the Macdoch Foundation on the Farming for the Future initiative, and its work to demonstrate and quantify, through the data, the link between increased farm profitability and enhanced natural capital value."
The project will involve comprehensive soil testing, farm practice analysis and natural resources assessment across participating farms. Farming for the Future will work with peak local agriculture bodies – including the project partner, the National Farmers Federation – to recruit a diverse range of farms for the project.
While there is some evidence that improving natural capital delivers financial gains on farm and beyond the farm gate, this research is small-scale, and actionable large-scale research specific to Australian conditions is required to develop a compelling case for change.
The discussion paper by PwC Australia and the Macdoch Foundation cites pre-existing research at a small scale, which indicated farms that enhanced natural capital were able to increase their average annual net income by more than 40 per cent.
"Although the limited research to date is promising, there are far too many factors at hand for us to clearly project the size of the prize on offer. But by working with more than 1,500 farms across the country, we aim to prove, on a wider scale, just how beneficial enhancing natural capital can be to farm profitability – and help producers achieve those benefits," said Stokie.
"This major study will help prove the link," said Gortan.
According to PwC Australia and the Macdoch Foundation, producers could benefit through improved profits, increased resilience to climate change, greater market access and improved producer wellbeing, which would help to create more resilient and thriving rural and regional communities.
For the broader community, the potential for improved waterways and biodiversity and a more resilient supply chain make a compelling case for change, while sectors such as financial services, government, retailers and wholesalers could also benefit.
Farming in an era of climate change poses challenges inside the farmgate and beyond
Environmental challenges have led to profit losses of an estimated 23 per cent over the past 20 years, while the risk of receiving low returns has doubled relative to the 1950-2000 period.
"The challenges posed by climate change aren't confined to inside the farmgate. Climate change puts stakeholder capital at risk, as investors seek other opportunities that mitigate the impact of this risk," said Stokie.
"Add to that, governments internationally are increasingly willing to introduce new regulatory measures for producers who are having a negative impact on the environment – and Australian producers have found themselves in regulatory crosshairs to meet international standards."
"We know the impact of prolonged dry periods - on the land, farm businesses, and the mental health of producers and rural communities - and this can be devastating. Farming for the Future highlights the opportunity for a just transition for producers and their employees by helping them build more resilient businesses, which also means healthier, more resilient rural and regional communities," added Gortan.
Revitalising productive landscapes could lead to more profits for producers, and benefits beyond the farmgate
According to Farming for the Future, Australia is on the cusp of a unique opportunity to propel Australian food and fibre producers to the forefront of innovation, practice and policy on environmental sustainability and linking natural capital into food and fibre production systems.
Beyond the farmgate, improved natural capital has the potential to:
- improve access to capital and better financing costs, reducing exposure to risky debts and the cyclical nature of agriculture and allow financial institutions to enhance their support for a sustainable agriculture sector;
- support innovation in AgTech that allows producers to gather relevant data and enable easier and more cost-effective measurement and management of natural capital;
- allow consumers to make more informed or sustainable choices about produce; and
- allow producers to maintain competitive access to vital markets, particularly those threatening carbon-based tariffs on Australian agricultural products.
Enabling a more financially-prosperous and climate-resilient sector
To achieve these desired outcomes, it will be necessary for a range of stakeholders to recognise the benefits – not just producers, but governments, food and fibre brands and retailers, financial institutions and consumers.
"We know information alone won't change the system," Gortan said.
"Activation of change will require work both directly with producers and their advice networks, and indirectly through the associated ecosystem with financiers, policy-makers, retailers and others.
"We need active participation across the entire sector. We are thrilled to be working with Tony Mahar and the team at the National Farmers Federation, and look forward to working with Australian agriculture's diverse stakeholders as part of this groundbreaking project."
To view Farming for the Future or to register your interest in the project, visit farmingforthefuture.org.au
