Enabling Smart Growth (ESG) - Opportunities for Australian farmers

Around the world, decisions are being made beyond the farm gate which will increasingly impact how farmers produce food and fibre. These decisions, driven by consumer expectations, investor pressures, government policy and global trade agreements, are rapidly reshaping the agricultural landscape. This report set out to explore the role of Environmental, Social and Governance (ESG) principles governing that change, and their growing influence on agricultural supply chains, market access, farm management, and the future competitiveness of Australian farming systems.

The objectives were clear: to investigate how ESG is being embedded in policy and market settings across key global agricultural trading partners, to understand the mechanisms being used to influence farmer behaviour, and to identify the risks and opportunities for Australian farmers and agri-food businesses as ESG rises in prominence.

The concept of ESG warrants reframing for farmers, from being a burden to an opportunity. The acronym could do with a new definition: Enabling Smart Growth on farms. This could empower farmers to work with ESG goals for their own benefit. In today’s market, farmers who actively work against ESG goals, do so at their own peril. Environmental management and agricultural performance can and must work hand in hand.

ESG has evolved from a corporate reporting mechanism into a powerful tool shaping global systems. While Australia’s agricultural sector is still largely navigating voluntary ESG frameworks, the trajectory is clear. From carbon border adjustments in Europe, sustainable farming incentives in the United Kingdom, biodiversity markets in Brazil, data-driven environmental initiatives in Canada, and voluntary but significant private sector investment in the United States, ESG is no longer a distant signal. It is here, it is accelerating, and it is becoming embedded in both trade policy and corporate strategy.

This report examines how ESG is playing out globally and identifies 5 major themes.

ESG momentum is fragmented and uneven. While some companies and countries are charging ahead with ambitious ESG strategies, others are slowing down or pulling back. This divergence is driven by a mix of factors, including the complexity of measuring and defining ESG metrics, fear of greenwashing accusations, political shifts, and the growing influence of private capital, which often operates without the same transparency requirements. Some firms have committed heavily to net zero and sustainable sourcing, while others are pausing to reassess feasibility and risk. In the European Union, despite its regulatory leadership, political pressure is mounting to delay or dilute ESG mandates, yet the commercial sector, having already invested significantly, is now pushing for continuity. This tug-of-war reflects the tension between long-term ESG goals and short-term commercial or political pressures. It is a landscape marked by uncertainty, where leadership, clarity and consistency will ultimately determine which regions and businesses stay ahead.

Policy is both a driver and a risk. In all countries studied, government policy is playing a central role in setting ESG expectations. The European Union leads with binding climate and biodiversity regulation. The United Kingdom is grappling with the balance between environmental ambition, farmer profitability and national food security. The United States remains fragmented, with ESG progress driven largely at state and corporate levels. Brazil and Canada, though contrasting in development status, both show strong policy support for aligning environmental protection with productivity. Japan and South Korea demonstrate how food security concerns are influencing their ESG priorities commercially. In parts of Africa, ESG is driven more by donor funding, NGO involvement and trade access incentives than by domestic regulation.

Metrics matter but there are few globally agreed definitions. Australia has traditionally relied on its reputation as “clean and green”, but increasingly, trading partners and companies are demanding verified evidence, particularly around carbon emissions, to support such claims. A common theme across all regions is the growing requirement for measurement, verification and traceability. Currently, there is no globally agreed definition around things like GHG emissions factors and net zero and mechanisms for measurement vary greatly. There is also no mechanism for quantifying appropriate outcome metrics across different soil types, regions and climates making ESG reliant trade sanctions unfair and unjust. Factors such as the ability to quantify emissions, biodiversity, water use, labour practices and governance structures will increasingly become a precondition for doing business. Farmers will increasingly need streamlined, clear, and where possible automated systems and support to meet these expectations.

Markets are moving, with or without formal regulation. Retailers, banks, investors and food manufacturers are embedding ESG into procurement, lending and investment criteria. In Canada, the National Index on Agri-Food Performance and the Canadian Agri-Food Sustainability Initiative are aligning farm practices with international ESG standards. In Brazil, JBS Seara is driving major shifts in animal welfare and circular packaging. In the United Kingdom, Biodiversity Net Gain schemes are unlocking private capital for farmers delivering ecological outcomes. In Japan and South Korea, consumer pressure is pushing individual brands to prove sustainability and animal welfare credentials to maintain trust. Commercial ESG initiatives are actively shaping markets, setting clearer expectations, attracting investment, and creating new value streams. Although these are slow and lumpy, the trend line is there and it remains an opportunity for Australian farmers.

There is no one-size-fits-all approach. ESG implementation varies significantly depending on a country’s stage of development, environmental pressures, governance structures and cultural values. In lower-governance environments, achieving environmental or social outcomes without corruption or exploitation is more difficult. In high-governance nations like Australia and Canada, the challenge is less about compliance and more about maintaining flexibility, innovation and fairness in the face of rising reporting and regulatory expectations. Systems thinking is critical. Poorly designed ESG interventions risk shifting land use, displacing industries or undermining food security.

For Australian agriculture, the key take-home is this: ESG is not a fad or a niche concern. It is a structural shift in how global markets evaluate risk, reward sustainability and build resilience. Although currently, ESG is lumpy and uncertain, over the longer term, most of Australia’s markets are signalling the integration of ESG requirements, reflecting a sustained shift in global market expectations.

Our competitors, especially Canada and Brazil, are actively positioning themselves to lead in this space through credible, internationally recognised, locally relevant, coordinated frameworks.

To ignore these signals is to risk exclusion from future markets, misalignment with global capital flows, and falling behind competitors. But to engage with them strategically is to potentially unlock new value. ESG can serve as a lens for innovation, a tool for de-risking supply chains, and a framework for ensuring Australian agriculture thrives in a changing world.

There are clear opportunities for farm businesses: ESG provides a framework to manage risk, build brand trust, meet investor and regulatory expectations, and secure long-term access to markets and capital by demonstrating responsible, resilient and future-focused business practices.

The market and political signals around ESG expectations are there and to be successful in future, businesses must consider these changes thoughtfully. Australia is well positioned to not only to meet rising expectations, but to shape and lead them globally.