Interview with AGRANA – about connecting sustainability and financing

The strategic implementation of sustainability measures is inevitable in the fight against climate change – but it does bear its challenges. How to deal with supply chains? How to optimally link ESG rating and sustainable financing? What are best practice examples?

We spoke with AGRANA experts Ulrike Middelhoff, Corporate Sustainability Management, and Joachim Reimann, Corporate Treasury.

Ulrike Middelhoff: For AGRANA, as an energy-intensive processor of agricultural raw materials in the fruit, starch and sugar segments, sustainability has always been an integral part of our business activities. 

Due to our activities at the intersection of nutrition, agriculture and industrial production, climate protection and climate change adaptation represent essential cornerstones of our sustainability strategy. We have demonstrated our commitment in this area by submitting climate targets in line with the 1.5°C target of the Paris Climate Agreement, with the Science Based Targets Initiative (SBTi) and its validation in September 2023. 

By 2030, as part of our SBTi commitment, we will reduce emissions from our production (scope 1+2) by 50%, and those from the upstream and downstream value chain (scope 3) by over 30%, in each case compared to the 2019/20 baseline. In addition, we aim to report net zero emissions in our own production by 2040 and across the entire value chain by 2050 at the latest. 

From today's perspective, we will have to invest around EUR 470 million to reduce emissions in our own production by 2040, including around EUR 213 million in Austria.

Ulrike Middelhoff: In terms of sustainability, we have been using various tools to monitor compliance with social standards in the agricultural and other supply chains for several years. The big challenge is reducing emissions in the value chain, our scope 3, which after all accounts for around 80% of our total footprint of around 4.9 million metric tons of CO2e in the last fiscal year and is largely beyond our direct influence. 

We still have a lot of work to do to convince our suppliers of the increasing regulatory requirements and those of our joint customers, to provide them with tools for calculating emissions in agricultural cultivation in accordance with the latest scientific carbon accounting standards – and to jointly identify measures for reducing emissions and provide support for their implementation.

Joachim Reimann: The financing need for greening the economy is enormous, and at the same time investments in green economic activities or measures should be promoted by the regulatory system under the EU Green Deal with favorable financing conditions – so much for the theory. In practice, it is still necessary to balance the financial commitment required on the part of the company with the magnitude of the potential benefits from green financing.

Ulrike Middelhoff: As part of its climate strategy, AGRANA has developed measures and projects that would enable net zero emissions from its own production by 2040 and extensive reductions also in the upstream and downstream value chain by 2050 at the latest. 

For AGRANA, the challenges of the green transformation lie not so much in the lack of technologies, but above all in the scientific and regulatory foundations that are still missing in some cases. The keywords are carbon sequestration and carbon removals in agricultural cultivation within the framework of the international carbon accounting standards of the IPCC and the GHG Protocol, as well as emissions-neutral accounting in the context of the use of biomass for energy. Regulators must create legal certainty for large-scale investments as quickly as possible to be able to tackle these issues. 

Joachim Reimann: The challenge with our first green financing in 2020, where we were among the frontrunners in Austria, was to find suitable ESG criteria for determining markdowns and surcharges in the financing conditions.

Joachim Reimann: RBI has been one of our financing partners for a long time and is certainly one of the most prominent players in the green finance field in Austria. Due to the status of our own sustainability and climate strategy at the time and after intensive consultation with RBI, we opted for an ESG rating-linked instrument based on an existing rating. Another financing transaction in late 2022 was also made with the link to this ESG rating. 

After three years of experience, we see the challenge with ESG rating-linked financing instruments primarily in two aspects: The lack of transparency of rating assessments to be able to achieve and demonstrate improvements on the one hand, and the timely delivery of these ratings by the mandated agencies on the other hand. 

Due to the increasing, regulatory-triggered, interest of companies and the financial market in green financing, rating agencies seem to experience an unprecedented influx, which brings them to their capacity limits and companies into a time-sensitive predicament regarding the rating evidence as part of their financing contracts and levers for the financing conditions. 

From today's perspective and with the successful validation of science-based targets, AGRANA would therefore rather opt for ESG-KPI-linked financing today.

Ulrike Middelhoff: AGRANA has been working intensively on sustainability for many years, so we believe we are well prepared overall for the upcoming additional (reporting) requirements. Nevertheless, AGRANA is currently rethinking aspects like risk management and planning a stronger integration of finance and sustainability. 

However, reporting is the least of all challenges, because if we are truly serious about the green transformation, we need to pick up the entire value chain, including suppliers, customers and ultimately consumers, and take them along with us. This is a task for society as a whole which we can only tackle together with all our partners – not least those in the financing world.