“It’s hard to be green, when in the red”

Farmers are facing a big challenge when it comes to balancing economic sustainability with environmental sustainability.

Words by: Michael Hayden, Assistant Professor of Accounting at Maynooth University

The economic importance of Ireland’s agricultural industry is well documented. According to the Department of Agriculture, Food and the Marine, agriculture accounted for 9.5% (€14.5 billion) of total exports in 2019, and makes a significant contribution to employment in rural areas.

However, from an environmental perspective, the outlook is much less positive. Agriculture generates a high level of CO2 emissions, and there is disagreement on how to tackle this.

The difficulty for farmers to balance economic sustainability with environmental sustainability is eloquently captured by the industry phrase: ‘It’s hard to be green, when in the red’. The challenge needs to be met, however, so farmers must work in collaboration with agricultural advisors and rural accountants to create more sustainable farm enterprises.

The complicated picture of sustainability in agriculture

The green agenda is at the forefront of national and international policy development in agriculture. Internationally, this is primarily driven by the UN’s Sustainable Development Goals, as many of them relate to food production.

At an EU level, the European Green Deal, through its Farm to Fork Strategy, sets out plans to improve the environmental impact of the agricultural industry by incorporating them into policy development through common agricultural policy (CAP) reform.

At a national level, the Irish government has announced the introduction of the 2021 Climate Action and Low Carbon Development Bill, which includes ambitious targets to reduce environmental emissions in agriculture.

In contrast, economic sustainability in agriculture is primarily concerned with the long-term financial benefits of food producers. Many farm enterprises in Ireland are financially vulnerable, with a high reliance on subsidies to provide financial support. This is particularly the case for beef, sheep and tillage farmers.

The 2021 Irish Farm Report, published by expert accountancy and financial advisory group IFAC Accountants, reports that 87% of beef farmers, 75% of sheep farmers and 63% of tillage farmers acknowledge that their farm enterprise does not provide an adequate income.

With rising costs of farm inputs, such as fuel, fertiliser and feed, placing additional pressure on profit margins for food producers, the outlook for 2022 farm incomes is bleak. Recent events such as the Covid-19 pandemic and the war in Ukraine have also increased the complexity of this situation, placing renewed focus on the necessity of having a sustainable food supply.

Creating sustainable farm enterprises

Research shows that agricultural advisors and rural accountants are trusted primary advice sources for farmers and small business owners. Therefore, farmers need to work with them to learn about sustainability initiatives that can help them to improve both environmental and economic sustainability.

Agricultural advisors and accountants can assist farmers in conducting a cost-benefit analysis of environmental sustainability initiatives (for example, calculating the payback or return on investment of initiatives that reduce the carbon footprint of farm enterprises), and help business owners to take advantage of financial support that will allow them to meet the cost of such initiatives.

If we want to maintain a sustainable food supply, economic sustainability should not be sacrificed for environmental sustainability. Instead, the focus should be on educating farmers and changing work practices to meet the dual agenda of economic and environmental sustainability. 

7.1%

Agriculture accounts for 7.1% of total employment in Ireland’s rural areas