CHICAGO — At the virtual BMO Capital Markets and Growth ESG Conference Dec. 5, ADM announced its new goal to engage 1 million acres in regenerative agriculture within the next year. Vikram Luthar, chief financial officer, and Alison Taylor, chief sustainability officer, participated in a virtual fireside chat to discuss the company’s strategy for enacting sustainability practices while maintaining its financial growth.
Mr. Luthar said, to date, ADM’s sustainability initiatives have improved the company’s financial performance.
“In fact, in the first nine months of this year, we exceeded our prior record earnings in 2021,” he said. “We delivered $5.91 EPS in the first nine months, adjusted and operating cash flow before working capital of $4.7 billion and ROIC of 13%. We also expanded gross margins over this period year-to-date comparison by 70 basis points.”
With increasing pressures to operate sustainably, Ms. Taylor explained that ADM is uniquely positioned in the ag value chain as it doesn’t own any farms or brands. From this space, the company can influence the entire agricultural value chain toward more sustainable practices, lowering carbon footprints, enhancing biodiversity and reducing water usage, she said.
“We can deliver information,” she said. “We can deliver a lower footprint. We can deliver a lot of knowledge about sustainability and regenerative practices. We’re collaborating with customers who are looking to lower their footprint, so they want this information.”
When asked about the tangible changes ADM has made over the last 12 months, Ms. Taylor said the company increased its engagement and education around regenerative agriculture. And it set a new target for its suppliers’ enrollment in regenerative practices — in 2023, ADM plans to achieve 1 million acres in regenerative agriculture.
“That’s a great acceleration over just the last year and certainly, the year before as well as we see more of that demand coming online,” Ms. Taylor said. “So, we are working with farmers to use platforms in which they can be measuring their sustainability practices.
“We’re seeing more and more farmers interested in this because they see that there is a real market for these credentials, and there’s also enhanced resilience of their farm practices and efficiency of their farm practices that we’re able to talk to them about.”
The company also set a new goal to reduce Scope 3 greenhouse gas emission 25% by 2035. Scope 3 emissions are those that result from the activities of assets not owned or controlled by the reporting organization, but that indirectly impact the organization’s value chain.
“So, we have to work with our downstream and upstream partners in order to achieve these goals,” Ms. Taylor said. “And again, back to regenerative agriculture, because those upstream emissions are a big part of our Scope 3 inventory, that’s a huge part of our strategy. So, we can probably assume that with customers having more interest in regenerative agriculture, we’ll be moving faster in that category or that aspect of our Scope 3 reductions.
“And as I said, 1 million acres within the next year is a short-term goal that we intend to hit there. And we look at about 0.5 metric ton per acre reduction in carbon when we’re looking at those kinds of acreage goals, and it can be higher depending on the crop and depending on the location.”
Ms. Taylor touched on the notion that food security can be improved as and sustainability efforts increase.
“Food security and sustainability have become a much bigger topic, and they’re also absolutely compatible,” she said. “As we can pivot around obstacles and supply chains and still supply those sustainable credentials, we really see that as the sweet spot for ADM.”
Mr. Luthar briefly addressed the Environmental Protection Agency’s Dec. 1 proposal to increase the amount of biofuels that must be blended with gasoline and diesel over the next three years.
“Based on our preliminary assessment … we see the RVOs (Renewable Volume Obligations) as a positive framework for the biofuel industry,” Mr. Luthar said. “And we think that it actually establishes a floor, not a ceiling, for demand going forward."