A new report by RSM Australia outlines strategies for agribusinesses to reduce emissions while maintaining profitability and meeting market demands.

As the world grapples with the challenges of climate change, the agriculture sector is under increasing pressure to reduce its carbon footprint. But how do Australian agribusinesses navigate the delicate balance of cutting emissions while also producing affordable food and fibre and remaining profitable?

A new report from AgriFutures evoke^AG. 2025 partner RSM Australia, ‘Decarbonisation strategies for agribusiness’, offers valuable insights into how farmers and investors can navigate this transition.

The report highlights key trends, strategies and financial incentives, and identifies some of the challenges agribusinesses can face in their journey towards decarbonisation.

Regulations and market shifts drive change

RSM Australia ESG and Climate Services Senior Manager Sarah Melville-Maguire said the push towards decarbonisation in agribusiness was being driven by both regulatory requirements and market demand.

RSM Australia ESG and Climate Services Senior Manager Sarah Melville-Maguire. Photo: Supplied

Mandatory climate reporting is now a reality, with banks and large businesses having to disclose their carbon emissions from January 2025 as part of the Australian Government’s commitment to net zero targets.

The ripple effect is being felt in farming, with banks now asking farmers for detailed information on their carbon footprints.

“(Banks) need to know what they’re financing and where the emissions are,” Sarah said.

“The other key reason is that the banks, particularly the big four banks, have made a lot of promises … and now they actually have to finance those sustainable projects so they can meet the targets they’ve publicly disclosed.”

Another significant driver is market demand, especially from consumers and major retailers, who are increasingly seeking products with verifiable green credentials.

As an example, Coles and Woolworths have committed to net zero – or even net negative – emissions by 2050 and are pressuring suppliers to adopt greener practices.

Other catalysts include international regulations around environmental credentials and traceability of sustainably sourced produce, brand reputation and market opportunities.

Decarbonisation strategies to reduce risk

The RSM Australia report outlines a range of strategies being used by agribusinesses to reduce their emissions.

One approach is natural capital accounting, which involves measuring and valuing the environmental assets and services provided by farms. This can help farmers identify areas for improvement and demonstrate the environmental benefits of effective land management.

Operational changes can include converting to renewable energy sources such as bio-diesel, solar or wind, improving irrigation efficiency, adopting more sustainable farming practices, and using feed supplements such as seaweed to reduce methane emissions of cattle by up to 80 per cent.

Other strategies can include embracing agtech, such as advanced sensors, drones and precision farming tools, to boost productivity and sustainability.

There is also demand from non-agricultural businesses keen to offset emissions in the short-term by buying carbon credits from landholders with carbon sequestration projects, or leasing land for their own reforestation and renewable energy projects.

As one of the most talked about mechanisms for decarbonisation, carbon farming can provide farmers with a valuable new revenue stream, but requires a long-term commitment over decades, rather than years.

The report includes a case study on Western Australia farmer Ian Clarke, who established a 25-year soil carbon project across half of Karinella Farms in 2022 and has so far sequestered 2439 tonnes of carbon in the soil.

Source: Decarbonisation strategies for agribusiness, RSM Australia

Financial benefits, grants offer incentives

While some of these activities will generate income, other financial benefits and incentives are available to encourage the transition to lower emissions.

RSM Australia Corporate Finance Partner Justin Audcent said a number of banks are offering interest rate discounts of 0.5 per cent to 1 per cent on ‘green loans’ for projects that reduce carbon emissions, such as planting trees or investing in energy-efficient equipment, or which otherwise contribute to environmental sustainability.

He also said that many banks offer discounts linked to the achievement of specific sustainability-related KPIs, which are often available on a broader range of loans and provide a real financial incentive to take action on emissions reduction and other sustainability initiatives.

RSM Australia Corporate Finance Partner Justin Audcent. Photo: Supplied

“The banks package these loans up and fund them through global wholesale funding markets where there is a high level of demand for green, sustainable, ethical-type investments,” Justin said.

“Think about all the super funds … Everybody wants to be putting money into investments that are ethical and with a clear focus on climate change and sustainability.”

Government grants are also available through the Federal Government’s $302 million Climate-Smart Agriculture Program, the $100 million a year Future Drought Fund and its Long-term Trials of Drought Resilient Farming Practices Program, and land restoration funds in Western Australia and Queensland.

The land use dilemma: Food versus carbon storage

According to the RSM Australia report, agriculture globally faces three main challenges: increasing yields to support population growth, adapting to climate change and navigating evolving market and geopolitical dynamics.

Urbanisation and renewable energy projects are reducing how much land is available for food production at the same time as food demand is rising and extreme weather events and changing rainfall patterns are affecting yields.

Closer to home, Australian farmers also face the trade-off between setting aside land for carbon storage and continuing to use it for crops and livestock production.

“One of the things that farmers sometimes grapple with, is it’s great to do the right thing for the planet, but am I actually going to get a return on the investment?” Justin said.

“In some cases there may not be an immediate or direct benefit, however supply chains are increasingly favouring, or in some cases requiring verifiable green credentials.

“Sometimes there is an ability to get a premium price for produce … whilst certain markets may not actually be accessible in the absence of meeting certain requirements, such as the need to meet EU sustainability requirements for canola producers to access the European market.”

Early movers might have an advantage, but eventually emissions and sustainability measures will become a normal part of doing business.

“We’re not there yet, but five years down the track, we may very well be,” Justin said.

First step: Measuring your carbon footprint

Before embarking on an emissions cutting program, Sarah said farmers and other agribusinesses need to calculate their existing carbon footprint.

“The vast majority of small manufacturers and farmers currently do not know what their emissions are,” she said.

“Once you’ve got your carbon emissions profile, you can start to build a picture of what’s actually happening on the farm and identify where you can reduce emissions.”

Sarah said the majority of farmers would not have to do a carbon offset project, but those who were unwilling or unable to produce the information required by banks, and the companies that buy their produce, might eventually find it increasingly difficult to borrow money or sell their produce.

“That’s going to be a big business challenge for those who don’t want to deal with all of these complexities,” she said.

There are free online tools for calculating baseline emissions at the Primary Industries Climate Challenges Centre and the Cool Farm Tool, as well as through organisations such as Dairy Australia and Meat & Livestock Australia.

Sarah said most agribusinesses preferred not to DIY, opting instead to have their carbon done through firms like RSM Australia, at a cost similar to that of a business tax return.

“We do the emissions calculations and we provide it back to them with an explanation, not just of what the numbers mean, but what can change those numbers and how to use the information,” she said.

This article appeared at evokeAG.