In 2022 exports of Irish food and beverages reached almost €22bn, growing over 20% year on year. For a country with a population of 5.1m this is a remarkable datapoint. Food produced by Ireland has the capacity to feed over 35m people and with a heavy reliance on grass-based dairy and meat the nutritional value of that produce is self evident. Food and Beverage output equates to 8% of Ireland’s GDP, which contrasts sharply with the sector’s 2.5% contribution across the EU.

Deep strategic thinking about how to evolve the Irish food and drink sector is critical to how the Irish Republic itself can develop. On top of the physical product made and exported, Ireland is also home to a set of companies and co-operatives that have major international footprints in markets across the globe. These businesses, including Kerry Group, Glanbia, Ornua, West Cork Distilleries and Dole, add significant value to the Irish food and beverage eco-system.
All of this business and investment operates in an environment where ESG and Sustainability have been vaulted to the top of every boardroom agenda. It is no longer acceptable to financiers, politicians, regulators and consumers for primary or secondary food and drink processors to ignore the way in which their engagement with natural resources affects the planet itself. This is leading to a revolutionary shift in the way food and drink is being originated, processed, distributed and consumed. The financial system has a large role to play in that process.

At its core this seismic change has to find a way to produce food for a growing global population while protecting a wide variety of natural resources including soil, waterways, biodiversity and energy generation. This is a mammoth agenda for the Irish industry which relies heavily on grass-based and ocean-related resources. If Ireland is to position itself as a globally relevant source of nutritious proteins it must prove an ability to deliver these without harming, and preferably enhancing the environment.

The pressure to advance this agenda comes from many sources but you will find a particular zeal within the financial services sector. Banks in Europe, at the behest of the ECB and political institutions, are being charged with using their financial firepower to encourage all industries, including food and beverages, to accelerate their initiatives around ESG. Quite simply, without an ESG plan that stacks up, corporates and co-operatives will struggle to access finance for future investment. Monies that are available will have elevated costs attached unless a coherent Sustainability Plan is presented.

Behind the FS are a set of investors which have equally adopted a much more robust agenda towards ESG. These major institutional investors are now routinely bringing ESG teams to meet the management of companies presenting quarterly, interim or full year financial results. At these meetings the ESG teams are drilling executives with probing questions around their ESG strategies and they seek detailed answers to how each company plans to move towards a less damaging impact on the environment. Management teams with poor answers discover that these investors no longer want to own their stockmarket-listed shares or debt instruments. Some investors will go further and commence activist campaigns to change the policies of companies they deem are not being aggressive enough on ESG.

This interaction between money providers and corporates regarding ESG is having a more profound effect than any media or political campaign. Directors and C-Suite executives know that the ESG agenda is no longer a nice-to-know agenda it but is instead a major strategic priority.

All of this feeds back to how the Irish industries will adapt in coming years. Under pressure from financiers, and encouraged by policy changes with the Common Agricultural Policy, I expect to see radical initiatives designed to ensure water quality in Ireland is materially improved by better on-farm practices. Soil quality too will come under focus as we move to avoid the intensive fertilising and land use which had destroyed parts of the Dutch and New Zealand farm sectors. Tangible bio-diversity initiatives, including the widespread reinstatement of hedgerows, use of multi species grasses and better animal welfare practices will roll out in exchange for payments under CAP and commercial revenues for farm output.

Conversely, farmers who do not adopt these changes will experience lower CAP payments, penalties and lower returns from processors for their farm output. Danone’s recent initiative to reduce methane emissions by 30% before 2030 is a case in point.

Ireland occupies a key position in the global food and beverages industry, hard won over one hundred years of independence. The challenge now is to devise systems and methods that further underpin the value of these businesses for the Irish economy while delivering much needed proteins and other food and beverage products for a growing global population. Coherent ESG strategies have to play a frontline role in that battle.