The biggest value-creation opportunity for New Zealand's agricultural sector is to be seen as a globally trusted source of sustainably produced goods, a new Rabobank report on the sector says.
The Sustainable Returns: Finding the value in Environmental Sustainability report says improved environmental practices can deliver an immediate monetary benefit, through price premiums, and long-term strategic advantages.
Report author Blake Holgate said many consumers now consider buying food products with sustainability credentials as a precondition rather than a value-add feature.
"In high-value international markets, where the vast majority of New Zealand product is purchased, consumers are unlikely to pay a premium for New Zealand products just because farmers are undertaking sustainable farming actions as required by their regional councils," he said.
To get a premium, food producers had to go beyond compliance to telling a story about the product: where it came from, how it was produced, and what it stands for, Holgate said.
Two examples of New Zealand companies that had successfully created their own value tories were merino wool clothing manufacturer Icebreaker and kiwifruit marketer Zespri, the report said.
However, sustainability is only one element as consumers seeking an authentic story also want high quality, consistency, safety, and ethical production.
The four main areas in which sustainable farming can provide long-term strategic value for the sector are: future proofing, customer intimacy, shared value supply chain relationships, and social intimacy, the report said.
Supply of sustainable food products was growing as regulators in an increasing number of countries introduce measures to improve environmental performance.
While New Zealand relied heavily on its perception of being "clean and green", it was "imperative that our actual environmental performance lives up to the perception", Holgate said.
Developing supplier relationships based on shared values was another way farmers could gain long-term strategic value, with many major food corporates investing heavily in ensuring transparency and accountability in their supply chain. In order to do that, they have to guarantee the raw materials they source have been produced through acceptable farming practices, the report said.
With 90 per cent of the country's population now urban and disconnected from the farming sector, the public no longer simply accepts farmers have a licence to operate as they see fit and industry controls and guidelines have given way to government regulations and controls, Holgate said.
"Just as consumers need to be told a story about where New Zealand's food comes from and how it's produced, so, too, must the public, to ensure there is an informed consensus as to what environmental and ethical standards are appropriate for farming in New Zealand."