Top tips on rural sustainability

This article was first published on <a href="https://www.todayfm.co.nz/home/rural/2022/07/top-tips-from-experts-on-rural-business-sustainability.html" target="_blank">Today FM</a>. When people hear the word sustainability, they typically think of the environment. However, the phrase’s definition is broader than that; and reflects an ability to maintain or support a process indefinitely. The concept of sustainability refers to how an organisation survives (and thrives) in both the short and long term. For those in the rural sector, it incorporates three key aspects: business, finance, and the environment. To better understand what sustainability means to New Zealand’s rural sector, ASB commissioned research in March 2022 and identified four key pillars that are top of mind for food and fibre producers: business sustainability, environmental sustainability, financial sustainability, and diversification. ASB’s General Manager of Rural, Ben Speedy, says that business sustainability is fundamentally about what your business needs to ensure that it survives and thrives over your targeted time frame. “Sustainability is not exclusive to the environment. It’s also about your broader business strategy and how your business can meet longer term challenges, whether they are environmental, regulatory, financial, or changing customer demand.” Expanding on insights garnered from the research, ASB and Rural Exchange hosted a series of webinars that have explored each of these pillars in depth. The series featured a panel of industry experts who shared their perspectives and offered practical tips that rural business owners and managers can apply to their businesses today.   <h2>Business Sustainability</h2> Business sustainability takes a holistic view of an organisation and considers its stability, viability, and resilience across three core components: business, finance, and the environment. It requires taking both a short- and long-term focus and considers: <ol> <li>Staff and labour</li> <li>Managing increasing operating costs</li> <li>Making better on-farm decisions with timely data and information</li> </ol> With short-term issues such as rising costs, increasing inflation, and labour shortages requiring attention now, to long-term challenges such as climate change and changes in environmental reforms that need time and planning, farmers must continue to adapt and evolve to ensure that their businesses remain sustainable and viable in the future. One of the key elements of creating a sustainable business long-term is building a great culture. Attracting good staff in the rural sector is often done by word of mouth, so once you’ve hired them, how do you retain them? Gilbert Enoka, All Blacks Manager and Mental Skills Coach and guest speaker for ASB’s webinar on Business Sustainability, highlighted the importance a thriving team culture plays in creating a sustainable business. Believing that there are no shortcuts to success, Enoka likens high-performing sports teams to high-performing business teams. Both are made up of people who aren’t afraid to roll their sleeves up and get the job done, and both understand and preserve their core value. Business sustainability requires high performing teams, where the success of the team is more important than the success of the individual. How does this translate on farm? Team culture is king and having shared standards and values helps everyone buy into the business’s overall objectives and success. Five things you can do to improve your business sustainability: <ol> <li>Take time to complete an evaluation of the culture of your business. Where are your strengths? Where are your weaknesses? What word would your staff use to describe your team culture?</li> <li>Surround yourself with great people. Train, retain, and build a great culture.</li> <li>Know your numbers. Have a good understanding of your business’s current financial position.</li> <li>Manage your operating costs. Inflation is on the rise, and costs are increasing, so what are you doing to manage these increases?</li> <li>Make more informed on-farm decisions by investing in products and services that provide accurate real-time information.</li> </ol>   <h2>Environmental Sustainability</h2> Climate change and environmental impact have been a hot topic of conversation this year.  Government regulations are constantly evolving, and farmers need to adapt and respond. ASB’s recent research showed that 66% of farmers interviewed are actively taking steps towards mitigating climate change to minimise their impact on the environment. The research revealed that planting trees and adopting more efficient farming practices were the most common mitigation strategies. 73% also cited government regulation as a significant issue, up 12% from the year before. Whilst there is acknowledgement from the rural sector that climate change and emissions are an important component of environmental sustainability, the volume of regulatory change is proving most challenging for many farmers. Regulation has come about because consumers have demanded it, and that demand is being driven by rapidly growing awareness of the impact that we have on the environment.  As part of the webinar on Environmental Sustainability, ASB’s National Manager of Rural Corporate, Aidan Gent, said that he believes that a key part of environmental sustainability is recording what farmers are doing, “it’s about proving what we do, rather than just knowing that we do a good job looking after our land and animals.” Charlotte Glass, Director at AgriMagic agrees, suggesting that one of the biggest changes for farmers to get their heads around is the need to provide evidence that they are farming in way that is environmentally sustainable. “The good news is we’re already doing it. We just need to prove that we are.”  Ben Brown, General Manager at Onside Intelligence, notes that starting with a base of good information is the first step in understanding your farm’s impact on the environment, “you can’t manage what you don’t measure.” He also recommends talking with others within the industry and sharing knowledge and expertise where you can. “Let technology help you too. There are some great organisations and tools out there trying to solve some of these problems, so leverage them.”  Knowing where to start when tackling environmental issues can be overwhelming, so Ben proposes committing to start small this season and expand from there. “Start small and commit to doing one thing – it can help you to feel like you’re making real progress.” Five things you can do to improve your business’s environmental sustainability: <ol> <li>Evaluate ways to improve your environmental footprint by creating a Farm Environmental Plan.</li> <li>Set some time aside to evaluate the risks that we are facing. What does that look like for your sector and for your business?</li> <li>Educate yourself on relevant regulations and understand what is required for your sector. </li> <li>Measure and monitor your impact on the environment.</li> <li>Consider what you can control. Mitigate what is going on and how you are adapting your business for the future.</li> </ol>   <h2>Financial Sustainability</h2> With short-term commodity prices high and long-term outlooks appearing promising, many New Zealand farmers are looking to invest in their businesses through debt reduction, balance sheet optimisation or growth plans. ASB’s research revealed that more than 40% of New Zealand farmers are investing in growing their business, with General Manager of Rural, Ben Speedy, noting a need to balance increasing debt repayments with investing in other opportunities. Strengthening balance sheets is essential as it enables farmers to utilise opportunities for expansion and build that resilience regarding interest rates.  Expert panelist Michelle Turfrey, Partner at Findex, recommends developing a financial business plan as the first step in ensuring that a food and fibre business is financially sustainable. “It doesn’t need to be time-consuming or expensive. You need a starting point, even if it’s just on note paper to begin with.”  ASB’s National Manager of Rural Greig Sinclair agreed, “start putting together a plan, for both the short and long term, and do a budget for the coming season. You need to understand what production looks like and what your costs are.” Farmers are generally really good at budgeting when times are tight, but Greig recommends budgeting even when times are good, highlighting that on-farm profitability has never been better. Once you’ve done your budget, talk it through with your trusted advisors, as this can help reaffirm any decisions that you have made. Succession planning can be a large part of financial planning too, and panel expert Matthew Pickering of Rural Coach suggests that farmers think about what they want the next 10 to 20 years of their lives to look like. “What does that look like individually and as a couple? How does the business and family integrate? If conversations about succession planning haven’t yet been had, Matthew recommends starting by talking about what each person wants. If you need support, engage professional experts. Grieg agreed, adding that sometimes bringing in someone who is not personally connected to the farm, but who is passionate about the industry and farming, can help a farmer transition off the farm. Six things you can do to ensure your business’s financial sustainability: <ol> <li>Understand your numbers – financial, production and environmental.</li> <li>If you are considering invest to grow, complete a comprehensive cost benefit analysis on new opportunities. </li> <li>Look to increase debt payments.</li> <li>Review existing processes to look for efficiencies and savings.</li> <li>Consider and implement a succession plan. Share that plan with your trusted advisors, whether that’s your bank, your lawyer, your accountant, or a farm advisor.</li> <li>Get advice where needed.</li> </ol>   <h2>Diversification</h2> Diversification can be a pathway to becoming financially sustainable, whether through capital to farm syndication, off-farm investment such as residential and commercial property and shares, on-farm diversification, or establishing different income streams across initiatives such as agri-tourism. With increasing costs and rising inflation, many in the rural sector are looking at additional ways to generate income. According to ASB’s research, 20% of farmers are considering diversifying into off-farm activities and nearly a quarter are considering diversifying into a different type of farming.  While on-farm diversification opportunities such as crop diversification may initially appear the easiest of new income options, expert panelist Dan Cottrell, of Kiwi Quinoa, recommends that farmers first consider the agronomy of the proposed diversification. “Ask key questions up front. Will it grow here? What else is needed to ensure that this option thrives? How does this new opportunity fit with your existing farming calendar?” Dan highlighted the importance of knowing the market, from its total size to other players to validating the commercial opportunity and understanding plant variety rights and licenses that may be required. Consider post-harvest too – how will you get this new product to customer? When it comes to hybrid diversification options such as agri-tourism, Marijke Dunselman, Founder of AgriTourism NZ advises looking at what infrastructure is already on your farm and how could it possibly be utilised in other ways. Can you add cycle trails, walkways, or shearer’s cottages to your existing property? Marijke recommends visiting other agri-tourism operators, seeing what is already on offer and thinking about how you could do things differently. “Take time to understand the agri-tourism industry and consider what may be required when marketing this new proposition too.” Investing outside your farming business requires understanding your own appetite for risk. Ross Verry, Chief Executive of online investing platform Syndex, suggests undertaking comprehensive research and seeking advice from those with experience. “When buying into businesses, it’s important to think about the business’s existing strategy too. Look for evidence that they have created value for themselves or other investors in the past and consider what your own exit strategy will be. You need to be really clear about why you’re diversifying and how it fits into your overarching strategy.” Six things to consider if you’re looking at diversifying your business: <ol> <li>Identify ways you can de-risk aspects of your existing business.</li> <li>Are your diversification opportunities on-farm or off-farm?</li> <li>What skill or knowledge do you or your family have that could be utilised in another area?</li> <li>Do you have the expertise needed to run a new element of your business? If not, where could you find support?</li> <li>What are your long-term goals? Do you have a succession plan or exit strategy? </li> <li>Engage with your Regional Business Partner Network as they can facilitate access to advice, people, funding and resources.</li> </ol> Sustainability involves understanding the purpose and values of your business and ensuring that you have a plan that promotes its success in both the short and long term. It incorporates business, environmental, and financial sustainability. If you want to know more about sustainability and ensure that your rural business has the best chance at success in the long term, get in touch with the expert rural team at ASB <a href="/content/asb/people/en/people/find-a-business-rural-expert.html">here</a>.