Yara and sustainability

Economic indicator points 2011

EC1 – Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings and payments to capital providers and governments

2011 2010
Direct economic value NOK millions NOK millions
Revenues 82,141 70,023
Economic value distributed
Operating costs 59,737 50,889
Employee wages and benefits 4,698 4,579
Payments to providers of capital 3,029 2,011
Payments to government 1,827 727
Community investments 14 15
Total 69,305 58,221
Economic value retained 12,836 11,802

EC2 – Financial implications and other risks and opportunities for the organization’s activities due to climate change

Yara has considered climate change and the risks and opportunities it presents to the company. However, Yara has not yet quantitatively estimated the financial implications of climate change, but acknowledges that it is expected to have a profound effect on world agriculture and consequently on the activities of Yara as well as Yara’s customers. Climate change also offers significant business opportunities, particularly in the field of improving the efficiency of farming while reducing emissions. At the same time, the European Emission Trading Scheme (EU ETS) coming into force from 2013 will lead to added costs for the already energy-efficient fertilizer industry in Europe.

In 2011, Yara continued its improvement, further reducing greenhouse gas (GHG) emissions from its plants. Its global engagement also includes catalyzing action and developing and offering knowledge-based solutions.

Major issues

The intertwined issues of food security and climate change are particularly relevant to Yara's business strategy, market position and societal role. Also, the complex issue of resource scarcity, particularly with regards to the availability of land and water, is of vital importance to Yara - and to society.
 
Food security

Yara's business is directly related to food production. With its agronomic solutions, Yara contributes to improving food security mainly by enhancing cropland productivity - increasing yields. By increasing farm output, Yara also contributes to improve the profitability of farming, which is a prerequisite for sustainable agricultural development.
 
Climate change

Yara's operations depend heavily on the use of fossil energy, causing emission of GHGs. But with its technology solutions, Yara has reduced its emissions and improved its energy efficiency. Also, by improving agricultural productivity, Yara helps to stall land use change for agriculture, a main driver of climate change.

Through 2011, Yara had a Board position in the World Economic Forum (WEF) project New Vision for Agriculture. A group of 17 global companies launched a road map with ambitious goals: To increase agricultural productivity, decrease GHG emissions and reduce rural poverty – by 20% every decade.

In 2011, the issue of climate change connected to farming highlighted the need to develop climate-smart agriculture, particularly in Africa. This was a key issue at the COP17. In a policy brief, the World Bank (WB) noted that ensuring food security under a changing climate is one of the major challenges facing Africa. Yara was the private sector’s onstage representative at the WB venue, addressing the need to step up efforts to make agriculture the engine for green growth.

Yara has entered into a collaborative project with Syngenta, the Norwegian University of Life Sciences and the Tanzanian University of Sokoine. The project, called Environmental- and Climate Compatible Agriculture (ECCAg), performs field trials in Tanzania to develop a science based framework for measuring how modern farming practices impact farming profits, the environment and  GHG emissions.

Preliminary results indicate that the yields and the  farmer’s profit can double without increasing emissions.

European Emissions Trading Scheme (EU ETS)

The fertilizer industry is energy-intensive and a considerable source of GHG emissions. However, there are significant differences in energy-efficiency and emissions levels between regions, with European producers representing the most efficient part of the industry. From 2013, all European ammonia and nitric acid plants will be regulated under the European Emission Trading Scheme. This will lead to added production costs for Yara and other European producers, especially in the ammonia sector.

The European industry is deeply concerned that this will lead to competitive distortion versus non-European producers, resulting in increased imports from less efficient producers outside the EU, with consequent carbon leakages and more global emission of GHGs. Yara expects to meet the new requirements for its nitric acid plants by having installed the company's N2O reduction technology and examines the possibility for further technical improvements in some of its ammonia plants.

EC3 – Coverage of the organization’s defined benefits plans obligations.

See Financial Report - Page 106-109, Note 22 (pdf) and Financial Report - page 78 (pdf)

 

EC4 – Significant financial assistance received from Government

The Norwegian government is the largest shareholder, with Ministry of Trade and Industry holding 36.21% of the shares. Government grants related to assets have been recognized as deduction to the carrying value of plant under construction by reducing “Addition at cost” with NOK 43 million in 2011.

EC6 – Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operations

Our geographic definition of local for this indicator is by country. Yara does not have a global policy on spending on locally-based suppliers. Some countries, e.g. Tanzania and Mexico spend 100% of the procurement budget on locally-based suppliers (excluding sourcing of raw materials, machinery and equipment). Factors that influence supplier selection would be e.g; compliance attendance, product quality and specification requirements, delivery performance, cost, social/environmental impact and ISO or other qualifications.

EC7 – Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation

Yara aims to recruit senior management that reflects its business needs, presence in local markets and composition of employees. The strategy in regard to locally recruited senior management is generally decided locally. We give preference to qualified internal candidates whose competences are on par with external levels, and who have the potential to grow.  This is also why we have a transparent internal job market where all positions are advertised, and a global recruitment process that deals effectively with internal applications, in a professional and fair manner.

EC8 – Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind or pro bono engagement.

Yara’s operations worldwide are engaged in and support a wide variety of community projects and local initiatives for the benefit of the public, adding up to total community investments of NOK 14 million in 2011. More significant, however, is Yara's business approach of delivering its agronomic knowledge to farmers.

Improving cropland productivity and increasing food production depends on the application of agronomic knowledge. Yara possesses extensive knowledge which is offered as part of its crop nutrition solutions. In addition, Yara contributes to knowledge development and dissemination through global initiatives and partnership projects such as the Ghana Grains Partnership, initiated by Yara in 2008.

Yara is a strong proponent of combining the closely interlinked issues of food and climate – calling for increased investments in agriculture in general, and in knowledge development and transfer in particular. These arguments were supported from several quarters also in 2011, including in the joint FAO / OECD report ‘Agricultural Outlook 2011–2020’. The report points at a slowdown in global agricultural production growth, and argues that “substantial further investments in productivity enhancement are needed to ensure the sector can meet the rising demands of the future”.

In 2011, the G20 group of countries pursued food security as a policy priority, stressing “the need to increase agricultural production and productivity on a sustainable basis”. Global business was involved in the process; Yara took part in the CEO Working Group, providing private-sector input to the overall G20 process. In the G20 Cannes summit declaration in October, member states committed to “sustainably increase agricultural production and productivity”.

Yara builds its crop knowledge in close collaboration with the market around the world. Cooperating with Yara, local growers, sales representatives and agronomists raise questions, address problems and promote ideas to growers worldwide. Backed by the industry's most complete range of plant nutrition products, Yara can give sound advice, aiming not only for optimal yields but also helping growers obtain the crop quality required by the market. Yara's Plantmaster series is a key element in this knowledge transfer, offering easy-to-use advice on plant growth and fertilizer application for most cash crops.

In 2011 the OECD presented a preliminary report on a green growth strategy for food and agriculture, stating that green growth is essential if the food and nutrition requirements of future generations are to be met. Green growth was identified as a priority by OECD agriculture ministers in 2010, pointing at the need for a strategy for increased resource use efficiency throughout the supply chain.

Yara has taken a role in promoting green growth solutions, such as resource efficiency with reduced carbon footprint. At the January 2012 World Economic Forum in Davos, Yara President and CEO Jørgen Ole Haslestad pointed to the need to integrate the food, climate, water and energy agendas – if green growth is to be achieved. Yara is engaged in the ‘New Vision for Agriculture’ initiative, aiming at reduced carbon footprint, improved agricultural productivity and reduced rural poverty. Yara is a catalyst for action in a pioneer project, the Southern Agricultural Growth Corridor in Tanzania (SAGCOT); also presented as a case study at the COP17 in Durban in December.

Yara together with its partners pursue infrastructure investments and agricultural development through the Agricultural Growth Corridors concept, an innovative approach to regional development in Africa.

More information:

The Ghana Grains Partnership

The Southern Agricultural Corridor

The Beira Agricultural Corridor

EC9 – Understanding and describing significant indirect economic impacts, including the extent of impacts

As the world's leading producer of mineral fertilizers, Yara is a key player in improving agricultural productivity and securing a profitable, viable business for farmers around the world. Therefore, Yara understands the indirect and direct economic impacts it can have by selling its products.

Elements of Yara’s approach is described at page 41 in the Financial report (link)

Yara offers a wide range of fertilizer products - and extensive agronomic knowledge that is shared with the farming community. The company has supported development programs worldwide and works closely with customers all over the world to help them best use Yara's plant nutrients to boost their yields.

More information on adding value to the agricultural sector can be found here:  

Profitable production

Yara's concept of Agricultural Growth Corridors is a prime example of how Yara utilizes its knowledge and engages with other stakeholders to create shared value:

Agricultural growth corridors and African partnerships

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