Yara and sustainability

Economic indicator points 2012

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

2012 2011
Direct economic value NOK millions NOK millions
Revenues 85,899 82,141
Economic value distributed
Operating costs 64,868 59,737
Employee wages and benefits 5,052 4,698
Payments to providers of capital 4,019 3,029
Payments to government 2,702 1,827
Community investments 12 14
Total 76,653 69,305
Economic value retained 9,246 12,836

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.

The European Emission Trading Scheme (EU ETS) enters phase III in 2013. While this will lead to added costs for the already energy-efficient fertilizer industry in Europe, the implementation of ETS III will have a neutral financial impact on Yara, considering its catalyst technologies for reducing GHG emissions.

Yara’s goal was to achieve a 45% reduction in its GHG emissions by 2013 from a 2004 baseline. The goal was overachieved, reaching a 54% reduction in 2012. 

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 and Climate change

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.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.

Throughout 2012 Yara had a Board position in the World Economic Forum (WEF) project New Vision for Agriculture. In 2010, 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 2012 the group had grown to 28 companies, and the initiative has catalyzed four major public-private partnerships, including country-level initiatives in Mexico, Vietnam, Indonesia, and India, as well as a regional partnership platform called Grow Africa which engages seven countries.

Yara was present at the COP18 negotiations, where Yara and its partners unveiled the Sahara Forest Project (SFP) pilot facility outside Doha, Qatar. This was the realization of a visionary idea of growing food in the desert, utilizing solar power and seawater.
 
The SFP, which is supported by Yara and its joint venture Qafco, opened its greenhouses for guests during the COP18 in Doha in December, offering vegetable snacks grown using solar power and salt water. The SFP is a pioneering environmental project with a unique approach to food security and climate change, using restorative practices to establish vegetation in desert areas.

Yara signed the cooperation agreement to build a pilot facility in February 2012, paving the way for construction and testing. The project aims to produce food, fresh water, clean energy and biomass using proven green technologies.

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

See Financial Report, page 106 (pdf)

EC4 – Significant financial assistance received from Government

The Norwegian government is the largest shareholder, with the 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 by reducing “Addition at cost” with NOK 12 million in 2012.

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. The suppliers are chosen according to quality, cost, lead-time and compliance requirements.

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 with regards to locally recruited senior management is generally decided locally. We give preference to qualified internal candidates whose competencies 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 23 million in 2012.

More significant, however, is Yara's business approach of delivering its agronomic knowledge to farmers. Yara’s mission is to deliver increased yield and value to its owners, customers, farmers and society at large.

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, and the Southern Agricultural Growth Corridor of Tanzania (SAGCOT), founded by the Tanzanian Government, Yara and other partners in 2010.

In 2012 attention to agriculture and food security remained high on the global agenda, with increased attention to productivity, closely connected to climate change. Yara has taken active part in the global policy process, arguing the case of improved agricultural productivity as a way to increase food security and at the same time reduce global warming.

Prices for major commodities in 2012 declined slightly compared to 2011, when the FAO Price Index reached its highest level ever. However, in mid-2012 cereal prices peaked at levels above 2011. Extreme weather threatens harvests, challenging agricultural productivity gains and adding uncertainty connected to price volatility.

In its ‘Food Price Watch’ of November 2012 the World Bank warned against a ‘new norm’ of high and volatile prices that seemed to be consolidating. In their ‘Agricultural Outlook 2012–2021’, the OECD and FAO anticipate commodity prices remaining on a high plateau the next decade, which would encourage farm acreage expansions and productivity investments. Yara shares the concern over price volatility since it tends to cause market ruptures, and Yara encourages investing in productivity.

Agricultural productivity has become the main route to meet food demands and reach food security. Yara has for several years championed improving productivity as essential to achieving food security and green growth. Also, losses along the food value chain have to be minimized. Despite the economic slowdown, the Economist Intelligence Unit in its 2012 report on ‘Agriculture in high-growth markets’ identified emerging markets, and the BRICs (Brazil, Russia, India and China) in particular, together with the most advanced developing economies, as being at the forefront of  ‘a new agricultural area, in which boosting yields and reducing harvest losses will be essential to feeding the world’s growing populations’.

Access to affordable financing for farmers is a key to improved agricultural productivity. Yara has consistently supported the call for increased agricultural investments. In 2012 the Mexican presidency of the G20 invited the private sector to contribute recommendations on improving agricultural growth, and Yara’s CEO participated in the B20 Task Force on Food Security. Key policy recommendations included an increase in investments to improve productivity, to ensure sustainability through effective resource management, including improving water use efficiency, and to apply climate smart agriculture.

In line with the B20 recommendations, the FAO in its ‘The State of Food and Agriculture 2012’ called for more and better investments in agriculture, including through agricultural value chains, as one of the most effective ways to reduce hunger and poverty while safeguarding the environment. 

Public-private partnerships and value chain collaboration have increasingly become avenues to obtain investments to improve productivity. Yara has been a pioneer in developing the concept of agricultural PPPs and food value chains.

More information:

Yara's Africa Engagement

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 providing its products, solutions, knowledge and technology to promote farming efficiency and profitability.

This approach is described in Yara’s Financial Report (pdf) as well as Impact Review (pdf).

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 sustainable value to the agricultural sector can be found here: 

Sustainable agriculture

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:

African engagement

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