Warning over ‘green’ contracts that risk future farm income

Farmers are being urged to think twice before signing a new generation of supply contracts designed to help food and drink companies meet their emissions targets, amid concerns they could be giving away valuable environmental rights.

Industry bodies say sustainability and Scope 3 emissions clauses are increasingly appearing in contracts for malting barley, dairy and potatoes as supply chains seek to reduce the carbon footprint of their products.

See also: Red Tractor axes plans for Greener Farms Commitment

However, Scottish Land & Estates (SLE) has warned that some agreements could leave farmers tied into long-term commitments, potentially restricting access to future environmental markets and schemes.

The concerns relate to UK-wide contracts that require farmers and landowners to undertake actions such as soil testing, reducing fertiliser use, introducing cover crops or making other management changes intended to lower emissions associated with food production.

While the carbon accumulation itself remains with the farmer, the resulting emissions reductions can be used by processors and maltsters to improve their own Scope 3 reporting.

Commitments

SLE said draft agreements it has reviewed could lock growers into five-year commitments, while limiting their ability to participate in other carbon, biodiversity or natural capital opportunities.

“There’s a real risk that farmers are signing these agreements because they want a market for their crop, without fully appreciating the wider commitments they are taking on,” said Eleanor Kay, SLE senior policy adviser.

The organisation is particularly concerned about a lack of clarity around future obligations, the absence of dispute resolution procedures, and questions over what happens if environmental measures affect crop performance.

For example, under the terms of one contract, if reduced fertiliser use leads to grain failing to meet malting specification, the grower would have to sell into a lower-value feed market with no guarantee of compensation.

Further concerns were raised about the wording of draft agreements that appear to preclude farmers from seeking external advice on their content.

Commercial decisions

Jeremy Moody, secretary and adviser to the Central Association of Agricultural Valuers (CAAV), said farmers must look at environmental agreements as commercial decisions, warning some “green” deals could transfer significant value away from the farmgate. 

“Does an agreement create value, transfer value or destroy value?” he asked.

“Farmers need to understand that before they sign.”

He added that many natural capital markets are still evolving and suggested some contract writers may themselves be grappling with the complexities involved.

“Not all know what they’re drafting for,” he said.

SLE is now working with other organisations, including the CAAV, on an open letter calling for greater transparency and stronger safeguards for farmers entering carbon and natural capital agreements.

The group is also urging governments across the UK to move beyond voluntary best-practice guidance and introduce legal protections to ensure farmers are not left carrying disproportionate risks.