Commentator(s): Aled Patchett, Managing Director, Head of Consumer and Retail for Lloyds Banking Group
What is your vision for the role financial institutions can play in promoting sustainability within UK agriculture, particularly for the food and drink manufacturing sector?
Lloyds Banking Group is the leading financier of agriculture, representing almost a third of all lending to the sector in 2023. We also work end-to-end across the entire supply chain, which gives us unique insight into the challenges facing farmers, retailers and manufacturers, as well as those of the primary producer.
We are passionate about working with individuals and organisations that are innovating for sustainable change – from environmentally friendly food production, through to sustainable packaging solutions and vertical farming.
Through our work with Soil Association Exchange, we now have the largest, most comprehensive dataset on farm environmental performance ever carried out in the UK, spanning more than 238,000 hectares. We’ve published a report with the findings, setting out what farmers are doing in this arena and the actions they are undertaking and why.
For the supply chain, it’s now about how we use that data to work with retailers and manufacturers to have commonality. This is about creating a consistent framework to which all supply chain actors, farmers, and retailers can align to as being best practice, while fairly sharing risk and reward. For example, creating a framework from which we can build a consumer index into the sustainability of food and beverages.
Private and public funding sources must be available to support the success of this. Therefore, we are committed to supporting both our clients’ and industry-wide sustainability goals through multiple approaches. Practically, we offer tailored finance options like the Clean Growth Financing Initiative (CGFI), providing discounted lending for sustainability projects. CGFI supports a diverse range of investments for farmers and businesses across the supply chain—from renewable energy infrastructure and sustainable production methods to low-carbon machinery and efficient waste and water management systems—helping clients implement their sustainability strategies.
At the broader level, we convene industry, government, and NGOs to address critical sustainability challenges together. Following this landmark report, we’re calling for policies that support the sector’s transition, including standardising environmental impact measurement, establishing a decarbonisation strategy for agriculture, and improving access to green finance. These actions are central to building a resilient, sustainable food system that benefits the entire supply chain.
Lloyds Banking Group’s partnership with Soil Association Exchange is groundbreaking for retailers, food and drink manufactures and famers. How does this initiative benefit manufacturers in securing sustainable and resilient supply chains?
Ultimately, our supply chains are under increasing pressure to produce products that have a reduced impact on the planet.
Through the use of a common methodology, the data shared via these reports provides a model for measuring, reporting and reducing this impact, which is scalable across farm types, and therefore across commodities value chains.
If we can measure impact reduction, we can share this valuable information within supply chains and consumers, so they can make informed decisions about the sustainability of the products they are purchasing and how they can support the transition.
With 685 farms assessed, what insights from the environmental baseline study can food and drink manufacturers take to ensure they are working with farms that are deeply committed to long-term sustainability?
Once producers have the environmental performance data, a lack of financial reward is one of the most significant barriers to taking action.
This is where food and drink manufacturers, together with private businesses play a key role alongside Government.
We must work together on solutions; it is a shared problem and so the solution should share the risk and reward of any change. While new methods of production must be profitable for farmers in the long run, farmers should not carry all the risk of lower yields whilst transitioning to more sustainable farming practices, which are for the benefit of all actors in the supply chain including the end consumer.
We have seen a number of successful linear or siloed supply chain solutions with an individual business having its own scheme or solution and methodology. However, by bringing together businesses we can align investment, resource and expertise across the supply chain to develop a common methodology.
That’s why, to encourage uptake of sustainable action and support farmers through the transition, particularly for those who are likely to be most significantly affected, we are piloting a new cross-supply chain model that rewards producers for practice change and helps to address current farm income gaps.
The pilot will provide funding through a coalition of private sources, working in partnership with Soil Association Exchange and Finance Earth to create a framework to monitor and verify progress as farmers transition to more sustainable practices. The aim is to showcase emission reductions within supply chains and to identify environmental co-benefits of the changes.
We believe this can offer a basis for wider change and would encourage businesses in the supply chain to engage with us on this to investigate future collaboration opportunities.
How do you envision this funding model impacting the cost, quality, and sustainability of agricultural products for food manufacturers?
The baseline assessment and pilot funding model offers us the chance to promote food and drink beyond cost and calorie index metrics. We have an opportunity to provide consumers with wider sustainability credentials of their produce.
Alongside this, we still need to drive awareness around the broader benefits of sustainable food. We recognise that this is no simple ask, it will take a wholesale cultural mindset shift, but the pilot is a step in the right direction.
As we look towards the future, what are the biggest challenges you foresee in making sustainable farming practices the norm, and how can the food and drink manufacturing industry contribute to overcoming those hurdles?
Unlocking data throughout the supply chain and raising consumer awareness are both key.
At the moment, retailers tend to focus sourcing decisions based on price and quality. Transitioning to a decision matrix that captures and assigns tangible value to the use of sustainable farming methods and approaches that to reduce carbon footprints and enhance biodiversity will be fundamental to embedding such changes. It will be a circular economy decision, rather than just a price-based decision.
From a consumer perspective, we start with the discussion on what a sustainable product actually delivers for them. It’s not just about cost, but also about responsible water use and quality, pesticide use, impact on soil health, packaging, and truly understanding where that product has come from.
