Mosaic’s Mixed Messages around Climate Change

Mosaic – a leading producer of crop nutrients – plays an integral role in feeding growing populations with innovative fertilizers that increase crop yields. The company also manages to maintain an intense focus on sustainability: it was heralded as a leader, for example, for reducing carbon emissions and mitigating the business risks of climate change (1). Despite its many recognitions, however, the truth may lie in the fine print. When the Carbon Disclosure Project inquired whether Mosaic would support an international agreement on climate change that would limit global temperature rise to under 2ᵒC (i.e. the Paris Agreement), the company responded that it held “no opinion” (2). This ambiguity stands in stark contrast to the sustainability-centric image Mosaic strives towards. Mosaic’s complicated relationship with climate change – a web of positive and negative consequences – makes taking a hard stance quite difficult. While Mosaic takes action toward reducing its carbon footprint, the company is not entirely aligned with evolving regulation.

Mosaic and Climate Change: It’s Complicated

Climate change imposes a myriad of impacts on Mosaic. Mosaic states that it takes a “balanced approach to crop nutrition, [which] can be considered a strategy to mitigate the adverse effects…caused by climate change” (2). While climate change increases volatility, it also increases the reliance on the Mosaic’s fertilizers in environments as crop growth proves increasingly difficult. In general, however, Mosaic states that environmental effects of climate change are likely adverse for the company, but are largely unknown and immeasurable, making it difficult to plan for.

There is more clarity around the impact of regulation. Mosaic emits greenhouse gases primarily through the production of potash and ammonia, the mining of phosphate rock and the transportation of materials and products (3). This requires operational infrastructure to be constructed around regulatory compliance. Evolving regulation – including the Paris Agreement  – has costly implications by restricting or changing operating activities, reducing efficiency or limiting output, requiring capital investment, increasing energy, raw material and transportation costs or limiting their availability (3). Current operations already necessitate that Mosaic enlist biologists, hydrologists and other specialists, in conjunction with as many as 12 regulatory agencies, to identify areas of environmental sensitivity that should be protected, and to develop comprehensive reclamation plans for every mined land permit (4). Additionally, Mosaic faces increased competition if producers in other geographies – particularly those in China, India, Former Soviet Union countries or Morocco – operate under less stringent regulation (3). Needless to say, evolving regulation threatens an already capital intensive and costly business.

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Despite reasons to resist regulation in support of climate change reduction, Mosaic views sustainability as a central corporate tenet through four strategies.

• Operational initiatives. Mosaic implements many initiatives to reduce its carbon footprint, many of which are executed at the plant level. Companywide priorities center around reducing energy use by recycling water; generating low-carbon, low-cost energy; using waste heat as power instead of diesel fuel through cogenerated energy; and lowering emissions with natural gas-powered trucks.
• Product innovation. Mosaic commits significant resources to product innovation. Its MicroEssentials product, for example, enables farmers to reduce emissions and capture higher yields. In addition, Mosaic established a research center to develop fertilizer formulations to improve nutrient use efficiency (2).
• Labor incentives. Mosaic financially incentivizes its management team based on sustainability initiative implementation. The company also fosters a culture around sustainability through internal strategies such as competitions between facilities based on energy usage (2).
• Funding climate change research. Mosaic funds multiple external research organizations specific to the fertilizer industry and supports their positions on climate change (2).

Additional Measures to Consider

As an adaptive measure in response to pending regulatory changes, Mosaic should consider infrastructural changes to enable the company to operate under a wider range of requirements. In turn, the company can attempt to quantify the costs of these changes and request a subsidy from regulatory authorities. Mosaic should also consider the eventual exit from markets on track to be heavily impacted by climate change and extreme climate volatility. Lastly, it can consider receiving credits for carbon-emitting operations in exchange for the reduction achieved through innovation, to which Mosaic already commits considerably resources.

Mosaic faces tension between honoring sustainability and the implications of climate change regulation. For a high profile company with emission-intensive operations and a larger mission (to feed the world), sustainability is at the forefront for investors and regulators. The issue is less clear, however, for companies that have a more inconspicuous carbon footprint: how do we manage the trade-off between social responsibility and the need to achieve returns and profitability? Mosaic’s conundrum emerges with a multitude of companies, and undoubtedly serves as a major obstruction toward effective solutions to climate change.

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Sources

1. Mosaic Company, “Who We Are,” http://www.mosaicco.com/Who_We_Are/OurStory_SustainableFertilizerUse.htm, accessed November 2016.
2. Carbon Disclosure Project, “Climate Change 2015 Information Request: The Mosaic Company,” http://investors.mosaicco.com/Cache/1500083250.PDF?Y=&O=PDF&D=&fid=1500083250&T=&iid=4097833, accessed November 2016.
3. Mosaic Company, “2015 Form 10-K,” http://investors.mosaicco.com/Cache/33026263.pdf?IID=4097833&FID=33026263&O=3&OSID=9, accessed November 2016.
4. Mosaic Company, “2015 Sustainability Report,” http://www.mosaicco.com/2015sustainabilityreport/company/, accessed November 2016.