Christopher Bonasia
The Advocate
Small, incorporated farms will feel the impacts that “trickle down” from climate reporting requirements for larger corporations, and a new guide says farmers should start preparing themselves now.
The guide, published by the Canadian Climate Law Initiative (CCLI), is directed toward the growing number of incorporated farms that share the fiscal obligations imposed on larger corporations. They carry these obligations “regardless of personal opinions on climate change,” and directors that fail to do so “may be exposing themselves to personal liability,” the guide warns.
New requirements are already being imposed on larger and publicly-traded agri-food businesses, oil and gas companies, and banks — all entities that Margot Hurlbert, a University of Regina professor and author of the guide, noted are “closely tied to the agriculture ecosystem in Canada,” and through which smaller farm corporations will experience trickle-down effects of reporting requirements.
And even though those larger corporations are likely “governed by more sophisticated boards of directors, the duties with respect to climate also apply to smaller farms and agri-food corporations,” Hurlbert said.
The guide focuses on incorporated farming business. It is a corporate structure that is becoming increasingly common for farms in Canada. Farms may choose to incorporate for a number of reasons, including for access to benefits, like liability protection, access to lower tax rates and opportunities to split incomes or pay out dividends to family members.
More farms in Quebec are incorporated
Most Canadian farms are still sole proprietorships. But of the 189,874 farms Statistics Canada reported operating in 2021, 47,824 — or about 25 per cent — were either family or non-family corporations, up from 13 per cent in 2001. The percentage is even higher in Quebec, where 37 per cent of farms operated as corporations in 2021.
Farms that incorporate become subject to the same legislation regulating other corporate businesses, and so are required to establish a board of officers and directors. People who act in those roles are legally obligated to exercise care and due diligence for overseeing the farm’s operations and ensuring its long-term viability and can be held accountable by shareholders if they don’t.
An officer or director of a small farm corporation is, therefore, responsible for staying informed about, and planning responses to, threats to the business. In a time of rising global temperatures, such threats include both physical impacts from changing weather patterns and from legal and policy changes that will affect farm management.
These changes are happening now. Farmers are likely already aware of new regulations or polices linked to climate change that have either been implemented or are on the regulatory horizon for producers, like taxation on fossil-fuel use and targets for reducing emissions. Changes in institutions that farmers rely on — for insurance or mortgages — or to international trade regulations may also be forthcoming and could disrupt how businesses operate.
Farmers will also need to adapt to new technologies as the rest of the economy electrifies and transitions to low- and zero-emissions energy sources.
In other cases, a farm corporation might find itself in hot water if it doesn’t respond to new policy requirements properly. The guide, therefore, recommends that farm corporations stay aware of carbon-offset schemes and the potential legal risks of over-relying on them to reach decarbonization goals. Furthermore, directors of agricultural operations should be careful about making claims of farm sustainability to avoid potential accusations of greenwashing.
Hurlbert added that the guide’s information is also important for sole-proprietorship farms, who will face many of the same risks even when not shouldering the governance accountability of a corporation.