Sri Lanka and ESG: A Case Study

Sri Lanka is currently in an economic collapse and humanitarian crisis. It has been just over a year since the federal government adopted organic farming policies in line with global environmental, social and governance (ESG) trends.

This summer, President Gotabaya Rajapaksa announced he would resign after thousands of citizens stormed his palace. Rajapaksa was transferred to an undisclosed location, resulting in a “peaceful transition” confirmed by his Mahinda Yapa Abeywardena, Speaker of Parliament. Political turmoil led to the inauguration of the new president, Ranil Wickremesinghe, who had been prime minister for six times.

Despite new governments, the Southeast Asian nation struggles to stop an economic crisis and political turmoil. sharply increased the economy fell into recessionThe rupee has lost 73% of its value against the US dollar.

The country’s current financial crisis, the worst since it declared independence from Britain in 1948, ran wild in early 2021 when the Rajapaksa government announced a review of its agricultural practices.

Introduction and results of greening

Colombo has imposed a nationwide ban on the use and importation of synthetic fertilizers and pesticides on major export crops such as coconut, rice, rubber and tea. The government has also ordered her two million farmers in the country to practice organic farming.

“This is how I will make my country rich again by 2025,” Rajapaksa declared at the World Economic Forum before the coronavirus pandemic.

sri lanka presidential palace
Protesters wait to enter the office of Sri Lankan Prime Minister Ranil Wickremesinghe, in Colombo, Sri Lanka, July 13, 2022. ( Dinuka Liyanawatte/Reuters)

The government’s order also garnered jubilant responses from environmentalists around the world, including Indian author and environmental activist Bandana Shiva.

“For our health and the health of the planet, let’s join hands with Sri Lanka taking steps towards a #PoisonFree #PoisonCartelFree world,” she posted. Tweet June 2021.

Wall Street too defended By November 2021, governments were beginning to shift their ESG focus.

“Sri Lanka will attract large-scale foreign direct investment if all are aligned and viewed through the exact same strategic lens to define how value is created, delivered and measured. Buwanesh Wijesuriya, Partner in Transaction Advisory Services at Ernst & Young, said:

By policy directive, Sri Lanka almost perfect score Because of its environmental impact, according to the London World Economics Study.

But just months after a decade-long initiative, authorities have responded to crop collapses, with food inflation at 100% today. November 2021, Rajapaksa Partially lifted We have given permission to the private sector to import chemical fertilizers so that food production is not undermined. The President also direct compensation 1.1 million farmers and an additional $149 million in price subsidies.

The government argued that the policy adjustments did not mean the country was reversing its organic farming efforts. There are, but ‘Look, organic doesn’t work’ isn’t one of them.”

Sri Lanka’s agricultural sector has remained self-sustaining and self-sufficient despite years of very deteriorating economic conditions. Before the restrictions came into force, more than 90% of his farmers in the country used chemical fertilizers. After the ban, 85% of these same farmers suffered huge crop losses due to reduced fertilizer application.

In 2022, the country will be forced to import about $450 million worth of rice as domestic production fell by 20% in the first half. In the first six months of 2022, grain imports have increased by more than 42%. According to the United States Department of Agriculture (USDA), the domestic tea industry was hit hard, with economic losses totaling $425 million (pdf).

A year later, inflationary pressures have not improved and retail prices of kitchen essentials have skyrocketed. has risen by 30%.

Human damage caused by organic farming

According to Chris Rawley, CEO of Harvest Returns, a platform for investing in sustainable agriculture, increasing food production to accommodate a growing world population has negative impacts on soil quality and biodiversity. It is important to find a balance between minimizing

“As we have seen in Sri Lanka, populations in developing countries are disproportionately harmed by food insecurity caused by well-meaning Service-to-Others who fail to consider the economic and practical consequences of their obligations,” Lowry said. “Regulations requiring measurement of carbon emissions in agriculture place an undue burden and cost on small family farms. Environmental factors must take precedence.”

In fact, the situation may not improve for 2023. The United Nations Food and Agriculture Organization (FAO) warned (pdf) Sri Lanka was living in poverty after two consecutive seasons of poor cattle feed, fruit, grain and vegetables.

“If a country is unable to import sufficient quantities of rice and other foodstuffs to cover existing food shortages, and humanitarian assistance is inadequate, the food security situation will change from October to February 2023 to It can get worse during the harvest season,” the report said. said.

All in all, this was a currency crisis that left more than 6 million people with severe food insecurity. limited financial resourcesand the collapse of the economy has forced most families to cope with less. It said it was adopting an “emergency livelihood strategy” such as reducing income and selling productive assets.

“More than 60% of families are eating less and eating cheaper, less nutritious foods. It happens when we are forced to scale back nutrition programs such as,” said Abdul Rahim Siddiqui, head of the United Nations World Food Program (WFP) and country. Director of Sri Lanka, report.

world bank anticipate Poverty in Sri Lanka will soar unless the international community, including China, India and Japan, provides billions of dollars in aid.

Will other countries learn from Sri Lanka’s mistakes?

Indian Prime Minister Narendra Modi spoke at an event in July, arguing the benefits of natural farming that could eventually serve as a model for the rest of the country.

“This mass movement on natural farming will be widely successful in the years to come. . Said audience.

Andrew Moran


Andrew Moran has been writing about business, economics and finance for over a decade. He is the author of “The War on Cash”.