INTERVIEW: Russia's Phosagro fertiliser producer goes green

INTERVIEW: Russia's Phosagro fertiliser producer goes green
Russia's leading phosphate-based fertilizer producer Phosagro has adopted the new green standards that have come into effect to improve both food security and its margins
By Ben Aris in Berlin January 30, 2020

Leading Russian fertiliser company PhosAgro was in Berlin in the middle of January to attend the Green Week and promote its ecologically friendly fertilisers as Russian corporates increasingly embrace the need to build sustainable businesses.

“Green Week is a unique opportunity for Russian managers to show off what they have achieved in promoting food security and tackling the new challenges,” Sergey Pronin, the deputy CEO of PhosAgro, told bne IntelliNews in an exclusive interview.

PhosAgro is one of the biggest fertiliser producers in the world, mining phosphate on the Kola Peninsula, north of the Arctic Circle, that is then processed into a variety of phosphate-based crop nutrient products that can dramatically improve crop yields, and exports its production to 102 countries all over the world.

Pronin says PhosAgro is proud of its phosphate ore deposits, which are unique in terms of their purity, and unlike many of their competitors contain no trace elements such as heavy metals that are injurious to health.

“Russia makes a significant contribution to food security, the agricultural sector of our country has shown impressive growth over the past few years and we see a significant potential for its further development,” says Pronin.

Green issues have come to the fore recently thanks to the campaigning of activists and the EU’s adoption of a circular economy package in 2019 that included measures to impose limits on cadmium, a harmful heavy metal, in phosphate-based fertilisers.

Companies such as PhosAgro welcome the cap on cadmium levels in fertilisers and seek to develop sustainable businesses, as not only is it a responsible way to work, but it is also good for business.

Last year PhosAgro produced about 9.5mn tonnes of fertilisers, and was one of the largest exporters in the world. About a third of its production goes to the domestic market in Russia, which has grown by over 35% in the last five years, says Pronin. The issue of food security has always been important to the Russian consumer, who values “natural” foods highly. This love of the natural is born out of the fact that almost all Russians have a dacha where they typically grow their own fruit and vegetables; it is a social cliché that this home-grown produce is always “better” than what you can buy in the shop.

However, even though PhosAgro sells a naturally occurring fertiliser, the produce grown using it does not qualify as “bio” in Europe.

“To be honest, there is no universal standard of what is a bio product,” says Pronin. “In Europe it is supposed to be a product that is grown with no chemicals involved at all. In Russia agricultural products grown with phosphate-based fertilisers that qualify for Russia’s green standard also qualify as green.”

Still, irrespective of the bio classification, there is a general increase in concern about the quality and safety of food products in different regions of the world and Pronin claims that PhosAgro fertilisers meet the “most stringent requirements for growing organic agricultural products, and we are ready to share experience, knowledge, work to strengthen trade relations and the search for joint solutions to the key challenges facing humanity,” he says.

To this end PhosAgro has developed a Green brand of Russian fertilisers, which it launched at the Berlin convention.

“Our phosphate-based fertilisers are made from unique raw materials - apatite-nepheline concentrate from the Kola Peninsula. According to its environmental characteristics, it is superior in its purity to two thirds of the world reserves of phosphate raw materials,” says Pronin.

Besides, the leaders in the mineral fertilisers, agribusiness and retail industries in Russia are creating an independent association, the Green Club, of manufacturers and suppliers of products with improved environmental performance. These products will be sold under the national brand “Green Standard” in Russia, according to regulations that are currently being considered by the Duma and should be implemented by January 1, 2021.

Thanks to the state programme for the development of agriculture and tit-for-tat sanctions that the Kremlin imposed on EU agro-imports in 2015, the Russian agricultural sector has been through a small revolution in the last five years as it attempts to become self-sufficient in many products, and the state has poured money into agro-infrastructure.

“The practical goal of the Green Standard project is to provide the population of Russia with high-quality agricultural and food products, to strengthen the competitive position of Russian producers of mineral fertilisers and agricultural products in the export market. The philosophy (mission) of the project is to update the image of Russia in the international arena as the only country capable of providing partner countries with high-quality mass-produced agricultural products,” says Pronin.

Last year, Russia ratified the Paris Accords and is now rolling out the legislative basis to regulate emissions and at the same time cut emissions of greenhouse gases (GHGs). Russia plans to launch a Green Certificate trading system to regulate carbon emissions and the food industry is setting up parallel initiatives. Indeed, in general the leading corporates are moving faster and further than the government, as several blue chips have already been punished by equity investors for their poor environmental, social and governance (ESG) scores.

The introduction of green labelling for food products in Russia will give domestic producers the opportunity to introduce a new brand of agricultural products to the European market, says Pronin.

“Large European food chains are expected to track what fertilisers and agricultural products were used in the production of food products they purchased; it may encourage farmers to use clean fertilisers, which will undoubtedly provide further opportunities for expanding sales markets for environmentally friendly products,” Pronin told bne IntelliNews.

As part of this drive, PhosAgro intends to invest some $3bn over the next five years in increasing production and improving its green credentials by adopting state-of-the-art technologies.

“This will allow PhosAgro to remain one of the most effective producers of mineral fertilisers on a global scale,” says Pronin. “For 2020, the company's investment is planned in the region of $500mn.” Part of the investment is so PhosAgro can make a contribution to achieving 10 of the UN’s 17 Sustainable Development Goals.

Although the sanctions imposed on Russia and counter-sanctions imposed by the Kremlin don't apply to fertilisers, European farmers still bear the financial burden of the EU common customs tariff for fertilisers, which amounts to 6.5% and applies to fertilisers that meet Russia’s new Green Standard.

“Today we see a paradox, where the regulator forces farmers to overpay for ‘green’ fertilisers. Removing artificial tariffs and duties will make fertilisers more affordable and fair for agricultural producers in the EU,” says Pronin.

According to the PhosAgro deputy CEO, the situation with European duties against environmentally friendly fertilisers resembles Ukraine’s ban on the import of fertilisers from Russia.

“Unfortunately, we have lost the Ukrainian market and it [has] forced us to find new customers,” says Pronin. “But the real losers are the Ukrainian farmers, as they have been forced to buy fertilisers with a lower quality.”