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Lufa Farms: Where ESG factors are at the core of the business model

December 21, 2023

Lufa Farms is taking numerous measures to limit the environmental impact of the vegetables that come out of their greenhouses, whether it's recirculating water during cultivation, having a short distribution channel or using a fleet of electric trucks. But beyond these individual choices, sustainable practices are baked in to the Montreal-based company's very business model. 

As a growing number of companies are integrating environmental, social and governance (ESG) factors into their operations, Lufa Farms is ahead of the game. That's because these principles have always been the cornerstone of Lufa's urban agriculture model, even when Mohamed Hage co-founded the SMB over a decade ago. The inexperience of the young entrepreneurs behind Lufa allowed them, from the beginning, to do things differently.

"We'd never grown or sold tomatoes before, so we were able to start from square one. Since we didn't know how things worked, we could imagine a completely different model, a completely new way of doing things." 

– Mohamed Hage, CEO and co-founder, Lufa Farms


The startup's mission: building a more sustainable food system by feeding cities with what they grow. In other words, bringing people closer to where their food comes from. In 2011, Lufa Farms built the world's first commercial rooftop hydroponic greenhouse in Montreal's Ahuntsic-Cartierville borough. Since then, they've found success, and now operate 3 more technologically advanced greenhouses, as well as an indoor farm. 

A company's environmental, social and governance (ESG) factors are used to assess best practices for sustainable development. These are non-financial factors that are increasingly influencing stakeholders, including investors, financial institutions and consumers.

30,000 Lufavores and counting

Through the urban food ecosystem they've created, Lufa delivers about 30,000 food baskets every week. Far from sitting on that success, the team is always looking to reduce its environmental footprint. "Plastic packing is still a major challenge," Hage explains. 

But the SMB's scope allows them to invest in innovation, just like they did by developing their own environmentally-friendly ice packs. "Without the volume we're seeing today, we wouldn't have been able to invest in a project like this to make our baskets more sustainable," says Hage.  

Beyond environmental considerations, Lufa Farms is committed to giving back to the community. That's why they created a direct donation program to deliver fresh food baskets to nearly 1,000 people every week. "What makes us proud is that contributions are traceable and go 100% to people who need them, with no management fees," adds Hage.

Take the time to do things right

Today, Lufa Farms estimates it serves approximately 2% of households in Montreal. However, Hage and his team are always looking to raise the bar higher. "Imagine if we could feed 10% of the population. Imagine the impact! That's our goal." 

But to get there, there's no compromise on the fundamental principles that guide the company's founders. For example, products should be pesticide-free and cut or prepared the same day as delivery, when possible. "It'll take a few decades to get there," says Hage, "but that's the advantage of being a multigenerational company."

Pop-up question  

If you could go back and start again, what would you do differently?

"I would aim higher from the start. I think we'd build a larger greenhouse and start developing more infrastructure from the outset. If we'd thought 'big' then, we wouldn't have had to keep expanding bit by bit."

– Mohamed Hage, CEO and co-founder, Lufa Farms

Desjardins Advice

Integrating ESG factors into your business practices: Where should you start?

Incorporating ESG factors can affect both small and very large companies. "Although many businesses want to incorporate ESG criteria into their practices, most don't know where to start," says Nancy Goudreau, Manager, Sustainable Financing at Desjardins. 

Managers sometimes feel that this means taking on a costly, complex, never-ending venture. "Do you already monitor workplace health and safety indicators? That's ESG. Do you have an advisory committee, a backup plan or a procurement policy? They're ESG, too!" Goudreau explains. "When you integrate ESG factors into your business model, into what's strategic and relevant for you, it doesn't slow you down, it helps you pick up the pace." 

Desjardins's sustainable finance teams are well-positioned to offer support that takes each business's unique reality into account. "Resources abound," Goudreau says, "but sometimes it takes help to find the appropriate programs, partners and solutions." 

ESG: Profitability guaranteed?   

With the right partners on their side, Quebec SMBs can begin a realistic shift to incorporate ESG factors into their practices. The good news is that, in the long run, these factors are creating value for businesses. A recent study from McKinsey1 shows that financially successful companies that incorporate ESG priorities in their growth strategies outperform the competition. "These companies are twice as likely to have revenue growth of more than 10%, which is significant," says Goudreau.

1 McKinsey & Company, The triple play: Growth, profit, and sustainability. August 9, 2023.