All building material, wood or metal, should be 6" above the grade. A few solutions would be to install a PT "skirt board" around the perimeter (a 2X10 or 12). This would allow you to cut the siding up (above grade) about 6-8" and install a horizontal trim (J channel or rat guard) and this new 2X would be your new fastening point for the siding & trim as well as a closure between the building & the ground.
Another solution would be to do the same thing at the bottom, but cut the siding up at the next wall girt and using a different accent color to replace the lower damaged piececreating a "wainscott" look and dressing things up a little. This also makes for easy future repairs at this area that is veunerable to damage.