Fonterra hopes its new "carbon zero" milk, being marketed as a first for the Southern Hemisphere, will grow to capture 10 per cent of fresh white milk sales at Foodstuffs North Island chillers.
But while New Zealand's biggest company may get marks for initiative, its use of carbon emission "offsetting" to claim carbon zero certification for its new premium-priced Simply Milk brand has been greeted with scepticism given it is a major emitter of greenhouse gases.
The company's annual report last year showed it emits 1.7 million tonnes of carbon dioxide a year - mostly due to coal use at nine of its 29 national manufacturing sites.
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Fonterra also receives free carbon credits under the Emissions Trading Scheme, New Zealand's main tool for reducing greenhouse gas emissions.
But the company said these credits are not eligible for carbon neutral claims so all the credits procured for Simply Milk were over and above Fonterra's ETS obligation.
Carbon offsetting is a form of trade. When a company buys an offset it funds projects that reduce greenhouse gas emissions.
Publicity around the launch of the Simply Milk brand this week said it had been certified carbon zero through the purchase of carbon credits from Toitu Envirocare, a subsidiary of Crown research Institute Landcare. The carbon credits relate to a native forest regeneration project near Kaikoura and renewable energy projects in Fonterra overseas markets.
Watchdog Consumer said carbon offsetting is not a solution to climate change.
"You're paying someone else to remove an amount of carbon roughly equivalent to what you produce," said head of research Jessica Wilson.
Shoppers concerned about the environmental impacts of a product's manufacture could look more widely, she said.
"For consumers thinking about their own emissions and what they can do to reduce them, then look at what your produce in your personal lifestyle - that could be weighing up everything from how often you use a car to how frequently you use certain products."
Green Party co-leader James Shaw said it was encouraging to see Fonterra moving to reduce the impact of its product on the climate.
"Offsetting helps, by sequestering an amount of CO2 equivalent to the amount of pollution emitted into the atmosphere as a result of getting the product made and delivered to customers.
"However, offsetting should never be thought of as a substitute for reducing the amount of pollution that goes into the atmosphere in the first place."
The new carbon zero milk brand, being offered in New World, Pak'nSave and Four Square stores, is made at Fonterra's Takanini, Auckland and Palmerston North manufacturing sites, which are powered by gas and electricity.
Fonterra told the Herald it receives "some" free carbon credits covering "a few products such as ethanol, whey powder and lactose products" under the ETS.
The emissions associated with manufacturing these products accounted for under 5 per cent of Fonterra's annual emissions, a spokeswoman said.
Free carbon credits are available to companies particularly exposed to international competition. The reasoning is that the carbon price in New Zealand could disadvantage companies operating globally.
Critics of the free carbon credit allowance claim it a multi-billion dollar Government subsidy of polluting companies which contradicts New Zealand's zero carbon ambitions by 2050.
Toitu chief executive Becky Lloyd said the carbon emissions of making Simply Milk were evaluated "from the farm via store fridge to the customer's home".
"The footprint includes farming, production, distribution as well as eventual consumption and disposal," she said.
Fonterra's 2019 annual report said the company represents around 20 per cent of New Zealand's gross greenhouse gas emissions - 90 per cent from farms, 9 per cent from manufacturing and 1 per cent from distribution to global markets.
A spokeswoman said it was currently converting its Te Awamutu site to wood pellets-fired energy. Once the conversion was finished, only two of Fonterra's North Island manufacturing sites, Waitoa and Hautapu, would still be using coal. Its other North Island plants used natural gas and electricity.
"In the South Island we are co-firing our site at Brightwater on wood biomass and working to move our Stirling site to renewable energy. Currently we are using coal at seven of our South Island sites. This means we are using coal at a total of nine of our manufacturing sites."
Last year's annual report said the scale of Fonterra's coal use and the lack of economically viable alternatives meant it remained reliant on coal "for longer than we would like".
It committed last year to not installing any new coal boilers and to not increasing capacity to burn coal at any site. Its emissions from coal last year remained essentially the same as in F18 despite processing more milk.