Fonterra, one of New Zealand's biggest coal users, plans to divest all its coal interests by 2025.
The co-operative has a direct investment in coal mining through its wholly-owned subsidiary, Glencoal Energy, which has mines in the Waikato.
"With our raised ambition in climate change, we have committed to divesting any coal mining interest by 2025," Fonterra said in its first sustainability report.
Glencoal has historically provided coal for local Fonterra factories.
The company's last mine, Kopako 3, finished producing for Fonterra's sites last season, and is now in the process of being rehabilitated.
A new site at Mangatangi, close to the existing mine, was granted resource consent in 2013.
Most of the site has been owned by Fonterra for many years and is currently used for dairy farming.
"Both sites have biodiversity management plans in place to protect the local environment during operations to rehabilitate them when operations are complete," Fonterra said.
After mining ceases, most of the land will be returned to pastoral farming.
Fonterra said it was working with the Government and the electricity industry to explore options to use electricity for its current processes, rather than relying on heat generated from fossil fuel boilers.
"While the technology looks promising, the existing transmission line infrastructure and pricing protocols makes this challenging," it said.
Fonterra said wood biomass offered another sustainable energy opportunity.
The co-op said it was committed to installing dual fuel boilers capable of being fuelled by a mixture of coal and wood biomass at its proposed Studholme expansion, in South Canterbury.
In the past year, Fonterra has trialled co-firing wood biomass in a coal boiler at its Brightwater plant, near Nelson.
Fonterra is working towards achieving 30 per cent carbon emission reduction by 2030.
Elsewhere in its report, Fonterra said: "The dairy industry is a cornerstone of the New Zealand economy but its environmental footprint is of national significance."
On water quality, Fonterra said 95 per cent of supplying farms in New Zealand were participating in nutrient management reporting and benchmarking, and that 98.4 per cent of waterways on supplying farms were fenced off.
Collection of milk was suspended at 78 farms in the past season due to non-completion of fencing to keep stock from waterways.
Every supplying farm in New Zealand is independently assessed each year, it said. This year 3.2 per cent of farms were referred to a sustainable dairying advisor with major or critical non-compliances.