Fonterra's farmers will be leaning on the company to show the way regarding its emissions reduction target. Photo / Michael Craig
Fonterra's farmers will be leaning on the company to show the way regarding its emissions reduction target. Photo / Michael Craig
Fonterra will be pushed to show a financial carrot for asking its dairy farmers to reduce emissions by 30 per cent in six years.
Watchdog for the farmer-owners of New Zealand’s biggest business, the Fonterra Co-operative Council, intends to “really push that question” because farmers must understand what their investmentin capital and time will deliver, chairman John Stevenson said.
“There are a number of actions farmers can take, whether it be investment in genetics and efficiency in what we are feeding our animals and investing in things like solar solutions, but we don’t have clarity over the cost at on-farm level yet. It’s a co-operative-wide target,” he said.
Farmers “absolutely needed” clarity on any premiumisation investment. The council wanted the Fonterra board to be more clear about what returns farmers would get from investing time and capital on-farm.
“As a farmer, if I’m going to invest, I want to know where the low-hanging fruit is.”
The big exporter revealed its Scope 3 emissions target to farmer-shareholders earlier this month. It wanted a 30 per cent intensity reduction in on-farm emissions by 2030, effective from 2018. This was a collective target, not per farm.
Scope 3 emissions are not produced by a company itself and are not the result of activities from assets owned or controlled by a company, but those it’s indirectly responsible for up and down its value chain.
Fonterra Co-operative Council chairman John Stevenson.
Fonterra’s aim is to reduce the emissions profile of its products, which it says are increasingly subject to scrutiny by its biggest international customers.
Dairy farmers are agriculture’s biggest borrowers, holding 60 per cent of all bank loans. Dairy debt was $36.3 billion this year, according to the Reserve Bank.
Stevenson said indications the 30 per cent target was achievable given performance to date had “landed quite well” with farmers.
“But in saying that, plenty of members are going to require the support of their co-operative to do this. Our message to the board is that this is a process and it will have to be an ongoing one.
“Farmers farm in different ways and this will impact them differently, so there is more work for Fonterra over the next 12 months in getting this to land with farmers.”
Asked if Fonterra risked losing suppliers to other dairy processors because of the target imposition, Stevenson said rivals for milk supply would always look to challenge.
“As a council, we are looking really hard at the rationale and returns for farmers for their investment [in the target], but on the other side of that, we challenged the board to deliver us the highest milk price and the best performance and the best returns for the milk we provide, and this is part of the response from Fonterra.
“If we can reduce our emissions by 30 per cent, their assertion to us is that it is going to secure us the highest-paying and the best customers, which in turn ensures a better return to farmers. As a council, we don’t have all the information yet, so our aim to is look for accountability around the decision.”
To date, Fonterra has only said the target was expected to be achieved with a 7 per cent reduction through best-practice farming, such as ensuring feed quality and improving herd performance; 7 per cent through novel technologies being developed under industry initiatives; 8 per cent through carbon removals from existing and new vegetation; and 8 per cent from historical land use change conversions to dairy.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
