Fonterra is New Zealand's biggest business with around 9000 farmer-shareholders.
Fonterra is New Zealand's biggest business with around 9000 farmer-shareholders.
A warning that dairy kingpin Fonterra will continue losing milk supply to rivals because it doesn’t listen to its farmers is looking like a fair cop with the company apparently ignoring a plea not to drop a game-changing proposal on them at the most challenging time of the year.
Thewarning, raised in farmer-shareholder circles on news that Fonterra had lost Waikato milk supply to new Singaporean processing entrant Olam, is finding fresh ground in Fonterra’s timing of a Scope 3 emissions target announcement.
It is expected “shortly”, said New Zealand’s biggest business in a statement response to Herald inquiries.
This is despite farmer-shareholder watchdog, the Fonterra Cooperative Council, telling the company now is not the time that farmers preoccupied with calving and winter pasture care can be expected to absorb the target and what it will mean to their bottom lines.
Scope 3 carbon emissions are those occurring because of the activities of an organisation but generated from sources not controlled or owned by that entity - in Fonterra’s case, its milk suppliers.
The farmer council has previously flagged that the company’s drawn-out background work on the target was causing farmers “uncertainty” in an already challenging economic time.
Council chairman John Stevenson told the Herald the subject had been “a really big unknown for farmers” and had caused apprehension. While they were anxious to understand more, farmers’ message, passed to the Fonterra board by the council, was that “this is the most dynamic time of the year for us when we see the majority of challenges.
“The bandwidth for farmers during July and August to be able to understand what it means for them isn’t as wide as it could be. If they really want farmers to engage we think that is something that should be taken into consideration.”
However Fonterra in a statement to the Herald said its customers were “looking to us to set one (a target) as soon as possible.
“We have said we would be making this announcement mid-year so it’s important we keep this commitment.
“While we understand it is a busy time for farmers, it’s important to point out that in announcing the target we are not asking them to make any immediate changes. We will be back out talking farmers later in the year about how we can work together to achieve the target.”
The company has held regional meetings about the plan to set targets with its farmer-owners but Stevenson said no specifics about the financial impacts on farm operations had been revealed.
John Stevenson, chairman, Fonterra Cooperative Council.
Fonterra is developing an “intensity-based approach” to Scope 3 emissions, the statement said.
This was not new for dairy companies, either at home or overseas.
The statement said in developing a suitable target the company had been discussing the topic with strategic customers, banks and markets.
“They have all expressed support for both the target-setting approach and overall leadership that Fonterra is taking. Our customers have been very supportive. As they purchase dairy ingredients from Fonterra, they know that any reduction in emissions intensity means they get a reduced carbon footprint for every product that they purchase from Fonterra.”
The statement said Fonterra was setting targets aligned to the Science Based Target Initiative, “a globally recognised organisation that defines and promotes best practice in science-based target setting.
“Our approach allows Fonterra to deliver emissions reduction in line with a 1.5 degree trajectory while driving efficiency and productivity with our farmers.
“Whilst we are setting an intensity target, we will continue to report annually on our reduction in absolute emissions which have reduced by 9.3 per cent since 2018.”
Fonterra did not respond to a request for confirmation of a report the target announcement would stop short of demanding absolute cuts to emissions.
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.
