Craigmore Sustainables' Te Awa dairy farm at Te Pirita in Canterbury is well ahead on the emissions reduction drive.
Craigmore Sustainables' Te Awa dairy farm at Te Pirita in Canterbury is well ahead on the emissions reduction drive.
Dairy farmers’ access to future bank funding will ride on their plans to lower on-farm emissions, says Fonterra, which has announced its much-anticipated target for emissions reduction.
The farmer-owned global exporter told shareholders at its annual meeting on Thursday it was targeting a 30 per cent intensity reduction in on-farmemissions by 2030, effective from 2018. This was a collective target, not per farm.
The announcement ends a tense wait for shareholders who’d been told to expect a target from mid-year. Their concern about the potential cost of measures to achieve the target weighed heavily as they grappled with a milk price downturn, steep on-farm inflation and ongoing regulatory costs.
At a pre-announcement media briefing, the company said access to future funding, not just for Fonterra but for farmers, was a key driver of the company’s climate ambitions.
Five banks had now linked farm sustainability plans to lending agreements, the briefing was told.
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.
Fonterra, New Zealand’s biggest business, said 86 per cent of its emissions originated on-farm. The target sought to reduce emissions intensity by tonne of fat and protein-corrected milk collected by its tankers.
The on-farm target was expected to be achieved with a 7 per cent reduction through farming best-practice, such as 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.
The cooperative’s major aim is to reduce the emissions profile of its products.
New Zealand is the world's biggest exporter of dairy product.
Chief executive Miles Hurrell told the annual meeting in Canterbury there was a lot of activity to reduce emissions across other markets, and Fonterra must keep making progress to make sure it didn’t fall behind.
“As a dairy partner to many of the world’s leading food companies, we’re responding to growing sustainability ambitions from our customers and financial institutions, along with increasing market access, legal and reporting obligations.
“Our collective efforts to reduce emissions from on-farm, across our operations and by our R&D teams, will help future-proof Fonterra, supporting our ambition to be a long-term sustainable co-op for generations to come,” Hurrell said.
Chairman Peter McBride said the cooperative’s overall on-farm emissions targets would affect each farm differently.
“There is significant variation within and across farming systems when it comes to emissions intensity.
“There’s no one solution to reducing on-farm emissions. It will require a combination of sharing best farming practices and technology to reduce emissions – it’s both our biggest opportunity and our biggest challenge,” McBride said.
“We have deep empathy for the challenges our farmers are already dealing with. The co-op’s approach will be to work alongside farmers, not against them, as we collectively make progress towards our target, including investing in methane reduction technologies.”
The company also launched a climate roadmap. This is a plan outlining actions Fonterra will take towards its 2030 targets and ambition to have net zero emissions by 2050. The roadmap’s primary target is product customers.
The new on-farm target has completed a package of emissions goals - Fonterra earlier this year lifted its targets for manufacturing and operations.
Hurrell said having a full suite of targets and a plan to achieve them would provide Fonterra’s high value customers with the confidence to continue buying its products “as well as protect our reputation as being one of the most emissions efficient suppliers of dairy at scale”.
The company also voluntarily released its first climate-related disclosure report. New Zealand is the first country in the world to pass a law introducing mandatory climate-related risk reporting, effective from next year for around 200 companies.
Nestle said the move was good news for farmers, researchers and policy makers.
Major customer global food giant Nestle said Fonterra’s announcement of an on-farm target sent a positive signal to New Zealand’s dairy industry and supported Nestle’s own ambition to reduce emissions throughout its value chain.
“This move by Fonterra will encourage even greater action by farmers, researchers and policy makers in support of a just transition for the dairy industry, which in turn, will help the industry and dairy farmers make the most of the economic opportunities presented by the shift to lower emissions.”
Nestle had sourced dairy from New Zealand for more than 100 years. It said it would continue supporting farmers to develop new economic opportunities and reduce greenhouse gas emissions.
“We do this by prioritising our sourcing from farmers engaged in lowering emissions, by providing technical support, and by paying a premium for their products.”
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.
