Fonterra suppliers have been told they may soon face a greenhouse gas emissions target set by the co-operative.
Despite being the world’s most efficient producers of dairy products, customers and consumers expect more and doing nothing simply wasn’t an option, chief executive Miles Hurrell told the annual meeting in Rotorua.
He said farmers need to maintain this advantage and keep pace with consumer and customer expectations.
Hurrell said the co-op is considering setting a target for scope 3 emissions, which encompass carbon emissions that are not produced by the company itself, but those it’s indirectly responsible for, including farmers.
More detail would come by the end of the year, but Hurrell said the rationale behind the move was compelling.
“In short, it comes down to us collectively meeting the climate change expectations of our stakeholders, and the risk if we don’t.
“Now that covid-19 restrictions have largely been lifted, the chair (Peter McBride) and I have been spending time in our markets. The subject that dominates conversations with our customers and debt capital providers is sustainability.
“Our high-value customers are setting emissions reductions targets and looking for our help. If we can’t give them confidence that we will help them achieve their targets, they will look to our competitors – including using alternatives to milk.”
Hurrell said Fonterra’s banks and financiers also want to know the steps the co-op is taking to reduce its emissions footprint.
“It is our expectation that the banks will be setting their own industry targets over the coming years.
We anticipate that you will be having similar conversations with your banks in relation to your individual farming businesses within a similar timeframe, so it’s a conversation and a change that we need to do together.
Hurrell said it was good to kick the year off with another strong forecast farmgate milk price range and that midpoint of $9.25/kg MS alongside an earnings guidance of 45-60 cents a share.
McBride told the meeting setting a scope 3 target would help Fonterra maintain competitive access to some of our key international markets.
“For example, the European Union has proposed a carbon border adjustment tax on certain carbon intensive goods,” he said.
“They are subject to a carbon emissions price via the EU’s Emissions Trading Scheme.
“Agriculture is not currently in scope, but it is possible it will be brought into the scheme. Others will follow.
“I expect these types of trade barriers to become more frequent as international governments respond to their own climate commitments. It’s important we get ahead of them early.
“These changes are not just compliance.
“They are an opportunity for us to leverage our natural advantages.”
