New Zealand farmers cannot escape environmental social governance requirements as more and more companies demand proof of green credentials before doing business, dairy analyst Julia Jones says.
Any person or company exporting products must be able to show their environmental and social credentials, Jones told farmers at a financial seminar near Lake Karapiro organised by the Smaller Milk and Supply Herds group.
Many of the dairy products NZ produces go into the supply chain of companies such as Nestlé that have to be able to show their customers and investors the environmental footprint of the products they use.
“This is why you’re getting asked for more information. It’s about transparency, it’s not a conspiracy. It’s simply a risk management tool.
“One thing we need to realise in New Zealand is that regardless of the structure of what we produce or supply to, they are always sitting in someone else’s supply chain.
“This means whatever we produce gets turned into something else and sold somewhere else through someone else,” Jones said.
NZ does not have the scale to push back at global food giants like Nestlé. If they try it, the companies will just go elsewhere.
“If you don’t do it, they will find someone else that will and it’s not because they’re bad – it’s just business.”
NZ punches above its weight from a dairy export perspective, comprising 23.6% of the market, but it is still small in the scheme of things.
“We don’t have bargaining power and we don’t have bargaining chips.”
“That’s why its important for us to maintain what we do for our own economic value.”
Farmers have to remember that NZ represents only 2% of the global food system and will never feed the world, Jones said.
In that respect, NZ has to be careful how it positions itself because it does not have bargaining chips when entering a trade environment.
But its small size does make NZ agile, Jones said.
“It gives us the ability to shift through markets, but what it doesn’t do is give us the ability to tell another country what it should be doing.”
Jones dismissed claims of carbon leakage if farmers have to produce less because of climate regulations.
“It’s bullshit, because we don’t produce enough to have an impact and if someone else wants to replace what we aren’t providing then they just redistribute what they are already growing; they’re not actually growing any more.”
Jones called the speed of change going on in the world “insane”. But, while she sympathised with farmers for the volume of regulations they are being hit with, she pointed out that these are a symptom of change, not the reason for it.
“We can’t stop it. It’s a societal shift,” she said.
The high level of scrutiny is also driving a higher emphasis on data collection and auditing.
“We have to show that we’re good, we can’t just keep talking about it.
“It’s part of getting our ticket to the game. It’s not compliance, it’s not bullshit, it’s not crap. It’s genuinely things that are required.”
The push for proof of climate action is part of a wider global move towards more protectionism. If farmers do not have that evidence, it is very easy for countries to bring in non-trade barriers.
“All these things are linked. The scrutiny is there because it’s around protectionism.”