17 Jan 2024
Global dairy companies take the lead in reducing greenhouse gas emissions.
The reduction of greenhouse gas emissions (GHG), especially scope 3 emissions occurring on farms, has been on the agenda of major dairy companies for many years. Historically, increased productivity has resulted in more efficient milk production and a reduction in emissions per kilogram of milk. However, more comprehensive reduction strategies are needed.
Since one cannot reduce what cannot be measured, in 2010, the International Dairy Federation, the Food and Agriculture Organization of the United Nations, and the Platform for the Sustainable Agriculture Initiative collaborated to create a harmonized carbon footprint methodology for the global dairy sector as the first step in the path to reducing industry emissions.
Most companies in the Global Dairy Top 20 – Rabobank’s annual ranking of the world’s top 20 dairy companies by revenue – have set climate goals or voluntarily committed to the Science Based Targets initiative (SBTi). More recently, companies, including most of the top 20, have begun to turn to SBTi’s guidance on forests, land, and agriculture (SBTi FLAG) to set objectives.
The levels, timelines, and scope of objectives may vary from one company to another based on regulatory environment, intermediary buyer requirements, or public pressure. In this report, we examine the GHG emission reduction objectives of the top 10 dairy companies and some of the strategies they employ to achieve them. For scope 3 emissions, several of these companies have committed to a reduction in intensity levels and/or absolute emissions by around 30% by 2030.
The sector has already taken numerous measures to stimulate GHG emission reduction, such as determining emissions on farms, establishing sustainability programs, and more recently, incentivizing farmers through outcome-based premiums and participation (“carrots”). At the same time, “sticks” will continue to be part of the equation, with increased specific regulation of agriculture and dairy products on the horizon, as well as greater buyer pressure to reduce GHG emissions. Non-compliance with voluntary commitments, such as SBTi targets, could have negative consequences for dairy companies in the future, such as damage to their reputation.
However, to achieve the 2030 goals and beyond, it is crucial to accelerate the adoption rate of GHG emission reduction measures on farms.
This is because reductions derived from increased productivity and efficiency may begin to decline in developed regions as we approach the target date. After 2030, these objectives may become more challenging, requiring a greater variety of mitigation measures on farms. To achieve the set goals, a well-balanced combination of “carrots” and “sticks” is needed, as companies currently cannot reward farmers with contributions from the downward market participants. Expanding financial incentives for farmers will likely require cooperation and collaboration from participants and stakeholders in the value chain. With that engagement, it is believed that long-term GHG emissions reduction in the dairy value chain can be achieved, accelerating the pace of reduction.
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