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Picture: 123RF/KWANGMOO
Picture: 123RF/KWANGMOO

Dairy giant Arla Foods is willing to pay European farmers extra for milk based on how many carbon-reducing activities they can tick off a company list.

The reward programme would cover about 20 variables, such as using natural additives in feed to cut methane emissions by cows or following precision farming techniques, CEO Peder Tuborgh said in an interview. The bonus amounts still need to be determined, and the plan could be implemented as soon as next year.

The incentives, which are still being worked out, are meant to help the Denmark-based co-operative achieve its target of reducing farm-level emissions by 30% this decade. The agriculture industry is being pushed to become greener, and Arla has committed to using fossil-free trucks, renewable sources of electricity and low-energy operations at its sites.

“The more activities you do that reduce the climate impact, the better the milk price you get from us,” Tuborgh said. “We know it will make a huge difference to the farmers if they are financially motivated to do the right thing.”

The Nordic region’s biggest dairy company also is researching how to remove carbon from the atmosphere using plantings and how to make energy production greener by converting manure into biogas or installing solar panels. Those actions could be included in the coming milk-price model.

The closely held producer’s brands include Castello cheese, Lurpak butter and Cocio chocolate milk. It reported revenue of €11.2b ($12.1bn) last year, an increase of 6% from 2020.

Arla raised milk prices in April, saying inflation was adding pressure on farmers wanting to invest in animal welfare and sustainability initiatives.

Almost 9,000 producers in Arla’s European network already receive one extra euro cent per litre of milk in exchange for allowing annual checks of their climate-related practices. Those reviews ask 200-plus questions about herds, feed, crop production, fertiliser use, manure handling, electricity and fuel. The answers are put into a social network-like database, started in 2020, so farmers can compare their performance.

“They can benchmark themselves against other farms and see where they are and how they can improve,” Tuborgh said. That competition is prompting many farmers to adopt practices that not only reduce carbon-dioxide emissions but also improve efficiency, he said.

Arla’s producers emit about half the amount of CO²-equivalent per kilogram of milk than the global average, the company said. And Tuborgh believes those emissions can be reduced even more. “We may even end at the point where this can be CO²-neutral,” he said.

Bloomberg. More stories like this are available on bloomberg.com

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