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How are dairy companies navigating the path to net zero?

The dairy industry is striving for net zero emissions by 2050 through the Pathways to Dairy Net Zero initiative. Despite increased sustainability efforts, these measures raise costs for farmers and consumers, creating a challenge in balancing sustainability with affordability.

Tessa Wiles, Content Editor

November 21, 2024

5 Min Read
How are dairy companies navigating the path to net zero?
© iStock/Peopleimages

Since the Paris Agreement, an international climate change treaty that came into force in 2016, many countries and organisations have committed to achieving net zero emissions by 2050.

In response, more and more large dairy companies have their sights set on the Pathways to Dairy Net Zero initiative, a global strategy targeting reduced greenhouse gas (GHG) emissions and a net zero status by 2050.

Currently, the livestock supply chain accounts for approximately 14.5% of global GHG emissions, according to the United Nations Food and Agricultural Organization (FAO), with dairy farming estimated to produce the bulk of agricultural GHG annually, 36% in 2020.

Senior sector economist at Dutch bank ING, Thijs Geijer, writing about the steps the industry can take on the path to net zero, said while there has been a clear shift in the dairy industry towards sustainability, there are challenges in implementing sustainability measures as these initiatives often increase costs for farmers, who in turn pass sustainability premiums onto customers.

Dairy executives in 2024: What’s on their mind?

To understand the evolving priorities of dairy executives, McKinsey and the International Dairy Foods Association conducted their sixth annual survey in the fourth quarter of 2023.

Despite optimism about the dairy industry, sustainability emerged as a top concern for these executives. One respondent said: “There are so many uncertain variables within sustainability and dairy.” Another highlighted the paradox of consumer behaviour: “Consumers are extremely interested in sustainability, but they are not necessarily willing to pay more. I’m not sure if this will ever change. People will tell you they are willing to pay for it, but they won’t.”

Nearly three-quarters of respondents cited customer pressure as the primary driver of their sustainability efforts, including from retailers and other dairy vendors, while just under half mentioned consumer influence. Executives worry that consumers may be unwilling to absorb the costs associated with sustainability initiatives, particularly decarbonisation.

On the other hand, a joint analysis between McKinsey and Nielsen IQ indicated the growing importance of environmental, social, and governance (ESG) factors among consumers. The analysis revealed that yoghurt and cheese products boasting ESG-related claims outperformed those without such claims, suggesting a shift in consumer preferences toward more sustainable options.

CO2 reduction targets in the dairy industry

CO2 reduction targets have become commonplace in the dairy industry, reflecting a growing awareness of the environmental impacts of traditional dairy production. Among 30 of the largest dairy processors in the world, almost all companies had communicated CO2 reduction targets for their operations, according to Geijer. On average, these companies aim for a 38% reduction by 2030 compared to 2020.

Yet, companies are not uniformly implementing strategies. Geijer explained: “Some only briefly mention their targets, […] The same is true for underlying strategies, which range from being quite concise to very elaborate.” This variation highlights the industry's different approaches and levels of commitment toward achieving these reduction targets.

Measures to reduce the carbon footprint of milk production

The CO2 emissions involved in producing one kilogram (kg) of milk varies significantly by region due to factors like climate, farming practices, and infrastructure. In key dairy regions, this sits at around one kg of CO2 emissions, per one kg of milk produced.

Countries such as New Zealand and Ireland generally have lower emissions per cow due to their extensive grass-based systems. Conversely, countries like China and the US have more intensive farming systems that focus on maximising milk output per cow, which does reduce emissions per kg of milk but produces more CO2 emissions per cow. Both types of systems have opportunities to reduce their carbon footprint, but each also face their own set of limitations, Geijer explained.

Both on-farm and on-site measures can help reduce the carbon footprint of milk production. On-farm measures include precision feeding, selective breeding for lower methane emissions, and practices to enhance carbon sequestration in soils. On-site measures at dairy processing facilities focus on improving energy efficiency and transitioning to renewable energy sources, such as installing solar panels, heat recovery equipment, and electric heat pumps.

Low-carbon dairy initiatives

In 2023, Wageningen University & Research (WUR), in collaboration with Unilever’s dairy supply chains (via its Ben & Jerry’s and CONO Cheesemakers brands) and Nestlé (via its Vreugdenhil Dairy Foods brand) initiated a four-year low carbon dairy public-private partnership. Rabobank, Agrifirm, ForFarmers, De Heus, Duynie, and Lely are also involved.

This project aims to achieve a 50% reduction in the carbon footprint of dairy milk by 2030. According to WUR, the programme focuses on implementing measures such as ration adjustments, the use of grass/clover mixtures, and manure fermentation, which are comprehensively tested and assessed. The project also aims to identify the most effective measures tailored to specific conditions by leveraging the diversity of participating companies located on different soil types with distinct strategies.

Dairy cooperative Arla’s FarmAhead Check tool is another example. Arla, which aims to achieve a 30% reduction in its carbon footprint by 2030, has developed a tool with 2.0-LCA, a Danish business consultancy. The tool provides its farmers with a blueprint for accelerating carbon reductions on their farms. So far, 7,986 Arla farmers from seven European countries have submitted detailed data on their herd, feed production, and energy usage. According to Arla, this data was verified by an external climate advisor, and personalised action plans were created for each farmer to further climate reduction.

The challenge for the dairy industry lies in securing cooperation from farmers, as initiatives that involve farmers are critical to reducing dairy’s carbon footprint. “After all, if farmers can’t minimise their environmental impact, dairy companies won’t come anywhere near their net zero targets,” Geijer said.

Innovating for a lower carbon dairy industry

Product innovation plays a crucial role in supporting a lower carbon dairy industry. While dairy companies inform consumers about their overall sustainability efforts – including aspects like animal welfare and biodiversity – carbon reduction alone is not a primary driver of consumer purchasing behaviour. Consumers prioritise price, taste, and health over carbon reduction. However, according to Geijer, the industry's sustainability efforts will eventually influence consumer prices.

About the Author

Tessa Wiles

Content Editor, Informa Markets

Tessa Wiles is a content editor for Ingredients Network, Food Ingredients Global Insights, and Vitafoods Insights. She writes about food and ingredient innovations, product development, R&D, nutraceuticals, consumer trends, and more.

Always looking for industry insights, Tessa invites connections to explore the latest developments in the food and beverage sector.

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