Miles Hurrell says emissions programme is vital if co-op wants to continues to supply key customers.
Fonterra says sustainability and emissions reduction are being demanded right across its value chain, from its banks to customers and consumers, and opting out isn’t an option.
Chief executive Miles Hurrell told the Farmers Weekly In Focus podcast that its Scope 3 emissions programme is vital if the co-operative wants to continue to supply key customers.
“It starts with those multinationals, and you referred to Nestlé, but there are a number of other multinationals that aren’t far behind. The whole finance sector is demanding these things as well, so access to capital, both for Fonterra, but also our farmers long term, will be impacted by this.
“It’s something that very much has been being pulled by customers and markets and the finance sector.”
Hurrell said in conversations with farmers they highlighted a desire for more value to be gained from better environmental performance.
“They’d like to see a bit more value extracted as a result of that. I get that and we’re working hard in that regard.
“But it is becoming, very quickly, a ticket to the game. If you’re not part of it, if you’re not willing to commit to something significant in a Scope 3 context on farm emissions, you’ll be sidelined by some of these big players long term.”
Despite some influential farming commentators saying New Zealand’s highly efficient systems should mean its place as a valued supplier is secure, Hurrell said that is not the case as other dairy producers are investing heavily in mitigation technologies that will see us surpassed.
Abandoning customers like Nestlé for others without sustainability demands simply isn’t an option either, he said.
“It’s a question that comes up often. Maybe we don’t need Nestlé, is a question that I get asked. Why don’t we go to the next-tier customer? You’ve got to remember that we’re already in the next-tier customer, and we’re in the tier customer after that, and we’re in the tier customer after that. We’re quite a significant player in the international market.
“If we were to decide that Nestlé was not a partner we want to work with, we very quickly skip to countries and markets and customers that are, quite frankly, a little bit undesirable. You come with a country risk, sovereign risk. In some of those countries they have fluctuating currencies, they have unstable governments.”
Hurrell said given the world is going through a time of instability at the moment, both economically and geopolitically, it is critical for the co-op and the government to be very careful about how they position themselves.
Having a strong balance sheet is key to negotiating the next few years and with a strong set of results in the past year and a healthy milk price forecast, with a mid-point of $9.50/kg MS, Fonterra is in a good place, he said.
Key to that is sticking to what the co-op does best – turning New Zealand milk into high-quality ingredients, which is why the divestment of the consumer brands is moving forward.
Hurrell said Fonterra’s ability to significantly grow those brands in high-value markets is limited.
“We just believe a different lens on those brands, a different ownership structure, could take those to the next level. And that’s not diminishing the work that our team have put into them.
“But we’re quite narrowly focused on dairy and if you want to really take it to the next level, maybe you need to go and expand beyond that. And I just don’t think that’s what our farmers want, if I’m honest.”
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