Dairy giant Arla wants to pay farmers more for low-emission milk

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

The rewards program would cover about 20 variables, such as using natural additives in feed to reduce methane emissions from cows or using precision farming techniques, Chief Executive Officer Peder Tuborgh said in an interview. Bonus amounts have yet to be determined, and the plan could be implemented as early as next year.

The incentives, which are still being worked out, should help the Denmark-based cooperative meet its goal of reducing farm-level emissions by 63% this decade. The agribusiness is being pushed to become greener and Arla is committed to using fossil-free trucks, renewable power sources and energy-efficient operations at its sites.

“The more activities you do to reduce your climate impact, the better the milk price you get from us,” Tuborgh said. “We know that being financially motivated to do the right thing will make a big difference for farmers.”

Scandinavia’s largest dairy company is also researching how to remove carbon from the atmosphere by planting crops and how to make energy production more environmentally friendly by converting manure into biogas or installing solar panels. These measures could be included in the upcoming milk price model.

Closely managed manufacturer brands include Castello cheese, Lurpak butter and Cocio chocolate milk. The company reported sales of 11.2 billion euros ($12.1 billion) last year, up 6% from 2020.

Arla raised milk prices in April, saying inflation is putting pressure on farmers looking to invest in animal welfare and sustainability initiatives.

Almost 9,000 producers in Arla’s European network are already receiving an extra euro cent per liter (34 ounces) of milk in return for having their climate-related practices checked annually. These assessments ask more than 200 questions about herds, feed, crop production, fertilizer use, manure handling, electricity and fuel. Responses will be entered into a social network-like database launched in 2020 to allow farmers to compare their performance.

“You can measure yourself against other farms and see where they are and how they can improve,” said Tuborgh. This competition prompts many farmers to adopt practices that not only reduce carbon emissions but also improve efficiency, he said.

Arla’s producers emit around half as much CO2 equivalent per kilogram of milk as the global average, according to the company. And Tuborgh believes these emissions can be reduced even further. “We might even end up at the point where this can be carbon neutral,” he said.

Bloomberg