But sustainability is now being driven by major global businesses and Fonterra farmers should get on board. New Zealand has major advantages, he told Fonterra Shareholders’ Council seminars last week. Fonterra should embrace the issue because it would be good for business. And pushing its cooperative structure as a marketing tool overseas should be part of that, he says.
“My argument is, it is good for you – you have natural advantages in sustainability as an industry which means the stronger the market demand, the better off you will be.
“Being pasture fed as the base of the industry is a plus. You’ve also got the co-op structure, a really under-utilised advantage. The world is deeply cynical about corporate generally. There is scepticism about corporates, corporate agriculture and corporate food supply and therefore being a co-op is a huge advantage in marketing. It is used, but it could be used a lot more outside New Zealand.”
Another advantage was simply being from New Zealand. Although there was criticism of our dairy practices, and some of them legitimate, on a global scale New Zealand is cleaner. ”You have to build and protect that reputation. The basic idea that you are a pasture-fed, co-op-owned New Zealand company is a powerful idea. The idea doesn’t only apply to production within New Zealand but also Fonterra globally.”
Gilding says while he sees NZ’s opportunity he also sees “a very defensive industry”, perceived as resistant to change. But it is no longer about whether the industry deserves to be attacked or should be defensive. “We have moved to a new phase. It is now a business opportunity and I would argue you need to change the way you think about the issue and have a more positive way of engaging it. To embrace it means to drive that process.”
With global trends, the most important thing was to “do something”. There were good examples of corporates aggressively going after environmental enhancement and driving business success.
Underpinning the basis of the global economy is land, water and resources. It has now reached the point where all those resources are constrained. “If resources are constrained, it will be seen in the behaviour of business and investors. We are seeing significant shifts in corporate strategy … I have worked 20 years in this space with these companies and I have seen a significant shift in the last three or four years.”
Before that most companies worked with sustainability to make them feel good, or for reputation. “Now because of the constraints on resources many companies are picking this up as a central idea to their business.”
An example is Unilever which includes sustainability in most aspects of business. “They are not doing it because is important to the world or reputation but because it’s important to their business.”
DuPont, General Electric and Walmart are other companies “now actively managing this issue as core to their business, including driving it back to their supply chain”. They know governments will eventually act and are trying to get ahead of the field.
Until recently environmentalists, community concern or scientific reports raised environmental problems, business resisted change and governments were umpires, eventually enforcing change with regulation.
“That’s shifted because companies have recognised they have to act before government does. The government has been slow to act on some issues, which are affecting business today.”
A group of large companies led by Unilever are lobbying for tightening of the European legislation on the Emissions Trading Scheme (ETS) – they are actually arguing for higher costs, Gilding said. Their view is governments will sooner or later act on greenhouse gases, price incentives will be offered for reduced emissions, and these companies are already ahead of their competitors in this field. Regulation sooner rather than later will be to their advantage. “They recognise it is a business issue,” he said.
