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Fonterra chief executive Miles Hurrell says that 91% of its group emissions are from behind the farm gate.
Fonterra says it must set a target for scope 3 emissions from supplying farms or risk losing global business contracts to rival processors.
The co-operative plans to start talks with its 9,000 supplying farms soon on what a scope 3 emissions target may look like.
Scope 3 emissions include carbon emissions not produced by the company itself, but by those that it's indirectly responsible for, like farmers.
Fonterra chief executive Miles Hurrell told Dairy News that 91% of its group emissions are from behind the farm gate.
He says the co-operative is under increasing pressure from both customers and consumers, and more and more from the finance sector, to put out a scope 3 emissions target.
Hurrell and Fonterra chair Peter McBride both gave farmers a heads up on the looming scope 3 emissions target in their speeches at the co-op's annual general meeting last month.
Since the announcement, there has been a wide range of views among Fonterra farmers.
Hurrell says while some farmers are anxious, a majority of them are looking for clarity. "We felt it was our duty to let them know at the AGM that this is the pull we are getting from consumers and customers and the finance sector."
He points out that most of Fonterra's major customers now have their own scope 3 emissions targets.
"So, they are looking for us, as a supplier to them, to ensure that we have our targets in place," he says.
"They will give us some time to get there but we don't want to be in a position where, if we can't come up with a target, they look at alternatives.
"Those alternatives may be other sources of dairy: globally there are other dairy companies that have set themselves scope 3 emissions target.
"But more importantly, it's making sure they don't look at alternatives that do not include dairy. That's an even bigger risk to us."
Hurrell says it's too early to talk about timeframes but the co-op hopes to start discussions with farmers in the coming months.
"It's an important part of our journey and it's also important we work with our farmers on that journey," he says.
The co-op hopes to discuss possible targets, timeline and understand from farmer shareholders what can be achieved. The science behind the targets and initiatives the co-op may offer farmers will also be discussed.
At Fonterra's AGM, McBride told farmers that from his perspective, setting a scope 3 target will help the co-op maintain competitive access to key international markets.
"For example, the EU has proposed a carbon border adjustment tax on certain carbon-intensive goods," he said.
"They are subject to a carbon emissions price via the EU's Emissions Trading Scheme. Agriculture is not currently in scope, but it is possible it will be brought into the scheme."
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