Eroding share of milk worries Fonterra shareholders
Fonterra shareholders are concerned with a further decline in the co-op’s share of milk collected in New Zealand.
The apprehension is around what farmers can deliver compared to what global customers and consumers want.
Most of Fonterra’s major customers now have their own Scope 3 emissions targets and they are looking at the co-op, as a supplier to them, to put a target in place.
The co-op is telling farmers that it’s under increasing pressure from customers and consumers, regulators, and more and more from the finance sector, to put out a Scope 3 emissions target.
Fonterra is giving away very little publicly around the target, however, many farmer shareholders are worried about changes that may be forced on them behind the farmgate.
The co-operative and its farmer shareholders are in a bind; they cannot be seen to do nothing on Scope 3 emissions – that encompasses carbon emissions that are not produced by the company itself, but by those that it’s indirectly responsible for, including farmers.
The Fonterra Co-operative Council, which represents the interest of farmer shareholders, says it’s trying to bring some balance to the conversation by representing the views of farmers.
The key will be to make sure Fonterra takes its farmers on the journey, provides support and does not set requirements that are too difficult to achieve.
The pace of change within the last 18 months is already putting pressure on farmers. Add to this the challenges around labour, rising input costs and soaring interest rates, Fonterra will be careful not to pile more pressure on its farmers.
But not doing anything is also risky. Fonterra doesn’t want to be in a position where, if it cannot come up with a target, then customers start looking at alternatives.
But more importantly, they could turn to alternatives that do not include dairy.
That's an even bigger risk, warns Fonterra.
Fonterra bosses believe setting a Scope 3 target will help the co-op maintain competitive access to some of its key international markets.
Scope 3 emissions target is here to stay. In the coming weeks and months, Fonterra farmers will find out what it really means for their farming operations.
Doing nothing may not be an option. But Fonterra farmers will be looking hard to their co-op for evidence that changed practices on farm will deliver value into their pockets.
