Times are a-changing and fast. We are now operating in an environment where climate change is affecting production worldwide, budgets are tight, and sustainability is a focus.
Environmental and sustainability plans are now a critical requirement for legal, regulatory, business,and financial support. This applies to small farm operators and large businesses like Fonterra. To this end, our Climate Roadmap details the Co-op’s 2030 targets and 2050 ambition, directly responding to the changing environment.
Our customers are also operating in this environment. The market pressure is real. We work with some of the world’s largest FMCG companies – Mars, Nestlé, McDonald’s, Dominos, and YUM!. These companies (our customers) all have all set emissions reduction targets, and they’re having discussions with us around these targets, but what’s driven them to do that?
It’s not consumer demand. Consumers aren’t at that point where they’re willing to pay for low carbon products at their supermarket shelves. This might come but they’re not there just yet.
Rather, it is about the legal environment that our customers are operating in, it’s about their access to capital, it’s about their reporting obligations. A good example is the risk disclosure or the climate disclosure rules that the EU have for some of its European domiciled businesses. There are a range of things that regulators are looking towards. It’s not just climate or modern slavery; it’s deforestation, it’s animal well-being.
Customers are quite rightfully looking up and down the value chain to work out what is needed to support them in that piece.
How serious are customers about this? Cynics will argue it’s a negotiation tactic – saying the right words to get the best price and conditions. This may have been the case once upon a time but not anymore. Our customers are no longer seeing their sustainability targets as simply a problem they can pass down the supply chain. They’re looking for partnership and investment opportunities to help, where they can best use their scale and resources. They’re willing to invest. If it was a simple negotiation tactic, we wouldn’t see them spend money down the value chain if they don’t have to.
Where once profits and sales were the key performance indicators for staff bonuses, we’re now seeing our customers reward their staff on their ability to integrate sustainability initiatives and targets into their work.
To be part of the conversation you now have to prove that you’ve earned the right to be there. Even large groups like Fonterra don’t get access to the tender documents anymore to even have the conversation about price and the types of quality and the specifications that they require without having a suitable sustainability target and strategy.
The Co-op has a fantastic value proposition to take to our customers and our customers in turn want to collaborate with us. Nestlé is rewarding all of our Cooperative Difference farmers to the tune of a few cents. We’ve got Greener Choices from Mars funding tools and services for more than 1000 farmers. We’ve got YUM! funding farm software for farmers.
We’re focused on selling our quality milk products to the best and most valuable markets around the world and it is competitive. We have a great story to tell and our customers are happy to be part of the tale.