ING Research looks at carbon reduction targets globally
Image: ING Research
An increasing number of large dairy companies have plans to become net zero in the future. Measures on farms play a crucial role in reaching targets but often raise costs for farmers. Paying out a sustainability premium of a couple of cents per litre of milk to farmers would make a difference, but dairy producers struggle to pass on such premiums to customers, says a recent article released by ING Research about sustainability and the dairy sector.
Carbon reduction targets have been widely adopted in the global dairy industry. Among the 30 largest dairy processors in Europe, North America, New Zealand, Australia and China, almost every company has communicated a CO2 reduction target for their own operations (Scope 1 and 2). On average, dairy companies aim for a 38% reduction in 2030 compared to 2020. Still, there are large differences between companies. Some only briefly mention their targets, while in other cases, targets have also been submitted to and validated by third parties. The same is true for underlying strategies, which range from being quite concise to very elaborate.
If dairy processors want to become net zero in 2050, they need to look beyond their own operations; around 95% of the greenhouse gas emissions from dairy products happen either upstream or downstream in their value chain (Scope 3). Emissions on farms in the form of methane (enteric fermentation, manure), nitrogen (fertiliser use) and carbon (land use change, energy use) are the predominant factor and account for 65% to 80% of all the emissions from grass to glass.
Thijs Geijer, senior sector economist at ING Research notes, “Most major dairy companies have set carbon reduction targets for their own operations and their value chain by now. The current phase is all about executing on the accompanying strategies by taking a range of measures in processing plants and supporting measures on farms. This means investments in processing facilities that help to reduce the dependence on fossil fuels but can also include operational expenditure on feed additives that reduce methane emissions from cows.”
Kiran Sanchit, head of food, beverage and agribusiness EMEA at ING adds, “A full value chain approach is required in order for the dairy industry to de-carbonise in line with net zero targets. Dairy processors have a major role to play in steering their farmer base towards net zero, as well as retailers and governments. As we have seen in other industries, incentives are key to get farmers to justify the substantial investments needed and the higher prices associated with sustainably produced dairy products. In the longer-term replacing part of dairy consumption by plant-based alternatives could also play a role in reducing the environmental impact of the industry as a whole.”