Groundbreaking sustainability incentive model from Arla expands to customers
Based on the experiences – and data – from Arla’s world-first Farmer Incentive Model, which was introduced in 2022, the global dairy company is now launching a new Customer Sustainability Programme, aimed, at first, at retailers in the United Kingdom, but planned to be rolled out across core markets in Europe through 2024.
Being the UK’s largest farmer-owned dairy firm, Arla has entered into key commercial collaborations with major retailers including Aldi, Asda, Morrisons and Starbucks, in a bid to enhance cooperation between the dairy industry and its retails partners to reduce collective carbon emissions.
The new partnerships already encompass more than one billion litres of milk from Arla’s UK farmers who are part of Arla’s climate data programme and Sustainability Incentive Model. Streamlining its diverse on-farm sustainability measures into the new so-called Customer Sustainability Programme, Arla thereby now offers its customers the ability to actively lower their Scope 3 emissions, which in sustainability reports are the emissions that result from activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain.
Customers engaging with Arla through the Customer Sustainability Programme invest in the cooperative’s ongoing efforts to reduce on-farm emissions, in return gaining access to on-farm R&D projects and pilot programmes. They also receive more precise on-farm data, including CO2 footprint per kg/milk, and customised data reports, which can be used in climate reporting practices (e.g. ESG reporting) to document the lowering of Scope 3 greenhouse gas emissions.
Arla Foods has a decarbonisation reduction goal of 63% by 2030, as part of approved science-based targets that support a 2050 net-zero vision.
The new target has been approved by the Science Based Targets initiative as consistent with reductions required to keep global warming to 1.5°C.
Commercialising climate actions at scale
Arla’s original Sustainability Incentive Model was formulated in collaboration with Arla’s farmer board and the active involvement of Arla’s 8,500 farmer-owners. These initiatives empower farmers with the tools to efficiently reduce emissions on their farms, supported by financial incentives.
The original Sustainability Incentive model is a point-based model that rewards past and future climate and environmental sustainability activities – and includes many options for farm owners to choose from. Activities lead to points – and every single point leads to a small amount of money on the milk price. The activities that have the potential to have the biggest improvement potential for climate and nature will lead to the most points – and therefore also the biggest financial incentive. In the model, Arla has earmarked up to 500m EUR annually until 2030 to reward and incentivize climate initiatives on farm.
From the start, the model has been funded through the raw milk value, but over time, the commercialisation of Arla’s future climate and environmental actions – including the new Customer Sustainability Programme – will help bring new money to Arla’s farm owners.