The past financial year was tough and one of significant challenges and fundamental change in the culture and strategy of the co-operative.
“Given the tough year we had it would’ve been easy to push sustainability to one side, whereas we have in fact continued to make progress,” chief executive Miles Hurrell said.
“We have underlined our commitment to the importance of sustainability and firmed up plans to do more on climate change, coal, waste and sustainable packaging.”
The report said only four of 11 core sustainability indicators showed good progress, the other seven being classified as some progress or slight delay.
The improvements were in recordable injury frequency on Fonterra premises, employee engagement, farm environment plans and manufacturing sites treating wastewater to leading industry standards.
Some of the notable misses included four of the 48 manufacturing sites not yet certified under a leading food safety management system, only 29% female representation in senior leadership and a slower reduction in greenhouse gas emissions.
Global sustainability director Carolyn Mortland said the shortfalls on diversity targets are causing concern in the company because there is a long way to go.
The report is the first to be organised under Fonterra’s new triple-bottom line reporting framework – healthy people, healthy environment, healthy business.
The healthy people category contains commitments on the quality of dairy products, the working environment of its employees, diversity in employment and helping to build resilient communities.
However, the report said community investment through the Grass Roots Fund was halved to $382,000 as Fonterra reviewed its approach to that giving.
Under the healthy environment goals are farm environment plans for all dairy farms by 2025 and zero waste to landfill and all packaging recyclable, reusable or compostable by the same date.
At the end of the 2019 financial year 23% of Fonterra farms had plans, prepared with the help of its sustainability advisers.
Fonterra is on track to achieve 100% plan coverage by 2025, Mortland said.
The healthy business key targets shown in the strategy reset and annual report in September and summarised in the sustainability report, are new.
They are to bring debt down into the range 2.5 to 3.5 times ebitda by 2022 and achieve 10% return on capital and earnings a share of 50c by 2024.
The comparative numbers for those measures in FY2019 were 5.8% and 17c and debt at 4.3 times ebitda.
Leading dairy sustainability will not be easy, chairman John Mongahan and Hurrell said in a joint statement in the report.
“Consumer habits are changing and they have a growing number of nutritional options, many of which claim to be more sustainable than dairy.
“We have an opportunity to take what’s special about us – our land, pasture-based farming model, our dairy and our New Zealandness to show the world how dairy is part of the future.”
Much of the change falls on the shoulders of dairy farmers who feel the weight of community expectations getting heavier, they said.
The co-operative is putting more energy and resources into the development of on-farm tools, research and solutions that will help them run healthy and sustainable businesses.
“Our approach is to apply and share our know-how and, by working with others, deliver technologies and solutions that don’t exist today.
“Most importantly, we’re asking for a clear and consistent science-based approach.
“That means taking the emotion out of these discussions, from both sides, and working constructively towards the development of realistic policy and solutions.”
Fonterra is making progress towards low-carbon energy for processing slower than it wants.
During the past year it converted Brightwater to co-fire wood biomass with coal and has begun to convert Stirling to electricity.
“The challenge with adopting wood biomass is the security of supply and obtaining sufficient volumes within a reasonable distance of the sites to allow full displacement of fossil fuel,” the report said.
About half of Fonterra’s gas emissions from manufacturing comes from coal and the report said little progress has been made in reducing that energy input during the past year.
