Dairy group Arla Foods has introduced a sustainability incentive for its farmer owners to help fund and motivate actions required to achieve its emission reduction target by 2030.
The group will give up to €0.03 per kilo of milk to farmers for sustainability activities in addition to the existing €0.01 for submitting Climate Check data.
Based on the cooperative’s current milk volume, this corresponds to a total of up to €500 million annually.
Arla Foods Sustainability Incentive Model
Following a comprehensive Climate Check on 8,000 farms across seven European countries in the last two years, Arla believes offering a sustainability-linked incentive is the next step in environmentally sustainable dairy.
The cooperative is introducing a point-based Sustainability Incentive model, building on data from the Climate Check, to reward current and future sustainability activities on farms.
In the first full year, €270 million is expected to be distributed through the monthly milk price, based on what farmers are doing according to 19 levers in the model.
Arla’s chairperson, Jan Toft Nørgaard, said, "The sustainability incentive model is a historical milestone in Arla’s transition to more sustainable dairy. We are introducing an advanced and ambitious sustainability incentive, which is a fundamental change to our milk price model.
"Going forward, the milk price Arla farmers will receive for their milk will not only depend on fat, protein, and quality, it will also depend on their activities on sustainability. The support from our members, even in a time of great uncertainty, is a testament to our commitment to be at the forefront of progressive dairy farming and set the standard for how to push our whole sector forward."
The incentive model is a point-based system, in which farmers can accumulate points based on their activities on the model’s 19 different levers e.g. feed, protein, and fertiliser efficiency, manure delivery to biogas, biodiversity, carbon farming, and the use of renewable electricity and deforestation-free soy.
Eighty points will be available from the start of the programme in 2023 and a further 20 points for new levers are expected to be built into the model within a few years, leading to a total of 100 points.
Activities with bigger improvement potential for climate and nature will lead to the most points, resulting in the biggest financial incentive, the dairy cooperative noted.
For an average Arla farmer with an average annual milk production of 1.2 million kilograms, it means that approximately €26,000 of the milk price can be returned based on their activities related to environmental sustainability.
However, the average pay-out might increase even for the first year, as some farmers are expected to attempt to earn as many points as possible from the start, e.g. by shifting to renewable electricity during 2023.
Ninety-five percent of Arla’s farmers, representing 99% of Arla’s owner milk pool, have already registered their data in the 2022 Climate Check.
Their points on some of the levers in the model will therefore automatically be calculated and rewarded.
The first incentive payment will be paid out as part of the monthly milk price in August 2023, based on milk delivered in July.