'Fonterra decade behind on sustainability'

Rural News

CEO Theo Spierings says Fonterra is 8-10 years behind Europe on sustainability; can't keep growing in same way or 'will hit the wall'

8th Nov 13, 3:58pm by Bernard Hickey

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

By Bernard Hickey

Fonterra Chief Executive Theo Spierings has warned that Fonterra's farmers must improve their sustainability to catch up to Europe, saying that if farmers continued to intensify their dairying in the same way they had in the last decade Fonterra would "hit the wall in terms of sustainability and the environment."

Speaking at a Trans Tasman Business Circle luncheon in Auckland, Spierings said if Fonterra did not have its sustainability act together it could not win versus its global competitors.

"That's one of the things where I was maybe a little bit disappointed, that Fonterra is really 8 to 10 years behind the pack when it comes to sustainability and CSR (Corporate Social Responsibility)," Spierings said to the audience of 150 executives.

"Where in Europe we were starting to think about all these things already in 2003-04, we have just started 15 months ago," said Spierings, who started as CEO in September 2011.

"If we want to grow, and we want to grow in New Zealand, we cannot grow in the way we grew in the last 10 years because we will hit the wall in terms of environment and sustainability, so we have to get our act together," he said.

"That's why we're fencing off all the waterways, and that's almost completed. A bit in silence. When we complete it we'll speak about it because we don't want to be seen bragging," he said.

Fonterra signed its 'Clean Streams Accord' in 2003, which aimed to exclude 90% of stock from waterways by 2012 and have 100% compliance with effluent discharge rules by 2010, although compliance was just 69% in 2011. This was superceded by the Sustainable Dairying: Water Accord in February 2012. See more here.

"We've done that and now we have to go to on-farm systems to really protect the environment and sustainability," Spierings said.

The Water Accord aims to exclude 90% of stock from waterways by the end of May 2014 and 100% by the end of May 2017.

It also aims to have all dairy farm effluent systems capable of being compliant with the relevant regional council rules and/or their resource consent 365 days per year, with 100% of farms assessed by the end of May 2014.

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17 Comments

by powerdownkiwi | 8th Nov 13, 5:04pm 1383883493

It would be interesting to know if he meant 'hit the wall' in the physical resource sense, or in the political buyer rejection sense.

Either way, he's on the right track. Kudos, that man.

by steven | 8th Nov 13, 6:11pm 1383887496

I wonder on the EU as more sustainable, I thought we had grass fed and they used feed.

Former, yes....not sure on ten years mind.

regards

by JB | 8th Nov 13, 5:05pm 1383883553

The Dairy Industry has been working on these issues for many many years. It simply nonsense to state that NZ did not begin to address these issues until just 15 months ago and an insult to a dairy farmers intelligence. I personally was involved in helping fence off waterways in the 1950's on the family dairy farm - over 60 years ago.

Sure the industry is not perfect and yes we can always do more - but at a cost. Before making these sorts of comments one should look at the pollution levels in our major markets where logically one would spend the next investment $. The Dairy industry is all that's keeping our heads above water right now from an external accounts perspective and we should never forget this as the trade balance deteriorates by over $ 1 billion year on year to some $ 2.2 Billion - before we have an interest bill of around $ 10 billion which we pay by borrowing.

NZ Dairy enviroment standards are not perfect - but I would suggest they are very much higher than almost all our competitors.

It's very easy to have a non polluting dairy industry in the EU where herd sizes average 50 cows supported by obscene CAP subsidies.

by cowboy | 9th Nov 13, 11:13am 1383948824

There were Phosphate restrictions.

Rules against dumping animals in or near waterways.

Rules against dumping raw animal effluent - remember the old walk throughs with the big water trough, the water was bucketed out and swept into the creek, all old sheds were built next to creeks for that purpose.

Neighbours used to complain if water was soiled when it got to them.

The big problem was always money. When you're working on a budget that relies on recycled #8 wire technology to jury rig things together until a "good year" hits, and the primary way to get ahead was take a massive mortgage and pay yourself nothing and everything to the bank for 30 yrs... then you're not going to be developing much in the way of fancy infrastructure. It's easy for the writers and latte drinkers of the "Dairy Industry" with their big salaries and very little on the job blood and sweat to say how things should be - It's a world of different for those in the _farming_Industry who actually do the work, to pull off such expensive pipe dreams. And remember for the past 50years, farm accountants have been talking about "Steel Disease" and how many NZ dairy businesses fail because of it.

"Steel Disease" is when you have too much retained earnings going back into plant and infrastructure compared to your dividend/net profit (over capitalisation/poor use of equity)

Subsidies make a huge difference because they're pure profit, poor year or good year; bad staff good staff; fertility/weather etc not withstanding. It's not an income which requires a risk and expense.

by Henry_Tull | 9th Nov 13, 11:59am 1383951563

recycled #8 wire technology to jury rig things together

Taught to us in Taranaki as the Queensland Hitch, No.1 first best maintenance technology. Returning many rightly so would not have one on the place.

http://www.instructables.com/id/How-to-Tie-a-Cobb-Co-Hitch/

by cowboy | 9th Nov 13, 2:36pm 1383960995

(1) Try it with 20 yr old rusty wire...

(2) It might work on fences and the odd bit of timber but it won't hold your plant, machinery or feedlot effluent together safely in this day and age. So if you're relying on it to keep the bottom line black...well that is the state of dairy last 50yrs which is why we're so far behind on farm.

by cowboy | 9th Nov 13, 11:01am 1383948076

Damn well ain't that Theo being the pot calling the porcelin black....

I've fenced off water ways, using fertiliser targeted for soil biology & using animal wastes as fert nutrients, 20kg Urea (not units N) per ha per yr, recycling water where possible, have heat recovery systems on my hotwater usage, and just put in 1.5kW PV panels, and have solar hotwater panels I'm hoping to upgrade next year.

What have Fonterra decided to do: Made a famous lake from buttermilk, opened a new coal mine, brought in rules which have doubled my hotwater needs on farm and quadrupled my plant/vat wash water needs.

Fortunately for me, my systems were already in place to minimise the impact of some of their demands, however their demands are causing strains on my systems; as existing dairy shed designs do not allow for such increased resource drain (the space and layout have been near optimised over the years to more efficient systems...so putting in an extra 300l of hotwater per day goes where, let alone plumbing for gravity for recycling water....).

by notaneconomist | 9th Nov 13, 5:10pm 1383970212

Glad someone brought up the buttermilk lake hipocracy.........

How many milk tankers sit at factories waiting for processing? What time period are the tankers sitting there for? What happens when the processing plants run out of chilling storage capacity? And what happens to this milk stuck in the tankers without chilling facility - where does it get processed?

....and my biggest gripe is.....why, does all purchased milk in shops taste like milk powder mixed up? Why does NZ have so many brands of rancid butter being sold in supermarkets?

I think most farmers know what they're doing and are doing very well in both sustainability and in addressing environmental concerns.........I think Theo needs to get his butt out of his office chair and put a pair of boots on and actually have a look around.

by powerdownkiwi | 9th Nov 13, 5:58pm 1383973108

Hypocrisy?

No farmer reliant on fossil fuels, is sustainable. No farmer reliant on imported anything - phosphate, palm kernel - is sustainable. No farmer - and no most-of-society-at-large - is sustainable.

Why is it that we somehow narrow down on one thing, and extrapolate that we're 'doing very well'? It's cognitive dissonance at best. There's a lot of it about, mind. Peter Dunne made some stupid remarks today in the same line, and the Govt is skewing it's carbon graphs in an interesting manner too - which won't be an honest mistake.

by notaneconomist | 9th Nov 13, 7:37pm 1383979039

..........I'm curious as to WHY you so frequently have the need to use the cognitive dissonance line..........maybe you feel conflicted..........or does accusing others by insinuating they are inferior to you make you feel better?.......What ever your issue....... it is yours.

Who skewed the carbon graphs?.........oh that's right.......the little hockey stick graph......think we have had that discussion......

Conversation over..........time to jump in the V8 and fan the breeze.

by steven | 9th Nov 13, 7:47pm 1383979644

Red is um red right?

So "cognitive dissonance" is what describes the issue/problem/symptom, hence when some yet agains says whats that? you get the same answer.

Hockey stick was and is proven to be robust science despite attempts to disprove it.

By all means enjoy the V8....it will pass into history just like Air New Zealand...

Maybe an opportunity to buy lots fo shares? It would be nice to se it sold into private hands held by ppl such as yourself

Good luck with that.

regards

by cowboy | 9th Nov 13, 8:19pm 1383981573

As mentioned I'm already in the process of bringing on line PV cells (1.5kW today), and solar hotwater. We're implementing insulation where we can. And also doing heat recovery. Also plumbing in systems for evaporative cooling of refrigeration and chiller gear to bring down load so I can break off circuits and use alternative sources and Automatic Transfer Switch gear to ensure full operation. (Using separate circuits reduces load per circuit and improves battery bank life and reduces bank fail rates, although inverter costs do add up.) LED lighting is almost complete with a few compact Flouro's waiting to be phased out.

Sadly such things are very expensive in NZ, and not much real expertise is out there. eg Finding out that most Modified Sine Wave inverters are useless because heating loads are about the only thing most of them are good for.

As mentioned I've been working with biologiogical fertilisers with the push towards optimising microbe activity. This means increase a few trace elements but a massive reduction in applied fertiliser - that's less processing, less trucking and staff driving to work, and less coal & gas factories producing power. One of our chief nutrients is now Sulphur, not phosphate or nitrogen.

Once the majority of the farm is solar or wind powered, I will look into motive electrical systems.... but a Sukuzi Zero (electric motorbike is $15k, as opposed to $3k for a mudbug) and I don't see rechargable four wheelers or tractors on the horizon anytime soon. But I might start playing around with a 4wheeler frame once I've got the farm ticking along.

I would like to see about doing methane capture and scrubbing. Especially for use in some of the bigger motors, but you really need a large volume of digestant, and it really should be higher energy that bovine grass manure. I've looked into gassifiers, but I'm still dubious about whether the fuel output is worth the atmospheric input; again with the energy recovery being quite low. You don't get something for nothing, and that's even more true with low value inputs.

The other item I was looking at was transesterfication, whether or not that could be applied to dairy waste (eg buttermilk). However finding the funding and time to experiment with nanoparticles is likely to prove to be a poor return on the raw materials. That is to say, it will take a long time and lots of money which is in short supply after the cost of the PV panels etc, so I'd be looking about about 3yrs research on my own "spare" time to get it working...and for what? So Fonterra can ship more of our business to China?

Part of the difficulty is volume. It's easy enough to run a household, couple of LED lights, laptop, LPG stove, fridge. When you've got a business that produces something then it takes more to provide that. I'm looking upwards of 50kWh /day, and dealing with 10kW motors (that's a LOT of 12v batteries)....on a budget and tax rate that is based on recycled #8 wire economy.

by Omnologo | 9th Nov 13, 10:07pm 1383988056

Steady on, you might prove to be too sustainable for PDK, he won't have a cause to rally against.

I wonder if Theo could expand more on Europes superiority in environmental sustainability and the oxymoronic 'corporate social responsibility'?

Interesting to note one of the groomed candidates for a Fonterra directorship wants to secure milk supply from subsidised competitors, despite accepting DIRA as a condition of forming Fonterra. And here we are dumping butter milk...well we may have to lift our game on sustainability, but I wont hold my breath on the executive and governance lifting their game on business performance.

by cowboy | 9th Nov 13, 10:44pm 1383990269

Much of Europe etc have fallen to two extremes. Little farmlets of 10-50 animals, that have been in the hands of the same people for generations (not just 2 or 3 generations, but 12 or more) and just puddle along doing sod all.

Or they're massive factories for 2000+ (I've heard of 12,000) with everything brought in, everything piped out. Receiving huge subsidises and assistance. Often these places had their startup before the regulations got tight, but with those kinds of volumes you have to be able to transport effluent and food, so infrastructure is in place early on. And with subsidy money the business doesn't even have to be viable early on (let alone cope with NZ style interest rates - or 70's style mega interest). But that is the whole point of those subsidies, to get the most basic need of dairy established in volume no matter what - these came about from Churchills changes to feed Britain during the war. 70% of British food was merchantiled in. War with Germany changed that. With Uboats and German navies Britain HAD to have food or it would have lost the war - in fact I think the Axis command were calculating on that. They brought in subsidise and forced (at gunpoint if necessary) the farmers to stop their antique "lifestyle block" methods of farming, to anything which would make food. Dairy was a primary importance, that and rabbits were the best way to create animal protein for the UK diet, and butter the best way to create fat.

At the end of the war, Britian voted to keep the control of the farms under the wing of the government as part of the new leftwing government that came in, the subsidies became entrenched with that legislation. Europe soon followed post war, for similar reasons, to rebuild what had been done to their farms and infrastructure. (a german war bread recipe for example includes grass clippings and sawdust). Money is needed to turn these things around - money which you can't get from a free-market if your farm isn't working!!

New Zealand, of course, copied what Britian did. But then later moved to repeal those subsidies, mostly because our people and economy simply couldn't afford it. Partly because it was causing some rather crazy market/on-farm behaviours. And partly and probably most importantly we couldn't compete with the prices offered overseas because they would always be able to out subsidise us, with their larger populations.

by Omnologo | 9th Nov 13, 10:55pm 1383990944

Insightful comment, and context to Theos opinion, thanks.

by notaneconomist | 11th Nov 13, 7:42am 1384108948

If Sustainability and Environment issues correctly identified the importance of Physiology instead of Psychology as it does now then we wouldn't be having much of the debate on these topics. The purposes of legislation like the RMA were to address physiological environmental affects and sustainability of that system.

Theo appears to have a very poor understanding of physiology and psychology which is why he has become confused on sustainability and environment. This confusion is widespread and poses enormous difficulties for people like farmers and any other business which gets the finger pointed at them. When you have one group who are actively partaking in addressing any Physiological affects and the rest of the populace using Psychology then confusion is created.

CSR is an abused phrase depending again on the psychology of the user.

by redcows1 | 11th Nov 13, 9:33am 1384115599

Nice rewrite of history there from Theo. from now on time shall be measured from the time theo took over. BT- before Theo , the dark ages. AT- after Theo, an enlightened time.

All hail Theo our environmental saviour.