Arla Foods has introduced the Sustainability Incentive, a voluntary rewards system designed to encourage farmers to adopt sustainable practices.
From 2023, the co-op will re-distribute 2.40eurocents per kg of milk to participating farmers based on their points tally, which will be awarded across 19 levers, with big-impact measures earning more points. Past activities will also be recognized.
At the start of the scheme, 80 points will be available for a total of 2.40eurocents, with another 20 expected to be implemented in the future to bring the total to 3eurocents.
A prerequisite to joining the scheme is submitting data through Arla’s online tool Climate Check, which requires farmers to answer 203 questions about their herd, feed production and energy usage among others. Doing so will earn them 1eurocent on top of the points-based earnings.
The scheme has a strong focus on climate activities and will be key to reaching the co-op’s scope 3 target for 2030, for which the organization must reduce greenhouse gasses per ton of standardized raw milk and whey by 30%.
Arla expects to distribute at least €270m in the first full year of the initiative, this being based on an average of 39 points or 2.17eurocent per kg of milk for achieved points. For an average farm that delivers 1.2m kg of milk yearly, that would bring in additional €26,000.
The co-op says around 95% of the its farmers have already registered their data through the Climate Check tool, making them eligible to start earning points right away.
How points are awarded
The Sustainability Incentive model rewards points for climate-smart activities undertaken across 19 levers.
The levers with the biggest impact potential will trigger the most points – these categories are the so-called ‘big 5’, which Arla has identified as feed efficiency, fertilizer and land use, protein efficiency and ‘animal robustness’ i.e. herd health.
Other levers include manure handling, sustainable feed, renewable electricity, and biodiversity and carbon farming.
The first incentive payment will be paid out as part of the monthly milk price in August 2023, based on milk delivered in July. It will be calculated on 2022 Climate Checks data and any additional documentation that the farmer has uploaded.
Arla’s chairman Jan Toft Nørgaard commented: “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.”