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How does Arla’s incentive model work for dairy farmers?
Governments, retailers and consumers are all calling for agriculture to transition to more sustainable practices, but how do you really drive change on farm?
As the largest dairy cooperative in the UK, Arla has taken a bold step to drive action on this area. In October 2022 it announced its Sustainability Incentive Model which rewards farmer owners for past and future actions on farm and makes up a proportion of the milk price.
How was it developed?
Arla launched its Climate Check programme in 2020 to capture data on the current carbon footprint of the milk being produced on its owners’ farms.
This information has given the cooperative a clear picture of where the biggest opportunities lie for reducing emissions and enhancing the environment.
“Using the Climate Check data as our foundation, we have worked with our farmer owners to develop a points-based model which rewards both past and future activities that makes the most impact on sustainability,” explains Paul Savage, Agriculture Director for Arla UK.
Paul Savage, Agriculture Director for Arla UK. © Arla Foods
“Completing an annual Climate Check is a prerequisite to accessing the Sustainability Incentive Model payments and farmer owners continue to be paid 1 eurocent per kg milk for completing the Climate Check.
“Owners can then gain points via the Sustainability Incentive Model depending on the actions they take, with 80 points being available from the start, each worth 0.03 eurocent kg/milk on the milk price.
“As part of our data analysis, we identified five areas which not only have the greatest impact on carbon footprint but also account for 78% of the variation of carbon footprint scores – we have called these ‘the Big5’.
“Many of the points are related to performance in the Big5 and are calculated automatically upon completing the Climate Check.”
The Big5 levers
© Arla Foods
The Big5 are ‘levers’ that all farmer owners can work on immediately within their farm management without any external dependencies apart from their normal advisory support.
For example, growing different varieties of grass to produce more forage from the same land area, or improving feed efficiency so less feed is required to produce the same amount of milk.
Arla has calculated that if owners manage these five levers with precision, they can deliver almost a third of the reduction necessary to meet its 30% reduction target by 2030.
The Sustainability Incentive Model also rewards other activity such as renewable energy use and sustainable feed sourcing.
© Arla Foods
“Our aim is to provide our farmer owners with clear guidance on what actions will make a difference and encourage incremental action in the areas that will make the most impact.”
“The incentive model rewards and helps motivate this activity and will hopefully prompt the rest of the UK industry to move in a similar direction,” concludes Paul.
Alongside the announcement of the Sustainability Incentive Model, Arla also released a report detailing the results of this years’ Climate Check data and the actions the cooperative is taking to reduce emissions on farm.
The ‘Data Driven Dairy’ report encourages lenders, government and the wider industry to support Arla farmer owners in this area, to accelerate action even further.
© Arla Foods
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Arla Foods is a global dairy cooperative owned by 8,500 dairy farmers, around 1,900 of which are in the UK.
Dating back to 1881, Arla’s purpose is to secure the highest value for its farmers’ milk, while creating opportunities for their growth. As a company owned by farmers, all our profits are returned to our farmer owners.
Arla Foods UK is the largest dairy cooperative in the country and is the UK’s largest supplier of organic dairy products and have UK favourite brands like Arla Cravendale, Lurpak and Anchor.
The UK business has a team of approximately 3,600 colleagues located at its dairies, creameries, distribution centres and head office.