“We feel the pressure from the market” – Emmi on sustainability targets

Switzerland-based dairy group Emmi has announced a new set of sustainability targets, with an overall aim to be “net-zero” by 2050. Gerold Schatt, head of sustainability at Emmi, talks to Dean Best about the company’s latest goals and the environmental spotlight being shone on the industry as a whole.

Dean Best: Emmi has set out a fresh set of sustainability targets, including an aim to be “net-zero” by 2050. Are these the most ambitious goals the company has drawn up?

Gerold Schatt: I would say so. It's a huge step forward for us. What's new especially is we start addressing issues outside of our direct operations: greenhouse gas emissions, water consumption, and food waste. That's a big step for us and not an easy one, especially when we talk about greenhouse gases and milk production.

What benchmarking does Emmi do on its competitors and peers in the dairy industry?

It was a big part of our work. We started this process two years ago and we saw many of them didn't have this long-term perspective and hadn’t then integrated this net-zero path.

Due to our partnership with WWF, we started to think in this direction quite early and to set our roadmap in line with Science Based Targets (SBTi). It's changed during the last two years. Not every company has science-based targets, validated targets but it's coming.

How important now do you think it is to have those science-based targets?

We feel the pressure coming from the market. I was for quite a long time against this because, for me, it was already clear we have to go to zero [emissions], so, it was, for me, just marketing, but now I see it helps. It gives you credibility and makes the reporting easier.

When you talk about pressure from the market, are you talking about investors, consumers, or both?

More from retail at the moment. Especially here in Switzerland, retailers are asking for it. You see the effect because, when they start to commit to SBTi, then they have to activate their suppliers as well. From consumers? No, not yet. From the investor side, yes, in the ratings and CDP and so on, there you see it coming as well.

When Nestlé set out its net-zero plans last year, its CEO said that the move was a “moral obligation” and was about “future-proofing the company”.

I fully agree with Mr Schneider. That's not to say it doesn’t sometimes sound a little bit strange to say ‘sustainability is to survive’ [but] it helps your company to survive because, if you do this job, if you are aware of the risk, if you are prepared, if you have a roadmap to reduce impacts, then you are prepared for the future. The groups asking for this are increasing. You mentioned the consumer, investors, but also the government.

Looking at the detail of Emmi’s new goals, your CEO Urs Riedener described them as "ambitious new targets". What are the most ambitious elements? And with ambition come challenges. What are the most challenging parts of this new strategy?

Reducing the Scope 3 greenhouse gas emissions by 25%. That's the most challenging. We know a lot of possible actions but we need the suppliers. It's not in our direct area of impact. It's always a partnership, collaboration, and then it's always the conflict about who is paying for it, what is it worth, as well as the different areas we are active on the globe. 

Greenhouse gas emissions from the cow and from milk production do not have the same priority in Tunisia, Chile, California, or Switzerland. We have to deal with this ambiguity. We have to do the right thing in the right place and improve our partnerships, together with our suppliers, but also with competitors and other partners.

It's not something we can do on our own. That makes it a little bit more challenging than just reducing greenhouse gas emissions in our own operations. More than 90% of our emissions are Scope 3.

How will you look to encourage your suppliers in those different countries to try to change their production models to bring those emissions down?

We start here in Switzerland because we are very close to the farmers with our main shareholder, the [dairy co-op] ZMP. We’ve started with different topics and pilot projects. One is on feed additives for cows. We have done some research and now we want to start the application of this at the farm level. We see big potential in this area.

I believe we can reduce emissions by around 10%, optimistically up to 20%, at the farm level. We do have, at the moment, some difficulties here in Switzerland with the legislation because the product is not allowed yet as a feed additive. We have to also help there to make it happen. 

A second is biogas production on the farm level. There we also see big potential. It has a double effect because it reduces greenhouse gas emissions at the farm level from milk production by digesting manure but also if we, for example, take this biogas into our own operations and use it instead of natural gas, we can reduce our emissions in production. 

They are two important projects we’re working on. There are several others; together with competitors and farmers, we’re trying to start a so-called resource project.

That’s a tool from the Swiss government. We send out our request for such a project and, if it's approved, they give the financial fundament for the project. That's a very important key for the success of this roadmap. 

If you can answer these financial questions for the next three, four years, then we have the freedom to start with pilot projects to make the proof of concept and to convince farmers it's possible, that the different activities are accepted as a measure of reducing emissions.

We have to show the farmers the measures we believe in and that have a certain impact and then, through pilot projects, how it’s working.

How much investment would a farmer have to make to try to make their own operations environmentally sustainable? Will Emmi look to support them financially?

I can't answer this question right now because we don’t have the details yet. To give you some thoughts, we see, for example, there is very good research done by several Swiss universities, published in 2018, showing the positive effects and cost benefits of a pasture-based dairy system. That's one example where we see that it's also possible to do it in a sustainable manner with lower costs.

When it comes to the feed additive I mentioned before, we have an idea at the moment about the costs but what we’re trying here is to use emission-reduction certificates to reduce the cost for the different parties involved. What we already have is the approval from Verra [a non-profit that certifies carbon-emission reductions] for the voluntary market.

An even better option would be if we get the approval for this emission-reduction measure from the Swiss government. By this, an even higher price than in the voluntary market could be possible and we see the chance that a significant share of this extra cost for the farmer could be covered by this.

That would be the best case but we are not there yet, that's a long and uncertain way to go. We know that at the beginning of such a project we have to spend some money to make it happen.

In 2016, Emmi set out some sustainability targets to hit in 2020. The plan was to reduce emissions by 25% and you got to 24%. On waste, the target was 20% and the result was 10%.

The biggest share of this amount, more than 60% – and if we talk about waste, it's waste to landfill and/or incineration – comes from the wastewater treatment at our plant in Tunisia. In Switzerland, for example, we can take biomass from a digester to compost or to another biogas plant. 

In Tunisia, it's not available so they have to dispose of it on the land. We tried to reduce this or to find another option. The idea was a land application as a fertiliser.

There was a process with the government but we didn't get approval. We have three new options. If we find a solution, that will push us far past a 20% reduction, closer to the 50% we have in the new strategy.

Why is a pledge on water included in the new goals?

We see the risk growing for water scarcity in our operations. It isn’t of the same priority everywhere but if we have a look at Tunisia or California, it's reality. In Tunisia, every year, for some days, the government stops the water supply because tourism has a higher priority.

We then have to stop [production]. We have our own wells that help, so we don't have to stop all production but we see there is water scarcity and that has a direct impact on our production.

A broader question on farmers. Should a farmer say to Emmi they are not prepared to make changes to their operations, would the company decide to no longer to buy from them?

Our understanding is if the farmer can't fulfil the criteria because their farm is, perhaps, in the middle of a village in Switzerland and the cows can’t go outside but they have a good stable and so on.

That's a different discussion than when a farmer says 'I don't want to do this, I don't understand why I should.' I think we will find a solution for the first one but, with the second farmer, that's not the right partner for us in the future.

To what extent is Emmi looking at regenerative agriculture as part of its plans to reduce emissions?

It's not on our agenda yet but it's part of the toolbox I mentioned before when we talked about biogas and so on. That's something we are really looking at now. Perhaps it's a pilot project for the next year.

We're seeing more consumers switching away from dairy and one reason can be the perceived environmental impact of the dairy industry. How concerned is Emmi that more consumers are questioning whether they should consume dairy because of its impact on the environment?

I don't think we are concerned. We are prepared. We have a very strong dairy-alternative portfolio, so we are ready. We can deliver. We see it in the market. There is a certain shift visible. The reason is clear.

We talked before about the impact of dairy on CO2, with water and so on. We have to do the job there. We have to reduce the emissions – but we also have to deliver alternatives, other options. It's about being prepared, knowing the risks, and then your business is future-proof.

It gives new opportunities to farmers as well. When I talk to farmers here in Switzerland, if we talk about oat production or soy production, it's possible here in Switzerland, they can diversify their portfolio as well. They have new options. 

We shouldn't fear that milk consumption is going down. The population is still growing and it would be a big success if we can stabilise milk production and if there is a disconnection from the environmental impact of food production that should be our goal.

At the moment, it's still growing together. If we can hold the dairy production, but reduce the environmental impact, then we have done a good job.

Does the dairy industry have a job to do to educating consumers about its impact on the environment?

Yes, we have to talk about this because not everything is bad. A cow producing milk is really a cool system. You have sunlight that grows grass, the cow eats this grass and produces a very, very, good food resource, with a lot of nutrients in it.

It's important to have a really sustainable production system using this grass, grown on pastures in an area where you can't cultivate something else. It’s important that you have this strong case and then milk production has its place. That's something we have to bring into the discussions, to make it visible.

Main image: Gerold Schatt, head of sustainability at Emmi. Credit: Emmi