Sustainability Watch - John O'Maoileoin, Dairy Crest
It has been an eventful summer for UK dairy company Dairy Crest, with protests by farmers over a proposed cut in milk prices grabbing the headlines, along with the sale of its French subsidiary, the announcement of plant closures and job cuts in the UK and the publication this week of an interim trading statement which warned of a drop on first-half profits.
The high-profile row over the milk prices, which also involved other dairy processors and major retailers, and the rationalisation underway in the UK eclipsed the launch in August of the company's new sustainability strategy which focuses on 40 Corporate Responsibility Pledges, included for the first time in Dairy Crest's 2012 Corporate Responsibility Report.
Given that some of the pledges deal directly with the equitable treatment of suppliers and employees, one wonders whether this would be the right moment to launch a set of bold statements setting out positions on a host of ethical questions.
And given that it is at times like these that comparisons are made between bold intentions in corporate responsibility strategies and a company's actions, the fact that the publication of its 40 Corporate Responsibility Pledges has attracted little attention may not have been a bad thing.
John O'Maoileoin, corporate responsibility and communications manager at Dairy Crest, agrees that the dispute over milk prices comes into "the corporate responsibility remit" and such a high-profile issue would lead to increased scrutiny of the company's ethical commitments.
In its latest corporate responsibility report, Dairy Crest states it "remains fully committed to building a strong and secure business on which our farming suppliers can depend," and that it "will continue to do everything we can to reduce the effects downward pressures from the market place are having on the price we pay for raw milk." Later in the report the company adds: "We offer our supplying farmers a fair and competitive milk price, help them focus on efficiency and best practice throughout the milk supply chain and provide advice and support services on issues such as legislation, animal welfare and wildlife support".
The image of farmers protesting at the dairy gate does not appear to accord all that well with these sentiments. However, O'Maoileoin points to Dairy Crest's actions in response to the protests, notably the fact it had been the first company to suspend plans for the August price increase - the company published details of price increases earlier this week following similar announcements by other processors - as evidence that it was continuing to live up to the ideals of the 40 Pledges. As to whether the company would be judged by others to have done so, O'Maoileoin says "only time will tell".
The company's new corporate responsibility platform of course covers much more than supplier and employee relationships. O'Maoileoin stresses it is the broad nature of the strategy, covering "the whole broad spectrum of what corporate responsibility is" which sets Dairy Crest apart from its competitors. Rather than focusing chiefly on the environment, "we wanted to include things like diversity in the workplace, staff engagement, well being, and community initiatives," he says, adding: "The more we looked at it the more we realised there is crossover between each area."
The 40 Corporate Social Responsibility Pledges cover a wide range of environmental impacts, improving the nutritional profile of products, ensuring an ethical supply chain, health and safety in the workplace and community engagement.
For example, Dairy Crest has pledged to reduce its relative carbon emissions from manufacturing by 30% by 2020 against a 2007 baseline. To date it has achieved a 19% reduction. O'Maoileoin says progress on carbon emissions is something the company is particularly proud of, citing the installation of a biomass burner at its Davidstow plant as a notable initiative and a first for a dairy company.
The GBP4m investment at the Davidstow creamery has helped reduce the company's overall carbon footprint by almost 10%, Dairy Crest states in its recent report, adding the company's carbon footprint is now 59% the size it was in 2007.
Also included in the environmental commitments is a pledge to reduce average CO2 levels to 120g/km by 2013. With a view to greening the supply chain, the company includes measures to help farmers reduce their CO2 emissions, notably with the introduction of a specialist carbon measurement tool. Average carbon emissions per litre of milk at the 100-plus farms which participated in a pilot project for the tool were found to be 18% lower than the European average, Dairy Crest reports. "It basically helps farmers reduce not just their emissions but also reduce costs, so it's a win-win," O'Maoileoin tells just-food. The tool has been endorsed by the Carbon Trust and has also been adopted by three of Dairy Crest's retail customers.
Regarding water use, the company has a target to reduce relative water usage by 20% by 2015, also against a 2007 baseline, and is "on target" to achieve that. It also aims to help its farmer suppliers measure their water usage through its 'WaterWell' dairy water audit package, launched in April. This package is to be offered to all its farmers as part of Dairy Crest's White Gold service with a target of a 25% uptake by April 2013. It is also encouraging farmers to participate in an environmental stewardship scheme to help sustain wildlife habitats.
Other targets include an aim to send no waste to landfill by 2015, and use 30% recycled material in all plastic milk bottles by 2015 and 50% recycled material in all plastic milk bottles by 2020. Dairy Crest has also pledged to reduce the amount of packing it uses by 10% by 2015 and reduce relative product wastage by 20% by 2015 against a 2007 baseline.
The new strategy also includes undertakings related to the nutritional profile of products, with a commitment to "continue to grow the lower fat variants of our core UK food brands".
Returning to the issue of supplier relationships, the 40 Corporate Responsibility Pledges also include an undertaking to increase the number of farms with direct supply contracts. In 2010, 74% of the milk the company sourced came from direct supply contracts but Dairy Crest has committed to increasing this to 85% by 2013.
As corporate responsibility champions are often fond of doing, O'Maoileoin stresses the business case underpinning the pledges, and arguably nowhere is this more apparent than in the company's dealings with its suppliers. As he puts it: "Without a sustainable dairy farming sector we wouldn't have a business, so it really isn't in our interest to cause our farmers difficulty".
However, this summer has shown that for dairy processors under severe price pressure from their retail customers, ensuring a sustainable supply chain represents an extremely daunting challenge.
Dairy Crest has launched a formula-based 12-month contract for non-aligned direct suppliers....
UK dairy group Dairy Crest has acquired small specialist regional milk group Proper Welsh Milk....
- Analysis: Is Heinz, Kraft merger "a growth story"?
- The challenges awaiting ConAgra's new CEO
- M&A Watch: Who could be on 3G Capital's radar?
- Focus: Can Mars gain share in Indian chocolate?
- Viewpoint: Faber-led Danone gets realistic
- UPDATE: Heinz, Kraft strike merger agreement
- Fatal explosion at French desserts firm Senagral
- Kraft "in buyout talks" with Heinz owner 3G
- Infographic: Heinz, Kraft unveil combined business
- Buffett: Kraft Heinz to withstand health focus