Netherlands-based dairy cooperative FrieslandCampina recently published its CSR Report 2012. In this month’s Sustainability Watch, CSR director Frank van Ooijen speaks with Ben Cooper about how the cooperative structure helps advance the company’s ambitious sustainability strategy.
It is a dangerous thing to generalise about what kind of companies might provide the most sustainable business models.
There has often been criticism short-term thinking in the investment community has militated against truly sustainable corporate expansion and yet there are many publicly-traded companies – not least in food manufacture and retail – with strong corporate sustainability strategies that are recognised as such by independent third parties.
Private-equity groups certainly had a questionable reputation in this area for many years but attitudes are changing, while there are examples of companies in private ownership that have consistently prioritised environmental and social sustainability.
On the face of it therefore, good and bad examples can probably be found everywhere. However, there is arguably something compelling about how a co-operative ownership structure might foster sustainable commercial growth.
With global revenues of EUR10.3bn across 100 countries, FrieslandCampina is among the five largest dairy manufacturers in the world and unquestionably a giant of the food sector. The Dutch-based company, which has recently published its 2012 CSR Report, is also owned by over 19,400 dairy farmers in the Netherlands, Belgium and Germany that provide the vast majority of its primary raw material.
The report includes some notable developments in energy efficiency at its plants, outreach and education to smallholder dairy farmers in the developing world, the company’s Foqus Planet sustainable dairy farming programme for its member farmers and the nutritional reformulation of its products.
These developments mark steps along the way to realising a raft of goals for 2020 that FrieslandCampina has set out across four priority areas: nutrition and health; efficient and sustainable supply chains; dairy development in Asia and Africa; and sustainable farming in the Netherlands, Germany and Belgium.
Key goals include reducing energy, water usage and waste water by 20% per kilo by 2020 against a 2010 baseline through an efficiency gain of 2% per year, and achieving a 100% supply of green electricity by 2020. Sustainability is also an integral part of the company’s overall “Route2020” growth strategy, launched in June 2010.
The last year has seen notable progress. In its report, FrieslandCampina records a 3.9% increase in energy efficiency against 2011, along with a 3.5% improvement in water efficiency. In the Netherlands, 40% of all the electricity consumed at FrieslandCampina’s production sites is now sustainably produced by its member dairy farmers. Meanwhile, in Belgium 100% of the company’s electricity requirements now come from renewable sources. In Germany, 20% of its electricity is produced from renewable forms of energy.
Frank van Ooijen, the company’s CSR director, believes the company’s co-operative structure brings some inherent advantages when trying to advance an ambitious corporate sustainability agenda. Arguably most crucial is the long-term thinking the model of ownership brings.
“The company has been here for almost one-and-a-half centuries so the farmers are tied to their soil, to their land, over generations,” van Ooijen tells just-food. “And the message that we get from the leadership of the co-operative is that it’s not just about a proper return on the investments made, so that the farmers will have a decent monthly income for the milk that they supply, but also they want us to make sure that we behave fully in line with expectations of stakeholders in the Netherlands and other key countries because that guarantees the continuity of FrieslandCampina.”
“Licence to operate” may be a term now frequently employed by the sustainability experts framing policy and practice at large multinationals. However, for van Ooijen it is a concept that FrieslandCampina’s dairy farmers, who he points maintain half of all the land in the Netherlands outside the cities, have understood and practised long before it became the subject of MBA modules.
In addition to taking a long-term view across every area of the company’s operations, the co-operative structure brings other practical advantages in furthering a sustainable business agenda. Among the achievements noted in the 2012 report are advances in sustainable procurement of palm oil and cocoa but it is the links the structure provides with the producers of its primary raw material that are arguably most critical.
The vertical integration and the control that gives the company over its supply chain is one of the six “anchors” of the company, van Ooijen points out, and also provides “a tremendous opportunity” to achieve its goals for sustainable agriculture.
Last year saw the launch of the company’s Foqus Planet sustainable farming programme for its member farmers. In its report, the company states the first year of the roll-out has gone “very well”. Progress has been recorded across the main criteria in the programme, with the downward trend in outdoor grazing arrested, improvements in energy efficiency and investments in green energy and a reduction in the use of antibiotics.
During 2012, the company held 23 farmer workshops on outdoor grazing, 17 in the Netherlands and six in Germany, while more than 4,000 member dairy farmers took part in workshops on the responsible use of animal medicines.
Gaining support from its major customers, such as Unilever and Danone, is an important component in making the business case for the work farmers must now engage in as part of the Foqus Planet programme.
For example, van Ooijen points out FrieslandCampina has extended its business with Unilever “substantially” because of progress on sustainability. “Sustainability has really brought us together and from both partners’ angles is very beneficial,” he adds.
Van Ooijen ensures such positive endorsement is communicated to farmers “so that they see that this is absolutely key from a business perspective, so they should really continue investing and putting a lot of effort in becoming more sustainable”.
The vertically-integrated structure also means there is enviable “in-house” expertise to draw upon for FrieslandCampina’s outreach and education work to farmers in developing countries.
Among the key developments reported in the company’s CSR report was the agreement of a partnership with Agriterra, a Dutch organisation that seeks to improve the livelihoods of farmers in the developing world. The ventue will see FrieslandCampina farmers travel to developing countries to help educate local smallholder farmers. Under the Dairy Development Programme, FrieslandCampina and Agriterra plan to send 15 dairy farmers to Asia or Africa each year.
For van Ooijen, it distinguishes the company’s member farmers from ordinary shareholders. Referring to a recent trip by four Dutch farmers to Thailand, he reports how they engaged “so enthusiastically” in the programme, “because they have something in common with small farmers in other geographies”.
He adds: “They know what these farmers are going through, so it is almost part of their own purpose, their own mission, to help people in dairy farming in other parts of the world.”