Arla Foods

Sustainable development strategy
Arla discloses a sustainable development strategy, highlighting a materiality process through which it identified its key topics and setting targets against all of these. The company’s two strategic focus areas, Stronger Planet and Stronger People, include targets covering topics across all three benchmark dimensions. The company further demonstrates its leadership by considering the influence it has across its value and supply chain when setting many of these targets.

Food loss and waste
The company has a time-bound target to halve its food waste by 2030 compared to a 2015 baseline, and it reports that it has reduced food waste by 24% since this time. It also discloses efforts to tackle this issue holistically across its value chain, joining the World Resources Institute’s Champions 12.3 10x20x30 initiative as a key supplier and launching Arla Deals (a digital platform) and ‘Tom din kyl’ (a phone app) to help consumers reduce their own food waste. Arla could further strengthen its performance by disclosing how it works with its partners to prevent food loss and waste across its supply chain.

Plastic use and sustainable packaging
The company has a time-bound target to achieve 100% recyclability for its packaging materials by 2025 and reports that it achieved 94% in 2020, demonstrating clear and measurable progress towards this target.

Accessibility and affordability of healthy foods
Arla demonstrates leading efforts to increase the accessibility and affordability of healthy foods. Focusing on Nigeria and Bangladesh, the company has set targets to increase its market penetration and reach 71.4 million low-income consumers in 2020 and 77 million in 2021, exceeding its expectations by reaching 75 million consumers in 2020. Furthermore, Arla discloses additional commercial activities by launching a new affordable dairy product in Nigeria to further support reaching these consumers.

No leading practices were identified for the company in the social inclusion measurement area.

Governance and accountability for sustainable development strategy
The company discloses that ultimate sustainability responsibility lies with the sustainability board, with all activities overseen by the board of directors. However, the company has an opportunity to improve its performance by linking the remuneration of its executive board and directors to sustainability-related metrics, whereas these are currently only based upon business performance and peer-to-peer comparison.

Stakeholder engagement
Arla outlines its process for engaging with multiple groups of stakeholders across its value chain, with many of the emergent issues reflected in the company’s sustainable development strategy and targets. While the company only produced a limited update to its materiality assessment as a result of COVID-19, it could also improve by disclosing further information on the impact of its stakeholder engagement outcomes and the process for identifying its key groups of stakeholders.

Animal welfare
Arla’s Arlagarden quality assurance programme includes animal welfare as one of four key focus areas and is compulsory. The company reports that in 2020, all 9,406 of its member farmers submitted data on four indicators related to cow well-being. While the company discloses that 30% of farms are audited annually by external certification bodies, this figure dropped slightly in 2020 due to COVID-19. It could further improve performance by setting targets in support of its policy.

Scope 1, 2 and 3 greenhouse gas emissions
The company has reduction targets for its scope 1, 2 and 3 greenhouse has (GHG) emissions. It also demonstrates progress towards all these targets since its baseline year. Arla can demonstrate leadership by realigning its targets with the Science Based Targets initiative’s 1.5-degree warming trajectory, rather than the 2-degree warming trajectory to which it is currently aligned.

Protection of natural terrestrial habitats
Arla discloses that it sources three high-risk commodities and sets deforestation-free targets and policies for all of these. It commits to buying only segregated palm oil, achieving 90% in 2020; to using 100% UTZ-certified cocoa, achieving this in 2020; and 100% certified soya, with a large proportion covered by RTRS credits. While the company discloses that its cocoa is predominantly sourced from Côte d’Ivoire, it can improve its performance by disclosing similar geographic information for its palm oil and soya.

Protein diversification
The company discloses that it has launched three organic oat drinks that are 100% plant-based, as part of its commitment to diversify proteins within its product portfolio. Arla could strengthen this commitment by setting sales-based targets for these products as a proportion of its overall portfolio sales.

Availability of healthy foods
The company discloses a sales-based target to incrementally increase healthy choices by 60,000 tonnes by 2025, compared to 2019 levels and based on products that meet Arla’s nutrition criteria. These aim to limit the amount of added sugar, salt and fat and are based on the Food and Agriculture Organization’s definition of healthy foods. Arla reports increasing this by 15,000 tonnes in 2020 and has set an additional target that 95% of its products should fulfil its nutrition criteria by 2020. The company did not entirely meet this target, with 91% achieved in 2018, 90% in 2019 and 89% in 2020, demonstrating strong performance but overall not progressing towards its 2020 target.

Clear and transparent labelling
The company has a food labelling policy which applies to all branded labels apart from bulk packaging labels. It complies with regulations regarding back-of pack (BOP) labelling in relation to calcium content and nutrients. In relation to front-of-pack (FOP) labelling, the company states that it has not found a global nutrition profiling system that is holistic and transparent but does outline some efforts to address this. Arla can further improve its performance by adopting an interpretive FOP scheme and disclosing the proportions of products for which these BOP and FOP commitments have been rolled out.

Food safety
The company states that ‘most’ of its dairies are certified to ISO 22000 standard. It has an opportunity to improve its performance by extending this certification to all its dairies and working with suppliers to address the issue of food safety.

Farmer resilience
Arla demonstrates a commitment to support the productivity and resilience of dairy farmers through its dairy development programme. The company enrolled 1,900 farms in 2019 and continues to work in countries including Nigeria, Ethiopia, Bangladesh and Indonesia, demonstrating a holistic and global approach. The company could strengthen its performance by disclosing more data on the impact of these programmes.

Child labour
While the company commits to prohibiting child labour in its own operations and requires its suppliers to adhere to the same standard, it has an opportunity to disclose a policy requiring its suppliers to have an age-verification system in place.

Forced labour
While the company commits to prohibiting forced labour in its own operations and supply chain, it has an opportunity to disclose a requirement that prohibits its suppliers from retaining workers’ personal documents and restricting workers’ freedom of movement.

Health and safety of vulnerable groups
Arla does not disclose that it specifically recognises the health and safety risks to vulnerable groups, such as migrant and temporary labourers, women and young farmers. While the company has previously carried out detailed human rights assessments in Ghana, Indonesia, Nigeria, Bangladesh and Senegal, these all fall outside the benchmark research period and the company has not provided any recent updates.

Arla discloses policies and commitments across most key topics under respect for human rights, including a due diligence process that includes regular human rights impact assessments and their integration into the company’s policies. However, the company lacks policies and disclosure on engagement with affected and potentially affected stakeholders as well as a third-party grievance mechanism.

Arla has in place policies or commitments on most decent work issues and has started the journey towards ensuring healthy and safe workplaces where workers are fairly remunerated and free from discrimination. However, Arla does not disclose a commitment on working hours that covers its operations and supply chain, nor does it report on collective bargaining agreements. In addition, it fails to report on ensuring health and safety in its supply chain or the provision of a living wage.

The company addresses all relevant issues for ethical business conduct through publicly available policies or statements, but there remains an opportunity for these to be strengthened. Arla fails to disclose information about its global tax approach and corruption identification processes, or whether it extends its lobbying and political engagement requirements to its business partners.