Fonterra

Sustainable development strategy
The company sets time-bound targets across three pillars of its sustainability strategy: Healthy People, Healthy Environment and Healthy Business, based on its most material and relevant issues. Within this, it sets targets for topics across all three benchmark dimensions, including greenhouse gas emissions and water use (environment), products meeting nutritional guidelines and food safety (nutrition) and lost time injuries and female/ethnic representation (social inclusion), demonstrating a holistic appreciation of its role in the food system. In particular, the nutrition and environment topics also relate to the company’s influence through its value chain as well as its own operations.

Governance and accountability for sustainable development strategy
Fonterra assigns responsibility and accountability for its sustainable development strategy to its highest governance body, in addition to receiving input from a Sustainability Advisory Panel composed of six external experts. Furthermore, remuneration for the company’s chief executive officer is based on several factors across all three benchmark dimensions, including health and safety, food safety and a lower environmental footprint.

Water use
Fonterra has a time-bound target to reduce water use at manufacturing sites in water-constrained regions by 30% by 2030 against a 2018 baseline, and it reports a 3.1% reduction in the period up to 2020. Furthermore, the company has used the World Resources Institute Aqueduct tool to identify water-stressed regions in its own operations (three manufacturing sites) and supply chain (Australia and Chile). However, it could further improve its performance by disclosing the proportions of withdrawals from these water-stressed areas.

Soil health and agrobiodiversity
The company has a time-bound target for 100% of farms to have Farm Environment Plans (FEPs) by 2025, showing progress towards this target between 2018-2020 to achieve 34% in 2020. FEPs are tailored plans which help farmers to implement good farming practices in relation to soil health, water quality and freshwater biodiversity, including recommendations on no tillage or low-impact cultivation to minimise sediment and nutrient loss, reducing periods of bare soil between crops and pasture to reduce erosion and leaching, using appropriate paddocks for intensive grazing and managing grazing to minimise nutrient loss from risk areas.

Animal welfare
Fonterra discloses a global animal welfare policy, in which it reports on several specific welfare indicators for cattle. These include avoidance of close confinement, avoidance of physical alterations, humane slaughter, limited long-distance transport and no cloning. It also sets targets and reports progress on somatic cell count performance as an indication of milk quality. The company could further improve its performance by disclosing further evidence on its third-party auditing processes, particularly for locations outside New Zealand.

Protection of natural terrestrial habitats
Although Fonterra has not updated its targets to source segregated palm oil from credible organisations and achieve 100% palm kernel extract traceable to mill since 2018, it has continued to show progress towards its targets in the period up to 2020. The company could further improve its performance by setting new time-bound targets for the only high-risk deforestation commodity that it sources.

Availability of healthy foods
The company has a 75% (2020) and 100% (2025) target for the percentage of everyday and advanced nutrition products that meet nutritional guidelines, and reports progress towards these between 2018-20. Fonterra’s nutritional guidelines, outlined in its nutrition policy, have been endorsed by the New Zealand Nutrition Foundation, and the company also discloses quantitative evidence of reducing sugar and fat in its product portfolio.

Clear and transparent labelling
In addition to complying with back-of-pack labelling regulations, Fonterra is utilising the nutritional Health Star Rating for front-of-pack labelling on its products in New Zealand. The company reports having rolled out this rating for 92% of its applicable products in 2020.

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

Stakeholder engagement
The company engages with multiple groups of stakeholders and outlines how it engages with them as well as key topics raised as part of the engagement. Fonterra could further improve by providing additional details on how the outcomes of its activities have specifically influenced its sustainability strategy.

Antibiotic use and growth-promoting substances
The company has a globally applicable policy which prohibits both the use of growth-promoting antibiotics and the prophylactic use of antibiotics. While Fonterra discloses that third-party audits are undertaken, it is unclear if these are globally applicable. Furthermore, it does not disclose any time-bound targets in support of its policy.

Protein diversification
The company reports that it has invested in Motif, a biotechnology company that develops animal-free foods, but otherwise does not disclose any data or targets related to diversifying proteins within its product portfolio.

Accessibility and affordability of healthy foods
The company demonstrates a commitment to increase the affordability of healthy foods through its commercial activities in Ethiopia, where it has launched Anmit, a drinkable porridge developed with local stakeholders and fortified with nutrients tailored to local needs. Fonterra could improve its performance by expanding this initiative, developing similar programmes or setting holistic and globally applicable targets.

Responsible marketing
While the company has a commitment to market its products responsibly, particularly to children, it has an opportunity to disclose qualitative or quantitative evidence reflecting this commitment.

Farmer resilience
The company has a commitment to support the farmers who make up its cooperative business structure and reports that these programmes extend to all countries where it is active. Farmers can achieve various levels based on their compliance with programmes such as Farm Environment, Health and Safety and Animal Welfare Plans. Although Fonterra reports on the number of farmers reached, it could improve its disclosure by reporting further on the quantitative impact of its programmes.

Land rights
Fonterra states that it has identified its palm oil procurement as a high-risk activity in this area. As such, it requires suppliers to recognise community rights through free, prior and informed consent and participatory mapping. The company codifies this in its palm oil standards policy but could strengthen its commitment by incorporating this requirement into its broader supplier code of conduct.

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 coordinated and consistent monitoring system for its own operations and supply chain.

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.

Fonterra discloses policies which outline its commitment to respect human rights and the ILO core labour rights, alongside expectations that its business relations meet the same standards. It also has a grievance mechanism which is accessible to employees and external stakeholders. Although the company outlines a due diligence process for identifying its human rights salient risks, it could improve its score by disclosing more information on how it assesses human rights risks outside of modern slavery.

The company demonstrates strong support for gender equality and women’s empowerment, disclosing commitments to and time-bound targets for increased female representation in senior leadership and data on female-to-male salary ratios. It commits to respecting health and safety in its own operations and supply chain and states that 62% of employees are covered by collective bargaining agreements. However, it lacks commitments relating to paying a living wage and working hour fundamentals.

The company publicly commits to protecting personal data and has a privacy statement on the use of personal data. Its code of business conduct also prohibits bribery and corruption and covers the company’s approach to lobbying and political engagement. Fonterra does not disclose information related to its lobbying expenditures and, although it does have a global tax policy, similarly does not disclose the tax it pays per tax jurisdiction.