Monday, 10 May 2021
As part of their pledge to become a net-zero business, Danish dairy major Arla Foods will purchase Guarantees of Origin (GOs) directly from their farmers. The move allows Arla to claim carbon reductions for their supply chain while offering farmers improved compensation for their power.
The Arla cooperative farmers who generate their own green electricity sell the excess to the public grid. However, Arla has recognised the value of the farmer's green electricity in their overall sustainability strategy.
"With this opportunity, the green energy that our owners produce can be counted as part of our collective actions to make dairy products more sustainable," said Jan Toft Nørgaard, Arla’s chairman.
Arla typically buys GOs to cover their electricity usage on the open market and similarly, the cooperative farmers sell their GOs associated with their green electricity production there as well. A bilateral agreement would lead to reduced costs for Arla and improved profits for the farmers by removing third-parties and associated commissions.
"Arla farmers can help their own company to accelerate the transition to renewable energy while the company can maximize the value of their investments in renewable energy,” says Hanne Søndergaard, Arla’s head of sustainability."
According to Arla's own data, approximately a quarter of the cooperative's farmers (more than 9 400 in 2020) produce electricity via wind turbines or solar modules installed on their properties. However, some of these installations receive government subsidies - for farms in jurisdictions such as Germany and Luxembourg, the State does not allow the subsidised producer to sell GOs. This lowers the proportion of current farmers who can sell GOs to Arla down to 14 percent.
Nevertheless, such GOs are expected to account for approximately one-fifth of Arla's total electricity usage. "The full profit for the GOs that we can secure the farmers with this move has no extra cost for the cooperative and is a positive contribution to the business case for Arla farmers who consider investing in renewable energy," said Nørgaard.
Arla announced back in 2019 their goal for net-zero carbon by 2050, along with a 30 percent reduction in emissions by 2030. Their 2020 annual report notes that 96% of their emissions are classified as Scope 3 (indirect, from purchased goods), where they are aiming for an emissions target of 1.15 kg CO2 per kg of milk (2019 global average was 2.5 kg CO2).
Biogas and biomethane is also part of the Arla sustainability strategy - Arla Food Ingredients, a subsidiary of Arla Foods uses approximately 50 GWh of biomethane based electricity each year at two of their production plants (click here for more detail). This has lead to CO2 emission reductions of approximately 62 000 tpa. Manure and crop waste from the Arla farms comprise the feedstock used to produce the biomethane.