EU Dairy Sustainability

Sustentabilidade na Cadeia de
Produção de Leite na Europa
Prof. Cesare Zanasi (Univ. Bologna)

EU COW MILK GLOBAL RELEVANCE
SOURCE: http://www.clal.it/?section=produzioni_popolazione_world

The milk chain in EU – structure
KEY CHARACTERISTICS OF THE SUPPLY CHAIN
Dairy markets are very diverse,
• different products (yoghurts, cheeses hard and soft, liquid milk, cream and
butter, high value added ingredients)
• different sizes
• different competition situation (local, national, European),
• different seasonality,
• different logistics due to shelf life.
It is not possible to consider these markets as a single global market which can be
managed in a single way.
Source
http://ec.europa.eu/agriculture/markets/milk/hlg/eda_bl1doc1_en.pdf
http://ec.europa.eu/agriculture/markets-and-prices/market-statistics/pdf/2014/d20-1-420_en.pdf

• Whilst a large and growing proportion of the industry’s output is higher value
added items, a significant proportion still has commodity characteristics, i.e.
products of identical specification in which competition is focused on price.
• The supply chain is extremely diverse.
• There is a large ingredients market both in the EU and overseas and a growing
catering and out-of-home sector.
• There are enormous variations in supply chain relationships. Some customers
are committed to particular suppliers but in many cases commercial
relationships are unstable and of short duration.

The dairy chain in EU – structure
There is a much higher degree of concentration amongst retailers than there is in dairy
processing
The valuation of raw milk is central to the competitiveness of processors.
Raw milk is usually the largest single cost component for dairy processors.
For cheese it can constitute up to 80% of the wholesale price.
For liquid milk it can be over half.
After raw milk costs, the majority is accounted for by energy or energy related costs and
labour costs.
For liquid milk the cost of packaging is very significant.
Farmers own a significant portion of processing capacity. Co-ops are estimated to account
for nearly half of EU processing capacity.
BUT FARMERS ARE GETTING OLDER AND STILL REPRESENT THE WEAKEST LINL IN THE VALUE
CHAIN

The EU dairy market
GLOBAL DEMAND INCREASE
The OECD and FAO, in their most recent Agricultural Outlook
report, predict that global dairy demand will grow by around
2% per annum up to 2023.
http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&reference=PE-541.637&format=PDF&language=EN&secondRef=01
End of quota system will increase EU markets volatility
EU encourages competition on quality and not on price

RELEVANT EONOMIC – SOCIAL AND
ENVIRNOMENTAL ROLE OF DAIRY
PRODUCTS FOR EU
In molte aree svantaggiate e regioni ultraperiferiche, la produzione lattiero-
casearia rimane l'unica fonte di reddito e di occupazione delle aziende
agricole. La sua sopravvivenza è essenziale per evitare l'abbandono delle
terre.
In quanto componente chiave dell'industria agroalimentare presenta un forte
potenziale di crescita e creazione di posti di lavoro nel lungo termine che dovrebbe
essere uno degli obiettivi del nuovo piano di investimenti;

How decisions and implementation of
sustainability work
Pro-sustainability Campaigns
(e.g. Soy moratorium)
Investors become aware of possible
damages to companies reputation
Producers/Processors/ Retailers
take action and participate in the
Sustainability guidelines definition
Many private or third party
voluntary sustainability
initiatives emerge (e.g. Sojaplus)
Governments regulation follow
and integrate or regulate
sustainability initiatives or
schemes (e.g. Organic in EU)
Media – Researchers – civil society
organizations – International
bodies ( e.g. FAO) provide info on
sustainability challenges
Producers/Processors/ Retailers adapt
to sustainability schemes and
regulations

It is important to understand
what the Industry Retailers and
Investors want in terms of
sustainability

SUSTAINABILITY
INVESTORS PERSPECTIVE

http://www.fdfworld.com/supplychain/85/Nestle-UK-Ireland-Builds-a-More-Sustainable-Dairy-Supply-Chain
SUSTAINABILITY OF DAIRY SUPPLY CHAIN
INDUSTRY PERSPECTIVE
Nestle UK & Ireland Builds a More Sustainable Dairy Supply Chain
Nestlé has been encouraging its suppliers along its supply
chain to
• reduce emissions
• develope biodiversity-based farming techniques.
Local creameries have been making efforts to
• reduce water consumption,
• reduce greenhouse gasses,
• improve the proportion of milk which comes from forage,
• plant wildflowers to attract and encourage the resurgence
of native flora and fauna species.

http://www.fdfworld.com/supplychain/85/Nestle-UK-Ireland-Builds-a-More-Sustainable-Dairy-Supply-Chain
http://www.edie.net/news/6/Nestle-secures-sustainable-milk-supply-chain-for-Kit-Kat-and-Nescafe/26574
Achieving these goals means working closely with its suppliers, and Nestlé UK
& Ireland is reportedly reaching out with special incentives to make the
initiative worthwhile for both parties.
Media reports that Nestlé offered UK-based dairy company First Milk a
competitive pay rate for its dairy supply in exchange for their cooperation
and help in this endeavor.
If repeated and sustainable success is achieved, it seems likely that other divisions
of Nestlé global operations will pick up the mantle and start moving toward a more
sustainable dairy supply chain as well.
Nestle UK & Ireland Builds a More Sustainable Dairy Supply Chain

British dairy supply chain a ‘global leader’ in terms of environmental sustainability: Industry report
By Mark Astley+ , 26-Jun-2013
The British dairy supply chain – comprising farmers, processors and retailers – is a “global leader” in terms of environmental
sustainability, an industry-funded report has claimed.
http://www.dairyreporter.com/Manufacturers/British-dairy-supply-chain-a-global-leader-in-terms-of-environmental-sustainability-
Industry-report
UK Dairy Chain sustainability requirements

SOURCE: http://www.danone.com/en/for-all/mission-strategy/our-strategy/a-sustainable-food-chain/
DANONE and Sustainability
Danone has today identified four key focus areas for their engagements looking ahead to 2020

Source EU dairy industry EDA
http://eda.euromilk.org/fileadmin/user_upload/Public_Documents/Fact_Sheet/Sustainability/2015_06_16_EDA_one-pager_on_preventing_food_wastage_in_t.pdf
EUROPEAN DAIRY ASSOCIATION (EDA)
Topics discussed
• Food Waste: Waste revision targets and packaging waste
• Animal Nutrition: Feeding dairy cows with sustainable soy
• Environmental Foot Printing
• Water Re-use
• References for Emissions Techniques
• Influence of Agricultural Policy on Rural Development
• The Global View on Dairy Sustainability

http://eda.euromilk.org/fileadmin/user_upload/Public_Documents/Annual_Report/EDA_Annual_Report_2014.pdf
EUROPEAN DAIRY ASSOCIATION (EDA) SUSTAINABILITY FRAMEWORK
Dairy Sustainability Framework (DSF): developed and managed by
the Global Dairy Platform (GDP)
• Shall give guidance to the dairy sector worldwide as to how to
work towards improvement of its sustainability
• Allows the sector and industries working in the sector to
develop coherent communication on the progress made on the
road to improved sustainability.

SOURCE: http://eda.euromilk.org/fileadmin/user_upload/Public_Documents/Annual_Report/EDA_Annual_Report_2014.pdf
EUROPEAN DAIRY ASSOCIATION (EDA) PROJECTS
Product Environmental Footprint (PEF) project: The highest
visibility and most probably the deepest strategic impact work in
sustainability according to EDA
CO2 Emissions and the Emission Trading Scheme (ETS)
Best Available Techniques Reference Document (BREF)
The BREF concept has been introduced to build up a technical
performance benchmark for different industries with regards to a
variety of emissions from production plants, and the part looking
at the food industry includes the milk processing industry

1 Climate change
and clean energy
2 Sustainable
transport
3 Sustainable
consumption and
production
4 Conservation and
management of
natural resources
6 Public health5 Social inclusion,
demography and
migration 7 Global poverty and
Sustainable
Development challenges
SEVEN KEY CHALLENGES
25
EU Sustainable Development
Strategy (EU SDS)

EU food Sustainability future strategy
Source: DG Agriculture and Rural Development.
The CAP post-2013: From challenges to reform objectives

EU food Sustainability future strategy
Source: DG Agriculture and Rural Development.
The new greening architecture of the CAP

THE EU POLICY FOR MILK
THE MILK PACKAGE
http://ec.europa.eu/agriculture/milk/milk-package/com-2014-354_it.pdf
Financial support to milk producers in disadvantage areas to
prevent rural migration and environmental degradation
No other measures directly linked to sustainability
Main concern is preventing price volatility, frauds, protect producers from risks
and in general promote the sector demand both internally and internationally

THE EU POLICY FOR FOOD CHAINS
High Level Forum for a Better Functioning Food Supply Chain published its
final report on 15 October 2014, concentrates its discussions and/or actions in
the following areas:
- business-to-business trading practices,
- the Internal Market for food and drink products,
- sustainability,
- social dialogue and food price monitoring.
EDA is following the work carried out by the High Level Forum via the Food & Drink
Europe B2B platform
http://www.interregdairyman.eu/upload_mm/0/f/1/732f3eac-fe02-461e-961d-1170e3a9a623_Rapport%20Dairyman%20Regional%20sus_LR.pdf
http://ec.europa.eu/environment/agriculture/index.htm
CAP and dairy see pag.12
http://ec.europa.eu/agriculture/milk/milk-package/com-2014-354_en.pdf

The HIGH LEVEL EXPERTS GROUP (HLG) should consider
how the EU can mobilize resources to invest in first order R&D into, among
others,
agricultural productivity
and how dairy can make a contribution to climate change mitigation
The EU dairy industry does not have the resources to engage in first order
scientific research.
EDA RECOMMENDATIONS TO RESEARCH

ACADEMIC PERSPECTIVE
Source:http://orgprints.org/21761/7/21761.pdf

ACADEMIC/INDUSTRY PERSPECTIVE
The conference will analyse environmental sustainability along the dairy supply chain,
Various aspects of resource efficiency,
• Waste transformation along the supply chain
• Packaging
• Feeding
• Sustainable Dairy farming systems
• Water consumption
• Milk processing: sustainable innovations
• Link between environmental sustainability and nutrition

EU Dairy Sustainability

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