Arla boosts dairy’s sustainability with closed loop on renewable energy strategy

05 May 2021 --- Arla is keeping more renewable energy within the cooperative’s value chain by purchasing guarantees of origin (GOs) directly from its farmer owners. The move allows Arla to claim the CO2 reductions in the dairy chain while securing farmers a better price for their power.

Arla’s cooperative farmers generate green electricity for their own farms and for the public grid. However, Arla wants to increase its share of renewable energy in its operations. This is why the company and the farmer owners have collaborated on an idea for how to keep the farmers green electricity in the dairy value chain and provide a better profit for the farmer.

“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,” says Jan Toft Nørgaard, Arla’s chairman.

GO is an EU measure for renewable electricity, which guarantees that a carbon reduction has only been counted once. Arla farmers currently sell surplus wind or solar energy as a commodity to a utility company or a trader. 

At the same time, Arla buys GOs on the open market for approximately one-third of its total electricity use in its operations. 

Arla estimates that around a fifth of the company’s total electricity usage in its operations can potentially be covered by farmer-produced GOs.By purchasing GOs directly from farmer owners at market value and leaving others out of the equation, the full profit stays with the electricity-producing farmer. 

“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. 

A go for GOs

According to Arla’s Climate Check data, 24 percent of the cooperative members currently produce renewable electricity from wind turbines and solar panels on their farms. 

As it’s mandatory for farmers in Germany and Luxembourg to pass over their GOs for green electricity to the government if their electricity production is subsidized, the share of owners who can choose to sell them to Arla is currently 14 percent. 

Arla estimates that around a fifth of the company’s total electricity usage in its operations can potentially be covered by farmer-produced GOs.

“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,” says Nørgaard.

Toward a sustainable future
In Arla’s operations, emissions have been lowered 24 percent since 2015 and the share of renewable energy used in operations is currently 35 percent. 

A continuous increase is part of the ambition to reduce total emission by 30 percent from 2015 to 2030 and to be a carbon net-zero dairy cooperative in 2050.

The company notes that apart from generating solar and wind energy, some of the cooperative’s farmers engage in biodiversity projects and others provide manure for biogas. 

“This [GO-purchasing strategy] demonstrates how we in our cooperative’s micro food system can work together to increase the sustainability of our value chain to the benefit of our owners, our business and the environment,” concludes Søndergaard.

Last month, Arla highlighted its new big data tool to reveal which activities can reduce the most CO2 on farms. 

By Missy Green