Examining Fonterra’s Social Licence
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The Land of Milk and Money

There’s no use crying over spilled milk, but intensively-produced and almost-entirely exported milk powder may warrant a tear or two. Aotearoa markets itself to the world as a “clean, green” paradise, all while it supports intensive agriculture amidst increasing dairy exports. Farming has carved out an important place in our national identity, and companies like Fonterra rely on their social licence in order to maintain those practices, but that social licence is beginning to falter. Business as usual, for many, is no longer an option. Critic Te Ārohi looks at the role Fonterra has in our economy and our emissions, the concerns farmers have for the future, and how shit-posting could help save our planet.

Fonterra is the biggest company in Aotearoa, and is responsible for producing 20% of our greenhouse gas (GHG) emissions. Around half of all GHG emissions in Aotearoa are methane emissions produced by agriculture (AKA cow burps and farts). Despite methane remaining in the atmosphere for a shorter time than other greenhouse gases, over a period of 20 years, the warming effect is 84 times greater than that of carbon dioxide. And for all that pollution, very little of the milk products remain on-shore; Aotearoa exports 95% of its milk products to 130 countries, constituting 21 billion litres of milk per year. 80% of this is supplied by Fonterra. 

Marc Rivers, the Chief Financial Officer of Fonterra, came to Aotearoa five years ago after being recruited by Fonterra from the U.S. After five years as CFO, Marc has decided to call it quits. He recently announced his resignation, calling it “an end of a chapter”, and spoke to Critic Te Ārohi about his experience. Fonterra had embarked on an “aggressive global expansion strategy,” with the aim of becoming “bigger and bigger”, but Marc said that “Fonterra had a couple years of losses and had to write off some assets.” Despite the shortfall, Fonterra now has a one-third market share of all milk that crosses our borders. While most milk produced worldwide is consumed domestically, our milk is not, as Marc was proud to explain.

Being a dairy nation, most land in Aotearoa is used for pasture farming. On the surface, grass fed cows seem the most “natural”. Marc told Critic Te Ārohi that “our farming system actually is really well suited to produce dairy… We’re actually doing the world a favour by producing the milk that’s going to be produced anyway. It’s better to produce it here than in a less efficient system somewhere else.” Indeed, according to Marc, Aotearoa’s pasture-based system leaves a relative third of the carbon footprint of the U.S. and European grain-based systems. As dairy cattle numbers increase, though, so too does the usage of synthetic phosphorus and nitrogen fertilisers to promote grass growth. In 2015, 429,000 tonnes of nitrogen fertiliser was used for farming in NZ, a seven-fold increase since 1990. Phosphorus sales have increased by around 64% – much of which is imported as “blood phosphate” from illegally-occupied Western Sahara – and distributed to farmers by fertiliser companies. Ravensdown and Ballance Agri-Nutrients. New Zealand is the only nation still purchasing this product, which leaches into our groundwater. As a result, “once rich whenua bustling with life [is] now reduced to stagnant monocultures of grass, cows, pesticides and fertilisers. It is no wonder poor health outcomes related to industrialised agriculture are rife and mental distress is prevalent in farming communities,” said Jack Brazil, member of Environmental Justice Ōtepoti.

Despite all of this, Fonterra brands itself as an environmentally conscious co-operative. Fonterra has capitalised on building its social licence to operate (essentially public approval and support) through a centralised commercial effort to market itself as environmentally friendly. “[Our social licence] is definitely something we’re very conscious of,” said Marc. Fonterra has pledged to support He Waka Eke Noa, a 5-year program aimed at “reducing Aotearoa’s agricultural greenhouse gas emissions” and “adapt to a changing climate”. According to Marc, Fonterra is focused on producing “valuable nutrition in the most efficient manner possible … with the least environmental impact [and] cost possible”. 

Dr. Alex McMillan, Associate Professor of Environmental Health at Otago, told Critic Te Ārohi, “[Fonterra] is incredibly sensitive to what New Zealanders think, and that’s because their whole business rests on their social licence to operate, including their social licence to pollute the water, the social licence to pollute the climate.” 

Climate campaigners feel that Fonterra’s social licence is a forgery, though, and that if anyone were to take a closer look they’ll find that Fonterra’s licence has long since expired. “Fonterra is playing a zero sum game,” said Jack. “Fonterra have long since privatised the profits and socialised the harm. When one considers the net ecological harm there is no reconciling this as an acceptable business model. Functionally the mauri of the land is being depleted for shareholder profits.” Indeed, Fonterra does not have a target for cutting methane emissions, its largest source of emissions. Fonterra’s self-audited sustainability report is focused on off-farm emissions (like factory processing), which account for 9% of its total emissions. On-farm emissions and export emissions make up the remaining 91%. Fonterra has further expressed doubt in reaching the upper range of the 47% decrease in agriculture emissions that the Zero Carbon Bill provides for, describing the reduction as “too steep.”

Fonterra’s current strategy is to rely on future scientific solutions to solve, as Marc put it, “the methane problem.” The current Emissions Reduction Plan provides $710 million for research into reducing methane emissions on farms, money which comes from the Emissions Trading Scheme, which the government has made the dairy industry exempt from contributing to. According to Marc, Fonterra is “doing things properly […] what we’re doing is very rational, and it’s science based.” Additionally, “the way we’re going to improve is through science and technology.” Kate, a spokesperson from Students for Environmental Action (SEA), called the $710 million grant a “publicly-funded expensive hunt for a technological fix”, adding, “[it] would prevent the industry from having to undergo real change.” 

Fonterra markets itself as a “co-operative” with a focus on “collective ownership” and “working as a team”. Fonterra “is basically owned by the farmers”, said Marc, whereupon “Fonterra as the processor is sort of an extension of the farm … [and the] means by which the farmer can monetize their land.” Despite this connection, Marc argues that Fonterra has “limited ability to actually influence what goes on behind the farm gate”, adding, “it’s not like we can just force farmers to do this or that.”

According to a recent report published by BusinessDesk, Fonterra has been devaluing its shares, resulting in farmers being left within a cycle of debt, making it understandably difficult for farmers to adapt to climate change. Meanwhile, Miles Hurrell, the Chief Executive of Fonterra, earned a cool $4.3 million last year (by contrast, the average Kiwi farmer earns $65,000/year). Alex McMillan says “[there is a] huge opportunity here to support farmers… to become the diverse group of sustainable food producers that we absolutely need, that we’re gonna rely on for survival.” 

As it turns out, Fonterra’s social licence is not infallible. Fonterra’s recent restructuring law has drawn criticism from Simon Upton, the Commissioner for the Environment, who said it could “increase greenhouse gas emissions and put more pressure on freshwater resources”. The government has agreed to pass this law allowing Fonterra to restructure to give more power to shareholders, thereby incentivising bigger dairy herds, which has cascading effects for the environment and freshwater sources. In response to the backlash, the agriculture minister, Damien O’Connor, said modelling the environmental effects would be too difficult.

Since 1840, rampant deforestation has led to the clearing of over eight million hectares of lowland native forests. Currently, 40% of Aotearoa is comprised of exotic grassland, used as pasture to feed livestock. Prior to colonisation, Māori lived in a symbiotic relationship with the whenua based around tikanga and kaitiakitanga. The reciprocal practice of leaving time to allow for the whenua and awa to regenerate is undermined by large scale industrial dairy farming, which creates overconsumption at the expense of the land and people. The whakapapa of intensive agriculture is deeply entrenched within colonisation, and Fonterra’s use of reo and “infusing Te Ao Māori into our core”, in an effort to strengthen public approval, has been seen as disingenuous by some Māori students. “It’s kind of hard to claim a te ao Māori approach when you’re not even from here,” said Rutene (Ngāti Porou, Ngāpuhi). “The cultural significance of Māoridom becomes diluted and loses its value when commercialised,” said Sky (Ngāti Hine). 

Sky explained that “traditionally, Māori ideas of agriculture aligned with our maramataka, an environmental calendar, that responded to the energies of the taiao (nature). This guide allowed our ancestors to listen to the taiao, a reciprocal relationship, where both parties receive what they need. You can’t just slap on a Māori title and call it innovative. We’ve been doing this for generations.” Jack Brazil added that “The case could not be more clear to devolve power from the likes of Fonterra by giving land back to hapū and supporting rural communities to transition to regenerative ways of living with the land… It’s not only the moral imperative, but the necessary one should we want a future where we all can thrive, not barely survive.”

Fonterra is the second largest burner of coal in Aotearoa (using more coal than the Huntly coal-fired power station), which it uses to process milk powder, Fonterra’s main export. Currently, a quarter of a million tonnes of coal is transported through Dunedin by train every year (the equivalent of putting 2,500 extra cars on the road every single day). Fonterra has stated that it will continue using coal until 2037. This comes as Bathurst has expanded coal mines such as Tākitimu, which it plans to run for a further 30 years to meet demand. Fi Clements, Kāi Tahu, said that “this undermines mana whenua and our place here as kaitiaki of Papatūānuku… Tākitimu is the waka that brought my tīpuna from Hawaiki, it was turned to stone at Murihiku and now Bathurst desecrates this whenua daily by carving it out and burning coal in Fonterra’s factories.”

Concerns have also been raised over the removal of the words “plant-based” from the recent Intergovernmental Panel on Climate Change (IPCC) summary report for policymakers,  prepared by the NZ government. The phrase “plant-based”, which was mentioned more than 50 times in the full 3,000 page report, was replaced by “well-rounded diet” in the summary, leading to allegations of Kiwi corporate lobbying influencing global climate policy. In fact, the IPCC itself states that there is “a history of strong industrial lobbying” when it comes to climate policy. Kate said that “the absence of challenge to the dairy industry is suspicious and concerning.” According to Marc, Fonterra had nothing to do with the change in wording. “We’re not anti-plant,” said Marc, adding “we have products that are partly plant-based [so] there’s no incentive for us to try to remove all mention of plant-based.”

Craig Cliff, Net Carbon Zero Programme Manager at the Sustainability Office, described the water-downed summary report as “disappointing”. “I think we’re due a conversation about the economic make up of NZ,” said Craig, adding that, “there’re a lot of farmers who are really switched on and engaged in this space; things need to change at lots of levels to be able to support them.”

António Guterres, Secretary-General of the United Nations, spoke to the social licence the fossil fuel industry has fabricated, and the tobacco industry before that. “For decades, the fossil fuel industry has invested heavily in pseudoscience and public relations – with a false narrative to minimise their responsibility for climate change and undermine ambitious climate policies … They exploited precisely the same scandalous tactics as big tobacco decades before.”

Evidence of preferences shifting away from dairy can be obviously seen at the cafe. Oat products have filled a rapidly expanding niche by providing an alternative to intensive agriculture. Otis Oat Milk was the first oat milk company in Aotearoa, supplying their product to around 150 New Zealand businesses. Their mission is to actualise a plant-based future and challenge the dairy industry through environmental change, and they maintain that “one litre of oat milk requires 11x less land, 13x less water, 6.5x less fertiliser, and emits 3.5x less greenhouse gas emissions than one litre of dairy milk.”

In just a few years, the market for oat milk has tripled from $52 million to $144 million (as of 2019) and is growing. Ōtepoti’s own Common Ground Espresso roastery was actually the first business in Aotearoa to be supplied with the product; “[Otis Oat Milk] is now our highest volume alternative milk and is threatening to overtake cow’s milk in the near future,” said Common Ground’s founder, Nick Scott.

Like Fonterra, Otis prides itself on being a local, grassroots-orientated business. Otis oats are grown in the Southland and Otago regions by local farmers, before being processed in Dunedin’s Harraways oat factory. However, also like Fonterra, the green image overshadows a high carbon cost during production; Otis grows their oats locally before shipping them to Sweden for the milk to be made and then back to Aotearoa to be sold. As a result, the cereal travels a total of 35,000 kilometres, which is just a touch short of the entire circumference of the Earth. But Otis is not stoked about the situation, and don’t attempt to hide the truth. On their website, they say that “unfortunately, little old New Zealand lacks infrastructure to produce plant based food and beverages. Funny that. The fact we’ve been such a good dairy producing country hinders a plant based brand such as Otis when it comes to looking for clean, non-dairy infrastructure.” Otis is planning on building the Plant Plant in Aotearoa to process their oats and cut down on carbon, but since “doing it right takes time”, their Sweden partnership was created to act as a stepping stone. “In the meantime,” they say on their website, “we should point out that we are positively offsetting all our shipping carbon emissions by 120%.”

A recent study by Cambridge University found that sales for cow milk have been on a continual decline for the past 80 years which, according to student Aidan, makes sense. He told us that “the whole discussion is ridiculous because cow’s milk is just disgusting anyway, when you think about it. Like, why do we even drink this? I guess it made sense in the ‘40s when we didn’t have other protein choices, but it doesn’t make sense now. It’s literally another animal’s breastmilk. Gross.”

But according to Marc, this decline is explained by the fact that most of the 95% of exported milk is turned into milk powder, while the headlines are focused on the decline of milk beverages. So the fate of companies like Fonterra may have less to do with oat alternatives, and more with long-standing and gradual shifts in public opinion and misreported statistics. Milk powder is still very popular in overseas markets.

The lack of milktight solutions have left some students feeling helpless in the face of a climate emergency. A 2020 Oxford University study on “Politics of Plant Milk” found that by placing the consumer as the instigator of change, climate action becomes depoliticised, and the focus shifts away from systemic change and more towards the individual. In other words, it’s more about your spending habits, and less about the few-dozen companies who actually control what options you have to buy. “Climate crisis pressure and responsibility needs to be taken off the people and put onto the government. You can feel like you’re doing your best and you’re still being manipulated by corporations,” said student Aylana.

Ultimately, intensive agriculture is the biggest emitter in Aotearoa. A recent study at Otago University found that a national dietary shift towards plant-based sources of nutrition, such as oats, has the potential to increase quality-adjusted life-years from between 1 to 1.5 million, whilst saving Aotearoa’s health system between $14 and $20 billion NZD within our current population’s lifespan. The CFO of Fonterra himself even said “science shows more and more that a diet that’s primarily plant-based is better for humans,” whilst arguing that bovine milk still has “an important role in that diet.” 

But it’s not just about health or wealth; it’s about culture. Farming is deeply embedded within our sense of national identity. Critic Te Ārohi sat down with June*, a 5th year Medical student whose stepfather is a 4th generation dairy farmer to better understand the perspective of students with connections to the farming community. June moved to her stepfather’s farm near the Abel Tasman National Park during her last year of highschool; “I have a little bit of experience with dairy farming, but not that much compared to a lot of other people who’ve been brought up on farms,” said June. June spoke about the need for empathy for farmers, saying that her personal experience has changed her. “I had a bit of a negative view [of Fonterra] growing up,” said June, adding that “since getting to know a bit more about dairy farming I have a bit more appreciation for what it is.” 

June was upfront about the role dairy farming has in climate change due to “huge carbon emissions.” Equally, however, “climate change drastically affects farming,” due to increased and intensified floodings and periods of severe drought. This in turn causes increased financial strain for farmers precariously living at the mercy of Ranginui: “your whole livelihood relies on it,” said June. June said that currently “there’s a lot of blaming,” and while some of it may be justified, “it’s easy to point the finger [at farmers]”. Ultimately June was hopeful that farmers and climate activists could find common ground against their “common enemy”. According to June, climate change is an inherently systemic issue which must be seen from a “big picture” perspective rather than singling out individual farmers. Marc also viewed climate change as a systemic problem which must be viewed from a global perspective: “We can’t just solve carbon, we have to solve for carbon in the context of everything else.”

It is difficult to pin down the shaky ground that Fonterra’s social licence to operate stands on, as doing so forces kōrero of processes of colonisation, capitalism, and systematic issues embedded in society. Despite this, students are no stranger to exposing and destroying social licences. In the wake of the 2010 BP oil spill disaster in the Gulf of Mexico, a group of Otago students banded together to create a shitposting page. On 9 February, at 6.30pm, The boys are what opened their campaign with a post that said “good evening, fuck BP.” The Facebook page quickly grew, amassing hundreds of thousands of followers. The boys are what told followers to “spam the comments” of greenwashed BP Facebook posts with messages like “Showing us how well you can clean cars won’t distract us from the fact that you couldn’t clean up the Gulf of Mexico”, or “this is a beautiful beach, it’d be a shame if someone spilt 4.9 million barrels of oil on it”. 

Through a decentralised, student-focused effort, The boys are what demonstrated the power of students to change public perception through memes. Now, over 12 years later, any time BP posts something climate-related, trolls still immediately flock to social media to mock the company and undermine their social licence. BP is a formidable power, but their social licence, which depends entirely on public perception, is not within their power to control. Otago students helped revoke that licence in 2010. If they see fit, it could happen again. Only this time, they’ll be working with a Kiwi company, and the consequences will affect Kiwi farmers. In the meantime, Fonterra’s social licence is still very much valid, and they have every reason to milk that for all it’s worth.

Oceania Dairy wanted to install a packaging machine purchased from Spain during the pandemic lockdowns in 2021. But due to New Zealand’s travel restrictions, no one from abroad could assist with the installation.

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