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Building Effective ESG Strategies in Dairy

How a digital platform can transform sustainability in Agri Tech
March 27, 2024

The agriculture industry needs to accelerate its use of digital solutions in its Environmental, Social, and Governance (ESG) strategies. Dairy companies, in particular, have an opportunity to benefit from the intersection of digital transformation and sustainability.

The global Smart Agriculture market was valued at $9.35 billion in 2022 and is expected to expand at a growth rate of 14.76% between 2023-2028, reaching $21.36 billion by 2028. Smart Agriculture is a management concept focused on providing the agricultural industry with the infrastructure to leverage advanced technology for tracking, monitoring, automating, and analyzing operations. This includes using big data, Artificial Intelligence (AI), the cloud, and the Internet of Things (IoT).

Digital is necessary for future growth, efficiency, and regulatory compliance. One area where digital is having a significant impact is managing ESG principles. Many businesses, including dairies, are now required to report on ESG, and a number of countries are implementing legislation around this. This means adopting sustainable practices isn’t just a choice—it’s a necessity for long-term success.

The dairy sector has evidently made substantial progress in reducing on-farm emissions. To date, Strategies to achieve this include improved feed efficiency, manure management, and adopting renewable energy sources. These developments are crucial for the sector’s sustainability efforts, showing a proactive approach to mitigating climate change impacts, but more needs to be done. The collective commitment is crucial for driving forward the sustainability agenda, making the dairy sector a potential leader in environmental stewardship within agriculture.

According to a recent Association of Equipment Manufacturers report, advancing technology implementation on farms is the most significant factor in reducing the dairy industry's carbon footprint, equivalent to taking 4 million cars off the road.

Dairy businesses must be able to navigate the dynamic ESG landscape, ensuring they fulfill reporting obligations, make positive contributions to the world, and simultaneously create incentives for farmers.

As dairy companies take this next step, the ability to measure, track, and report on ESG efforts will provide competitive advantages and build stronger foundations for technological advancements industrywide.

Scoping Out ESG

The challenge for many dairies is that they do not have the right tools and resources to implement effective sustainability strategies to comply with ESG requirements and create impact.

A stable and predictive operating environment is essential for long-term viability when adopting sustainable practices. This ranges from financial stability and access to markets to technology and 24/7 support.

Over recent years, dairy businesses’ ability to address Scope 1 and 2 emissions has improved industry-wide. Scope 1 and 2 emissions are the direct and indirect emissions from purchased electricity. However, tackling Scope 3 emissions, which include all other indirect emissions that occur in a company’s value chain, like those from the production of purchased goods, transportation, and waste disposal, remains a significant challenge. This highlights the complexity of achieving full sustainability in the dairy sector, requiring concerted efforts beyond the farm gate and processor level, extending into the broader value chain.

Reaching net zero will require dairy businesses to drill down on manure management, feed production and efficiency, energy use, and more. It will be imperative for dairies to focus on Key Performance Indicators (KPIs) to track production and usage across all areas of sustainability management to allow for growth and sustainable impact.

Simplifying Sustainability with New Transparency, Visibility & Analysis

To adopt sustainable practices that enhance efficiency, dairy businesses need guidance from a partner who can provide a sustainability management solution. The solution should enable dairies to capture real-time data and make informed decisions around ESG practices. Dairies have the opportunity to deploy digital solutions that are categorized module by module. A modular approach allows dairies to focus on one area at a time to ensure they can quickly adapt to changing environments. This will enable them to increase efficiencies, reduce greenhouse gas emissions, and lower operating costs.

A sustainability management solution makes it easy to calculate environmental impact, measure key sustainability metrics, and report on ESG and sustainability progress so that dairies can provide viable evidence that they’re working towards ESG goals. As a result, customers, partners and investors will be driven to expand working relationships and generate new business with more farmers in a wider range of locations.

A sustainability management solution will provide up-to-date research, innovation, and regulatory requirements through articles, videos, and webinars to educate dairies and enhance their knowledge of implementing sustainable practices effectively.

Sustainability shouldn’t be seen as a part of business which stands alone. Dairies, farmers, and hauliers must collaborate and build a community that positively impacts the entire industry. Sustainability management solutions should include discussion forums, chat functionality, and virtual workshops where members can exchange ideas, share stories, and learn from each other’s experiences.

As time passes, sustainability management solutions will be able to create and update a repository of sustainable farming practices, techniques, and guidelines that teach users about innovative approaches to promoting sustainability in dairy farming.

Sustainability isn’t just about the here and now. Dairy businesses need to be able to look to the future and build evergreen sustainability strategies.

Enabling Farmers to Build a Sustainable Future

Dairies implementing a sustainability management solution will demonstrate commitment to ESG by taking a proactive approach that removes the hassle from manual practices. Dairies with sustainability practices in place will be able to adapt to fast-moving changes in the industry with new levels of flexibility and agility.

An all-in-one solution eliminates the need for ad hoc tasks and timely person-dependant processes, which can cause unforeseen costs while maximizing transparency that enables dairies to track, monitor, and report on their sustainability targets. This allows them to reach targets and comply with ESG regulations and recommendations more efficiently.

Gaining clear insights into how ESG metrics are performing with a click of a button will better inform dairy executives and ultimately allow them to make informed decisions that will have beneficial outcomes.

A partner can help manage the entire migration journey to the sustainability management solution and provide full end-to-end support. The solution will also integrate seamlessly with other modules on the digital platform to ensure sustainability journeys can be implemented at any time.

It’s simple to manage milk operations effectively, businesses just need to leave the technology to experts in digital and dairy.

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