Sustainable Practices Challenge Cooperatives

A key focus at last year’s International Dairy Summit held in New Zealand was "dairy farming and sustainability". This intense interest in sustainable practices only emerged late in...

A key focus at last year’s International Dairy Summit held in New Zealand was “dairy farming and sustainability”. This intense interest in sustainable practices only emerged late in the last decade — there was not a whisper of it in any of the industry strategy documents prior to 2005.

Up until recently, the focus for most of the dairy industry was squarely on farms improving productivity and achieving quality milk growth.

Suppliers’ raw milk production is vitally important to dairy cooperatives. It is the sole measure of participation, and hence the primary source of new capital as well as raw material for generating cashflows.

Like all cooperatives with a serious amount of invested capital, dairy processing companies must maintain participation levels to remain viable. Indeed, this has been a core principle in the design of the dairy cooperatives.

This is why the emergence of “sustainability issues” is so important. Now, dairy companies must not only concern themselves with the quantity and quality of the milk delivered to them, but also with how it was produced.

Indeed, there is a serious worldwide trend towards also monitoring the wellbeing of livestock and ensuring they are not just healthy but also “happy”, quite apart from any food security issues.


This is nothing new to trading cooperatives such as Foodstuffs. Retailers have known for years that developing strategic sourcing from reputable suppliers is fundamental to maintaining their own reputations.

One difference is that Foodstuffs has always reserved the right to tell its members how to do certain things central to its image and reputation.

More importantly, Foodstuffs’ suppliers are not co-op members, so they may be subjected to disciplinary actions without repercussions reverberating through the core membership.

In contrast, dairy — and other supplier cooperatives — have only in recent years grappled with balancing both the immediate imperative to maintain supply volumes, and the longer-term imperative of managing members’ on-farm practices.

Anecdotally, it is the last 10% of suppliers who are recalcitrant in complying with these new requirements. Unfortunately, the necessity of policing the entire membership places an economic drag on all members and creates an entirely different political dimension for the co-op and its directors.


Many suppliers have been farming for decades, and are inherently resistant to being told how they must farm, even if they agree with the broad direction.

They may therefore support directors who side with them, rather than against them. Inevitably, this sort of politics leads to foot-dragging instead of proactive change.

This concerns the whole industry, not just any single company. Indeed, the industry’s reputation may hinge on the last 10% of recalcitrant suppliers to the least compliant company.

Nonetheless, the systems and structures for managing this must work largely through cooperative companies.

— From the February 2011 Cooperatives News

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