Peder Tuborgh, CEO, Arla Foods keynotes at the Reuters Events Supply Chain USA Virtual 2020

Well, as I'm here as the CEO of Arla Foods, a dairy company of a certain size on a global scale. I think we have the fifth largest milk pool, 14 billion liters of milk that we are processing from 10,000 European farmers and dealing with our business and our supply chain throughout the world. There's probably not a country where we are not selling either large volumes or smaller volumes. And we are a cooperative owned by farmers, which in the dairy space is not unusual but probably compared to other FMCGs rather unusual. It worked for us and we are here for the farmers. That's actually, as CEO, my main KPI. Other than that, I'm a happy father of five wonderful kids and a wonderful wife.

Well, sustainability, and it's easy to say today, but it has actually for quite a number of years been right in the center of our DNA at Arla Foods. We work very carefully with sustainability. However, sustainability also has evolved over time. Obviously, for now, climate is very much the thing when we talk about sustainability. When you look into the UN 17 sustainability goals, sustainability is not only about climate; it's also about having a well-balanced, well-functioning world going forward. We've been committed to the 17 goals and we work very hard with them throughout the entire organization, more than 20,000 people. It's very lively at Arla Foods, so it's fundamental to our long-term success. And I'd like to say also, sustainability is important and very complex. I guess that we'll be talking about that during the course of this session. But from a full point of view, we see a couple of challenges. One is that clearly we have a climate challenge that we all need to deal with and move forward on over the next many years and even decades. But at the same time, the population in this world will grow to close to 10 billion people in 2050. So the real difficulty about the sustainability agenda is how to match, on one hand, caring for the world, for the climate, making the world a better place, but at the same time producing more with less energy, so to speak. That's very complex, but it's right there in the center of our strategic agenda.

Well, it's right in the center of our strategic commercial agenda, has been for quite a long time. We've, as many other companies, tried to describe our identity both who we are and who we strive to be. It's very well described in our company, and I guess there's not one employee who, or for that matter farmer who owns the company, who doesn't know what our identity is all about. And it matches very well up against what we see in consumer trends. Consumers are getting more conscious, so are the retailers, and that consciousness is now focusing in on the whole climate impact of what we do as a corporation and how we improve ourselves going forward. So our consumers, the kings and queens of our business, they simply expect us to improve on climate and on the broader sustainability agenda. And everybody at Arla Foods is working with that, so it's right there in the center of everything we do. And I actually don't think that we will survive going forward if we don't remain very focused on the sustainability agenda, including in our supply chain, which has probably the hugest potential to do good, but also we shouldn't miss it there because then we miss the entire commercial agenda.

Yeah, it's a good, very good question. To me, supply chain is actually the entire value chain of Arla Foods, so that's how we work with it basically. Obviously, there's the classical supply chain, the production, the logistics part which is huge, and that's also where we have the dominant part of our activities going on in terms of energy consumption, etc. But we actually see the supply chain from, so to speak, farm to fork, and we work very diligently with the sustainability agenda year on year, very focused throughout that entire supply chain. But obviously, where the most activity sits is in our production area, in our inbound logistics from farmers into the factories, and from the factories out through the logistical networks all the way out to the consumers. That's probably the classical supply chain, but we evenly work with our farmers because without bringing them on board, working with them on their sustainability agenda and helping them, then we wouldn't be true to our cooperative spirit. So that's why we're actually looking at it from farm to fork, so to speak.

Exactly, and that's where quite a bit of, when we talk climate impact, quite a bit of the climate impact comes from. And that's why we're engaging with our farmers on that subject. We have actually developed just now, a few months ago, probably what is today the world's largest database on knowing exactly on the individual farm level what is his or her climate impact, CO2 level per kilogram that he or she produces, and what can we do about it. And we help the farmers benchmark up against each other. If we don't get that part right, then what we do on the rest of the supply chain in the production and logistics doesn't really matter. So we need to look at it from a very holistic point of view. But we have come quite far, I would say, on what you would call the classical supply chain. In the last years, we have since 2005, for example, up until today, reduced our carbon emissions from production, packaging, transport, logistics with more than 25 percent, despite the fact that we have increased our activity with 40 percent, so more milk actually in our meal program. We're a bit proud about that, but it's only a start on a journey that will carry on for a couple of generations, I think.

Yeah, if we look at the farm part, as I said, we've just finalized the creation of the database so that we now know on the individual farm level where he or she is. That's the starting point because what you measure is what you also start to work with, of course. What we're putting in place now is benchmarking tools for the farmer so that the best farmers can teach the rest of the group. They actually have a lot of things that they can do to contribute, and we will probably over time help them develop. We're actually incentivizing our farmers through the milk price to participate in this program, and that of course also helps. But we have a huge journey going on. We are very much depending on research, feeding cows, ways of optimizing land use, etc. Biogas, we're considering using a biofuel from our farmers; they actually produce that into our facilities so that it becomes one holistic view into all of that. Then of course, when we look into the supply chain as such, it's all about taking our dairies further into biogas. The biogas area today, 33 percent of our power into the supply chain, the classical supply chain dairies, come from renewable energy sources, and we just need to push that agenda even further in order to reach our goals for 2050, which is carbon neutral. And nobody knows how that is going to play out, but we have organized even our work in supply chain very diligently in five-year cycles, what needs to get done. I just gave you the example on fossil, going away from fossil fuels into renewable energy, but there's much more to do. The whole food waste agenda is very critical. You can't imagine how much food is actually wasted on a world basis, either on farm level or through the entire value chain. So we've gone a bit down that road already. I think that we have from our sites reduced our food waste with 27 percent just the last five years again, but that has to continue. There's a lot of potential there, and food waste is also a part of the climate sustainability agenda going forward.

Well, first of all, I'm a guy that always looks around the corner and see what's new, and that's probably why I'm still around. I would love to say here now that it's all about sustainability because that strategically that is actually the case in the case of Arla Foods, but given the COVID-19 situation right now, for me, keeping our people safe and healthy—all of our employees mostly have been working hard; they meet at work, logistic, production, on farm, and then they're not sitting like we are behind the screen. So keeping our people safe and healthy and serving our customers in the most unprecedented, unusual times is what I have very short-term on my mind. And it starts actually with keeping our people in the supply chain healthy. I've just been through that in the first round of COVID, and they are really the heroes of Arla Foods, I have to say.