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NZ a decade behind Europe on sustainability: Fonterra CEO

NZ a decade behind Europe on sustainability, says Fonterra boss

By Pattrick Smellie

Nov. 8 (BusinessDesk) – The New Zealand dairy industry is a decade its primary competitors from Europe in its approach to social and environmental sustainability, according to Fonterra chief executive Theo Spierings.

Making his first high-profile public appearance since the false alarm over botulism in infant formula hit the company in early August, Spierings was also disarmingly frank to a senior Auckland business audience about the challenge to rebuild Fonterra’s reputation and his impatience with “hysterical” political and media comments that harmed New Zealand needlessly.

“That’s one of the things where I was a bit disappointed,” said the former senior Dutch dairy industry executive, who took the helm at Fonterra, the world’s largest dairy exporter, in 2011.

“Fonterra is really eight to 10 years behind the pack for sustainability and CSR (corporate social responsibility),” he told the lunchtime meeting of the Trans Tasman Business Circle. “If you expect sustainability anywhere in the world, it’s here. It’s Brand New Zealand.”

Yet this year’s annual report was the first to devote significant space to reporting Fonterra’s progress.

Part of the problem had not been a lack of initiatives, but too many initiatives that were little more than charitable donations and were pursued without focus on the company’s strategic needs.

For that reason, Fonterra was now concentrating its efforts in the Milk in Schools effort, partly because Spierings said he found the fact some 27 percent of New Zealand children had no milk before lunch “devastating.”

“If that remains the case, I don’t think they will be milk consumers when they are 20 or 25” years old, he said. “We are investing in our consumers 10 years from now.”

Meanwhile, the company was throwing its weight behind efforts to clean up New Zealand’s fresh waterways, recognising clean water as a fundamental part of Fonterra’s claims to high quality products.

“If the water’s not protected, we have no future,” he said.

The two programmes were linked by having farmers deliver milk to schools and children visit farms to plant streambeds and wetlands to help control farm runoff into waterways.

Fonterra was “better to do three to four massive commitments than 40 different things.”

Asked to comment on the potential for a change of government at next year’s election and the wavering support in the Labour Party for the Trans Pacific Partnership free trade agreement, Spierings said he expected Opposition parties to say one thing to get votes and another “when they really have to run the country.”

“You see that in Labour, certain messages,” he said. “TPP, what does it practically mean? What happens to our IP (intellectual property)?”

In government, they knew their primary responsibility was to deliver economic growth.

Of Fonterra’s handling of the false botulism scare, Spierings said the company had learnt a lot about “how layered and difficult sometimes we are.”

An issue which began with a torch lens being lost in processing had also seen a cascade of poor decisions, including that he should have been informed back in May when the cooperative’s food safety scientists decided they needed to test for a bacterium strain capable of causing botulism.

It was a straightforward “yes” or “no” question for management as to whether testing for botulism was a serious issue requiring escalation to the chief executive’s suite. Fonterra had since established a whistleblower’s hotline for staff to report any qualms about food safety straight to the food safety unit.

Even before that, management at the plant where the torch lens was lost should have ensured the reprocessed whey protein powder in question was kept out of the production chain for use in infant formula.

“If it had gone to animal feeds, the Delta (cost to the company) in money was hardly anything, but we could have avoided the whole crisis.”

Spierings said one of the unexpected aspects of Fonterra was its disproportionate significance to the national economy and therefore the amount of political and public scrutiny it attracted.

However, he made no apology for calling politicians and journalists out for overstating issues for public impact.

“I understand their perspective, but they should understand that I am not accepting it, that you have to take a responsible approach. By now in Wellington, they know I will react.”

Of Chinese perceptions about Fonterra since the botulism scare, he said some 45 percent of consumers were aware it was a false alarm and appreciated a level of honesty they would not expect from Chinese firms.

However, the other 55 percent only knew there’d been a problem. Fonterra had gone ahead with a cautious launch of its Anmum formula in China in September and although it was early days, Spierings was optimistic it would be well-received and that the cooperative’s model for roll-out was “even better” than a similar venture in 2008 for his previous employer.

(BusinessDesk)

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