For the dairy processing industry, sustainability is no longer just a buzzword. For many, it is a driving force in their businesses.
The industry has seen a large shift toward more sustainable practices in day-to-day operations, as well as throughout the supply chain. The concept of sustainability goes far beyond environmental protection alone. It also encompasses both economic profitability and social responsibility for all points of the dairy supply chain.
In a survey commissioned by Dairy Processing in collaboration with Cypress Research, Kansas City, Mo., 106 participants representing North America-based dairy processors were surveyed in July and August 2024 in order to better understand how company leaders are committing to sustainability initiatives in their dairy processing facilities and the importance of prioritizing such initiatives as part of their business success during the next five years. The study utilized a random stratified sample of professionals familiar with dairy processor company environmental sustainability initiatives and included leadership from executive management, operations and production, R&D, purchasing, marketing and sales. Survey respondents from companies where revenue exceeded $100 million were classified as large processors, whereas respondents from companies that reported sales below $100 million were classified as small- to medium-sized processors for the purposes of this survey. Respondents were from companies that primarily manufacture cheese, ice cream, cultured products and fluid milk products.
“There is a significant amount of environmental sustainability investments reported among US dairy processing companies,” said Marjorie Hellmer, president, Cypress Research. “However, greater shares of professionals with larger companies (more than $100 million annual sales) tend to lead their small- to mid-size processor counterparts.”
Top priorities
The online survey investigated the commitment to company sustainability initiatives in the industry. Key areas of interest included specific processor-level initiatives currently in place or under consideration in the area of environmental sustainability (e.g., energy reduction, water reduction, heat recovery); the status of formal, measurable targets for specific processor-level environmental sustainability initiatives; and barriers to implementation of environmental sustainability initiatives. The survey also looked at expectations of supply chain partners and needed supplier support within the processor’s environmental sustainability journey.
When reviewing the top overall priorities of their businesses’ success over the next five years, processors rated the importance of eight goals for their investments on a 5-point scale, where 75% or more of respondents viewed the following three drivers as top priorities:
• Streamlining operations (89%)
• Increased market share (86%)
• Highly skilled workforce (79%)
Second-tier goals on the part of two-thirds of participants were led by new product innovation and improving customer service. When it came to priorities regarding corporate environmental sustainability policies, guidelines and practices, 67% of participants considered this important or extremely important in the next five years. However, when broken down, 81% of respondents from larger processors reported that sustainability is a priority in the next five years, whereas only 58% of respondents from smaller companies considered it a priority.
Respondents were asked if their company has environmental sustainability programming to help manage business risks and opportunities. Approximately 80% of respondents reported that their company currently has a program in place or one currently under development. The remaining 20% were split, with 10% reporting that their companies are considering implementing programming in the next 24 months, while remaining respondents said their company had no plans for such programming.
“When it comes to having formal, measurable reduction or increase targets in place for initiatives, larger processors lead the industry,” Hellmer said.
In regard to employing senior personnel whose primary function is to oversee the company’s environmental sustainability programming, 53% of all respondents reported that they employ such personnel. When broken down by revenue, 83% of those with reported annual revenue of $100 million-plus said they currently have such personnel, whereas only 33% of respondents from companies with reported annual revenue less than $100 million answered in the affirmative.
“Small- and mid-size processing professionals are significantly less likely to report that their companies have dedicated senior personnel whose primary function is overseeing company environmental sustainability initiatives,” Hellmer said.
Image: Sosland Publishing Co.Market drivers
When exploring what drives dairy companies to engage with and make investments in environmental sustainability, there were two primary factors reported by all respondents: market and consumer demands, and the company’s business model preference. Other drivers included customer demands, government regulations and investor demands. Even when broken down by revenue, responses from smaller and larger processors were similar. Of the samples, 76% of larger processors said consumer and market demands were their top driver for prioritizing sustainability, while 67% percent of smaller processors said the same.
Delving deeper into sustainability practices, respondents were asked if their companies engage in 12 different sustainability initiatives. The top initiatives with programs in place or currently under development according to all respondents include:
• Waste reduction (83%)
• Material recycling program (79%)
• Energy reduction (75%)
• Water reduction (75%)
Regarding formal, measurable reduction or increase targets for such initiatives, only 60% of respondents reported having targets for overall waste reduction, and 51% and 50% had targets for energy reduction and water reduction initiatives, respectively.
“According to professionals with larger dairy processors, these companies begin to pull far ahead of their small- and mid-size company counterparts, with significantly greater shares reporting additional commitments in renewable energy use, use of technology/data/AI, heat recovery systems, upcycle ingredients use, and a commitment to a net-zero transition plan,” Hellmer said.
Supply chain partners
A company’s sustainability journey is not isolated; it relies on partnerships throughout the supply chain, particularly with equipment and ingredient suppliers. When asked how important it is for these suppliers to provide leadership, education and resources related to environmental sustainability program development and design, 61% of total respondents said it was important or very important.
When asked to rate the importance of ingredient suppliers having their own environmentally sustainable practices, the top areas include:
• Humane farming (70%)
• Waste reduction (63%)
• Sustainable packaging (62%)
• Supply chain transparency (60%)
For equipment suppliers, top areas include:
• Sustainable packaging (67%)
• Material recycling program (66%)
• Supply chain transparency (63%)
• Waste reduction (63%)
When asked about barriers to implementing environmental sustainability initiatives, overwhelmingly 71% of respondents said that balancing the short-term mission of sustainability with long-term company vision is the biggest obstacle.
Sustainability study webinar
For more about the Environmental Sustainability Commitment in the US Dairy Processing Industry study, join Dairy Processing’s free webinar on Thursday, Nov. 14, at 2 pm EST.
Moderated by Dairy Processing managing editor Kristen Putch, the discussion will feature Cypress Research president Marjorie Hellmer and Dairy Management, Inc. vice president of sustainability standards, measurement and reporting Eric Hassel. They will explore the study results and the state of sustainability commitments within the dairy supply chain.
To register for the webinar, visit the sign-up page online.
