Arla Foods Consolidated Annual Report 2021

126 Arla Foods Consolidated Annual Report 2021 / Environmental, social and governance (ESG) data / Notes Environmental figures 1.1 GREENHOUSE GAS EMISSIONS (CO2e) Contents III Accounting policies (continued) Emissions from whey relates to externally purchased whey for the largest sites of Arla Foods Ingredients. Included whey is standardised and recalculated based on the milk solid content to consider the difference in quality and fractions purchased at Arla. The emission factor related to externally purchased whey was unchanged at 1.0, a conservative estimate (Flysjö, 2012). Arla collects data from transport and packaging suppliers covering a minimum of 95 per cent of the spend, and based on the collected data, emissions are scaled up to cover 100 per cent. Biogenic emissions are not currently disclosed in the ESG section but will be disclosed from 2022. For transport, operations and packaging emission factors are obtained from Sphera, an industry-leading consultancy firm. The emission factors are updated annually to the most recent complete data set for the same year, in this case 2017. Emission factors are unchanged compared to 2020 due to changes in delivery time from Sphera. Farm-level emission factors are obtained from 2.-0 LCA Consultants. For non-owner milk, emission factors were unchanged at 2015 levels. Scope 3-Emissions on farm Scope 3 emissions from raw milk are calculated in accordance with the International Dairy Federation's guideline for the carbon footprint of dairy products (IDF 2015). The tool used for calculating the carbon footprint from milk is based on an attributional life-cycle assessment (LCA) that has been developed during the last decade in collaboration with 2.-0 LCA Consultants, a Danish consultancy firm formed by academics. For detailed descriptions of methodology, please refer to Schmidt and Dalgaard (2021). Farm-level emission factors are also obtained from 2.-0 LCA Consultants. Non-owner milk emissions are calculated by multiplying milk volume with emission factors based on national inventory data and not Arla specific data. The calculations are based on an earlier version of the farm tool following IDF 2010 (Dalgaard R, Schmidt J, Cenian K, 2016). Emissions related to raw milk include emissions both on and off farm. The emissions relate to the cow's digestion, feed production and purchase, manure storage, energy usage, capital goods and peat soils. Emissions related to feed include fertilizer for home-grown feed and purchased feed, and transport of purchased feed. Manure storage can result in methane and nitrous oxide emissions. The amount of emissions varies depending on how manure is covered and whether it is used for biogas production. Peat soils are wetland with a high CO2e content. When soils are drained and used in crop production CO2 and N2O are released. The emission figure related to raw milk presented in this report is a weighed average emission per kg of milk, calculated based on validated climate data from farms where the data has been validated by external climate experts, multiplied by the fat and protein adjusted milk intake. Farms visited by external climate experts are statistically representative of all Arla farms. Uncertainties and estimates In 2021,93 per cent of Arla's active farmer owners, covering 98 per cent of Arla's owner milk volume, submitted a detailed Climate Check questionnaire (farmers receive an incentive of 1.0 EUR-cent/kg of milk to complete the survey). Their answers were validated by external climate experts. This report includes only externally validated data which at year end 2021, accounted for 77 per cent of Arla's active farmers. Farmer owners complete the Climate Check once a year based on data from their most recent financial year. This could vary from farm to farm, as some have financial years running from January to December, while others run from July to June. Therefore, the figures presented are not necessarily based on farm data covering the same period. The majority of data, 61 per cent, relates to the period 1 January 2020 to 31 December 2020 while 14 per cent relates to earlier periods. An uncertainty analysis has been carried out to understand the biggest areas of uncertainty related to self-reported farm emission data. The analysis was centred around four key levers; herd, feed, crops and manure handling, and addressed the parameters with the highest impact on the emissions on farm. The analysis concluded that data could be manipulated, in worst case up to 10-12 per cent, but only if the farmer had a starting point of high emissions and claimed to change from no biogas treatment to full biogas treatment of slurry. Smaller farmers and farmers using extensive grazing systems are not always measuring the amount of feed that the cows eat or the dry matter content of the grass on the fields. To enable these farmers to report, the system contains a model which calculates feed consumption based on herd size and milk yield. Reporting on peat soils is a developing field and still subject to higher uncertainty than other areas. Due to it's relatively high climate impact uncertainties related to peat soils could have significant impact on the total reported greenhouse gas figure. The risk of errors and data manipulation is minimised by external climate advisors validating the data, and also by a systematic statistical process conducted by Arla to filter outliers. All outliers are flagged to the climate advisors, who may go back to the farmer to investigate. Numbers are only released for reporting after thorough investigation. The methodology used to calculate emissions on farm is developing over time. Currently, factors that potentially lower total net emissions, such as carbon sequestration on farm and direct land use change, are not included. IDF 2015 suggest that direct land use change should be included in the calculations. Other uncertainty relates to data collection regarding packaging and transport from our suppliers. Each year, Arla sends its suppliers detailed requests to provide the necessary data, accompanied by a manual on how to complete the related documentation. Manual data entries from different sources are clear risks to data quality. To minimise the risk of reporting errors, a rigorous two-step internal validation process is in place. WHERE DO OUR EMISSIONS COME FROM ON FARM? CO2 N₂O N₂O CH4 CO2 5% 41% 33% 9% 10% Peat Feed purchased soil and home-grown 費用 Manure storage Cows' digestion of feed Energy Other emissions, 2 per cent, include capital goods and destruction of animal remains.

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