Arla Foods Annual Report 2020
Management Review
Our Strategy
Our Brands and Commercial Segments Our Responsibility Our Governance
Our Performance Review Our Consolidated Financial Statements
Our Consolidated Environmental, Social and Governance Data
Governance data
3.3 GENERAL ACCOUNTING POLICIES
Basis for preparation
The consolidated environmental, social and governance
(ESG) data is based on ongoing monthly and annual
reporting procedures. The consolidated data complies
with the same consolidation principles as the
consolidated financial statements unless described
separately in the definition section of each ESG note.
All reported data follows the same reporting period as
the consolidated financial statements.
Materiality and reporting scope
When presenting the consolidated ESG data,
management focuses on presenting information that is
considered of material importance for stakeholders, or
which is recommended to be reported by relevant
professional groups or authorities.
To establish what is material for this report, a materiality
analysis was conducted in 2017. The analysis involved
consumers, customers, owners, non-profit organisa-
tions and financial institutions in Denmark, Sweden, the
UK and Germany. All stakeholder groups received a
survey and were asked to prioritise 22 defined areas of
interest. Moreover, a group of non-profit organisations
was interviewed to get a deeper understanding of their
views and opinions. In addition to prioritising the
group's activities, these results were used to improve
communication processes and widen the reporting
scope. Based on results from the materiality analysis
and constant tracking of consumer preferences,
climate, food safety and animal care were identified
as focus areas. Recycling and waste, transparent and
accountable business were also ranked as highly
important to Arla's stakeholders. The materiality
analysis undertook a light update in 2020 with
unchanged conclusions compared to the 2017 analysis.
The figures disclosed in the consolidated ESG data
section were chosen based on the materiality analysis,
but also consider the maturity of data to ensure high
data quality on each KPI. In some cases, it was
concluded that current data tracking or collection
capabilities do not provide sufficient data quality to
satisfy disclosure to the highest standards, despite the
fact that the figures could be of material importance to
stakeholders. In these cases, the necessary steps to
improve data tracking and collection have been intiated
and the plan is to extend the ESG reporting in 2021
and beyond.
This section was inspired by the principles and
recommendations of the The Danish Finance Society/
CFA Society Denmark, FSR - Danish Auditors and
Nasdaq published in the ESG reporting guidelines
booklet in 2019. Where maturity and availability of data
allowed, recommended ESG figures were added to this
section. In the coming years, plans are to widen the
scope of reporting to fully comply with best practice in
ESG reporting.
The above priorities are reflected throughout the
Annual Report: Animal welfare (page 35), governance
principles (page 38-39) and diversity policies (page 40)
are reported at length in the management review, while
in this section definitions, data and accounting policies
related to Arla's greenhouse gas emissions (Note 1.1),
animal welfare (Note 1.4), food safety (Note 2.5), waste
and recycling (Note 1.3), and diversity (Note 2.2 and
2.3) are presented, making Arla's business more
transparent and accountable.
Environmental KPIs (Note 1.1-1.3) included data from
all production and logistical sites, This, together with
milk, external waste handling, external transport and
packaging cover all material activities in Arla's value
chain. The environmental impact related to offices,
business travel and other less material activities was not
included in the total emission figure. This scope also
applies to the accident KPI, Note 2.6, however accidents
at head offices in Denmark, UK, Sweden and Germany
were also included.
Comparison figures
In line with ESG reporting guidelines, environmental
data is presented in absolute figures to ensure
comparability. Where relevant, a measure for progress
towards Arla's previously communicated internal
targets is included. Baselines and comparison figures
are restated according to Arla's restatement policy. By
default, Arla's baseline emissions are reviewed every
five years from the target base year (2020, 2025, 2030),
if no significant structural or methodological changes
trigger a recalculation before. Every 5 years, Arla
assesses if the structural changes (e.g. acquistions or
divestments) in the past years reach the significance
threshold when added together in a cumulative
manner. Each year, Arla assesses if the structural
changes that year reach the significance threshold
(see below) by themselves or when added together.
A threshold is defined for each Science Based Target:
■Scope 1 and 2:5 per cent change compared to the
base year
■Scope 3 per kg of raw milk: 3 per cent change
compared to the base year
■■Every time baseline emissions are recalculated due
to significant structural changes in the company (as
defined above), historic figures are also recalculated
and reported alongside the non-recalculated (actual)
historic emission figures. This provides the reader
with more clarity to understand Arla's actual
emissions each year. Other externally reported ESG
KPIs are only restated if material mistakes in the
previous years' reporting are discovered. The
materiality of mistakes is determined on a case-by-
case basis.
In accordance with the restatement policy and
Science Based Target, Arla restated the baseline in
2020, primarily driven by the switch to market-based
accounting.
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