Arla Foods is increasing the value of its climate incentive payments to farmers by a third as part of a major overhaul of its €550m sustainability programme.

The dairy cooperative will introduce six new ways for farmers to earn rewards for cutting emissions from 2027, in the biggest update to its FarmAhead Incentive scheme since its launch in 2023.

Under the changes, the value of each incentive point will rise from 0.03 to 0.04 euro cents per kilogramme of milk, while the total number of available points will increase by more than 30 per cent, from 84 to 111.

The scheme links farmers’ milk payments directly to environmental measures carried out on their farms, with Arla committing up to €550m annually to rewarding emissions-reduction efforts.

The expansion follows a reported 1.2 million tonnes reduction in absolute CO2-equivalent emissions from Arla’s raw milk production since 2020.

The six new areas eligible for rewards will cover forage, manure treatment, biofuels, low-carbon fertiliser, reducing methane emissions from grazing cows and breeding.

Arla will also revise how points are awarded for existing measures, including feed efficiency, fertiliser use, protein efficiency and grazing.

Hanne Søndergaard, executive vice president of agriculture, sustainability and communication at Arla Foods, said: “With FarmAhead Incentive, we link actions to reduce the climate impact of milk production on farm directly with the milk price paid to our farmers. That is a powerful way for a farmer-owned cooperative to drive change.

“Now we are taking our biggest step forward since launch, providing more ways for farmers to act and ensuring a higher reward for every point they earn.”

Since the programme began, Arla farmers have increased their average incentive scores by six points, with the cooperative reporting a correlation between higher scores and lower on-farm emissions.

The changes are also designed to help Arla’s retail and foodservice customers reduce emissions associated with the dairy products they purchase.

Through its FarmAhead Customer Partnerships, Arla provides businesses with farm-level carbon footprint data and opportunities to support emissions reductions across their supply chains.

Søndergaard added: “Our customers want measurable reductions in the footprint of the dairy they buy, and they want to work with us to achieve them.

“By giving farmers more opportunities to take action, we are strengthening the link between what happens on the farm and what our customers can achieve in their value chains.”

Arla chairman Jan Toft Nørgaard said the changes would also give farmers who had already reached maximum scores in parts of the existing scheme further opportunities to increase their rewards.

The overhaul has been approved by Arla’s board of directors, with the first payments under the revised model taking effect from 1 January 2027.

The programme will remain within its existing framework of redistributing up to three euro cents per kilogramme of milk through climate incentive payments.

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