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Sustain­ability & Respon­sibility

Integrated Annual Report 2019

Market & Trends
Financial and Reporting Information

Sustainability’s place in the corporate strategy.

It has been some years since the DMK Group first committed to increasing sustainability in the company and the dairy industry. These efforts were also rigorously pursued in 2019 as we worked to achieve the aims of our “DMK 2020” sustainability strategy.

Sustainability is a cross-departmental task at DMK, involving a number of different specialist departments such as Procurement, Agricultural Affairs, Occupational Health & Safety/Environmental Protection, Energy Management and Quality Management. These departments work autonomously on the sustainability tasks in hand, because the topics concerned are embedded in their processes and are therefore part of the departments’ day-to-day operations. The Management Team coordinates regularly on sustainability issues with the executive bodies and takes its decisions on the basis of this close community relationship.

We have also incorporated this sense of responsibility into our 2030 Mission Statement, and next year we will present a new strategy which defines the course for the coming years. One important consideration here is the fact that sustainability has attained the status of a megatrend in society and determines our customers’ purchasing behaviour. As a trusted partner, it is our mission to recognise our consumers’ new needs and respond to them appropriately. We can arrive at a holistic solution by adopting their perspective and seeing what they want from a company like DMK.

 

We have also incorporated this sense of responsibility into our 2030 Mission Statement, and next year we will present a new strategy which defines the course for the coming years. One important consideration here is the fact that sustainability has attained the status of a megatrend in society and determines our customers’ purchasing behaviour. As a trusted partner, it is our mission to recognise our consumers’ new needs and respond to them appropriately. We can arrive at a holistic solution by adopting their perspective and seeing what they want from a company like DMK.

At the same time, DMK is mindful of the farmers’ and dairy industry’s welfare as the company changes its course. We believe that converting to more sustainable production will ultimately benefit everyone. The DMK Group therefore wants to engage its energies for more sustainability in its own company and the entire dairy industry. However, this will only work if the entire value chain from the farm via the retailer’s chilled cabinet to the refrigerator (“from grass to glass”) shares a common understanding. The entire industry must develop a shared understanding which is also supported by the retail sector. Our company prompted the idea for the “Dairy Sector Strategy” and suggested at the Green Week two years ago that the industry segments and professional associations such as the Association of the German Dairy Industry (MIV), Deutscher Raiffeisenverband e.V. (DRV) and the German Association of Farmers (DBV) should come together to develop a shared position on topics such as sustainability, environmental protection, animal welfare and communication.

“The demand side is buzzing. There’s no longer just one type of consumer! The importance of topics like sustainability is rocketing.”

Ingo Müller, CEO of the DMK Group

Our great objective is to ensure more sustainability along the entire value chain, use our resources economically and implement holistic environmental protection in production and retailing. We can only succeed by acting as a community and involving a large number of stakeholders in the implementation of our objectives. All the departments have to work hard in order to anchor these topics in the company's daily operations and be successful in the long term. We also want to give the farmers’ commitment and hard work an even higher profile in society.

For this reason, we worked on promoting open dialogue with the stakeholders and on enabling more transparency in every area of the company in 2019. Because our aspiration to act responsibly and entrepreneurially does not relate simply to our customers and their needs. We are also under an obligation to our farmers, employees and partners. It is essential for us to know about their needs and to support their independent efforts even more effectively – for a fair and more sustainable future for everyone.

Climate protection on the farms.

Environmental protection is a practice taken for granted on most dairy farms. One in two farms uses renewable energy from solar power or biogas and optimises its energy consumption with heat recovery plants. Many farms use energy-saving plate coolers and pipe coolers in milking and for cooling raw milk. What’s more, our farmers are devoted to the care of their cattle and work constantly to achieve ideal housing conditions and calf-rearing methods.

1 Base: 2019 self-assessment data and additional survey on tie-stall housing in summer 2018. Farms which did not take part in the self-assessment were questioned directly in the survey.
2 Average figure, estimate based on milk volume in the self-assessment

This starts with feed procurement. In the year 2019, the share of feedstuffs which were GMO-free in accordance with the VLOG standard at our dairy farms was around 67% (VLOG is the German acronym for the Association for Non-genetically Modified food). For all feed which is not subject to the VLOG standard, DMK acquires SFAP certificates which are based on the established FEFAC guidelines and therefore on the European standard for sustainable feedstuffs. The guidelines stipulate that there should be no engagement in child labour, that areas assigned as legal reserves or conservation areas must be protected, that evidence of ownership rights is available and that the rules of integrated crop management are complied with.

Almost 20 percent of the farmers use no soya at all. The use of sustainable feed in DMK’s milk production is therefore rising steadily. Almost 84 percent of all dairy farmers grow more than half of their feed components themselves or procure them from their own region, and more than 14 percent actually use only self-grown or regionally procured feed.

 

Feedstuffs used 2019Share %
Farms with only regionally produced feed components (100%) in the total diet13,9
Farms with mainly regionally produced feed components (>50%) in the total diet83,4
Farms with less than half regionally produced feed components (<50%) in the total diet2,7

In addition to their work on the farm, many farmers also ensure transparency. They allow consumers insights into their daily work, either on the farm or on social networks, and raise the profile of the dairy industry’s efforts to improve animal welfare and environmental protection with their active public relations work. DMK wants to show appreciation of this commitment and support farmers even more than before on the course they are pursuing.

Milkmaster Programme receives a thorough overhaul

In the context of the DMK 2020 sustainability strategy, it has been our concern to promote transparency on the farms since 2013. This mission has not changed at DMK in any way. Our most important tool here was and is the Milkmaster Programme, which supports farmers in the implementation of higher animal welfare and environmental protection.

After the last update to the programme in 2018, further changes were initiated last year. These took effect on 1 January 2020. Importantly, the programme has been made easier to use. By this measure, DMK is responding directly to the wish for more transparency and clarity expressed by the farmers, who devote themselves to increasing sustainability on their farms every day. In addition, there is a stronger focus on the most socially relevant topics in environmental and climate protection.

 

To achieve these ends, we reduced the complexity of the bonus programme. Only 4 bonus criteria will now be gathered instead of the previous 13: lifespan, access to pasture, udder health and herd care. In addition, the farmers’ annual self-assessment no longer applies as a prerequisite for the Milkmaster bonus. In future, only the milk volume planning in the periods from 1-28 February and 1-31 August is of crucial importance.

From 2020 onwards, there will also be a new audit cycle, which applies an industry-wide QM standard. Pre-notified QM audits will then always be carried out after three or – if there is a shortfall in the number of points attained – after one and a half years. The bonus review no longer depends on self-audits, but is done via the newly developed online platform “myMilk”.

The Milkmaster Code has also been revised and simplified. These guidelines for more sustainability on the dairy farms now focus on core topics of importance to economical and ecologically responsible milk production. In addition, social and animal welfare aspects are primary considerations.

The new bonus is also the result of a long dialogue with the farmers participating in the Milkmaster Programme. We incorporated their criteria for successful implementation when we optimised the programme and have thereby created more clarity, transparency and fairness for the farms and made it easier for all those involved to internalise the concept of increased sustainability.

Climate protection in production.

The topic of sustainability is also of major importance in milk processing. We have focused her on an important lever: energy production and consumption in the factories. In addition, DMK once more addressed the optimisation of water consumption, waste water discharge and treatment, and compliance with the new, stricter guidelines for factory emissions in 2019.

Last year, energy management was incorporated into the DMK Group’s Integrated Management System. All 20 DMK sites are certified in accordance with ISO 50001, the global standard for systematic energy management, and therefore comply with the highest requirements on handling energy responsibly.

Despite sweeping changes in the corporate structure, a product portfolio overhaul and alterations in the manufacturing process, the demand for energy in the factories in 2019 was roughly in line with the previous year’s.

Direct energy consumption (kWh)201920182017
Total direct energy consumption1.471.028.2611.489.191.4871.643.414.055
Of which, direct energy from non-renewable energy sources1.459.152.2221.483.917.4121.629.212.626
Electricity284.491.217298.250.903320.930.023
Natural gas1.053.050.2591.042.476.6651.086.006.499
District heating46.811.55653.374.63948.739.461
Diesel fuel/heating fuels refined from crude oil87.810.39086.079.87994.677.224
Liquid gas661.414743.947754.680
Heating oil1.978.7252.991.3792.450.006
Of which, direct energy from renewable sources11.876.03914.274.07514.201.429
Hydro power0392.036518.868
Biomass11.876.03913.882.03913.682.561
DMK GmbH incl. all min. 75% owned subsidiaries, excl. DOC Kaas. Basis for the gathering of data on direct energy from non-renewable energy sources is the actual quantities of energy consumed; basis for the gathering of data on direct energy from renewable data sources is the purchase/conversion of wood consumption for biomass. Biomass at Waren site. Hydro-electricity eliminated due to sale of Rimbeck site.

With consumption reduced by approximately 1.7% year on year, we have once more saved energy on the manufacturing side. We aim to go on pulling this lever in the future to steadily improve energy efficiency in the factories.

DMK is conducting research into further opportunities for using energy efficiently in the factories in the context of the “Kopernikus-Projekte für die Energiewende” project, which is funded by the Federal Ministry of Education and Research. In our “SynErgie” sub-project, we carry out critically important model calculations which provide insights into how individual production processes and plants can be involved flexibly and profitably in the energy market.

We were also able to apply this knowledge in practice in 2019, at our Edewecht site. For the first time ever, DMK successfully marketed energy self-generated by the factory’s own gas and steam turbine facility. In addition, a cold store was installed which hedges the investment when energy prices are low.

The DMK Group has already applied successfully for the second phase of funding and will now carry out three more years of research into the flexibility of cold stores. For this purpose, more factories will be assessed for possible optimisation projects from 2020 onwards.

In addition to energy, water is an important element of production. We pulled critically important levers in this area, too, in 2019 to reduce consumption further and thereby ensure increased sustainability in our factories.