Location: Korumburra, Victoria
Population: 30,577 (South Gippsland LGA, 2021 Census)
Understanding the sustainability challenges and opportunities for small to medium food manufacturing businesses in regional locations across Australia close to farm suppliers is important for the future growth of Australian manufacturing, and the achievement of net zero. One example is the story of Burra Foods based in the small town of Korumburra, in Gippsland Victoria, 120km south-east of Melbourne.
Established 30 years ago with steady growth and currently employing 170 mostly local residents, Burra Foods exports over 80% of its products with a base of customers throughout Australia, Asia and the Middle East. Burra Foods is now owned by overseas interests. It produces concentrated milk products, cream cheese, bulk processed milk, milk powders and infant formula.
Burra Foods faces many sustainability challenges, yet also opportunities. It sits in a tough market where investment, regulation and support are needed so it can meet an increasing community expectation for businesses to demonstrate environmental and food quality credentials.
OPPORTUNITY IDENTIFIED
Alongside an already installed 600m2 of solar panels, a current opportunity being reviewed by the company is the installation of a biogas plant to generate electricity from waste products, through a waste innovation company that focuses on renewable energy from agriculture.
The biogas plant project is still in the scoping stage, where return of electricity is being calculated to ensure there is a financial saving. As the biogas plant will be powered by biogenic sources, it will have nil emissions. Once a business case is built, a full benefits analysis will be completed including calculating the emissions offset by using biogenic electricity rather than grid electricity.
Most opportunities reviewed to date have included an element of cost saving as a key focus. A grant through the Victorian Government's Business Recovery Energy Efficiency Fund supported boiler upgrades on an existing unit, which was completed in 2022. A biogas electricity plant could focus on finding a way to insulate the company to price spikes seen over the last two years in both electricity and gas. If the project ends up price neutral but reduces emissions, the company has indicated it would be difficult to see it progress due to the simplicity of buying power versus the capital and risk of it running a power plant itself with its increased downtime, even with reduced emissions. Ultimately the bottom line will direct the company’s investments.
The ability to install a large battery to stabilise the powder grid at the factory (there are currently 8-12 power outages a year which result in significant product loss), may allow the purchase and storage of power during cheaper midday periods.
Burra continues to monitor industry changes and international expectations. Its current state could be best described as ’in transition’, with a firmer regulatory framework and more robust technical solutions needed before the company could invest with confidence.
CHALLENGES ADDRESSED
The current challenge for Burra Foods is the need to complete an overarching carbon accounting summary, before being able to develop a sustainability plan. To date, most opportunities have been ad hoc and have been focussed on efficiency, energy or yield improvement programs which are based on financial returns, but often provide some emission reduction benefit.
The business has been unable to prioritise funding carbon accounting, the basis required to begin to understand net zero opportunities. It indicated the National Greenhouse and Energy Reporting system (NGERS), is not a suitably wide and stable base for building a carbon reduction plan, due to it being an older measurement of emissions, and unaligned to global expectations and science.
For the scope 1 and 2 emission challenges of Burra Foods, capital expenditure vs operational expenditure is the biggest challenge, that is, choosing between options with different ongoing or upfront costs. Burra Foods indicated if all transport was electrified, and either gas transitioned to hydrogen or wood fired boilers were used, the majority of emissions would be removed from its business. The challenge here is the hydrogen industry is not influenceable for a small company like Burra Foods, and without surety of future technology it said it was difficult to justify going down either the hydrogen or biomass boiler route. For transport, the company said the initial capital outlay was prohibitive to fully transitioning to new electric trucks. Over time it said there was a clear benefit where running costs become significantly cheaper using electricity versus diesel, but the availability and capital outlay for the vehicles and charging stations are the barriers.
THE BIGGER PICTURE
Methane produced on farms is easily the biggest dairy industry challenge for manufacturers like Burra Foods, that relies on farm practices and potential new innovations. Secondly, with 12-month milk contracts but five to 20 year sustainability plans, Burra indicated it would be difficult for processors to influence farm behaviour and strategy. Farms are often capital intensive which can prohibit further expenditure.
The shift to non-fossil fuel transport and machinery across supply chains, both on and off the farm, is a key sustainability and eventual cost reduction factor. The issue of readiness, regulation and simplification of technology is recognised as a key contribution to the broader sector, especially as it is also associated with multiple suppliers and third-party transport carriers.
KEY INSIGHTS ON PROGRESS
Burra Foods has indicated while the Australian Government has made net zero commitments, this doesn’t directly translate to specific and practical company commitments or legislation to reduce carbon emissions for a business of Burra’s size. Secondly, Burra said overseas ownership added an additional higher-level lens to all decisions, and if there was no market or government imperative, capital expenditure would be difficult to justify purely to reduce emissions. The current dairy industry in Australia is incredibly tough – with high prices for dairy products at supermarkets, yet poor returns for farmers – this prohibits a longer-term focus and emphasises short term financial goals as a way of getting on track.
Regulatory and timing certainty would greatly assist in aligning organisations like Burra Foods to establish a strategic and capital investment plan to achieve sustainable outcomes. In the absence of this, the company’s strategy is focussed and capital deployed mostly on financial returns. It said it is considered risky to commit to a particular strategy for emissions reduction in the absence of regulatory certainty.
A clear direction for reducing emissions in the agriculture industry is critical. The company believes there is still substantial discussion to be had on soil sequestration. It said there are many different smaller agriculture businesses which are all interconnected but have very different ideas of what climate change and emissions reduction looks like. Burra said having a framework to assess an organisations’ business practices and performance on various sustainability and ethical issues would be helpful.
Having more alignment at the base and core of the production industry would then allow for a common path forward: define what the goalposts are and allow for industry to get on with the job of doing it – rather than asking what it will be.
This case study is an excerpt from the Towards Net Zero: Transition Pathways for Regional Australia report, which was released in March 2024 under the Intergovernmental Shared Inquiry Program.
The report was funded by the Australian Government through the Department of Infrastructure, Transport and Regional Development, Communications and the Arts; the Victorian Government Department of Jobs, Skills, Industry and Regions; the South Australian Government Department of Primary Industries and Regions; the Western Australian Government Department of Primary Industries and Regional Development; and the Queensland Government Department of Regional Development, Manufacturing and Water.