Retail Dairy Supply Chain

Supplier data can enable strategic climate and water action

April 14, 2026

Dairy cows in barn — WOPA091010_D043 Housed Holstein cattle feed at a modern Wisconsin farm in the Pecatonica River watershed of western Wisconsin. The Keller Crest Registered Holsteins, Inc., farm practices compatable agriculture, contour farming and other methods to protect the watershed and habitat of the region. The Nature Conservancy works with the agriculture community to protect the Mississippi River and its watershed through the Great Rivers Partnership which is a collaboration between a wide array of partners dedicated to the conservation of the world's great river systems for the benefit of the people and the species that depend upon them for life. © Mark Godfrey/The Nature Conservancy

Grocery retailers are uniquely positioned to accelerate the adoption of sustainable dairy practices across their supply chains. By making informed, data-driven decisions and taking decisive action, retailers can sustain current momentum and drive positive outcomes across the broader food system. Retailers that have publicly committed to reducing their carbon and water footprints must therefore work closely with suppliers to achieve meaningful progress toward their climate goals. As expectations from consumers, investors, regulators and other stakeholders continue to rise, companies must respond in ways that advance sustainability while maintaining profitability and competitiveness. Strengthening dairy supply chain sustainability can also enhance retailer resilience and financial performance, motivating many supply chain actors to commit to reductions across Scope 1, 2 and 3 emissions. The actions outlined below provide guidance for grocery retailers seeking to develop a sustainable dairy strategy and support on-the-ground efforts to reduce the environmental impacts of fluid milk production.

1. Using Regional Insights to Prioritize Risk Regions

Regional greenhouse gas (GHG) and water insights can help retailers prioritize where engagement, investment and collaboration will deliver the greatest returns for climate and water goals.

By looking at emissions and water risk at a regional level, retailers can better understand where environmental impacts are most concentrated, which may differ from where the greatest sourcing volumes originate. This perspective enables more strategic allocation of time, resources and supplier engagement.

Regional insight can help retailers:

Focus efforts on a small number of high-impact regions. In many cases, a limited set of regions accounts for a disproportionate share of total emissions, creating opportunities for outsized impact through targeted action.
Avoid relying on volume alone to guide decisions. Regions with the highest environmental impact may not always be the retailer’s largest sourcing regions, underscoring the importance of impact-based prioritization.
Select interventions that fit local conditions. Understanding the primary drivers of emissions within each region (such as on-farm practices, feed systems or energy use) supports the selection of mitigation strategies that are practical and regionally appropriate.

Additionally, regional water insights help retailers understand where milk production overlaps with higher water stress or reliance on irrigation, enabling engagement strategies that reflect local hydrological conditions and risks rather than one-size-fits-all solutions.

This approach helps ensure that sustainability strategies are not only credible, but also actionable, scalable and aligned with long-term resilience and competitiveness.

2. Understanding Water Risk as a Shared and Evolving Business Challenge

Water risk is not static. Conditions that appear manageable today can change quickly as climate impacts intensify, demand grows and regulatory expectations evolve. For grocery retailers, waiting to respond until water stress becomes acute increases exposure to supply disruptions, cost volatility and reputational risk. Proactive engagement allows retailers to stay ahead of these shifts rather than react to them.

Because many retailers and suppliers source milk from the same regions, water risks are rarely confined to a single company. Water availability and quality challenges, and their consequences, are often shared across entire milksheds. This shared risk presents a key opportunity for collective action, enabling interventions that deliver benefits at the watershed or landscape scale rather than at the level of individual farms alone.

Retailers can use this shared risk to drive more effective action by:

Prioritizing early engagement in at-risk regions
Aligning efforts with other supply chain actors
Shifting from compliance to resilience

3. Taking Early Action on Water and Climate

Proactive engagement is not only an environmental imperative, it is a strategic business decision. Retailers that act before risks escalate are better positioned to protect supply continuity, manage costs and maintain trust with customers and stakeholders.

Taking action early allows retailers to:

Capture efficiency gains and reduce costs: Investments in improved water and energy management can lower operating expenses over time, benefiting both retailers and suppliers.
Strengthen supply chain resilience: Addressing climate and water risks in advance helps reduce exposure to volatility caused by extreme weather, water scarcity and shifting production conditions.
Stay ahead of regulatory and policy change: Early engagement positions companies to adapt more smoothly to tightening environmental and water regulations, avoiding disruptive or costly last‑minute adjustments.
Build and maintain stakeholder trust: Customers, investors, communities and regulators increasingly expect credible, measurable progress on climate and water. Early action demonstrates leadership and long-term commitment.

Intervening early enables retailers to support suppliers through transition while protecting their dairy supply base, reducing long-term risk and driving sustainable growth in an increasingly resource-constrained environment.

**Midwest Cows** A brown and white cow grazes in a field. © Patrick Flood

Farmer Advisor Roadmap — **Cover crops on dairy farm** A person reaches down their hand to examine a grassy area on a farm. © Patrick Flood

4. Designing Regionally Appropriate Mitigation Strategies

Effective climate and water action depends on recognizing that not all regions face the same challenges or offer the same opportunities for improvement. Differences in geography, production systems and management practices mean that mitigation strategies should be tailored to local conditions rather than applied uniformly across the supply chain.

Retailers can strengthen the impact of their sustainability efforts by focusing on what drives emissions and water use in each priority region, and by aligning interventions accordingly. This approach helps ensure that actions are both feasible for suppliers and meaningful in terms of environmental outcomes.

To design regionally appropriate strategies, retailers should:

Avoid one-size-fits-all solutions: Practices that deliver strong results in one region may be impractical or ineffective in another. Tailoring expectations improves adoption and long-term impact.
Focus on the dominant drivers of impact in each region: Understanding whether impacts are primarily associated with feed, energy use, herd management or other factors helps direct attention to the most effective levers for change.
Match interventions to what retailers & suppliers can influence: In some cases, grocery retailers may have limited control over upstream production processes, such as purchased feed, which may constrain feasible mitigation options. Recognizing these constraints allows retailers to prioritize interventions where they can realistically take action. However, this also underscores the importance of context-specific planning and supplier engagement.

Supplier input is critical in providing local and regional insights to ensure interventions are technically feasible, economically viable and aligned with on-the-ground realities.

5. Scaling Impact Through Collaboration and Collective Action

Since many dairy suppliers serve multiple retailers and operate within shared milksheds, collaboration is one of the most powerful levers retailers have to accelerate progress on climate and water goals. Collective action allows retailers and suppliers to move beyond isolated efforts toward solutions that deliver lasting, system-level impact.

By working together, retailers, suppliers and other stakeholders can:

Pool resources to accelerate scale: Coordinated investment helps bring proven practices and solutions to scale more quickly, amplifying climate and water benefits across shared sourcing regions.
Enable peer learning and confidence building: Farmer-to-farmer and supplier-to-supplier learning reduces perceived risk and supports wider adoption of innovative practices.
Advance innovation & de-risk adoption: Collaborative efforts can support the testing, piloting and refinement of emerging solutions and technologies, such as improved feed strategies, methane-reducing feed additives or alternative manure management approaches.
Support capital intensive improvements: Shared investment models make it more feasible to implement practices that require upfront capital but deliver long-term environmental and economic benefits.

Collective approaches reduce duplication, lower per-unit costs and increase the likelihood of durable, system-level outcomes.

6. Enabling Continuous Improvement Through Data and Technical Support

Leveraging supplier data is essential for retailers to track progress, refine interventions and drive continuous improvement over time. Robust data enables deeper insights into regional performance and supports more informed decision-making.

To turn insight into lasting improvement, retailers should focus on:

Using data to guide decisions, not just report outcomes: Regularly updated supplier data helps identify what’s working, where performance is improving and where additional support or engagement is needed.
Linking data to action on the ground: Insights are most valuable when they inform targeted interventions, supplier conversations and investment decisions that drive measurable change.
Planning for continuous refinement: As data quality improves and practices evolve, retailers can revisit assumptions, adjust strategies and raise ambition over time.

However, many regions face a shortage of on-the-ground technical assistance, creating a gap between strategy and implementation. Grocery retailers can play a critical enabling role by supporting technical expertise and advisory programs that help farmers adopt and sustain climate and water-smart practices.

Investments in technical capacity not only accelerate environmental outcomes but also strengthen retail-supplier relationships and improve the long-term resilience of dairy supply chains.

The Path Forward

Together, these approaches demonstrate how grocery retailers can move beyond high-level commitments to deliver meaningful, on-the-ground progress in dairy sustainability. By building decision-ready data, prioritizing action where it matters most and working collaboratively with suppliers and peers, retailers can reduce climate and water risks while strengthening the resilience of their supply chains. The path forward calls for sustained leadership – using insight, partnership, and targeted investment to turn commitment into lasting progress for a resilient, sustainable dairy system.

From Data to Action: How Retailers Can Collaborate with Suppliers to Build a Credible Dairy Sustainability Baseline

Discover how The Nature Conservancy worked with a grocery retailer to map their dairy supply chain, address supplier data challenges and turn sustainability data into actionable sourcing insights.