Dairy cooperative Fonterra is cracking down on farmers who pollute rivers and streams.
It has announced it will withhold some money from those who are punished by regional councils and will pay the farmers only when the problem is resolved.
The company is targetting the 11% of its suppliers who are still not complying with effluent conditions and the Clean Streams Accord.
From the 2010 season, the company will hold back $1500 from the milk payout of farmers who receive enforcement notices from regional councils for effluent breaches. If a farmer is prosecuted, the company will impose a $3000 fine.
The company is also looking at bonuses for farmers who meet targets set out in the Clean Streams Accord, although it says any such scheme is at least two years away.
The latest results of the accord, between Fonterra and central and regional government, are due out next week.
Fish & Game, which has been highly critical of dairy farmers' environmental performance, has welcomed the tougher measures but says they still do not go far enough.
Chief executive Bryce Johnson says setting a goal of reducing serious non-compliance by 50% by August 2011 means Fonterra is condoning the continued flouting of the law by a proportion of its farmer shareholders.
It says a target of 100% compliance with resource consents is the only acceptable goal.
Taranaki Federated Farmers president Peter Adamski says regulation will be needed to force recalcitrant dairy farmers to improve waterway protection. He says regulation would deal with a hard core of farmers who are not willing to understand the benefits of taking action.