The head of the Waikato Regional Council says Fonterra may want to look at a rewards-based system to encourage dairy farmers to take a more environmentally friendly to their production.
Chairman Peter Buckley says a report released by the council in September showed water quality is deteriorating because of significant nutrient leaching and run-off from farms, and nearly 70% of regional rivers and streams sampled may be unsafe to swim in.
The comments follow a meeting between council officials and Fonterra to discuss the future of dairying in the region, and the need to clean up local waterways.
Mr Buckley says the objective of the discussions was to come up with ideas on how to improve the region's water quality, while ensuring dairy farming remains economically viable.
The council is seeking commitments from Fonterra to provide rewards for farmers who provide good milk and have good environmental practices.
Rather than penalising those who do not perform, Mr Buckley says that perhaps it would be better to identify and reward those who do really well.
The regional council is holding a meeting this week with industry representatives to discuss the future of sustainable dairying in the region.