In partnership with sustainability consultancy Guidehouse, confectionery giant Mars has formed the Supplier Leadership on Climate Transition (Supplier LoCT) to accelerate climate action in the supply chain. PepsiCo and McCormick have also signed up to the initiative. The aim is to mobilise suppliers by sharing knowledge, resources and tools that support the development of their own climate plans.
The coalition was formed after Mars identified a barrier to moving its supply chain to a lower impact footing. Knowledge.
“At Climate Week 2019, we launched Pledge for the Planet, which was a call for our suppliers to get involved in setting either greenhouse gas targets or renewable energy targets. The thought behind that was a way of helping contribute to Mars’ scope three ambition,” Mars Sustainability VP Kevin Rabinovitch recalled.
“When we made that announcement, we discovered a number of our suppliers were already committed to some of those targets... But a relatively small number. What we heard from other suppliers was: ‘Yeah, okay. But we don't know how to do that stuff’.
“It is [comparatively] easy as these big multinational food companies with dedicated staff working on sustainability. We're already quite deep into this journey. The idea of setting a target is quite straightforward because we've got the data and we know what the language means. But a lot of our suppliers are either smaller or maybe less consumer facing, or just don't have the background and the experience. We came up with Supplier LoCT as a way of helping onboard people."
Rabinovitch described Supplier LoCT as ‘consulting 101’, answering some of the more basic questions like how to complete a baseline, or even defining scopes one, two and three.
“There are varying levels of knowledge. This is about raising the knowledge level amongst our suppliers. It's very easy to spend a lot of time trying to understand the language, and the concepts, and the math. While obviously that's important, every minute you spend on it is a minute you're not spending actually doing a renewable energy project or driving a carbon reduction project.”
Actions advocated by the coalition will drive improvements across a supplier’s total business, not just the goods or commodities directly purchased by Mars. This can help support change at scale and drive out complexity for suppliers.
This is another reason the sustainability expert believes aligning with other CPGs through the coalition is important. “What we're asking them to do is the exact same thing that Pepsi's asking them to do, it's not incremental work. They aren’t being asked to do one thing by one customer and something slightly different by a different customer. Now they spend their time trying to juggle different customer requests, which again is not time spent signing renewable energy contracts or reducing fertilizer use. That single ask is really important.”
Follow the money: Procurement is ‘the powerful lever’
In order to transition the food system towards a lower impact model, Mars believes in putting its money where its mouth is.
“It's all about procurement, right? If sustainability is the what, procurement is the how,” Rabinovitch explained.
“People get excited about the money that companies donate philanthropically. That might be a few tenths of a percent of annual sales. The capital investment budgets of a food business might be a couple percent annually. Our procurement spend is tens of percents of annual sales. And we spend it every year.
“From a money point of view, our procurement dollars are much larger than any other expenditure by the company. To the extent that we can use those to reward the right behaviours and shift things, that's really the powerful lever.”
To pull that lever, the company has adjusted its sourcing strategy. This, Rabinovitch continued, has involved a move away from purchasing commodities on an open market where anyone is a potential vendor because sustainability is not a measurable product attribute.
To secure sustainable inputs, you have to know the processes and practices that have been used to produce them. This requires traceability.
“As soon as I know that process, it's not a commodity anymore because it came from a specific place, a specific plantation, and it was made in a specific way. Realising that, we think we're approaching the end of the commodity era. This means you need to rethink your procurement models.”
The outcome of this rethink for Mars: “A positive program built on the premise of a much smaller number of suppliers where we have longer term relationships and we work together to make sure those process attributes are what we want.”
‘When everybody is a shade of grey, its harder to drive change’
Rabinovitch suggested that consolidating the supply chain and aligning with suppliers who share Mars’ values is ‘central to using our influence’.
But is there a risk that this will result in a market divided between ‘good’ suppliers who have acted on issues like emissions or deforestation and ‘bad’ suppliers who have not? This situation, it could be argued, would fail to support the change needed at a systemic level, leaving some suppliers to continue engaging in harmful activities and supplying customers for whom sustainability is not such a hot topic.
Rabinovitch rejects such concerns.
“The theory of change that we're driving in deforestation, for example, that we helped develop and are now helping drive through the Consumer Goods Forum Forrest Positive Coalition, is that it's not enough for us to manage our supply chains. For 50,000 tons of palm oil that I'm buying from a million-ton business, I need to be judging you on your entire million tons. That drives transformation at scale. In a lot of these markets, a single digit number of traders represent 70-80% of the market. The leading motivated companies working on this can influence those [large suppliers].
“Is there a risk that the next three traders down essentially stop selling to companies like Mars and sell to companies that don't care? Yeah, sure. There's a risk there. But instead of having all of these traders who are various shades of grey, it’s helpful to force a separation because when everybody is some shade of grey, it's harder to drive change. It's harder for governments to regulate. But when there's a very clear separation in the market, we think that's a more powerful lever of change.”
Agriculture and land-use central to climate action
Mars’ full value chain greenhouse gas emissions in 2015 – the company’s baseline – were estimated at 33m tonnes of CO2e. Within the supply chain, agriculture and land-use change account for 80% of the total, making supplier engagement a must.
Mars’ climate change targets are to reduce its total GHG emissions from the full value chain by 27% by 2025 and by 67% by 2050, from 2015 levels.
This ambition might seem to fall below the net-zero by 2050 agenda spearheaded by the likes of the UN and various national regulators. Rabinovitch told FoodNavigator this reflects the fact that Mars was an early adopter of carbon targets.
“The first carbon targets we set were in 2010. We set a net zero target for our scope one and two emissions. We saw what was coming and that we knew we would need to eventually set an ambitious target for our entire value chain. But at that point we only had the data to do a good job on scope one and two, so we set a net zero by 2040. And it's basically a straight line from 2007, which was where we originally started, down to 2040, because we know what matters is not just performance in a target year, but cumulative emissions over time.
“Then in 2015, we started with better data doing more of the work to develop a value chain target. … We set what, at the time, was a leading [ambition] aligned with 2°C, actually ahead of the Paris Agreement. For our full value chain, we set a 67% reduction by 2050 with an interim milestone of 27% in 2025.
“Those are the targets that we're currently working on right now, but they're five years old. As you might imagine, we are having discussions and exploring what we should be thinking about in terms of the long-term. Obviously we're so close to 2025, we're not likely to change the short-term full value chain target.”
In fact, efforts like a transition to renewables mean that the company is ahead of its 2025 target to cut over 42% of emissions in direct operations, building momentum towards net-zero in direct operations by 2040.
On the full value-chain target for 2025 – 27% - Rabinovitch said ‘we are making progress’ but added ‘it's a challenge’.
“One of the biggest contributors to our progress is going to be our work on deforestation, which is a big chunk of our footprint. And we feel like we've kind of cracked the code on how to manage that.”
The unlock here, according to the sustainability executive, is firstly to ‘design a supply chain where people understand the expectations'. “If you just put in a monitoring system, you'll keep seeing bad things happening. If you're only reacting after the fact that's not really management that's corrective action.”
Consolidation of the supply chain has enabled Mars to tilt towards the ‘good actors’ and anyone found in breach of the confectionery giant’s deforestation requirements will face consequences. “Ultimately if we see people that are not following the policy, which we have clearly communicated to them, one of the consequences is they will be excluded from our supply chains.”
Again, given the socioeconomic nature of factors driving deforestation, does this rigid approach risk excluding those most vulnerable within the supply chain, such as smallholder farmers? Providing an alternative path to development that negates the need to cultivate more land is key to Mars' strategy. This solution focuses on promoting agricultural practices that boost yields.
“We absolutely recognize no one is chopping down trees because they hate them. They're cutting them down because they want to feed their families, or they're trying to generate income, or maybe more accurately there's something they like more than they like the trees, which is economic prosperity and wellbeing. Fair enough.
“But the challenge is to find a solution that doesn't involve ever-expanding land use. That’s the reason behind our land target, which is to hold the physical land area of our supply chain flat even as we grow as a business. This means we have to do things to help improve productivity, to produce more crops on the same amount of land. Improving productivity also helps improve incomes.”