Mars Worries M&M’s May Actually Melt in Your Hand
Candy Supplier Pledges $1B to Overhaul Global Supply Chain in Initial Effort to Combat Climate Change
A few months ago, Mars, Incorporated, owner of popular candy brands such as M&Ms, Twix, and Skittles, as well as brands such as Pedigree pet foods and Uncle Ben’s rice, made a public commitment to spend $1B to help fight climate change and make its supply chain more sustainable for the future [2]. This comes on the heels of a 2013 report by Oxfam (a global organization that evaluates and reports on social injustice all over the world), which cited Mars as having the lowest ratings for water and land issues, among the world’s 10 largest food producers. These low ratings were due to Mars’ “lack of knowledge of its environmental impact, as well as for its supplier policies” [1]. This provides an interesting opportunity because of the 10 largest global food producers, Mars is the only privately owned [1]. Mars’ commitment to addressing climate change issues by adjusting its supply chain, is a chance for a global business to demonstrate that it can still be profitable and a responsible member of the global community. Being private allows Mars the time to experiment with different methods and find the path to responsible profitability, without facing the pressures from shareholders or equity markets.
To address the issue, Mars’ management made a commitment to science-based solutions. In 2016, The World Resources Institute (WRI) announced it had partnered with experts at Mars to develop science-based targets for Mars’ land, water, and climate impacts [3]. Partnering with WRI was key because it helped develop solutions that would be supported by Mars top management and still impact the issues. WRI did this by presenting goals in a streamlined manner for top executives, focusing on the source of land and water impacts, addressing impacts to the value chain, and searching for synergies [3].
Mars already supports 100% of its operations in five countries (including the US and UK) with renewable energy [4], and will increase the total to 11 countries by next year [2]. Mars set and met a goal to reduce total greenhouse gas emissions by 20% and decreased its total global water use by 18% in 2015 [5]. By 2020, Mars will reduce emissions an additional 20%, make a 15% water improvement across its manufacturing facilities, and has set the goal to reduce emissions 100% by 2040 [4].
Mars was also heavily involved in establishing the CocoaAction coalition through the World Cocoa Foundation [2]. As of 2014, 12 companies across the globe, including an additional global leader in Nestlé, had committed to CocoaAction. The coalition plans to build “a rejuvenated and economically viable cocoa sector, for no fewer than 300,000 cocoa farmers and the communities where they live, by 2020” [6]. The coalition focuses on the farmers and crops of Ghana and Côte d’Ivoire, which produce 55% of the world’s cocoa, and is committed to education and practices that will help fix unproductive orchards and declining soil fertility. The supply chain has caused this ecosystem to be stretched to its limits over the years, and with an increasing world population and demand for cocoa on the horizon, these communities could experience devastating consequences if the problems are not fixed [6].
Despite the commendable efforts and response by Mars, it cannot fix the problem on its own. Even with the help of Nestlé and other major chocolate producers, there is still a tremendous amount of support needed by businesses across the globe to impact climate change. With policies in countries across the globe being enacted to reverse the efforts to control and reduce climate change, it would appear the world is not trending in the right direction to fix this problem. The biggest effort Mars can take in the near term to help impact this issue is to see these initiatives through, and to capture data for the effects they are having. In the medium term, however, Mars will have to take the step to prove this is economically viable to corporations. Being a private company, Mars does not have to show its financial statements to anyone and can afford to take losses to make these things happens. Publicly traded companies do not have that same luxury and will be unlikely to get shareholder support for programs that make their companies unprofitable.
To that end, the questions remain: will Mars be able to prove that these initiatives are economically viable, and will they be willing to disclose the financial documentation to prove it? Additionally, will Mars be able to prove with scientific data that their efforts positively impacted the environments in which they operate, and that these improvements were not caused by other random or unexplained phenomena?
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Sources
- Alexander E.M. Hess, “Companies That Control The World’s Food,” 24/7 Wall St., August 15, 2014 [http://247wallst.com/special-report/2014/08/15/companies-that-control-the-worlds-food/3/], accessed November 2017
- Oscar Williams-Grut, “’We’re trying to go all in’: Chocolate giant Mars pledges $1 billion to fight climate change,” Business Insider, September 6, 2017 [http://www.businessinsider.com/mars-climate-change-investment-global-warming-sustainability-plan-greenhouse-gas-2017-9], accessed November 2017
- Samantha Putt del Pino, “How Mars and WRI Developed Science-based Sustainability Targets for Climate, Land, Water,” World Resources Institute, October 19, 2016 [http://www.wri.org/blog/2016/10/how-mars-and-wri-developed-science-based-sustainability-targets-climate-land-water], accessed November 2017
- Mars, Incorporated, “Climate Action,” http://www.mars.com/global/sustainable-in-a- generation/healthy-planet/climate-action, accessed November 2017
- Mars, Incorporated, “Water Impacts,” http://www.mars.com/global/sustainable-in-a-generation/healthy-planet/water-impact, accessed November 2017
- World Cocoa Foundation, “CocoaAction Frequently Asked Questions” (PDF File), downloaded from World Cocoa Foundation website [www.worldcocoafoundation.org], accessed November 14, 2017.
You raised two very interesting questions, Jack. The first one is to understand what motivates companies to address climate change challenges. Mars, which is not public, ranked very badly on the ratings you mentioned for water and land issues among other industry leaders. Therefore, are companies incentivized, or not, to address climate change challenges for share price reasons, customers concerns, or because of their own and spontaneous will to address it. To answer your question, I am sure that Mars would be proud and even advertise their ability to lead these initiatives in an economically viable way, but would probably not if results are not satisfying. Also, I wonder to what extent Mars is committing to really addressing the problem: they promised to invest a $1 billion over “the next few years” [1], which given their annual $33 billion revenue will represent a very little fraction invested to solve a quite pressing issue.
[1] http://fortune.com/2017/09/06/mars-pledge-one-billion-fight-climate-change/
Great choice of company to evaluate as it is privately owned. My view on their efforts is a bit cynical: it seems to me they were forced to those efforts by rankings and bad press. This type of PR was a threat to their operations, so they decided to position themselves as a leader in driving the change. The value of this PR pressure is unparalleled – without it companies would be hesitant to step on the path of sustainability, which is often very expensive at its beginning. But when the company is forced to join “sustainability club” it cannot leave it no more. This fact maximizes their efforts to make sustainability good for business in financial terms. And that drives other companies to join the race, as it gives them financial incentives, accelerating the momentum of fighting climate change.
Great article, Jack. The example of Mars is especially interesting given its private ownership, the relatively significant size of its financial commitment (i.e., $1B), the context behind this commitment (i.e., negative press), and its NGO partner (i.e., WRI). Like others, I have some skepticism about the intention behind this commitment for all four reasons above. Mars’ private ownership frees it from the pressure to generate returns to shareholders from these supply chain improvements, so I’d be wary of expecting them to produce any proof of economic viability. The $1B dollar amount seems like a figure that Mars’ management derived more because it generates positive shock-value than because they actually have a solid plan for how to invest all $1B. The fact that Mars ranked so low in its sustainability ratings prior to the commitment also suggests an ulterior greenwashing motive. Lastly, the partnership with WRI raises similar concerns, given the positive PR benefit Mars gets from being associated with WRI’s positive environmental track record and the revenue diversification WRI gets from displacing public funding with corporate donors (http://www.wri.org/about/wri-2016-funding-commitments). Skepticism aside, however, I’m glad to see large-scale companies like Mars at least putting skin in the game like this—particularly when climate change and supply chain sustainability have a direct effect on both their core business operations and the communities in which they operate.
Thanks for an interesting read, Jack! I think your first question is a challenging one, and I would push it even further: if Mars released evidence of how financially successful their new climate change initiatives have been, would anyone believe it? Mars enjoys a unique benefit as a private company in that they have largely have control over information flow. However, while this affords them the ability to pursue their billion-dollar commitment as slowly as they want, it also reduces the credibility of what they do provide the public, as this data is not subject to the same oversight and institutions as it would be coming out of publicly-traded companies. This problem has been exacerbated by recent bad behavior from even larger privately-held companies, such as Koch and Cargill, who have lagged many of their publicly-traded peers in pollution and climate change. As much as the public generally mistrusts corporations to be good stewards of the environment, this cynicism might be even more difficult for Mars to overcome.
[1] http://www.greenpeace.org/usa/global-warming/climate-deniers/koch-industries/koch-industries-pollution/
[2] https://www.corp-research.org/cargill
Mars is facing the issue of climate change head on in the same manner as larger multinational organizations like Walmart and Coca Cola. I think their initiatives are viable even the highly ambitions goal to have all their manufacturing facilities being powered by renewable energy, but I’m skeptical about whether $1B of capital will be deployed to achieve it. In the future, there may be regulations for industrial companies to measure and track their carbon footprint, but it’s not necessary for those companies to reveal the costs of making those investments especially if there are no shareholders to report to. Ultimate, Mars would see their return on investment as a reduction in operating expenses due to more sustainable changes within their value chain. Lastly, partnering with NGOs as you mentioned is another measure by which Mars can be held accountable for their commitment.
You can refer to my essay on Coca Cola’s efforts to reduce greenhouse gas emissions for some additional insight on how other industry giants are approaching this issue.
https://d3.harvard.edu/platform-rctom/submission/coca-cola-using-carbonation-to-drive-a-nation-towards-climate-change/