Inside Mars, Inc.'s $1 billion pivot toward sustainability

NEW YORK — When Mars Inc. recently concluded a five-year effort to map and evaluate its supply chain, the company realized its very business would be in jeopardy if a few things didn’t change.

Without improving supply chains, Mars won’t be a resilient company, won’t attract the best workers, and in some supply chains, they won’t have enough of the crops they need, the company concluded. For years, Mars had worked to improve sustainability efforts in factories. But it hadn’t worked as much with the 1 million smallholder farmers at the far tail of its supply chain — and they required attention.

“We learned if we don’t take action and try to catalyze change, then we’re facing a challenge in having a business at all,” said Marika McCauley Sine, the company’s human rights director.

That realization has become the inspiration for a $1 billion investment over three years, called the Sustainable in a Generation Plan, aimed at tackling issues from climate change, to poverty in its supply chains, to resource scarcity. The program marks a fundamental shift in how the 100-year-old private company looks at its business.

The roughly billion dollar investment will come in the form of business expenses, not corporate social responsibility or philanthropic programs. Embedding these issues and goals in the core business and tying them to business growth is critical to their adoption and success, said McCauley Sine. The company — which has come under fire in the past for human rights issues, particularly in cocoa supply chains — is looking for help and partnerships to make changes.

Taking action

Mars aims to change some of the ways it does business — how it sources products, how it monitors its supply chains, and how it measures its environmental footprint.

Supporting the Sustainable Development Goals “requires you completely rethink supply chains and incentivize business leaders,” said Matthias Berninger, the vice president of public affairs at Mars.

The first step will be to improve traceability in the supply chain, so Mars can identify problems and work toward solutions. That poses a major challenge for a firm that sources from a diverse number of local companies around the world, McCauley Sine said. Often, the toughest issues are at the farthest end of the supply chain, where Mars has less visibility, control, or influence.

The company has a supplier code of conduct and a responsible sourcing program, which set standards for first tier suppliers; those operating in areas with high human rights risks undergo independent evaluations. The sustainable sourcing program works to map key supply chains to better understand where products come from and the potential impacts in an ongoing process. The company has also worked with experts and continues to collaborate and create joint efforts — including with industry, government, civil society, and communities — to address human rights challenges in its supply chains.

When problems do arise at the ends of supply chains, companies including Mars have to look at the available levers to create change, McCauley Sine said. One core challenge for Mars, for example, is how to ensure farmers in the supply chain have a decent standard of living.

“People have been trying to solve [these problems] for decades,” she said. “To break through, we and others need to do some things differently.”

One way Mars is looking to do that is by launching a Farmer Income Lab to look at new solutions to improve farmer livelihoods. The lab will be a “collaborative think-do-tank” aimed at researching and testing solutions that build supply chains to better serve smallholder farmers, then sharing and advocating for those solutions.

But for dramatic, systemic change in livelihoods, particularly in the cocoa industry, Mars and companies like it need to change the way they buy cocoa. Mars is committed to paying more for cocoa, even though that might be a competitive disadvantage in the short term, Berninger said. “We need to make sure we buy the best, not just the cheapest,” he said.

Berninger did not specify what prices Mars would pay precisely, but he said that if farmers are cutting down cocoa trees to plant other crops, as is happening in places such as Indonesia, the price is too low, he said.

Mars believes that it must pay more to reduce poverty among its farmers. But to convince them to continue growing, higher prices are not enough, Berninger said. Mars also aims to invest in extension services and small business support, he added.

Part of the company’s plan will also focus on climate. Mars’s corporate carbon emissions are equal to that of Panama, Berninger said. The company is now looking to reduce emissions by two-thirds and to keep land and water use flat while growing the business. The company already uses or purchases only renewable energy in the U.S., the U.K., Belgium, Brazil, and Lithuania, and that has provided cost savings, he said. The company has set goals of reducing greenhouse gas emissions across its value chains by 27 percent by 2025 and 67 percent by 2050, as compared to 2015 levels. As part of the new plan, the company will work to eliminate 100 percent of greenhouse gas emissions in its direct operations in more than 80 countries by 2040.

A final pillar for change will be human rights, where Mars is prioritizing ending hazardous labor, forced labor, and child labor, with a focus on specific supply chains. This includes the fish industry in Thailand, where the company has laid out an action plan with clear goals, McCauley Sine said. The strategy includes increasing the number of local staff working in Thailand and ensuring strong governance; working toward full traceability; engaging with human rights experts, local NGOs, and others assess human rights conditions; and launching prevention and monitoring systems in the supply chain to ensure that human rights standards are met. They plan to do so in collaboration with others in the industry, government, and civil society, publishing regular progress reports.

Looking for partners

Mars has sought out partners already and is looking for more organizations with the necessary expertise and reach in the rural communities they source from.

The company recently announced a partnership with International Fund for Agricultural Development to improve smallholder farmer livelihoods through greater access to tools, technology, and training. Oxfam is advising the new farmer income lab, and Verite, an organization that monitors labor and human rights violations in global supply chains, helped the company develop its human rights strategy. They work in house to ask tough questions about human rights and offer advice.

Mars has come under criticism in the past for child labor in its cocoa supply chains, and the company knows that may make some organizations hesitant to partner. The company acknowledges its role in addressing some of these concerns, but McCauley Sine argues that many of these challenges “are systemic across societies, not unique to any one business, so the right approach is to come together around them and not say they are attributable to one player in the industry.”

McCauley Sine urged NGOs to engage and have a conversation about what Mars is doing, how it can do better, and how the broader industry can work differently.

“We shouldn’t stop talking because issues exist,” she said. “Unless we engage civil society, we won’t be able to break through.”

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