In 2016, chocolate lovers consumed roughly 7.3 million tons of chocolate worldwide. Global consumption has grown 2% annually since 2013 and is expected to continue to grow at 2% through 2019 . While the world’s insatiable appetite for chocolate continues to grow, key areas of production might soon be at risk as a result of climate change. One key player in the industry, Mars, is taking major steps to build a sustainable supply chain for the future and to reduce the impact of its operations on climate change.
A Sticky Situation
Chocolate’s key ingredient, cocoa, is predominantly grown within 20 degrees north and south of the equator. Cocoa production is largely concentrated in a few West African countries (see figure 1), namely Cote d’Ivoire and Ghana, which together account for nearly 70% of global cocoa production . For Mars – maker of favorite candy confections such as Milky Way, Mars, M&M’s, Snickers, and Twix – this dynamic presents a challenge to the Company’s supply chain in the face of climate change.
Cultivatable land in Cote d’Ivoire and Ghana is likely to decline, as these countries are expected to experience a temperature increase of 3.8 degrees Fahrenheit by 2050 . This increase will result in higher levels of evaporation and plant transpiration to the atmosphere without a commensurate increase in rainfall. Consequently, land suitable for growing cocoa will be constricted over time, as illustrated in Figures 2 and 3 .
Given these challenges, Mars has outlined and begun to implement meaningful changes to secure the lifeblood of its delicious treats for years to come.
Chipping Away at a Chocolate Problem
In September 2017, Mars CEO Grant Reid emphasized the importance of addressing the sustainability of Mars’ global supply chain, saying, “The engine of global business – its supply chain – is broken, and requires transformational, cross-industry collaboration to fix it. ” Mars has made meaningful commitments in the short, medium, and long term to reduce its operations’ impact on climate change. The Company has pledged $1 billion over the next three years to its “Sustainable in a Generation Plan” aimed at, among other things, reducing its greenhouse gas (GHG) emissions and helping its cocoa producers prepare for the realities of climate change.
Wind energy is a key component of Mars’ GHG reductions. In recent years, Mars opened wind farms in Texas and Scotland, which generate the equivalent of 100% of the energy required to power Mars’ U.S. and U.K. operations, respectively. Similar plans for wind production in Mexico are underway. Additionally, Mars expects to power 100% of its operations in the Czech Republic, France, Spain, and Poland with renewable energy by 2018. This is all part of Mars’ goal to reduce its GHG by 27% by 2025 from its 2015 levels and by 67% by 2050.
Mars is also focused on helping cocoa farmers deal with climate change. In July 2017, Mars launched “The Farmer Income Lab” to improve “breeding, farming methods and protection against pests and disease for cocoa. ” To this end, Mars’ goal is to obtain 100% of its cocoa from certified sources by 2020. Additionally, Mars has committed to investing $280 million in Cote d’Ivoire alongside the government through 2025 to advance farmers’ livelihoods . By providing resources and expertise to its cocoa farmers, Mars is working to mitigate the impact of climate change on its supply chain.
More Work to Do
To secure its long term supply chain, the Company must accelerate its involvement with local cocoa farmers. Today, Mars does not typically purchase raw materials from small farms, and while it has launched its Farmer Income Lab, its peers have moved more quickly. For instance, The Hershey Company began its “Learn to Grow” farmer training program in 2012, which impacted over 30,000 farmers across over 450 cocoa communities in 2015 . Similarly, Mondelez launched its “Cocoa Life” program in 2012, which reached over 75,000 farmers in nearly 800 communities in 2015 .
In addition to enhancing its outreach to farmers, Mars needs to work directly with local governments and regulators to enhance their relationships with the small farmer communities. Local governments in these areas can play a meaningful role in increasing the level of engagement with small farmers, thereby accelerating the pace of potential technological change and socio-economic improvement .
Food for Thought
To date, Mars has made good progress in securing its supply chain vis-à-vis climate change. However, questions remain regarding additional steps the Company can take. Namely, how can Mars reduce its overall energy footprint rather than merely offset it with alternate energy sources? How should Mars define success with respect to enhancing the sustainability of its small farmers and suppliers? And finally, how can Mars create a competitive advantage through its sustainability efforts?
 ICCO. n.d. Retail consumption of chocolate confectionery worldwide from 2012/13 to 2018/19 (in 1,000 metric tons). Statista. Accessed 10 November, 2017. Available from https://www-statista-com.ezp-prod1.hul.harvard.edu/statistics/238849/global-chocolate-consumption/.
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