Mars Inc. (Mars) is on the forefront in the food processing industry in proactively combatting climate change and the effects it can have on a company’s business model. Mars’ primary raw material is cocoa, which grows best in the rainforest under specific conditions including uniform temperatures (within ~20 degrees of the equator), high humidity, abundant rain, and low to non-existent wind levels. Most of the world’s cocoa is sourced from West Africa, Southeast Asia, and the Americas. In recent years, research suggests that rising temperatures have a direct impact on rates of rainfall and evaporation1, leading to an increase in evapotranspiration, or the sum of evaporation and plant transpiration from the Earth’s land to the atmosphere. This increase, more so than the increase in temperature, threatens the future sustainability of cocoa since projected temperatures in West Africa by 2050 are unlikely to be accompanied by a sufficient increase in rainfall to offset the moisture loss, according to projected carbon dioxide emissions scenarios2.
In addition, climate change will cause cocoa-growing locations, located within 300 km of the coast, to shrink by 20302. By 2050, rising temperatures will push the suitable cacao cultivation areas uphill, as the optimal altitude will rise by over 1,000 feet, and force growing countries to “choose between growing enough to meet demand and preserving natural habitat2”.
Source: Climate and Chocolate2
In order to address these issues, Mars has taken a multi-pronged approach including partnering with non-profits, targeting emission reduction benchmarks, and employing in-house meteorologists. These meteorologists are dedicated to analyzing the impacts of weather on the cocoa-producing business in order to anticipate necessary changes in the supply chain to promote more sustainable future cocoa supply3.
Mars has set targets to reduce its emissions through the company’s Sustainable in a Generation program, vowing to eliminate all greenhouse gas emissions from operations by 2040 and reduce emissions from product deliveries to retail customers as much as possible4. In 2015, Mars met its goal to cut greenhouse gas emissions by 25% in large part to the company’s new wind farm in Texas, which allowed Mars to cut Scope 2 emissions (greenhouse emissions from consumption of purchased electricity, heat, or steam) by nearly 40%. This 200 megawatt wind farm has 118 turbines producing enough electricity to power over 60,000 homes, or all of the company’s domestic sites, making Mars the first major food business to source all of its electricity for its domestic operations from renewable sources. While it did not hit its target of decreasing fossil fuels by 25% in 2015, the company has reduced total energy use by 5% and fossil fuel use by 18% since 2007, while simultaneously growing the business4.
MARS has employed several new strategies in order to reduce these emissions and promote efficiency throughout the company. For example, a team in the U.K. has come up with several of energy-saving projects, ranging from switching off lights in unoccupied areas to optimizing the building management system, which have saved the business ~1,000 kilowatt-hours per week4. Additionally, the team in Belgium has invested $500,000 in a pilot project to research new technologies in hopes of cutting greenhouse emissions by 50%.
While management is committed to fully eliminating scope one and two emissions by 2040, ~77% of the company’s scope three emissions (from purchased raw materials, transportation, packaging and other goods and services) relate to the production of the purchased goods and services, in particular agricultural raw materials. The agricultural materials release these greenhouse emissions through energy used during farming and the production of fertilizers and pesticides, nitrous oxide from livestock and crops, and forest clearance. The company is continually working with scientific experts at the Sustainable Agriculture Initiative Platform and the University of Cambridge to explore ways to reduce emissions by developing a better strategy for encouraging sustainable agriculture in the supply chain4.
Source: Assessment of Climate Change Impacts on Cocoa Production and Approaches to Adaptation and Mitigation5
It is important to note that there is time for Mars and other cocoa-consuming companies to adapt their practices since the changes in climate suitability are expected to take place over the next 40 years, impacting the next generation of cocoa farmers more than the current one. In addition to the steps that company has outlined, management should consider promoting change in the cultivation process to retain, or in some cases replant, other rainforest trees. These taller retained or replanted trees would provide cacao trees with shade, that could help decrease both temperature and evapotranspiration, as well as protection from wind and soil erosion. Additionally, carbon that would have been released into the atmosphere as a result of clearing these trees from the forest would no longer be released2. By methodically addressing the company’s supply chain issues through alternative energy programs, increased efficiency, and partnerships with researchers and sustainability experts, management has put Mars on a path to eliminate greenhouse gas emissions from operations by 2040.
1 Climate Change in 2016: Implications for Business case