Climate Change might take away one of our most innocent and wonderful pleasures: chocolate. While the claim needs further validation as the topic of climate change itself does, Mars, one of world’s largest chocolate producers, is indeed facing challenges as a result of climate change in sustainable sourcing of cocoa, one of the most important ingredients of chocolate making and in its energy consumptions in operations.
As one of the world’s largest buyers of cocoa, Mars always holds a reasonable concern about the volatility of cocoa supply. One reason is the concentration of the supply, with four countries in West Africa-Côte d’Ivoire, Ghana, Cameroon and Nigeria- supplying two thirds of the world’s cocoa. Despite incessant political instability that cut cocoa supply by 70% in years of wars, aging and low-productive trees have also added to the concerns of local farmers. Climate change will only worsen the situation. For Ghana and Cote d’Ivoire for example, a study by International Center for Tropical Agriculture predicts that the temperature in those two countries will increase by 2 degree Celsius by 2050, which will accelerate the evaporation of water from the leaves and earth, leaving less water for cocoa trees and reducing its productivity. Another negative impact of climate change on the chocolate producer is the increasing cost of energy consumption. Mars operates across multiple touch points- factories, warehouses, distributors and retailers, and consumes tons of energy to produce, warehouse and transport its products. Under the impact of climate change, the use of fossil fuel has been increasingly regulated and criticized in its operation, which has and will continue to raise the cost of different touch points across supply chain. One example is the higher commissions charged by Mars’ distributors for warehousing and transporting its products due to the increasing cost in electricity and gasoline. Besides, the use of fossil fuel also has negative impact on Mars’ government relations. For example, in China, government officials are increasingly measured against greenhouse gas emissions reduction targets. To build strong governmental relation, which is key for doing business in China, Mars has pressure to push for more green energy alternatives to fuel its business.
To solve those challenges, Mars launched “Principle in Action” program with two specific focuses on building sustainable supply chain and operations. In raw materials sourcing specifically, the promise is to help agricultural suppliers produce with higher yields and quality, but with less energy and greenhouse gas emissions. It aims to purchase 100% of several key raw materials via independent certification programs such as the Rainforest Alliance and UTZ Certified. Several innovative scientific centers have been set up to improve farming and production method. On the operation side, Mars pledges to eliminate all greenhouse gas emissions from operations by 2040 and reduce emissions from product deliveries to retail customers as much as it can. By 2015, it has met its mid-term goal to cut greenhouse gas emissions by 25%. One major initiative that year included the establishment of a new wind farm in Mesquite Creek, Texas, which enabled the company to cut GHG emissions from consumption of purchased electricity, heat or steam by nearly 40%. The use of renewable energy has become the major way to reduce fossil fuel consumption in other factories, including sourcing hydropower from local and installing solar panels on the roof of the factory.
Moving forward, I think Mars has several opportunities to mitigate the negative impact of climate change and contribute to the environment. One thing that is happening but lacks consistent execution is to reduce energy waste in offices via better employee education. Mars has offices across 74 countries in the world, which consumes far more electricity and water than factories. Behaviors such as turning off lights before leaving the room or using water-saving toilet flush when you have a choice are not followed by employees. Energy saving from this area, while with huge size of opportunity, only requires investment on cultural and awareness reinforcement. Another opportunity includes changes in its operating model. De-seasonality of the business will help reduce unnecessary raw material, finished goods and energy waste during peak season where sales people are irrationally piling up stocks in distributors, which later resulted in large goods return and write off.