Corporations are being forced to grapple with climate change, just like the rest of us, and how they choose to adapt may be what decides their success or failure in the very immediate future. Mars Inc. has recognized the importance of bringing sustainability into its practices and is spending $1 billion on strategies that will lead to greener practices, according to Bloomberg. And they believe it'll also pay off in profits.
“There is a very concrete business case to this,” Barry Parkin, chief procurement and sustainability officer at Mars, told Bloomberg in a phone interview. “We’re going to get a payback on that billion several times over.”
While many are familiar with Mars Inc. for its namesake candy bar, they actually have five businesses that cover numerous food products, from chewing gum to rice, and also invest in nutritional research, specifically in a cocoa nutrient called "flavanols."
In 2016, the company generated $35 billion in revenue, and they currently employ about 110,000 people. The wide scope of their work means that when climate change strikes, they are likely to be affected.
The billion dollars is being divided into thirds by Parkin and the sustainability office at Mars. They want to replace the artificial ingredients in their products, simplify their supply chains and buy directly from farmers whenever possible, and they want to increase efficiency when it comes to energy and water.
At the moment, Mars is responsible for buying 0.2 percent of the world's palm oil, and it's sourced from all over. That makes it virtually impossible to track the potential environment, social or governance risks (known as ESG), because the oil is coming from thousands of palm oil-producing mills.
“You cannot possibly have a compliance program that ensures there are no issues when you have that level of complexity,” Parkin said. “Deforestation is probably the biggest environmental issue and on the social side, it is forced labor and extreme poverty. Those are the challenges of sourcing anything from the developing world.”
Their target is to reduce their greenhouse emissions to zero by 2040 and have already cut them by 30 percent. They're also financing programs to support farms growing cocoa and vanilla and have signed long-term sourcing agreements, which will make their product much easier to track for regulatory purposes. Next, they're working on reducing pollution on the supply chain.
This new direction is in part because of the Paris Climate agreement, which saw countries agreeing to reduce their carbon emissions—and which Trump pulled out of his first year in office. While some companies are likely thrilled by the loosening of environmental regulation entered in by the current White House administration, Mars Inc. seems to believe that the trend towards sustainability can't be pushed aside. It just makes business sense.
“It’s the end of the commodity era, the nature of a commodity is that it’s the same everywhere and you can just buy on price and no one asked or knew where it came from,” Parkin explained. “That’s no longer acceptable.”
He added: “Partly because it’s the right thing to do but also partly because there’s already a price on carbon and we only expect it to increase. With 26 million tons of CO2 in our extended supply chain, even if you took a conservative $20 per ton view on that, that’s half a billion dollars of cost. When we have a significantly smaller footprint than our competitors, we’ll have a cost advantage.”
Hear that, big business? You can make your money and do the Earth a solid, too.