Mars: To transform raw materials supply, we must work together
Mars has just published its fourth annual Principles in Action Summary, which details how the company runs its huge business. And it makes for interesting reading.
This 100-year-old family-owned, family-run company has net sales of more than $33 billion. It has six business units (including chocolate, pet care and food and drink), 75,000 staff dotted in locations across the planet and a plethora of well-known brands (from Galaxy and Uncle Ben's to Sheba and Skittles). And it well understands its position in the world and wants to drive positive change at the intersections where it can make a big difference — not least in driving better practices in farms in the developing world.
At the offices of the company's London-based communications agency, I caught up with Mars's global sustainability director, Kevin Rabinovitch, to find out how the business is using its scale to create change where it is needed most.
Tom Idle: This latest Principles in Action document covers a lot of ground. How long has this sustainability strategy been in its current guise? And how is it managed across the company?
Kevin Rabinovitch: We started having a more organized approach to sustainability about seven years ago. Prior to that, our behaviors and approaches were driven by the Five Principles [of quality, responsibility, mutuality, efficiency and freedom]; that goes back decades. But in 2007 we realized a need and value to have a more structured approach and that is what prompted our Principles in Action.
Of course, one of the trends right now is for businesses to adopt integrated reporting — combining financials and sustainability. This is an integrated report (albeit with less financials because our shareholders already know how we're performing) and we have been doing that since 2010.
Idle: Tell me about the Quaker roots of Mars. I love this idea of the Five Principles, especially the concept of working towards mutuality — so that if suppliers do not mutually benefit from working with you, you would walk away. How does it work in practice?
Rabinovitch: The great thing about working for Mars is that they are a family that thinks of business in generational terms — "One day my children will own it." And that flows through into how we make decisions. Setting up relationships with suppliers; building a factory; expanding into new markets — these decisions are made with a 20-, 30- or 50-year thinking horizon.
Idle: So does working for a family-run business make your job easier?
Rabinovitch: It creates opportunities for us to think differently. And it gives us freedom to explore ideas that might not, at first, work from a business point of view. Where we get to in the end is about taking actions we believe any business ought to do.
But sometimes we have to step quite far out of the box to find a good way back into a good answer. We have freedom to go play.
Idle: Give me an example.
Rabinovitch: Our cocoa training for 50,000 farmers in West Africa. We have got our peers to stand next to us to train thousands of farmers too. Figuring that out took some time.
Mars has so many brands and operates in so many markets with so many touch points among suppliers, producers and customers. Do you feel a weight of responsibility to get it right? Absolutely. But it is collectively important for all of us to get it right. I find it exciting to be in a role in a company in an industry where if we get it right, we make difference at scale.
I have been at Mars for 20 years, starting as an engineer designing manufacturing processes in the R&D team. In 2004 I was living in California. My wife decided we should put solar panels on our roof, so we decided to go for a two-kilowatt system which covered all of our electricity needs for the house. I realized I could make a job out of sustainability, so I moved into one of the first sustainability roles at Mars. Six years on and I have just helped lead a 200MW wind farm at our site in Texas. In six years, I went from installing two kilowatts to 200,000 kilowatts — and that is incredibly exciting; to have the opportunity to make a difference at 100,000 times the scale.
Idle: So, presumably that first sustainability role was all about making internal efficiencies.
Rabinovitch: Yes. The original remit was for me to help the business understand what sustainability means for Mars. The first to do was to accelerate efficiency in our factories and it spiraled out from there. We looked at water, waste, renewable energy and looked at what materials we used and how much we could reduce that use.
Idle: You have done a fair bit of work in defining your material impacts as a business — environmentally and socially. Are you happy with where you've got to in that process?
Rabinovitch: Yes. With our Scope 1 and 2 impacts, we are proud of the program. Thanks to our efficiency work and renewable plants, like the one in Texas, we're confident we will meet our 2015 targets. We have pretty stringent targets. And the 2020 targets will be no less stringent. We are heading for 100 percent reduction in greenhouse gas emissions by 2040.
And for the broader supply chain impacts, we have begun the accounting process. And right now, we are developing the programs to set reduction targets in those areas. But when it comes to tackling raw materials, it is much more challenging because the ability to measure is harder and we don't directly control things. It's about changing those mutual relationships with suppliers; it takes longer, but we're on the case.
Idle: This year, you carried out some supplier risk assessment work with Maplecroft — ranking yourselves alongside 24 peers. And your ranking is improving. What did you find out? And why is your ranking improving?
Rabinovitch: We use Maplecroft, as well as the likes of WWF, to understand the climate change and GHG emission impacts and risks in our supply chain.
For our Tier 1 suppliers, we use a Code of Conduct for Responsible Sourcing to ensure they are behaving well. We risk-assess suppliers; if they are low-risk in a low-risk geography, we say, "You're fine." If they are high-risk, we follow up with more detail and a third party audit to check. The quality of our ranking has improved over time.
Idle: What is the risk based on? The impact on the environment or the impact to the value of the business?
Rabinovitch: Both. It's a combination of how important the raw material is to the business. Certain geographies with higher risks — whether they be social, environmental or political — need to be scrutinized more closely to make sure we are working with the good guys.
Idle: But given the size of your business, don't you also have a role to play in making sure the "bad guys" up their game so that you might work with them one day?
Rabinovitch: Absolutely. Business can be a great force for driving positive social change. We need to figure out how we can do more of that.
In West Africa, the commitment we have made to 50,000 cocoa farmers is about delivering what we call a "productivity package" — a mix of knowledge, planting materials and insight into how to run a more efficient cocoa plant in order to triple yields. As a farmer, if you can triple yields, that's three times as much cocoa to sell, more income, and you don't need to find more land, which reduces the pressure on climate change. And there is three times as much cocoa in marketplace, so we have good supply. Everybody wins.
Idle: And these farmers are free to sell the extra cocoa to other buyers?
Rabinovitch: Yes. It doesn't work for us [alone] to have good cocoa and palm oil. We have realized that transforming whole industry is the answer.
Idle: You have done plenty of scientific research in this area. How is this going and are you open to collaborate with others, competitors even, to make it happen quicker?
Rabinovitch: Immensely so. The cocoa genome — the work we did with U.S. Department of Agriculture and IBM to sequence it — was immediately published. But we said that anybody that wants to access that information would have to share their discoveries and make them open, too. You can't take our research, develop it and then lock it away. That work was not about improving the lives of plant breeders. It was about improving the lives of people growing cocoa. There is nothing secret about our productivity package either; it is all open. We want the knowledge out there. That's what drives change.
Yes, we compete with other food companies. But in sustainability and raw material supply, there are lots of opportunities. This is not an area for competition. It is more efficient to work together and we can then fight it out in the market over product quality and great advertising.
Idle: What does it take to build sustainable sources of certain commodities? In terms of meeting your targets, you are clearly further along the path on something like cocoa then you are with fish. Your goal is to have a 100 percent sustainably sourced supply of fish by 2020 and yet you're still at 10 percent.
Rabinovitch: The role that our raw material purchasers play is very different from material to material.
We are one of world's largest buyers of cocoa. So, if we go talk to our six friends, we have much of world's cocoa market and we can talk about how we transform the market. With almost everything else that we buy, we are purchasing fractions of 1 percent of the global supply. So, the same strategy for cocoa won't apply in corn, for example.
Idle: Looking at all of these commodities, what's the one that gives you biggest headache and keeps you up at night?
Beyond beef, pulp, paper and soy, we are working on rice (we own the Uncle Ben's brand) to develop breeding practices. And we are doing a lot of work on mint (we're one of the largest buyers of mint in world).
Idle: You don't need me to tell you that obesity is a huge problem. As a business, you are fueling child and adult obesity, aren't you?
Rabinovitch: Obesity levels are rising and it's a concern we share. We make products that people enjoy. It's about giving consumers a choice and being responsible about single portions [limited to no more than 250 calories].
We were first to do GDA labelling and we don't market to kids under 12. That was a commitment we made in 2007 across all advertising.
Idle: You are doing some truly innovative things — not all of which I fully understand, having read this latest Principles in Action document. What is getting you most excited right now?
Rabinovitch: Finding ways to create different relationships with suppliers or customers that enable you to do things you wouldn't normally do.
Renewable energy is a good example. When we build a factory, it will be there for decades. We know we will need energy for that plant for decades. Normally, we buy energy like you do at home — from month to month. But we want to say our energy supplier, "We will buy energy from you for 20 years." Yes, we will still want to negotiate price. But that knowledge is valuable to a supplier — not just for energy suppliers, but for other materials, too. To know that we will be a customer for the long-term makes them comfortable in making investments. It is a real unlocker. And that business-model innovation is very exciting.
Idle: And does that hark back to Mars's Quaker roots?
Rabinovitch: It is the recent interpretation of mutuality. There is a realization that when a supplier doesn't know whether there is a long-term business relationship, it makes them more hesitant to do some of the things you want them to do for the benefit of them and us.
Idle: So, what remains the biggest challenge for Mars as a business going into 2015?
Rabinovitch: Well, everybody defines sustainability differently. Not everyone is chasing the same things — and even if they are, it is not at the same pace or in the same way.
We have reach a good moment in lots of areas — like palm oil and renewable. There has been enough innovation and experimentation in the market to say, "Do you know what? This model works so let's just go!" That degree of collaboration and alignment is not as rapid as it could be.
Idle: The awards and accolades keep stacking up: Clearly, Mars is a great place to work. Why is that?
Rabinovitch: Mars has a decentralized model, which means that more of the ownership for decisions is devolved into the organization. You have a lot of control over how to solve the problems. Yes, the targets might come from above, but how you achieve them is up to you.
It is also full of opportunities to shape your work, job and career, rather than "There's the slot, go fill in." That is empowering.
This is not just a family-owned business. It is run by the Mars family and they do a great job.