cocoa supply chainreducing packaging materialeliminating 50 million pounds B u s i n e s s F i n a n c e
THE INGREDIENTS OF A SUSTAINABILITY PLAN
“We can have real impact on the ground.”
—Roland Weening, president of coffee, Mondelēz International
As one of the world’s largest snack food companies, Mondelēz International operates in more than 80 countries, sourcing ingredients for coffee products from such countries as Vietnam, Indonesia, and Brazil and cocoa for chocolate from Côte d’Ivoire, Ghana, India, and the Dominican Republic. Mondelēz, which is headquartered in the Chicago suburb of Deerfield, Illinois, is committed to promoting sustainability throughout its supply chain and such initiatives as its Cocoa Life and Coffee Made Happy programs are designed to ensure that agricultural supplies are sustainably sourced.
In its “2013 Call for Well-Being Progress Report,” for instance, Mondelēz announced that with 10 percent of its cocoa supply sustainably sourced, the company is on target to reach its longer-term goals. In order to reach those goals, Mondelēz plans to spend $400 million over 10 years to train cocoa farmers in better agricultural and business practices and to provide them with access to planting materials. “We’re investing in much more than farming,” explains Bharat Puri, president of global chocolate and candy. “It’s about empowering cocoa communities as a whole so cocoa-farming villages become places where people want to live.”
President of coffee division Roland Weening agrees: “Together with our partners,” he says, “we can help farmers solve challenges and secure a more sustainable coffee supply.” For Mondelēz, then, working closely with communities of growers is not simply a matter of improving supply-chain efficiency: It also reflects the principle that the power of a big company to contribute to global sustainability can be harnessed most effectively when it’s extended to the activities of the smaller organizations with which it does business. “We can have real impact on the ground,” says Weening.
As of 2013, Weening’s division was sustainably sourcing 56 percent of its coffee and was well on its way to its goal of 70 percent by 2015. As a matter of fact, Mondelēz is big on goal settingin all of its sustainability initiatives. In wheat, for example, which is a core ingredient in the company’s line of biscuits, Mondelēz established the Harmony Charter, a partnership with members of its wheat supply chain designed to encourage “more respectful agricultural practices, which include wheat variety selection, soil management, limiting fertilizers and pesticides, and smart water use.” The company has set a goal of using Harmony wheat in 75 percent of its total biscuit volume by 2015. According to its 2013 report, it has reached a volume of 44 percent and is on target to meet that goal.
Mondelēz is also a member of the Roundtable on Sustainable Palm Oil (RSPO), which was established in 2004 to promote the production of sustainable oil palm products through the certification of industry practices. The company set a goal of having 100 percent of its palm oil supply RSPO certified by 2015, and in 2013, Mondelēz announced that the goal had been reached two years ahead of schedule. Now that the goal has been attained, says Dave Brown, VP of global commodities and strategic sourcing, we recognize the need to go further, so we also challenged our palm oil suppliers to provide transparency on the levels of traceability in their palm oil supply chains. Knowing the sources of palm oil supplies is an essential first step to enable scrutiny and promote improvements in practice on the ground.
Not surprisingly, Mondelēz set a goal for ensuring acceptable levels of supply-chain traceability—the ability to trace an ingredient through every stage of production and distribution. The company plans to review suppliers’ traceability practices and then publish an action plan for giving priority to suppliers whose practices are consistent with companywide sustainability principles. The goal is to eliminate all supplies that don’t meet standards by 2020.
To understand how Mondelēz wants to coordinate the entire range of its sustainability efforts, we might take a look at one of its most recent initiatives. In 2014, Mondelēz Ireland announced a partnership with Bord Bia Origin Green, a nationwide Irish food-related sustainability program, to promote sustainability throughout the country’s food sector. “We have already achieved significant positive change in Ireland,” explains Patrick Miskelly, manufacturing director of Mondelēz Ireland, “but we have a lot more goals to achieve,” and the company sees the Origin Green partnership as the means of taking its sustainability plans to the next level.
These plans revolve around the three manufacturing plants that Mondelēz operates in Ireland, and the immediate focus will be on the supply chain—in particular, the sourcing of raw materials. The company is already committed to local sourcing. At one plant, for example, 37 percent of all raw materials originate locally; another plant uses 21 million gallons of milk from local cooperatives that have adopted sustainable farming practices. Origin Green will add independent verification of farmers’ and food suppliers’ success in setting and achieving measurable sustainability goals.
Sustainable sourcing, however, is only one aspect of Mondelēz Ireland’s sustainability strategy. In terms of organizational planning, sustainable-sourcing programs reflect a set of carefully developed tactical plansdesigned to further a larger strategic plan. Sustainability goals, for example, also include the protection of Ireland’s rich natural resources and a reduction of the company’s overall environmental impact. Between 2005 and 2010, the company reduced waste at all three Irish plants by 42 percent, and the largest of the three has already met its goal of diverting all of its waste from Irish landfills by 2014.
Mondelēz Ireland also plans to reduce carbon emissions from natural gas consumption by 15 percent by 2016, and like most sustainability-conscious organizations, Mondelēz International regards its various sustainability plans as part of an overarching strategy to reduce its carbon footprint—the total of greenhouse gas (GHG) emissions for which it’s responsible. Between 2005 and 2010, the company reduced GHG emissions by 18 percent and then set a goal of another 15 percent reduction by 2015. As of 2013, it had attained a 9 percent reduction and considered itself on target. As for reducing energy use, Mondelēz admits that “more improvement is needed” if it’s to meet its goal of a 15 percent reduction by 2015; as of 2013, it had cut energy use by only 6 percent. On the upside, the company has exceeded its 2015 goal of reducing manufacturing waste by 15 percent, having achieved a 46 percent reduction by 2013.
- Here are a series of Mondelēz’s publicly announced objectives for enhancing sustainability:
- Reducing production waste to landfill sites by 60 percent
- Reducing our energy and GHG in manufacturing
- Educating employees to reuse water and improve processes
- Reducing the impact of our operations
- Addressing child labor in the cocoa supply chain
- Reducing packaging material
- Eliminating 50 million pounds of packaging material
- Buying certified commodities
- “Our business success,” says Mondelēz chairman and CEO Irene Rosenfeld, “is directly linked to enhancing the well-being of the people who make and enjoy our products and to supporting the communities where we grow our ingredients.”
- Assume that you’re a Mondelēz representative who’s been asked to give a presentation to students in an introductory management class. Explain Rosenfeld’s reasoning or her “philosophy” of “business success.” Be sure to give some examples of how and why this approach works at Mondelēz (which, remember, is a global snack food company).
- Explain—hypothetically—how the following might emerge as barriers to sustainability planningat Mondelēz:
- Inappropriate goals
- An improper reward system
- A dynamic and complex environment
- Resistance to change
- According to a 2014 McKinsey & Co. survey of executives, 36 percent included reputation management—building, maintaining, or improving corporate reputation—among the top three reasons for addressing sustainability. Explain how the following management strategies can help to enhance both sustainability and reputation:
- Setting aggressive internal goals for sustainability initiatives
- Adopting a unified sustainability strategy with clearly articulated priorities
- Building a broad leadership coalition in shaping sustainability strategy
- Ensuring that everyone in the organization understands the financial benefits of sustainability