Creating a Sustainable Global Supply Network in the Chocolate Industry

Below I compiled my notes taken during a session with Barry Parkin, Global Commercial Vice President of Mars Chocolate. As with other blog posts in this series, all written below should be considered paraphrases, not direct quotes.

Mars Facts:

• Mars is 100% family owned, started in 1911
• They have 5-6 million cocoa farmers in their supply chain
• Each farm is about 1-3 hectares
• Average production is half-ton cocoa per hectare
• Cocoa trees take 2 to 3 years to produce
• This yield has not changed substantially over the last 50 years 

Side note: CNN Freedom Project put together a series of reports discussing the issue of child labor in cocoa fields. They are worth a read/watch if you haven’t already. I have embedded the first video below.

Why Focus on Productivity?

These are not professional farmers are they are struggling financially.

Mars approach is focus on improving cocoa yields which benefits the farmers financially and contributes to economic growth of their country. This approach also helps Mars by keeping supply up to meet demand.

Mars has tried small partnerships up and down their value (supply) chain, hundreds of small-scale projects, without any noticeable increase in yields.

Their new strategy is to partner with competitors on 2 or 3 big projects, intended to:

• Address worst forms of child labor
• Involve governments and NGOs
• Improve productivity/yields
• Work toward eliminating all child labor
• Get kids in schools
• Encourage economic and social development 

This strategy operates under the philosophy: “if you don’t solve the economic issues, you can’t solve the social issues; but you can’t stop at solving the economic issues.”

Mars believes yield development should be considered a pre-competition issue (competitors should be willing to work together).

They examined processes to determine where they can either influence the actors or bring science to reduce water use and improve production – for cocoa production they can do both.

Mars started with a research farm in Brazil to investigate companion crops, fertilizer, and insect repellent. They are using an organic and industrial fertilizer mix. They have determined pheromones work best to repel pests.

Certification

Mars is working to certify farmers but believe this should be done through collaboration with other big brands. There should be one certification process due to time and money investment of social, environmental, and productivity training and auditing. They are starting to see momentum in this direction.

Certification must result in economic prosperity for the farmers.

In the Côte d'Ivoire (Ivory Coast), they have already seen productivity yields increase by 30%.

Currently the supply of certified cocoa is keeping up with consumer demand, but this will change and there are not enough farmers ready to be certified. A massive training program is needed.

Mars works with governments to ensure countries can support the training programs and the results with improved infrastructure and resources to accommodate needs associated with increased production and economic growth.

They have resisted lowering the certification “bar” because they want to see real sustainable change.

It is cost-prohibitive for farmers to achieve certification without outside (company) funding.

Palm Oil

Side Note: Rock Center on NBC did a report on the destruction caused by palm oil plantations, which threatens orangutan habitats. I have embedded the video that aired below but there is more on their site.

Visit NBCNews.com for breaking news, world news, and news about the economy

Unilever got the industry together to address palm oil certification. Mars joined their existing group.

Mars plans to source 100% certified palm oil by the end of 2013, 2 years ahead of original commitment.

Other Raw Materials and Supply Chain Issues

Mars uses thousands of raw materials so they have to prioritize and pick those which they think they can make the biggest positive difference.

Goal is to marry sustainability with procurement because it makes sense within their business model.

“You can only sell it well if you buy it well.”

They plan to use metrics related to improvements they want to see. So far they have agreement conceptually but nothing has been set.

Strategic Sourcing

Responsible sourcing is risk-focused.

There will be competition to provide certified cocoa. That is where the industry is headed.

As of now, they do not see certified cocoa significantly influencing consumer purchasing.

It does provide a reputation benefit.

Goal is to get to 100% certified cocoa and then work on efficiency.

Lessons

My takeaways from the talk:

• There are many ways to approach sustainability and human rights issues – philosophically, strategically, and financially
• Working on addressing big problems takes industry collaboration and working with governments and NGOs
• Infrastructure improvements must accompany economic and social change
• Consumers are not driving change on many important human rights issues

I wrote more about issues in the chocolate supply chain here, prior to the conference. I must say, I'm more optimistic now than I was then. If you have any comments, questions, or corrections related to the above, please let me know.