Mars’ approach to a deforestation-free palm oil supply chain

SL Staff

The consumer goods giant achieved 100% deforestation-free palm oil

2021 World Sustainability Awards Shortlisted Initiative

This example was shortlisted for the Sustainable Supply Chain Award at the 2021 World Sustainability Awards after being reviewed, scored and discussed by a panel of 17 global Chief Sustainability Officers. The judging panel was impressed by the progress being made and felt this initiative was one that should be shared and celebrated.

Challenge

Palm oil is an ingredient within a huge variety of packaged products, widely used due to its versatility, stability and lack of odour. Its popularity has led to it being a major driver of deforestation, damaging many of the world’s most diverse ecosystems. The oil palm – the crop in which palm oil is sourced – is highly efficient, but the challenge businesses face is how to source enough sustainable palm oil which does not contribute to forest loss.

Mars Wrigley’s business uses palm oil in chocolate and other confectionary products. Consequently, the need to ensure sustainable sourcing of palm oil featured prominently in the company’s ‘Sustainable in a Generation Plan’ launched in 2017. In 2019, this focus evolved into the Palm Positive Plan, with Mars committing to sourcing 100% deforestation-free palm oil by the end of 2020.

The challenge Mars faced was in the complexity of its palm oil value chain, as working with over 1,500 mills made it very difficult to identify where its raw materials were coming from and set out a clear strategy for improvement. Mars required a strategy which could simplify this complex ecosystem, whilst establishing rigorous mapping, management and monitoring. The company committed to assessing and consolidating their supply base, as well as building stronger partnerships with the most sustainable suppliers.

Approach

Mars Wrigley’s sustainability operating model

Since January 2019, responsibility for managing the execution of the Palm Positive Plan has sits with the sustainability team at Mars Wrigley, operating within the Commercial function. The team focused on palm oil includes;

  • Category director for global fats and oil, and three buyers within their team
  • Global sustainable sourcing director
  • Palm sustainable sourcing manager
  • Internal quality and R&D teams supporting material specification changes
  • Over 15 suppliers partnering on the palm positive implementation
  • Annual consulting support from Earthworm Foundation and Earthequalizer Foundation.

This resource is also backed up by a clear strategy around governance and measurement. Mars Commercial has a scorecard with annual targets that not only tracks traditional KPIs, but the delivery of sourcing projects against targets for greenhouse gas emissions, income of farmers/smallholders, water and human rights. It now also tracks the proportion of palm oil suppliers adopting the Palm Positive principle of zero deforestation.

The Palm Positive Simplification strategy

In July 2018, the business signed off on a Palm Positive simplification strategy which had an objective of building a deforestation-free supply chain with advanced respect for human rights. This began the process of consolidating the supply base to suppliers who were already able to supply Mars with deforestation-free palm. Increasing the volume of business with these suppliers, allowed Mars to make further investments to address deforestation, including committing itself to a deforestation free supply chain.

Mars utilised a number of levers to execute on this strategy;

  1. Substituting materials: Removing palm kernel oil and replacing with palm oil. This not only reduced the complexity of their upstream supply chain, but generated savings which fuelled further investment in simplifi
  2. Assessing the commitment and capabilities of suppliers: 10 criteria were identified; policy, transparency of supply chain, monitoring and verification, grievance management processes, zero instances of unmanaged grievance, commitment to join landscape programs, human right systems, numbers of palm mills, no deforestation (with 100% traceability) and commitment to Mars’ human rights supplier program.
  3. Consolidation: Using this criteria, the procurement team phased business out with suppliers who were perceived to not be committed, and increased the volume commitments with the remaining suppliers.
  4. Partnerships: Mars worked to ensure that its suppliers were engaged and established partnerships with the Earthworm Foundation and AidEnvironment (Earthequalizer Foundation) to vet suppliers’ traceability, assess monitoring capabilities of suppliers and assess grievance management effectiveness. Mars also partnered with Verité, a non-profit focused on labour, to explore how businesses across the palm oil supply chain can better understand, address and prevent human rights risks

One particularly effective partnership has been with UniFuji, a joint venture partnership between United Plantations Berhad and Fuji Oil. Mars have worked closely with UniFuji enabling a reduction from 780 palm mills to just one. This involved establishing Mars’ supply chain connection to the 1:1:1 model, which means that palm is grown on one plantation, processed through one mill and then sent to one refinery. This relationship which initially focused on establishing a deforestation free supply chain, has enabled partnering to establish a broader and deeper long term commercial relationship which is mutual to both Unifuji and Mars.

Driving improvements with key suppliers

This simplified supply chain has enabled greater collaboration, with long-term engagement with Tier 1 suppliers. These collaborations have included establishing capabilities in suppliers to support them in monitoring, addressing and preventing human rights risks in their supply chains.

A major collaboration has been with agribusiness, Wilmar International and Verité. Mars and Wilmar identified a need to strengthen the company’s ability to manage human rights risk within their extended (upstream) supply chain in Malaysia. This partnership involved Verité analysing Wilmar’s operations, identifying areas for improvement and training the company to take more active control in risk management.

Mars also funded additional work with Verité to launch a customized online toolkit equipping palm oil producers across the sector with practical guidance to design and manage their own effective due diligence system. Launched in 2021, the toolkit is available in Bahasa, English and Spanish, both as an interactive online tool and as a downloadable file. It includes diagnostic tests, maturity frameworks, explanations of principles and standards, and useful templates.

Outcome

Results

Simplification efforts have led to a reduction in palm oil mills within Mars’ supply chain from over 1,500 in September 2019 to less than 90 by 2021. This has paved the way for the company to deliver success through its Palm Positive strategy. On 6th October 2020, the company announced that it had achieved a deforestation-free palm oil supply chain. In doing so Mars estimates that its greenhouse gas emissions due to land use have reduced by around 30%.

Additionally it has seen a number of suppliers who have taken their lead in adopting the same strategy, assessing their own supply chains and looking for opportunities for simplification.

Next steps

Mars is looking to further consolidate the partners it works with in 2022, planning to partner with a smaller cohort of 13 suppliers. This will be part of a rollout of the company’s next generation supplier program, working through mutual long term contracts with clear expectations around deforestation and human rights.

The success of the sustainability team in addressing deforestation in the palm oil supply chain, also lays a framework for efforts across four other raw materials Mars has identified as focus areas; beef, cocoa, pulp and paper, and soy. Action plans to reduce deforestation have now been laid out for all four areas.

Advice to others

The sustainability team identified a number of major learnings from this supply chain reconfiguration:

  1. Be courageous and prepared for long term deep engagement with your suppliers to genuinely understand their commitments and capabilities beyond price/quality.
  2. Be smart in understanding when your strategic outcome achieves the same endgame of your suppliers strategy, even if the needs appear different at first sight.
  3. Be equally smart in aligning internal sustainability outcome delivery to value leadership delivery.
  4. Bring your internal supply chain stakeholder organisation along the deep engagement journey too – they are equally as important as suppliers.

Image credit: rvlsoft / Shutterstock.com

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