Good morning,
Solving sustainability issues in manufacturing is a collaborative effort, and that’s something Mars Inc. Has set its sights on, says CFO Claus Aagaard.
The private, family-owned business based in McLean, Va., has been in operation for more than 100 years. It has over 135,000 associates in more than 80 countries. Most of Mars’ business is in consumer-packaged goods like candy—think Snickers and Milky Way—plus pet food, rice, and tomato sauce, among many other products. Mars Petcare, a growing segment of the business, is a big piece of the company’s plan to hit $70 billion in sales.
“We asked our top 200 suppliers, do you have a science-based target and a plan to drive a massive reduction on your carbon footprint?” Aagaard says. “Twenty out of those top 200 said yes.”
In response, Mars, in partnership with Guidehouse, a sustainability consultancy, formed the Supplier Leadership on Climate Transition initiative this spring to mobilize suppliers on climate action, he says. The partnership aims to drive industry-wide movement. PepsiCo and McCormick have also joined as leaders and enrolled their suppliers to take part, Aagaard says.
There are 30 suppliers engaged in the first cohort. In their first year, they will learn the foundations of greenhouse gas reductions in their own businesses. Mars is planning workshops with them, helping to map out their carbon footprint, and sharing best practices, Aagaard says. And, if participants do the same practices with their suppliers, this “could be a game-changer,” he says. In a year’s time, Aagaard expects “very concrete examples” to measure the effectiveness of the program, which will determine a timeline for suppliers. “Right now, it’s more of getting this process going,” he says.
Mars is holding their suppliers accountable for their part in supporting the environment, “but we do see this as a mutual challenge; like we’ve done with palm oil,” Aagaard says. The company has a goal of reducing greenhouse gas emissions in its own operations by 27% by 2025 and 67% by 2050. In October, Mars announced it would eliminate palm-oil suppliers that do not commit to preventing deforestation. The company also said its palm oil use no longer contributes to the clearing of forests in the tropics.
As CFO at Mars, Aagaard says the company proposing a sustainability solution is both economically beneficial and a “moral obligation.” Mars also has goals to cut emissions in its own operations by switching to renewables —which now accounts for 54% of the company’s global electricity. “In the United States, 100% of our electricity is coming from renewable energy,” Aagaard says.
Despite the pandemic, Mars increased ESG investments by 25% in 2020 and plans to double its investment by 100% this year compared to fiscal year 2019, he says. “We’ve defined with our shareholders a set of long-term objectives that we think is pretty unique; we call it the Mars Compass,” which consists of four elements, Aagaard explains. “Only one-quarter of my long-term incentive is directly financial results.”
“My job as a CFO is to make sure that our strategies are delivering against all of the elements of our shareholder objectives,” says Aagaard, whose favorite candy is the Mars bar.
See you tomorrow.
Sheryl Estrada
[email protected]
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