Amy Brown interviews Barry Parkin to find out why having joint responsibility for sustainability and supply chain is critical to achieving the FMCG's #PledgeforPlanet to align with a 1.5C future
In the rice fields of Pakistan, food giant Mars has found a more sustainable way to source the basmati rice for its Uncle Ben’s brand. Working closely with farmers and relying on the innovation of its procurement team, Mars was able to demonstrate that more efficient and sustainable farming practices could yield a triple win: farmer income up by 30%; water use down by 30% and cost savings for Mars of 30%.
Barry Parkin, who holds the dual role of chief sustainability and procurement officer at Mars, says this example crystallises the beauty of combining the two functions, something that the company did two years ago.
While integrating sustainability into procurement has long been part of overall corporate sustainability strategy, making them a single function is a more recent development. Parkin’s peers include Tony Milikin at AB InBev and Katharina Stenholm at Danone.
We’ve made clear that over time only companies that align with what we want to do can be part of our supply chain
For Mars, combining the two functions was a natural progression in the company’s Sustainable Generation Plan, a $1bn programme launched in 2018. Targets include a reduction in total greenhouse gas (GHG) emissions across the value chain by 27% by 2025 and by 67% by 2050 (from 2015 levels).
At the UN Climate Week last month, Mars announced its new #PledgeForPlanet initiative to further reduce GHG emissions from its direct operations in line with the most ambitious aim of the Paris Agreement – to limit global temperature rise to 1.5C.
As an initial demand, Mars has asked its top 2,000 suppliers to sign up to the Science Based Targets Initiative and to The Climate Group’s RE100, a global corporate leadership initiative bringing together influential businesses committed to 100% renewable electricity. Parkin points out that there are close to 300 companies signed up to RE100 now; Mars’ request to its top 2,000 suppliers will increase that number exponentially.
“Will they all sign up tomorrow? No. We’re going to have to incentivise them to do so. While right now we’re only asking them to sign up, we’ve made clear that over time only companies that align with what we want to do can be part of our supply chain,” Parkin says.
“The only way we can become a true sustainable business is by changing what we buy, how we buy it and where we buy it, and procurement is at the heart of that,” he says.
Parkin says benefits of joining the procurement and sustainability functions include a greater ability to influence positive social and environmental outcomes, such as reduced carbon footprint as well as human rights, labour rights, empowerment of women and poverty reduction, particularly among smallholder farmers.
When I tell procurement they need to meet targets for quality and cost, reduce GHG footprint and raise 50,000 farmers out of poverty, they scratch their heads
The latter is a particular focus for Mars, which has chosen to champion SDG1 on poverty within the Business Avengers coalition, launched at Climate Week New York last month, of companies promoting individual SDGs. (See 2020s declared decade of action on climate, biodiversity and SDGs)
Danone, another of the “avengers”, and AB InBev have both partnered with Mars in the Farmer Income Lab, a multi-stakeholder platform that Mars founded in 2018 to drive a 200% increase in the income of smallholder farms.
“When I tell our people in procurement they not only need to meet all the usual targets for quality and cost but also reduce the GHG [greenhouse gas footprint] of that raw material and raise 50,000 farmers out of poverty, they scratch their heads typically and say, ‘I don’t know how to do that’,” Parkin says.
“But it forces them to really innovate and actually be radical. Once one or two of them figure out how to do it, they become the heroes in the function. Talk about purpose. They are at the heart of that journey. We put purpose in their jobs and they feel really good about it.”
A staggering 95% of Mars’ carbon footprint is upstream in its supply chain, and along with its adoption of science-based climate targets, the company has had to put a laser focus on addressing the scope 3 emissions outside its direct control.
The sustainability-procurement combined function is also a hedge against risk, Parkin says. Supply chain operations and strategies are more visible today than ever before and represent a host of operational, financial, regulatory and reputational challenges for an organisation. Embedding sustainability ever deeper into supply chain management has been a key part of the way many companies have approached mitigating those risks.
We set the challenge to our sourcing directors that they now own the sustainability impact of what they source
But implementation usually involves culture change. Many companies are not structured in a way that facilitates the alignment of the two functions, with sustainability at odds with traditional sourcing, where cost is often an overriding factor.
With 60,000 suppliers globally and 1,000 people working in procurement, Mars faced a heavy lift. A first step was having both functions report to Parkin and for the heads of its business units around the world to also merge its sustainability and procurement functions.
“We set the challenge to our sourcing directors, who buy all these raw materials and packaging, that they now own the sustainability impact of what they source,” he says.
He has observed a “real building of knowledge on both sides”, with the deep experts in sustainability able to share their insights about programmes, policies and measurements and then roll up their sleeves to work alongside procurement people to understand how they work on the ground with suppliers.
Parkin admits the change has made the sourcing team’s job more difficult, but it’s also unleashed new innovative approaches, like moving to longer-term contracts, from a year’s contract to a 10-year contract with a farmer, and reducing complexity in the supply chain.
“You can’t just put a Band-Aid on the supply chain you have now and say, ‘Job done. Now we’re sustainably sourced’. You typically have to radically change the way you work,” Parkin says.
A case in point is Mars’ sourcing of palm oil, which represents about 0.1% of the palm oil market. Intent on fulfilling Mars’ commitment to end deforestation in its supply chain by 2020, Parkin said Mars traced its palm oil value chain and discovered it was buying from half of the palm mills in existence. “We were buying from everywhere and there was clearly no way to understand what was going on.”
It is inconceivable for an organisation to be on a sustainability journey if their procurement function isn’t at the heart of it
The joint sustainability and procurement team set up “a massive simplification activity”, reducing the number of mills from which Mars sourced palm oil from 1,500 and “heading towards less than 20”, Parkin said.
“When you do that, you not only solve your sustainability issues but you are inherently entering into long-term agreements with fewer suppliers and unlocking the benefits of that. It took two years and four or five people working on it, but you come out the back end knowing you have a clean supply chain. And you save money.”
That so few other companies have followed Mars’ lead perplexes Parkin. “It is inconceivable for an organisation to be on a sustainability journey if their procurement function isn’t at the heart of it. I challenge some of my peers at other companies on this. When I meet with CSOs [chief sustainability officers] who don’t run procurement, I see them struggling to influence their supply chain and their procurement people. If the chief procurement officer isn’t your best friend, you’re going to have a problem.”
Amy Brown has written about sustainability and responsible business for over 20 years, specialising in sustainability reporting, policy papers and research reports for organisations and companies across a range of sectors. She is co-editor of Creating a Culture of Integrity: Business Ethics for the 21st Century.
This article is part of the in-depth Inclusive Capitalism briefing. See also: