Decarbonization is high on just about every large company’s agenda. But how do you achieve it while still achieving growth?
One company that has untied that Gordian knot is Mars, the family-owned company most known for its eponymous snack bars and pet food. Since reaching “peak carbon” in 2018, the company decreased its total carbon emissions by 15%, while its business grew 60% from a 2015 baseline.
Like so many other companies, Mars still faces an uphill climb to reach its science-based targets, which would need to see emissions decline by 25% by 2025 and 50% by 2030. But as the company’s vice president for corporate affairs and sustainability, Andy Pharoah, notes, Mars has “broken the link” between business growth and carbon emissions, meaning that its carbon emissions started to go down in recent years, even as the business continued to grow.
So what is the company’s recipe for this progress? I recently spoke to Pharoah about Mars’s journey in marrying sustainability and business growth so far, and what others can learn from it. Here are some of the most interesting things he said.
On the need to be “science-based” and include all scopes in setting sustainability targets:
“When we started to look at what should be the right targets, we quickly came to the realization that they need to be science-based. We had some targets that were not science-based, and that didn’t work. Take water use, for example: Water from the Rhine is different than water in water-stressed area. And on carbon, we realized that Scope 1 and 2 were tiny, and we needed to include Scope 3. Today, we’ve got science-based targets, and for a ‘1.5 degree’ scenario.”
On the role of family ownership:
“We have a family that believes that the biggest difference it can make to the world is through the company it owns. From the first time we set sustainability targets, our owners said they wanted to set some clear objectives, [and] be clear with business on how we they measure success. The Mars Compass they devised set seven shareholder objectives. Two of them are related to sustainability.”
On the return on investment and incentives for sustainability:
“We will be spending $1 billion in the next three years [on sustainability]. It will be assessed in the same way as we would for advertising. And it is transposed in the remuneration system. Our top 300 leaders are remunerated around the Mars compass, with a very good weighting, 40%, going to the non-traditional factors.”
“In the end, things like carbon emissions and plastic packaging, we don’t believe they are not financial. Our finance department is incredibly focused on treating [sustainability] as if it were any other venture. It’s not in a corner, dealt with people fighting for attention.”
On the role of sustainability in attracting and retaining…
…consumers:
“There is a lot of claimed behavior. But certainly, people will punish bad behavior. We know that our consumers want us to focus on sustainability. We did some polling in seven countries. We asked, given the economy, which is a very big issue, should we do more on the environment? It turned out that 70% wanted us to prioritize climate at least as much as the economy.”
…talent:
“It’s pretty much around the world that [sustainability] matters to talent. There is no question at all. It’s tremendously important to win in recruitment and retention. We have found that when new vet clinics join us, for example, the emphasis we place on the environment is extremely powerfully received by these associates. It’s a great source of pride.”
…clients/retailers:
“You cannot have a relationship with your customer, and have ‘category captainship,’ without sustainability. Large retailers work with one category captain, and it’s very hard to become one if you’re not focused on sustainability. If you want to have a strategic relationship to your customer, sustainability clearly matters.”
On how emissions reductions have been and will be achieved:
“It’s a combination of many different things. There are hundreds of initiatives. We measured them against difficulty and cost per metric carbon. Partially we measured against what science said, and knowing it would get us there… Concerning our 2030 target, there are things that won’t work as well, others better. We remain confident that we can achieve our 2030 targets through reductions, not offsets. We’re making necessary progress.”
Last September, the Financial Times looked at Mars’s accomplishments so far and determined the company’s progress was “limited.” It also noted that the Science Based Targets initiative, which validated Mars’s goals, “was being paid to validate targets for which they were also setting the criteria.”
I don’t entirely agree with this criticism. Reducing carbon emissions is an arduous task for any company. Mars stands out as having cracked the code, with lessons for others to learn.
More news below.
Peter Vanham
Executive editor, Fortune
peter.vanham@fortune.com
This edition of Impact Report was edited by Holly Ojalvo.
ON OUR RADAR
The gender pay gap actually increases as women climb the corporate ladder (Fortune)
By now, we all know there is a significant and persistent “gender pay gap” in the workplace. But according to new research from Payscale, a compensation data, software and services provider, that pay gap actually grows, rather than declines, as women climb the corporate ladder, my colleague Emma Burleigh writes in today’s CHRO Daily.
Women managers and supervisors earn 83 cents on the dollar compared to men, directors make 82 cents, and executives only 72 cents, she writes. Why is that? Not so much because of maternity leave or childcare duties, Payscale found. No, the driving factors are a “loyalty penalty,” which is higher for women than men; a worsening of pay gaps over a career path; and the “gendered” nature of C-suite posts such as CHRO and Chief Marketing Officer, which tend to pay less compared to other executive functions.
Could AI be the “magic beanstalk beans” of productivity and salary increases? (The Associated Press)
Stagnating real wages: It’s a problem confronting the U.S. economy since the 1980s. Ask unions and progressive think tanks such as the Economic Policy Institute, and they’ll tell you the reasons are excessive executive pay and an underappreciation of worker contributions.
But ask economists like Robert Gordon, and they’ll point to the fact that wage growth is typically correlated with productivity growth, which has largely stalled in the U.S. economy in the past few decades. Well, no longer: According to the latest Bureau of Labor Statistics data, real wages have started to rise again, and research from economists such as Erik Brynjolfsson suggests that's due to AI-driven productivity growth.
So, could AI be the “magic beans” of real wage growth going forward? This Associated Press piece, published by Fortune, suggests so. It would be good news for companies implementing AI, as they’d be able to claim a very positive social and economic impact on workers. But let’s not celebrate yet. Magic beans are fictitious, after all.
