Mars aims to tackle 'broken' cocoa model with new sustainability scheme

© Reuters. FILE PHOTO: M&M's chocolate candies are displayed at the M&M's World store in New York

By Ana Ionova

LONDON (Reuters) - Mars Wrigley Confectionery launched a new sustainability strategy on Wednesday with the aim of combating deforestation, child labor and poverty in what it called the "broken" cocoa supply chain.

U.S.-based Mars, the maker of M&Ms and Snickers, said it had revamped its cocoa strategy in an effort to tackle problems that the company and wider industry had so far failed to address.

"The cocoa supply chain as it works today is broken," John Ament, global vice president of cocoa at the privately owned company, told Reuters in an interview.

"It's time to recognize this and to build a new model and a new approach that focuses on putting the smallholder at the center."

The cocoa industry's current approach to sustainability has drawn criticism in recent months, as years of scattered actions have done little to improve the lives of farmers and prevent environmental degradation.

Under the new sustainability scheme - which will cost the company $1 billion over 10 years - all the cocoa it buys will be responsibly sourced by 2025, Mars said.

This means the cocoa will fit the company's internal criteria - including full traceability to ensure it doesn't contribute to deforestation - and carry a stamp of approval from a third-party verifier.

Mars had previously committed to buying 100 percent certified cocoa by 2020. However, the company is now looking to move "beyond certification", which has not delivered the impact the company had hoped for, according to Ament.

"Certification isn't enough," he said. "Our belief is that we need to set more demanding standards than certification sets today."

Currently, 50 percent of the cocoa that Mars buys is certified by schemes such as Rainforest Alliance and Fairtrade. Mars said it will maintain these volumes and potentially increase them if it sees improvements in the schemes' standards.

Certification - designed to ensure more ethical practices and better earnings - has also been widely criticized as doing little to improve the lives of farmers, as the premiums they receive under the biggest of these schemes have been falling.

HIGHER PREMIUMS, GPS MAPPING

As part of its new scheme, Mars said it will work with certifiers and suppliers to "overhaul" its premium model, ensuring it pays more for responsibly sourced cocoa.

"We'll see a combination of increased premiums overall and a bigger share of those premiums going to the farmers," Ament said.

The scheme will also use GPS mapping to ensure none of the cocoa it sources is coming from protected forests. Much of the surge in production in West Africa has come from the encroachment of cocoa into protected areas.

Mars also plans to work with certifiers and suppliers to tackle hazardous child labor on plantations through community monitoring and intervention schemes.

However, the company said it recognizes that the voluntary nature of such programs - coupled with limited access to schooling - poses a challenge. It aims to work with governments to drive investments in infrastructure and to provide communities with an alternative to child labor.

The company's new strategy also involves measures aimed at ensuring long-term sustainability, which will be rolled out across 75,000 farming families and suppliers. These will aim to boost productivity, help producers diversify crops and improve access to finance.

"We're convinced that these farmers need a broader source of income to ensure that they have a resilient model, with income spread throughout the year rather than just two peak seasons of cocoa," Ament said.

Some critics have accused productivity schemes of contributing to overproduction, with Ivory Coast this year halting the distribution of higher-yielding seed varieties and other advanced tools.

However, Ament said Mars is seeking to collaborate with governments and stakeholders to ensure productivity increases do not have a negative impact on supply and price.