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CSR & Global Sourcing

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MSCPM

Sept 2018 – 2020

Group 1

MASETTY Venkata Purna Rao

NAKKA Vinay Kumar

KIRUBAHARAN Jacinth Raajam Daanelle

HAZIME Marwan

MURALITHARAN Avinash

Contents

1. Executive Summary 2

2. Introduction 2

2.1 Mission and Strategy 3

3. Sourcing 3

3.1 Level of Sourcing 4

4. Corporate Social Responsibility (CSR) 5

4.1 CSR aspects addressed 5

4.1.1 Environment 6

4.1.2 Social 6

4.1.3 Economic: 6

4.2 CSR aspects prioritized 6

4.2.1 Safety 7

4.2.2 Sustainability 7

4.2.3 Community 7

4.2.4 Well-Being snacks 7

4.3 CSR disclosure in Global Sourcing 7

4.3.1 Code of Conduct COC 7

4.3.2 Cocoa Sourcing (2012): 8

4.3.3 Harmony Wheat 9

4.3.4 Palm Oil 9

4.3.5 Eggs 9

4.3.6 Milk & Dairy products 10

4.4 CSR Management and Evaluation 10

4.4.1 Sustainability in Agricultural sourcing 11

4.4.2 Human Rights 11

4.4.3 Child Labour 11

4.4.4 Woman Welfare 12

4.4.5 Packaging 12

4.5 CSR evaluation 12

5. Action Plan 13

6. References 14

1. [bookmark: _Toc7087587]Executive Summary

This Report deals with CSR and Global Sourcing of Mondelez International, Inc. for which we have assessed Sourcing activities and evaluated Level of sourcing under which Mondelez is operating.

Corporate Social Responsibility (CSR) activities addressed and prioritized by Mondelez are identified. CSR disclosure in Global sourcing is discussed along with its management and evaluation based on the Triple bottom line. An Action plan is proposed based on current progress to achieve future goals in the next 3 to 4 years

Data used in the report is taken from the yearly reports published by Mondelez as IMPACT for Growth and models used are from academic articles published which are available in the Reference section.

2. [bookmark: _Toc7087588]Introduction

Mondelez International, Inc. is an American based Multi-national Food, Snac, and Beverage company, headquartered in Chicago, UnitedStates. It’s origin traces back to National Dairy Products Corporation founded in 1923. In 2012, Food snack division of Kraft Foods divided and renamed as Mondelez International, Inc. They have their presence in approx. 150 countries through sales, operations and supply network making a turnover of $26Bn Net revenue (as of 2018). Some of the Global products of Mondelez are Oreo, Milka, Halls, Tang, Trident, belVita, Cadbury, Toblerone.

Mondelez’s Purpose is to empower people to snack right.

[bookmark: _Toc7087589]2.1 Mission and Strategy

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Source: https://www.mondelezinternational.com/about-us/~/media/MondelezCorporate/uploads/downloads/Strategy_Globe.pdf

3. [bookmark: _Toc7087590]Sourcing

Mondelez works with thousands of Suppliers, consultants and business partners around the world.

Sourcing in Mondelez is primarily concentrated on key ingredients of its products. Being an FMCG industry, Raw material sourcing plays an important role in the spending category. Mondelez sources following products globally from”,

Product

Sourcing countries

Types of supplier

Cocoa

Ghana, Côte

d’Ivoire, Indonesia, Dominican Republic, India

and Brazil

Nearly 200″,000 small farmers, Communities

Wheat

Poland, Belgium, France, Spain, Italy

1700 Harmony Farmers

Palm oil

Indonesia, Malaysia

Palm oil Mills

Eggs

United States, Canada, Russia, Ukraine, China

Farms and Distributors

Dairy products

France, Germany, Russia, Spain

Suppliers

Table 1: Global sourcing of Raw material (Published on Mondelez website)

[bookmark: _Toc7087591]3.1 Level of Sourcing

Source: Trent, R.J and R.M Monczka (2003)

Sourcing in Mondelez can be termed as Level-5 Purchasing or Global Sourcing as”,

1. It has operations & sourcing in nearly 50 countries

2. It has got sourcing strategies integrated across worldwide locations.

3. Various functional groups like Designing, R&D, Engineering are involved in global sourcing.

4. Common process and global infrastructure are used globally in sourcing activities

5. Centrally coordinated global sourcing process.

6. Partnerships with suppliers for developing more sustainable and innovative practices.

4. [bookmark: _Toc7087592]Corporate Social Responsibility (CSR)

CSR is an internal Organizational policy that has been developed by organizations to use their authority to push it beyond individual or industry-wide initiatives to invest for the well-being of society that they are part of.

[bookmark: _Toc7087593]4.1 CSR aspects addressed

[bookmark: _Toc7087594] 4.1.1 Environment

a. Reducing environmental footprint

b. Act against Deforestation

c. Sustainable sourcing of Raw material

d. Animal welfare

e. Climate change

[bookmark: _Toc7087595] 4.1.2 Social

a. Safe products

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b. Empowering livelihood of farmers and communities

c. Human rights & Child Labour

d. Act against Forced labour

e. Diversity and Inclusion

f. Harassment and Abuse

g. Safety and Health

[bookmark: _Toc7087596] 4.1.3 Economic:

a. Investments in Community welfare programs.

b. Programs for gender equality.

c. Helping farming communities for financial stability.

d. Education programs for children.

[bookmark: _Toc7087597]4.2 CSR aspects prioritized

Mondelez carries out its CSR activities under the programme named IMPACT aimed at creating a positive impact for people. They call it, simply, IMPACT for growth – A commitment to driving business growth with a positive change in the world.

It is divided into four key areas”,

1. Safety

2. Sustainability

3. Community

4. Well-being snacks

[bookmark: _Toc7087598]4.2.1 Safety

a. Safety and integrity come first as the main aspect of their responsibility caring for the employees.

b. They ensure the safety of all employees in the supply chain and quality of snacks they make.

c. They implement best in class safety measures and bring down Total Incident Risks.

d. Certification of internal sites, suppliers with globally recognized food standards.

[bookmark: _Toc7087599]4.2.2 Sustainability

a. Reducing environmental footprint and fight against climate change.

b. Empower farmers who grow their raw materials.

c. Action plans to improve traceability of raw materials.

[bookmark: _Toc7087600]4.2.3 Community

a. Supporting communities where their products are made and sold.

b. Helping communities especially Children by transforming their lives educating on nutrition knowledge, physical activity.

c. Helping farmer communities growing Cocoa and Harmony wheat by training on sustainable methods of farming.

[bookmark: _Toc7087601]4.2.4 Well-Being snacks

a. Economic sustainability in parallel with social responsibility can be achieved by promoting well-being brands of snacks.

b. Renovating Brands to make them more relevant with their objectives and policies.

c. Growing Well-being brands at twice the rate of the base portfolio.

[bookmark: _Toc7087602]4.3 CSR disclosure in Global Sourcing

Every year Mondelez publish their CSR activities, interests, progress and goals in the form of reports available to all the stakeholders as well as general public under name of “Impact for Growth progress Report”

[bookmark: _Toc7087603]4.3.1 Code of Conduct COC

a. Make food that is safe to eat

b. Market responsibly

c. Treat people fairly

d. Respect the free market

e. Compete fairly

f. Respect the environment

g. Deal honestly with the government

h. Keep honest books and records

i. Never trade on inside information

j. Give Mondelez international your complete business loyalty

Mondelez is involving their Code of Conduct and their Corporate Responsible expectation in their purchasing practices either by evaluating their supplier based on their Code of Conduct and by including their Corporate Responsible expectation in their contracts with their global suppliers, furthermore, they are training their procurement department and their supplier on risk management and human rights.

Mondelez launched sustainable programs in global sourcing, such as Cocoa life for Cocoa and Harmony wheat for wheat and a yearly Palm oil action plan and sustainable practices dairy and eggs sourcing.

[bookmark: _Toc7087604]4.3.2 Cocoa Sourcing (2012):

Mondelez invested $400 million in Cocoa Life program starting from 2012, they are committed through this program to improve the lives of farmer communities and creating a dynamic Cocoa supply chain.

This program addresses deforestation and forest degradation, by signing an agreement with NGOs to achieve their objective mainly in Ghana and Côte d’Ivoire as well as environmental and forest conservation training, mapping cocoa farms, monitoring protected land and distributing shade trees in all Cocoa Life countries and support shade-grown cocoa, intercropping and agroforestry.

i. They have trained till 2017 nearly 68″,200 community members on Good Environmental Practices

ii. They have distributed nearly 6 million cocoa seedlings to increase productivity and promote the growth of higher quality cocoa (Cocoa Life, 2019).

Cocoa life is working to eliminate Child Labour by working with Local governments, NGO’s and forming Child Labour Monitoring and Remediation Systems (CLMRS). Their strategy is to address the root causes of Child labour in cocoa-growing communities

i. Through CLMRS 516 communities, 53000 farmers were educated on issues of Child labour (Cocoa life, 2019).

Women Empowerment: Mondelez is working towards providing equal rights to Women in the workplace along with Men and they don’t see Growing Cocoa as Men activity. To encourage this, they are connecting more women to finance. Village Savings and Loan Associations (VSLAs) provide cocoa community members with access to finance and financial literacy training.

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i. 51″,566 community members participating in VSLAs.

ii. 1″,828 operational VSLAs.

iii. 28″,589 community members trained in business management.

iv. 29″,728 community members trained in financial literacy (Cocoa Life, 2019).

[bookmark: _Toc7087605]4.3.3 Harmony Wheat

Being the largest producers of Biscuits in the world, Mondelez is acting against climate change because agriculture is impacted by climate change. Increase in carbon emissions and scarcity of water resources has a huge impact on Wheat production.

Mondelez launched Harmony wheat in 2010 to ensure that the wheat they are sourcing in Europe is grown in a sustainable way. Within this program, they are committed to relationships with local partners, 44 sustainable agriculture practices, innovative actions to preserve biodiversity reduce the usage of pesticides and fertilizers.

Within this program:

i. Around 2000 farmers in Europe are trained on growing wheat in a sustainable way.

ii. The program achieved:

iii. 20% of reduction in the usage of pesticide.

iv. 27 butterflies’ spices and 30 million bees were detected in the farming field in 2016.

v. Mondelez is Engaging with NGO and governments to ensure the sustainability in wheat farming

In North America, they established a partnership with Michigan State University and their supplier of soft white wheat and the Cooperative Elevator Company to engage a group of farmers each year to track their farming practices, use of inputs such as fertilizer, and their yield (Mondelez, 2019).

[bookmark: _Toc7087606]4.3.4 Palm Oil

Palm is a key ingredient of all Mondelez products. They believe sustainable palm oil is important for the long-term growth of our business and should be accessible to all.

i. In 2016 Palm Oil Action Plan was developed with the World Wildlife Fund and UNDP keeping deforestation issue as the main concern.

ii. Working with recognized third-party experts to protect labour rights

iii. By the end of 2017, they had maintained 96 percent traceable palm oil back to the mill and 99 percent was from suppliers with published policies aligned to them.

iv. They developed a grievance procedure with external input from Proforest. They are now using this process to guide responses to controversies in the supply chain and to drive reform or exclusion of responsible direct or third-party suppliers.

[bookmark: _Toc7087607]4.3.5 Eggs

i. They recognize concerns for the welfare of laying hens and they have taken a number of steps to switch to cage-free supplies.

ii. Recognizing their limited influence in the market for egg products, they continue a dialogue with suppliers and stakeholders to encourage the availability of viable cage-free supplies.

[bookmark: _Toc7087608]4.3.6 Milk & Dairy products

Milk and other dairy products are important ingredients for cheese and chocolate products.

i. Since 2013, sustainability projects all over the world are coordinated by the Dairy Sustainability Framework (DSF), the dairy sector program to align, connect and demonstrate continuous improvement in sustainability.

ii. In Germany, they supported the development of a new voluntary Quality Milk Standard and implemented it in 2016. And across Europe, they are engaging all milk suppliers to build their sustainability roadmaps.

iii. To date, nearly 50 percent of our total global dairy supply is sourced from suppliers following recognized standards; and they expect this to increase to the majority by 2020 as supply becomes available.

[bookmark: _Toc7087609]4.4 CSR Management and Evaluation

Mondelez manages CSR activities through its IMPACT program under which individual programs like Cocoa life and Harmony Wheat are created. They work with multiple NGOs and third-party organizations to manage and evaluate those CSR activities.

From the perspective of Triple Bottom line, CSR Management in Mondelez Global sourcing is explained as follows”,

The main focus of Mondelez is on Planet (Environmental Sustainability) and People (Social responsibility) and they believe contributing to the below activities will yield long term benefits to the organization

Triple Bottom Line

Planet

Sustainability in Agricultural sourcing

Packaging

People

Human Rights

Child Labour

Women empowerment

[bookmark: _Toc7087610]4.4.1 Sustainability in Agricultural sourcing

1. Ipsos:

It is a third-party market research company which measures the performance of Cocoa Life based on the following KPI’s”,

a. Net income from cocoa

b. Cocoa productivity

c. women’s participation in the decision-making process

d. Increase capacity in the community

e. Net income from sources other than cocoa

f. Cocoa farmers’ reduced vulnerability to external shocks

g. Reduction in child labour and forced child labour

h. Increase in career opportunities for youth in the cocoa sector

i. Helping future farming generations through sustainable natural resources use on the farm

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j. Increase in the conservation of forests and maintenance of ecosystems.

2. FLOCERT:

i. It is a third-party audit and certification body for Fairtrade standards. They verify the Cocoa supply chain from Cocoa farming communities to Mondelez, by verifying the farmers if they have clear trade terms, payments, and transparency.

ii. They are working with Michigan State University and suppliers of soft wheat to develop innovative practices to reduce Pesticide and fertilizer use.

[bookmark: _Toc7087611]4.4.2 Human Rights

1. SEDEX:

SEDEX Members Ethical Trade Audit helps to identify the potential human rights and supports in mitigation and monitoring of human rights violation.

2. EMBODE:

Cocoa life partnered with EMBODE (an independent human rights consultancy), to analyse national child protection and environmental infrastructure in Ghana, Cote d’Ivoire, and Indonesia.

[bookmark: _Toc7087612]4.4.3 Child Labour

Mondelez partnered with local governments and NGOs to build Child Labour Monitoring and remediation Systems (CLMRS). By such approach communities fully own the well-being of children and cocoa life supports them with expertise, funding, and tools.

The major objectives of CLMRS are as follows:

i. Sensitize all communities on the danger of child labour Identity with risk within the communities.

ii. Remediate identified cases of child labour with the help of NGOs and appropriate local authorities.

[bookmark: _Toc7087613]4.4.4 Woman Welfare

Woman welfare has been one of the core values in Mondelez CSR strategy. In this category ensuring equal representation along with men. In Ghana, Cocoa Life’s Gender Dialogue Platforms (GDPs) creates an avenue for elevating and empowering women’s voices at home and in the community. This has been helping woman towards gaining knowledge of community dynamics, public speaking and leadership skills. There is a Village Savings Loan Associations (VSLAs) provide finance and financial training for start-up capital, farm rehabilitation.

[bookmark: _Toc7087614]4.4.5 Packaging

Being an active member of CGF (Consumer Goods Forum) Solid Waste Working Group, Mondelez is working to address challenges and support Ocean Conservancy Trash Free Seas Alliance.

From 2010 to 2106 the elimination of 53″,500 metric tonnes of packing from Mondelez supply chain helped them to reduce 130″,000 tonnes of annual CO2 emissions and goals to eliminate 65″,000 metric tonnes by 2020.

[bookmark: _Toc7087615]4.5 CSR evaluation

CSR progress is evaluated based on data in Impact for Growth Progress Report 2016 & 2017 published on Mondelez website

Responsibility

Goal

2016

2017

2022

Evaluation

Progress

Progress

Target

Agricultural

sustainability

Sustainable Sourcing of Cocoa

21%

35%

100%

Low Progress

Sourcing HARMONY wheat in Europe

75% in Western Europe

60%

100%

Low Progress

Maintain 100% RSPO palm oil

100%

100%

100%

Achieved

100% palm oil traceable to the mill from suppliers with aligned policies

96% traceable to mill

99% suppliers aligned to policies

100%

On-track

Table – 2: CSR progress based on Impact for Growth 2016 & 2017

[bookmark: _Toc7087616]

5. Action Plan

Based on the above evaluation, few gaps were found in Global sourcing activities which needs an action plan for improvement.

Program

Status

Plan

100% sustainable sourcing of Cocoa

Low Progress

1. Focus on R & D to develop innovative and sustainable agricultural practices

2. Training farmers on innovative and sustainable sourcing practices

3. Revision of trade terms to improve the financial stability of Farmers

4. Partnership with NGO’s and Govt agencies for community development

100% sourcing of Harmony Wheat

Low Progress

1. Educating farmers on the benefits of growing Harmony Wheat

2. Providing benefits to suppliers and farmers growing/supplying Harmony wheat

3. Harmony wheat to be part of sourcing strategy

100% traceability of Palm oil

On – track

1. Continuous evaluation of suppliers on Sustainability and traceability

2. Helping suppliers who are willing to improve

3. Usage of technologies like Block Chain

4. Working with 3rd party agencies like Eco Vadis to audit traceability

6. [bookmark: _Toc7087617]References

Trent, R.J. and Monczka, R.M., 2003. Understanding integrated global sourcing. International Journal of Physical Distribution & Logistics Management, 33(7), pp.607-629.

Impact for Growth 2017

Impact for Growth 2016

Cocoa Life

Responsible Sourcing guidelines

Ethical raw material sourcing – News article

Mondelez Sourcing information

Level -1

Domestic purchasing only

Level – 2

International purchasing when needed

Leve – 3

International purchasing as a part of sourcing strategy

Level- 4

Level – 5

Integration and coordination of sourcing strategy

Integration and coordination of global sourcing strategy with other functional groups

2

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