Mondelez

The company showed significant progress, starting a TCFD-aligned scenario analysis in collaboration with EY, demonstrating progress towards a better understanding of its exposure to climate-related risks and opportunities. The results may shift the company’s approach to protein diversification in the future. However, the company is yet to provide a timeline for when this work will be completed and whether it will cover its dairy supply chain. Mondelez’s approach to portfolio diversification continues to be driven by consumer demand. Although the company recognises that diversifying its protein portfolio may align with its broader ESG agenda, its motivation to launch plant-based products, such as the Cadbury Plant Bar, and acquire plant-oriented companies, such as Cliff Bar (June 2022) and Hu (January 2021), is to respond to consumer demand. Further, Mondelez disclosed in its meeting with FAIRR and investors that the Board’s interest in plant-based products is primarily to understand how the company is catering to changes in consumer demand. Protein diversification does not currently feature in conversations between the Chief Impact and Sustainability Officer and the Board as a climate mitigation tool. Dairy makes up 22% of overall emissions and accounts for 21-40% of revenues. Despite references to the sustainable sourcing of dairy in its 2021 Snacking Made Right Report, dairy is not included in Mondelez’s ‘Snacking Made Right’ sustainable sourcing commitments. The company has prioritised addressing the sustainability impacts of wheat and cocoa supply chains, as these are the company’s two main ingredients by volume. Last year, Mondelez issued its first green bond, raising approximately $2.4 billion. The proceeds of the debt will be channelled to ingredient supply chains, primarily wheat and cocoa. There is no mention of dairy supply chains in the Green Bond framework so the use of proceeds may not be able to be used on projects and targets addressing dairy.

The company advanced relative to last year committing to set a science-based Net Zero target (which includes Scope 3) and made progress towards its Health and Nutrition target. In 2021, Mondelez committed to set a science-based Net Zero target by 2050 through the Science-Based Targets initiative (SBTi). The company also joined the UN’s Race to Zero campaign. It is currently developing its Net Zero roadmap and plans to release a 2030 interim target later this year in its 2022 Snacking Made Right Report, which will re-baseline the company’s current target and incorporate its recent acquisitions plus aligning to a 1.5-degree pathway. The company did not indicate the extent to which dairy and portfolio diversification will play a role within the net-zero roadmap, but it did state cocoa would be the focus. More information on its interim 2030 strategy will be released later this year. Mondelez’s current emissions reduction efforts remain focused on cocoa alongside wheat and the company is yet to disclose a strategy or targets for reducing emissions in its dairy supply chain – as it indicated during the last phase of this engagement. Whilst the company does not have a public commitment or programme for dairy, Mondelez is advancing dairy sustainability programmes through its procurement and supplier development strategy. For example, Mondelez is working with its UK dairy farmers to undertake carbon footprinting with a company called Alltech, who are also supporting farmers to build CO2e reduction plans. As of 2021, 100% of liquid milk suppliers in the UK and Ireland are tracking GHG emissions and working on farm action plans. 72 farms in the Selkley Vale farming group have also put in place a plan to reduce emissions by 10% by 2025, but it is unclear if this was supplier or company driven. 95% of Alpine milk for the Milka brand comes from suppliers tracking GHG emissions and all milk suppliers in Spain and Germany for the Philadelphia brand are on track to complete GHG assessments and develop farm action plans. For all GHG calculations, suppliers have to comply with the International Dairy Federation (IDF) methodology. As Mondelez does not source milk or other dairy products directly from farms the company is facing some difficulties in engaging farmers to address sustainability challenges. The company is initially focusing on its liquid milk supply as it has closer relationships with those suppliers. Mondelez also states that it is currently reviewing emission mitigation technologies that could be applied to its dairy supply chain, such as feed additives to reduce enteric emissions. In Mondelez’s 2021 Snacking Made Right report the company links animal welfare and climate impacts stating that “there is a clear link between healthy, productive animals and lower emissions”. However, the company does not provide evidence to support this link. Mondelez is also engaging suppliers to source sustainable or certified soy. The company reported progress against its ‘mindful snacking’ commitment with 17% of net snack revenue from portion control snacks in 2021, up by 1%. Mondelez has not set sales-based or displacement targets for protein diversification. The company disclosed in its meeting with FAIRR and investors that any commitments would likely be made at a unit level rather than top-down.

The company has progressed since the last phase launching the plant-based Cadbury Plant Milk bar and plant-based Philadelphia cheese products. It has also grown inorganically its plant-based range through the Clif Bar acquisition in August 2022. Mondelez’s R&D teams are working to embed sustainability within product development to reduce end-to-end environmental impact. However, there were no examples given where products have been developed or reformulated without animal-derived. The company provided no additional detail about its internal resourcing for plant-based R&D, yet it disclosed that it is developing plant-based products from a market-based perspective and that it identified Australia as a particularly suitable market for low-carbon products given its sustainability demand. Mondelez launched the Cadbury Plant Bar in 2021, made with almonds. The company also launched a plant-based cream cheese in the Philadelphia range, a vegan candy under the Natural Confectionary Company in Australia and Stimorol, a vegan gum. Mondelez disclosed that reception to these new products and its acquisitions has been positive. Clif Bar produces nutritious energy bars with organic ingredients. Some of the products are vegan and Clif Bar promotes plant-based eating on its website. Clif Bar also launched the company’s first line of plant-based jerky for dogs in the US. Through SnackFutures Mondelez is going to scale two of its own brands that have high growth potential, Dirt Kitchen, which is a veggie-centric snack brand developed by leveraging the company’s investment in Israeli food-tech start-up Torr, and NoCOé, a carbon neutral cracker brand. In addition, Mondelez concluded its first CoLab programme with nine start-ups with ‘some potential investments’. The second programme includes ten start-ups and will finish in 2023; two of these ten companies are plant-based companies, Pan’s and GoNanas.

Mondelez is not strategically engaging consumers on the benefits of adopting plant-based diets for health and/or sustainability. In its meeting with FAIRR and investors Mondelez stated that it does not take a different approach to marketing plant-based products and did not give a reason for this. This is despite the company’s International State of Snacking 2021 Global Consumer Snacking Trends Study showing that consumers are increasingly motivated by sustainability. The results showed that 80% of consumers have become more in touch with their values in the last year and that 85% of consumers would buy snacks from companies working to offset their environmental impact. There is evidence at a brand level, with Clif Bars, that the company is promoting the health and sustainability benefits of a plant-based diet, but this appears to be isolated. Clif Bar promotes plant-based eating on its website. It states that whilst products are not all vegan many are and that they can 'fit into a plant-based diet'. Mondelez continues to engage consumers on healthy snacking through its ‘Mindful Snacking Campaign’. For example, the company launched its MDLZ Bite podcast in the UK and conducted a survey in Malaysia in 2021 to understand consumer snacking behaviour. In the meeting with FAIRR and investors Mondelez shared more detail on the pricing of its plant-based products. For example, the Cadbury Plant Milk bar, launched in the UK, is priced more expensively than its Cadbury Milk range (£2.50/90gr bar vs. £1.50/110gr bar). The company explains that the premium is a combination of two factors: (a) consumers are willing to pay more for these products and (b) alternative ingredients have higher costs.

The company disclosed that it is currently in the process of completing its GHG inventory for 2021 and refining its Scope 3 calculations in line with the GHG protocol as part of its Net Zero roadmap work and will be able to disclose more information once the roadmap development work is complete. However, it did not provide a timeline for this. Mondelez disclosed in its meeting with FAIRR and investors that dairy accounts for 22% of overall emissions, this is 7% higher than was reported last year, a significant increase y-o-y and is the result of increased sales demand, and therefore sourcing volumes. In its 2021 Snacking Made Right report Mondelez further broke down its dairy footprint stating that liquid milk accounts for 27% of its emissions. Moreover, at a farm level approximately 40% of emissions are attributed to enteric emissions, 34% to feed sources, 11% to manure management and the remaining 15% to fertiliser usage, fuel, and electricity. Mondelez will report on any emissions reductions by suppliers once they are validated by a third party. Finally, Mondelez is yet to provide evidence that it is tracking protein exposure at an ingredient or product level. In its response to FAIRR’s assessment, Mondelez said it would consider disclosing the percentage of sales linked to animal-derived products vs. alternatives or plant-based foods for the 2022 reporting period.

Mondelez participated in the technical roundtable on measuring portfolio diversification in February. The company agreed to a dialogue with investors and met with the coalition, as it did last year. The company provided detailed responses to the coalition’s questions on the call and responded to follow-up questions with information from public disclosures. The company also provided feedback on their final assessment.