Big Idea: Leading Sustainable Organizations

Why Kraft Foods Cares About Fair Trade Chocolate

As vice president for sustainability at Kraft Foods, Chris McGrath has been pivotal at guiding the company’s sustainability efforts. With its global reach and massive market shares, the company is setting new standards on how to source through sustainable agriculture and keep packaging out of landfills.

Chris McGrath (Kraft Foods), interviewed by Nina Kruschwitz Reading Time: 13 min 

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Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
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Chris McGrath, vice president for sustainability at Kraft Foods

With 23 years in the food industry, Chris McGrath is responsible for balancing the environmental, social and economic considerations across Kraft Foods’ global portfolio. Her job: helping to ensure that sustainability is a part of every business decision. McGrath works with business teams around the world to reduce Kraft’s environmental global footprint and deliver Kraft’s sustainability commitments.

Last year the company laid out a plan to divide into two independent public companies — a North American grocery business, Kraft Foods Group, Inc., and a global snacks business, Mondel?z International, Inc. McGrath will become vice president for external affairs at Mondel?z International, with broad oversight for the new company’s sustainability, health and wellness and public affairs initiatives, beginning October 1.

Among the Kraft brands are staples of many American children’s lunches: Oscar Mayer hot dogs and lunch meats, Capri Sun and Kool-Aid beverages, JELLO-O gelatin desserts, Nutter Butter and Oreo cookies.

In 2010, Kraft acquired the esteemed U.K. chocolate company Cadbury, and, according to Forbes, became a confectionary powerhouse: “Kraft has now become the biggest player in the global chocolate industry with popular brands like Dairy Milk, Creme Egg, Flake, and Green & Black’s.” Forbes estimated that Kraft’s global market share in chocolates and candies was 12.5% in 2011.

The Cadbury product line has opened up new sustainability avenues for the U.S. company. “Kraft Foods has been on a sustainability journey for quite a few years,” says McGrath, “but we’ve had an increased sense of focus since 2006. Much of what we’d done in the past was in our manufacturing operations and was viewed as efficiency — doing more with less. That work continues, but we’ve gone beyond that by building sustainability into our business strategy and changing our corporate culture. A particular focus is to invest in the sustainability of the key agricultural commodities that we buy.” In 2011, for instance, Kraft increased its sustainable sourcing of agricultural commodities by 36%. It’s now the world’s largest buyer of Fairtrade Certified cocoa and Fairtrade Organic cocoa.

Topics

Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
More in this series

About the Author

Nina Kruschwitz is managing editor and special projects manager of MIT Sloan Management Review.

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Comments (2)
ziontrain
To the commenter above: that behavior isnt inconsistent. 

You need to realize that the real reason the food industry is beginning to care about "fair trade" is basically self-preservation, not social interest. 

Basically the  existing raw material supply chain for cocoa has a bunch of impoverished rural farming folks (often including child labour, regardless of what the end-user and brand owners say they wish to happen) making the product under appalling conditions and then earning little in good years and nothing in bad ones. 

Next rung up the chain, the distributors and traders of the cocoa buy the cocoa from the farming paupers and earn far more for doing far less.

Then the brand owners take the cocoa, cut it like a drug dealer would (making a cocktail of sugar, salt, milk and filler - and only 25-30% chocolate - if that much) and sell it as "chocolate".  At an eye-watering markup. That's where the quarterly profits come from.

The problem is that the farmers earn so little that it is increasingly unnatractive as a career prospect. Putting the entire scam on the line. But you cant have long term threats to corporate profits, you know. 

So the brand owners' solution is to push "fair trade", a scheme in which the consumer is goaded to pay even more for the diluted end-product, the farmer gets a pinch more (enough to stem the draining of exploitable rural folks from the supply chain anyway) and the middlemen and traders pay the bill in reduced or eliminated markups for their minimal contribution.

That's "fair trade" - and its all about the brand owners, despite the catchy labelling. Not saying it does no good, but please understand that the brand owners remain as self-interested as ever.

As for the british workers, well global free trade means that their jobs go to the lowest bidder, so they are SOL. Why they would have believed any empty promises, I don't understand. They should have known better. When has such a promise EVER been kept by a stock-market listed company with Wall St and City analysts cracking the whip behind them every 3 months? It's never happened. Pure fantasy to convince yourself any such promise was genuine.

The only leverage the cocoa famers had (albeit inadvertently) was that there is no one lower on the poverty scale that the industry could exploit! So there was in incentive to keep them in the game.

But let's be honest, the laid off Brit factory workers are actually better off than the impoverished cocoa farmers. Even after "fair trade" those farmers still have a lower standard of living than the laid off british worker now on public benefits!

Gruesome, but true....
leslief
Just a shame that the company didn't care about keeping its promises to the Cadbury's workforce in the UK.