The Untrue Sustainability Issues of Kellogg's Company

Food represents a substantial part in the culture of many countries and is an essential element of the life of any creature. Individuals are dependent on food but are nevertheless putting increasingly more attention to what they eat. Food could not be produced without natural resources, such as raw materials, water, or energy. The manufacturing of food and involved agriculture; however, contribute heavily to undesired negative environmental impacts, which include GHG emissions.

Multinational companies apparently entail comprehensive global supply chains but are still affecting the environment in particular ways. Therefore, it is fundamental for companies to the environmental impacts of its entire supply chains and, hence redefine strategies to minimize those effects caused by the manufacturing of its products. Established in 1906 in the United States of America, the world’s leading breakfast cereal manufacturer, Kellogg Company, supplies its products, such as Kellogg’s Special K, Corn Flakes, Froot Loops, Frosted Flakes and Rice Krispies to customers in 180 countries with production facilities in 18 regions. The Company competes with its major American opponent General Mills and the Swiss food titan Nestlé for the top ranking in the cereal market. Kellogg’s promotes its products with the clear vision ‘To enrich and delight the world through foods and brands that matter' and shows commitment to philanthropic practices through their Global Code of Ethics and their corporate social responsibility strategy, giving the company a long-term and sustainable approach. Kellogg’s makes all of its decisions based on the interests of its stakeholders, which is anchored in its CSR activity. Despite the extensive market size and the fact that Kellogg’s breakfast cereal-products are regarded as an integral part of the diet for many individuals, there have been several boycotts against Kellogg’s, supported by scientific evidence, claiming the products would cause both health and environmental harm.

The major contributors to global warming are the ingredients and the energy they use for the manufacturing process. Even the Ministry of Health suggested to the public to not consume specific Kellogg's cereal products for making unsubstantiated promises on the nutritional value of its products and its unethical partnerships with suppliers. Considering these accusations, the purpose of this report is to examine the sustainability issues of Kellogg's strategy and to provide recommendations on how the Company could improve its position towards a truly strategically sustainable company by improving the Company’s bottom line and engaging its stakeholders with sustainable-agricultural practices.

Company Profile

Kellogg’s is the world’s leading manufacturer of breakfast cereals. The Company has been trumping its rivals General Mills and Nestlé with its outstanding performance in health and nutrition, providing consumers with an extensive range of food products for more than 100 years. This success story can be credited to its value-based culture and its commitment to practices based on particular business values, which are going to be analyzed in the subsequent section.

For Kellogg’s, these are attributed to as the ‘K-Values‘, including integrity, accountability, passion, humility, simplicity, and their focus on success. The Company’s values shape the way it engages with its stakeholders all over the world, which are individuals or organizations with an interest in the products and influence the way the business performs. Kellogg’s began to establish its business in Michigan whilst, in the end, has developed into a multinational organization with 30, 000 employees, leading the breakfast cereal market. Kellogg’s innovation and leadership has impacted its competitive market to a more noteworthy extent. Offering new items adapted to changing markets and the tastes of individuals occasionally have made Kellogg's to win its clients. The Company offers its products at a lower price, so even an average household can afford it. Kellogg's sells its items itself instead of through any other retailer. Kellogg's intention and the simultaneously strategic objective is to emphasize the importance of a healthy and balanced lifestyle. Tactical plans helped the Company to implement food labeling in order to enable consumers to understand the nutritional value behind its products. Kellogg’s strategy and long-term business goals focus on interacting with its stakeholders to ensure to meet their needs. In order to achieve that, Kellogg’s is bound to high ethical standards and sustainable business approaches, which are based on its circular business model. These requirements are anchored in the Global Code of Ethics, where it says that a truly sustainable business is one, that focuses on minimizing any negative impact to guarantee future generations to prosper.

The Company’s founder W. K. Kellogg once said: “Character will never be produced by money. I’ll invest my money in people” which describes what makes the Kellogg Company stand out: its focus on all of its stakeholders. Kellogg’s strategy is to emphasize both, a philanthropic approach as well as strategic sustainability and embed them in its overall company strategy. Kellogg’s vision to enrich and delight the world through foods and brands that matter is supported by its humanitarian purpose of ‘Nourishing families so that they can flourish and thrive. ’ That is how Kellogg’s ensures that none of the involved parties along its entire supply chain will be missed out and guarantees that each Kellogg’s employee around the world is working towards these principles.

Commitment to sustainability

Kellogg's vision reflects the Company's long-term goal to integrate corporate responsibility including sustainability as the essence of its business in each department. Through its integrated approach of reporting its governmental, social, ethical, and environmental-based efforts, Kellogg’s has earned its position worldwide as one of the best-rated corporations for sustainable business practices. Hence, Kellogg’s made it as an official member of the World Business Council for Sustainable Development, the United Nations Global Compact, and is incorporating the UN Sustainable Development Goals in each activity and decision it makes. The Company was furthermore named again to the prestigious Dow Jones Sustainability Index and was recognized for its corporate responsibility commitments, such as triggering food security by feeding deprived people and nurturing the planet.

Being included in the DJSI shows the Company’s commitment to enhancing the livelihood of its stakeholders and natural resources, including sourcing its ingredients with the aim to reduce negative environmental impacts such as greenhouse gas emissions. Kellogg’s sustainable engagement is reflected in its CSR commitment, which is based on four pillars: A marketplace ambition by providing high quality products, and promoting the ethical and responsible marketing, an environment ambition through using narrow resources carefully, and simultaneously reducing environmental impacts and encourage sustainable agriculture. Additionally, a community ambition, contributing money towards hunger relief and concentrating on nutrition and physical fitness. Kellogg’s introduced its initiative ‘Breakfast for Better Days’ to help families in need and, thus, donate cereal products around the world.

And finally, considering the premise of pleasing shareholders, but not at the expense of its stakeholders to avoid social risks along the supply chain; a workplace ambition, supporting a talented and diverse workforce which emphasizes diversity and inclusion, and ensuring a safe work environment whilst abiding by best practice labor standards. By encouraging such policies, Kellogg's achieved to reduce the number of its occupational accidents and, hence, the time lost due to such injuries. The Company furthermore included its suppliers to its CSR policy by stressing regulatory compliance, product safety, and recordkeeping through a Global Supplier Code of Conduct. By following this, Kellogg assures to maintain an ethical and transparent supply chain and to buy merely from producers whose practices protect the environment and respect human rights, including those of local and indigenous people.

Kellogg’s commitment to its triple bottom line has helped it join an honored group of the "World's Most Ethical Companies" in 2015, a ranking that recognizes companies that translate words into actions and actually do business ethically. A fundamental prerequisite is Kellogg's implementation of the Global Code of Ethics, which incorporates the ‘K-Values' and is anchored in the Company's philanthropic culture. As already stated in its CSR report, Kellogg's is committed to reducing its GHG emissions, the amount of waste, and its energy consumption, while constantly analyzing how it impacts its triple bottom line. With the aim of increasing its overall efficiency, Kellogg’s introduced its efficiency and effectiveness initiative ‘Project K‘ whilst working on building a future global supply chain through responsible investments in emerging markets, such as India or Thailand.

Kellogg’s sources its ingredients for its cereals from all over the world. The Asian Pacific and Africa region, for instance, represent the Company's sourcing priority for rice and corn as those are essential raw materials for the production of Kellogg's most hyped brands. The use of corn in the total cereal production in India accounts for nine percent with a tendency to increase, resulting in a limited capacity to boost quality and quantity as the available yields are about half of the global average. In order to overcome the geographic and climatic stress, Kellogg’s implemented a pilot program growing its own variety of seed. At COP21, the Convention on Climate Change in Paris, Kellogg officially announced its 2020 goals of managing its emissions reductions by 60 percent relative to 2015. However, in order to successfully realize that pathway, Kellogg's first needs to find an authentic baseline for its previously recorded emissions.

Accusations

Despite all the praise and nominations as one of the most ethical companies, Kellogg’s might still have room for improvement regarding its overall sustainability. Kellogg’s, making its first moves towards higher levels of efficiency, initiated its ‘Project K' with the pretense to develop the growth of its business when it actually downsized its workforce. The layoffs began to result in wildcat strikes and sales drop accordingly, indicating Kellogg’s social risks in its international supply chain.

Legal institutions fought for fair wages of Kellogg’s employees, however, Kellogg's did not agree to pay additional benefits and hired temporary workers, who charge sub-standard salaries. The Company has further been accused twice at times for controversies making false promises on the nutritional value and environmental impacts of its cereal products. This outcry was followed by subsequent product recalls and affected the Company’s brand image negatively. There have been several claims and boycotts against Kellogg’s encouraging health and environmental damage. Even the Ministry of Health suggested to the public to not consume specific Kellogg's cereal products for being high in sugar and providing little nutritional value.

The amount of sugar in Kellogg’s Honey Smacks accounts for considerable 56 percent. The Company is not only dishonest when promoting its products as healthy, it even exaggerates its nutritional values when it claims, the cereals could also boost kids' concentration. As there was no actual scientific evidence behind these allegations, this deception cost Kellogg’s a four million Dollar fine. On its website, Kellogg’s further claims to always seeking the very best grains - those which are sustainably grown and responsibly sourced.

However, the ingredients the Company processes actually require an extensive use of poisonous herbicides as they are grown within chemically agricultural procedures. Scientific evidence implies that long-term GMO consumption is harmful as GMO agriculture is using an intensified amount of toxic synthetic pesticides. These procedures do not only jeopardize the health of any species but simultaneously impact the environment unfavorably. Nevertheless, there are some countries, including the United States of America, one of Kellogg’s biggest markets to sell its cereal products, which lacks legal requirements to label genetically engineered foods. Kellogg’s spent more than three million Dollar to actively lobby federal governments and fight against food transparency.

The Company’s unethical corporate behavior, making false promises on the nutritional value of its products might be a severe cause for concern. Another allegation refers to the Company’s dyadic relationship with its suppliers. Kellogg’s revealed to not directly contract with farmers concerning agricultural practices and how to grow the ingredients the Company uses in its products. The ingredients are directly purchased from those suppliers, who process the raw materials into ready-to-use ingredients, including rice, corn or even palm oil. Despite its activities supporting deforestation and child-labor in Asia, Kellogg’s was caught partnering with Wilmar, the largest provider of palm oil and allegedly least sustainable company in the world, just to purchase cheap palm oil used for its products. Kellogg’s tries to acquit itself of all responsibility in this affair, but financially supporting Wilmar to commit this environmental violation, makes Kellogg’s a complicit as well.

Kellogg's lack of transparency on refutable activities seems to push along its entire supply chain, resulting in uncontrollable impacts on climate change. According to ESG Censible, Kellogg’s is reportedly performing miserable relatively to its competitors considering its carbon footprint, which is an indicator on its failure in properly implementing resource efficiency measures. Findings reveal that the average GHG emissions of different Kellogg’s cereal products equals 1. 04 million metric tons in 2017, which is almost as much as the amount of a Boeing with 1. 30 million metric tons per annum. Ingredients and energy used in the manufacturing stage and for packaging are the dominant hot spots, contributing to primary energy demand and to more than 90 percent of the water footprint.

Conclusion & Recommendations

In order to trigger the previously mentioned issues, this report entails recommendations on improving Kellogg’s sustainability by integrating particularly environmental-sustainability-considerations for the production and packaging of its products as well as engaging stakeholders with sustainable and better-agricultural practices. Despite Kellogg’s recent effort to sustainable practices, the Company is still not directly associated with a truly strategically sustainable company. It already implemented sustainable guidelines into its policies, however, corporate sustainability is not yet fully anchored and lived in hindsight of its recent preaches.

Kellogg’s, being aware of the fact that it is an important player in the nutrition and health industry, is already working on increasing the data transparency along its supply chain and embed sustainability guidelines accordingly - albeit with limited success. As Kellogg's shows, corporate sustainability requires active engagement throughout both the internal and external supply chain. Based on its sustainability targets, the Company could implement the following improvement opportunities:

The first option includes Kellogg’s senior-level management to engage stakeholders worldwide, particularly its farmers, with best-practice agricultural procedures, such as optimizing the crop yield, the application of fertilizers and use of natural resources to reduce the GWP of its products by five percent. Therefore, Kellogg’s started providing training to its 70 suppliers and helps them to share sustainable agricultural behavior. This implies the premise to be picky when it comes to its supplier selection and actually bounding them to transparency and the strict sustainability guidelines according to its Global Supplier Code of Conduct to avoid unethical practices. Constant exchanges and data updates through an information management system, which is a platform as a central point of data aggregation, enables full data transparency.

In addition to reducing negative effects from agriculture, there is also a scope for improving the resource efficiency and modifying the product recipes according to criteria of a fully sustainable formula. A recent study revealed that food consumers have become more health-conscious-and-pay more-attention to the-nutrition value-on products’ labels. As Kellogg is now forced to meet Europe’s Food Information Regulation EU-1169, it requires consistent information for consumers on product ingredients, nutritional value, and allergens. Kellogg’s could use less of those ingredients that have high environmental impacts, such as rice, and replace them with wheat or corn in equal proportions. As the results of this advisory report reveal, the agricultural procedure of Kellogg’s ingredients is the main hotspot for most of the environmental impacts, with rice being the main contributor.

The best solution for Kellogg’s to stem the environmental impacts and become a fully strategic sustainable company is to first restructure its supplier network according to certified sustainability requirements. Sustainability practices should be rolled out throughout the entire supply chain - from sourcing its ingredients to responsibly selling the ready-to-eat products. However, the Company’s performance regarding its overall sustainability might need some improvement, but it is still doing better relative to its number one competitor Nestlé, which has been voted among the ‘worst companies in the world’ recently.