General Mills, Inc. (GIS) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining us today. We're excited to continue the series we have, delving into the sustainability issues. If you were to delve in deeper into the consumer packaged goods industry, we'll talk about ESG more broadly before we delve into the specific topic of raw materials. Before we get into the fun exciting part, however, I am required to read aloud a quick disclosure. So we're required to make certain disclosures in public appearances about Goldman Sachs relationships with companies that we discuss. The disclosures relate to investment banking relationships, compensation received or 1% or more ownership. We're prepared to realize these disclosures for any issuer upon request. However, these disclosures are available in our most recent reports available to you as clients of our firm. What a mouthful and not the most exciting way to get started. So I'm very happy to turn to more interesting content. And to delve into this, we've got quite a star-studded lineup of speakers. So we've got Mary Jane Melendez, Chief Sustainability and Social Impact officer at General Mills, a company that she's worked at for more than 19 years, largely overseeing philanthropic and ESG initiatives. Joining her is Chris Montenegro McGrath, Vice President and Chief of Global Impact, Sustainable and Wellness -- Sustainability and Wellness at Mondelez, a company she's been at for roughly 25 years. And joining them with a slightly different voice from outside but still connected to the industry is Kate Rebernak from FrameworkESG, a business she found and has led as CEO for the past 17 years. She and her firm worked with a number of large public companies, including many in the CPG space to help reduce the environmental, social, governance risks while strengthening trust in creating value for key stakeholders. So all of you, thank you so much. I appreciate you carving the time out to join us and welcome.

So to get it started, I thought I was thinking we could start very high level with a fairly broad question before we leg into more nuance and specificity. So to begin with opening question, what does ESG mean to you and your firm? And how has that definition evolved over time? Mary Jane, why don't we start with you and then see what others got to add?

Great. Thanks for the great question, Jason, and I'm really pleased to be here with you all this morning. So for me, ESG is really about the way that General Mills operates and brings its business to life in a way that does good for both people and planet. And this is not something that's new to the company. We're more than 150 years old, and we can point back to the inception of our company and actually an explosion on the mill -- at one of our mills in 1878 that killed 18 mill workers, and in addition to the founder creating an orphanage to take care of the children who are impacted by that explosion. We also developed technology to make power million safer and didn't keep that just for General Mills, but actually shared it with our industry, shared it with competitors. And I think that's a very powerful way of bringing ESG to life, doing right for people and planet. And what we've been doing is actually evolving that over time where I would say now more than ever taking care of people and planet in the way that we operate our business day in and day out is more and more important. And as a food company that's so directly tied to Mother Nature. We have been doing a lot in the area of climate and taking care of the environment and working very hard to build a more resilient business over time. And today, we're focused on people, planet, community, food, whether it's sustainably sourcing our top 10 priority ingredients or advancing regenerative agriculture on 1 million acres of farmland. Those efforts have definitely evolved over time with more and more focus on the climate because of the scarcity of natural resources that we're seeing today.

That's helpful. Chris, same question to you. I mean, what's it mean at Mondelez and how does it evolve there?

Sure. At Mondelez, ESG is about driving sustainable business growth by doing business the right way. And it's a core part. It's the centerpiece of our purpose, our mission and our values where we want to lead the future of snacking by offering the right snack made for the right moment and made the right way. And so our sustainability efforts are a core part of what we're doing in terms of driving that positive impact for people and planet as well. We have signature sustainability programs in our key ingredients like Cocoa Life and Harmony Wheat where we've been investing for a long time to really take a holistic approach and drive positive benefit for both environment and for people. And our approach has evolved over time as well. We have ongoing dialogue. I personally -- our Board of Directors meet with investors and really -- I have been meeting with NGOs, et cetera, and really hear what's on their mind. We also talk a lot with consumers and take a very consumer-centric approach to understanding how their awareness and concern over these -- the issues of sustainability and well-being are evolving and adapt our products and our approach and our conversation as -- to continue to be relevant. So it's definitely increase in focus over time and importance for us.

And Kate, how does that compare and contrast to the other companies you work with, whether it be in CPG or anywhere else?

It's very similar. And the work that we do with clients is really about creating value through looking at these issues from a business standpoint. So for us, it's always been an operating lens about building accountability for all these issues that haven't necessarily historically been thought to directly influence value. But I think it's becoming clearer and clearer that they are. And I think most of our clients start with that premise that these are issues that are more and more thought by our key stakeholders to have some impact on value whether we address it -- increasing value if we address it well and decreasing value if we don't. The evolution is interesting because it's -- historically, it's been CSR, citizenship, corporate responsibility, sustainability and now ESG, which is really reflective of the attention that investors have been giving because that's the time that they've been using to signify a broader set of risk factors and value drivers.

Kate, I think you used the term create value a couple of times in your description there. And well, I don't know if I heard the same term used by either Mary Jane or Chris, I think you kind of got to the point a little bit. So maybe I'd love to hear you guys weigh in on what do you think you can -- where you can really create the value. Is there a competitive advantage that can be created with ESG? Or where does the source of value creation really come from? And maybe we'll move backwards, starting with you, Kate, and then Chris and Mary Jane this time around.

No. I think that over time, the business case for looking at ESG issues as creating value for business. As that's become clear, I think stakeholders have become more sophisticated in understanding of how those factors can impact value. And so I think companies are looking to get more specific about what they're doing and how it's creating value. So drawing those connections is really important. And I think it's important to collect data and to set vision and goals. And I'm not sure I'm really answering your question, so interrupt me if I'm not. But I think it's -- things have evolved because stakeholders are being more -- they're more clear on what they want to see from companies, and companies are needing to respond to them. And just stop there -- I'll stop there.

No. I think I understood. It sounds like we're still in a sort of discovery mode for much of this. It's clear that there's potential to create value. It's clear that there's opportunity to create value, and we're still early trying to discover where the sweet spot is, where the richest opportunities are. At least that's sort of my interpretation of what I heard from you, Kate.

Yes. I think that's absolutely true for a lot. I mean some companies have been doing this for a very long time. And so for companies that are still in that discovery mode, it's really about understanding what the expectations are and looking at what they're already doing that they're maybe not talking about to sort of signal to the marketplace that they are meeting those expectations or they're at least aware of what the expectations are and taking action to address them.

Okay. And Chris, similar question to you. Where do you see the value creation through ESG initiatives? And what, if any, competitive advantage do you think could be generated, could be a proactive and front-footed on ESG?

Yes. So I think sustainable companies today -- excuse me, successful companies are creating value for the world at large in addition to just for their businesses and really understanding what's material for your business as well as the broader impact that you could have is absolutely essential. So for us, a big part of that is being consumer-centric, as I mentioned earlier, and just understanding where -- what the -- where consumers are going in their awareness. And we increasingly see consumers understand the connection that their choices have on the environment in addition to their own well-being. And so we're doing work to try to continue to talk about what it is that we're doing with consumers. We also understand what's material to our business and our -- and the broader world around us. So we are one of the world's largest buyers of cocoa for example. And so that's critical for our business to be able to have a strong supply of cocoa. That's why we created Cocoa Life. We're also able to drive then systemic change for the broader world in that work that we do. We're able to help the farmers that we source from. We're able to help the communities that we're buying from, and so creating value for the broader world at large. And then, again, taking it to drive change with -- in broader ways, working with governments, working with other industry players, because I think some of these complex challenges are just too great for any one company to be able to solve on their own. So a big part of also creating value is in a pretty competitive way. We're working to share best practices, share knowledge and drive some scale so that we can make some of these sustainable solutions. I think sustainability used to be a little bit off to the side. If you wanted sort of like the certified -- it was kind of like organic. It was like sort of a segment of certified products that were sustainably sourced for like the stuff that was for certain parts of the business. And now what we're working to do is much more make these mainstream and that create value for our business, for the industry for -- and again, for the broader communities and environment.

And Mary Jane, anything you'd add to that?

Yes. I think I would echo a lot of what Chris said. And I would say, we are seeing from our consumers that they expect brands to be a force for good. And for us, that's really necessary to continue to maintain a competitive advantage. I think this is especially true for consumers of our products like Annie's and Lärabar and EPIC, but even for consumers from -- who choose Cheerios and Nature Valley and Yoplait. And for us, it's really about thinking about our operations and how do we activate in a way that does good for people and planet and builds both business and planetary resilience at the same time. We want to be in business for the next 150 years. And I think we've realized with the impact of climate change on our business, even when it comes to ingredient sourcing and challenges that we see when we're dealing with extreme weather, that it is so critical that we look up and down our supply chain to really be thoughtful about going all the way back to the farmer who is growing our key ingredients like oats. We're one of the largest purchasers of oats for products like Cheerios and Nature Valley. And what we've been doing recently is really looking at practices beyond simply sustainable sourcing, but really looking at regeneratively sourcing and regeneratively growing these key ingredients in a way that's building resilience for the farmer, the farmscapes and our ingredient streams over time. We are a company that depends completely on the health and well-being of Mother Nature. We take the outputs from Mother Nature, make and market products that are sold all around the world. And if we don't have a steady reliable ingredient stream, we're not going to be able to do business. So that's -- for us, it's really an imperative and value creation for both us as a company and for society.

That makes sense. The next question I wanted to pivot to is more sort of the internal thrust. So we just touched on the external forces that are making this more important. But I think in some of the open dialogue, too, you mentioned internally, it's become much more of focus and a greater priority at your firms, both Mary Jane and Chris; and I'm sure many of the firms you worked with Kate. So on that topic, I guess, first and foremost, who do you view as the key stakeholders for you and the ESG initiatives you're leading? And how the expectations of those stakeholders evolved over time? Mary Jane, we just closed with you. Your mic is still live, so why don't we jump off there?

Sure. That sounds great. I would say, in this field, you have several key stakeholder groups that you're always trying to balance and continue to listen to and taking their feedback to continue to drive improvements. For us, I would say there's a handful of groups. Obviously, our employees internally are key stakeholders. Our investors, our suppliers, our communities, our Board of Directors who's asking a lot of questions in this space, and I think we see more and more interest in this. I would say, in terms of how has this evolved, what's been really interesting for me -- I've been in this current role overseeing sustainability for about a year, and in the last several months, it's been interesting to see the number of investors who are going deep into asking about General Mills, what we're doing to take care of the planet because they're continuing to see extreme weather events or the fact that we -- 1/3 of the world's top sales are not farmable anymore. Meanwhile, we waste more than 1/3 of the food that's produced for humans, and it's ending up in a landfill, emitting very powerful greenhouse gases. So there's this interesting confluence of all of these challenges that are happening on our planet today and they're impacting people. And more and more, our employees want to know what we're doing to address those issues. Our stakeholders, our Board of Directors want to know that and our consumers. Our consumer care deeply about these issues and expect that we're leveraging the size and scale of General Mills and putting our dollars to work in a way that's helping to heal, repair and regenerate the planet.

And pivoting to Chris. Chris, anything you would add there or pretty similar?

Well, we definitely have similar in that multiple stakeholders, and the interest has grown over time. There's been some things that have been pretty consistent. Our Board -- I've been leading Sustainability since Mondelez started in 2012, and I've been talking with the Board all along about both Sustainability and Well-Being. Definitely, in their own personal involvement, I think, in understanding the topics and being a much more, I would say, well-versed in the issues has definitely grown. And I think that's also in response to their -- they themselves. I sat with them; they are having more conversations with investors directly on these topics. So certainly, investor interest in terms of the level of disclosure, the level of engagement, the kind of conversations. And when I started, it used to be just the socially responsible investors, and now it is mainstream lines as well. The other thing I would add in terms of who my stakeholders are, definitely, internally, we have -- one of the things that my -- me and my team, we are responsible for is helping to work with our -- we have 14 business units around the world. And just -- there's so much more interest, because I think, similarly, consumer -- we're all consumers. We're all living and we read the headlines and we feel the impacts of extreme weather and we see what's going on, even COVID, and understanding potentially some of the connections and the vulnerabilities that we all face from being connected to our environment. So a lot of internal interest from our employees and accountability to help drive our results and KPIs. And so we work to really understand at a local level what are the issues locally and how are consumers seeing it. The way they see sustainability in China is different from the kinds of issues and concerns they have in the U.S., but that doesn't mean that they don't have similar interest. And so really helping to unlock those nuances is part of what we're working on as well.

And Kate, a question for you. As I listened to both Mary Jane and Chris, talk about who the key stakeholders are. It was clear that they're now getting questions from a lot of different stakeholders, a lot of different angles. A lot of people pushing for engagement and change, which is probably quite a bit different than what it was 5 or 10 years ago. You worked with a lot of different companies and different industries. I'm sure you saw more and more front-footage, some with a little further yield. What are you seeing across these? And are common characteristics that you see in terms of level of engagement for the companies that you think are getting more advanced versus those who aren't?

Yes. I think it started with the more heavily regulated businesses who were sort of -- they got to jump on a lot of other companies because they really needed to have that social license to operate. So the heavy industry companies were sort of early to pull it all together. What we're seeing is really similar to what Chris and Mary Jane talked about, which is greater engagement on the part of investors. I mean, 5 years ago, there weren't a lot of institutional investors who were focused on taking deep dives on ESG issues, and now almost all of them are. So that has driven a lot of great -- a lot of interest on the part of investor relations people and reporting it to the CFO. I mean, as late as 3 or 4 -- I'd say, 4 years ago, we would be -- investor relations people would kind of come kicking and screaming to the meetings and would be saying, we never get any of these questions. Now they actively want to be a part of the discussions. And we're also seeing a lot greater engagement on the part of senior leadership. They're -- if they're not driving it, they are actively supporting the effort as a whole. So that's been a big shift over the, I would say, the last 5 years, and that's across sectors.

Yes. Yes, yes. We certainly see and feel it for our vantage point as well, which is, of course, the reason that we're hosting our first-ever consumer-oriented ESG conference, because it is front and center, much more so than it has been in the past. I want to switch gears a little bit, but still focusing internally. Mary Jane and Chris, you both have defined ESG leadership roles, and I don't think that's unique. I think many of the companies, I look at, they all have somebody who's the spearhead of ESG, the breadth of the team may vary across one company or the other. But is ESG's responsibility in the leadership isolated to your group or is it much broader base throughout the organization? Are there other key stakeholders across the company who are proactively taking leadership roles on ESG-oriented topics? And Chris, we will start with you and then go to Mary Jane. I'd love to hear what Kate sees and hears across the base company she works with ours too.

So we have an impact team that I lead that are subject matter experts in various parts of sustainability and well-being. And so we definitely are sort of the cornerstone of working on helping to set the strategy and the goals and create some of the important content. For instance, Cocoa Life, I have direct accountability for that program. But importantly, we also work cross-functionally to drive the agenda with -- and there's leadership roles across manufacturing, procurement, RDQ, research and development. And then we've also now made some of the KPIs around sustainability. We've embedded that in the performance metrics for each of our business unit leaders, so around the world to help drive the agenda. So it's in our -- my CEO -- in their management scorecard all the way up, and that comes from the bottoms-up from the business units, rolling up to deliver the overall company performance. So it's really a collaborative effort. And as I said earlier, a lot more engagement and interest in recognizing, because again, the consumers are asking about it, local governments are asking about it out and around the world, different -- there's lots of different conversations happening. So there's much more internal collaboration to be able to drive it forward.

And I guess, Jason, I'll follow-up on that, and just say, from the General Mills side, similar to how this is structured at Mondelez, I lead the sustainability and philanthropic arm of the company. And while that team is centrally located, we actually collaborate very deeply across the organization, especially across our supply chain. We work very closely with, for example, our manufacturing team that's actually working to elevate and activate the company's commitment to use 100% renewable electricity by 2030. So we set the strategy. We make commitments on behalf of the enterprise and then work internally with partners to bring those commitments to life. And it's not just our supply chain, which, again, that's where the majority of our sustainability efforts come to life, especially through sourcing, as I had mentioned before, but we also work very closely with our operating units and our business segments. So for example, one of the ways that we've been able to gauge our largest segment across North America is actually having those leaders make a commitment on behalf of the companies to advance regenerative agriculture across 1 million acres of farmland by the year 2030. And that's significant. That represents about 20% of their sourcing footprint. And that leadership has been so important to help really continue to spearhead those efforts and get brands and business involved. This work takes a lot of hands. It's not a light lift. A lot of people need to be engaged. And I think the business needs to see the value, the opportunities, how it's going to make their own business more resilient over time. And I'm excited that we're starting to see more and more of that internally. And I think there's a great opportunity to figure out how do we also crack the code to help elevate this could work through all the way to our consumers. That's an area of opportunity that we see in the future as I think about the backup materials back and being able to articulate how these oats are growing and how they're good for the planet and how they're good for heart health, and really helping our brands to tell that message more powerfully and carry that through to consumers going forward.

Kate, anything you would add on that?

Yes. I was looking for patterns, just thinking about our clients and where the function sits. And it's all over the place. There are companies that have a team of one. And there's one client we worked with who had 30 people dedicated to just ratings and rankings, and looking at what those inquiries were. So it's really -- it just runs the gamut. But where we see the concentrations in ESG leadership, it's really in legal and risk and corporate and public affairs. And they -- we tend to think of sustainability or ESG functions in the company as kind of a business intelligence unit to get information out that there's -- what they're seeing, what is the external -- what are the external perspectives and then to gather information from across the company and across the functions to make -- to pull that all together and create a narrative and also identify gas and identify where the company can really make a serious impact. We -- less often, we see responsibility flow from communications, investor relations, EH&S and more rarely human resources in a company. In some companies, there is a dedicated CSO, Chief Sustainability Officer. In my experience, that position doesn't often report to the CEO, but it reports to somebody on the executive team who reports up to the CEO.

And Mary Jane, Chris, where do you guys report up to -- that you're reporting to?

So I report directly to our Chief Supply Chain officer who then reports to the CEO.

And I report into our EVP and General Counsel who reports into the CEO.

Okay. Interesting, interesting. So both one level removed from the CEO, but 2 very different verticals within the leadership team. Mary Jane, you mentioned you report into the Head of Supply Chain. You also talked to some of the supply chain initiatives that you're heavily engaged with. And I think you mentioned regenerative agriculture, which, I have to be honest, I don't fully understand what you mean when you say this. So can you elaborate? Tell us about what this initiative is and what you're trying to accomplish with it?

Absolutely. So regenerative agriculture is really a holistic principles-based approach to farming and ranching that seeks to strengthen both ecosystems and community resilience. And we have had the opportunity to learn directly from regenerative farmers over the last several years about the power for regenerative agriculture to be one of many levers to help address planetary health. And the more we started learning about and from these farmers about the practices that they were implementing on their land, like, understand the context of your farm operations, understand your climate, your soil type, minimize soil disturbance. When soil is disturbed, it releases carbon into the atmosphere. Soil can be a very powerful carbon sink and actually take carbon out of the atmosphere and then roots in the ground, act as straw, sucking that carbon in where it nourishes the network of life underneath. We have worked with farmers, learning about the maximizing crop diversity. So not just growing oats, not just growing corn, but really maximizing their land and growing several different varieties, whether it's varieties of oats and peas and wheat, actually getting more out of their land. And what we hope to achieve out of this is a few different things. One, we hope that farmers are more economically resilient. And we've activated some pilots in the last year, specifically where we are sourcing key ingredients like oats, for example. We weren't sure how this was going to play with farmers if they were interested in participating in a program like this where they're actually applying a certain set of principles and then practices on their land over a 3- to 5-year period. We invited them in to learn about the power of soil health and participate in soil health academies. We were hoping for about 20 farmers in the first pilot. We have 46 farmers and 50,000 acres under management, and we were blown away by the interest that farmers had in wanting to participate in this program. And what farmers are doing today as they're moving -- we have both conventional and organic farmers participating. They are moving to apply these regenerative practices to their farmscape. And what's been really interesting to learn even in year 1 from some of the pilots who are -- the farmers who are participating in the pilot is that, in year 1, they've been able to dial back on synthetic inputs. So they're spending less money on fertilizers or pesticides and rather reinvesting in things like cover crops and planting cover crops on their land. We bring alongside a consultancy called Understanding Ag, which is actually a group of -- it's a consultant's -- farmers who have been growing, managing their land regeneratively for decades. Farmers like Gabe Brown from North Dakota, he is walking side-by-side with these farmers, helping them to implement these practices. So we're hoping for more economic resilience for these farmers. More money in their pockets at the end of the day because if it doesn't work for farmers economically, it's not going to work at all. We're looking to improve soil health, increase biodiversity both above the ground and below the ground within the soil, to improve the quality and quantity of water on that farm. And then -- so those are the 4 outcomes that we're looking for. And when we get our first pilot results back this fall, we will make that public. We want to share it with the world to help people understand what we're learning through these learning laboratories, these farms that are part of this pilot project to hopefully help others realize that there is power in this, and it can be good for the planet in terms of carbon sequestration and growing our food in a more resilient manner over time.

It sounds really interesting. It also sounds like sort of the work that you would expect to be coming out of some of the academic institutions who are focused on ag, like Cornell as a huge ag in life sciences school, for example, that I think does work along these lines. Are you planning land culture or the academics on land culture any way on this?

We are. In fact, Cornell is one of our partners in this work. So we're partnering with Cornell, with North Dakota State University, Kansas State University, so several academic partners in this space. Also what was really interesting, we recently launched a pilot in Kansas City, where we grow a lot of wheat for our Pillsbury brand. And it was really interesting. We were actually approached by the Kansas State Department of Health and Environment who wanted to actually make an investment to measure and track the impact that this was having on water. They have a very significant water challenge in the Cheney Lakes area -- reservoir in Kansas, and they believe that this move to regenerative agriculture and the reduction of synthetic inputs will actually improve water quality and water quantity over time. So it's really been interesting seeing the public-private partnerships continue to evolve. And more and more partners actually coming to the table wanting to be there to learn about the impact that this can potentially have on so many other scarce natural resources today.

That sounds really interesting. Christina, I want to pivot to you -- Chris, I want to pivot to you. You guys have a lot of initiatives underway. I just went through your SNACKING MADE RIGHT manifesto, which was large and robust. And I'm sure this -- we could probably spend an entire hour just talking about that. But a couple of things that you highlight in those and a couple of things that you've mentioned so far were Cocoa Life initiative and the Harmony Wheat initiative. Can you elaborate on what those are and walk us through those initiatives?

Sure. Absolutely. Similarly, with our portfolio, sustainable ingredients is a key focus for us. They represent 50% of our CO2 emissions come from our ingredients. So for us to tackle climate change and also create future growth by having a secure supply of key ingredients is absolutely essential. So Cocoa Life is a program where, as I mentioned, we're one of the world's largest buyers of cocoa for brands like Cadbury and Milka, Toblerone, et cetera. And we started this program back in 2012. We launched it with the ambition to really try to understand and tackle the root causes of some of the issues that we were seeing. And just for perspective, I grew up on the marketing side of the business. And I was doing new product innovation and doing some growth initiatives and then was putting a sustainability role and went to Ghana to see a program that we were working on, Cadbury back then, with farmers, and basically just started to understand the complexities and the root -- some of the challenges within the supply chain that we were having within cocoa and really set out to Cocoa Life as like an innovation -- innovative approach to pull together ways to help farmers grow more cocoa on less lands to help the environment. But importantly, cocoa farmers struggle with real low productivity levels due to -- they don't have a lot of access to good farming practices. They didn't back them. They didn't have access to good seedlings, to fertilizers and they didn't know how to use them well. They didn't have access to financing. Women do about 40% of the work in cocoa farms, particularly in West Africa. So Ghana and Côte d'Ivoire produce about 70% of the world's cocoa. So that's why it's such a key focus for us, although we work in 6 different origins around the world. So women were not getting very much access to any of the training or the inputs. So we created Cocoa Life. We are now at the point, 7 years later, where we're working with over 175,000 farmers. We have, as of the end of last year, 63% of our chocolate is sourced through the program. But more importantly than how many people that you're reaching, one of the things that we think is super important is measuring the impact of our work because we want to know -- I mean for us, this is a major investment of time and money, and we're doing it to make sure that we're actually transforming the way cocoa is grown, that we're truly solving deforestation on the ground, that we're solving some of these community challenges around poverty, around lack of women having equality and having a voice. And so we measure the impact. Last year, we published our -- it's quite an undertaking to try to understand in a measurable way what are we seeing as the results of all of this work. It's been a much better approach for us because we're able to work with all of our partners. And similar to Mary Jane, we work with lots of different partners in our value chain to get the work done, suppliers, NGO partners, different experts on human rights issues, on community development issues as well as things like agroforestry, et cetera. So working with those partners, we're able to understand through our impacts, results, why -- what's working, and we're able to tailor the approaches and continue to track whether the modifications of the programming are continuing to lead to better results. So it's -- I think the -- similarly, having these kinds of programs that are holistic, they're interconnected, they tackle the root causes and are there to -- and able to go at scale because we're on a mission to get to 100% of our chocolate sourced to the program by 2025 from 63% today. We're well on our way there. And so we're able to help drive change in our business and in a much broader context in the industry given our size and scale.

How about the Harmony Wheat program?

Sure. So Harmony Wheat is a program where we've been -- it started in Europe, for our little business in France. And there, we're working directly with farmers to source our wheat and ensure that it's grown in a sustainably sourced way. Similar to Mills, in fact, we've worked with Mills over the years to understand best practices, particularly in the U.S. We also have a program for our Triscuit Wheat's in North America. I've been out in Michigan to visit the farmers. And what's interesting is some of the interconnectedness, even though European farmers and North American farmers and contrasting that with a smallholder farmer, you're talking in wheat about like very different kind of crop that's grown. And it's about soil, health and fertilizers as well as biodiversity. We do a lot of work in Harmony on helping to cultivate bees and sort of -- around the farms to have wild flowers growing and all that because it's so important to -- for the long-term health of the environment, the crops, et cetera, and the productivity for the farmers. But what's interesting, similar to what Mary Jane was saying, is that some of the challenges farmers face when they're running like major -- a sophisticated tractors and they're are able to have a -- on their computer screen within the tractor, see the fertilizer, soil condition, the water levels and like do pinpointed fertilizer application as a way to get at some of these conservation methods absolutely so different than what a smallholder farmer who has got like 2 hectares in Ghana is dealing with, but yet some of their issues are the same in terms of how they are trying to work together in co-ops, some of the climate change impacts that they're dealing with that are sometimes out of their control, et cetera, even some of the financial challenges. And so we're able to take from big industrial sort of, I would say, big farming all the way to -- from U.S. and Europe and across to the work that we're doing in Cocoa Life, and find ways to share best practices across.

Now both of you talked about working directly with farmers. And it's -- I imagine when you're working directly with a farmer that's going to supply you, you've got good visibility into the input stuff that they're bringing to you and good oversight in terms of the standards that they're meeting. However, I apologize for any background. My office companion sometimes get a little bit rowdy. But the -- you also buy a lot of inputs from various parts around the world. I imagine that it'd be quite difficult to ensure that they meet your standards all the time. How do you measure? How do you track? And like what steps can you take to ensure that when you set standards, those standards are being met with a proxy or procuring? I don't know where we want to start. I'd love to hear from all of you on that topic. So Chris, I think your mic's probably still live, so why don't we go there and then speak to Mary Jane.

Yes. No, it's a great question, and it's something that's critical to us. And we do it in a slightly different way. So for Cocoa Life, we -- again, 175,000 farmers. We are working with these farmers -- through. We buy through those suppliers. We don't buy directly. We buy through the suppliers, but we're working directly with the farmers through our own teams on the ground in the 6 different origins. So we have a direct relationship. And I've been out to visit the origins and I go every year. I may not make it this year where we're -- with the situation. But I go every year and meet the farmers myself. But we have a process where we use flow search. It's a part of the -- we used to buy through Fair Trade. They're now one of our strategic partners, but they have a division where they actually are able to track all of the purchases. We want to make sure that the amount of cocoa we said we're going to buy at the price that we contracted with the farmer that we were going to pay is actually flowing back to the farmer. And so we have a whole system of being able to verify that information. And then on top of that for the impact measurement, we work with a company called Ipsos that is able to -- that does a lot of work to read both quantitatively and qualitatively our various KPIs around farmer incomes, around some of the environmental practices, the community practices, et cetera, and be able to see progress there. And then what we're -- on some of our other commodities, we have different ways to be able to measure. Increasingly, I would say, transparency is important to us. It's important to our stakeholders, to our consumers. So Global Forest Watch is a satellite monitoring system that we use to be able to track things like deforestation on crops like palm, et cetera, and be able to see for ourselves and that the farms that we're sourcing from as well as then -- one of the things that we've done is put in conditions around deforestation-free practices for our suppliers in palm, but not just on what we buy from them and having assurance of that, but also asking to make sure that they apply that across their entire supply base. So the satellite monitoring, which we're continuing to expand both the reach as well as the kinds of level of information we're able to get from it, is expanding. Lastly, what I would say is we're working towards -- in some of the industry coalitions that we're working on, is having more common systems of sharing information about -- and working towards that in the future so that we can have, I would say, better visibility, a common set of information. And I would say, more real-time information or if there are issues happening to be able to share that. And that applies on the -- as well, not just on the environmental side, but on the social side, with things like forced labor and other human rights issues. Having that shared knowledge is something that we're working through with like The Consumer Goods Forum, industry group that we're working on some of these sustainability areas together.

Mary Jane, is that pretty similar for you, too?

It's very similar actually. There's a number of tools that Chris mentioned that we are also leveraging, like Global Forest Watch, a number of coalitions that we're part of. We engage with a number of our peers. Actually, The World Cocoa Foundation has a Cocoa and Forest Initiatives that were part of alongside Mondelez. And I think there's so much power in the collaboration, because these issues are -- these supply chains are so fragile depending on where they are in the world and there's different issues in different places. The way that we're going about sourcing oats in North America is very different than the way that we are sourcing palm oil in Indonesia or cocoa in West Africa. And they require a very different approach. And I think what's been powerful is to be able to come along like-minded industry peers who have the same objectives and wanting to have that sustainable ingredient stream, improve the community, have better livelihoods for farmers at the end of the day and really help to move the needle on some of these really challenging issues. So very similar at General Mills. I would say the other piece that we've been leveraging more in the last few years is engagement with nonprofit partners, NGO partners globally, whether it's PUR Projet who's helping us really look at a no-deforestation strategy, bringing in that external expertise just to continue to really help us advance our work and challenge our thinking to continue to improve the areas that we're working in because it's just -- the landscapes can change so quickly. So having that outside perspective is still critically important today.

And both of you, as we've gone through this and talked about the raw material side, you both highlighted some of the environmental factors that you're focused on. But I've also heard both you mentioned some of the social factors, too, whether we're talking farmer economics or labor conditions. How important is the social side to you as you think about some ESG applied to raw materials? And how has it evolved over time? Mary Jane, why don't we stick with you for a moment?

Yes. I would say it is critically important to address the social side. If we are not taking care of people in this process, we're going to have a really hard time getting any of the ingredients we need and doing right by the environment. So that's really where it needs to start today. And I think that, again, depending on where you're working in the world, the issues can look very different, whether it's deforestation because of poverty -- challenges with poverty or child labor because of poverty, and farmers need more hands on the farm to be able to help where there's not safe access to schools. It's really important to take a comprehensive approach and really be thoughtful about place-based interventions. And again, what we're doing here in North America around regenerative agriculture is not something that we would just lift and shift to Africa. You really need to understand the context of the challenges in those communities, the climate challenges that they're facing, the social issues that they're facing, the culture -- the difference in culture and how these -- how families and farmers are facing some of these issues. And I think that continued deep understanding and engagement with partners and directly with those farmers, again, I think will continue to be more and more important going forward. And then I think when it comes to the companies where we have responsibilities to continue to shine light on those areas where we are seeing progress, where we're driving impact, where we are having challenges and to continue to drive transparency, especially across these complex and fragile supply chains.

Chris, anything you'd add?

Yes. I think just really understanding and emphasizing the interconnectedness of the issues. So I think, historically, there would be, even in some of the industry groups meetings that we have, there would be the environmental issues meeting or work stream over here and then social over there. One of the things in Cocoa Life, we from the get-go understood that the interconnectedness of the issues like Mary Jane said and the idea that if you want to really tackle the root causes of things like deforestation, you have to go absolutely straight at what's going on for the people because that's why the deforestation is happening in many cases. So absolutely, that's toward -- core to our approach. I think also just helping to expand the awareness of human rights and forced labor, it's something that we're working on as an industry, as consumer goods industry. We have a human rights coalition, working group. I used to Co-Chair at the Consumer Goods Forum. But just we got to a common definition a couple of years ago of what is forced labor. And it's things that maybe, a, that's not always comfortable to talk about, but it's like raising that awareness and knowing what to look for and working with our suppliers around things like making sure that people don't have to pay to get a job, making sure passports aren't being withheld, et cetera. And then importantly, we're working now to make sure that we have awareness that we're raising and doing training internally throughout our organization, particularly with the parts of the company that are working with suppliers, third-party manufacturers, et cetera, to make sure that they know what the issues are and what to look for, et cetera. And then the last thing I would say is similar. If the industry collaboration, and not just amongst ourselves, but importantly, having that dialogue with governments, we're seeing more and more governments get involved, not just in the producing countries, but in the consuming countries. So looking to put legislation in around more -- like more due diligence and asking for businesses to be able to prove that they are -- and suppliers and companies that they are aware of the issues and doing the due diligence to protect people. So it's, I'd say, all around the collaboration. I think that -- we think that, that kind of government involvement can be very, very helpful in helping to move the needle to really drive change.

Yes. It sounds like it's probably actually one that's just helpful. It's probably a requisite in many instances to really get the change. Kate, I'd love to pull you back into the conversation because we've paused you in agreement for too long now. You -- as you -- when you work with food companies or CPG companies, we just spent a fair amount of time talking about raw materials and sourcing and supply chain. How much you are trying to spend on that area of topics? Is this like a prominent area where you see most CPG companies and food companies focused on today?

Yes. I think it's a big issue. What we generally do with our clients is serve at the front end. We're not deep in supply chain work. We'll identify supply chain hotspots and things like that. But we're not getting -- we don't have the deep expertise that Chris and Mary Jane's partners have on those issues. More of our work with our clients is helping them to figure out which ones are the most important ones to focus on from the get-go. So those issues are always coming up. In fact, we worked with a company that is in Mondelez space a long time ago when Cooper Sourcing was really starting to become a hot betting issue. And we're instrumental in sort of helping that company wrap its head around how it is going to address those issues. So the issues that you're seeing are the ones that we're seeing. And I just wanted to mention that -- just underscore what Mary Jane and Chris were saying about power partnership because these are such big interconnected issues that companies really can't do it by themselves, and it doesn't make sense to do by themselves to engage with those experts and the NGOs. And just a good competitive work in the industry, I think, is critically important in [ remediating ] these issues.

And sticking with you for a moment, Kate, thinking more bigger picture, what other ESG issues have bubbled up recently in the CPG space?

Plastics is a big one. So the circular economy conversation keeps going on. And I think so plastics packaging and waste are big concerns for CPG companies. Some more specific ones are to remain in more sustainable meat production. There's some interesting surgence in alternatives to meat. And back to Chris' point about the interconnectedness of the issues because climate change is tied in a lot of ways to meat production, that's bubbling up [indiscernible] sourcing obviously consumer health. It's another issue that's showing up a lot in CPG companies. And then the ones that kind of show up across sectors, talent, diversity and inclusion, climate, of course, in some cases, data security for CPG companies that are basically handling data for customers and consumers.

That's interesting. Folks, we're running up against the clock. We've been at this for nearly an hour now with some rich conversation. And I know we can keep it going for quite a while longer, but we do have to wrap it up. But before I wrap it up, I want to come back with another sort of ESG-related question, but ESG question in the context of where we're at today. The fact that we're doing this virtually speaks volumes of the situation we're currently in with coronavirus, COVID-19. And a lot's changed beyond just sort of how we're going to interact to pull this event off. And I'm sure a lot of this changed in terms of how you're thinking about ESG going forward, at least I suspect it is. I love to hear what, if any, changes to the ESG dialogue discussions you think will result from COVID-19? And Kate, you were just speaking. Why don't we kick it to you and then route to Mary Jane and Chris afterwards?

Yes. A couple of things have come up. One thing which was a bit of a surprise for me was -- because in past crises, we've seen a dialing back of attention to ESG issues, and we're not seeing that right now. And I think what's happening is because of the pandemic and then layering on of that with what's been happening over the weekend with protests about racial injustice, I think companies are realizing that they need to continue to address these issues in ways that are authentic and also have the bold action to back them up. I think one other thing that I'm thinking and the company's leadership must be realizing is because some of the underpinnings that would help reduce the impacts, both immediate and longer-term [ route ] like this, are not really there. Company leaders are going to be realizing that they have to build those structures both internally and throughout their value chains just to insulate against some of the impacts and create resilience. And so I think also their -- our expectations that company leaders need to speak out on issues and really engage public policy makers to address some of the things like paid sick leaves and health care issues and pay equity. I think those are going to start rising to look forward. I don't think environmental issues are actually going to go by the wayside. I think that they will -- they're sort of being outshouted right now, but I don't think that those are going to go away because they're not -- those issues aren't going away. And they're just going to be -- they're going to be resurging in the coming months, I think. And to Chris' point, all these issues are connected in some way or another. So we're really understanding that being able to articulate that from the business perspective, I think it's going to be really important.

Mary Jane, same question for you. COVID-19, the wake of it, is there change in the discussion around ESG? Is it going to change the discussion of the focus going forward? What's your take?

I think it has and will continue to do -- to change. I think the world is so different than it was 3 months ago. And I think that we are in a new place today. I think, for us, COVID-19 demonstrates a few things. I think, one, the need for -- building a resilient business and not having sustainability after the side, but truly integrate it across your operations to ensure that you can withstand these types of pandemics. I think it also has highlighted the need for large-scale collaboration to solve issues like climate change. I think that Mother Nature has been trying to get the attention of humanity for a long time. And I think she's got it now. It may have taken a goal of pandemic to do that, but I think people are really seriously rethinking their approach to the environment. And I think we're in a situation that none of us believe we would be in. And I think that people -- I think we're seeing the best in a lot of people in terms of ambitions to come forward and to do things differently. One of the things that we're having discussions about at General Mills right now is how do we think about continuing to improve the global supply chain and our food. So you think about, today, in the U.S., we are seeing families stand outside of their banks for hours at a time, waiting for food that will get them through the next few days. Meanwhile, farmers across our country are dumping millions of gallons of milk down the drain or plowing fresh fruits and vegetables into the ground because there's no outlet for them. Restaurants are closed, schools are closed, hotels are closed. And something has got to change within that global food supply chain. So what an opportunity for companies who have expertise across supply chain, logistics, planning, to think about new ways to bring their skills and expertise piece to life. So I do think that it will continue -- the situation will continue to push for new and different interventions so that we do not find ourselves in this state again. So I think that we've got -- I think a lot of good work has been done. I think there's a lot of work to do ahead of time and what's in front of us. And I think partnership, collaboration and having the will to do things differently is going to be really important for companies going forward.

Chris, anything you'd add?

A lot of similar themes. I guess what I would add is that I think the -- putting people at the center of these issues and understanding that connectedness, again, the vulnerability that people have to some of these issues and our need to take care of the health and safety of our employees and our local communities and also the long-term well-being of people. One of the things that we're working in the area of mindful snacking, which is a topic for a different day, but helping consumers to learn how to -- healthier long-term habits as a way to continue to stay vital. I think the last thing also is true collaboration. What I'm hopeful for and what we're working to try to drive is, as we build back -- we truly build back better by bringing the best of what different parts of the sectors have to offer. Business has a lot to offer. Governments are going to be anxious to go. They're going to be under a lot of stress with all of the efforts -- the relief efforts that they've put out, the financials, pressure they'll be under. And consumers or everyone's going to want to get back out, get in their car, start driving. And some of the, I think, the -- we've seen how great we can drive positive change, how quickly to help our environment, et cetera. But how can we work together truly to come up kind of bring the best of everything that the various segments has to get to true sustainable solutions for a resilient future for both people as well as the environment. It won't be easy necessarily, but I'm hopeful that there will be a spirit of being -- willing to roll up our sleeves and truly collaborate.

Yes. No doubt. And it's unfortunate that we have the catalyst that's upon us right now. But the clip side, the silver lining is maybe it's just a catalyst, catalyst to get more engagement and more collaboration and more change. On that note, we do have to wrap it up. I want to say a huge thank you to all of you, not just for taking the time to spend with us today, but for all leadership initiatives you've demonstrated on this topic. The knowledge and insights you guys are willing to share today I hope is -- proves helpful for not just investors but other CPG companies or other companies, whether it be CPG or not, who tune in to listen to what you guys had to share, because I do think you're the vanguards, you're on the forefront of this. And I think a lot can learn from you, and hopefully, following your way to drive real impactful change. So thank you so much for your time.

Thank you.

Thank you.

All right. Cheers, everyone.