Sharing Goodness for - 2019 SUSTAINABILITY REPORT - The Hershey Company
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THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE MAKING MOMENTS OF GOODNESS Welcome to our 2019 Sustainability Report. This year we celebrated 125 years of making more moments of goodness, the purpose that inspires Hershey to provide quality brands that people love. Behind these moments of goodness is a deep sense of pride in our long-standing values of integrity, excellence, togetherness and making a difference. These values underpin our belief that operating responsibly, ethically and sustainably is imperative to fulfilling our purpose. As we care for our people and progress on our commitments to our communities where we source, manufacture and distribute our products, we’re ensuring consumers can feel even better about the special moments made with our brands. As we reflect on the past 125 years and plan for the next, The Hershey Company is proudly driven by our founder’s legacy and by our company’s purpose. We believe this combination is the recipe for success. There are many more moments to be made! 2 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE WHAT’S INSIDE? 04 THE BIG PICTURE 09 GOVERNANCE 13 BUSINESS 36 PLANET 05 A Message From Michele Buck & APPROACH 15 No Compromise on Food Safety 37 Managing Our Impact on 07 Our Sustainability Strategy 10 Being a Responsible & Ethical Business 17 Marketing Responsibly Climate Change 08 Our 2019 Goodness Highlights 11 Material Issues 19 Responsible Sourcing 39 Protecting Our Water Supply 12 Staying Secure, Transparent & Resilient 20 Embedding Human Rights 40 Working Towards Zero Waste to Landfill 25 Cocoa For Good 41 Exploring Sustainable Packaging 26 Working With Cocoa Communities 42 Planting Tomorrow’s Forests to End Child Labor 43 PEOPLE 50 CHILDREN & YOUTH 56 COMMUNITIES 61 OUR PERFORMANCE 44 The Hershey Employee Experience 51 The Heartwarming Project 57 Values With Impact: How We Make 47 Better Together—Diversity & Inclusion 53 Nourishing Young Minds a Difference at Hershey 55 Our Shared Goodness Legacy— 58 A Spirit of Volunteerism 49 Prioritizing the Safety of Our People Milton Hershey School 3 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE the big picture Built By Purpose From the moment Milton Hershey founded our company and sought to make chocolate—previously a luxury good—accessible to the masses, we worked to make more moments of goodness in people’s lives. Over a century later, we’re invited into people’s moments of goodness every day. We’re there for holiday gatherings and campfires; for break-ups and make-ups; for road trips and school trips. It’s a pretty special place to be. Operating sustainably is what wraps each moment in something we can all feel good about. 4 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE A MESSAGE FROM MICHELE BUCK making a positive impact on society’s most impact human rights across our business. pressing issues. This Sustainability Report The Hershey Company has more than seeks to address those questions. 125 years of experience managing through tough, fast-moving and “It is no longer enough to consider what unprecedented moments— our company is able to do for the world. two World Wars, economic depressions and recessions, Now we must answer: what does the and other momentous events. world need from Hershey?” Each time, we planned. We took action. We learned and adapted. Our products rely on a global supply chain And we kept our focus on making the best and agricultural ingredients. Climate decisions for our employees, our partners, change poses a significant, increasing our stockholders, our communities and the pressure on these resources and the consumers we serve. communities where we source them. This Today, we draw on that same spirit to is why we committed to the Science Based keep our company resilient through new Targets Initiative in January 2019 and are challenges that are disrupting economies well on track for the January 2021 deadline and societies. I remain confident in the to announce our target. strength and resiliency of our business We continue to make good progress within over the long-term, and in our remarkable our Cocoa For Good strategy, but we leaders and employees who are executing know there is a long way to go to resolve our strategies, reacting to current changes 2019 was a special year for The Hershey focus on what is most important—the health some of the most pressing issues facing and capitalizing on the opportunities this Company. As we celebrated our 125th and safety of our colleagues, family and cocoa-growing communities, including change presents. anniversary, we had the opportunity to friends and our commitment to continue child labor. In 2019, we began publishing We love making the brands that become explore our rich heritage and the legacy of making those moments of goodness on our website the findings from our part of people’s moments big and small. our founder, who instilled in our business in people’s lives even when physical Child Labor Monitoring and Remediation Going forward, it’s this purpose that inspires core values that connect us to one another connection is limited. Systems (CLMRS) work. We will continue us to win so that we can continue to make and to the world. The energy within Hershey this practice as we expand CLMRS to cover Our company is wrapped in a deep legacy more moments of goodness. was tangible as you experienced the 100 percent of our cocoa supply chain in of caring for our people and communities. Ghana and Côte d’Ivoire in the coming years. connectedness, passion, positivity and the But it is no longer enough to consider what deep pride and appreciation we have for Last year, we published our first our company is able to do for the world. each other and this special company. comprehensive human rights policy that Now we must answer: what does the world As I write this note, the world is experiencing need from Hershey? outlines our commitment to respect human rights throughout our value chain. We’ve an unparalleled and rapidly evolving global We continuously meet with a variety also begun deploying a new human rights Michele Buck pandemic. In this unprecedented time, our Chairman, President and CEO, of stakeholders—consumers, retailers, training program to help ensure everyone people and our business remain grounded The Hershey Company investors, governments and NGOs—all across our organization understands our in our purpose to make more moments of asking how we, and other companies, are values and how they personally can goodness. This grounding has allowed us to 5 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE SHAPING SHARED GOODNESS OUR CHALLENGES As we continue to grow and broaden our brand portfolio, our business faces a variety of challenges. We use our expertise, along with that of external partners, to address these challenges so that we can continue to delight consumers and communities around the world. MEETING CHANGING COMBATING CLIMATE CHANGE ADDRESSING POVERTY STAKEHOLDER EXPECTATIONS CONSUMER NEEDS Our products rely on a global supply chain AND SUPPORTING FARMER A wide variety of stakeholders, including Consumers’ preferences are changing— and agricultural ingredients. Climate LIVELIHOODS consumers, retailers, investors, from seeking healthier options that satisfy change poses a significant and increasing Our complex global supply chain spans governments, NGOs, and even our different snacking occasions, to wanting pressure on agricultural commodities and communities with high levels of poverty employees are increasingly expecting greater transparency across the supply the communities where we live, work and and inequality. The raw ingredients companies to use their operations as a chain and products made with responsibly- source our ingredients. we source come from different force for good by making an impact on sourced ingredients. countries with unique laws, environmental some of society’s most pressing issues. conditions and concerns, labor standards and pricing models. 6 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE OUR SUSTAINABILITY STRATEGY We’re Focused On SDGs Supported kable Peop r Remar le to a ti n g O u Sh a re Shared • Sustainable sourcing • Respecting human rights tiv Ac Supporting Go o BUSINESS • Choice and transparency Bright Futures dn es Shared s • Reductions in greenhouse gases (GHGs), total waste, Planet packaging waste and water use • Addressing climate change ct across our value chain ental Impa Driving owth Reducing Our With Purpose Our Shared Gr Our Remarkable • Championing diversity and inclusion GOODNESS PROMISE ironm People • Developing great talent Env • Building careers I Children • Helping children succeed • Improving access to Acr mproving Lives oss O ur Communit ies and Youth nutrition for children • Building meaningful connections Shared • Investing in the places where we live and work COMMUNITIES • Employee engagement and volunteerism To find out more about Hershey’s work as it relates to the SDGs, visit our SDG Index 7 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE OUR 2019 GOODNESS HIGHLIGHTS $610 80+ Where We are Headed milli n brands $7.98 15 in dividends paid to shareholders manufacturing $8,347,912 Finalizing science-based targets to reduce GHG facilities globally of community emissions billion in sales product donations 775,386 Expanding certification 68,988 for our key ingredients Investing $500 million to 56M improve farmer livelihoods 90% children being kids directly in our cocoa-growing monitored under our benefiting from communities by 2030 Child Labor Monitoring Heartwarming and Remediation System certified sustainable cocoa* Project investments sachets of ViVi distributed since 2016 Embedding robust human rights programs across our value chain 1,936,167 Growing diversity and inclusion through focused 50% 411,802 47% trees planted for initiatives that develop and reforestation in energize our people West Africa, the diverse board members hours of employee learning of facilities sending U.S. and Mexico and development zero waste to landfill *As of January 2020, Hershey achieved 100% certified sustainable cocoa. 8 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE Governance & Approach Operating with integrity is one of our core values and a key driver for how we build trust with our consumers. We invest significant time, resources and expertise in developing and maintaining processes and policies that keep us competitive, prepared and financially resilient. We continuously explore evolving best-practices and assess what we can implement to further strengthen our approach. 9 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE BEING A RESPONSIBLE & ETHICAL BUSINESS WHY IT MATTERS To manage these responsibilities, the Board GOVERNING SUSTAINABILITY Hershey prioritizes upholding ethical maintains five committees that conduct Our sustainability governance model includes a multi-level operating business conduct and being transparent. in-depth reviews of significant issues: structure to ensure we are aligned on the most important issues facing Through our commitment to live our Audit, Governance, Compensation and the company and equipped with the right resources to drive progress. values, we have developed robust policies Executive Organization, Finance and Risk Accountability for managing sustainability across the enterprise sits with and procedures to act responsibly across Management, and Executive. the Vice President of Corporate Communications and Global Sustainability our operations and supply chain. We The Board oversees environmental, social who reports to our Chief Supply Chain Officer. regularly review our approach to align with and governance (ESG) at Hershey and the the changing regulatory landscape. ESG team briefs the full Board of Directors at least annually, or more GLOBAL Led by the Senior Director of Global Sustainability HOW WE DO IT frequently as needed. SUSTAINABILITY and Social Impact, this team is composed of leaders TEAM from across the business who manage the strategy, Our Code of Conduct guides our approach As of December 2019, the Board had 12 implementation and reporting of our global to ethical issues and our commitment directors, each over the age of 50 and each sustainability progress. The Global Sustainability to complying with relevant local and with significant professional experience. team is in regular communications with external international regulations and policies. Diverse directors made up 50 percent stakeholders who provide valuable perspectives The Code details Hershey’s approach of our board, including five women. and insights into our program decisions and focus. to anti-corruption, antitrust and whistleblower protection and is published For more information on our Board, in 10 languages. All our directors and committees and approach to executive Composed of vice presidents from across key compensation, please see our Proxy SUSTAINABILITY employees receive annual training on the business functions who routinely meet throughout Code and verify that they’ve read and Statement. STEERING the year to review progress, discuss challenges and agree with the principles it outlines. COMMITTEE opportunities and approve key decisions related to our global sustainability programs. OUR BOARD The Board of Directors oversees our strategies (including our Shared Goodness EXECUTIVE Includes our CEO and her direct reports who Promise strategy), significant decisions COMMITTEE conduct semi-annual reviews of the Shared and business performance. This includes Goodness Promise sustainability strategy, data, overseeing our compliance with legal progress and the emerging sustainability challenges and regulatory requirements, our and opportunities. Enterprise Risk Management (ERM) program and the key risks it identifies, BOARD OF Briefed at least once annually on our Shared the integrity of our financial statements, DIRECTORS Goodness Promise progress and apprised and management succession planning and of the most important emerging sustainability compensation policies. trends, risks and opportunities. 10 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE MATERIAL ISSUES We conduct a materiality As a result of this analysis, we Major assessment every few years to identified a total of 29 issues, ensure that Hershey focuses on the with 11 being our most material: issues where we have the greatest • Child labor impact and works to effectively Food safety • Climate change Influence on stakeholder decisions and assessments engage with these issues to make Responsible sourcing a difference. Our last materiality • Consumer engagement on Human rights Child labor assessment was done in 2018. sustainability Responsible and ethical business Ecosystems Farmer livelihoods • Ecosystems OUR MATERIALITY PROCESS • Farmer livelihoods Climate change We align our materiality Consumer engagement on sustainability methodology with the Global • Food safety Women’s empowerment Packaging Reporting Initiative (GRI) Standards. • Human rights Water Nutrition, ingredients This includes interviewing or Responsible marketing & product transparency sending questionnaires to internal • Nutrition, ingredients and Employee experience and external stakeholders, product transparency Innovation Diversity and inclusion Supporting communities Financial health including Hershey managers • Packaging The future of retail Workplace health and safety across different functions (legal, • Responsible and ethical business Waste ethics & compliance, supply chain, Global competitiveness sustainability, government relations, • Responsible sourcing Data protection and privacy communications, packaging, Transparent policy and lobbying For a list of definitions, please see nutrition and environmental Business continuity/disaster recovery our GRI Index. health & safety), investors, NGOs, Animal welfare Air pollution think tanks, suppliers and industry We also recognize that investors Energy associations. and other stakeholders are interested in what Hershey is doing We also conducted an employee Significant on topics identified as material materiality survey. More than 1,200 by the Sustainable Accounting randomly selected employees rated their top 10 most material issues Standards Board (SASB). Hershey and how Hershey was performing now reports on SASB standards and Significant Major against them. the results can be found here. Impact on economy, environment and society Key Material Important 11 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE STAYING SECURE, TRANSPARENT & RESILIENT DATA PROTECTION & PRIVACY Company funds are used to periodically BUSINESS CONTINUITY & Every three years the Global Security We respect the privacy of our consumers, support or advocate for issues, legislation DISASTER RECOVERY Team uses the Crisis Management process our customers, our coworkers and others or referenda of importance to Hershey and to assess our manufacturing and sales As a large organization with a global with whom we conduct business, and our stockholders. These funds, classified facilities as well as our distribution centers supply chain and multiple manufacturing we handle their personal information under the U.S. Internal Revenue Code as and co-manufacturing partners, checking operations, it’s vital for Hershey to be with care. “Personal information” is any non-deductible lobbying expenditures, the preparedness of their physical security, prepared for the unexpected. We use a information that could be used to identify are paid primarily to industry trade processes and communications. These comprehensive, adaptive approach through someone, either directly or indirectly, such associations, lobbying entities and our are performed in conjunction with local planning and integration of Enterprise as a name, employee ID, email address internal government relations personnel. In stakeholders—such as fire departments Risk Management, Crisis Management, or phone number. There are data privacy accordance with the Lobbying Disclosure and police services—to map the highest and Business Continuity to ensure we can laws that prescribe how to responsibly Act of 1995, our company files quarterly risks, including fire, natural disasters, respond effectively to crises and minimize collect, store, use, share, transfer and lobbying reports, which outline the power outages and others. downtime from disruptions. dispose of personal information, and we are company’s federal-level advocacy work. Additionally, the Global Security team works committed to complying with those laws We also publish a report of advocacy In any crisis, people’s safety is our first with and trains local crisis management wherever we operate. expenditures on the Investors section of priority. Our CEO is the leader of the teams to conduct risk-based, tabletop our website annually. Company Crisis Management Team exercises to identify and remedy any gaps. (CCMT) with overall accountability for LOBBYING & TRANSPARENT crisis planning, response and recovery. Our We have also worked to improve the POLICY CCMT is charged with handling a range of security of our IT systems. In 2017, we As per our Code of Conduct, Hershey incidents, and each site has a local team invested $28 million to implement a four- does not make political contributions with clear decision rights and escalation year Data Center Migration program, which and only engages in corporate political thresholds. will include a complete transformation of activities through the Hershey Political our data center footprint with two new, Action Committee (PAC). Funds raised bicoastal data centers. through the PAC, which is made up of voluntary employee contributions, are used to support elected officials—regardless of political affiliation—who have demonstrated a willingness to consider Hershey’s perspective on matters impacting our business. All contributions are disbursed pursuant to our internal contribution guidelines and in accordance with applicable election laws. 12 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE business A Recipe for Excellence Progress highlights and Integrity Hershey’s vision is to become an innovative snacking powerhouse, providing consumers with a portfolio of 90% of cocoa was certified and sustainably iconic brands spanning from sweet to savory. As we pursue our vision, we will sourced in 2019, and 100% as of never change our commitment to live January 2020 our values of excellence and integrity #7 —always working to the highest standards of product safety and championing consumer trust and transparency. Our operations span continents and our supply chain includes large scale in Morning Consult’s Most Trusted Brands manufacturing as well as small family Consumer Survey farms. This global reach gives us an 100% opportunity to change thousands of lives for the better. From working to eliminate child labor and fostering economic resilience in cocoa communities to driving environmentally sound of our wholly owned facilities are Global agriculture practices and protecting Food Safety Initiative (GFSI) certified human rights in a complex supply chain, we’re crafting safe, delicious products consumers can love—and trust. 13 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE QUALITY INGREDIENTS, PRODUCT NUTRITION & TRANSPARENCY We craft snacks that work for every occasion—from energy-boosting options that support a healthy lifestyle to indulgent treats for special moments. We use quality ingredients and leading manufacturing standards and provide user-friendly nutritional information on our packaging to offer trusted snacks that are safe and delicious. Sweet Savory 14 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE No Compromise on Food Safety Robust food safety is non-negotiable to DRIVING FOOD SAFETY 2019 100% us, and we are proud that consumers trust BEYOND HERSHEY our products. Hershey has some of the Hershey sources 100 percent of ingredients highest food safety production standards from suppliers approved through the in the industry. We go beyond compliance Hershey Supplier Quality Management of Hershey wholly owned facilities are GFSI certified with national and international standards, Program, which is defined and executed and every part of our manufacturing Globally, 87% of our suppliers are GFSI certified in compliance with applicable GFSI and process is subject to rigorous oversight (note: this is based on the number of suppliers not volume) regulatory requirements. Hershey has also and auditing. been working with suppliers to help them We maintain a Product Excellence achieve certification under a recognized Program (PEP), which is informed by GFSI Standard and has made great progress the Quality Management System for toward the goal of sourcing 100 percent Food Safety, Regulatory Compliance of our ingredients from GFSI-certified and Product Quality procedures. PEP suppliers, with 87 percent of our suppliers is focused on identifying, reducing and globally having achieved certification. eliminating risk throughout all stages of In addition, throughout 2019, leaders product production including product working in our supply chain completed design, the supply chain and distribution. a three-part interactive Food Safety Awareness program. Our Quality and Regulatory Compliance (QRC) team continually reviews and We also focus on food safety education evaluates emerging regulations and within the community. In May 2019, industry practices to ensure PEP is members of the QRC team led Turn it Teal meeting the latest requirements and initiatives in support of the National Food thinking. PEP’s elements currently Allergy Awareness Week. This included meet or exceed current Global Food public education events and lighting-up Safety Initiative (GFSI) standards and company and town landmarks in teal, the keep Hershey compliant with global official color of food allergy awareness. food safety regulations. All Hershey Approximately 1,500 members of the public owned manufacturing facilities are joined in education events and activities. GFSI certified, which is an independent verification of the strength of our food safety and quality systems. In addition, we require 100 percent of our manufacturing facility employees to undergo food safety and quality training annually. 15 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE Offering Innovation, Choice & Transparency 22% Today’s consumers are seeking healthier The Council provides guidance with regard 2019 PROGRESS options and wanting greater transparency to product claims, labeling, marketing 2019 PROGRESS Percentage of our portfolio about what is in the food they are eating. and advertising early in the innovation with a live SmartLabel™ Percentage of our portfolio As a consumer-focused company, we seek process to ensure products are compliant landing with page a live with detailed SmartLabel™ increase in sales growth for sugar-free chocolate to meet these changing preferences with and address consumer needs. In providing product, ingredient landing page and with detailed choice and transparency. guidance, the Council touches upon a allergen information product, ingredient and wide variety of topics including nutrition, (excluding allergen multi-product information Through our work with SmartLabel™, we assortments and Krave Jerky) (excluding multi-product ingredients, sustainability, responsible offer consumers greater transparency taking some of our most iconic brands, and assortments and Krave Jerky) sourcing and product certifications. 2017 100% through a convenient digital platform that creating new options that offer choice to enables access to ingredient information consumers looking to control sugar, fat As we work towards our vision to become an 2018 2017 90% 100% on 90 percent of our U.S. products. and portion sizes. For example, our iconic innovative snacking powerhouse, our work 2019 2018 90% Reese’s Peanut Butter Cups now also come on innovation, choice and transparency helps 2019 90% *The drop in SmartLabel™ We continue to grow our snacking in thins and sugar-free versions. us meet our consumers’ standards and take compliant products is due spectrum and have evolved from being to recent acquisitions part in every snacking occasion. solely a confectionery-based company to To further this work, we maintain a Food also offering brands focused on fueling Claims Review Council in the U.S. that acts healthier lifestyles, like SkinnyPop, One as a collaborative, cross-functional team of Percent of products with Bars and Oatmega. In addition, we’re regulatory, nutrition and legal partners. easy-to-read Percent front-of-pack of products with calorie labels front-of-pack easy-to-read calorie labels 2017 100% 2018 2017 100% 2019 2018 100% 2019 100% Number of wholly owned manufacturing Number of whollyandowned joint- venture operations manufacturing and and joint- contractoperations venture manufacturing/ and co-packing that attain food contract manufacturing/ safety certification co-packing recognized that attain food by the certification safety GFSI recognized by the GFSI 2017 88% 2017 88%of The Hershey 88% Company-owned 88% of The Hershey facilities (15 of 17) and Company-owned one joint(15 facilities venture of 17) and one 84%joint venture of our contract manufacturing facilities 84% of our contract globally—100% of our manufacturing facilities U.S. and Canadaof our globally—100% co-manufacturing U.S. and Canada facilities co-manufacturing 2018 facilities 100% 16 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT 2018 100%of Hershey wholly 100% owned facilities globally
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE MARKETING RESPONSIBLY WHY IT MATTERS party licensed characters in advertising principles we are held to in the U.S. organizations and programs, including Hershey is committed to the responsible primarily directed to children under elementary and secondary schools. That By agreement, we allow selected third marketing of its products. Our strong 12. Hershey submits an annual self- said, we do not advertise our products parties to display our well known brands on values guide our behavior in aspects of our assessment to CFBAI that provides detailed to children in elementary schools and a variety of high-quality food and non- brand-building work, and we apply these information on its compliance procedures, we do not license our brands for use on food items to be sold in various outlets values to consumer communications. We ads distributed in children’s media and educational material or materials intended throughout the world. We are also proud know that parents play a crucial role in advertising plans. In Canada, we have for use primarily in elementary schools. of the positive role our products play teaching children healthy eating habits and signed a pledge with the Canadian CFBAI in raising funds for a wide range of the appropriate role of treats and snacks that commits us to similar standards and in a balanced diet. We support this parental gate-keeping role, particularly in connection with children under the age of 12. HOW WE DO IT Hershey’s marketing efforts are guided by principles that stress responsible practices, particularly in relation to children. Hershey is a member of the U.S. Children’s Food and Beverage Advertising Initiative (CFBAI), which is a voluntary self- regulation program created to improve the landscape of food advertising directed to children under the age of 12. Under our individual CFBAI pledge, we commit to not engage in advertising primarily directed at children under 12. For measured media, like television, radio and print, that means we do not purchase advertising on programming for which 30 percent or more of the annual audience on average is composed of children under 12. For unmeasured media, we use a multifaceted analysis to determine whether the media is child-directed, including factors such as an assessment of the target audience and the overall impression of the advertising or site’s content. We are also committed to not using third- 17 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE WHERE WE SOURCE OUR INGREDIENTS Canada Hershey actively works Flour to responsibly source raw Eastern ingredients and materials USA Europe for our delicious snacks. This Soy Almonds map highlights the origins of Beef several of those resources. Dairy Flour Peanuts Pulp and paper Philippines Soy Belize Ghana Coconut Sugar Sugar Cocoa Mexico New Sugar Zealand Malaysia Dairy Côte d’Ivoire Palm oil Ecuador Cocoa Cocoa Indonesia Palm oil Brazil Cocoa Sugar Disclaimer: The map does not include all geographic locations, ingredients or sourced materials. 18 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE RESPONSIBLE SOURCING RESPONSIBLE SOURCING COMMITMENTS AND PROGRESS 2019 Cage-Free By 2020, source 100% certified 75% WHY IT MATTERS In the past year, we also updated our Eggs cage-free eggs for the U.S. and Target 100% Supplier Code of Conduct to incorporate Canadian* markets from cage-free Every year, Hershey buys thousands of farms that are in accordance with the tons of cocoa, sugar, dairy, nuts and other our new human rights and environmental American Humane Certified program ingredients and raw materials from all policies. This involved engaging multiple over the world. Each presents unique external stakeholders including suppliers, sourcing challenges, since environmental, peer companies, Verité (a leading human Cocoa** By 2020, source 100% certified 90% social and labor practices vary by region. rights nonprofit) and other NGOs and and sustainable cocoa through: Target 100% Regardless, we strive everyday to associations focused on labor rights and • Fair Trade USA safeguard human rights and use our scale human rights. • Rainforest Alliance (UTZ) to implement sound agricultural practices We work with credible sustainability • Suppliers’ standards meeting the and protect the people and ecosystems certification organizations from UTZ, international ISO/CEN criteria behind the ingredients that make our Rainforest Alliance, Fair Trade USA, iconic, delicious snacks. Bonsucro and the Roundtable on By 2020, source 100% certified Coconut 75% Responsible Palm Oil (RSPO) to make coconut through Fair Trade USA Target 100% HOW WE DO IT sure environmental and social conditions All suppliers are expected to abide by along our supply chain meet a high our Supplier Code of Conduct. We also standard. Hershey uses independent Palm By 2020, achieve 100% 100% maintain several commodity-specific sustainability standards because they RSPO-certified mass balance RSPO requirements for suppliers including our: inform best practice in our industry palm oil and 100% traceability 99.8% and are trusted by consumers and traceable to the mill • Sustainable Sugar Sourcing Policy other external stakeholders. 50% • Responsible Palm Oil Sourcing Policy traceable to the plantation • Pulp and Paper Sourcing Policy Target 100% • Farm Animal Welfare Position In early 2019, we published our Human Pulp and By 2020, source 100% virgin fiber 100% Paper pulp and paper products in the U.S. Rights Policy, after conducting an in- Target 100% and Canada from third party-certi- depth assessment of our most salient fied suppliers (Forest Stewardship human rights issues. We also launched Council, Programme for the our Environmental Policy in 2019. Both Endorsement of Forest Certification policies guide Hershey’s activities within or Sustainable Forestry Initiative) our supply chain and throughout our direct operations. Sugar By 2020, source 100% certified 65% and sustainable sugar Target 100% *During our 2019 financial year, Hershey committed beyond our existing U.S. and Canada goal by adopting a commitment to source 100% cage-free eggs globally by 2025. **Goal achieved as of January 2020. 19 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE EMBEDDING HUMAN RIGHTS WHY IT MATTERS global procurement professionals across Hershey was founded on the principle Hershey and is strongly encouraged for of doing well by doing good. For more leaders in functions like manufacturing, than 125 years, we have operated our legal and human resources, as well as business understanding that we are integral certain commercial functions. members of the communities where we To further inform our human rights Access to water live and work. The remarkable and diverse actions and approach to human rights due and sanitation people employed by Hershey and the diligence, we also partnered with Verité individuals who work along our value chain Access to grievance Child labor on a methodology to identify and assess are some of our most important resources. mechanisms current and future human rights risks Guided by an approach that identifies, across our key ingredients’ and materials’ assesses and prioritizes the most significant value chains and geographic footprint. human rights risks in our value chain, we Using a set of indicators from more than use our direct business relationships and 12 external data sources—including U.S. leverage to enable all to exercise and enjoy Departments of State and Labor reports, Forced labor and SALIENT ISSUES Climate change their fundamental human rights. human trafficking the UN Multidimensional Poverty Index, UN Migrant stock data, the International Identifying and addressing the HOW WE DO IT Trade Union Confederation (ITUC) Global most pressing human rights In early 2019, we released our first Rights Index and the UN Gender Inequality issues across our value chain enterprise-wide Human Rights Policy. It Index—we identified risks and opportunities is publicly available in six languages on our to guide programming over the next few Land rights/ Deforestation website and was launched to employees by years. As a result of this partnership, we our CEO at a company-wide town hall. The now have a replicable framework for acquisition policy follows the guidance of the United conducting human rights due diligence Nations Guiding Principles on Business and across our facilities and supplier base. Women’s Human Rights (UNGPs) and was developed Read more about our work with Living wage rights and with input from diverse stakeholder groups Verité here. and income empowerment including Hershey employees, labor Safety organizations, investors, governments, and Finally, we recognize that addressing and health nonprofit and civil society actors. human rights issues requires partnership and coordination. Our partnerships with During 2019, we also integrated human nonprofit organizations and pre-competitive rights into our learning and development industry collaborations play a critical role in WATCHING ISSUES program and new employee orientation. informing our strategies. In 2019, we co-led This process included creating an e-learning an AIM-PROGRESS working group focused module that covers the UNGPs, Hershey’s on identifying strategies for training buyers salient human rights issues, high-level and procurement professionals on human considerations for human rights and rights topics. A more comprehensive list of purchasing practices, and guidance on our human rights partnerships and efforts is Children’s rights Environmental being an internal champion for human available here. health and justice rights. This training is mandatory for all 20 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE OUR PROGRESS WHAT’S NEXT Using the human rights due diligence During 2020, we will continue to engage tool we developed with Verité, we with key stakeholders to elevate our work evaluated all of our Tier 1 raw material and to promote human rights across Hershey’s packaging suppliers as well as our co- entire value chain. This will include: manufacturers, co-packers and licensees. • Launching our newly-revised We then developed a prioritized list for Responsible Sourcing Tier 1 Supplier further supplier due diligence as part of program, including communicating our our newly-revised Responsible Sourcing new Supplier Code of Conduct and Tier 1 Supplier program. We also mapped implementing our new social compliance and collected data on all our direct labor and human rights due diligence program service providers globally to begin work on new standards and expectations around • Training 100 percent of our procurement responsible recruitment. professionals on human rights by 2021 using our new human rights e-learning platform • Developing and communicating more specific expectations for labor service providers in our value chain and piloting different approaches to verification, including approaches that directly engage and gather feedback from workers. 21 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE PROMOTING DIVERSITY WITHIN OUR SUPPLY CHAIN Hershey actively supports an inclusive marketplace through our supplier diversity program that creates business opportunities for qualified and diversely-owned enterprises. Besides enabling us to represent and better understand our consumers, diverse supply chains drive innovation and fresh thinking and reflect our diverse employee base, cementing their pride and sense of engagement in working for our company. To promote and educate on supplier diversity across our business, we operate a Supplier Diversity Roundtable with representatives from each procurement area, as well as our Manufacturing Alliances. We also have access to a searchable supplier database to help identify diverse suppliers. Additionally, our procurement contracts request that our suppliers utilize diverse suppliers and report their diverse spend attributable to Hershey. To ensure compliance, we track quarterly the internal reporting of diverse spend of both Tier 1 suppliers (those directly supplying us with goods and services) and Tier 2 suppliers (those who supply our Tier 1 suppliers). Currently, we track spending with minority, women, veteran, LGBTQ and disability- owned businesses. Hershey annually reports this performance through our DiversityInc submission. In 2019, we developed a new Supplier Diversity Strategy, which we will be launching in 2020, paving the way for further growth and development in addition to internal and external engagements. 22 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE P artnering for Sugar Sustainability Since 2016, Hershey has partnered with our supplier American Sugar Refining and Belize’s Sugar Industry Research and Development Institute to continue our Learn to Grow program for Belize’s sugar cane farmers. The program uses a field farmer model to help farmers learn about and implement sustainable growing practices. During the past three years, more than 1,600 farmers have participated in the program and benefited from increased yields while lowering their environmental impact. We’ve been so pleased with the results that in November 2019 we launched a Learn to Grow sugar program in Mexico. We’ve also been expanding our approach to responsible sugar in other ways. We continue to purchase Bonsucro Certified Mass Balance sugar in the U.S., Canada and Brazil, as well as a small volume of Fair Trade USA sugar. In addition, we ensure that all the facilities we source sugar from in the U.S. have an up-to-date ethical trade audit from SEDEX, a leading nonprofit focused on improving ethical performance in corporate supply chains. 23 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE PARTNERING FOR BETTER PALM OIL WHY IT MATTERS correction plans that address root Hershey recognizes that palm oil has causes. If the palm oil companies fail to impacts on forests, biodiversity and comply with specified human rights and producer communities that make it a environmental standards, we will instruct challenge to grow and source responsibly. our suppliers to discontinue working with While we buy a relatively small amount of them. Through Earthworm Foundation’s palm oil, we are committed to the highest Engagement for Policy Implementation standards in responsible and sustainable tool, we continue to deepen engagement palm oil sourcing. This is why, in 2014, with suppliers to better understand and Hershey committed to sourcing 100 support commitments and progress toward percent responsibly grown palm oil that achieving an NDPE palm oil supply chain. protects forests and peatlands and is free from labor exploitation. We want to help OUR PROGRESS embed the highest standards in palm oil In 2019, we remained committed to production, enabling the industry to fight purchasing 100 percent RSPO, mass- environmental degradation and provide balance palm oil. For all palm oil and palm safe, fair and dignified work to thousands. kernel oil purchased in 2019, we maintained 99.8 percent traceability to the mill year HOW WE DO IT over year and increased traceability to the To deliver our Supplier Code of Conduct plantation to 47.4 percent. and our commitment to No Deforestation, We improved our plantation traceability in Peat and Exploitation (NDPE) in our 2019 by increasing engagement with our Responsible Palm Oil Sourcing Policy, suppliers to report on their traceability Hershey engages with partners such as data and reallocating business to suppliers Earthworm Foundation to work toward a that are more committed to traceability fully-traceable palm oil supply chain and and reporting progress. In 2020, we invest in transformation projects in key continue to work on increasing traceability to the Leuser Ecosystem and the Rawa WHAT’S NEXT sourcing areas. Singkil Wildlife Reserve. APT endeavors to In 2020, Hershey will join the APT Steering to plantations. cultivate long-term collaboration between Committee and co-fund several other To increase transparency on NDPE Hershey is a proud supporter of the industry, local NGOs and government Earthworm Foundation-led projects in issues found within our supply chain, we Earthworm Foundation’s Areas for Priority to develop transformation activities in the key sourcing regions including East Riau, developed a public grievance procedure Transformation (APT) project in the Aceh region, which has since seen a 60 percent Indonesia and in Malaysia to strengthen our and log. This formally discloses how Tamiang and Southern Aceh regions of reduction in deforestation between 2016 palm oil supply chain. we engage our suppliers so that they Indonesia, areas of rich biodiversity near and 2019. can push for meaningful and decisive For more information please visit our palm oil facts page. 24 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE COCOA FOR GOOD COCOA FOR GOOD At a Glance—Cocoa for Good Explained In 2012, Hershey committed to sourcing We’re working to make cocoa-growing 100 percent certified and sustainable communities stronger for generations cocoa by 2020, which we achieved at to come. To do so, we have a clearly PRACTICES PARTNERS the start of the year. In 2018, we further defined program: We focus on four key areas of impact We work with partners and support strengthened our cocoa sustainability that we believe are all interconnected: initiatives that correspond to our efforts with our Cocoa For Good program impact areas. that holistically addresses systemic social •N ourishing Children: We provide and environmental issues in our cocoa PURPOSE better nutrition at school and provide In 2019 our partners included: supply chain. training to support improved child To support the people in the •N ourishing Children: Global nutrition at home. Child labor, poor nutrition and communities where Hershey sources Alliance for Improved Nutrition its cocoa and support our business •E mpowering Youth: We work with (GAIN), Hellen Keller Foundation, deforestation are all symptoms of poverty. objectives to source cocoa that communities to combat child labor, International Cocoa Initiative Through Cocoa For Good, Hershey aims is socially and environmentally improve the quality of education and (ICI), Project Peanut Butter, The to disrupt the cycle of poverty while responsible. equip youth with life and business Sustainable Trade Initiative (IDH) and also addressing each of these symptoms skills and resources to break the cycle Transforming Education in Cocoa directly. The program works to increase of poverty in their communities and Communities (TRECC) the profitability of cocoa farming as well as become tomorrow’s leaders. diversify incomes at the household level, PRINCIPLES •E mpowering Youth: Aflatoun educate families on the value of savings, • We listen and engage with •P rospering Communities: We and Inades, CARE International, empower communities, foster women’s communities on the ground, economically empower women and CocoaAction, ICI and TRECC leadership and improve the quality of incorporating constructive feedback provide training and financial support •P rospering Communities: Bill & nutrition and access to education. and supporting people-led change. to cocoa farmers and their families to Melinda Gates Foundation, CARE, grow their business and diversify and Cocoa For Good is backed by Hershey’s • We partner with like-minded CocoaAction, ICI and USAID stabilize household income. commitment to invest $500 million by organizations to drive change at scale. •P reserving Ecosystems: Cocoa & •P reserving Ecosystems: We teach 2030. In 2019, 21 percent of our global • We track our performance and Forests Initiative (CFI), Impactum, more environmentally-responsible cocoa needs were sourced from specific share our successes and learning Nature Conversation Resource agricultural practices and promote farmer groups where Hershey invests in opportunities. Centre, Pur Projet and USAID agroforestry and shade-grown cocoa Cocoa For Good programming. to tackle deforestation. 25 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE COCOA FOR GOOD WORKING WITH COCOA COMMUNITIES TO END CHILD LABOR Hershey does not tolerate child labor At Hershey, we strongly believe children structures and community-based groups WHAT IS within our supply chain and is working should not be deprived of their childhoods to identify child labor and to monitor and CHILD LABOR? to eliminate it from occurring within due to economic circumstances. This belief remediate when cases are found. Hershey uses the cocoa communities. We also recognize drives our approach toward eliminating Reporting results is a critical component International Labour that in our cocoa-growing communities child labor within cocoa communities. of building local capacity to deliver a Organization (ILO) child labor is driven by poverty and is robust CLMRS program. Under CLMRS, definition: an incredibly complex issue. In many HOW HERSHEY SUPPORTS THE both members of local farmer groups and communities, child-friendly work on the PREVENTION, IDENTIFICATION AND Child labor is often defined as work our suppliers’ staff become facilitators farm or in the household is an important REMEDIATION OF CHILD LABOR that deprives children of their that receive training and build skills to part of young people’s learning and childhood, their potential and their In 2018 and 2019, we introduced CLMRS detect and report instances of child labor. development. However, a lack of stable dignity, and is harmful to physical through our suppliers on Cocoa For Good At the same time, a community-level child income and education opportunities in and mental development. farms and in their local communities in protection committee is equipped to do rural areas often leads to children putting Côte d’Ivoire and Ghana. the same. As trusted community members, However, not all work done by in long hours at home and on family farms, both these groups are in the best position children, such as helping their parents which is often the family’s sole source of CLMRS is the leading method of detection to raise community awareness, identify around the home and assisting in a income. This, in turn, puts children at risk and remediation of child labor among cases of child labor and implement the family business, should be classified of performing inappropriate or hazardous children ages 5 to 17 years old and was most appropriate child safeguarding as child labor. farm work. developed through the International Cocoa practices to remediate those cases. Initiative (ICI). It leverages both supply chain The worst forms of child labor put children at the greatest risk and are the highest priority for elimination. Child labor is also distinct from forced labor, which is defined by the ILO as: Situations in which persons are coerced to work through the use of violence or intimidation, or by more subtle means such as accumulated debt, retention of identity papers or threats of denunciation to immigration authorities. As of 2019, Hershey’s Child Labor Monitoring and Remediation Systems (CLMRS) found no evidence of forced labor in Hershey’s cocoa supply chain. 26 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT
THE BIG PICTURE GOVERNANCE AND APPROACH BUSINESS PLANET PEOPLE CHILDREN AND YOUTH COMMUNITIES OUR PERFORMANCE COCOA FOR GOOD 2019 PROGRESS Detection and Reporting* 2019 PROGRESS Children monitored* 68,988 CLMRS remediation varies depending on As we work to eliminate child labor, we Detection 2018 and Reporting* 33,956 the kind of labor children are found to be support remediation initiatives that address 2019 68,988 doing. In 2018–2019, CLMRS reviewed entire families. In many instances, something Children monitored* and assessed 68,988 children who were as simple as providing family farms with a 2018 33,956 living in cocoa-growing communities. wheelbarrow (434 provided in 2019), clean 5–17-year-olds currently being monitored by CLMRS 2019 68,988 Children identified doing Of the children assessed by the monitoring cook stoves (276 provided) or better tools, inappropriate work and in system, 6.7 percent were found to be like the Pelle Bongo knife to ease cocoa pod process of remediation* 29,744 doing inappropriate work on family breaking (665 provided), can have a positive Children identified doing 2018 2,948 (33% girls) farms and were supported by our impact. By improving the farmer’s ease and inappropriate work and in 2019 4,616 (33.4% girls) CLMRS programs. efficiency of completing tasks around the process of remediation* farm, the need for children to lend a hand Most instances of inappropriate child labor farmers and 330 supplier personnel trained on child labor issues 2018 2,948 (33% girls) with more hazardous tasks is reduced. involve tasks such as carrying heavy loads Children identified 2019 4,616 (33.4%ingirls) like firewood or water, coming into contact forced labor with agrochemicals or clearing away bushes. 2018 0 Children identified in 2019 0 forced labor *We are continuing to expand our 2018 CLMRS program0 to cover a greater The report is verified portion of our supply chain Any child involved in 2019 0 The current increases in year-over-year. hazardous activity is identified children monitored and children identified *We are continuing to expand our doing inappropriate work is reflective of and information about his/ CLMRS program to cover a greater The data is used to design actions the continued growth of the program. portion of our supply chain her situation recorded in a year-over-year. The current increases in in support of children identified centralized database children monitored and children identified doing inappropriate work is reflective of the continued growth of the program. Community Children and their families facilitators visit receive remediation Capacity Building every farm assigned support from supply chain Monitoring & Remediation to their cooperative facilitators and the ICI Agents and Community Capacity Building Liaisons (PAID) Monitoring 2018 & Remediation 368 Agents and Community 2019 542 How CLMRS is Liaisons (PAID) helping kids be kids 2018 368 2019 Community542Child Protection Committee members or Equivalent (VOLUNTEER) Community 2018 673Child Protection Committee members or 2019 830 Equivalent (VOLUNTEER) 2018 673 2019 Number of830 farmers trained on 27 THE HERSHEY COMPANY | 2019 SUSTAINABILITY REPORT child labor issues
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