Hershey GC Sees Climate Change As Compliance Challenge
By Alison Noon
Law360 (March 14, 2019, 7:21 PM EDT) -- The Hershey Co. is exploring the possibility of moving its cocoa production indoors to save chocolate production from the effects of climate change, the company's general counsel said Thursday, delving into his expectation that global warming will jump from corporate research and risk management to the compliance desk.
The Hershey Co. is exploring indoor farming in light of climate change and the company's top lawyer thinks compliance officers should take note. (Credit: AeroFarms)
Speaking at a corporate ethics conference, Damien Atkins said one of the world's leading chocolate manufacturers is exploring not only the science of indoor cocoa, but whether it could insulate Hershey's supply chain and ease the stress over global warming that will come down the line for his coworkers in compliance.
"I think the geopolitical risk is something you have to manage," Atkins told a ballroom of compliance officers in Manhattan. "With respect to climate change, you see it now in terms of the quality and nature and types of trees and the way that you manage trees, and we're looking at things like indoor farming."
He indicated it's not a far-fetched idea, mentioning that one of the world's largest indoor agriculture facilities was located in nearby New Jersey, where AeroFarms LLC grows vegetables in trays stacked high in climate-controlled warehouses.
"You have to think of ways of how you actually get that product when your core supply can disappear," said Atkins, who worked at Oath Inc. predecessor AOL and Panasonic before Hershey.
But throwing supply chains into disorder will only be the beginning of the disruptive effects of climate change on business, Atkins said. Global warming could sneak up on compliance departments years from now if they let it, which they may — compliance officers interviewed by Law360 at the conference said they did not foresee global warming earning a place in their work. Atkins indicated they have another thing coming.
"Climate change is one of those things that has a slow velocity but high impact, and those are the worst things to plan against, right, because there's no immediate pressure but you know that it's coming," he said on stage at the Ethisphere conference.
He further explained to Law360 after the panel that raising the stakes will increase pressure on employees. As compliance officers know, high pressure invites white collar misconduct.
"As that comes under stress, the dollars to process the systems, the procedures, all kinds of bad things happen," he said.
The prospect of growing cocoa indoors is in research and development, Atkins said. The company currently sources cocoa from family-run farms in Africa and South America that employ 2 million people, according to the company's website. Atkins said the company is wholeheartedly committed to them, recently pledging to invest $500 million over the next decade in West African cocoa communities.
The flip side, Atkins told the conference, is the occasional report that Hershey's family-run farms are employing children. Nothing is without risk, especially in the age of social media.
"You just have to, as my former CEO [at Panasonic] would say, stay on strategy," Atkins said on stage. "You have to keep doing it."
Hershey and other major chocolate manufacturers recently beat several lawsuits that sought to put a disclaimer on chocolate products saying it may have been made using child or slave labor. A Massachusetts federal judge and the Ninth Circuit dismissed those claims.
Increasingly, Atkins said, Hershey's supply chain is thrown off course due to political unrest.
"We have areas in Mexico now where we ship trucks of chocolate and raw material and maybe once or twice a month these trucks get hijacked," Atkins said. "I mean, it's a common occurrence. And how do you plan around areas where you can't go to the police because the police were probably into it?"
He said the hijacking has become "more pervasive" absent government intervention.
"That happens to us a lot."
--Editing by Michael Watanabe.