How the Environmental Sustainability TRACC helped Mengniu Dairy become China’s top food industry green performer

Executive summary

Founded on the 17 Sustainable Development Goals (SDGs) adopted by the United Nations in 2015, China’s Mengniu Dairy Group’s green innovation strategy landed them one of the country’s first top sustainability awards. Mengniu Dairy’s strategy is called the GOAL system and is driven by the Environmental Sustainability TRACC which was implemented in 2019. The introduction of the system is Mengniu’s response to the UN’s universal call to action to end poverty, protect the environment, and ensure prosperity by 2030. Mengniu Dairy is also the first Chinese company to integrate TRACC’s environmental sustainability best practices into its knowledge management system which aims to promote the sustainable development of China’s dairy industry.

RESULTS
  • The first Golden Key Honor Award for Mengniu Dairy’s GOAL system in 2020, the second Golden Key Excellence Award for “Fighting against food waste through cooperation with food bank” in 2021
  • The company was named the carbon neutral best practice case for “Fighting against food waste through cooperation with food bank” in 2021, by the Center for Environmental Education and Communication of the Ministry of Ecology and Environment
  • Golden Apple Award from the China Sustainable Plastics Association (CSPA) for replacing carton boxes with recycled polypropylene (PP) plastic boxes in 2019, for the GOAL system implementation in Qingyuan pilot plant in 2021
  • The preventive milk loss map won second prize in the 4th “Puhua Smart Cup” Benchmark Lean Improvement Competition in 2020, second BP on pasteurization milk loss improvement won first prize in the 5th “Puhua Smart Cup” in 2021
  • Significant improvements in resource utilization and environmental performance, including reductions in milk and other raw and processed material loss, water consumption, energy efficiency and carbon emissions
  • Significant improvements in environmental management system building (compliance and competency) and sustainability system building (awareness and competency, stakeholders’ connection and cocreations)
Challenges

In May 2019, a group of about 10 Beijing Shijia Hutong Primary School students, their teachers and parents, volunteers from the Nature Gaia Antelope Group (a volunteer group from an NGO – Friends of Nature), visited the Mengniu Fresh Fermented Dairy Products business division in Beijing’s Tongzhou district. The children started a school project called “Bye-bye plastic straws”, aimed at raising awareness among the business and broader community about reducing disposable plastic straws at the source. They thoroughly impressed divisional representatives not only for bringing up issues, but also with solutions such as some of their novel, eco-friendly “new straw made of chocolate” designs.

Following the school visit, Mengniu Dairy realized that consumer preferences were changing fast, driven by this new generation of environmentally conscious cohorts. They knew they had to change faster than ever before, but the challenges were to combine sustainable development with their business and improvement strategy, to sell the concept internally as a lifestyle, establish a responsible supply chain, and pass it on through products and brands to consumers.

Solution

Being aware of shifting consumer expectations prompted Mengniu Dairy to roll out CCi’s Environmental Sustainability (ES) TRACC in the second half of 2019, signaling the birth of the Green Operation and Life (GOAL) system. GOAL also refers to the 17 United Nations Sustainable Development Goals (SDGs). Mengniu’s ES team would like to promote a culture of becoming GOAL activists among internal stakeholders for the decade 2020-2030.

 

The GOAL system comprises five stages:
1 Indifference
2 Compliance and enlightenment
3 Commitment
4 Innovation
5 Leadership
Each stage focuses on four environmental areas of concern related to Mengniu Dairy’s operations:
1 Air pollution and substances of concern
2 Waste
3 Energy and climate change
4 Water

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At the same time, Mengniu Dairy published its sustainable development strategy aimed at creating a “brand new Mengniu by 2025”, with the core promise to protect the common health of humankind and the planet. The dairy group based their strategy on the 17 SDGs adopted by the United Nations in 2015.

Fortunately, Mengniu Dairy is already well acquainted with the TRACC methodology, having experienced big successes with implementing the TRACC Value Chain Improvement Solution – which Mengniu Dairy termed ‘‘WCO2.0’’ – at its Fresh Fermented Dairy Products division. The ES TRACC implementation forms part of the WCO2.0 initiative.

Apart from the initial four focus areas explained in the ES TRACC, Mengniu also added other relevant modules related to ESG and applicable in operations, such as “green in and green out”, “regenerative agriculture”, “nature and me”, “responsible supply chain”, etc. By doing so, GOAL covers more of the underlying logic of the environmental crisis, such as biodiversity, soil health, nature education, volunteer services, etc. In 2021, the GOAL system was developed into nine of its own modules. They address operations environmental issues, and also promote a positive culture and behavior around the ecosystem, aligning with the country’s strategy.

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The GOAL system

Mengniu Dairy’s ES team developed three levels to implement the GOAL system: The first level aimed to connect the nine modules of the GOAL system to each management function at divisional level, the second level focused on two pilot factories (Tianjin and Qingyuan), while the third level focused on non-ES pilot factories. The two pilot sites were selected based on their successes with WCO2.0 implementation as well as their control level to auxiliary facilities such as utilities. The ES action group at HQ level also takes care of tutoring, resource sharing, health checks and strategy workshops. Although the pandemic disrupted this period, the two groups still managed to offer guidance through a combination of online and offline sessions.

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“The TRACC-driven GOAL system is proving to be the boost we needed to achieve our 2025 new Mengniu targets.”
– Jianbing Luo, Operation Performance Director of Mengniu Fresh Fermented Dairy Products

 

Internalization, knowledge-sharing and knowledge management are important aspects of Mengniu Dairy’s culture. So, for the non-ES pilot sites, they appointed GOAL representatives to participate in online training and use basic WCO tools to implement milk loss map, energy and water maps, carbon maps, etc. All staff members were also encouraged to participate in a volunteer service incorporating the community and the city, which made some unique contributions in specific fields during 2021. The business case of “fighting against food waste”, which won big prizes in 2021, was carried out by this third level – non-ES pilot factories. Through this program, the employees would like to provide nonsellable but safe and nutritional products to vulnerable people around the factories, extending ES (environmental) practices to ESG (social) applications.

Awareness and knowledge of environmental sustainability best practices have reached a reasonable level, and the GOAL system and its practices were widely listed in Mengniu’s annual ESG report (2019 and 2020). The aim is to have complete synergy between sustainable development and the business strategy within the next two to three years as part of Mengniu Dairy’s pursuit to develop China’s dairy industry sustainably in the era of digital connectivity.

Results

Four years into their WCO journey and two years after introducing the GOAL system, Mengniu Dairy has made significant progress in resource utilization and environmental performance, such as improvements in milk loss, water consumption, energy consumption, carbon emission reductions and circularity, etc. The GOAL system was featured in the Golden Key China Excellent Action Set for Sustainable Development handbook (published in 2021).

Company Background

Inner Mongolia Mengniu Dairy (Group) Company Limited was founded in 1999. It was listed publicly in Hong Kong in 2004. In 2014, it became the first dairy stock of China selected as a constituent of the Hang Seng Index. COFCO Group, China’s largest grain, oil and food corporation, and Arla Foods from Denmark are Mengniu Dairy’s strategic shareholders in 2021. As of 2020, Mengniu Dairy’s sales were €10.3 billion. The group has been among the top 20 in the global dairy company list for 10 consecutive years and currently ranks 8th.

Disclaimer:

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