It’s been a week since Nestlé held its second international Creating Shared Value Forum, which has given me time to reflect on the day’s lively series of debates.

The decision to invite some of - in Nestlé chairman Peter Brabeck’s words - ‘the best minds available’ to discuss the role that business and other global partners can play in addressing key challenges in nutrition, water, and rural development over the next decade, was guaranteed to generate a fascinating variety of opinions.

In the end, these came not only from the Forum’s expert speakers, but also the government officials, academics, and charity, NGO, and media representatives in the audience, the 3,500 people from who followed the live webcast online, and all those who submitted questions to the panel and took part in the parallel online discussion here.

Although the Forum served to highlight the complexity of the problems in hand, and the fact that they have are no simple solutions, the extent to which they resonated with a cross-section of international society was clear.

Whether it was Peter Brabeck asserting “that corporate philanthropy is absolutely wrong”, Jane Nelson of Harvard Kennedy School observing that partnerships “are absolutely critical to the delivery of shared value”, or the online participants asking if a company’s commitment to sustainable practices can impact its profitability, or what multinationals like Nestlé can do to encourage best practice among small farmers, participants were motivated one thing: the desire to achieve lasting impact by finding better ways of working together.

If there a consensus was to be had, it was that Creating Shared Value, championed by Nestlé as the operating model which goes beyond traditional concepts of Corporate Social Responsibility, could be a real driver of positive collaborative action if private, public and civil institutions are prepared to enter an open constructive dialogue, where knowledge about potential risk, as well as value creation, is freely shared.

 

An article in The Philippine Star examines the creating shared value (CSV) concept as coined by Porter and Kramer. This CSV approach has been embraced by Nestlé a fundamental part of its business strategy. Nestlé particularly focuses on issues relating to water, nutrition, and rural development – as these are areas identified by Nestlé where value can best be created both for society and shareholders, thus maintaining a long-term perspective on business development.

This year’s World Health Day will focus on urbanization and health with the campaign "1000 cities - 1000 lives".  Led by the World Health Organisation (WHO), the goals of the campaign are to open up public spaces to health, whether it be activities in parks, town hall meetings, clean-up campaigns, or closing off portions of streets to motorized vehicles in 1000 cities, and to collect 1000 stories of urban health champions who have taken action and had a significant impact on health in their cities during the week of 7 to 11 April. We welcome you to share stories of urban health champions that you have come across or have been involved with. One of Nestlé’s flagship collaborations is the EPODE programme, which we have been sponsoring since the past 17 years. EPODE is a French acronym for ‘Together Let's Prevent Childhood Obesity’ (Ensemble, Prévenons l'Obésité Des Enfants). This is a European obesity prevention programme based on the experience of two towns in the north of the France, Fleurbaix and Laventie, where a community-based obesity prevention programme aimed at children was initiated between 1992 and 2004. The EPODE model is based on the involvement “of the” community”, “for the community”, to curb childhood obesity. It is part of a long-term programme and methodology that integrates the daily challenges and constrains of family life and incorporates a positive, step-by-step learning process on food and physical activity. EPODE is a behaviour centred approach, with an educational philosophy promoting fun and non-stigmatisation of any food and behaviours. Nestlé’s support and involvement with the EPODE programme is part of a larger global commitment by the company, which we call the Nestlé Healthy Kids Global Programme. The objective of the Nestlé Healthy Kids Global Programme is to raise nutrition, health and wellness awareness of school age children around the world. Nestlé believes that education is the single most powerful tool for ensuring that children understand the value of nutrition and physical activity to their health through the course of their lives. In recent years, Nestlé has accompanied the development of EPODE beyond France and also supports the programme in Spain (Thao programme) and in Greece (Paedetrofi programme). In addition, together with the European Commission, Nestlé is supporting the European EPODE Network (EEN) project, from 2007 to 2010. Today, Nestlé’s overall sponsorship of EPODE and related initiatives amounts to well over half a million Euros each year. Nestlé intends to implement the Healthy Kids Programme in all countries where it operates directly by the end of 2011. The development of the Healthy Kids Global Programme is building on Nestlé’s existing base of over 30 education programmes, which includes EPODE. EPODE now extends to 275 cities – 225 in France (EPODE) and 38 in Spain (THAO), as well as 13 in Belgium (VASANO), and most recently, five in Greece (PAIDEATROFI). It is now expanding in Mexico and South Australia.

Thera N. Kalmijn and R. Paul Herman share the 10 R’s of water management and show a few examples of how some companies are managing their water risks and opportunities. Click here to hear specific initiatives that bottled water companies, including Nestlé, have taken to lessen their environmental impact.

Nestlé has teamed up with the Tanzania Coffee Research Institute (TaCRI) to help improve Tanzania’s coffee sector. In 2009, the partnership offered TaCRI scientist Damien J. Mtenga a one-year training programme on Somatic Embryogenesis (SE) – an accelerated propagation method of reproducing large numbers of high-potential plantlets. Thanks to this training at Nestlé’s R&D Centre in Tours, the TaCRI will continue to support the rapid multiplication of new improved varieties and distribute them to farmers.  This will ensure a good quality coffee production at an affordable cost, a healthier environment and a sustainable supply to consumers. Nestlé purchased more than 154 million USD worth of coffee from Africa in 2008. Sponsoring scientists like Mr Mtenga is part of Nestlé’s business strategy to create shared value along our value chains – shareholders, employees, farmers, consumers and the communities where we operate. As one of the world’s biggest buyers of coffee, Nestlé continues to ensure that this crop is produced in a sustainable manner and also produces value right through the supply chain, particularly for farmers. Over the last 30 years, at its R&D Centre in Tours, France, Nestlé has developed the expertise to propagate higher quality coffee plantlets that have helped to rejuvenate coffee plantations around the world.

In the face of climate change and a precious economic recovery, water supply is an issue that has struggled to compete as one of the key dangers threatening international development and food security. By 2030, global demand will by 40% higher than current supply – of course this is not just about drinking water -to grow food we need water too. Huge agricultural and industrial growth in countries like India and China combined with the increasingly meat-centric diets of western food markets will, at current rates, create more demand than supply of this precious resource. Today, 22 March, is World Water Day and it offers everyone from individuals and charities to businesses and governments the opportunity to reassess how we should respond to the serious challenge of providing a secure global water supply that meets the needs of rapidly growing demand. As the world’s largest Nutrition, Health, and Wellness Company, Nestlé’s approach to the issue and how it manages its water supply is critical. Our long-term success depends on ensuring the sustainability of the water resources that supply the company's everyday operations and those that we do business with.  Water is a major priority for Nestlé as it cuts across each stage of our value chain. This is why we have chosen water as one of the three areas of focus (the others being nutrition and rural development) in our creating shared value approach of simultaneously considering the needs of our shareholders and the local communities where we operate, in all our business undertakings.   In 2009, we invested over CHF 220 million in environmental sustainability programmes and initiatives. We also led a joint project with McKinsey & Company to analyse water overuse and develop a comprehensive fact-based approach to address it, the results of which are documented in “Charting our water future: Economic frameworks to inform decision making”. To contribute to best practice in sustainable water management in the private sector, we are a founding signatory of the UN Global Compact’s CEO Water Mandate and report against the six core elements in our UNGC Water Communication on Progress (COP). Our Chairman Peter Brabeck-Letmathe highlighted the issue of water security at the World Economic Forum (WEF) at Davos this year, where he backed a new water initiative by the WEF. Nestlé is also a founding member of the 2030 Water Resources Group.    As effective water management is a core issue, we continue to identify and implement projects to reduce our use of water, non-renewable energy and other natural resources, reduce greenhouse gas (GHG) emissions, eliminate waste, and improve the environmental performance of our packaging. We also work alongside our suppliers to promote more sustainable practices in our supply chain, including the promotion of water stewardship. We also work with local stakeholders where water has been extracted for bottling and contribute to community schemes to improve water infrastructure. Please visit www.nestle.com/csv/water for more information on our water management initiatives.  We will run out of water before we run out of oil and we must urgently seek to change the focus from a climate threat we do not fully understand to Water security that we know is in peril. Water Day is an opportunity to start the debate now. I welcome you to share sustainable and innovative water management or water stewardship initiatives that you manage or have come across, right here on www.creatingsharedvalue.org.

Corporate social responsibility, corporate citizenship, corporate accountability, stakeholder engagement, sustainable development. These are just a sample of different terms that express the same concept. But what does CSR really mean? The conventional concept of CSR is philanthropic contributions and aid by corporations. However, this understanding of CSR is largely being questioned and criticised by opinion leaders, NGOs, responsible investors, and media alike. Others, particularly in the western hemisphere, have a conflicting opinion that governments and not companies should generally be responsible for social benefits. Recently, I have come across a lot of blog posts and news articles looking at how CSR has changed over the last few years with a move away from responsibility with an emphasis now on social – “CSR is no longer about what companies aren't doing wrong but about what they are doing right.” Marian Salzman’s blog in The Huffington Post discusses how social networks are becoming increasingly significant in raising awareness, promoting causes and fund-raising. Terence Corcoran, writing for the National Post talks about the inverse relationship between the rise of responsibility and stakeholder governance theories and corporate performance. Michael Edwards, in the Guardian, points out some of the challenges these more traditional practice of corporate philanthropy deflects attention away from the need to change core business practices to add more value to communities receiving aid. Also in The Huffington Post, Jeffrey Hollender adds to the calls for a Corporate Responsibility 2.0 which utilises business competition over a philanthropic approach, through his new book, The Responsibility Revolution: How the Next Generation of Businesses Will Win written with co-author Bill Breen. If not the conventional CSR approach, what is the way forward for businesses? The first and most basic action is thinking long-term and following sound business principles to create value for shareholders and for society through its activities --- in terms of jobs for workers, taxes to support public services, and economic activity in general. But there is also a further step that companies can take – creating shared value. A company should consciously identify areas of focus, where shareholders’ interest and society’s interest strongly intersect and where value creation can be optimised for both. As a result, the company invests resources, both in terms of talent and capital, in those areas where the potential for joint value creation is the greatest. Due to the nature of our company and its operations, Nestlé has chosen nutrition, water, and rural development as the areas with greatest potential for joint value optimisation. You can find more of Nestlé’s CSV operations on www.nestle.com/csv.

A recent survey by the Consumer Good Forum lists corporate responsibility as the second highest priority for retail and consumer goods executives.  This clearly demonstrates companies’ confidence and thus their sustained interest in CSR despite the economic downturn. But what drives business toward CSR and sustainability? Why are companies focusing on environmental and social issues? It is a matter of risk and opportunity – preventing or mitigating risk and identifying and creating new opportunities for business. Although there are moral and sustainability arguments for companies to address environmental and social issues, it is important for businesses to understand the interconnectivity between companies, society and the environment. Particularly, as there is mounting pressure for companies to become transparent and take responsibility for the negative, and often unintended, side-effects of their activities. Understanding this intricate relationship will enable companies to realise how the impacts of the environment and society subsequently lead to challenges as well as opportunities for their business. Risks for businesses can be reputational: damage to brand & image or challenge to “license to operate”; operational: reduced availability of raw materials (such as water, timber, fuel), higher costs of these raw materials, disruption to business operations; legal: new government regulations, penalties, lawsuits, restrictions on expansion of operations, higher transaction costs. Change in customer preferences is also a major risk that companies can face. Identifying these risks at an early stage can itself create business opportunities. There are opportunities to increase resource efficiency, shape national and international policy, develop new products, create new investment opportunities, and differentiate brand. This is why one can see a dramatic increase in the number of companies creating CSR programmes and initiatives and providing CSR or sustainability reports based on the Global Reporting Initiative (GRI) guidelines. Post-recession, (hopefully) businesses have realised that they need to take a more long-term and holistic approach to integrate of environmental, social, and governance issues in their policy and operations. A responsible business will aim to align its investment decisions with the expectations and needs of society – who are not just the end, but also the beginning of the investment chain. The creating shared value concept which Nestlé has embraced does exactly that – simultaneously creating value for society AND its shareholders.

The new Creating Shared Value Report 2009 highlights Nestlé’s drive in nutrition, water and rural development, as well as environmental sustainability. The complete 90-page CSV report as well as the condensed 24-page CSV summary report is now available for download. You can visit the new CSV section on www.nestle.com/csv to access the reports as well as films and images that illustrate Nestlé’s ongoing CSV efforts worldwide. Last year saw significant improvements including improvements in the Company’s greenhouse gas emissions, water use and creation of waste and by-products. The 2009 report also reveals key performance indicators collected throughout the year by hundreds of employees across the business – from factories to sales and marketing to management. There has also been a 59% reduction of water withdrawal per tonne of product since 2000, while a total of 165,553 farmers and suppliers were trained through capacity-building programmes. With regards to nutrition, the performance indicators show over 7,200 Nestlé products have been renovated for health considerations and over 3,300 have reduced sugar, sodium, fats or artificial colours.

Nestlé tops the Consumer Food Products industry category in the annual World’s Most Admired Companies by Fortune Magazine. As an industry champion, Nestlé has been ranked number 1 in all criteria including innovation and global competitiveness, achieving a total score of 7.63.  In addition, Nestlé is positioned number 34 in the top 50 overall.  A total of 667 companies from 33 countries were surveyed by the Hay Group who determined ranking by asking a total of 4,170 executives, directors and analysts to rate companies in their own industry on nine criteria; from investment value to social responsibility. Participants chose from a list made up of the companies that ranked in the top 25% in last year’s surveys, plus those that finished in the top 20% of their industry.  

Follow Peter Brabeck-Letmathe, Nestlé Chairman, speak live about Creating Shared Value as a new concept of corporate social responsibility at the International Food Policy Research Institute (IFPRI), Washington, USA. The Policy Seminar proposes a new approach, which replaces the more traditional descriptions of corporate social responsibility with Creating Shared Value - a concept initially developed by Harvard's Professor Michael Porter and championed by Nestlé. Using a range of examples from the Nestlé context, Mr Brabeck-Letmathe will also examine the links between the role of business in society and the broader issues surrounding food security. Click here to listen to his speech. You can view his presentation here.

Does mainstreaming CSR make good business sense? Do they actually positively impact a company’s bottom-line? Craig Smith writes about why mainstreaming CSR still makes good business sense, even during an economic downturn when CSR is not high on the priority list of many companies. Lisa Cohen, in a recent post on CSRWire also discusses whether socially responsible investment (SRI) strategies produce results.   Nestlé is one example a company doing well by doing good. Creating Shared Value, which is Nestlé approach towards CSR, is a fundamental part of Nestlé’s way of doing business, which focuses on specific areas of the Company’s core business activities where value can best be created both for society and shareholders. With an organic growth of 4.1% achieved in 2009, Nestlé has been able to grow substantially faster than the industry. I would like to invite you to share examples of companies you think are doing good work in integrating CSR in their business operations.

A recent edition of the International Trade Forum showcased two of Nestlé’s 20+ public-private partnerships with local governmental and non-governmental agencies, as well as agricultural producers to create shared value in these communities.

 

The article describes the use of biogas technology for milk production in Shuangcheng, China and the promotion of sustainable Robusta production in Viet Nam’s Dak Lak Province.

 

 

 

The World Economic Forum Annual meeting in Davos brought together leaders from governments, business, civil society, academia and media  to discuss the most pressing issues facing the world today. Nestle at Davos At a session on “Rebuilding Water Management”, Nestlé Chairman Peter Brabeck-Letmathe, part of a panel comprising Tsakhiagiin Elbegdorj (President of Mongolia) Ajit Gulabchand (Chairman and Managing Director, Hindustan Construction Company), Michael Mack (CEO, Syngenta), and Ajay Vashee (President, International Federation of Agricultural Producers) explored the challenges water management will face in the next 20 years, its relevance and impact on issues such as health and security, as well as how best to implement information systems tools to protect and strengthen water management. At a another panel “Global Industry Outlook: Health, Consumers, Tech and Travel”, Chairs of the WEF Governors Meetings each shared their industry's evaluation of the most important challenges and opportunities facing them in 2010. Global Industry Outlook sessions at the WEF provide an update on the state of the telecommunications, travel, health and consumer industries worldwide, map out external and internal growth factors and trend, and recommend practical solutions which will help business and government leaders collaborate most effectively in achieving this vision. Nestlé CEO Paul Bulcke presented the consumer industry’s perspective at the session. The two major issues Mr. Bulcke focused on were water security and food security. In order to increase water security, Mr. Bulcke recommended more appropriate water pricing, efficient irrigation and water use, cultivation of the right crops for the right climate, stopping of biofuel production and lastly, the need for more research in water rights trading. His recommendations to increase food security were sustainable production without western-style agricultural policies and subsidies, generation of reliable incomes for farmers through better  productivity, and added that food must be affordable and accessible and of proper “quality”. He reiterated that the private sector is part of the solution. Mr. Bulcke also outlined Nestlé’s concept of Creating Shared Value (CSV) -- the positive role of business on society. This concept is well grounded in Nestlé’s roots as its very first product, an infant cereal developed in 1866, was both a business opportunity and a response to an urgent societal need – both factors being mutually inclusive. Put simply, business can do business and do good at the same time. Stating that companies should aim to create and share value at all levels of the value chain, Mr. Bulcke added that when value is created and shared, people’s sense of responsibility, of ownership and stewardship increases. Click on Global Industry Outlook: Health, Consumers, Tech and Travel to view video of session. Successful companies can create shared value by identifying desirable outcomes for both shareholders and communities – with the right labor, human rights, development, sustainability and community policies.

An abstract of Nestlé Chairman Peter Brabeck-Letmathe’s speech on why CSR has recently become topical and why we are observing a fundamental change in economic circles towards this issue. The reason is the recent global financial and economic crisis. The last 18 months have made businesses increasingly aware that you can have long-term success only if you create the same value for shareholders and for society or the community in which you operate. There is now a change in attitude with regard to the social responsibilities of businesses, which has been traditionally been limited to philanthropic and charitable activities, often undertaken by companies to enhance their reputation. For Nestlé, the observance of the Business Principles, national laws, and international standards is not only to ensure that our activities are environmentally sound, socially equitable and economically viable, or the role of a good corporate citizen. Our approach of creating shared value, delves deeper. We aim to work with the entire value chain to bring real benefits to business, society, customers and products.  A single company cannot solve all the world’s problems, but every company can have its unique value chain aligned with sustainable positive impact - and in a manner which adds value to its shareholders.

A major factor contributing to poverty and hunger is food insecurity, or the lack of sustainable physical or economic access to sufficient safe and nutritious food for healthy and productive living. The Food and Agricultural Organisation (FAO) of the United Nations has projected that, in 2009, over 1 billion people will go to bed hungry, and estimates that the world will need until 2050 to boost agricultural investment by US$83bn a year to feed a growing population. Speaking on the issue of food security at the Private Sector Forum in Milan, Nestlé Chairman Peter Brabeck-Letmathe stressed the need for and the willingness of the private sector to be actively involved in addressing this issue. He emphasised that reducing food insecurity is not just about taking measures to produce more food, it is also about taking measures that actually change expectations and lead to sound long-term food security and called for bold solutions to tackle this issue. In his presentation, Mr. Brabeck-Letmathe explains that there are five major challenges to overcome long-term global food insecurity: necessary quantities (basic calories and proteins) in a sustainable manner, generating reliable incomes for farmers, affordability of the food for low-income consumers, quality of food (including nutritional value and safety), and access (food at the right time, in the right form, at the right place). It is unfortunate and ironic that most of the people that are under-nourished or malnourished are primarily farmers, and come from rural areas. Click here to view video. I welcome your views on how private sector companies can confront and combat the issue of global food insecurity.

A visual summary of Nestlé's commitment to creating shared value in 2009. We look forward to your comments!

Nestlé recently opened a global R&D Centre for biscuits and cereal-based snacks in Santiago de Chile. The new R&D Centre will lead Nestlé’s global research and development in biscuits and cereal-based snacks, focusing both on innovation and renovation of products.  R&D Santiago will bring together specialists from various fields, including nutrition, engineering, product development and quality control. With ingredients such as wholegrain, fruits and nuts, biscuits are part of a healthy balanced diet. The development of new technologies at R&D Santiago will help to further reduce sugar and fat levels to make biscuits lighter, without compromising taste or texture. R&D Santiago will also develop biscuits with bioactive ingredients to improve digestive health as well as fortified products to address local micronutrient deficiencies, thereby adapting biscuits to local tastes and needs.  Nutrition is one of three main focus areas of Nestlé’s Creating Shared Value strategy based on our assessment that nutritional awareness and the desire for improved health and wellness will increasingly drive consumer choice and aiming to create both financial value for shareholders and nutritional value for lower-income populations.

As part of its ongoing commitment to deliver superior nutrition in its cereals, Cereal Partners Worldwide (CPW) -- a joint venture between Nestlé and General Mills has committed to reduce sugar levels in cereals advertised to children by an average of 20%. Having reduced sugar in cereals advertised to children since 2004, CPW’s commitment to reduce sugar content further by an average of 20% will be carried out using existing technologies – as well as through advances that will be developed by the new CPW Innovation Centre, once it is fully operational by the middle of 2010. Christi Strauss, President and CEO of Cereal Partners Worldwide, said: “Throughout the years, CPW has invested to deliver superior nutrition in its cereals.  This is another important commitment that we are confident will be well received by consumers. By making this commitment, we will continue to deliver the superior nutrition that millions of consumers around the world have come to expect from us.” Ms Strauss stressed that the taste of the cereals will not change and added: “Reducing sugar without sacrificing the taste is a challenge.  But our joint venture has developed capabilities that are second to none in the food business. We can leverage these breakthroughs. It will require technology, time and substantial levels of ongoing investment, but we are committed to this initiative.” Throughout the past decade, CPW has led numerous innovations in cereal that deliver superior health and nutrition to consumers.  Due to the sugar reduction it has already achieved, CPW estimates that over 5,000 tonnes of sugar have been removed from its global food supply.

In the past decade, there has been a significant shift in the way the private sector has addressed corporate social responsibility (CSR) – from inserting an environmental section to their annual financial report and only reacting to issues when it hit the media to being pro-active and embedding CSR as part of their day-to-day business operations. Bill Greenhalgh, in his recent article on CSR in the Financial Post, mentioned Nestlé’s work in the milk districts in India as “the ultimate example of altruistic self-interest” by continuously implemented initiatives that have improved the quality of life of the communities around its factories. Over the past 50 years, Nestlé has developed artificial insemination programmes for cattle, subsidised farmers’ purchase of milking machines and helped procure loans for the community. In addition, company veterinarians and agronomists supervise the milk routes and advise farmers on the most appropriate feed for the herds and milk storage facilities have been set up in close location to the farmers.  Corporations need to change the way they manage “people, planet, and profit” and embrace CSR as the way they do business.