Context

Globally, the combination of population growth, increasing affluence and lifestyle patterns are outstripping the planet's ability to bear the effects of human activity. We believe that we are facing a serious water crisis in the coming years that will have serious consequences for food security. The food chain, from agriculture to manufacturing and consumption, contributes significantly to water quality and availability, climate change, energy use, biodiversity and soil quality, and air quality – at the same time, it is heavily dependent upon all of these environmental resources. As an example, the availability and accessibility of fresh water already affects our business, and we also expect to see the consequences of climate change on our operations over the next decades.

Our goals

Our ambition is to produce tasty and nutritious food and beverages that also have the lowest environmental footprint, so we strive to continuously improve our operational efficiency and environmental performance. We apply a life cycle approach to assess the impacts of our own operations and those associated with the wider value chain, thereby contributing to a better future and Creating Shared Value to both Nestlé and society.

Our actions

We have invested over $225 million in environmental sustainability programs and initiatives during 2009. We continue to identify and implement projects to reduce our use of water, non-renewable energy and other natural resources, to reduce emissions of greenhouse gases (GHGs), to eliminate waste and to 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.

Our performance

We continue to make improvements in our water consumption and CO2 emissions performance through reduced energy consumption following operational energy efficiency measures and a move towards renewable energy sources. More waste is being diverted from landfill and incinerators without energy recovery. A continued focus on packaging weight reduction remains a priority.

CSV summary:

• Value for Nestlé: Continuously improving environmental performance; productive factories; reduced risks; reduced costs; long-term availability of raw materials and water; sustainable, profitable growth.
• Value for society: Raising of environmental standards; higher incomes; better standards of living.

International Policy

Nestlé believes in the superiority of breastfeeding and recognizes that the World Health Organization's (WHO) International Code of Marketing of breast milk substitutes is an important instrument for the protection of it, particularly in countries where poor sanitary, economic and social conditions prevail. Read more on the WHO Code of Marketing PDF 136 Kb.

Nestlé sells and markets infant formula products responsibly, and we voluntarily and unilaterally apply the WHO Code in all developing countries. To ensure compliance with the WHO Code, Nestlé has developed a unique global management system, which includes the following aspects. For more information about infant formula download the following documents:

• Infant formula and complementary food labelling; PDF 91Kb
• Infant formula marketing PDF 99Kb

Nestlé in Canada Policy

In Canada, where the WHO Code is not legislated, Nestlé supports the position of Health Canada, the Canadian Paediatric Society and Dietitians of Canada. This position is outlined in the document, Nutrition for Healthy Term Infants, which states that breastfeeding for as long as possible is best, and that formula is appropriate if mothers choose to supplement or discontinue breastfeeding. In addition, Nestlé complies with the Food and Drug Act and Competition Act, which regulate the infant formula here in Canada.

Nestlé WHO Code Quality Assurance System

This has been implemented in all developing countries where Nestlé operates and is built along the lines of ISO quality assurance systems. The manual, outlining Nestlé policies and procedures, gives detailed operational guidelines to all Nestlé employees in their daily conduct of business related to infant formula to ensure compliance at all levels with both the WHO Code of Marketing of breast milk substitutes and local regulations.

Training, testing and compensation on WHO Code knowledge

Nestlé trains relevant Nestlé Nutrition personnel on the WHO Code. They are tested regularly on their knowledge, and their performance is a criterion upon which salary increases and promotions are based.

In 2009, 100% of staff involved in infant formula marketing in developing countries received specific WHO Code training [KPI]; we aim at 100% coverage in any given year, but this may not always be possible due to employee turnover. During the course of 2010, a new web-based training and testing tool was implemented to assess the Code knowledge of all Nestlé Nutrition's medical delegates on a continual basis.

Audits

Nestlé has established a significant program of WHO compliance and monitoring. Corporate auditors check approximately 20 countries every year to verify Code compliances. Any verified Code violation is submitted to the CEO of Nestlé for review and action, and is reported to the Audit Committee of the Board of Directors. The Nestlé system is recognized as best-in-class by social investment groups.

Read more about our implementation of the Code at the Babymilk website.

International Policy

At Nestlé, we believe in providing only responsible consumer communication and are especially rigorous when it comes to communicating to children. Our Corporate Communication principles set high ethical standards that are diligently followed. Among other elements, these principles mandate that communication to children:

• Encourage moderation, healthy dietary habits and physical activity
• Must not undermine parental authority
• Must not mislead children about potential benefits from using the product
• Must not create a sense of urgency
• Must not general unrealistic expectations of popularity or success
• Must not create difficulty distinguishing between the real and the imaginary
• Must not use program personalities, live or animated, other than our copyright characters to market products or adjacent to TV programs, movies, magazines or printed material or on websites in which they normally appear to ensure our communication is distinguished from such content

Nestlé in Canada Policy

In Canada, Nestlé is a member of the Canadian Children's Food and Beverage Advertising Initiative, which is a voluntary program created by 16 leading food and beverage companies. The program involves promotion and support of healthy dietary choices and lifestyles among children 12 years-old and under. Participants also focus on shifting their advertising and marketing emphasis to foods and beverages that are consistent with the principles of sound nutrition guidance, including those that are lower in total calories, fats, salts and added sugars, and higher in nutrients that are significant to public health.

What is Creating Shared Value?

Creating Shared Value is the basic way we do business, which states that in order to create long-term value for shareholders, we have to create value for society. But we cannot be either environmentally sustainable or create shared value for shareholders and society if we fail to comply with our Business Principles.

This involves compliance with national laws and relevant conventions, as well as our own regulations, which often go beyond our legal obligations. For example, we support the Universal Declaration of Human Rights (UDHR), which stands at the basis of the UN Global Compact's Human Rights Principles, and our CEO Paul Bulcke signed the UN Global Compact CEO Statement for the 60th Anniversary of the UDHR.

Our detailed commitments to the UN Global Compact, the Fundamental Conventions of the International Labour Organization (ILO) or other relevant instruments, are laid out in our Nestlé Corporate Business Principles PDF 1159Kb and related policy documents, and their application is verified through our CARE program and our internal Corporate Group Auditors.

Beyond that, how we do business is based on sustainability - ensuring that our activities preserve the environment for future generations. In line with the Brundtland Commission's definition, sustainable development to Nestlé means "development that meets the needs of the present without compromising the ability of future generations to meet their own needs".

At the same time, Creating Shared Value goes beyond compliance and sustainability. Any business that thinks long-term and follows sound business principles creates value for shareholders and for society through its activities e.g. in terms of jobs for workers, taxes to support public services, and economic activity in general.

But Creating Shared Value goes one step further. A company consciously identifies areas of focus, where: a) shareholders' interest and society's strongly intersect, and b) value creation can be optimized 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, and seeks collaborative action with relevant stakeholders in society.

At Nestlé, we have analyzed our value chain and determined that the areas of greatest potential for joint value optimization with society are Nutrition, Water and Rural Development. These activities are core to our business strategy and vital to the welfare of the people in the countries where we operate.

In March 2011, Nestlé Canada proudly launched the Nestlé Cocoa Plan, a global cocoa sustainability initiative that is committed to investing $120 million over the next 10 years. The Nestlé Cocoa Plan addresses some of the complex challenges that are facing the cocoa farming communities that Nestlé works with. Among these challenges are the age and condition of the cocoa trees, decreasing yields and insufficient incomes. The aim of the Nestlé Cocoa Plan is to leverage Nestlé’s agricultural and scientific know-how to improve the quality and yield of the cocoa plants. At the same time, Nestlé will be training and educating local farmers and helping them increase their income by improving the quality and productivity of their harvests.

Through the Nestlé Cocoa Plan initiative, Nestlé Canada is sourcing enough cocoa to produce our top selling bars: KIT KAT, COFFEE CRISP, AERO and SMARTIES in both single and multi-pack formats.

The Nestlé Cocoa Plan focuses on five key pillars: farmer education, sustainability, supply chain efficiency, improving social conditions and working with partners:

• Farmer Education: The Nestlé Cocoa Plan supports Field Schools which help farmers understand how to increase their yields and the quality of their cocoa. Nestlé is committed to buying cocoa from trained farmers and paying a premium for higher quality cocoa. 
• Sustainability: Nestlé is helping farmers with the introduction of top quality cocoa trees that are disease tolerant and produce higher quality cocoa beans. Nestlé is committed to distributing 12 million cocoa trees over the next 10 years.
• Supply Chain Efficiency: The existing supply chain model is extremely complex and Nestlé is committed to improving this by working with farmer groups and cooperatives to help them produce export ready cocoa thus eliminating some of the middlemen and ensuring a greater revenue for the local community.
• Social Conditions: Nestlé is committed to helping to end unacceptable forms of child labour and to this end we are working with the International Cocoa Initiative.
• Working with Partners: Nestlé is supporting improvements in living conditions in communities by working with different partners depending on the local circumstances. We have partners in the areas of child labour sensitization, water and sanitation, farmer training, trees and certification.

Nestlé partners with Rainforest Alliance, an independent international non-profit organization whose vision is to achieve sustainable supply on this initiative. Rainforest Alliance will work with Nestlé to certify Nestlé Cocoa Plan partner cooperatives.

The Nestlé Cocoa Plan is an example of Creating Shared Value, a fundamental way of how Nestlé does business. For further information, please visit www.thecocoaplan.com.

Context

Agriculture employs over one-third of the world's working population and three-quarters of the world's poor people live in rural areas. Nestlé spends approximately $20.8 billion a year on raw materials, and works directly with approximately 540,000 farmers to help them to increase their productivity, protect the environment and climb out of poverty. About 3.4 million people in developing countries earn their livelihoods from our supply chain, so we can have a positive long-term impact on economic and environmental development and standards of living, sometimes helping entire regions to increase agricultural productivity and economic performance. Sourcing in ways that minimize impact on climate change and long-standing social issues such as child labour in the rural sector are among the challenges we face.

Our goals

The wellbeing of the communities from which we draw our agricultural raw materials and local labour is vital to our success as a business and to our shareholder value. Through rural development, providing local employment and encouraging sustainable production practices, as well as purchasing directly from small-scale suppliers and intermediaries, we not only seek to protect the supply and quality of our raw materials, but also to have a positive, long-term impact on the local economy and standards of living of rural people.

Our actions

In 2009, we supported direct suppliers through technical assistance and knowledge transfer, and provided microfinance loans totalling $ 30 million, and ensured they operate responsibly and sustainably through the Nestlé Supplier Code. Our rural development principle is to manufacture, wherever possible, in countries from which we source commodities; today, about half of our 456 manufacturing plants are in the developing world, primarily in rural areas and directly provide local employment to over 200,000 people. We also actively participate in multi-stakeholder initiatives to promote best practice.

Our performance

During the year, we enhanced our approach to supplier development and farmer training and developed more Sustainable Agriculture Initiative Nestlé (SAIN) initiatives, which were coupled with the ongoing communication of, and assessment against, our Supplier Code of Conduct. We also consolidated our support for the cocoa industry under The Cocoa Plan, committed $470 million to coffee and cocoa plant science and sustainable initiatives over the next decade and developed our policy on palm oil.

CSV summary

• Value for Nestlé: More secure supply of better-quality raw materials; lower procurement costs; consumer preference for our products; profitable growth.
• Value for society: Advice and technical assistance; greater yields; higher quality crops; lower resource use; increased income; wider employment and economic development opportunities; consumers aware our products are safe, of high quality and produced using sustainable practices.