Order 911769: CSR reporting project

Nestlé CSR, 2013

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Corporate Social Responsibility Reporting – Nestlé Company

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Financing Organizations

Autumn, 2014

City University, Seattle

Abstract

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Many people possess a vision of a company, based on what they have learned about that

company from media, the news, advertising, and word of mouth. Typically, the average

consumer does not take a great deal of time to understand a company’s merits based on how that

company interacts with the world. For most of the last 80 years, from the end of World War II to

current, people have learned about products and companies through marketing.

Beginning in the 1960’s advertisers and media began to be challenged about the

reliability of the statements that were being made. Quotes like “I don’t care what you say about

me, just make sure you spell my name right” have been around since the early 20th Century

(Turney, 2012), and the attitude is that people remember what they want to about a person or a

company. Most people remember a product and whether it worked for them, more than they

remember details about the company. If a skin cream makes your skin soft, then the company

must be doing a good job. Companies and advertisers began to take advantage of the consumer’s

willingness to trust them, and advertising and gimmicks became common on Radio and

Television as a way of promoting products. In May, 1958 the game show “Dotto” was found to

be rigging their outcomes and shortly after that the popular “$64,000 Challenge” was also

accused of coaching contestants (PBS.org, 1999). This began an era where people started to ask

about the truth and viability of corporate practices.

It is ultimately up to the consumer to know about what they are buying and how a

company or organization does business. Since the first United Nations convening of Global

Responsibility and Global Reporting initiatives, consumers have had increasing information on

how a company operates (UN, United Nations Document Retention, 2014). The outcome of the

reporting will vary based on the amount and quality of the data, and on how frank a company is

about the context of the reporting.

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The Nestle Company is a global brand, producing and distributing a myriad number of

products. Nestle has reported Sustainability or CSR Reports since 2002 (Nestle, 2013). Nestle

has been given awards for their reporting of their global activities, and yet Nestle is also under

fire with environmental and human rights groups for misuse of resources and for using their

global financial resources to control precious natural resources such as water (Matera, 2013).

It seems impossible for a large corporation to monitor and manage the activities of

thousands of employees around the globe, no matter how good their systems. In this discussion

the focus will be on Nestle and the quality and accuracy of the Nestle CSR Report for the year

2013, as it relates to the Nestle Company’s product line and their ability to maintain the

Company Mission through their global activities.

Nestle

Many people in the United States think first of a candy bar or hot cocoa when they think

of Nestle, yet the Nestle range of brands begins with Carnation, Inc. and goes as far as Perrier

and other water products. Nestlé’s first product was an infant baby food called “Farina Lactée”,

invented by the company founder Henri Nestle.

Today, Nestle is the largest provider and seller of food and beverage in the world, with

global revenues in 2013 of over $104 Billion (Nestle, 2013). Nestle is also one of the largest

employers in the world, with more than 300,000 employees working in 196 countries around the

Earth (Nestle, 2013).

As noted earlier, the Nestle product line includes a wide range of brands and products,

including food, beverage, health and wellness products, and a variety of consumer goods ranging

from cat food to bottled water. Nestle products are in nearly every home and business in the

civilized world.

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Nestle has become a leading brand through acquisition of other companies, as well as

through development of new products. The Carnation company and Ralston Purina are two large

companies that were acquired by Nestle in the last 15 years. These two companies gave Nestle

significant presence in key consumer goods areas of pet food, dairy products and baby food.

Nestle is now a global leader in the production of baby food and formula and has come under fire

since the 1970’s for inappropriate distribution of, and quality issues with their infant formulas.

The complaints in the 1970’s were focused on distribution of infant formula in impoverished

areas of the world where infant breastfeeding was more appropriate and safer for babies.

(Krasny, 2012).

More recently Nestle has become the focus of many complaints and accusations around

the damaging effects of their bottled water programs (Lohan, 2007) (Thomasson, 2012).

Organizations have accused Nestle of hoarding water in developing countries, while others

complain of the immense waste issues associated with packaged water products. Further, Nestle

has been criticized in the US for packaging products represented as spring water, that are nothing

more than tap water that has been filtered (Matera, 2013).

The complaints and criticisms of the Nestle Company would seem to be at odds with the

company’s stated Mission of “Good Food, Good Life”, yet Nestle continues to be a large and

successful enterprise globally. Even as these negative reviews come in, the company discusses

the ongoing merits of the community work, corporate initiatives, and resource management

(Nestle, 2013). Nestle employees are allegedly out in the world taking control of water rights,

selling products that are not needed, and duping consumers with products that are sub-par or not

needed. It would seem that the Nestle employees are out to take over the world and mislead the

consumer, despite all of the efforts of the company.

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Global Transparency

A key area of the CSR Reporting initiative is the Standard Disclosures of each reporting

company, where performance is discussed in the key foundations of the Global Reporting

Initiative. The Standard Disclosures in the Nestle CSR include Sourcing, Economic, Social:

Labor Practices, Social: Human Rights, Social: Society, Social: Product Responsibility, and

Animal Welfare. In these reviews Nestle discusses both accomplishments and legal and social

complaints, how those issues have been addressed and whether the infractions have been

corrected, or are in process or under review.

It can be expected by a reviewer of the Nestle CSR Report that these disclosures will be

consistent with statements made in other areas of the CSR Report around Ethics, Corporate

Governance and Corporate Mission and Values. The 2013 CSR Report by Nestle is increasingly

focused on improving global resonance for Nestle programs, and thus improving stockholder

value as the company continues to work toward long-term sustainable, growth.

Animal Welfare

The Nestle Company uses sizeable amounts of dairy, meats and animal bi-products in the

development and preparation of their products. While infant foods and chocolates have been a

rich part of the Nestle products, only in the last year has Nestle begun to implement strict focus

on the use of hormones and other production techniques by their vendors (Nestle, 2013, p. 158).

While Nestle is now part of an extensive ISO Technical Specification initiative in Europe, the

reader might wonder how producers have been monitored in the past. There is notable effort in

place to improve awareness and training of farmers who contribute to the Nestle product line,

including large training farms in Pakistan and China.

Dairy

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As noted above, dairy is a critical element in the product line of the Nestle Company.

Dairy accounted for 18.83% of total revenue, with $19.7 Billion in 2013, with a profit margin of

15.2% or $2.99 Billion (Press Release, 2014). In 2013, Nestle sourced dairy products from over

400,000 farmers world-wide (Nestle, 2013, p. 146). The Nestle spend on farmer assistance and

training in 2013 was over $50 million. Nestle has begun to advance the training and certification

of their dairy products since 2009, with inspections and standards being implemented in Spain,

Mexico and other countries. The focus of these efforts are to reduce greenhouse gas emissions

as well as consolidate production facilities to limit energy use. Prior to 2009 it would seem that

Nestle was satisfied with allowing producers to set their own standards for production and

transport of products.

Deforestation

Many would argue that the need for palm oil is limited, as it is not only a difficult

resource to obtain sustainably, but palm oil is also not really very good for you. Still, there is a

sizeable global demand for this product and Nestle is a key user in its product line. Additionally,

Nestle products include soya which impacts forests in several countries like Brazil, and Nestle

packaging is one of the largest users of paper goods in the world. Beginning in 2010 Nestle has

stated publicly that they are taking a “No Deforestation” approach to their business practices.

This goes as far as managing traceability of palm oil sources, and holding suppliers accountable

for acceptable forest practices and recycling around paper goods (Nestle, 2013, p. 144). It seems

that Nestle has taken this area seriously in the last few years, and is working to be a good

corporate citizen moving forward.

General Sourcing

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Since 2009 Nestle has begun to audit Tier 1 producers and suppliers, with about 65% of

their suppliers now being audited globally. Nestle is now holding suppliers accountable for

producing standards, and a lack of action will result in the elimination of that supplier from the

company’s procurement plans. Nestle efforts around sourcing and monitoring of methods and

activities by suppliers is now a key company initiative (Nestle, 2013, p. 131). This responsible

sourcing initiative includes Nestle focus on twelve key commodities; palm oil, soya, sugar, paper

and board, coffee, cocoa, dairy, fish and seafood, shea, vanilla, hazelnuts, and meat, poultry and

eggs. While these efforts to improve the awareness of sourcing are commendable, currently

Nestle discloses that only 17% of all commodities used by the company are traceable (Nestle,

2013, p. 385). One of Nestlé’s largest volume products is also not mentioned in this review of

sourcing, and that is water. If water is one of the company’s largest volume products, it would

seem to be necessary to track that as part of the sourcing programs. However, Nestle has listed

water as an entirely separate area in their CSR Report.

Water

Nestle Waters is the largest producer and distributor of water world-wide (Nestle-Waters,

2014). This resource is seen as a critical element to the Nestle business, generating nearly $8

billion in revenues and over $800 million in profit in 2013 (Press Release, 2014). Water is also a

key area of concern for Nestle, both to the company and to their consumers and the community.

Nestle notes both water challenges and water initiatives in their report, highlighting the

challenges as a separate awareness area, which includes the fact that 36% of the Nestle

manufacturing facilities are located in water stressed areas of the world (Nestle, 2013, p. 170).

Nestle also discusses in this portion of their report the recycling and reduction of water use in

water extraction and product development and manufacturing of other products. In both cases

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Nestle points out that they have reduced their impact on the world water supply by sizeable

percentages.

In the case of managing water as a resource and contributing to the development of water

supplies, Nestle has taken responsibility for the management of water as a resource by creating a

global Operations Water Task Force, which is part of the Operations Sustainability Council

(Nestle, 2013, p. 178). The Water Task Force monitors water risk and stress through site

measurement based on ISO 14001:2004 guidelines and improvement of performance against

those guidelines.

Nestle also participates in the creation of new standards through internal commitments

stated as the Nestle W.A.T.E.R. commitment. This commitment is broken into 5 key areas:

 Work to achieve water efficiency across our operations

 Advocate for effective water policies and stewardship

 Treat the water we discharge effectively

 Engage with suppliers, especially those in agriculture

 Raise awareness of water access and conservation

These above noted commitments are part of a CEO water mandate adopted in 2013 as part of the

Nestle Commitment on Water Stewardship. These efforts demonstrate a recent effort on the part

of Nestle to the wellbeing of the planet, and are part of a larger sustainability initiative that many

would say has been a long time coming for a company the size of Nestle.

Criticism

As noted earlier, many organizations and individuals have found fault with Nestle around

their conduct as a world leader in the procurement and selling of food and beverage and

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consumer goods. Among the criticisms of the Nestle company are the previously mentioned

issues of baby formula and water. Both of these areas have been reviewed and responded to by

Nestle on numerous occasions with recent commitments already noted in this discussion. As

mentioned previously, palm oil is listed as one of Nestlé’s most watched commodities due to its

presence in Nestle confections and other consumer products. Palm oil has been identified as a

major contributor to deforestation and rain forest destruction.

On a broader scale, is the ongoing challenge to Nestlé’s right to procure public resources

for their operations. Most notably, water is an ongoing area of challenge in the United States and

around the world (Matera, 2013). The outrage over Nestlé’s right toward water resources has

even been featured in the movie “Tapped” which discusses not only the misuse of water

resources, but also the impact of huge amounts of plastic bottles on the planet (Atlas, 2014).

Further, Nestle has delayed its response to many criticisms over the years, by delaying

transparent reporting and limiting global improvement commitments until recent years. Most

Nestle responses to public pressure have been authored and implemented in the last 4 years, led

by the Nestle response to the direct pressure on its palm oil processes.

The assumption that Nestle may buy any resources they wish, is becoming more

increasingly challenged around the globe. Global sentiment and ongoing challenge in the courts

and the community will limit the freedom of the Nestle Company to grow in the future. Nestle

stockholders, board, and management have moved forward together in the last 5 years to begin to

respond to global pressures, as noted in the 2013 CSR Report.

Conclusion

Nestle has noted in the last few years that increasing public pressure on governance and

policy has required a strong response to protect market share and stockholder value (Nestle,

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2013, p. 6). As Nestle moves forward in its ongoing commitment to more sustainable and

globally focused practices, a major challenge will be to not only deliver on commitments, but

also to be more public about the accountability of the company to the community. This effort

will include being a leader in training and developing more pro-active processes with vendors

and business partners.

Nestle business practices in the past have seen the company painted as a global bad-guy

in many ways (Matera, 2013) (Krasny, 2012). Undoing the damage noted in the press and in the

courts will be a major challenge that management must step toward. Stockholder value in the

coming years will depend not on quick profits, but on long-term generation of value.

References

Atlas, Films. (2014). Tapped the Movie. Retrieved from tappedthemovie.com:

http://www.tappedthemovie.com/

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Krasny, J. (2012). Business Insider. Retrieved from BusinessInsider.com:

http://www.businessinsider.com/nestles-infant-formula-scandal-2012-6?op=1

Lohan, T. (2007). AlterNet. Retrieved from Alternet.org:

http://www.alternet.org/story/52526/rural_communities_exploited_by_nestle_for_your_b

ottled_water

Matera, P. (2013). Corporate Research Project. Retrieved from corp-research.org:

http://www.corp-research.org/nestle

Nestle. (2013). Neste, Creating Shared Value. Retrieved from Nestle.com:

http://www.nestle.com/asset-

library/Documents/Library/Documents/Corporate_Social_Responsibility/nestle-csv-full-

report-2013-en.pdf

Nestle-Waters. (2014). Nestle Waters. Retrieved from Nestle-waters.com: http://www.nestle-

waters.com/aboutus

PBS.org. (1999). PBS "The American Experience". Retrieved 2014, from PBS.org:

http://www.pbs.org/wgbh/amex/quizshow/peopleevents/pande06.html

Press Release, N. P.-2. (2014). Nestle 2013 Performance Press Release. Retrieved from

Nestle.com: http://www.nestle.com/asset-library/documents/library/events/2013-full-

year-results/press_release_en.pdf

Thomasson, E. (2012). Reuters. Retrieved from reuters.com:

http://www.reuters.com/article/2012/10/26/us-nestle-online-water-

idusbre89p07s20121026

Turney, M. (2012). Northern Kentucky University, PR Dept. Retrieved 2014, from NKU.edu:

http://www.nku.edu/~turney/prclass/readings/3eras1x.html

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UN. (2014). UN Global. Retrieved 2014, from http://www.unglobalcompact.org/

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http://www.un-documents.net/ocf-09.htm

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pollution/