The Nestlé Creating Shared Value Report 1

The Nestlé The Nestlé Creating Shared Value Creating Shared Value Creating Shared Value For a business to be successful This publication is an integral in the long term it has to part of our overall Company Report create value, not only for its reporting, and is a companion shareholders but also for society. document to the 2007 Nestlé We call this Creating Shared Management Report and

Report Value. It is not philanthropy or Governance Report. It is a ﬁ rst an add-on, but a fundamental step in providing increasing part of our business strategy. amounts of worldwide Simply stated, in order to create information about the Company. value for our shareholders and With the development of GLOBE, our Company, we need to create our new business management value for the people in the information system, we can countries where we are present. begin to provide increasing This includes the farmers who amounts of information supply us, our employees, our regarding Nestlé on a worldwide consumers and the communities basis which were previously where we operate. inaccessible. As additional areas As a necessary condition for of GLOBE are implemented Creating Shared Value, we need in future years, in areas such to demonstrate responsible as human resources and behaviour – by assuring product composition, we will compliance and sustainability. be able to expand our reporting This includes complying with accordingly. Nestlé Business Principles, national laws and international norms, and ensuring that our actions are environmentally sound, socially just and economically viable.

For a business to be successful in the long term it has to create value, not only for its shareholders but also for society

  The Nestlé The Nestlé Creating Shared Value Creating Shared Value Creating Shared Value For a business to be successful This publication is an integral in the long term it has to part of our overall Company Report create value, not only for its reporting, and is a companion shareholders but also for society. document to the 2007 Nestlé We call this Creating Shared Management Report and

For a business to be successful in the long term it has to create value, not only for its shareholders but also for society

  Highlights Performance summary Nestlé has developed performance indicators to provide a focus for measuring and reporting Creating Shared Value. The summary below forms part of our communication of progress on the UN Global Compact Principles (see page 52 for further details). Unless stated otherwise, performance indicators are for the year ending 31 December 2007. Reducing our environmental footprint and Nestlé Creating Shared Value performance indicators GRI reference reducing operational costs: pages 10-19 Total Group sales (CHF billion) 107.6 n/a Total shareholder return: 1 January 1997 – 31 December 2007 342.5% n/a Manufacturing Materials Raw materials and ingredients (except water [see below], million tonnes) 20.48 EN1 76% 22% 3% 16% 28% and our Packaging materials (million tonnes) 4.08 EN1 Increase of Reduction of Reduction of Reduction of Reduction of water environmental production volume* packaging material energy use* greenhouse gas withdrawal* footprint By-products (for recycling, million tonnes) 1.07 EN22 for bottled water** emissions* Reduction of by-products since 1998 (per tonne of product) 58% n/a Waste (for fi nal disposal, million tonnes) 0.372 EN22 Reduction of waste since 1998 (per tonne of product) 58% n/a Energy Direct energy consumption (Peta Joules) 85.3 EN3 Improving workers’ earning capacity and Energy saved since 1998 (per tonne of product) 45% EN5 1 creating a skilled workforce: pages 20-25 Greenhouse Direct CO2 emissions (million tonnes) 4.1 EN16 gases Reduction of direct CO2 emissions since 1998 (per tonne of product) 53% EN18 Water Total water withdrawal (million m3) 157 EN8 917 2.2 42% 65 647 Water saved since 1998 (per tonne of product) 59% n/a Number of Key Average number of In developing Number of 3 Business Positions successors per Key countries, local employees in Total water discharge (million m ) 101 EN21 Business Position Management developing countries Quality of water discharged (average mg COD/l) 62 EN21 Committee members who received formal Packaging Source reduction (thousand tonnes): 1991–2007 326.3 n/a who are nationals of classroom training the country Source reduction (CHF million): 1991–2007 583.7 n/a Reduction of packaging weight (per l of product) Nestlé Waters: 2002–2007 22% n/a Helping farmers improve earnings and assuring our Governance ISO 14001/OHSAS 18001-certifi ed sites (number of certifi cates) 171 n/a supply of quality raw materials: pages 26-35 Sites audited through CARE programme 403 n/a Our people Workforce size (total number of employees) 276 050 LA1 Lost Time Injuries (per million hours worked) 3.7 LA7 610 000 97 500 2-5% 29.9 million Total Injury Rate (per million hours worked) 7.5 LA7 Number of farmers Tonnes of coffee sourced Average annual milk Value of credit loans receiving free directly from farmers district growth rate to farmers in 2006, Leadership positions2 held by women 24% LA4 technical assistance in 2006 in CHF Local Management Committee members native to country in developing countries 42% n/a Formal classroom training received in developing countries (number of employees) 65 647 LA10 Key Business Positions 917 n/a Employees with potential to fi ll Key Business Positions 3 247 n/a Expanding lower income segment’s access to nutrition Agriculture Farmers trained through capacity-building programmes 111 800 n/a and broadening our customer base: pages 44-45 and rural Markets covered by (SAIN) sustainable programmes 28 n/a development Suppliers audited for safety, quality and processing 3 400 n/a Products and Popularly Positioned Products3: Europe (sales volume, CHF million)4 212 n/a billion million 77 50 consumers Popularly Positioned Products3: Americas (sales volume, CHF million)4 3 517 n/a Potential market Number of consumers reached 3 4 for Popularly by our new factory in North-East Brazil Popularly Positioned Products : Asia, Oceania and Africa (sales volume, CHF million) 1 722 n/a Positioned Products, Nestlé Nutrition business (sales 2007, CHF million) 8 434 n/a in CHF Number of products renovated for nutrition or health considerations5 6 445 n/a Increase in nutritious ingredients or essential nutrients (number of products)5 2 603 n/a

5 Mrs Maïmouna Reduction of sodium, sugars, TFAS, total fat or artifi cial colourings (number of products) 3 842 n/a Touré trades in Improved nutrition for the consumer and increasing - Reduction in trans fatty acid (tonnes): December 2003 – February 2007 34 200 n/a Belleville market sales /profi tability for Nestlé: pages 38-43 - Reduction in sugar (tonnes): January 2003 – December 2006 204 000 n/a in the Treichville district, south - Reduction in salt (tonnes): April 2005 – December 2006 5 000 n/a of Abidjan, Côte Products covered by Nestlé Nutritional Compass (% of sales) 95 PR3 d’Ivoire. Affordable 14.6 billion 6445 4.4 billion 1.88 billion 6 Nestlé products like Products with GDA labelling (% of sales) 45 PR3 Sales value of Number of products Sales value of products Total R&D expenses Maggi cubes help products “60/40+” renovated for with Branded Active in 2007, in CHF Infant formula marketing (number of internal audits) 9 PR7 generate income, tested in 2007, nutrition or health Benefi ts, in CHF Infant formula marketing (number of external audits) 1 PR7 and 90% of the in CHF considerations in 2007 1 4 stalls in Belleville Includes CO2 from fuel usage, refrigerants 2007 PPP sales cover 3 markets in Zone Europe, 22 in Zone Americas and Ozone Depletion Potential (ODP) substances and 12 in Zone Asia, Oceania and Africa offer Maggi for sale 2 Defi ned as positions with people management responsibilities 5 Based on reports of approximately 75% of worldwide product development teams 3 Products for those on lower incomes 6 Based on reports for European Union only * Reference year: 1998 ** Reference year: 2002 For a complete list of indicators and defi nitions please visit www.nestle.com/csv

  Highlights Performance summary Nestlé has developed performance indicators to provide a focus for measuring and reporting Creating Shared Value. The summary below forms part of our communication of progress on the UN Global Compact Principles (see page 52 for further details). Unless stated otherwise, performance indicators are for the year ending 31 December 2007. Reducing our environmental footprint and Nestlé Creating Shared Value performance indicators GRI reference reducing operational costs: pages 10-19 Total Group sales (CHF billion) 107.6 n/a Total shareholder return: 1 January 1997 – 31 December 2007 342.5% n/a Manufacturing Materials Raw materials and ingredients (except water [see below], million tonnes) 20.48 EN1 76% 22% 3% 16% 28% and our Packaging materials (million tonnes) 4.08 EN1 Increase of Reduction of Reduction of Reduction of Reduction of water environmental production volume* packaging material energy use* greenhouse gas withdrawal* footprint By-products (for recycling, million tonnes) 1.07 EN22 for bottled water** emissions* Reduction of by-products since 1998 (per tonne of product) 58% n/a Waste (for fi nal disposal, million tonnes) 0.372 EN22 Reduction of waste since 1998 (per tonne of product) 58% n/a Energy Direct energy consumption (Peta Joules) 85.3 EN3 Improving workers’ earning capacity and Energy saved since 1998 (per tonne of product) 45% EN5 1 creating a skilled workforce: pages 20-25 Greenhouse Direct CO2 emissions (million tonnes) 4.1 EN16 gases Reduction of direct CO2 emissions since 1998 (per tonne of product) 53% EN18 Water Total water withdrawal (million m3) 157 EN8 917 2.2 42% 65 647 Water saved since 1998 (per tonne of product) 59% n/a Number of Key Average number of In developing Number of 3 Business Positions successors per Key countries, local employees in Total water discharge (million m ) 101 EN21 Business Position Management developing countries Quality of water discharged (average mg COD/l) 62 EN21 Committee members who received formal Packaging Source reduction (thousand tonnes): 1991–2007 326.3 n/a who are nationals of classroom training the country Source reduction (CHF million): 1991–2007 583.7 n/a Reduction of packaging weight (per l of product) Nestlé Waters: 2002–2007 22% n/a Helping farmers improve earnings and assuring our Governance ISO 14001/OHSAS 18001-certifi ed sites (number of certifi cates) 171 n/a supply of quality raw materials: pages 26-35 Sites audited through CARE programme 403 n/a Our people Workforce size (total number of employees) 276 050 LA1 Lost Time Injuries (per million hours worked) 3.7 LA7 610 000 97 500 2-5% 29.9 million Total Injury Rate (per million hours worked) 7.5 LA7 Number of farmers Tonnes of coffee sourced Average annual milk Value of credit loans receiving free directly from farmers district growth rate to farmers in 2006, Leadership positions2 held by women 24% LA4 technical assistance in 2006 in CHF Local Management Committee members native to country in developing countries 42% n/a Formal classroom training received in developing countries (number of employees) 65 647 LA10 Key Business Positions 917 n/a Employees with potential to fi ll Key Business Positions 3 247 n/a Expanding lower income segment’s access to nutrition Agriculture Farmers trained through capacity-building programmes 111 800 n/a and broadening our customer base: pages 44-45 and rural Markets covered by (SAIN) sustainable programmes 28 n/a development Suppliers audited for safety, quality and processing 3 400 n/a Products and Popularly Positioned Products3: Europe (sales volume, CHF million)4 212 n/a billion million 77 50 consumers Popularly Positioned Products3: Americas (sales volume, CHF million)4 3 517 n/a Potential market Number of consumers reached 3 4 for Popularly by our new factory in North-East Brazil Popularly Positioned Products : Asia, Oceania and Africa (sales volume, CHF million) 1 722 n/a Positioned Products, Nestlé Nutrition business (sales 2007, CHF million) 8 434 n/a in CHF Number of products renovated for nutrition or health considerations5 6 445 n/a Increase in nutritious ingredients or essential nutrients (number of products)5 2 603 n/a

  Contents

Creating Shared Value: the role of business in society 2

Company proﬁ le 4

About this report 6

Business Principles and strategy 8

Manufacturing and our environmental footprint 10

Our people 20

Agriculture and rural development 26

Products and consumers 36

Support of the UN Global Compact Principles 52 and Millennium Development Goals

Engaging with our stakeholders 54

Future reporting 55

Independent assurance – 56 Methodology & preliminary ﬁ ndings statement

Cover: Razia Berveen Left: Nestlé- is a “Female Livestock sponsored training of Worker” in Farooqa, agricultural extension Pakistan. She is workers in Renala, one of the Nestlé Pakistan. Passing trainers passing on on vital skills in knowledge and skills water management to 4000 women encourages who will go on to sustainable practices become agricultural on dairy farms in extension workers Pakistan. More on under a Nestlé-United page 29 Nations Development Programme (UNDP) partnership scheme in Pakistan

The Nestlé Creating Shared Value Report 1

  Henri Nestlé founded our Company home – planet earth – and the future of Creating in 1866 on a single product, an infant our business is inextricably linked to the cereal, which was created to save future of the planet. Shared Value: the life of a neighbour’s child. From Creating Shared Value means that time onwards, the fundamental thinking long term, while at the same the role strategy of our Company has been to time delivering strong annual results. create value for society, and in doing so One of the fundamental Nestlé of business create value for our shareholders. Corporate Business Principles is As a result of this strategy, over that “we will not sacrifi ce long-term in society the past 141 years Nestlé has grown development for short-term gain”. from a small family-owned business to We aim for (and have achieved) become the world’s foremost Nutrition, consistent improvements in annual Health and Wellness Company. performance through what we refer to However, Creating Shared Value for as “The Nestlé Model”: annual organic society and investors means going growth of 5% to 6%, combined with beyond consumer benefi t. The very a sustainable annual increase in the fi rst edition of the Nestlé Corporate profi t (EBIT) margin. But we resist Business Principles stated that “Our short-term temporary business and investments must be good for the social solutions. For instance, we have Company and for the countries where purposely avoided being listed on stock we operate”. exchanges which require reporting of Creating Shared Value also means quarterly earnings, because we believe bringing value to the farmers who this can lead to business thinking which are our suppliers, to our employees, is too focused on the short term. and to other parts of society. It means As a result of this approach to examining the multiple points where business, independent research on the we touch society and making very long- Nestlé brand indicates that globally term investments that both benefi t the we are rated very highly on “fulfi lling public and benefi t our shareholders, our responsibilities to society”, and who are primarily pension savers or particularly in developing countries. retirees. The strength of the Nestlé brand, Over a period of decades, we have including its performance in this area, worked with millions of milk and is fundamental to the success of our coffee farmers to make them better Company. It is a result of taking our suppliers, and in so doing, have helped relationship with society seriously over them to climb out of poverty and to many decades, and building a brand prosper. Today, we work with about based on Creating Shared Value. 600 000 farmers globally, providing free However, we are not satisfi ed with technical assistance, infrastructure and the status quo. For instance, we are over CHF 29.9 million of micro-credit increasingly focused on providing Creating Shared Value means loans. About half our factories are in affordable, nutritious foods to lower- thinking long term, while at the rural areas in the developing world, income populations in developing and have a profound impact on family countries. In 2007, working with same time delivering strong income, quality of life, and the future national governments, we opened annual results. One of the for the next generation. large, state-of-the-art factories in rural fundamental Nestlé Corporate Creating Shared Value additionally areas of Brazil, China and Pakistan, Business Principles is that means treating the environment in to produce food with high nutritional ‘we will not sacrifi ce long-term a way that preserves it as the basis value at an affordable cost for the local development for short-term gain’ of our business for decades, and population. centuries, to come. Ending dangerous trends in air and water pollution and mismanagement is basic to our being bbPeter Brabeck-Letmathe, able to sustain a growing Food and Chairman and CEO, Nestlé Beverages business. We all share one

2 The Nestlé Creating Shared Value Report

  Nestlé Chairman and CEO Peter Brabeck- Letmathe visiting a Mexican coffee farm in Jicotepec during a training session for the coffee growers participating in Nestlé’s Technical Assistance programme. Mr Gonzalo Contreras, one of Nestlé Mexico’s agronomists, demonstrates a Coffee Berry Borer insect trap that enables pest control without using pesticides, contributing to more environmentally sound coffee growing conditions

This report is a fi rst step in providing to the Global Reporting Initiative, the data on a global level regarding UN Global Compact Principles and the Creating Shared Value. It is an integral UN Millennium Development Goals. part of our Company reporting, together As I prepare to hand over the Chief with the 2007 Nestlé Management Executive Offi cer role to Mr Paul Bulcke, Report of fi nancial results. It follows a I refl ect on the past eleven years as publication two years ago on Nestlé, Nestlé CEO, during which time we have in which Harvard’s Mark Kramer and increasingly sought to engage with Professor Michael Porter established a society and to communicate about the framework to examine our Company interdependent relationship of Nestlé in Latin America in terms of Creating with the people of the countries where Shared Value. As a result, we have we operate. defi ned a multi-year plan for a step-by- In my continued role as Chairman step expansion of our measurement of Nestlé, I will remain committed to of Creating Shared Value. Access assuring that we continue to expand to global information has been a our thinking and engagement in this signifi cant internal limitation on our area. This report is part of an evolving reporting, but our new GLOBE business process, and I hope that it helps you information system will, for the fi rst to understand and evaluate Nestlé’s time, allow us to provide global Nestlé interdependent relations with people information in many areas where it is and the planet. currently unavailable. We began planning this report with a study of outside views on what is most relevant for us to report, and thank the SustainAbility organisation for their help in this. We have also sought stakeholder feedback via an engagement process in different regions of the world facilitated by AccountAbility International. As a Peter Brabeck-Letmathe result, included in the report is a Chairman of the Board and summary of Nestlé activities in relation Chief Executive Offi cer

The Nestlé Creating Shared Value Report 3

  Company proﬁ le Nestlé is the world’s leading Nutrition, Health and Wellness Company

Vevey Nestlé factories by continent, 2007 Nestlé employees by geographic area, 2007 Location of the Company’s Africa Europe headquarters, in Switzerland 27 184 Asia, Europe Oceania Oceania 34.5% 19 and Africa Asia 27.2% 1866 84 Year the Company was founded

107.6 billion Total Group sales, in CHF Central and South America 77 Americas North 38.3% 10.6 billion America Net proﬁ t, in CHF 89 Source: Nestlé Source: Nestlé 276 050 Sales and organic growth by product category, 2007 Number of employees Product category Sales (CHF billion) Organic growth Powdered and liquid beverages 17.9 10.3% Nestlé Waters 10.4 6.6% 480 Milk products and Ice cream 20.7 7.8% Number of factories Nestlé Nutrition 8.4 9.7% Prepared dishes and cooking aids 18.5 4.0% Confectionery 12.3 5.3% 86 PetCare 12.1 7.0% Number of countries in which Pharmaceutical products 7.3 11.0% the Company has operations Source: Nestlé

4 The Nestlé Creating Shared Value Report

  Far left: Inauguration Left: Kevin Duck, a have been added over Below: Products bring a nutritional of our new milk Nestlé employee at the last two years to with proven “plus” while also factory in Hailar, Cereal Partners UK, Nestlé brands sold superiority in addressing public Inner Mongolia, manufacturers of in Europe. More on consumer preference health-sensitive which opened in Shredded Wheat. page 42 and nutritional value nutrients. Enhanced 2007 backed by a Wholegrain are the foundation nutritional value Nestlé investment of provides important of Nestlé’s strategy. is already driving over CHF 20 million. nutritional value Our proprietary Nestlé’s business More on page 14 and 1.6 billion testing process, growth. More on additional servings called 60/40+, helps page 38

The Nestlé Creating Shared Value Report 5

  This report is Nestlé’s fi rst attempt at Our reporting history About this report a global Creating Shared Value Report, Previous reports have focused on concerning our corporate social specifi c topics or regions, as detailed responsibility and sustainability. It is below: an integral part of our reporting G The Nestlé Water Management and a companion document to our Report – 2006; 2007 Management Report. Information G Nestlé, the Community and the UN covers Nestlé’s global operations for Millennium Development Goals – 2006; the year ending December 2007, unless G The Nestlé Concept of CSR as otherwise stated and has been subject Implemented in Latin America – 2005; to external assurance (see page 56). G The Nestlé Commitment to Africa – The report covers those business 2004; impacts of particular concern to our G Faces of Coffee – 2003; stakeholders (see below for how these G Nestlé and Water: Sustainability, impacts have been identifi ed and Protection, Stewardship – 2003; prioritised). More information on a G The Nestlé People Development wider range of topics is available on our Review – 2002; website at www.nestle.com/csv G Sustainability Review – 2001; We fi rst explored the concept of G Nestlé Environmental Progress Creating Shared Value in our 2005 Report – 2001; report, The Nestlé Concept of CSR, G Nestlé and the Environment – 1995. which focused on our Latin American Previous reports are available at operations. Its authors, FSG – Social www.nestle.com/csv/downloads Impact Advisors, led by Managing Director Mark Kramer (also Senior Key issues Fellow at Harvard University’s John F. This report focuses on areas which Kennedy School of Government) then have a signifi cant current or potential challenged Nestlé to provide further impact on the Company, are of evidence. Since then, in conjunction signifi cant concern to stakeholders and with our business areas and over which Nestlé has a reasonable advisers including SustainAbility and degree of control. AccountAbility, Nestlé has identifi ed Working with SustainAbility and and assessed critical issues, developed using their best practice methodology, global performance indicators and we undertook a systematic process engaged stakeholders in debate. to prioritise the issues deemed most The result is this, our 2007 Creating critical to the Company, drawing on Shared Value Report, a fi rst step the opinions of investors, civil society towards providing evidence that the groups and the media, and then successful creation of long-term assessed them with Nestlé executives. shareholder value is dependent also on Five areas were identifi ed and the creation of value for society. prioritised for inclusion in this report: G Manufacturing and our environmental footprint: Managing operations with respect to the environment; and how responsible safety, health and environment practices create a more effi cient and cost-effective business (pages 10-19);

6 The Nestlé Creating Shared Value Report

  Creating Shared Value at each stage of the value chain

Agriculture and rural development Environment, Products and consumers manufacturing and people

Expertise and Providing ongoing Investing in local Building brands Increasing support for farmers R&D and expertise manufacturing plants through responsible volume and for suppliers marketing value of sales

Value for Securing supplies Improving Lowering Entering new and Achieving of high-quality raw community manufacturing and emerging markets competitive Nestlé materials relationships and distribution costs shareholder returns product quality

Value for Improved yields and Reducing Creating jobs in local Widening access to Generating local increased incomes consumption of communities nutritional products investment and society natural resources consumers prefer economic growth

G Our people: Acting as a responsible Reporting boundary and scope employer (pages 20-25); Data is provided for Nestlé’s wholly G Agriculture and rural development: owned companies and subsidiaries, Nestlé’s approach to agricultural excluding joint ventures and suppliers, sourcing (pages 26-35); unless otherwise stated. As part of G Nutrition, Health and Wellness: continuously developing our approach Nestlé’s strategy of improving Nutrition, to shared value creation, we will Health and Wellness as a driver of explore the possibility of widening the business growth (pages 38-43); scope of our reporting. G Marketing and communication: The environmental data refer Marketing based on improving to factories only, including Cereal information concerning nutrition Partners Worldwide and Dairy Partners and health in a responsible way Americas. Alcon reports separately. (pages 46-51). Health & Safety ﬁ gures cover all Nestlé employees, as well as approximately The business case for Nestlé: 61 000 contractors. simultaneous beneﬁ ts for Nestlé and society Nestlé’s long-term objective is to create sustainable value for its shareholders. To do this, we need to create value for the societies where we operate. The diagram above shows how Nestlé’s actions at each stage of its value chain are driven by its business strategy, but also create value for the societies where we are present. Look closer @ nestle.com Complementary video and slide- show material is summarised in “look closer” boxes throughout this report. At www.nestle.com/csv, you can also listen to audio content, and read case studies, policies and publications on Creating Shared Value.

The Nestlé Creating Shared Value Report 7

  Nestlé has a strong corporate A framework for Creating Business culture, which unites people from Shared Value widely different backgrounds in over Nestlé’s approach is based on: Principles 100 countries in a single corporate G A long-term view; culture built around basic human G Strong presences in, and and values and principles. Our fi rst principle understanding of, countries and is that our investments must be good cultures; strategy for the Company and for the countries G Responsibility and accountability. where we do business. To deliver shared value we will also: Business Principles G Continue to develop new skills in The Nestlé culture and relationship to response to rapidly changing markets stakeholders is expressed in the: and operating conditions; G Nestlé Corporate Business Principles; G Continue to apply our global G Nestlé Management and Leadership principles and standards consistently Principles; and rigorously in all countries; G Nestlé Code of Business Conduct. G Foster sustainable development Global policies on nutrition, in partnership with others, not just in marketing, environment, occupational our own direct operations, but also health and safety and human resources by collaborating with others on wider support these principles. Nestlé’s issues where we can bring infl uence principles and policies are available for and leadership to bear; download from www.nestle.com/csv/ G Understand and address the risks downloads and opportunities raised by our most Key management tools include the critical sustainability impacts; Nestlé Environment Management G Address them by strengthening our System (NEMS) and our HR governance and management systems; Management System. Formal and G Develop clear goals – fi nancial, informal networks of Nestlé experts environmental and social; also share information in order to G Work with our business partners and develop global best practices. stakeholders to deliver shared value. Later sections of this report outline specifi c social and environmental challenges we are addressing in relation to products, consumers, employees, agriculture, sourcing and manufacturing. The diagram opposite summarises Nestlé’s framework for Creating Shared Value.

8 The Nestlé Creating Shared Value Report

  Nestlé’s framework for Creating Shared Value Engaging with our stakeholders To understand the environment in Nestlé Business Principles and commitments which the Company operates, Nestlé to external standards experts throughout the Company

Agriculture Environment, manufacturing Products and consumers engage with consumers, investors and rural development and people and NGOs to inform the actions the company takes, the products we Nestlé social and environmental Nestlé social and environmental Nestlé social and environmental impacts impacts impacts produce and the information we communicate. This year, we have also Nestlé commitments Nestlé commitments Nestlé commitments undertaken corporate engagement and actions and actions and actions with opinion formers; see page 54 for more details. Nestlé also works closely with peers Societal value + Nestlé and shareholder value to develop market-wide frameworks. These include the Sustainable Agriculture Initiative (see pages 33–35) = Shared value and PROGRESS, a forum of leading Fast-Moving Consumer Goods (FMCG) In every part of our value chain, from sourcing to end product, Nestlé Business Principles brand producers supporting responsible and external standards are the basis of all our activities. At every stage, we are committed to managing impacts and delivering beneﬁ ts, Creating Shared Value for Nestlé and society sourcing practices and sustainable production systems.

Auditing and assurance standards Formal governance bodies We ensure rigorous application of G Operations Sustainability Council; principles and policies through auditing G Audit Committee; and assurance standards: G Risk Management Committee; G Compliance against Corporate G Group Compliance Committee. Business Principles in the areas of HR, The Board is the ultimate safety, health and environment is governance body of the Company assured through our CARE programme, and is responsible for the supervision which relies on an independent, of the Group. With the exception external audit network; of Peter Brabeck-Letmathe (Chairman G In addition, manufacturing sites are and CEO), all members of the Board of being progressively certiﬁ ed against Directors are non-executive members. standards including ISO 14001, OHSAS For full information on 18001 and ISO 22000; governance, please see our Corporate G Infant food marketing activities are Governance Report 2007 at independently audited internally and www.nestle.com/csv/downloads externally; G Suppliers are regularly screened and Setting objectives audited. Nestlé has a culture of continuous improvement and generally considers historical performance trends to be more revealing and useful for future planning than setting individual forward targets.

The Nestlé Creating Shared Value Report 9

  Manufacturing and our environmental footprint

Opposite: Water treatment plant, Agbara, Nestlé factories are a major engine Nigeria. Nestlé invests in water treatment plants in developing of rural development and of new countries even when there is no legislation because maintaining environmental quality standards, good water quality in the areas surrounding particularly in developing countries. our plants has direct beneﬁ ts for our business. This plant has Nestlé has made major strides in served as a model for another treatment plant in Tema, Ghana reducing environmental impact, thus helping to reduce costs and ultimately improving proﬁ tability and long-term sustainability.

Creating Value for Nestlé Value for society Shared Value Building high-quality, high-performing Our major investments in rural areas help factories with good and continuously workers acquire new skills and higher improving environmental performance, income, develop local suppliers and supported by strong local businesses, entrepreneurs, and raise environmental enables Nestlé to achieve sustainable standards. proﬁ table growth by meeting the increasing demand for food and beverages. As a company that requires high-quality agricultural raw materials and clean water throughout its value chain we depend on a clean environment and the sustainable use of natural resources to assure the long-term success of our business.

10 The Nestlé Creating Shared Value Report

  Manufacturing and our environmental footprint 11

  18% Proportion of factories certifi ed to ISO 14001 and/or OHSAS 18001 The global context Environmental management Our principle is to manufacture, We have invested signifi cant when possible, in countries resources in the Nestlé from which we source Environmental Management commodities, rather than System. NEMS helps ensure to export the raw materials. compliance with legislation Regional manufacture for and with the Nestlé Policy regional markets means our on the Environment, helps products have fewer miles Nestlé to achieve continuous to travel, resulting in lower performance improvement and transportation costs and contributes towards sustainable less environmental impact. development. Today, about half our factories In addition, we are seeking are in the developing world, external certifi cations for all our located primarily in rural factories in line with ISO 14001, areas, refl ecting our long-term the internationally recognised approach to investment and environmental management our ability to operate in diverse system standard. This provides and complex environments. For a common language and example, Nestlé has operated enables compliance to be in South Africa since 1927 demonstrated more easily to and in Brazil since 1921. And All these facilities have been our stakeholders. we continue to manufacture equipped from their inception 18% of our factories are coffee in Côte d’Ivoire despite with up-to-date environmental certifi ed to ISO 14001 and/or the sporadic violence and technologies, such as plants OHSAS 18001. We aim to civil unrest there over the last to treat the water used in certify 100% of our factories few years. Among Nestlé’s manufacturing processes by 2010. major industrial investments in before returning it clean to the 84% of our factories have Estelle Kouadio works developing countries in 2007 ecosystem. in Nestlé’s Maggi been audited within the scope were: Our key environmental factory near Abidjan, of our CARE programme. G Pakistan: The world’s focus areas are water, energy Côte d’Ivoire, where we have continued largest milk processing plant and packaging. As well our operations in Kabirwala. Investment: as managing these areas despite severe civil CHF 90 million; holistically throughout our unrest in recent years G Brazil: Popularly Positioned business, we are increasingly Product plant in Feira de working along the whole value Santana, Bahia province. chain to positively infl uence Investment: CHF 60 million; how they are addressed beyond G China: Milk processing plant our operations. This helps to in Hailar, Inner Mongolia. improve quality, reliability and Investment: CHF 20 million. costs from farm to fork. For full coverage of all environmental performance areas, including transportation and refrigeration, please visit www.nestle.com/csv/ environment

12 The Nestlé Creating Shared Value Report

  403 Number of factories audited within the scope of our CARE programme

Reducing our carbon Greenhouse gases: CO2 emissions, footprint 2003-2007* Nestlé’s drive for improved 5 energy efﬁ ciency has a 4.74 direct positive impact on 4 4.41 4.31 4.05 our greenhouse gas (GHG) 3.92 emissions. Additional reduction 3 of GHG emissions is achieved through a number of our 2 factories switching to cleaner fuels such as natural gas. 1 Nestlé has reduced GHG 0 emissions by 17.3% since 2003. 2003 2004 2005 2006 2007

We are committed to continue 6 *10 Tonnes our established track record Source: Nestlé of improvement for the At the Nestlé Product foreseeable future. Greenhouse gases: CO2 emissions We recognise the need to Along with over 2000 of the per tonne of product, 2003-2007* Technology Centre continue working with others in Beauvais, France, world’s largest companies, 150 we are working with to implement our strategy Nestlé participates in the 142 partners to develop worldwide. Recent progress 125 Carbon Disclosure Project 133 commercial ice-cream includes: 118 freezers using natural (CDP), in order to share our G Generating energy from the 100 106 refrigerants and strategy and results. This is 95 other new cooling combined production of steam part of our ongoing effort to 75 technologies that and electricity (co-generation), have low energy enable our performance to which improves energy 50 consumption, no effect be benchmarked and drive on the ozone layer and effi ciency and reduces are inherently safe in further improvements. We are 25 greenhouse gases emitted; public use also among a small number G Methane recovery 0 of companies participating in 2003 2004 2005 2006 2007 (methanisation). We a CDP trial to raise awareness increasingly recover methane *kg among suppliers. We are Source: Nestlé gas generated from our water leading this pilot in our treatment plants and we use it own supply chain to inspire Insight Investment, the asset as a fuel. In our Shimada factory performance improvements manager of major institutional in Japan, for example, this has and help address the issue of investor HBOS Group, gave resulted in a 38% reduction in effi ciency and energy savings a 100% score to Nestlé for GHG emissions. beyond our own operations. governance of carbon issues. We have also been identifi ed as the most carbon-effi cient company among the Dow Jones Stoxx 600 food products companies, on the basis of direct GHG emissions per revenue (Merrill Lynch, Carbon Leaders: Quality Win-Win Stocks, 31 August 2007).

Manufacturing and our environmental footprint 13

  Industrial investments: Hailar milk processing plant, China

Nestlé’s state-of- income of around the-art milk factory CHF 500 000 per in Hailar, Inner day, fostering Mongolia was opened rural sustainable in July 2007 with development for an investment of the communities over CHF 20 million. concerned. At least Since Nestlé began 200 000 people beneﬁ t investing in China directly and indirectly two decades ago, from Nestlé’s milk we have opened activities in China. 21 factories and Hailar was one of today employ about three major Nestlé 13 000 people. Nestlé investments in rural buys fresh milk from regions in 2007, some 40 000 Chinese the others being in farmers and Pakistan and Brazil provides them with an overall regular

14 The Nestlé Creating Shared Value Report

 

Energy consumption, 2003-2007*

2.83 Integrating CSR concerns 2.73 into a company’s strategy – 2.42 2 2.21 instead of considering them 2.08 merely as add-ons – is central to implementing this concept meaningfully. 1 For developing countries, this also means giving special attention to 0 2003 2004 2005 2006 2007 developmental concerns,

9 *10 Joules (GJ) per tonne of product such as upgrading local Source: Nestlé suppliers, training and We have reduced our energy usage by 3% from 1998 to 2007 transfer of technology. while in the same period to develop a global reporting Co-generation plant at Nestlé is certainly taking a increasing our production volume standard and indicators on Mainz coffee factory, by 76%. Our objective is to Germany, where number of exemplary steps sustainability in the food achieve annual energy savings of spent coffee grounds in this direction 1%-2% per tonne of product over sector. Nestlé is also among are used as fuel the next fi ve years 150 companies calling for a comprehensive, legally binding We have also recently UN framework to tackle climate aligned our reporting of GHGs change, in a communiqué to internationally recognised published by The Prince of standards (Greenhouse Gas Wales’ Corporate Leaders Protocol, WBCSD/WRI 2004) Group in December 2007. so as to present an accurate For more information, and consistent account of please visit www.nestle.com/ Karl P. Sauvant, Ph.D., Executive our emissions through the use csv/climatechange Director, Columbia Program on of standardised approaches International Investment, and Co-Director, Millennium Cities Initiative and principles. Improving our energy We are among the fi rst effi ciency food companies to join the Nestlé improves its energy Global Reporting Initiative effi ciency, saving around multi-stakeholder programme CHF 33 million in 2007 through these efforts, mitigating the impact of soaring energy prices. In addition, we also use renewable energy sources, such as coffee grounds generated in our coffee factories, to reduce our reliance on non-renewable fuels. Nestlé invests signifi cantly in raising awareness, training and technical improvements (approximately CHF 40 million annually).

Manufacturing and our environmental footprint 15

 

Reducing our water Aquapod is an consumption innovative form of packaging that We are committed to appeals to children, becoming the most effi cient encouraging them water user among food to choose water in preference to manufacturers. Reduction of sweetened soft drinks water consumption has been part of management practice at plant level for many years. A formalised, company-wide effort initiated in 1997 has achieved further signifi cant effi ciencies. Nestlé Waters is the world’s bottled water leader but withdraws a very small percentage of global Water withdrawal versus production volume, 1998-2007* freshwater usage annually. Production volume Water withdrawal Total volumes withdrawn by 200 Nestlé Waters represent no 180 more than 0.0009% of all 160 water withdrawn by humans. 140 More than half of this 120 water goes directly into the 100 72 bottled water brands we 80 sell worldwide and quantities 60 withdrawn are strictly aligned 40 with bottling unit needs. The 20 rest is mainly water used 0 % 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 for operational processes *Relative to index 1998 and cleaning. The amount Source: Nestlé of additional water we need Since 1998, Nestlé has increased its food production volume by 76%. Over the same period we have reduced our water withdrawal by 28%. to produce 1 litre of bottled We aim to reduce annual consumption per tonne of product further by water is currently 0.81 litres. 2%-3% over the next fi ve years Through rigorous practices in the production process, this represents a reduction of Bottled water, health Nestlé Waters strives to be a around 34% over 6 years. and environment responsible water user, working There is growing consumption in line with local regulation of bottled water, and level or as well as our own business decreasing consumption of standards. A dedicated team of sugared soft drinks. This is hydrogeologists provides advice positive for health, but does and monitors the water sources this growing consumption of to ensure good stewardship. bottled water have a negative This is both for the benefi t of environmental impact? society, and for Nestlé to be able to sustain a long-term

16 The Nestlé Creating Shared Value Report

 

business. Bottled water also uses far less water than other bottled drinks. 70% of the world’s water is withdrawn by agriculture, while bottled water uses very little. Transportation is an issue to be addressed, and we are working to shorten the distance from source to consumer. Regarding use of plastics, Nestlé has developed the lightest-weight bottle in the industry, which is also twice as light as soft drink bottles. The issue of waste produced by discarded water bottles is part of a wider problem that only recycling will solve. While water bottles make up less than 1% of refuse in public dumps in the USA, plastic bottles can be recycled, melted and reused. Nestlé supports a wide variety of recycling initiatives, including the recent New York marathon, where we worked with the New York Road Runners to At the Gerber baby food Returning cleaned water Organic load in waste water, 2007* factory in Fremont, recycle all the 75 000 containers to the ecosystem Before purification After purification Michigan, water used to provide water to the used in primary plant Our fi rst objective is to minimize 120 000 competitors. But much remains processes (such as the volume of water used in to be done in recycling of all washing raw materials, our operations. Secondly, we 107 500 pictured) is recycled 90 000 types of refuse, which must be for secondary uses (for continue to invest in plants tackled as an integrated system. example, washing fl oor to treat water after it has In the majority of places where drains). It is then piped been used in manufacturing, 4 miles down the road 60 000 we sell bottled water, most to the Gerber 450 acre returning cleaned water to consumers also drink tap water. farm to irrigate crops the ecosystem. We decrease However, the convenience that are grown to the organic burden to the 30 000 produce animal feed of chilled water in a bottle for local farmers environment by treating water continues to be increasingly to remove the vast majority of demanded by consumers and organic pollutants. 0 6 250 *Tonnes Chemical Oxygen Demand (COD) preferred to soft drinks. Source: Nestlé Treated water leaving Nestlé factories is returned cleaned to the ecosystem, containing reduced levels of COD (Chemical Oxygen Demand, or organic pollution in water) after purifi cation in Nestlé plants

Manufacturing and our environmental footprint 17

 

Left: Khun Taleungkiet at the Chachoengsao coffee factory in Thailand, testing the quality of water that has been treated for re-use. It is our ﬁ rst “zero water discharge” factory that recycles almost all water, either in cooling towers or for irrigation of an adjacent coffee nursery

Optimizing packaging Packaging is essential for food safety and freshness, and it also provides consumers with nutritional and environmental information at point of purchase. Nestlé has adopted an integrated approach: Key challenge reducing materials used where feasible; providing Sustainable water use to improving the management meaningful information to As populations rise and of water outside our direct consumers about recycling and standards of living improve, operations. We support recovery; developing recyclable demand for fresh water is Project WET, an education packaging from renewable forecast to increase. Over programme promoting water resources; and supporting the 1 billion people currently lack stewardship. Since 1992 this development of public recycling access to water and over has reached several million schemes. 2.4 billion lack access to basic children in over 20 countries. We have reduced the volume sanitation. Nestlé needs access Agriculture withdraws some of packaging material used per to clean water to conduct its 70% of available freshwater litre of bottled water by 22% business, consumers need globally so we are increasingly over the last 6 years, saving it to prepare many of our working to help our supply 257 000 tonnes of packaging products, and our supply chain chain to improve their practices material. We also continue to partners need it to produce the through our extensive network develop innovative packaging agricultural raw materials we of agricultural advisers materials. We were the ﬁ rst rely on. (see Agriculture and rural company in Europe to introduce development section). As a Plantic, a biodegradable Our response founding signatory of the UN alternative to plastic, made We have reduced water Global Compact CEO Water from renewable resources, for withdrawal in our direct Mandate in July 2007, Nestlé packaging manufactured food operations by 28% since has also invited business products. 1998. At the same time leaders to address the global our production volume has challenge of water access and increased by 76%. As well scarcity. as managing our direct Read more at water consumption, we are www.nestle.com/csv/water increasingly contributing

18 The Nestlé Creating Shared Value Report

  CHF 583.7 million Cost savings from optimized packaging volumes over 16 years Assessment, which follows the latest methods established in international standards (ISO 14040:2006 and ISO 14044:2006) and has been reviewed by a panel of four external experts. For more information, please visit www.nestle.com/ csv/packaging

Looking ahead We will continue to develop our environmental management, with a focus on: G Maintaining continuous improvements in our environmental performance; G Encouraging our business partners to apply environmental management systems based on the ISO 14001 international standard in their own operations; G Communicating reliable environmental information to Communicating spoon and including recovery consumers in a meaningful and environmental information of packaging. This results from straightforward way. on our packaging the weight reduction achieved We provide our consumers by replacing a glass jar with and business partners with a plastic pot, as well as clear, accurate environmental energy savings from the new information based on scientifi c manufacturing process and evidence. Different means the energy recovered from exist to communicate this used plastic pots. It has been Above left and above: information effi ciently. One substantiated by a Life Cycle NaturNes baby food option is the packaging itself. being microwave- For example, our new NaturNes tested at the Nestlé technology centre in baby food pot shows that Singen, Germany, to it requires less energy and confi rm the optimum settings and methods produces fewer CO2 emissions for uniform heating than the previous version – of the product by over its life cycle from farm to consumers. Information on product use and packaging recycling is communicated clearly Look closer @ nestle.com on-pack Watch a video on energy effi ciency in 4C coffee production at www.nestle.com/csv/stories

Manufacturing and our environmental footprint 19

  Our people

Opposite: Workplace safety at Nestlé is Long-term investments in training give non-negotiable. Whether working at the Nestlé people better job opportunities Shuangcheng milk factory in China or at our other operations and increased income, and provide worldwide, the same universal standards of Nestlé with a skilled workforce to safety are applied manufacture food products. Our principle is that each employee should have the opportunity to develop his or her potential in a safe and fair workplace where they are listened to, respected and valued.

Creating Value for Nestlé Value for society Shared Value By maximizing the performance of our Nestlé offers employment opportunities people and ensuring they have the worldwide, providing the potential motivation and skills to perform to their full for a better standard of living and potential, we achieve superior business self-development. results and future sustainable growth.

20 The Nestlé Creating Shared Value Report

  Our people 21

  276 050 Number of employees worldwide

Health and safety at work Total Injury Rate and Lost Time The Nestlé Occupational Health Injuries, 2003-2007* and Safety Management Total Injury Rate Lost Time Injuries 20 System (NSMS) was revised in

line with the 2007 edition of the 19.6 international standard OHSAS 15 18.6 18001 and reissued to all Nestlé operations, reinforcing 10 12.2

our commitment that “Safety 10.6 9.1 is non-negotiable”. We are 9.7 7.0 5 7.5 also working towards external certifi cation of our factories 4.8 against OHSAS 18001. This will 0 3.7 2003 2004 2005 2006 2007 provide a common language *Per million hours worked around our health and safety Source: Nestlé management systems, and In the period 2003-2007, the number of injuries with time away make it easier to demonstrate from work per million hours implementation of these worked (for employees and contractors) reduced by 65%. standards to our stakeholders. Our aim for 2008 and subsequent Despite our continuous years is to continue to reduce efforts to prevent accidents injuries by 10% or more every year The global context and foster a culture of safety, Nestlé has a strong corporate we deeply regret that there Also of high importance culture which unites more were 15 fatalities in 2007 due is the independent audit than 275 000 people from over to accidents while at work programme, CARE, which 100 countries. 34.5% of our (11 employees, of which 8 were reviews Nestlé’s compliance workforce is in Europe, 38.3% traffi c accidents offsite – often with our Corporate Business in the Americas and 27.2% in challenging rural areas with Principles ( available for in Asia, Oceania and Africa. poor and limited infrastructure – download at www.nestle.com/ Around half of our employees and 4 contractors). csv/downloads) in the areas of work in developing countries, A key requirement of NSMS human resources, safety, health with a high proportion Nestlé depends on a is to ensure that Behaviour- and environment, including skilled and motivated employed in their country of workforce for Based Safety (BBS) is in compliance with local laws. origin. In Africa, for example, continued success. place in all our factories and only approximately 3% of our Mechanic Frank distribution centres. Nestlé’s A fair workplace McClamma and workforce is not originally from machine operator BBS programme concentrates Nestlé has a strong that continent. Leconya Rhym at the on awareness-raising and management framework which Nestlé Waters factory personal and interpersonal guides employee relationships. in Madison, Florida, manufacture Aquapod, responsibility for safety and is Principles are laid down in the an innovative concept critical in reducing accidents. Corporate Business Principles in encouraging In addition and in recognition and Human Resources Policy, children to drink water in preference to of the employee deaths due to with guidelines adapted to local sweetened soft drinks traffi c accidents, a major focus laws and norms. It is our policy on road safety will commence to abide by national laws in all in 2008 to help minimize countries in which we have vehicle-related accidents. operations and to comply with the ILO conventions on child labour and fair employment.

22 The Nestlé Creating Shared Value Report

 

Nguyeãn Thanh Tuaán Key challenge and Nguyeãn Vaên Tuaân at the Dong Nai factory in Vietnam, Empowering high- keeping ﬁ t in their performing teams lunchbreak by playing Within diversiﬁ ed, table tennis. Nestlé runs wellness-at- decentralised operations in work programmes emerging as well as developed worldwide economies, our key challenge is to continuously build local capacity, expertise and leadership to raise standards across the board.

Our response Nestlé continuously promotes a culture of engagement Nestlé’s compliance with Listening and responding and performance and strives local laws and with our to employee views towards best practice. For Corporate Business Principles Businesses throughout example, we have introduced is verifi ed through CARE, our Nestlé listen and respond to Mission Directed Teams independent audit programme, employees. Nespresso globally (MDTs) in a number of our which covers areas of human conducted an independent operations. Each MDT is resources, occupational health survey, which provided a mini-business focused & safety and environment. For constructive feedback from on delivering high-quality environmental performance, employees on a range of products and services to see the Manufacturing and topics. A clear fi nding was that other internal MDTs. Early our environmental footprint Nespresso employees wanted results from pilots in our section on pages 10-19; for the business to take a fresh manufacturing plants show occupational health & safety, see look at internal communication. value being delivered through the graph on the opposite page. Nespresso responded effi ciency gains, higher levels Nestlé respects the fi rstly by running structured of engagement and service right of employees to form workshops to help translate improvements. For example, representative organisations opinions into action. Various MDT made a signifi cant and to join (or not to join) initiatives were implemented contribution in Blacktown, trade unions, provided this as a result. These range from Australia, where past results right is freely exercised. It new opportunities to meet have shown customer is our policy to govern the and share (“mystery lunches” complaints falling by 33% on relationship with unions in and monthly departmental prior year (a key focus was accordance with national laws product quality issues), and and the practices outlined in absenteeism reduced by 6.5% the Nestlé Corporate Business to below 3% of hours worked. Principles. There are Collective Bargaining Agreements in 19 developing countries, covering 39 340 employees.

Our people 23

  Developing future leaders

We need to maintain a global pipeline of talented people who can help us keep our competitive advantage and achieve sustainable growth. We have 917 global Key Business Positions and have, in 2007, identifi ed around 3000 current employees who have the potential to fi ll these and other key positions. Other key statistics: G For every global Key Business Position, there are more than two successors on average; G 24% of leadership positions (defi ned as having people management responsibilities) are occupied by women. With manufacturing processes, headquarter operations and R&D capacity structured to build signifi cant local presences, Nestlé relies on competent local workforces and leadership. 42% of Local Management Committee members in developing countries are native to that developing country.

Nestlé employees undergoing intensive training courses at the Rive-Reine International Training Centre, Switzerland

24 The Nestlé Creating Shared Value Report

 

meetings) to improved Building our capabilities information sources (intranet We need to build the By investing in safe and publications library). In capabilities required for workplaces, and addition to business-speciﬁ c short- and long-term success surveys like Nespresso’s, through on-the-job experience, empowered, well-trained Nestlé is conducting a global coaching relationships and and professionally employee survey. This is off-the-job learning. In 2007, developed people, currently underway, and we will 65 647 employees in businesses at once create be able to report on it in future 33 developing countries increased productivity and publications. received formal classroom loyalty for themselves, training. but also enhance the Supporting employees local talent pool. This through business changes phenomenon is especially In March 2004, Nestlé Purina acute in developing PetCare (NPCC) announced countries and is evident the intention to close their in particular for large pet food canning factory in Barrhead, Scotland, due to companies like Nestlé the continuing downturn in who are integrated into the canned pet food industry. developing country The age and layout of the societies factory ruled out any potential upgrade to dry or foil-sealed pet foods. 206 people were employed at the factory. NPCC formed a resettlement team made up of management and unions, which worked in close partnership with local job and training agencies. Employees were supported with job search Rob Goffee, Professor of Organisational Behaviour, London Business School services, CV preparation, careers and training advice, a jobs fair and pension advice. 197 of the former employees responded to a post-closure survey. 85% of respondents had used the services provided. 96% rated out of 10 (most positive) the services at 5 or above. 62% of respondents were in work approximately three months after exit from the plant, with only 7% still actively seeking employment at the time of the survey. Others speciﬁ ed “taking a break”, “still with Company” and “Further/ Higher Education”.

Our people 25

  Agriculture and rural development

Opposite: Mrs Asso Kofﬁ , owner of a Nestlé spends approximately cassava plantation from which Nestlé purchases supplies, CHF 13 billion a year on agricultural with Pondo Kouamé, head of Nestlé agricultural services materials such as milk, coffee and in Côte d’Ivoire. Nestlé is supporting cocoa. So, although we do not own government and UN efforts in West Africa designed to increase any agricultural land or operate the quantity and quality of production, as cassava plays a vital commercial farming activities, role in employment of African famers and we seek to improve farmers’ living in feeding millions of people throughout the continent standards, environmental practices and water usage. This gives Nestlé access to high quality raw materials.

Creating Value for Nestlé Value for society Shared Value By engaging closely with the communities Thousands of farmers use our advice that supply us with agricultural and technical assistance to produce commodities, we benefi t from a more greater yields of higher quality crops secure supply of better quality raw using fewer resources, which benefi ts the materials, which lowers our procurement environment and increases their income. costs (due to fewer middlemen, fewer Rural communities also gain from wider defects and reduced waste), and results employment and economic development in better end products, helping to ensure opportunities. Consumers also know consumer preference and profi table growth the products they buy are safe, of high for our brands. quality and produced using sustainable agricultural practices.

26 The Nestlé Creating Shared Value Report

  Agriculture and rural development 27

 

The global context The world currently faces three major issues that particularly inﬂ uence the future of our business and our industry. They are: G The growing demand for food in countries like China and India because of improving family incomes; G The growing scarcity of water globally; G The continued poverty, ill health and lack of purchasing power of over 2 billion people in rural areas. The problem of water scarcity must be addressed while increasing production of food, and at the same time, we must work to bring rural communities into the cash economy with adequate access to nutrition, water and sanitation.

Rural development Our team of 675 hundreds of farmers in Zhengjun Wang, Nestlé has a long history of agronomists and approximately northern Thailand to grow who owns nine cows and six calves, has helping farmers to be better 5000 extension workers Arabica coffee. They receive been supplying milk and more prosperous suppliers. and contractors currently practical training on coffee to the Nestlé plant This has a positive long-term offers support and training fertilisation, irrigation and in Shuangcheng, North-East China, impact on economic and assistance to 111 800 farmers harvesting techniques, which since 1990. A Nestlé environmental development via 28 projects in 21 countries helps their coffee to command project in the milk and standards of living, as well as maintaining a higher price. We have taken district now provides farmers with proper sometimes helping entire ongoing dialogue with a similar approach in Yunnan manure storage regions to increase agricultural traders, governments and Province, China, where Nestlé facilities, which productivity and economic NGO partners. There are no has set up a training centre, reduces impact on water sources and performance. This often begins conditions attached to the demonstration farm, nursery also creates a biogas by helping farmers through assistance we give and farmers and buying station. energy source for agricultural programmes that are not obliged to sell their farmers’ homes share good environmental and produce to Nestlé. water management practices. Such projects secure supplies of higher-grade raw materials, which ensure we can maintain production of high-quality end products. For example, Nestlé’s Doi Tung Experimental and Demonstration Farm helps

28 The Nestlé Creating Shared Value Report

 

United Nations Development Key challenge Programme Partnership A joint programme between Biofuels the UNDP, Nestlé Pakistan In addition to being a source and Engro Foods has trained of food, some crops such as 4000 women agricultural maize and wheat can also be advisers, whose assistance and grown as a source of energy. advice is helping to increase Such “biofuels” are considered milk production among dairy by some to be a long-term, farmers in rural Pakistan who low-carbon energy option. supply fresh milk to Nestlé. Nestlé believes that To build confi dence in decisions about energy the milk trade, Nestlé India sources must be based on established well-equipped cost–benefi t and life-cycle milk collection centres, and its analysis, and should consider fi eld staff provide farmers with their full social and technical assistance and advice More than 4000 women Each of the key regions environmental impact, about animal health, breeding in Pakistan are learning from which Nestlé sources including the effects on food new agricultural and fodder production. This skills, such as raising its products has its own prices and water. Current has helped to raise the quality livestock and managing political, socio-economic and biofuel production has and value of the milk produced water resources, environmental conditions, but contributed to signifi cant price through training by 85 000 farmers, and, we provided by Nestlé Nestlé works to protect the increases and is likely to believe, improved the health security of its supply, the quality eventually create food and economy of the local of the resources available, shortages for millions of community. Nestlé is also and rural employment and low-income consumers. working with schools and development. Agriculture already withdraws local associations to improve For example, soil erosion can 70% of available water drinking water and toilet be a challenge in mountainous sources, and with every litre of facilities in schools within the countries with heavy rainfall biofuel from irrigated maize or milk district serving the Moga like the Philippines. Nestlé’s soybeans requiring up to factory, while another project agricultural experts have 5000 litres of water to helps to fund medicines for a worked with the Ministry of produce, any large-scale local tuberculosis clinic. Agriculture and local coffee expansion will make water farmers to implement the SALT even more scarce. Sourcing profi le (Sloping Agricultural Land Furthermore, depending on Nestlé buys CHF 8 billion of Technology) programme. By crop type and location, agricultural commodities from planting along contour lines and greenhouse gas savings emerging economies every using vetiver grass to bind the compared to fossil fuel can year – around two-thirds of the soil, erosion has been reduced actually increase in Company’s total expenditure by up to 90%, soil fertility some cases. on raw materials – and nearly has improved and crop yields 40% goes towards three key increased. commodities: milk, coffee and cocoa. Over half a million farmers (610 000) supply Nestlé directly.

Agriculture and rural development 29

 

Nestlé sourcing profi le, 2006 Milk Coffee Cocoa* 11 850 000 tonnes 750 000 tonnes 370 000 tonnes Food businesses in CHF 4000 million CHF 1600 million CHF 930 million particular have a signifi cant Other: fruit, vegetables and cereals partly sourced directly from farmers; sugar, oil, meat, spices and other ingredients sourced through trade interest in enhancing *Cocoa beans, powder, butter and liquor Source: Nestlé agricultural productivity and sustainability. World Milk and farmers are assured regular population is rising rapidly, Nestlé is the world’s largest payment at a fair price. and fortunately more and milk company, sourcing Nestlé’s milk district model, more people are emerging 11.8 million tonnes of milk from introduced in Switzerland in from poverty. They are more than 30 countries. But as the 1870s, has been replicated demanding more and rising disposable income levels and adapted for use in Latin better food, creating great in developing countries lead America, the Caribbean, Asia opportunities for farmers to greater demand, securing and Africa – and most recently and the food industry. The a plentiful supply of fresh, in Inner Mongolia. On average, challenge, though, is to high-quality milk in economical milk districts are growing by make sure this demand can and effi cient ways remains 2–5% annually, and some by a challenge. as much as 10%, generating be met, not just today and Nestlé’s approach includes millions of dollars into rural tomorrow, but in the long the development of milk economies every year. run – in spite of the world’s districts, which involves Caquetá, a poor and sparsely limited resource base. And regular purchasing of milk populated region of Colombia nowhere is this more from local farmers, regardless with over 1 000 000 hectares evident than in the area of of how much or how little of grazing land, is home to water security. Companies they produce. It also requires a Nestlé milk district. Over that actively engage in adapting or installing collection, the last 30 years, Nestlé has helping agriculture – as storage and chilling facilities, installed three plants and the biggest water user – and arranging transportation 220 cooling stations, and enhance sustainable water to a local factory. Such regularly provided 2800 farmers use, are investing in their investments demonstrate to with technical advice on animal local communities that we will nutrition, farm development own supply chain security be there for the long term. and road construction to Local communities also improve the quantity and benefi t from much more than quality of their milk. just a market for their milk. Training is provided through Nestlé agronomists and fi eld technicians, and sometimes in partnership with a local college

or university. Quality control, Professor Stefan Tangermann, traceability and food safety Director for Trade and Agriculture, OECD systems are also put in place, ﬁ nancial support is available,

30 The Nestlé Creating Shared Value Report

  97 500 Tonnes of coffee sourced directly from farmers Coffee Coffee is the second most traded commodity in the world after oil, and grows best within the “coffee belt” between the tropics of Cancer and Capricorn that spans Latin America, Africa and Asia. For many countries, coffee is a valuable export, and for some communities, its cultivation is the primary economic activity. The coffee supply chain is extremely complex, with 80% of farmers operating as smallholders with a few hectares of land or less. Around 25 million smallholders depend directly on coffee farming for their livelihoods, and a further 100 million people are involved in the industry as a whole. Nespresso AAA Sustainable Working closely with In coffee-producing Quality coffee the Rainforest Alliance, our countries where we have Only about 2% of the world’s commitment includes: factories, our direct buying speciality grade coffees G Paying farmers a premium system allows farmers to deliver meet the specifi c profi le of price for their AAA coffee; coffee directly to our buying Nespresso’s Grands Crus. So G Setting out the practices stations. Nestlé’s seven buying to ensure a consistent supply in required by the AAA standard; stations in southern Thailand, the future, we encourage and G Analysing the data from Nestlé agronomists for instance, receive coffee from and Colombian reward farmers who grow such the independent verifi cation about 20 000 farmers who, by producers share best grades, developing lasting, process conducted by avoiding intermediaries, receive practice methods for mutually benefi cial relationships Rainforest Alliance; coffee-drying, just a higher price. one of the sustainable and improving traceability in the G Providing technical training Nestlé purchased agriculture topics supply chain. and assistance to farmers; 750 000 tonnes of green coffee discussed as part of a “AA” has always stood for G Investing in wider week-long exchange in 2006, about 13% of it directly of ideas and learning the highest-quality coffee, community projects. from farmers, making us the under the Nespresso but in 2003, Nespresso In 2007, 35% of the total world’s largest direct purchaser. AAA Sustainable incorporated an additional “A” green coffee beans Nespresso Quality Programme Nestlé also offers coffees for sustainability. The resulting purchased came from farms which are Fairtrade certifi ed (or Nespresso AAA Sustainable in the AAA Sustainable Quality other certifi ed coffees), where Quality Programme draws on Programme. This is an increase consumer or retail customer our relationships with suppliers from 25% in 2006, and we have demand is suffi cient. Nescafé and partners to ensure our committed to increase this to Partners’ Blend is one example. coffee is produced to the 50% by 2010. highest quality standards but also considers the social and economic value for farming communities and its environmental sustainability.

Agriculture and rural development 31

 

The AAA Sustainable Quality Programme has been rolled out in Mexico, Guatemala, Costa Rica, Colombia and Brazil. ( See www.nespresso.com At this Nestlé- for further information) sponsored farmers’ In November 2007, the fi eld school in second AAA Sustainable Quality Nobertkro, South-West Côte d’Ivoire, topics Coffee Forum took place in include responsible Costa Rica. ( Read more at labour practices, www.nestle.com/csv/AAAforum) the importance of schooling for children In 2006, Nespresso and and sustainable TechnoServe initiated a three- farming methods. year sustainable development Cocoa from farms like this will be used project in Caldas, Colombia, in leading Nestlé to help coffee farmers chocolate brands improve the quality of their manufactured at York in the UK coffee and their yields, and achieve higher prices as a consequence. The total investment of CHF 847 000 – including CHF 472 000 from Nespresso and TechnoServe – is being used to improve farm productivity, establish a pricing system and help build new laboratories. By 2011, Cocoa G Working closely with West the investment is expected to Although Nestlé does not African governments, labour have generated an additional own any cocoa farms or experts and other industry CHF 3.5 million GDP in the plantations, we are committed partners to implement a Caldas region – around 20% to contributing to more system of certifi cation for (CHF 880) extra per farmer – sustainable cocoa growing cocoa-growing regions, which and enabled Nespresso to buy through programmes run with will help to improve the lives 25 000 bags (1500 tonnes) of other members of industry, of children and families on AAA green coffee. governments in the producer cocoa farms by identifying countries of West Africa, and non-compliance with ILO other partner organisations. convention 182 regarding child Nestlé is: labour and taking corrective G A founding participant in the action where problems are International Cocoa Initiative identifi ed; (ICI), a joint industry – labour G A member of the World union and civil society initiative Cocoa Foundation, which which works to eliminate child supports cocoa farmers and traffi cking and abusive labour their families worldwide. practices; Nestlé is also funding a three-year sustainable cocoa project with three co-operatives of about 3000 farmers in Côte d’Ivoire.

32 The Nestlé Creating Shared Value Report

 

This scheme, in conjunction Children in Kaleke, Key challenge with the International Cocoa India, at a well built in their school as part of Organization (ICCO), the a Nestlé partnership Water management ICI, cocoa exporter ECOM to bring clean water in agriculture Agroindustrial and local non- to villages in the milk Agriculture uses nearly collection district governmental organisation around its Moga factory three-quarters of the world’s FEMAD (Women, Action and available fresh water, so Development) aims to improve good water management cocoa farmers’ incomes, is fundamental to the protect the environment, livelihoods of farmers and combat child labour, improve their communities. Many school attendance and increase programmes around the HIV awareness. Further projects world help to train agricultural in West Africa are under workers to address issues development. such as irrigation, water scarcity and sanitation. Initiatives and partnerships These include the UN Global G Teaching Vietnamese coffee Nestlé actively participates Compact CEO Water Mandate, farmers effi cient irrigation in a number of international a public-private initiative techniques expected to reduce initiatives and cross-sector between the United Nations water use by 60%; partnerships that promote Global Compact and a group G Supporting a local sustainable agricultural of committed companies and government programme practices. Of particular organisations launched in to help farmers in the signifi cance are: July 2007. Shuangcheng milk district, China, to store farm Common Code for the Our response effl uent correctly to avoid Coffee Community (4C) As a founding signatory of contaminating groundwater. See page 34 for more details. the Mandate, Nestlé is a vocal In 2000, the Sustainable public advocate for access to Agriculture Initiative Nestlé Sustainable Agriculture clean drinking water, and has (SAIN) was launched Initiative (SAI) made considerable efforts to to promote sustainable The Sustainable Agriculture share knowledge and best agriculture and improve Initiative of the Food Industry practice on agricultural water effi ciency and risk (SAI-Platform), co-founded in use and protection. These management. To provide a 2002 by Nestlé, Danone and include: systematic framework for Unilever, now involves 22 major G Providing 85 water wells in Nestlé’s many water-related food trading and producing schools in villages within the projects, the Company has companies. Its main objectives Moga milk collection district in made water a key SAIN activity. are to address: India; G Quality and safety in the food G Working with milk supply chain; producers in South Africa G The growing global demand to use more effi cient tillage for food; practices, night-time irrigation G The possible adverse effects and computerised irrigation of agriculture on natural systems; resources and the environment.

Agriculture and rural development 33

  Common Code for the Coffee Community (4C)

The Common Code for the Coffee Community (4C) builds on a voluntary code of conduct adopted by the coffee producers, traders, civil society and other stakeholder organisations that form the not-for-profi t 4C Association, who are committed to good farming and management methods to improve effi ciency, roasters and manufacturers, Top left: Mrs Vo Thi Above left and right: profi tability, transparency and are now represented among Thinh, a coffee farmer Auditors visit a farm to in Vietnam, delivers verify that its farming sustainability in the production, the 72 members of the 4C her fi rst lot of coffee and management processing and trading Association. Nestlé will receive verifi ed under the principles adhere to of coffee. 4C coffee in 6 of our coffee Common Code for the the 4C Code, and Coffee Community check coffee quality. By December 2007, factories by the end of the fi rst (4C) scheme, having Top right: Coffee- approximately 6 million 60 kg quarter of 2008. taken part in 4C drying on a bags (360 000 tonnes) of Read more online at training and produced Vietnamese farm her coffee in line with coffee, 6% of the world’s www.nestle.com/csv/stories the Code supply, was 4C-verifi ed, and and www.sustainable-coffee.net more than half of the global coffee producers, as well as the largest trading houses,

34 The Nestlé Creating Shared Value Report

  6% Proportion of world coffee supply currently 4C-veriﬁ ed Within the SAI framework, Furthermore, we make clear Nestlé has worked with farmers our expectations with regard to develop best practices in to the social conditions of the milk production, and coffee, farmers we buy from, with child cereal, fruit and vegetable labour and employee health and growing. It also plans to expand safety all high priorities. these activities to all main raw Detailed policies and materials and to issues such guidelines concerning our as use of water in agriculture position on these and other and biofuels. Through its issues can be found at www. coffee working group, Nestlé nestle.com/csv/downloads is involved in three sustainable All measures taken to support coffee production pilot environmentally sound projects, each undertaken in business practices and improve collaboration with a major environmental performance trade partner: are set out in Nestlé’s Policy on G ECOM in Nicaragua; replicate best practice across As part of the Nestlé the Environment. G Volcafé in Guatemala; all key sourcing areas, continue Sustainable Agriculture Initiative, this project G NKG Partnerships in building partnerships and in Vietnam is passing Direct Purchasing guidelines Vietnam. deliver measurable results. on expertise in Nestlé is aware of the strain Find out more at Nestlé is also a member of sustainable farming agricultural processes can put practices to coffee www.saiplatform.org AIM-PROGRESS Task Force. growers on environmental resources This is an initiative comprised of and ecological habitats. Managing supplier leading Fast-Moving Consumer In order to maximize the relationships Goods (FMCG) companies performance of our agricultural In 2007, Nestlé conducted that supports the use of inputs and minimize potential 3400 audits of suppliers’ common evaluation methods negative impacts, Nestlé has facilities to help ensure that to determine CSR supplier issued purchasing guidelines they comply with Nestlé food performance and help promote recommending, wherever safety standards. ( See www. responsible sourcing practices possible, sustainable farming nestle.com/csv/downloads) within the supply chain. practices in the case of direct Our objective is a global, Nestlé insists on honesty, procurement from farmers. supply-chain-wide system integrity and fairness in all of quality, social and business relationships, and environmental audits, which when instances of non- will not only reduce the total compliance are discovered, burden and any duplication corrective measures are of work, but also help us to needed for the supplier to be retained. It is Nestlé’s policy to apply sanctions in the event of misconduct or abuse of ethical standards and guidelines.

Look closer @ nestle.com Watch videos on 4C-certiﬁ ed coffee and the International Cocoa Initiative at www.nestle.com/csv/stories

Agriculture and rural development 35

  Products and consumers

Opposite: Liz Ellis, former Australian Nestlé’s core business strategy is national netball team captain, fronts a major television Nutrition, Health and Wellness – advertising campaign for a range of Nestlé products, offering products of superior value emphasising how all of them combine to those of our competitors, which taste and enjoyment while ﬁ tting into a healthy lifestyle improves both consumer wellbeing and Nestlé sales results.

Creating Value for Nestlé Value for society Shared Value By responding to consumers’ changing Increasing numbers of consumers get needs, integrating further into society and access to safe, high-quality, nutritious communicating clearly, our brands and food products. They also gain a greater customer loyalty are strengthened, bringing knowledge of health issues, as well as a long-term enhanced growth, market share better understanding of how they and their and proﬁ tability. families can use Nestlé products for a safe, healthy and enjoyable diet.

36 The Nestlé Creating Shared Value Report

  Products and consumers 37

 

Nutrition, Health and Wellness As an increasing number of societies begin to move out Nutrition, Health and of poverty, it’s quite likely Wellness profi le From the very origin of our that over a period of years, Company, our strategy has been the disease profi le changes based on nutritious products from infectious diseases as that contribute to the health the main cause of death, and wellbeing of consumers. especially among children, In recent years, Nestlé has to an emphasis on chronic, reinforced this strategy, mostly non-infectious, becoming the world’s leading diseases, which primarily Nutrition, Health and Wellness affect adults and the elderly. company, with total Group sales Safe, nutritious food, of CHF 107.6 billion. Wellness Unit, the programme especially if it is fortifi ed Nestlé invests in continuous gets its name from its dual aim: with key micronutrients development and renovation gaining the approval of at least of its products to enhance their 60% of consumers in a taste that are present in the quality and nutritional value. It test while bringing a nutritional average diet in insuffi cient also continually adapts them “plus”. The process helps to amounts, can have a to meet consumers’ changing continually improve the taste signifi cant impact on preferences, as they evolve and nutritional value of our chronic diseases, precisely beyond taste, enjoyment and products, contributing to market because there is a huge convenience towards the share gains and improved incentive for enlightened added benefi ts of nutrition and profi tability. 60/40+ product testing is implemented manufacturers to personal health. To have the most impact, the worldwide, resulting in contribute to public health programme focuses on our best- products with added at the same time as they Making nutrition the sellers. Products with a sales nutritional value, produced to suit local are growing their preferred choice: 60/40+ value of CHF 14.6 billion were tastes. Maggi Dal Atta penetration. From my Nestlé’s strategy is based on tested in 2007, making 60/40+ Noodles, for example, offering products that have the largest nutrition-focused are formulated to meet experience in Mexico, I the specifi c needs believe that Nestlé has truly proven superiority in consumer programme in the Food and and preferences of preference and nutritional value Beverages industry. consumers in India understood this dynamic over the competition. This is Exemplifying the 60/40+ and is delivering genuine based on a proprietary product programme, Nestlé India shared value through its testing process called 60/40+. launched Maggi Dal Atta Noodles. products in that society Championed across all Nestlé This is not only one of the businesses by the Corporate country’s most popular snacks, but offers protein and dietary fi bre in the form of atta (a whole wheat fl our) and vegetables, with reduced salt content.

Julio Frenk, former Secretary of Health of Mexico

38 The Nestlé Creating Shared Value Report

  CHF 11 billion Approximate value of annualised sales of Nestlé Nutrition Nestlé Nutrition Nestlé Nutrition is a global, standalone business that focuses on delivering science- based nutrition products and services designed to address speciﬁ c health and wellness needs. With a presence in more than 100 countries and with more than 20 000 employees, it operates in four key business areas: G Infant Nutrition (infant formula, toddler and baby food): Helping infants and young children to grow and develop into healthy adults; G HealthCare Nutrition: Products for the elderly, and for people recovering from, or managing, certain medical conditions; Nestlé Nutrition, 2007 This acquisition comes in the G Performance Nutrition: Business area Position wake of two others – Novartis Promoting peak mental and Infant Nutrition* 1st Medical Nutrition and Jenny physical performance for HealthCare Nutrition 2nd Craig – transforming Nestlé athletes and highly active Performance Nutrition 1st** Nutrition into a business with people; Weight Management 1st*** annualised sales of about G Weight Management: * Baby food and infant formula CHF 11 billion. ** Position of performance bars in North America Offering personalised weight *** Position of personalised weight management See www.nestlenutrition. in North America management programmes that Source: Nestlé com for more information. help consumers to lose weight. Gerber products being put through With the acquisition of the their paces at a tasting session. Gerber Baby Food Company in Gerber has developed September 2007, infant feeding “Start Healthy, Stay solutions and baby food make Healthy”, an initiative using the latest up more than 70% of Nestlé nutrition research to Nutrition’s business (Baby Food help parents establish 44%, Infant Formula 29%). This healthy eating habits for their children now gives us the number one position in the largest single baby food market worldwide, the United States, and clearly establishes Nestlé Nutrition as the global leader in the sector.

Products and consumers 39

  CHF 1.88 billion Value of Nestlé R&D expenses in 2007 Nutrition research largest private facility for underway at the Nestlé nutrition-related research, Research Center, part of the world’s largest with a permanent staff of 700, private nutrition including over 300 scientists, research network representing 48 nationalities. The NRC ( www.research. nestle.com) is the hub of Nestlé’s worldwide R&D community, combining global scale with local relevance. It engages in more than 200 external scientiﬁ c partnerships and university collaborations each year, continuously building a knowledge base to meet changing consumer needs. Research & Development expenses, 1998-2007*

2.0 Nestlé International Nutrition Symposium 1.88 1.73 At the NRC’s annual 1.5 International Nutrition 1.50 1.43 Symposium, leading experts 1.21 1.21 debate current issues in human 1.0 1.16 1.04 health and physiology, identify 0.90 0.81 future research directions 0.5 and publish their conclusions in scientifi c literature. In October 2007, the fourth 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Symposium on Nutrition and Cancer explored the role of diet *CHF billion Source: Nestlé as a risk factor in the origins of cancer, as well as explaining Research and development investment and collaboration how nutrition can provide with our suppliers. For example, preventative solutions. Nestlé’s R&D network in February 2007 we formed Read more at www.nestle. Nestlé continues to be a an agreement with INMEGEN, com/csv/symposium global leader in R&D, with Mexico’s National Institute of NRC research concepts approximately 5000 people Genomic Medicine, through are transformed into product actively involved. In 2007, Nestlé which we fund a chair and two innovations and processes spent CHF 1.88 billion on R&D, fellowships. And in November through an international this fi gure having more than 2006 we formed a partnership network comprising: doubled in the past eight years. with EPFL (Ecole Polytechnique G Product Technology Centres Nestlé is committed to open Fédérale de Lausanne) to (PTCs), each aligned with innovation, through which we co-operate on scientifi c particular Nestlé businesses to multiply our opportunities and research into the role of provide expertise for specifi c leverage research into products nutrition in brain development. product categories, and and services. This includes The Nestlé Research Center together forming a hub for partnerships with universities (NRC), based in Lausanne, global product and process and start-ups, venture capital Switzerland, is the world’s development;

40 The Nestlé Creating Shared Value Report

  6445 Number of products renovated for nutrition or health considerations in 2007

G Research and Development Key challenge Centres (R&D Centres), working in close collaboration with the Tackling obesity PTCs to meet regional R&D Obesity occurs when energy requirements. consumption exceeds energy For a full list of our 23 PTCs expenditure over time, and and R&D Centres, please the excess is stored as body see www.nestle.com/csv/ fat. One of the main causes researchcentres is excessive consumption of Nestlé is further supported energy, e.g. from fatty snacks by the Nestlé Nutrition Council, and sugary drinks. established 30 years ago and composed of internationally Our response renowned nutrition scientists. Nestlé’s strategic response is The Council aims to review characterised by the following current and developing nutrition approach: issues, and advise senior G Recipe innovation and management on their impact renovation, seeking to upon Nestlé’s policies and optimize nutrition, for example strategy. Over the last decade, by removing trans fatty acids, it has examined issues such as or reducing fat, sugar or salt; diabetes and childhood obesity, G The PowerBar sports G The 60/40+ programme, and reviewed Nestlé policies on nutrition bar includes a delivering taste and nutritional the reduction of trans fatty acids, supplement proven to provide superiority over competing salt and sugar levels in food, as endurance athletes with long- products; well as iron and other nutrient lasting mental alertness; G Branded Active Benefi ts, fortifi cation. G A reduced fat cappuccino Staff at the Nestlé providing additional nutritional technology produces the Product Technology benefi ts; Centre, Beauvais, Applying science and creamy head for Nescafé France (left to right): G The Nestlé Nutritional technology Cappucino, while reducing the Juliette Théry, Sigrid Compass, providing We apply science and technology fat content. Lemonnier and comprehensive nutritional Anthony Pizzagali. to formulate products that Nestlé R&D staff worked Nestlé’s patented information to allow address health issues including for over a decade to perfect Low Temperature consumers to make informed intestinal health, healthy ageing Low Temperature Freezing Freezing technology choices; retains the taste and sports performance: (LTF) technology, a process and texture of G Helplines, providing one- G We were among the fi rst designed to destabilise the fat conventional ice- to-one advice on subjects to use probiotics – benefi cial droplets in ice-cream so that cream, but with only including nutrition; half the fat and a bacteria that strengthen the it retains the taste and texture third fewer calories. G Development of nutrition- immune system – in the of conventional ice-cream, but Originally developed oriented brands and early 1990s; with only half the fat and a third in the USA, LTF technologies such as Lean has been rolled out G We have developed fewer calories. LTF technology to popular French Cuisine, Jenny Craig and technologies to replace partially is used in Nestlé brands such brand La Laitière Slow Churned ice-cream. hydrogenated fats with natural as Dreyer’s Slow Churned, La vegetable oils in Maggi bouillon Laitière, La Lechera, Häagen- cubes and seasonings, and Dazs and Mövenpick. fortify them with iodised salt to help prevent thyroid problems and impaired development of children;

Products and consumers 41

  CHF 4.4 billion Sales of products containing Branded Active Beneﬁ ts

Optimizing the nutritional value Even in developed countries, of Nestlé products malnutrition affects up to Enhancing: 50% of residents in nursing G Whole grains: 1.6 billion additional homes and up to 70% of servings in Europe (2004–2007); G Health benefi ts: Branded Active elderly patients in hospital, Benefi ts (see below); leading to increased illness G Micronutrients: vitamins, minerals and mortality. In response, and trace elements. Nestlé has developed fortifi ed Reducing*: drinks, soups and prepared G Trans fatty acids: 34 200 tonnes removed (Dec 2003 – Feb 2007); meals designed to suit the G Sugar: 204 000 tonnes removed changing nutrition needs, and (Jan 2003 – Dec 2006); taste and texture preferences, G Salt: 5000 tonnes removed (Apr 2005 – Dec 2006). of senior citizens. For example,

* CPW not included in these fi gures Nestlé’s Nutren Optimum Source: Nestlé range, available in Latin America, is enriched with Product development calcium, phosphorus, Omega 3 We continually review the and 6, and prebiotics, while nutritional content of our the products from Davigel, products, reducing public- a branch of Nestlé France health-sensitive components Professional, include Les Cereal Partners Worldwide such as salt, sugar and trans Essentiels, frozen vegetable (CPW), a 50/50 joint venture fatty acids, and increasing or fruit purées enriched with with General Mills Inc., is others considered to be positive protein, calcium and fi bre for improving its breakfast cereals for health, such as calcium, use in desserts and soups, and with whole grains, which iron, whole grains and fi bre. pre-cooked Savoureux meals, studies have shown to rich in protein and calcium, with contribute to better heart Branded Active Benefi ts the right texture for patients health, blood sugar regulation In addition to the general with swallowing problems. and weight management. CPW nutritional benefi ts of our has, since the start of 2004, Product testing of products, we offer consumers Shredded Wheat at added an extra 1.6 billion Cereal Partners UK. a variety of products with servings of whole grain to Nestlé breakfast Branded Active Benefi ts (BABs). its European product range. cereals contain whole This is a range of specifi c grains Alongside this, CPW has also ingredients and formulas that removed 3500 tonnes of sugar provide additional, proven and 530 tonnes of salt. health benefi ts to our main food and beverages categories. In 2007, products with BABs achieved sales of CHF 4.4 billion, an increase of more than 16%. These include products containing Actifi bras to aid digestion, BL for improved immunity and protection, and ActiCol to help lower blood cholesterol.

42 The Nestlé Creating Shared Value Report

 

Compounded annual growth rate, Serving local tastes and 2004-2007* demands Occasional Food & Beverages Everyday Food & Beverages To ensure our products meet Nutritionally enhanced Food & Beverages the local needs and preferences Branded Active Benefits of consumers, many of them 30 are produced with subtle variations. For example, we 20 23.7 launched local variations of traditional products in Brazil 10 two years ago, starting in the

7.8 North-East. These include Ideal 5.6 6.2 0 powdered milk, a variation of % Ninho/Nido with a different

* Figures exclude non-food products combination of vitamins and Source: Nestlé ingredients.

Nutrition for family pets Left: Branded Purina Pro Plan is addressing Pets are an important source Active Benefi ts are the changing nutrition and ingredients and of companionship and formulas that provide physiological needs of ageing psychological wellbeing to additional, proven cats with new dry cat food many people around the health benefi ts to formulas specifi cally for two our main food and world. Concern over obesity beverages categories. different senior life stages: and health is not restricted In 2007 sales of mature (7–11) and senior to humans, and much of our products with BABs (11 and over). increased by more human nutrition knowledge can than 16%. For further information, be adapted for cats and dogs. Above: Nestlé makes please visit www.nestle.com/ For example, intestinal bacteria nutritious foods to csv/catfood suit local tastes and in pets show many similarities pockets to those in humans, so Nestlé scientists have formulated a range of balanced pet foods that promote a long and healthy life. This includes extending the use of prebiotics – non- digestible carbohydrates that selectively stimulate the growth of good bacteria to aid intestinal function – to pet food. Nestlé is now an industry leader in the sector, starting with the purchase of Carnation in 1985, followed by the acquisition of Spillers and then Ralston-Purina to Look closer @ nestle.com create Nestlé Purina PetCare. Watch videos and slide ( www.purina.com) shows on Gerber and Low Temperature Freezing technology at www.nestle. com/csv/stories

Products and consumers 43

  Popularly Positioned Products: improved nutrition at the base of the pyramid

Left and right above: The Feira de Santana factory in Brazil opened in 2007 with an investment of CHF 60 million, bringing 125 direct jobs and fi ve times as many indirect employment opportunities to an economically challenged, rural region. Right below: Brazilian dairy farmers benefi t from free technical advice in Nestlé milk districts which supply milk to the Araçatuba factory. The factory manufactures affordable Ideal powdered milk, which is enriched with iron, calcium and vitamins A, C and D Value for Nestlé: Low-cost business model; committed workforce providing profi table access to a large consumer market Value for society: Employment opportunities; local economic development

Local sourcing Brazilian dairy farmers beneﬁ t from free technical advice in Nestlé milk districts Nestlé has a responsibility Local job opportunities which supply milk to the to provide consumers with In February 2007, Nestlé Araçatuba factory. The factory nutritious products regardless opened a factory in Feira de manufactures affordable of where we sell them and Santana, Brazil, for the Ideal powdered milk, which is the price point at which we packing of coffee and infant enriched with iron, calcium and sell them. To help to provide cereals, and the production of vitamins A, C and D. the 2.8 billion people around instant noodles. Backed by a the world who earn less than CHF 60 million investment, the Value for Nestlé: Secure source USD 10 (CHF 11) per day with new site created 125 direct jobs of high quality raw materials affordable food products, we and ﬁ ve times as many indirect Value for society: Reliable have renewed our Popularly employment opportunities for market and regular income for Positioned Products (PPPs) local distributors, brokers and suppliers initiative. Our Ideal powdered suppliers, as well as reaching milk, a PPP sold in Brazil, 50 million consumers in an is just one example of how economically deprived region. value is shared by both Nestlé and society.

44 The Nestlé Creating Shared Value Report

  Nutritional value Some PPPs are fortiﬁ ed to ensure consumers get added nutritional beneﬁ ts. In Latin America, for instance, Ideal powdered milk is enriched with iron, calcium and vitamins A, C and D, and Our Direct Store Maggi Sopa Crecimiento in Delivery initiative has increased market Central America, a chicken penetration and and noodle soup with a product availability milk base, contains protein, in countries with widespread vitamins and minerals needed populations. In for child development. Brazil, this has Enriched products are provided 4000 “Até Você” door-to-door successful in Africa too; Maggi distributors with bouillon, made with iodised income generation salt (which helps prevent opportunities thyroid disease) is the fastest growing Nestlé product in Guinea, Cameroon and Côte d’Ivoire.

Value for Nestlé: Access/ growth in new markets; greater product appeal and wider brand recognition; appropriate ﬁ nancial returns Value for society: Access to affordable nutrition products

Affordability and availability Similar schemes for ice- G Affordability: PPPs often cream distribution have been come in smaller, more established in South Africa affordable pack sizes so that and Thailand, as well as more lower-income consumers can than 3000 “coffee carts” across buy them regularly; West Africa. G Availability: Our Direct Store Delivery initiative has Value for Nestlé: New business increased market penetration opportunities; proﬁ table brand- and product availability in building; closer community countries with widespread relationships populations. In Brazil, there are Value for society: Income 4000 door-to-door distributors creation; skills transfer; who supplement access to microﬁ nance; social inclusion Look closer @ nestle.com traditional trade outlets. Watch a video about Popularly Positioned Products in Brazil at www.nestle.com/csv/stories

Products and consumers 45

  95% Proportion of products sold carrying the Nestlé Nutritional Compass on pack Marketing and Responsible food labelling While discussions continue communication about the best approach to food labelling, Nestlé Our communication has already introduced the commitments Nestlé Nutritional Compass We are very conscious of our (launched in 2005). This is an role in communicating on-pack information panel responsibly to consumers, and that provides consumers with particularly to children, which relevant, easy-to-understand is why all Nestlé companies are nutrition information. It is a required to abide by the Nestlé global labelling scheme that Consumer Communication translates into billions of clearer Principles. nutrition labels in the hands of As part of our overall consumers. The Compass responsibilities to consumers, already appears on products we are committed to: amounting to 95% of total G Clear, user-friendly labelling sales globally, and continues and supporting materials to to be rolled out across our help consumers make well- product range. informed food choices; Built around a nutrient G Responsible communication content table, the Compass about all products, especially comprises: those consumed by children, G Good to know: Key nutrition (see section on Advertising information relating to to children, page 49) in line ingredients or issues of public with applicable laws and our concern (for example, fat, sugar The Nestlé Nutritional The on-pack contact details Corporate Business Principles; or salt content but also iron or Compass system provide access to 96 Consumer gives clear and G Participation in and support ﬁ bre); comprehensive Services teams around the for public nutrition education G Good to remember: Tips nutrition information world. Nearly three-quarters programmes; for healthy enjoyment of the on-pack. The (73%) of the 10 million Compass is shown G Collaboration with public product; above as it appears calls they receive each year health bodies to work towards G Good to talk: Contact details on the Milo brand as are requests for product healthier diets and lifestyles. and links to further information sold in Malaysia. Milo information, nutritional advice is popular in Malaysia The full Principles are online. and many other or recipes, and worldwide, over available at www.nestle.com/ Please visit www.nestle. countries around the 40 million consumers choose to csv/downloads com/csv/compass for more world receive information and advice information about the Compass. from Nestlé through e-mail or direct mail. Nestlé nutritionists work with various stakeholders to develop the Compass and ensure its continued relevance. In Europe, for example, it is being adapted to feature a complete Guideline Daily Amount (GDA) table for the “big 8” (energy, carbohydrates, proteins, fats, sugars, saturated fats, sodium

46 The Nestlé Creating Shared Value Report

  Over 10 million Total number of people reached by Nestlé education programmes and initiatives and ﬁ bres). This is Nestlé policy G Switzerland and Hungary: and essential if a health or The Nutrikid programme is nutrition claim is made; only a joint venture between the where there is a lack of space Swiss Society of Nutrition, and no such claim is made Nestlé Alimentarium (food can just the “big 4” (energy, museum) and Nestlé carbohydrates, proteins and Switzerland and Hungary, fats) be listed. reaching 170 000 students The GDA table will be with classroom kits offering complemented by at-a-glance nutrition education in the information, on the front of form of videos, game cards packs, about energy content and books; per serving and its contribution G Brazil: 800 000 children aged to recommended daily calorie 5–14 have beneﬁ ted from our consumption. An arrow will Nutrir programme, which trains direct the consumer to the Nestlé volunteers to promote Compass for further information. Education and engagement Nestlé sponsors the nutrition, hygiene and health The GDA nutrition labelling Nestlé has developed or Healthy Thai Kids through games and play; programme, reaching scheme is on 45% of our sponsored many community 5000 primary schools G Thailand: 5000 primary products in Europe (as of education programmes with nutrition schools have been reached end 2007). around the world to improve education. Here, through the Healthy Thai Kids children discover in a understanding of the fun way all about how wellness in school campaign. importance of nutrition and food is digested See www.nestle.com/csv/ physical activity to health. Good education for more details of eating habits start at an early these and other programmes. age, so much of our focus is on Underscoring our belief of schools. the importance of nutrition, G France and EU: The Nestlé- we also empower our own sponsored programme colleagues with a global “Together Let’s Prevent nutrition training programme Childhood Obesity” started called Nutrition Quotient as a pilot project in 1992 (NQ). Using different modules in northern France. It has suitable for all employees, now been adopted by 10 other from the Executive Board French cities and several to plant level, NQ leverages other European countries, and the nutrition expertise of has created the EU-funded our Nestlé Research Center Prevent Childhood Obesity (NRC) scientists. Network of which Nestlé is a Read more at www.nestle. founding sponsor; com/csv/NQ

Look closer @ nestle.com Watch an animated example of the Nutritional Compass at www.nestle.com/csv/compass

Products and consumers 47

 

Left: The Nestlé Nutrition Duchess Club is an informal association of women of all ages and from diverse backgrounds in Nigeria and Ghana. The club promotes healthy eating habits, good nutrition, home management, entrepreneurship and leadership, and has also embarked on community-based health initiatives, The Nestlé Nutrition Duchess including food Club is an informal, all-female hygiene education for association in Nigeria with the market traders and schoolchildren. aim of empowering women Right: Members of through knowledge and skills in the Nestlé Nutrition nutrition, home management, Duchess Club passing on practical food and entrepreneurship and hygiene knowledge in leadership. The Duchess Club an open air market provides nutrition education workshops focusing on healthier eating habits, food safety and food management for mothers and homemakers. The Nestlé’s NIDO Nutrition promotion concentrated on the Duchess Club has 530 members System, which has achieved “10 signs of good nutrition” who have reached over half a sales of CHF 1.2 billion in just for children, such as clear skin, million women. fi ve years, lays the foundation good muscle development, for healthy development in early sleeping well and being alert childhood. It now incorporates and cheerful, developed by Lactobacillus PROTECTUS to the Nutritionist-Dietitians’ strengthen the immune system Association of the Philippines against germs, as well as Prebio Foundation. On-pack in pre-school milks for children information was supported under 5 years old, and Calci-N by a wide range of celebrity- for continued healthy bone endorsed communications, growth in children. such as point-of-sale materials, The NIDO Nutrition System print, radio and television was launched in the Philippines advertising, and feature articles in 2000 repositioning NIDO in magazines. In addition to fortifi ed milk with added increased consumer awareness vitamins A and D. The of the benefi ts of good nutrition, the campaign resulted in 8% sales growth of the more nutritious product in the Philippines in 2006, and its roll out as a global campaign was started in 2007.

48 The Nestlé Creating Shared Value Report

 

Marketing and advertising Joint industry initiatives on Key challenge practices advertising to children In December 2007, Nestlé Advertising to children Advertising joined voluntary responsible Our Consumer Nestlé Principles concerning advertising initiatives by the Communication Principles appropriate communication Food and Beverages industry in ( please see www.nestle. with consumers have been a Europe and Canada to children com/csv/downloads) part of the Nestlé Corporate below 12 years of age. The include specifi c criteria Business Principles since they aim is to support and promote for communication with were fi rst published in 1999. good nutrition and a healthy children. They are aimed at These undergo periodic review, lifestyle. The industry pledge, encouraging moderation, and a more complete and to be fully implemented by the healthy dietary habits and detailed set of Principles was end of 2008, will be subject physical activity without released in 2002. They were to independent compliance undermining the authority of further strengthened in regard monitoring. parents or creating unrealistic to children in 2004 and 2007 For further information on expectations of popularity or (see opposite). our Consumer Communication success. They also ensure that The Principles ( available Principles, our Policy on we do not create diffi culty in at www.nestle.com/csv/ Marketing Communication to distinguishing real from downloads) are required Children and other pledges and imaginary or create a sense reference points for all initiatives we support, please of urgency. marketing staff and advertising see www.nestle.com/csv In light of rising concerns agencies globally, and must about child obesity, Nestlé be used when developing our Communicating with health strengthened its Principles in consumer communication. professionals 2007 by adding two important All marketing campaigns are For more than 60 years, provisions: reviewed and we have put an Nestlé has contributed to the G No advertising or marketing internal monitoring process in continuing nutrition education activity is to be directed at place in our markets to ensure of health professionals children under 6 years; compliance with the Principles. through scientifi c publications, G Advertising for children Additionally, Nestlé participates workshops and scholarships. from 6 to 12 years must be in industry initiatives aimed In 2007, the NRC published restricted to products with a at furthering responsible 200 peer-reviewed research nutritional profi le that helps advertising. This includes a publications, and some children achieve a healthy Europe-wide initiative, started 4000 medical delegates balanced diet, including clear in 2005, which assesses communicate with healthcare limits for such ingredients as companies’ compliance with professionals on a daily basis sugar, salt and fat. industry-wide Codes of Conduct over the course of the year. These will be fully for Food and Beverages implemented in all countries Marketing Communications. by the end of 2008 and This has provided a useful tool subject to monitoring. for Nestlé to receive feedback on its advertising and maintain high standards of compliance.

Products and consumers 49

 

The Nestlé Nutrition In addition, Nestlé is the only Institute (NNI) is an educational major company that markets organisation providing a complementary foods only after forum for health professionals six months of age in developing to share information about countries. the latest developments in paediatric, clinical and Breast milk and breast milk performance nutrition. The NNI substitutes has held more than 70 global Nestlé began to meet the Nestlé Nutrition Workshops need for a nutritionally safe and granted more than alternative to breast milk with 500 postgraduate scholarships the development of Henri to young paediatricians, Nestlé’s original infant cereal. paramedics and scientists from In 1869 he declared in his developing regions. Memorial of the Nutrition of Nestlé has also produced Infants that breastfeeding more than 3000 publications, was best for babies and including Annales Nestlé and that every mother able to The Nest for paediatric health breastfeed should do so. This professionals, and Clinical original principle still forms Nutrition Highlights, a scientifi c the cornerstone of our Infant journal for clinical nutritionists. Formula Marketing Policy. A range of other material However, not all mothers in print, audio-visual and breastfeed, and infant electronic formats is available formula is the only product in English, French and Spanish, recognised by the World and the NNI website ( www. Health Organization (WHO) as nestlenutrition-institute.org) an acceptable substitute for provides access to an online breast milk. Infant formula, medical and scientifi c library, with its specially adapted educational tools, online nutrition, has ensured the workshops (webinars) and The Nestlé Marketing of products for healthy development of many information on forthcoming Nutrition Institute infants children around the world and communicates with events to young paediatricians, health professionals replaces dangerous breast health professionals and at congresses Nutrition during the fi rst milk substitutes. We provide scientists. worldwide three years of life high-quality, safe and nutritious Globally, malnutrition actually infant formula products and are becomes most serious among committed to their responsible infants after six months sale and marketing. On the of age, when nutritional pack, we inform consumers “complementary foods” (cereals, and health professionals of milks, puréed vegetables and the benefi ts and superiority meats) become critical to of breast milk; product labels health and survival. Nestlé is and educational materials also the world’s leader in producing carry preparation instructions and promoting these foods, as well as warnings about which typically replace foods inappropriate use. like corn starch or rice – or even soft drinks and French fries.

50 The Nestlé Creating Shared Value Report

 

The WHO International Code Assurance WHO Code implementation of Marketing of Breast-milk Nestlé has a three-part method and assurance Substitutes to assure compliance with the Nestlé learned a great deal from The aim of the WHO Code is “to WHO Code: its experience concerning infant contribute to the provision of G Nestlé has an extensive formula marketing in Africa, safe and adequate nutrition for ISO-like internal monitoring recognising our responsibility infants, by the protection and system, the WHO Code Quality to go beyond what were promotion of breastfeeding, Assurance System, which is accepted marketing standards and by ensuring the proper use now active in all developing at the time. We integrated of breast milk substitutes, when countries; the WHO Code across our these are necessary, on the G Nestlé international auditors entire operations in developing basis of adequate information conduct an extensive audit of countries in 1982, and continue and through appropriate compliance with the WHO Code to monitor its application, marketing and distribution”. in 9 –20 countries annually; refi ning our instructions with The Code was adopted by G Nestlé has a system of experience. We work with the World Health Assembly ongoing, independent audits governments, others in industry in 1981 as a recommendation by external social auditing and members of civil society to to all its Member States, and companies. develop the Code in countries Nestlé was the fi rst company Results of the most where it is applied. to announce (in 1982) that it recent of these external audits, The Infant Food Industry would voluntarily implement carried out in Sri Lanka, can be and the WHO Code, published the WHO Code in all developing accessed from www.babymilk. by analysts GES Investment countries. As a result, Nestlé nestle.com Services, assessed infant food accepts no advertising or In addition, there is a Nestlé companies’ implementation marketing to the public of any internal ombudsman system of the Code and rated Nestlé kind, and no contact between for any employee who wishes as the top company in Code infant milk marketing staff and to confi dentially report alleged application, stating: “Nestlé the public in those countries. WHO Code violations. has the most elaborate policies Nestlé has repeatedly taken In 2006, the Malaysian and mechanisms to address action in countries to promote government imposed sanctions the Code, distinctly ahead of its adoption of the WHO Code by on 8 out of the 12 infant food peers”. governments, and government- companies operating in the The full wording of sponsored monitoring of the country for violations of the our Infant Formula Policy entire industry. Malaysian Health Ministry’s is available online at www. Infant Formula Code of Ethics. babymilk.nestle.com, where Nestlé was the only non-Asian we also answer the most company not at fault. commonly asked questions Read more at about infant feeding. We www.nestle.com/csv/malaysia welcome feedback, and we continue to monitor our approach and communicate openly with all stakeholders.

Products and consumers 51

  Support of UN Global Compact Principles and Millennium Development Goals

Nestlé’s Corporate Business Principles In the table opposite are just a ( see www.nestle.com/csv/ few examples of our actions in 2007 downloads) guide our behaviour in that meet our commitments as a relation to all relevant stakeholders. UNGC signatory. They reﬂ ect the basic ideas of fairness, Nestlé supports the UN Millennium honesty and respect for people and the Development Goals (MDGs), which we environment in all our business actions. regard as highly important objectives Their ongoing evolution has seen the that, through partnerships which inclusion of the 10 UN Global Compact respond to local needs and harness (UNGC) Principles on human rights, local knowledge and capabilities, can labour, the environment and corruption result in positive, sustainable change. in 2002. Examples that illustrate our Nestlé’s creation of shared value compliance with, and support for, these for itself and society brings speciﬁ c Principles are contained in this report. contributions to the UN Millennium Nestlé’s further support for the UNGC Development Goals. There are was demonstrated in July 2007 through many examples in this report that Above: Contributing d’Ivoire, a major its patron sponsorship of the UN Global demonstrate how our long-term growth to UNGC Principles cocoa-producing Compact Leaders’ Summit in Geneva. strategy helps alleviate extreme poverty 7-9 and MDG 7: country, Nestlé Reducing packaging works with three and hunger (goal 1) through initiatives weight at Nestlé farming co- like our PPP strategy (page 44); our Waters. operatives to capacity-building programmes in milk 257 000 tonnes promote good labour of packaging for practices, including districts and through coffee initiatives bottled water have those relating to like Nespresso AAA and 4C (pages 30, been saved in the child labour. We also 31 and 34). Similarly, there are many past 6 years. support programmes Above right: with other partners examples of how we contribute to Contributing to that encourage UNGC Principles 1, sustainable methods 2, 4, 5 and MDGs 1 in cocoa farming and 7: In Côte

52 The Nestlé Creating Shared Value Report

  The UN Global Some examples of Nestlé actions Described The UN Millennium Development Goals Compact on pages Principles 1. Eradicate extreme poverty and hunger

Human Rights Expansion of participation in International Cocoa Initiative and 32 2. Achieve universal primary education Principles Nestlé-speciﬁ c cocoa projects in West Africa 3. Promote gender equality Labour Principles CARE independent audit programme covers areas of human 22 – 23 and empower women resources, occupational health and safety, and environment 4. Reduce child mortality

Environment related Reduced water consumption and inﬂ uencing supply chain to 10 –19 5. Improve maternal health Principles adopt good water management practices; higher energy efﬁ ciency and lower GHG emissions; optimized packaging 6. Combat HIV/AIDS, malaria volumes and sustainable packaging; founding signatory, UNGC and other diseases CEO Water Mandate 7. Ensure environmental sustainability Corruption related Establishment of Nestlé Code of Business Conduct 8 8. Develop a global partnership Principle for development

environmental sustainability (goal 7), Beyond the impacts outlined above, Contributing to for proper storage such as reducing water consumption we support more than 120 projects and UNGC principles of farm efﬂ uent 1, 7, 9 and MDGs (China); working (page 16), packaging materials (page 18) initiatives around the world that relate 1, 4, 5, 7 and 8: in partnership on or our carbon footprint (page 13), speciﬁ cally to the eight Millennium Among the many clean drinking while the environmental aspects of Development Goals. Nestlé water-related water projects projects that are (Mozambique – our agricultural engagements such as Please see the Nestlé, the still ongoing – see above – and managing water in agriculture (page 33), Community and the UN Millennium providing access Rwanda) 4C coffee and Nespresso AAA also Development Goals report, available at to clean water by constructing wells contribute to this goal. www.nestle.com/csv/downloads, for (India); working more information. with farmers on water conservation measures (Vietnam); providing facilities

The Nestlé Creating Shared Value Report 53

  Stakeholder convenings Expert participants* Engaging with For the fi rst time we invited external Expert participants included: stakeholders to convene during 2007 Conference of NGOs, Conservation our stakeholders specifi cally to provide feedback on our International, Human Rights Creating Shared Value strategy, priority Commission of Malaysia, Institute issues, communication and reporting, of Corporate Responsibility, Malaysia, in order to inform future decisions by International Federation of the Red Nestlé and to validate the fi ndings of Cross and Red Crescent Societies, earlier internal consultations to identify International Initiative against key issues. Child Labour, International Labour Three full-day sessions were held Organisation, Lutheran World during 2007, in Geneva, Washington Federation, Malaysian Association DC and Kuala Lumpur. We intend to for the Study of Obesity, Malaysian follow up these sessions and examine Institute of Corporate Governance, the potential to conduct further Max Havelaar Foundation, The Nestlé commits to open dialogue with engagement and research in future Methodist Church, Rainforest Alliance, all stakeholders, including consumers, years; to include Africa and Latin Sustain, Transparency International, customers, employees, investors America. United Nations Development and others. The stakeholder convenings were Programme, World Business Council We communicate on an ongoing designed, organised and facilitated on Sustainable Development, World basis using a wide variety of channels. by AccountAbility and were attended Cocoa Foundation, World Economic For example, through our 60/40+ by a total of more than 50 external Forum, World Wildlife Fund. product testing programme consumers participants, expert in a wide range can infl uence our product development, of social and environmental impact * This list records independent organisations while our Nutritional Compass labelling areas relevant to Nestlé’s business who attended stakeholder convenings gives access to 96 consumer service activities and operations (see list of in 2007, and is not intended to imply that these organisations have commented on teams around the world, and many of expert participants). The participants or verifi ed the contents of our 2007 Creating our brands have dedicated websites. were invited by Nestlé to share their Shared Value Report. In addition, we are engaging more perspectives candidly. widely to understand and respond to Sessions were also attended by Key issues identifi ed by convenings opinions on our strategy of Creating senior managers and decision-makers A number of key issues emerged during Shared Value. The objectives are to: from Nestlé functional business areas the participants’ discussions, and the G Provide a formal mechanism for an and public affairs. question of compliance and verifi cation exchange of views; emerged as a common theme in all G Enable Nestlé to understand convenings. Other key issues identifi ed views from a wide variety of external included: stakeholders, providing a broad societal G Nutrition, Health and Wellness, perspective; including promotion of healthy lifestyles G Identify future trends, risks and and related information provision/ opportunities relevant to Nestlé and its communication; stakeholders; G Human rights and sustainable G Challenge Nestlé’s internal production as part of the supply chain, perspectives gained from consultations including water and packaging issues; with senior managers through which G Community support and Enterprise key issues were identifi ed during 2007. development.

54 The Nestlé Creating Shared Value Report

  Insights and learning for Nestlé Improving scope The sessions enabled an effective Future reporting of performance data dialogue resulting in valuable For the fi rst time in Nestlé’s reporting perspectives. Nestlé is grateful to all history, this current report presents those who took part. In particular, performance indicators in all critical these external opinions provided Nestlé areas of Creating Shared Value. While with a valuable cross-comparison to historical data is not available for some issues already identifi ed through the indicators, we are working towards earlier internal consultation process greater coverage and depth by 2010. (see page 6). They also gave Nestlé further insight into relative priorities in Communicating with key audiences the context of individual, organisational Our reporting strategy is designed to and geographic perspectives of the ensure consistency, integration and participating stakeholders. For example, topicality. This current print report, Nestlé’s role in standards development/ published in 2008, summarises 2007 promotion – especially on Halal – was External reporting also has a role to play performance for our shareholders discussed during the Kuala Lumpur in Creating Shared Value. We believe that and other global stakeholders, and is convening. external reporting of initiatives and key published with our 2007 Management Nestlé has committed to report performance indicators can help drive Report. In the 2008 report (published back to the expert groups on progress improved performance internally, as has 2009), we aim to provide appropriately made in relation to recommendations been demonstrated by our increased targeted information relevant to specifi c by approximately May 2008. The fi nancial disclosure and improved audience groups, including customers, feedback and recommendations will fi nancial performance. The key here is investors and regulators. Our 2009 be more fully considered for Nestlé’s to report on those areas that are report (to be published 2010), will be next report on Creating Shared Value most material to the Group – where our next major publication on Creating (to be published in 2010) while the an improved performance can have Shared Value. We will continually website will make updates available the greatest possible impact. update the information available on as we progress work with our Nestlé is committed to reporting our website. stakeholders to improve and respond its performance openly. We aim to to recommendations made. continuously develop our reporting, to refl ect issues of most relevance to Nestlé and its stakeholders, to engage all levels and areas of the business in the processes of Creating Shared Value, and to maintain progress towards our sustainability goals. Focus areas include:

Aligning reporting with external guidelines Some Global Reporting Initiative (GRI) performance indicators are included where indicated. We also summarise performance in relation to Global Compact requirements. Our objective is to align with good practice external reporting guidelines for our next global print report, which we aim to publish in 2010.

The Nestlé Creating Shared Value Report 55

  G Verifi cation of performance data Considerations and limitations Writing and editing Independent and factual information within Excluded from the scope of our work Nestlé S.A., Public Affairs, the Report; is information relating to: with SustainAbility and Flag Communication G Visits to 18 operational sites in G Activities outside the defi ned assurance – 13 countries to evaluate the SHE reporting period; Concept and design data management systems, and G Statements of commitment to, or Nestec Ltd., SGDU, data reliability and accuracy; intention to, undertake action in the Corporate Identity & Design, Methodology G Pilot evaluation against the future; with Esterson Associates main principles of the AA1000 G Statements of opinion, belief and/ & preliminary framework, entailing review of or aspiration; Photography materiality analysis, stakeholder G Information hyperlinked from the Nicole Bachmann, mapping and engagement, and Social Report. Jodi Bieber, Richard Birch, Our review was carried out to fi ndings Nestlé’s governance arrangements. Patrick Brown/Panos Pictures, provide reasonable, rather than Markus Bühler-Rasom, Preliminary fi ndings absolute assurance and we believe Douglas Engle, statement Based on our work, it is our the scope above provides a Sam Faulkner/NB Pictures, opinion that the Report: reasonable basis for our conclusions. Peter Garmusch, G Includes information that is This independent statement should Peter Ginter, reliable, understandable and not be relied upon to detect all Marcel Grubenmann, clearly presented and provides a errors, omissions or misstatements. Harmen Hoogland/Nestec Ltd., Marc Latzel, reasonable account of relevant More detail on assurance Nadine Markova, activities and performance over the fi ndings, key areas for Philippe Prêtre /APG Image, reporting period; improvements, considerations Qilai Shen/Panos Pictures, G Addresses and responds to and limitations and Bureau Veritas’ Jacob Silberberg/Panos Pictures, issues pre-selected by Nestlé independence, impartiality Paul Weinberg/Panos Pictures for reporting that are of material and competence are reported importance to the organisation in our full statement on Printing To: the stakeholders and its stakeholders; Nestlé should www.nestle.com/csv Entreprise d’arts graphiques Jean Genoud S.A. (Switzerland) of Nestlé S.A. now consider how it could further Bureau Veritas HS&E Ltd., provide transparency and context Paper Introduction on its impacts, risks and positive London, January, 2008 This report is printed on Profi bulk, Bureau Veritas has been engaged initiatives; a paper produced from well-managed to provide external assurance G Refl ects a reasonable level forests and other controlled sources to Nestlé S.A. (Nestlé) over its of completeness for a fi rst certifi ed by the Forest Stewardship Creating Shared Value (CSV) Report comprehensive sustainability Council (FSC) (the Report) and reporting process. report, with disclosure of The preparation of the Report is performance on a range of issues; the sole responsibility of Nestlé. Nestlé should now consider how Our aim is to provide assurance to further develop meaningful Cert no. SQS-COC-100125 to stakeholders over the accuracy, indicators that will demonstrate reliability and objectivity of the implementation of its long-term information included in the Report. CSV strategy; G Provides adequate information Scope and methodology through its position, data and The scope of the assurance case studies; Nestlé should now included review of: consider how to present its position 1. Activities undertaken by Nestlé and performance in the most over the reporting period balanced manner; January 2007 to December 2007 G Includes some information Statement of independence, (unless otherwise stated); on the organisation’s internal impartiality and competence 2. Information relating to Nestlé’s systems; Nestlé should provide issues, responses, performance greater detail in future reporting Bureau Veritas is an independent data, case studies and underlying on the governance, accountability professional services company systems to manage such and management structures to that specialises in quality, health, information and data; enable greater understanding of safety, social and environmental 3. Information from external the internal management and management advice and © March 2008, partners relating to materiality assurance of key issues. compliance with almost Nestlé S.A., assessment and stakeholder 180 years’ history in providing convenings; and independent assurance services Public Affairs 4. An evaluation of safety, health and an annual turnover in 2006 and environmental (SHE) data and of EUR 1.8 billion. Nestlé S.A. systems across a sample of global Bureau Veritas has operational sites. implemented a code of ethics Avenue Nestlé 55 As part of its review, Bureau Veritas which is intended to ensure 1800 Vevey undertook the following: that all our staff maintain high Switzerland G Interviews with key management standards in their business at Nestlé’s head offi ce; conduct and prevention of G Review of processes for confl icts of interest. www.nestle.com/csv identifi cation and collation of We believe our assurance relevant information, report content assignment does not raise any and performance data from Group confl icts of interest. e-mail: operations; [email protected]

56 The Nestlé Creating Shared Value Report

  Highlights Performance summary Nestlé has developed performance indicators to provide a focus for measuring and reporting Creating Shared Value. The summary below forms part of our communication of progress on the UN Global Compact Principles (see page 52 for further details). Unless stated otherwise, performance indicators are for the year ending 31 December 2007. Reducing our environmental footprint and Nestlé Creating Shared Value performance indicators GRI reference reducing operational costs: pages 10-19 Total Group sales (CHF billion) 107.6 n/a Total shareholder return: 1 January 1997 – 31 December 2007 342.5% n/a Manufacturing Materials Raw materials and ingredients (except water [see below], million tonnes) 20.48 EN1 76% 22% 3% 16% 28% and our Packaging materials (million tonnes) 4.08 EN1 Increase of Reduction of Reduction of Reduction of Reduction of water environmental production volume* packaging material energy use* greenhouse gas withdrawal* footprint By-products (for recycling, million tonnes) 1.07 EN22 for bottled water** emissions* Reduction of by-products since 1998 (per tonne of product) 58% n/a Waste (for fi nal disposal, million tonnes) 0.372 EN22 Reduction of waste since 1998 (per tonne of product) 58% n/a Energy Direct energy consumption (Peta Joules) 85.3 EN3 Improving workers’ earning capacity and Energy saved since 1998 (per tonne of product) 45% EN5 1 creating a skilled workforce: pages 20-25 Greenhouse Direct CO2 emissions (million tonnes) 4.1 EN16 gases Reduction of direct CO2 emissions since 1998 (per tonne of product) 53% EN18 Water Total water withdrawal (million m3) 157 EN8 917 2.2 42% 65 647 Water saved since 1998 (per tonne of product) 59% n/a Number of Key Average number of In developing Number of 3 Business Positions successors per Key countries, local employees in Total water discharge (million m ) 101 EN21 Business Position Management developing countries Quality of water discharged (average mg COD/l) 62 EN21 Committee members who received formal Packaging Source reduction (thousand tonnes): 1991–2007 326.3 n/a who are nationals of classroom training the country Source reduction (CHF million): 1991–2007 583.7 n/a Reduction of packaging weight (per l of product) Nestlé Waters: 2002–2007 22% n/a Helping farmers improve earnings and assuring our Governance ISO 14001/OHSAS 18001-certifi ed sites (number of certifi cates) 171 n/a supply of quality raw materials: pages 26-35 Sites audited through CARE programme 403 n/a Our people Workforce size (total number of employees) 276 050 LA1 Lost Time Injuries (per million hours worked) 3.7 LA7 610 000 97 500 2-5% 29.9 million Total Injury Rate (per million hours worked) 7.5 LA7 Number of farmers Tonnes of coffee sourced Average annual milk Value of credit loans receiving free directly from farmers district growth rate to farmers in 2006, Leadership positions2 held by women 24% LA4 technical assistance in 2006 in CHF Local Management Committee members native to country in developing countries 42% n/a Formal classroom training received in developing countries (number of employees) 65 647 LA10 Key Business Positions 917 n/a Employees with potential to fi ll Key Business Positions 3 247 n/a Expanding lower income segment’s access to nutrition Agriculture Farmers trained through capacity-building programmes 111 800 n/a and broadening our customer base: pages 44-45 and rural Markets covered by (SAIN) sustainable programmes 28 n/a development Suppliers audited for safety, quality and processing 3 400 n/a Products and Popularly Positioned Products3: Europe (sales volume, CHF million)4 212 n/a billion million 77 50 consumers Popularly Positioned Products3: Americas (sales volume, CHF million)4 3 517 n/a Potential market Number of consumers reached 3 4 for Popularly by our new factory in North-East Brazil Popularly Positioned Products : Asia, Oceania and Africa (sales volume, CHF million) 1 722 n/a Positioned Products, Nestlé Nutrition business (sales 2007, CHF million) 8 434 n/a in CHF Number of products renovated for nutrition or health considerations5 6 445 n/a Increase in nutritious ingredients or essential nutrients (number of products)5 2 603 n/a

  The Nestlé The Nestlé Creating Shared Value Creating Shared Value Creating Shared Value For a business to be successful This publication is an integral in the long term it has to part of our overall Company Report create value, not only for its reporting, and is a companion shareholders but also for society. document to the 2007 Nestlé We call this Creating Shared Management Report and

For a business to be successful in the long term it has to create value, not only for its shareholders but also for society

 