Nestle Social Report

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The document discusses Nestlé's social reporting process and how it has evolved to communicate its relationship with the communities it operates in.

Nestlé is the world's largest food and beverage company with over 275,000 employees worldwide. It has a decentralized structure organized by geographic zones and markets.

Nestlé's social reporting has evolved from issue-specific reports to a more holistic report that attempts to communicate its interdependent relationship with the people in the countries it operates. It has moved from responding to debates to creating a platform for dialogue.

Learning, Practice, Results.

In Good Company

Nestlé Shares Its Story


of Creating Shared Value
One in a series of case studies on social reporting

Institute for Responsible Investment


Boston College Center for Corporate Citizenship

Project overview
This case study is one of a series published
in 2009 by the Boston College Center for
Corporate Citizenship through its affiliate,
the Institute for Responsible Investment,
on the topic of social reporting. Companies
participating in the project were Nestlé,
Baxter International Inc., Gap Inc., Novo
Nordisk, Seventh Generation, State Street, and
Telefónica. These companies provided funding
for the project as well as access to individuals
involved in their reporting process. In the case
studies, Center researchers explore how and
why companies prepare social reports, where
the challenges lie, how they are overcome
and where the true value is in the report
and reporting process for a group of leading
companies.

By Belinda (Hoff ) Richards


and Seema Bharwani

Contents
2 About Nestlé
3 Challenges Nestlé faces in reporting
6 History of social reporting at Nestlé
10 Deciding on the content of the reports
14 Process for preparing the report
16 Distribution of the reports
18 Conclusion

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Learning, Practice, Results. In Good Company

Evolution of reporting at Nestlé


Over the past eight years social reporting at Nestlé
has evolved from issue specific reports responding
to current debate to a more holistic report that
attempts to “communicate about the interdependent
relationship of Nestlé with the people of the
countries where [it] operates.” This case study
describes why and how Nestlé has evolved its
reports, the challenges of communicating “shared
value creation” and how a commitment to greater
transparency is helping Nestlé to reinforce its
company values and create a “platform for dialogue”
with internal and external stakeholders.

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Boston College Center for Corporate Citizenship

About Nestlé Villiers explained, the link between corporate


Nestlé is the world’s largest food and beverage reputation and brand poses real business
company. Sales of more than us$80 billion risk for Nestlé if it is not properly managed.
and net profit of about us$8 billion in Based on external commentary, the key
2007 make Nestlé larger than its next two reputational issues Nestlé currently faces
competitors, Kraft and Unilever, combined. Its include lingering controversy surrounding
global work force comprises roughly 275,000 its infant formula products (which date to the
employees and it has factories or operations in 1970s), NGO campaigns about Fair Trade and
almost every country in the world. genetically modified crops, and community
concerns about bottled water. Despite this,
Everyday about 2 billion Nestlé products Nestlé is increasingly gaining recognition
are sold with 50 percent of those products for its positive contribution in rankings such
bearing the Nestlé trademark. The company is as AccountAbility’s global rating, Innovest’s
operated in a relatively decentralized manner, ranking of the world’s 100 most sustainable
according to geographic zones and markets. companies, and the award of a Gold Standard
Nestlé also operates some of its business, such for its sector in the 2007 Dow Jones
as Nestlé Waters, through a separate structure. Sustainability Index.

This decentralized structure reflects the According to Nestlé’s Chairman, Peter


nature of Nestlé’s value chain, which in Brabeck, corporate citizenship and
most cases involves agricultural sourcing, sustainability are “a useful set of principles
manufacturing and consumption occurring and practices” which can contribute to the
in the same country or region. Nestlé uses company’s greater goal of creating value for
key documents such as the Nestlé corporate society over the long term. Unlike many of
business principles to convey a common its peers, for a long time, Nestlé chose not
corporate culture across its decentralized to publish an annual report on corporate
structure and strives to achieve consistent citizenship. Instead, it reported on social and
quality standards across its operations. First environmental information through annual
adopted in 1998, Nestlé’s business principles management reports and issue specific
have since been expanded to incorporate reports, published annually and distributed to
the first nine principles of the U.N. Global shareholders.
Compact in 2002 and again in 2004 to
include further business principles on This approach allowed the company to
consumer communications and contributions inform shareholders and other stakeholders
as well as the 10th principle of the UNGC on about how it was approaching particular
anti-corruption. issues and to create a platform for dialogue
around issues within the company’s sphere
Nestlé’s leadership position means that it is of influence. However, this approach also
subject to the scrutiny of NGOs, consumers limited Nestlé’s ability to demonstrate the way
and employees around the world. As Investor that its business “creates shared value” for
Relations Vice President Roddy Child- society and shareholders more broadly.

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Learning, Practice, Results. In Good Company

About this case study


To prepare this report, Boston College Center researchers visited Nestlé’s corporate
headquarters in Vevey, Switzerland, and interviewed the following people, each of whom is
involved in preparing or using information on social and environmental performance:

José Lopez, executive vice president, Corporate Operations


Jean-Marc Duvoisin, senior vice president, Human Resources
Roddy Child-Villiers, vice president, Investor Relations
Hans Joehr, assistant vice president, Corporate Agriculture
Hilary Parsons, manager, Public Affairs
Pascal Greverath, manager, Corporate Safety, Health and Environment
John Bee, communications manager, Public Affairs

Information in this case study was obtained during the interviews, and from Nestlé’s publicly
available reports, which can be accessed at the company’s web site. Reports from Nestle’s
subsidiary companies around the world were also provided during the interviews.

A system for social reporting created by Mark This case study was prepared as Nestlé’s
Kramer and the FSG Social Impact Advisors approach to social reporting evolved from
is enabling Nestlé to: issue specific reports to a comprehensive
corporate social responsibility report, which
• Strengthen the link between strategy and was published in March 2008. It highlights
corporate citizenship; how Nestlé has transferred the lessons
• Demonstrate that examples of good learned from its former approach to reporting
practice are embedded in the business and how it has developed a system for social
rather than excellent “one off” examples; reporting. As Nestle Executive Vice President
• Build partnerships to tackle societal issues; for Corporate Operations José Lopez stated:
• Focus internal resources on effective “The report is how Nestlé shows its face to
execution; and all stakeholders, including employees and
• Engage more effectively with stakeholders. the outside world. It has to be linked with
the key corporate objectives and core values
These steps, identified in FSG’s Report: “The and principles. The report is the face of the
Nestlé Concept of Corporate Responsibility company.”
as implemented in Latin America,” reflect
the developmental framework set out in the Challenges Nestlé faces in reporting
Boston College Center’s “Stages of Corporate
Creating a platform for engagement and
Citizenship.”
dialogue with stakeholders

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Boston College Center for Corporate Citizenship

Protecting corporate reputation is a key Issue specific reports have helped Nestlé
priority for Nestlé, given the exposure of the create what Public Affairs Communications
Nestlé brand on its products. Building trust Manager John Bee described as a “platform
in the Nestlé trademark goes beyond building for dialogue,” providing opportunities to
trust in a brand. It also requires building trust participate in debates rather than being the
in the company behind the brand. Finding a topic of debate. Extending the scope of its
way to effectively communicate how Nestlé’s reports will allow Nestlé to widen the range of
business “creates shared value” is critical issues it can engage. The objective of greater
for the company to maintain the confidence transparency is to help Nestlé be a partner in
of internal audiences such as management solutions and help shift the emphasis toward
and employees, and external audiences, the role business can play in addressing
including suppliers, customers, governments, issues such as the water crisis, sustainable
local communities and, most importantly, development and global poverty. This in turn
consumers. Part of this challenge involves will respond to the growing demand that
developing a more robust framework for consumers must trust not just a brand, but
stakeholder engagement. Nestlé was ranked also the company behind a brand.
25th in the 2007 AccountAbility ratings and
scored impressively relative to its peers in all Challenges remain in identifying the most
areas except for stakeholder engagement. As effective way to present information about
Brabeck noted in an interview with Kramer in Creating Shared Value and to create feedback
2005: loops among a wider group of stakeholders
which ensure Nestlé can leverage the reporting
“We must learn to handle genuine concerns process to identify future issues and reinforce
in a positive, forward-looking way that is current strategy with external support.
consistent with our core business principles.
We must also do a better job of informing Communicating Creating Shared Value
people about Nestlé so that consumers The scale of its activities and the familiarity of
understand the way that shared value creation its brand afford Nestlé the capacity to achieve
and corporate responsibility are embedded in large-scale impact through its actions up and
our brands.” down the value chain. During interviews the
Nestlé executives repeatedly stressed that the
Nestlé has been progressively building its company’s fundamental corporate business
processes for stakeholder engagement around principle is: “investments must be good for
key issues, starting through the preparation the company and good for the countries
of its issue specific reports. This engagement where Nestlé operates.” However, while
has allowed Nestlé to better understand the Nestlé has long advocated this broader view
context of the issues covered in the reports of the role of business and the concept of
from a wider perspective. As Nestlé moves corporate citizenship, it is only just starting
to its new approach to reporting, it is taking to identify effective ways to demonstrate what
the opportunity to strengthen its stakeholder this means in practice. The Latin America
engagement process and create a more Report published in 2006 marked a first step
systematic approach to engagement.

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Learning, Practice, Results. In Good Company

toward providing metrics and examples to Shared Value Report, identifying indicators
support this position. that demonstrate this concept poses the
following challenges:
In the Latin America Report, Kramer’s team
at FSG recommended that to strengthen • Ensuring that the selected indicators drive
the link between strategy and corporate performance in areas that matter given
citizenship, Nestlé should adopt a more the nature of Nestlé’s value chain and its
holistic set of indicators to demonstrate how business;
it creates shared value, and be more explicit
about desired social impacts. As Nestlé moves • Finding ways to quantify the “indirect”
to the biennial publication of a Creating impacts Nestle can make through its
business, where those impacts are not only
related to its manufacturing processes
and products, but also to interactions with
suppliers and consumer habits.
Creating Shared Value –
Nestlé milk districts Using the report to drive performance but
Through Creating Shared Value, Nestlé not priorities
links its operations to long-term value While Nestlé acknowledges in its recent
both for its business and for society as a report that “external reporting of initiatives
whole, and defines its success in terms and key performance indicators can help drive
of internal financial returns and external improved performance internally,” executives
social and economic results. expressed concerns during interviews that
the goal of reporting should not be allowed
www.nestle.com/SharedValueCSR/ to displace Nestlé’s focus on long-term value
Overview.com creation. Nestlé is taking steps to participate
in initiatives such as the Global Reporting
An example of what Creating Shared Initiative Sector Supplement for the food
Value means is Nestlé’s milk districts. processing sector, a move which will allow
By building “milk districts” in rural areas it to contribute to the development of more
of developing countries, Nestlé helps appropriate indicators for the sector. This will
foster local economic development permit Nestlé to focus both its reporting and
in a manner that is sustainable for management on issues related to its industry
farmers and for the business. Nestlé is and to facilitate creation of benchmarks
able to access reliable sources of milk among its peer companies.
that meet its quality standards, while
farmers receive the technical assistance Reporting on common indicators will not only
to improve their milk quality and farm help external audiences better assess where
economies, as well as gaining a reliable Nestlé stands relative to its peers, it will also
customer. provide incentives to support Nestlé’s culture
of continuous improvement.

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Boston College Center for Corporate Citizenship

History of social reporting at Nestlé Over time, the information in the annual
As can be seen from the following timeline, report has grown from environmental
social reporting has been driven by a progress, to discussion of sustainable
number of objectives at Nestlé, both internal development in 2003 to a broader concept of
and external. Some of those identified in “corporate responsibility” in 2004. Nestlé’s
interviews were: recognition of the importance of nonfinancial
issues is also reflected in the evolution of the
• Informing shareholders of policies and company’s corporate business principles,
priorities related to environmental and which were first adopted in 1998, shortly
social issues as adopted by the board and after Brabeck took over as Nestlé’s CEO. As
senior management; Human Resources Senior Vice President Jean
• Being part of current debate around social Marc Duvoisin recalled, rather than being
and environmental issues that affect the a sign of a new culture, the principles put
company’s business; Nestlé’s long-standing culture into writing,
• Upholding commitments to initiatives something that was important as the group’s
such as the United Nations Global operations grew globally. The principles were
Compact by providing reports on progress; expanded in 2001 and 2004 to reflect Nestlé’s
• Taking opportunities to demonstrate commitment to the United Nations’ Global
leadership on issues of importance to the Compact. Upholding its commitment to
company and senior management such as report on progress as part of the U.N. Global
sustainable development, water and the Compact was noted as one of the drivers for
meaning of corporate social responsibility. starting to report externally.

Nestlé’s Annual Report to Shareholders Informing shareholders about how Nestlé


Corporate Safety, Health and Environment is achieving its business goals continues
Manager Pascal Greverath explained that to be a reason for reporting. Roddy Child-
social reporting began at Nestle in 1990 Villiers noted that investor relations include
when the annual management report slides on creating shared value in all key
noted the appointment of a supervisor of financial presentations because it is a
environmental matters for the company. central part of how Nestlé runs its business.
According to Greverath, this information However, the response from shareholders
was provided to shareholders because is mixed. While Nestlé’s retail shareholder
describing the steps the company was taking base is concerned that Nestlé uphold its
to address environmental risk was deemed status as a Swiss icon, it is not yet clear that
material by Nestlé’s board and senior Nestlé’s broader institutional shareholder
management. Consistent with this, Nestlé base considers nonfinancial matters when
has continued to report to shareholders on evaluating the company. Despite this
how it is managing environmental risks attitude, investor relations recognizes its
including information on development of an role in educating shareholders about why
environmental policy, adoption of the Nestlé the sound management of environmental
Environmental Management System (NEMS) and social issues adds value to the company,
and performance against internal indicators.

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Learning, Practice, Results. In Good Company

and continues to bring information about shareholders and serving as a leadership


this to Nestlé shareholders. As Child-Villiers example to other stakeholders. Similarly,
described it: “Reporting at Nestle is not a the 2002 Sustainability Review, which
reactive piece of communication. It does not was Nestlé’s first attempt to produce a
respond to investor concerns, but instead it is more comprehensive social report, was
used to make strong statements about what timed to coincide with the United Nations
is important to the business, what investors Environment Programme’s 2002 World
ought to care about.” Summit on Sustainable Development. The

Nestlé’s issue specific reports


In addition to reporting on its progress in “Reporting at Nestle is
the Annual Management Report, since 2000
Nestlé has published a series of reports not a reactive piece of
aimed at engaging with a broader group of
stakeholders. The topics covered are: communication. The report
• 2001 – Environmental Management is used to make strong
Report
• 2002 – Nestlé Sustainability Review statements about what is
• 2003 – Nestlé People Development Review
• 2003 – Nestlé and Water – Sustainability, important to the business,
Protection, Stewardship
• 2004 – Faces of Coffee Report what investors ought to care
• 2005 – Nestlé commitment to Africa
• 2006 – The Nestlé concept of CSR as about.”
implemented in Latin America
• 2007 – Nestlé Water Management Report – Roddy Child-Villiers, Vice
• 2008 – Nestlé Shared Value Creation
Report President Investor Relations
The first two of these reports were published
when the social reporting was still a purpose of the report was to allow Nestlé
nascent field. Nestlé’s 2001 Environmental to communicate the way business could
Management Report documented the contribute to sustainable development.
“continuous improvement” Nestlé had made
in applying the NEMS in more detail than Nestlé then focused on producing issue
had previously been provided in the annual specific reports, which provided the flexibility
report. In this sense, the publishing of the to deeply consider issues facing its business
Environment Progress Report was not or society, without the space constraints of
an objective in itself for Nestlé, but rather the Annual Report. According to Bee, issues
a means of communicating progress to addressed in the reports have been in areas
where Nestlé feels the perception of its

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Boston College Center for Corporate Citizenship

activities does not match the reality. primarily as a means of communicating


Nestlé’s perspective on current topics, the
Bee described these reports as a ”platform reports are now also a means for Nestlé
for dialogue,” providing a means of to better understand issues from different
publicly addressing issues that both affect perspectives. As set out in the 2007 Water
Nestlé’s business and are within its sphere Management Report, the purpose of the
of influence. This reflected an internal report was:
shift toward increased transparency about
Nestlé’s business and a greater willingness • To understand how social and
to participate in dialogues. The subjects of environmental issues will affect Nestlé’s

“Nestlé intends to publish a comprehensive report on


Creating Shared Value on a biennial basis, complemented by
the continued publication of issue specific reports and up-
to-date information on the company’s web site.”
– Peter Brabeck, Chairman
the reports were selected to address issues ability to conduct its operations and
where Nestlé felt there was an imbalance in produce quality products for consumers;
what was being said about its activities and • To document the actions Nestlé has taken
what it saw was happening on the ground. to contribute to solutions both directly
For example, Bee noted that the Coffee through its operations and indirectly
Report responded to concerns raised during through community support;
the international coffee crisis, caused by the • To obtain stakeholder input and explore
global slump in coffee prices. Similarly, the future directions that Nestlé can take to
Africa Report was published in 2005, a year contribute to improvements.
when the international community, led by
the Group of 8, was focused on the continent. Internally, the issue specific reports help
At forums including the BBC’s Africa 2015 Nestlé to communicate the company’s
conference, the report gave Nestlé a voice in position on various issues across the many
the dialogue on the issue of development in countries where Nestlé operates. This helps
that continent. The report was the foundation to ensure consistent practices and values
used by Nestlé to communicate the positive throughout the group. For example, José
role the private sector can play in Africa. Lopez noted the reports “bring Nestlé’s
corporate business principles to life”
Over time, the purpose of these reports for employees by giving examples of the
has expanded. Rather than being seen

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Learning, Practice, Results. In Good Company

principles in action. This in turn helps to a broader concept more aligned with shared
reinforce a common corporate culture within value creation.
the company.
The reports have also allowed Nestlé to
An example of this was the publication of reinforce its ongoing dialogue with suppliers
reports related to sustainable development by around sustainable agricultural practices.
Nestlé Colombia and “shared value creation” Nestlé gets approximately 35 percent of
by Nestlé Mexico. Jean Marc Duvoisin, then the commodities it uses in production
group head, Nestlé Mexico, recalled that directly from farmers. Hans Joehr, who is
publication of the group level Latin America responsible for managing Nestlé’s direct
Report emphasizing “creating shared agricultural sourcing, described using the
value” as Nestlé’s definition of corporate Water Management Report on a visit to China
citizenship led him to revise the Mexico to stress the importance of sustainable water
report. Rather than using the language of use. When dealing with farmers and other
corporate citizenship, which had been in the stakeholders in China, Joehr found the report
initial drafts, he was able to align the report reinforced his message by providing greater
with the language used in the Latin America context to the issue at hand demonstrating
Report. As the Nestlé Mexico report was more Nestlé’s top level commitment to water as
directed to the local audience of employees seen through the CEO’s message.
and the community, this extended the reach
and strengthened the message from corporate While issue specific reports have provided
headquarters. By translating the concept to useful tools for communicating Nestlé’s
the Mexican context, there was an opportunity position and approach, their ability to
for headquarters to understand the affects of demonstrate progress on dealing with issues
its policy in different locales. This example is limited by the fact different issues are
highlights the valuable role reports can play in considered each year. This also means certain
creating internal feedback loops to reinforce issues may not be tracked as rigorously at a
corporate culture. country level, as there is no annual process or
deadline for collecting information
Outside the company, the reports have
allowed Nestlé to take a leadership position on In March 2008, Nestlé published a
the issues dealt with in the report by creating comprehensive report on Creating Shared
a “platform for dialogue.” These dialogues Value. This report is a first attempt to create
include those conducted at an international a series of key performance indicators
or government level. Bee referred to Nestlé’s against which Nestlé will report biennially
participation in the European Commission’s with the dual goal of measuring continuous
inquiry into responsible competitiveness, improvement internally and creating greater
while Duvoisin noted that publishing the accountability for performance through
Nestlé Mexico Report allowed Nestlé Mexico external publication of results. To develop
to help shape discussion around corporate these KPIs, Nestlé has drawn on its internal
citizenship in Mexico from philanthropy to policies, referenced external standards such

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Boston College Center for Corporate Citizenship

as the Global Reporting Initiative Guidelines,


and convened external stakeholders to
The Nestlé water management report identify the issues viewed as important for
The Water Report, published in 2007, the company. Internal consultation has also
has allowed Nestlé to take a leadership occurred with representatives from across
position on an issue which affects both Nestlé’s business, including many of the
its business and society: and one which people interviewed for this case study.
is becoming increasingly controversial in
many countries. It has proved to be an At the launch of Nestlé’s 2007 report, Peter
effective platform from which to enter Brabeck noted Nestlé received a lukewarm
debates surrounding this issue and was response to the 2002 Sustainability Review.
also a valuable process for identifying In particular, the report was criticized for
the gravity of the issue for Nestlé. For the lack of detailed global information it
this report, Nestlé engaged with a range contained: a problem created both by Nestlé’s
of stakeholders including academics, decentralized structure and the absence,
NGOs and others so that it could at that time, of a common information
better understand the problem and management tool. Today, Nestlé can draw
the expectations of Nestlé’s role. The on its new information management system
involvement of stakeholders helped to “GLOBE,” which will, according to Brabeck:
evolve Nestlé’s thinking about the issue. “Allow us to progressively provide more
information for better management and
Market and country level managers external reporting. Nestlé intends to publish
have adapted the Water Report for use a comprehensive report on Creating Shared
in publications directed to their local Value on a biennial basis, complemented by
stakeholders. For example, Nestlé the continued publication of issue specific
Nigeria included an extract of the Nestlé reports and up to date information on the
Water Report, supplemented with local company’s web site.”
examples, in its staff magazine “Nestlé
News”. Deciding on the content of the reports
A key priority which emerged around
Peter Brabeck recently referred to the discussions about the content of the
Water Report in a panel at the World issue specific reports and the selection of
Economic Forum, during which he and performance indicators is Nestlé’s desire to
fellow panelists, including Ban Ki Moon, focus on issues that matter to its business
the current U.N .Secretary General, and on which it can have an influence. In
discussed the importance of addressing the past, Nestlé has chosen the topics of its
the growing global water crisis. issue specific reports to coincide with global
debate and interest. However, now that Nestlé
intends to publish a more comprehensive
social report on a biennial basis, it must
consider the scope of the indicators against

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Issue Identified
Board creates position of
manager of environment in 1991,
building on prior recognition of
the importance of environmental issues

Deve • Principles on the environment


• Internal targets and rove lop published in 1992
Imp a nd • Principles revised as appropriate
performance reviewed d Re
an fin
in an ongoing cycle ets eP
rg

Ta

rin
e

cip
vis

les
Re

Cycle for developing environmental

Develop and
Performance

• Report on progress against policy and managing performance


environmental goals (1995)
• Environmental performance • NEMS adopted in
indicators published in annual 1993 to implement the
report to share holders principles across the group
cate

Refin
from 2002-present • Strategy expanded as needed
u ni

• Nestlé Sustainability

eS
Review (2002)
mm

ate tr
Co

gy
Measure Progress

• Environmental performance
indicators linked to NEMS
priorities measured across group

which to report. Interviews made it clear that taken across the group, creating a process
indicators and policies are adopted by Nestlé for feedback loops. Although the reason
where they help the company manage its for collecting the indicators was to manage
performance, not just to prepare a report. As environmental matters, reporting helped
Lopez cautioned, “reports are not an input support requests for data on performance
to the process of continuous improvement. and reinforced the importance of providing
Rather, the process of continuous accurate information. Greverath noted
improvement is an input into the report. The Nestlé’s internal audit team, which also
report is simply a photograph, a snapshot in monitors financial results, already audits
time, to show what is being achieved.” environmental results. As Nestlé starts to
report on a broader set of indicators on an
Greverath explained that for Nestlé’s safety, annual basis, it has the opportunity to further
health and environment team (SH&E), strengthen the commitment to continuous
the annual publication of environmental improvement across the group on a wider
indicators across the group helped create range of issues as it has done with SH&E.
greater discipline in the accuracy and
timeliness of results. It also allowed Nestlé The diagram above represents how Nestlé’s
to find out more about local initiatives being environmental performance indicators were

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Boston College Center for Corporate Citizenship

developed. Seen here, reporting is part of be of limited use to Nestlé as it develops


the process of performance management indicators to demonstrate “shared value
and continuous improvement, but not the creation.” Bee puts this down to two factors:
driver for managing environmental issues. first, the GRI indicators were not developed
The driver is the recognition of the issue as with the operations of a food company in
material to Nestlé’s business and something mind and are better suited for companies
the company should communicate about. in other industries, such as the mining and
This reflects Nestlé’s concern that the report extractives sectors; and second, the GRI
is about communicating the conclusions the focuses on demonstrating how companies
company has made through its actions, not “do no harm” rather than providing a tool for
acting in order to be able to report. “Global demonstrating how companies can create
environmental performance indicators are positive impact. Nestlé has recently become
first and foremost internal management one of the first companies to join a working
tools,” Greverath remarked. “Reporting them group to produce a “sector supplement” to
externally is an add-on to inform interested the GRI for the food sector. For Nestlé this
parties on progress achieved.” represents an opportunity to share lessons
learned and create consensus on the key
This process has allowed Nestlé to develop impacts – positive and negative – for the food
and refine its environmental indicators based sector through a multi-stakeholder process.
on the NEMS and environmental policy. As
Nestlé broadens the focus of its reports to the As Nestlé is able to explore a broader set of
concept of shared value creation, however, non-financial issues in more detail through
it must also develop a more holistic set of its Creating Shared Value Reports, it will be
indicators to demonstrate how this applies interesting to see how the company evolves
to its business. One of the recommendations its indicators. Already, through the process
made by Bureau Veritas, auditor of Nestlé’s of preparing its issue specific reports, Nestlé
2008 report, was that Nestlé “consider how has been able to better understand the way
to further develop meaningful indicators that that different issues are affected by and
will demonstrate implementation of its long- affect its business. As Hilary Parsons noted,
term CSV strategy.” “through reporting, Nestle does a bit of
both capturing what it already knows and
Nestlé’s issue specific reports will provide also a bit of exploring of the issues.” The
a solid starting point for identifying the issue identification process facilitated by the
material questions across its business. reporting process provides Nestlé with the
The Latin America Report in particular opportunity to identify future issues that may
examined the relationship between Nestlé’s warrant consideration internally to determine
business and society across its value chain whether additional action must be taken to
from sourcing, to manufacturing and then ensure, when the issue arises, it is dealt with
sales/distribution. The Global Reporting in a manner consistent with the company’s
Initiative Guidelines, as the only existing corporate business principles.
social reporting standard, have proved to
A drawback to Nestlé’s prior approach to

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reporting was that the issue specific reports


provided only a snapshot of the issue at 2008: The Nestlé Creating
hand. As FSG observed in the Latin America
report, this meant it was difficult for external
Shared Value Report
This report is Nestlé’s first attempt to
audiences to know whether the examples
provide details of how it creates value
used in the issue specific reports were “truly
for both its shareholders and for society
representative of business culture at Nestlé,
across its value chain. The report is
or merely excellent one-off examples.” By
divided into the following sections based
reporting on performance against a broader
on Nestlé’s value chain:
set of indicators on a more regular basis,
Nestlé will be able to create greater confidence
• Manufacturing and our environmental
that it is managing a range of issues
footprint;
continuously, not just when forced through
• Our people;
external pressure or circumstances.
• Agriculture and rural development;
• Products and consumers
Another tension Nestlé will face as it refines
its approach to reporting is the question
The report also provides information
of reporting on internal goals and targets.
about business principles and strategy,
Externally, this is increasingly seen as an best
support of the UN GC and Millennium
practice in CSR Reporting as an indication
Development Goals, stakeholder
companies are managing social and
engagement and independent
environmental issues strategically. However,
assurance.
publishing goals and targets presents a
conflict with Nestlé’s internal policies. This
At the beginning of the report, a
conflict is not due to an absence of internal
performance summary is provided,
goals. Rather, as Child-Villiers explained,
which references the GRI where used.
Nestlé does not publish financial targets –
Nestlé uses a combination of GRI
even though there is a strong demand for this
indicators and its own metrics to assess
information from analysts – because doing
performance.
so may shift the focus of management to
short term performance rather than creation
of long term value for the business. Brabeck
reiterated this policy at the launch of the
2008 report stressing that the importance of AccountAbility. SustainAbility assisted Nestlé
a long term view applies to financial and non- in conducting a materiality assessment to
financial aspects of Nestlé’s business. identify relevant issues from public debate
and commentary. Nestlé then worked with
Going forward, Nestlé is adopting a set of AccountAbility to explore these issues in
more holistic indicators across its business more detail at a series of stakeholder forums .
to identify whether it is moving toward its While Nestlé remains committed to ensuring
goal of shared value creation. To do this, that the indicators against which it reports are
Nestlé worked with both SustainAbility and

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Boston College Center for Corporate Citizenship

meaningful for the purpose of performance the tools public affairs uses to communicate
management, this increased engagement on social and environmental issues.
reflects the nature of what Nestlé is trying
to measure, namely “creating shared value.” Nestlé begins preparation of the report
In order to properly measure whether it is approximately a year prior to publication.
achieving this objective, Nestlé must consider To date, the issue specific reports have been
the impact of its activities from different published and distributed with the Annual
perspectives. Management Report for shareholders. In
some years this has been more coincidental

“Switzerland is the world’s oldest democracy and decisions


about the report reflect this. We have a collaborative process
to discuss the content of the report at a series of meetings
where we ask questions: What information can Nestlé
feasibly provide? Does it make sense to do so? Where can
Nestlé make an impact?”
– Hans Joehr, assistant VP, Corporate Agriculture.

Process for preparing the report than deliberate but going forward, Bee noted,
Nestlé does not have a dedicated corporate Nestlé aims to publish its sustainability
citizenship department, as it views corporate report with the management report.
citizenship (or CSV) as something that cuts Whether or not the issue specific reports are
across all areas of its business. Similarly, published prior to the management report,
it does not have a specific social reporting they do inform the discussion of corporate
department, so the reporting process is led citizenship/sustainable development in the
by Public Affairs. All in all, production and Annual Management Report, so they need to
dissemination of the report takes up about be conceptualized and approved for inclusion
70 percent of the time of Bee, Nestlé’s public in the report on the same time line.
affairs communications manager. In addition,
there is a large team of specialist contributors Issues and initial thinking about the content
to the report across the company and regular of the report commences in May. In October,
input from other members of the public public affairs makes its initial conceptual
affairs team. The report is seen as just one of presentation to the key issue owners across

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Learning, Practice, Results. In Good Company

the company including investor relations, noted, Nestlé’s stakeholder engagement


operations, corporate health safety and process became more “systematic” during
environment, and human resources. the preparation of the 2007 Creating Shared
Issues are then refined through what Hans Value Report. This process was facilitated
Joehr, assistant vice president Corporate by AccountAbility, with three convenings
Agriculture, described as a democratic taking place in North America, Asia and
process – in keeping with Nestlé’s Swiss Europe. There were two steps in preparing
roots. Involving managers from across for the convenings. The first step identified
the company in this process also brings to key issues from the company’s perspective
bear their different perspective on the most through desk research and internal
effective way to communicate elements of comments. Next, issue experts in each of
Nestlé’s performance. the locales were brought together so Nestlé
could benefit from their perspective of what
For the issue specific reports, Nestlé the key issues were in the different regions.
engages with external stakeholders to better In Parsons’ words, “Nestle’s role was to just
understand the issues. In particular, for listen to what stakeholders think are issues
the Latin America Report and the Water for Nestle and how Nestle should be involved
Report, Nestlé has begun reaching out to in these issues.”
groups to get a better understanding of the
context in which an issue is being examined. A more complete draft of the report is
As Public Affairs Manager Hilary Parsons presented in December, with the final

Experts consulted during the preparation of the Latin America Report


To properly understand how the concept of shared value creation operated in Nestlé’s Latin
American operations, the company consulted with the following experts:

• Mark Kramer, senior fellow at Harvard’s Kennedy School of Government and Foundation
Strategy Group.
• Felipe Larraín, Pontificia Universidad Católica de Chile – economic growth and
development in Latin America.
• Alfredo Zamarripa, INIFAP Institute, Chiapas, Mexico.
• Ignacio Loyola Vera, federal attorney general of environmental protection, Mexico
• Hugo Lavados, ProChile director
• Didier Lebret, former sustainable agriculture initiative platform manager.
• José Luis Calderón, environment educator, State of Aguascalientes.

FSG. 2005. The Nestlé concept of corporate social responsibility as implemented in Latin America. p. 44
2

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Boston College Center for Corporate Citizenship

document receiving sign-off in January. improve its report in coming years. The
This allows public affairs to deal with the recommendations made included:
practical elements of publishing the report
including photography, film crews, producing • Developing meaningful indicators to
information about the report in alternative demonstrate the implementation of
media such as CDs, DVDs and slideshows, Nestlé’s shared value creation strategy;
a corresponding Web site and talking points
for senior managers. The report then goes to • Presenting Nestlé’s position and
Brabeck for final comment and sign-off. performance in the most balanced
manner;
Data on environmental performance is
collected using an online management • Including more information on Nestlé’s
system. The system requires managers at a internal systems around governance,
market level to input the data on performance accountability and management structures,
of their facility. To ensure this information and how these relate to management of
is accurate, training is conducted on the key corporate citizenship issues.
meaning of different indicators and internal
audits are done to ensure consistency. Nestlé Distribution of the reports
uses the same internal audit team to verify Nestlé does a print run of 60,000 for its issue
its financial and environmental performance specific reports, and publishes the report
figures. Nestlé also conducts external audits online as a PDF. The report is translated into
particular of facilities or programs where four languages: English, French, German
there is local concern about a project. For and Spanish. Copies of the reports are
example, Bureau Veritas audited Nestlé’s included in the annual management pack
São Lourenço spring in Brazil in response for shareholders and distributed to those in
to local concerns about the potentially Nestlé’s 14,000 strong database who have
negative impact of Nestlé Waters’ operations.2 indicated an interest in the company’s social
Similarly, Nestlé has a long-standing and environmental performance. Aside from
process in place to audit its compliance this initial distribution, Nestlé has other
with the World Health Organization Code channels that are used to distribute the report
of Marketing Breastmilk Substitutes, which during the year, such as convenings around
includes internal and external verification. As the specific issues covered in the reports
Nestlé moves to its more holistic approach and presentations made to shareholders.
to reporting, it is also expanding the extent Nestle also relies on country and market level
of external assurance of the information managers to distribute the reports and the
included in its report. information they contain as appropriate for
their local audiences.
In 2008, Bureau Veritas provided an
assurance statement for the Creating For example, in 2007 Nestlé convened
Shared Value Report, which included more than 30 events around the issue
recommendations on how Nestlé can of water. These convenings involved

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Learning, Practice, Results. In Good Company

presentations from senior management, content of the report into a format that is
including the chairman, the CEO and chief most relevant for their local stakeholders,
financial officer, to audiences that included using staff magazines, publishing country
investors, academics, local government specific reports and including summaries in
officials, representatives from international local language to highlight key issues for the
institutions such as U.N. agencies and the country. This also helps Nestlé identify the
media. The purpose of these forums was issues that are important for different locales,
to raise awareness of the importance of the by observing how the information is adapted
issue for Nestlé’s business and for society as to local audiences. In some cases, Nestlé has
a whole. Particularly in the financial sphere, been surprised by the interest in different
Child-Villiers noted, Nestlé uses the reports issues around the world. For example, Bee
as a proactive way to demonstrate why issues recalled there was an unexpectedly strong
are important for the business and why interest in the Africa Report in Japan. This
shareholders in the company ought to care further highlights the role reports can play in
about them. creating feedback loops for Nestlé.

The report is not the only tool public The interviews revealed that even though
affairs uses to respond to concerns raised Nestlé uses wide channels to distribute the
by stakeholders, and indeed, as Parsons report, the company has found it difficult
acknowledged, a report is not always the most to obtain information about who reads
appropriate tool for responding to urgent the report and why. Nestlé includes a card
and specific concerns. Nestlé recognizes that allows readers to send feedback to the
that for some stakeholders, the reports will company about the reports, but it receives
not contain enough in-depth information, very few comments. In respect to its internal
while for others they will cover too broad audiences, Nestlé has some indications
a range of topics. Further, the time it takes of which regions most actively use the
to prepare the reports means they are not reports, such as the use of extracts in local
always a means to respond to an immediate publications. But there is potential for
concern raised by stakeholders. However, the generating greater benefit from the reports
reports do allow Nestlé to be more proactive internally by getting more detail about which
about communicating on issues and create groups of employees refer to the report and
starting points for discussing issues and what they take away from it. By doing this,
demonstrating Nestlé management has Nestlé can further leverage the potential
recognized the importance of the issues for the reports to provide insights into the
covered in the reports. “next” issue facing the company and provide
opportunities for closer engagement or
The report is also included in the partnerships with different audiences.
communications toolkit for public affairs
and communications managers around the Identifying the most effective format for
world and can be ordered internally. Over distributing the issue specific reports is
time Nestlé has found markets adapt the another concern. Although printed reports

www.BCCorporateCitizenship.org Social Reporting case studies 17


Boston College Center for Corporate Citizenship

have proved useful to an extent, Nestlé has and framing the dialogue on social and
received little feedback on the preferred environmental issues, instead of being
format of publication and is concerned print reactive;
may not be the most effective. One option
Bee said Nestlé is considering is to house • Giving Nestlé and its leaders a stronger
the granular detail about the company’s voice in dialogues about finding solutions
performance online and limiting the printed to problems through a publicly stated
report to an overview of Nestlé’s activities and commitment and position;
impact. This would allow those stakeholders
who are interested in more specific • Helping to reinforce Nestlé’s corporate
information to access it, while at the same culture around its corporate business
time allowing Nestlé to reach out to a broader principles by providing clear illustrations
audience. Nestlé is not alone in attempting of the principles in action.
to identify the right balance between detail
and accessibility in its reports. As more In addition to the support the report provided
companies continue to publish information to Nestlé’s communication strategy, the
on their corporate citizenship activities and following additional benefits can be identified
stakeholders better understand what this as arising from the reporting process:
information means, it’s expected there will be
a greater consensus around the most effective The reports help headquarters to lead and
format and manner of providing different align thinking on social and environmental
types of information. issues across Nestlé’s decentralized group
structure by providing global examples of
Conclusion how issues are being addressed. For example,
Nestlé Mexico and Nestlé Nigeria have
Where was the value in the reports and the
extracted examples from these reports to
reporting process? adapt the message to the needs of their local
The evolution of Nestlé’s approach to audiences.
reporting and interviews with Nestle
executives suggested the company derived Establishing processes for collecting and
a number of benefits from reporting. As presenting information across the group
highlighted in this case, the reports did has created feedback loops, which prompt
serve their objective of creating an effective more information to come from different
communication tool for Nestlé by: regions, markets and countries. This in
turn means corporate headquarters has a
• Allowing Nestlé to be more systematic in greater understanding of what is happening
acting on its desire to be more open with on the ground and country level managers
external stakeholders and in the way it understand the context of their achievements.
engages around key issues; This also provides opportunities for head–
quarters and local managers to learn from
• Creating a platform from which Nestlé innovation and best practice in other places.
could be more proactive setting the agenda

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Learning, Practice, Results. In Good Company

Having a reporting schedule has reinforced how Nestlé “creates shared value” across
internal discipline around the quality, its global operations and building a system
reliability and speed at which data is gathered for capturing performance information.
across the group. For SH&E in particular, The process of examining issues in detail
this has been a tool that has helped support through its issue specific reports gives
performance management objectives and Nestlé a starting point for identifying how to
made it easier to monitor performance measure its impact more broadly and to begin
because of a fixed deadline for final engaging and learning with stakeholders.
information. Working with external groups, such as the
GRI Food Sector Supplement, can help Nestlé
Having a public explanation of why issues build on this foundation and demonstrate
are a priority for Nestlé has strengthened leadership by sharing its experience with
the legitimacy of managers seeking support others in the industry.
from internal and external partners. Examples
of enhanced partnership include: working Overall, systematizing its approach to
with business partners to implement transparency around its business impact
more sustainable agricultural techniques; creates opportunities for Nestlé to take a
demonstrating Nestlé’s Corporate Business leadership position on issues from which it
Principles in action to NGO partners such would otherwise be excluded. Rather than
as the International Red Cross; and working being an outsider, Nestlé can take steps
with peers to resolve common problems such toward being a partner and lending its
as the water crisis in settings such as the support to issues such as the water crisis
World Economic Forum. and global climate change. Most importantly,
the reports create a mechanism to reinforce
This case highlights the role reports can the common corporate culture that Nestlé
play in supporting alignment of a truly aspires to maintain across its global business.
global company around a common set of As Nestlé continues to develop indicators
fundamental business principles. By creating that better reflect the impact of its values
feedback loops that support Nestlé’s clearly in action and identifies more effective ways
articulated principles, the reports can create of communicating this impact, it stands
internal and external demonstrations of what to foster greater internal understanding of
these principles mean in practice. They also “creating shared value,” which, in turn, will
permit the company to benefit from greater help Nestlé address its goal of building trust
dialogue and partnership with internal and confidence in both its brand, and the
stakeholders, such as employees, and external company behind the brand.
stakeholders.

Challenges remain for Nestle in the


reporting process, in particular, identifying
indicators that measure and communicate

www.BCCorporateCitizenship.org Social Reporting case studies 19


Boston College Center for Corporate Citizenship

“The report is how Nestlé shows its face to all


stakeholders, including employees and the outside
world. It has to be linked with the key corporate
objectives and core values and principles. The report
is the face of the company.”
– José Lopez, Executive Vice President for Corporate
Operations

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Learning, Practice, Results. In Good Company

Other publications in this series of case studies on


social reporting

Gap Inc. Fashions a Revealing Look

Nestlé Shares Its Story Of Creating Shared Value

Novo Nordisk Takes Strides To Integrate Triple Bottom Line

State Street Accounts For Shareholder’s Needs

Seventh Generation Seeks to Sustain Essence Amid Change

Telefónica Makes Connections Local and Long Distance

Learning, Practice, Results. In Good Company

The Value of Social Reporting


Examination of the experiences and practices of seven companies formed
the basis of case studies and an overview report, “The Value of Social
Reporting”. The research focused not on the social reports themselves, but
rather on the process and outcomes of reporting: How companies prepare
The Value of Social Reporting
Lessons learned from a series of case studies documenting
the reports, the effects of reporting on management practices, the changes
companies expect to make in the future, and the lessons they have learned
the evolution of social reporting at seven companies

along the way.

The Institute for Responsible Investment, a project of the Boston College Center for Corporate
Citizenship, provides a platform for dialogue on fundamental issues and theories underlying
responsible investing. Our work is meant to identify and promote market structures and
investment activity that can best create long-term wealth creation for investors and society alike.

www.BCCorporateCitizenship.org Social Reporting case studies 21


Learning, Practice, Results.
In Good Company.
The Boston College Center for Corporate Citizenship is a membership-

based research organization associated with the Carroll School of

Management. It is committed to helping business leverage its social,

economic and human assets to ensure both its success and a more

just and sustainable world. As a leading resource on corporate

citizenship, the Center works with global corporations to help them

define, plan and operationalize their corporate citizenship. Through

the power of research, management and leadership programs, and

the insights of its 350 corporate members, the Center creates


knowledge, value, and demand for corporate citizenship.

www.BCCorporateCitizenship.org

Boston College Center for Corporate Citizenship 55 Lee Road, Chestnut Hill, MA 02467

Phone 617-552-4545 Fax 617-552-8499 Email [email protected] Web site www.BCCorporateCitizenship.org

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