Nestlé's 2012 Sustainability Report: Creating Shared Value for the Long Term

If you have been wondering what’s going on with the concept of shared value developed couple of years ago by Michael Porter and Mark Kramer, you had better have a look at Nestlé’s 2012 sustainability report. You will find not just evidence that shared value is alive and kicking, but also an update from what seems to be one of the largest experiments in creating shared value (CSV).

Released last week, the report shows the progress Nestlé has made in the last year, focusing mainly on the three areas the company prioritizes to create shared value: nutrition, water and rural development. This lengthy report (309 pages) is an opportunity not just to follow the company’s progress or to get an idea on where it’s heading, but also to find out if Nestlé already provides an example of the business case for shared value.

We believe that we can create value for our shareholders and society by doing business in ways that specifically help address global and local issues in the areas of nutrition, water and rural development. This is what we mean when we speak about Creating Shared Value (CSV). We proactively identify opportunities to link our core business activities to action on related social issues,” Peter Brabeck‑Letmathe, Nestlé’s Chairman and Paul Bulcke, Nestlé’s CEO writes at the beginning of the report.

This is not just a great way to describe CSV, but also one of the strongest commitments I’ve seen of a company’s leadership in this concept. Now, when you find this sort of commitment, it makes you even more curious to see to what extent Nestlé actually follows its own vision of CSV. Furthermore, even though the vision that “for our business to prosper over the long term, the communities we serve must also prosper” reflects a long-term strategy, does it already provide results?

Nestlé explains in the report how it implements its CSV strategy in the three areas it is focusing on:

Nutrition

By providing nutritious products that deliver real health benefits to our consumers and by making our products more affordable and accessible through innovation and partnerships.

Water

By advocating for the protection of scarce water resources and by using water more efficiently in our manufacturing and distribution processes in ways that also benefit others in our supply chain.

Rural development

By supporting farmer development in rural areas where the raw materials we need are grown, securing our continued access to quality inputs and strengthening our customer base.

Let’s look at nutrition, which seems to be the most fundamental among the three areas to the core business of the company. Nestlé is working in various ways to address nutrition issues, such as malnutrition and obesity. One way is investment in research – the company reports on an investment of $1.66 billion in R&D in 2012, exploring how to grow conventionally bred crops that are naturally rich in micronutrients.

In addition, Nestlé keeps pushing the envelope when increasing the nutritional contribution of its products. In 2012, 75.7 percent of the entire Nestlé portfolio met or exceeded the Nestlé Nutritional Foundation criteria (this means they fulfill the nutritional criteria to qualify as a frequent choice in a balanced diet) comparing to 74.1 percent in 2011.

In absolute numbers, the number of renovated products for nutrition or health consideration rose from 5,066 in 2011 to 6,692 in 2012 (32 percent) and the number of products with increase in notorious ingredients or essential nutrients rose from 3,851  in 2011 to 4,691 in 2012 (22 percent). The most impressive growth, though, was in products with reduction of sodium, sugars, trans-fatty acids, total fat or artificial colorings – from 1,215 in 2011 to 3,317 in 2012 (173 percent).

You might wonder if these efforts are also reflected in increased sales. One indicator the company provides are the sales of its Popularly Positioned Products (PPPs), which are high quality food products that provide nutritional value at an affordable cost and appropriate format aiming to help consumers avoid under-nutrition and prevent micronutrient malnutrition. The sales of these products increased from $11.44 million in 2011 to $12.90 million in 2012. As part of Nestlé's total sales, PPPs’ share rose slightly from 1.27 percent to 1.3 percent, reflecting the fact that the growth in PPPs was very similar to the growth in the overall sales of the company.

It’s also important to mention the focus of Nestlé’s efforts on children – including reducing saturated fat, sugar and salt in children’s products. The company reports that in 2012, 90 percent of its products mostly consumed by children met the Nestlé Nutritional Foundation criteria on sugar, sodium and saturated fat, and its goal is to have all children’s products meet these criteria by 2014.

In all, looking at the measurements provided by Nestlé, it’s really difficult to determine to what degree CSV is successful as a business strategy in the short-term. In fairness, Nestlé is the first to admit that it still needs to develop its approach to CSV measurement and “develop additional quantifiable evidence linking business performance and social impact.”

Nevertheless, with the indications we have for the growing importance of under‑nutrition and obesity issues worldwide, working on finding solutions rather than contributing to the problems seems more and more like an overall winning strategy, even if Nestlé can’t prove it in the short-term.

[Image credit: Nestle, Flickr Creative Commons]

Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the Parsons The New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.