ETHICAL SOURCING Hilary Parsons Nestlé SA The Responsible Business Summit May 14th 2008 1
Disclaimer This presentation contains forward looking statements which reflect Nestlé s current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments. 2
Shared Value definition Hierarchy of Corporate Social Responsibility CREATE SHARED VALUE Reduce poverty, Improve health Empower people SUSTAINABILITY Protect the future COMPLIANCE Laws, Business Principles, codes of conduct 3
4 Shared Value is applied across Nestlé's Value Chain
Performance Highlights from The Nestlé Creating Shared Value Report REDUCING OUR ENVIRONMENTAL FOOTPRINT AND REDUCING OPERATIONAL COSTS IMPROVING WORKERS EARNING CAPACITY AND CREATING A SKILLED WORKFORCE HELPING FARMERS IMPROVE EARNINGS AND ASSURING OUR SUPPLY OF QUALITY RAW MATERIALS EXPANDING LOWER INCOME SEGMENT S ACCESS TO NUTRITION AND BROADENING OUR CUSTOMER BASE 5 IMPROVED NUTRITION FOR THE CONSUMER AND INCREASING SALES/PROFITABILITY FOR NESTLÉ
Facts about Nestlé: World s Largest Food & Beverage Company Founded 1866 in Switzerland as an infant nutrition company, Creating the Nestlé Nest Brand 480 factories; about half in developing countries 276 050 employees worldwide Strong portfolio of brands and innovations driving growth Transforming further into Nutrition, Health & Wellness company CHF 107.6 bn sales in 2007, +9.2% Consistent long term growth in both sales and profit (EBIT) margin: the proven Nestlé Model 6
Shared Value and agriculture/sourcing Nestlé-sponsored sustainable cassava project in Côte d'ivoire CHF 13 billion of agricultural commodities, much from emerging economies Milk: Coffee: Cocoa: 11.8 million tonnes 750 000 tonnes 370 000 tonnes CHF 4000 million CHF 1600 million CHF 930 million 7 610 000 farmers supply Nestlé directly and receive technical assistance 3 400 audits of suppliers facilities for food safety. Expectations with regard to social conditions of farmers we buy from: child labour, employee health and safety high priorities. Value for Society: knowledge sharing, improved agricultural & water management practices Value for Nestlé: quality supplies from motivated, enabled farmers
Creating Shared Value with milk farmers Zhengjun Wang, who owns 9 cows and 6 calves, has been supplying milk to the Nestlé plant in Shuangcheng, north-east China, since 1990 More than 4 000 women in Pakistan are learning new agricultural skills, such as raising livestock and managing water resources, through training provided by Nestlé and UNDP Milk districts in 30 countries Growing between 2-5% each year 8 Value for Society: rural economic growth and development, higher agricultural standards Value for Nestlé: quality supplies from motivated, enabled farmers
Creating Shared Value with cocoa farmers Nestlé-sponsored farmers field school in Côte d Ivoire. Cocoa from farms like this will be used in leading Nestlé chocolate brands manufactured at York in the UK 9 Funding 3-year sustainable cocoa project:with 3000 farmers in Côte d Ivoire Founding participant in the International Cocoa Initiative (ICI) Working closely with West African governments, labour experts and other industry partners to improve the lives of children and families on cocoa farms Value for Society: more sustainable cocoa farming practices, including on child labour Value for Nestlé: quality supplies from motivated, enabled farmers
Creating Shared Value with coffee farmers 4C coffee farmers harvesting, drying coffee and acquiring sustainable farming techniques 10 Direct purchasing: 13% Nestlé green coffee purchased direct = largest direct purchaser Nespresso AAA: 35% of total purchase from the AAA Sustainable Quality Programme increase from 25% in 2006, commit to increase to 50% by 2010 4C: 360 000 tonnes) of coffee, (6% of world supply), 4C-verified by end 07. In Nestlé plants from Q1 08 Value for Society: coffee farmers grow income, farm more sustainably Value for Nestlé: quality supplies from motivated, enabled farmers
GREEN COFFEE SCHEMES AND PROJECTS IN 14 PRODUCING COUNTRIES Mexico China Guatemala El Salvador Vietnam Nicaragua Philippines Costa Rica Colombia Côte d'ivoire Ethiopia Thailand Indonesia Brazil Direct procurement : Other Sustainable Projects : 11
Nescafé Factories 27 NESCAFÉ factories. Six of these NESCAFÉ factories provide farmers with technical assistance, based on sustainable approach, including green coffee quality and DIVERSIFICATION, etc. 55 % of NESCAFÉ is produced in Developing Countries. Provide jobs to thousands of people. The added value is brought on the spot. 12
"COMMON CODE FOR THE COFFEE COMMUNITY" or "4C" An All Stakeholders Association : includes farmers, civil society, manufacturers & traders. Nestlé is one of the founding members. Initiative started in 2002. Mainstream approach. Objective : implementing sustainable practices at farm level and along supply chain. Principles defined by a code based on the 3 pillars of Sustainability. 13
Certification Schemes Worldwide, there are 5 coffee verification / certification schemes : one verification system, 4C 4 NGOs' certification bodies, FairTrade, Rainforest Alliance, Utz Certified & Organic. 14
NESCAFÉ Partners' Blend PARTNERS' BLEND launched on October 2005. "A sustainable end-product where, in addition, the social pillar is guaranteed by a Fairtrade certification". Manufactured with green coffee from growers assisted by Nestlé through sustainable coffee projects in Ethiopia & El Salvador. Partners' Blend : Began in UK and has now spread to other European countries 15
Fairtrade Coffee in the Nordic Region Zoégas Kaffe launched its first Fairtrade coffee Hazienda -in 2006, based on the same origin as Partners Blend; El Salvador and Ethiopia Norway Finland Denmark Sweden In the beginning of 2008, NESCAFÉ Partners Blend was launched in all Nordic countries In May 2008, Hazienda will be Re-launced in two dark roasted Versions, Hazienda and Estanzia both Fairtrade and Organic certified 16
The Netherlands: March 2008, Launched to the Out of home market: NESCAFÉ Partners' Blend The Movie: Brochure: Website: Play Read Visit 17
Nespresso Nespresso AAA : to offer a cup of coffee associating sustainable production and supply with the highest possible cup quality 18 PRINCIPLES Why AAA? Approach identical to Partners' Blend : helping farmers at source to be sustainable. Collaboration with suppliers (co-ops, traders) and with Rainforest Alliance (TASQ) Aim towards full traceability. Adapted to specific consumers' segment. AAA is a long term vision: with market development, availability for specialty coffee is decreasing. AAA ensures adequate supply in longterm.
Other Nestlé certified coffees Rainforest Alliance certified coffee launched in Portugal for Mcdonalds 19
20 Thank you!