Nestlé, the world’s largest food and beverage company with $92 billion in revenue in 2016, depends on a sprawling supply chain of over 680,000 largely independent, smallholder farmers. The challenges this supply chain faces amid changing climate conditions include:
Adverse impacts on supply chain productivity and security
Climate change drives up costs and affects the quantity and quality of yields. Worldwide, the agriculture sector absorbs approximately 25% of damages related to extreme weather events. Companies are already feeling the effects of climate-related production shocks. Diageo, an alcoholic beverage company, believes that climate change could cost the company US$77M in increased costs and production disruption in its supply chain.
Food and economic insecurity for smallholder farmers
Climate change also threatens the food security, safety, and livelihoods of millions of workers in agricultural supply chains worldwide. Unstable conditions stemming from climate change contribute to poverty, involuntary displacement, and conflict. In 2008, food shortages led to political instability and riots in Egypt, Haiti, and Bangladesh.
Release of greenhouse gasses from agricultural activities, further exacerbating climate change
Not only is the food and beverage industry impacted by climate change, it is a major contributor. In 2005, agriculture accounted for 10-12 % of total global anthropogenic greenhouse gas emissions.
Addressing climate change in the supply chain
Nestlé has chosen to outsource agricultural production, making its supply chain more flexible in the face of potential shifts in global agricultural productivity. Nevertheless, with limited development in many of the countries where Nestlé sources raw inputs, the company is committed to mitigating the effects of climate change on its supply chain:
Helping farmers increase climate change resilience
In 2011, Nestlé provided technical assistance to over 200,000 farmers, including training more than 16,000 coffee farmers in techniques to adapt to changing weather patterns. Nestlé is also developing early warning systems, and has engaged governments, farmers, and others to develop vulnerability assessments and climate change adaptation strategies.
Distributing new plant varieties to improve yields and minimize environmental impact
In 2016, Nestlé distributed over 2 million higher yielding cocoa plants through the Nestlé Cocoa Plan. In West Africa, where the amount of land suitable for cocoa farming is expected to shrink substantially due to changing climate conditions, improving yield allows farmers to produce more on less land.
Nestlé has also committed to a variety of other climate change actions, including cutting supply chain carbon emissions. In 2016, based on work to reduce emissions and lower climate-related risks in the supply chain, Nestlé was included in the top ranking of the Carbon Disclosure Project’s first Supplier Engagement Rating.
Preparing for the day after tomorrow
With 680,000 farmers in its supply chain, it seems there is ample opportunity for Nestlé to scale its efforts. This may require closer partnership with other companies, local governments, and non-profits. With a more resilient and sophisticated agricultural supply chain, Nestlé and other companies may be able to reduce the dependence of smallholder farmers on their technical assistance and other supports.
Additionally, Nestlé could collect more data and increase transparency around supply chain emissions and productivity. Nestlé can get out ahead of other brands and establish a clear comparative advantage in this regard. For example, just 4% of companies responding to the 2016 Carbon Disclosure Project Supply Chain information request have supply chain carbon emissions targets in place, masking the fact that most companies’ emissions-reduction activities focus on direct operations rather than supply chains.
As Nestlé considers how to fortify its supply chain, what is the company’s role vis-à-vis potential partners (companies, government, non-profits)? What is Nestlé’s responsibility in reducing smallholders’ carbon emissions?
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 McGrath, Maggie, “The World’s Largest Food And Beverage Companies 2016: Chocolate, Beer And Soda Lead The List,” Forbes (May 27, 2016)
 Norton, T.; Ryan, M.; and Wang F., “Business Action for Climate-Resilient Supply Chains: A Practical Framework from Identifying Priorities to Evaluating Impact.” BSR Working Paper. BSR, San Francisco (2015)
 Way, Frances, “Food and drink companies found to be ignoring biggest impact on climate”, The Guardian (Sept 3, 2013)
 Business for Social Responsibility, Carbon Trust, “Missing link: Harnessing the power of purchasing for a sustainable future: CDP Supply Chain Report,” (2016/2017)
 Norton, T.; Ryan, M.; and Wang F., “Business Action for Climate-Resilient Supply Chains: A Practical Framework from Identifying Priorities to Evaluating Impact,” BSR Working Paper, BSR, San Francisco (2015)