Nestle, the world’s largest supplier of food and beverages, is a global leader in addressing sustainability not just within their company but across their entire supply chain. In January 2019, Nestle was one of only 29 companies recognized for addressing climate change with their suppliers in a report by the nonprofit group Carbon Disclosure Project (CDP).[i] According to CDP, “the vast majority of emissions of the average company are in the supply chain,” but “too few companies have engaged with their suppliers.”[ii]
Food producers are already seeing impacts of climate change on crop yield as weather becomes more volatile. According to a 2014 report by the UN’s climate science panel, crop yields are seeing a decline in rate of growth, and changes in temperature and rainfall could cause food prices to rise between 3% and 84% by 2050.[iii] Nestle and other large food and beverage companies are well aware of these risks. In the lead up to the 2015 Paris Climate Accord, Nestle USA CEO Paul Grimwood joined 9 other CEOs of leading food companies including Mars, General Mills, and Kellogg in releasing a joint letter urging world leaders to take action on climate change. In the letter, Grimwood stated, “these changes impact the business we do every day as well as the work of farmers, suppliers and distributors across our vast network of partners.”[iv]
While on the surface Nestle talks about business and corporate responsibility as the main reasons for its sustainability efforts, reputational risk is also a major concern. Customers are increasingly sensitive to where their food comes from, yet they do not often differentiate between the brand name on their package and the suppliers further up the chain.[v] Therefore a company which has its own sustainability programs but does not look to its entire supply chain may still suffer reputational damage if one of its suppliers is a major polluter. To this end Nestle has participated in European Commission efforts to standardize how environmental standards and claims of sustainability are communicated to consumers, including standard definitions of “sustainability” and how to measure environmental impact.[vi]
Nestle’s actions to date
Nestle has taken steps on several fronts to “green” their entire supply chain. They have taken a “life cycle approach” (LCA) to looking at their products, an assessment approach that identifies the environmental impact of a product at every stage in its life cycle. LCA is becoming more and more common in agriculture and industrial food, and it has proven effective in assessing environmental impacts of products in a more systematic way.[vii] For example, for their Nespresso coffee products, Nestle started with coffee farmers at the very top of their supply chain, evaluating sustainability practices at the farms and coaching farmers through a continuous improvement process.[viii] In their manufacturing processes, Nestle has set a goal of being emissions-free by 2030. To date they have achieved reductions in emissions by improving manufacturing efficiency and switching to renewable energy and clean fuels.[ix] Nestle also encourages factory sites to adopt best practices in sustainability from other sites through their Do It Yourself website.[x]
Taking it further
While Nestle has done a lot of work to promote sustainability in their supply chain and has been a strong advocate for responsible climate policy, some of their branding efforts seem to cross the line into “greenwashing,” or using labels and packaging that imply that a product is environmentally friendly. For example, some of Nestle’s breakfast cereals sport a green banner at the top and proclaim themselves to be “whole grain.” Nestle’s branding implies that these products are healthier and more environmentally friendly, yet many still contain large amounts of added sugar. With these products Nestle risks alienating environmentally-friendly consumers who may resent this “greenwashing.” They also risk misinforming consumers trying to make healthier choices, which goes against some of their customer-focused positioning, or diluting their environmental work by associating ‘green,’ more natural-looking labels with physical health instead of environmental health. In addition, to drive real sustainability, Nestle should look to innovation in their packaging to develop more compostable or renewable packaging for currently disposable goods like plastic water bottles and cereal bags.
Do consumers take sustainability into account when making purchasing decisions? What is the best way to convey this message? How can more large companies convince their shareholders to take sustainability seriously at all stages in the supply chain? (884 words)
[iv] GLOBAL FOOD COMPANIES UNITE ON CLIMATE ACTION; in joint letter released today, chief executive officers of 10 leading food companies call on U.S. and world leaders to act swiftly and decisively. (2015, Oct 02). M2 Presswire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1718381026?accountid=11311
[v] P. Rao and D. Holt, Do green supply chains lead to competitiveness and economic performance? International Journal of Operations & Production Management, 25(9), (2005), 898-916
[vii] A review of life cycle assessment (LCA) on some food products. Roy, Poritosh; Nei, Daisuke; Orikasa, Takahiro; Xu, Qingyi; Okadome, Hiroshi; et al. Journal of food engineering Vol. 90, Iss. 1, (Jan 2009): 1-10.
[viii] Alvarez, G., Pilbeam, C., & Wilding, R. (2010). Nestlé nespresso AAA sustainable quality program: An investigation into the governance dynamics in a multi-stakeholder supply chain network. Supply Chain Management, 15(2), 165-182. doi:http://dx.doi.org.ezp-prod1.hul.harvard.edu/10.1108/13598541011028769