Nestle explains logic of shareholder-community focus
Peter Brebeck-Letmathe, chairman of Nestle, yesterday highlighted the crucial role of food companies to taking the lead in building food security in a presentation at the International Food Policy Research Institute in New York.
He said that one of the main lessons of the financial crisis has been companies’ realization that “they can only have long term success if they create value for shareholders and for society at large at the same time”.
But in the past, many CSR programmes have been based around giving to charity and ‘giving back’ to society. The assumption is that, through its day-to-day operations, it is ‘taking away’.
“How sustainable is it to equate the level of a company’s responsibility to society with the size of the cheque that it writes, especially when it is a publicly listed company and that money belongs to its shareholders – many of whom are themselves feeling the bite of recession?”
When CSR reporting starts from a negative premise and tries to deliver on promises like fewer emission, less packaging, fewer strikes and accidents, positive progress can be restricted.
“If you are always trying to prove you are less bad, where is the incentive to excel rather than just mitigate risk?”
Shared Value
Brebeck-Letmathe went on to explain the thinking behind Nestle’s approach to CSR, called Creating Shared value.
“Creating Shared Value says that for our business to be successful in the long run, it must consider the needs of two primary stakeholders at the same time: the people in the countries where we operate and our shareholders.”
But beyond just looking to the long term, it aims to consciously identify “areas of focus where shareholders’ interest and society’s interest strongly intersect, and where value creation can be optimised for both”. It then invests both talent and capital in these areas, and seeks collaboration with other stakeholders.
The areas of its supply chain that Nestle has identified as encapsulating the best potential for value creation are: water, rural development, and nutrition.
But the company’s initiatives in these areas are not intended to be charitable. Rather, they are founded on good business sense.
“While European growth is at best stagnant, we are seeing growth in the high single figures, sometimes even double figures, in developing markets.
It’s a tremendous opportunity for us; provided we get our product offering right with these consumers. I think it’s a powerful example of how we are tangibly creating value for the people we interact with at various stages in the value chain; and growing our own business at the same time.”
