Corporate Social Responsibility has now moved from being a hot topic to a globally accepted business practice. This is very positive. But, if we are honest, I don’t think there are many businesses out there that are really delivering the scale of returns for society that they have the potential to. And I think there are two main reasons for this: the prevalence of short-termism, and the fact that few companies have taken engagement with the societies they serve deep enough into their organisations.

We have done things a little differently at Nestlé and, while we still have a long way to go until we achieve the impact on society that I believe we can have, we have made a very positive start by making these topics integral to our global business strategy through an approach to business called Creating Shared Value (CSV).

Creating Shared Value, not giving back

I remember not so long ago becoming involved in a discussion about corporate social responsibility at the World Economic Forum. Over a number of days
I heard pleas from CEOs and prominent movie stars to “give back to society”. This frustrated me. I kept thinking: “Why should I give back? – I haven’t stolen anything!” When I stood up at the end of the forum and stated this, the audience fell silent. But I was convinced that many businesses were looking at CSR in a rather superficial way, and a more robust approach was needed, one that is in tune with the way business can and should really work.

Not long afterwards, I had the opportunity to speak with Michael Porter and Mark Kramer from Harvard Business School about this idea and how I firmly believe that it is only by integrating societal objectives into your business strategy that you can have the level of impact that society needs, because then responsibility becomes sustainable and scalable –and not just a one-off project funding approach.

For example, we have been working for decades with rural communities to help them improve the quality and yield of their produce and adopt sustainable farming methods. This means that farmers can enjoy higher and more sustainable incomes and, if the farmers choose to supply to us (which they are not obliged to, even if they accept our technical assistance and support), then it means that we have sustainable access to better quality raw produce, which is key to our long term business success. It’s hard to see how philanthropic contributions could continually support more than 690,000 farmers a year in this way – which is the number of farmers who supply Nestlé directly.

So, in fact, Creating Shared Value behaviours had already been practiced for some time in our company before the CSV theory and terminology were articulated. After our discussions, Michael and Mark agreed to work with Nestlé to determine how we could create mutual benefit for our company and for the societies it serves part of the way we did business…and Creating Shared Value at Nestlé was born.

Making strong values last

Henri Nestlé founded our company in 1867, when he developed a life-saving infant cereal.He gave our company a vision about the importance of good nutrition and a set of values that still guide us today. These were based on respect: respect for people, respect for cultures, respect for the environment and respect for the future of the world we live in.

In the recent past, companies have had a tendency under pressure from the financial markets to focus on maximising shareholder value, but what this really means, if you analyse it well, is short-termism. And using tools like quarterly share price targets to drive growth only serves to destroy long-term value and weaken the company’s chances of continued success into the future. That is why Nestlé does not offer quarterly reports – and protects our creating shared value focus, proving that working to longer-term targets can be a better alternative.

Creating Shared Value at Nestlé

At the heart of Creating Shared Value is the belief that as a company, we have a clear responsibility to deliver value for our shareholders over the long-term by conducting our business in a way that creates sustainable value for the society in which we operate and which we serve.

To ensure that Creating Shared Value could be fully integrated across our organization, we conducted an analysis of our core activities and identified where the future needs of society intersect with the future needs of our operations and where we could, therefore, have the most impact on society while building a strong business for the future to deliver superior shareholder value.

We identified three areas of focus: offering products and services that help people improve their nutrition, health and wellness because we believe that good nutrition will play an ever more important role in the health and wellness of individuals and society. Next, we focus on water, not only because water is a human right, because water scarcity is a very serious issue in many parts of the world and water is quite simply the linchpin of food security. Finally, we prioritize rural development, because the overall well-being of farmers, rural communities, small entrepreneurs and suppliers is intrinsic to the raw material supply and thus to the long-term success of our business.

CSV provides us a clear framework on which to determine how to focus our investments to secure benefits to society that make a lasting difference and help create the conditions necessary to sustain and expand our business,
to develop products and distribution systems which help improve the lives of consumers, and to run our business in a way that also benefits the communities in which we operate. It also, crucially, ensures that we use resources efficiently and contribute to preserving the environment.

Creating Shared Value has a natural fit within Nestlé as it echoes the values our company was built on nearly 150 years ago. This has been demonstrated by the speed at which our decentralized businesses around the world have not only taken CSV on board, but made it their own, giving it strength and making it an indelible part of our current and future business strategies.

Creating Shared Value – the tip of the iceberg

We recognise that our position in society brings both opportunities and responsibilities: to do business in compliance with national laws and international standards as well as our own values and principles, as expressed in our Code of Business Conduct, Corporate Business Principles and Management and Leadership Principles. These principles have been enriched through our involvement in the United Nations Global Compact in many ways, including alignment on human rights, labour rights, environmental sustainability and corruption.

For a company like ours to prosper, we must take a long-term view, framed in a robust set of principles and values with respect at their core. We must go beyond mere compliance and live the values that form the foundation of our actions in Creating Shared Value.

Seek answers widely

While Creating Shared Value is proving to be an excellent articulation of our strategy to create value for society and shareholders simultaneously, it does not provide us with all the answers.

Being serious about CSV means that we have to tackle some extremely difficult issues that we cannot hope to address alone. We have also made many commitments to society that extend beyond our own factory gates and beyond the reaches of our own influence. To help us address some of the more perplexing challenges, we are engaging with a wide range of stakeholders with specific expertise and local networks, understanding or influence. Together,
we are starting to make a real difference.

Communicate transparently

To support our engagement with partners and other external stakeholders,
we are making our communications ever more transparent and responding to stakeholder encouragement to take leadership positions on key issues.

Our latest Nestlé in Society report, released in March 2014, is a good example of the progress we are making in this respect. The document shares 35 forward-looking commitments that we have made to ourselves and to external audiences. In so doing, it provides a clear sense of the strategic direction in which we are heading and the standards to which we hold ourselves accountable. It reports on our achievements, as well as where there is more work to be done and where real and potential challenges lie.

By openly sharing information, we of course leave ourselves open to criticism.
I see strength in such transparency; this allows us to get feedback and build on it. This is an important part of Creating Shared Value and an important part of our journey. It gives our stakeholders a chance to hold us accountable for our actions, to offer us guidance and even to join us in our journey.

Making CSV happen

To align the organisation to the idea of Creating Shared Value we started at the top. Engaging the Board of Directors and the Executive Board in the concept was key; they had to embrace it before they were willing to support its integration into our business strategy. We then shared this new idea with managers, and then with the whole organisation. It took time, conviction, a lot of communication and finally, we had to deliver concrete, demonstrable actions in the three focus areas in order to provide the proof of concept and to set the example for our own people.

To continue engaging people in the concept over time and confirm that CSV is the right approach to take, we have had to put clear measures in place. This is key for any new idea; you have to prove it to move people from having a passive understanding to being a passionate advocate. That is one of the reasons why we are a partner of the Shared Value Initiative, a global community of practice committed to driving adoption and implementation of shared value strategies among leading companies, civil society, and government organisations.

And while it is far from over, our journey is well underway. As I mentioned earlier, in just five short years CSV has been enthusiastically adopted across all our markets and while nutrition health and wellness is ‘what’ we do, CSV is ‘how’ we do it.

Every market has looked for the areas where they can optimise CSV within the local context, and they are building stronger more vibrant businesses as a result. This penetration is important. Sitting at the top of the company, the Chairman and the CEO must continuously drive to ensure that CSV becomes part of the DNA of the company and is integrated in our business strategies. The real value creation however happens in the factories in all our daily operations in every part of the world by our more than 330000 people, willingly embracing the opportunity to make a difference for the communities around them, and creating long term value for our shareholders. And for nearly 150 years we leave been able to do so and our legacy is to continue to do so for the next 150 years.

SHARE
Previous articleInterview with Alexander Osterwalder- Business Model Canvas
Next articleHumanitarian action in the next decade
Peter Brabeck-Letmathe started his career with Nestlé in 1968 and has held various roles including Salesman, National Sales Manager, CEO of Nestlé Ecuador and Venezuela. In 1987 he joined the headquarters as Senior Vice President, than was appointed Executive Vice President, and in 1997 Chief Executive Officer of Nestlé S.A. In 2001 he was elected Vice Chairman of the Board. Mr. Brabeck-Letmathe is Vice Chairman of the Foundation Board of the World Economic Forum. He holds a degree in Economics from the University of World Trade in Vienna.  In 2012 he received an Honorary Degree of Doctor of Laws from the University of Alberta in Canada.

NO COMMENTS