Initiatives Companies can take towards Creating Shared Value
Etienne Benet, Managing Director, Nestlé India Limited at the Porter Prize ceremony on initiatives companies can take towards creating shared value.
“It is very essential understand that CSV goes beyond CSR and is not philanthropy.”
“Restoration of resources is a priority within our factories and in areas under our control.”
Nestlé’s business philosophy is about creating shared value (CSV). This concept is not new to us. We have a legacy to this since our founder Henri Nestle invented Farine lactee to save the life of a neighbor’s child. From that time it has been embedded in our values and business principles. The principle around creating shared value (CSV) was developed by Harvard professors Mark Kramer and Michael Porter. They are encouraging companies to understand this concept and to adopt it.
So, what is creating shared value? CSV is based on the understanding that business and long-term social benefits go hand in hand. The business that thinks long term and follows some business principles creates value for society and shareholders through its activities. This means making specific investments necessary to sustain and expand our business to develop products and distribution system, which help improve lives of consumers and turn our business in a way that it also benefits the communities in which we operate. All the while using resources efficiently and contributing to preserving the environment. It is very essential understand that CSV goes beyond CSR and is not philanthropy. For CSV to be impactful it is essential to determine the areas where shareholders interest and society interest strongly intersect and where value creation can be optimized for both. Each company and business has to analyze its value chain and see where it can create maximum impact.
As we know, growth and social change are accelerating the desire of communities to move up the income pyramid. Therefore, 3 issues namely, rural development, conservation of water and environmental resources as well as access to nutrition and food security will be even more important for society. When we analyze our value chain we identify that these 3 areas are very important for us and this is where we can and want to add value.
Let me start with rural development. We have consistently invested in developing farmers and our string team of agronomists for providing free training, technical assistance to dairy farmers, coffee farmers and chicory farmers. The example of extensive work to develop the milk economy in Moga is well known. Today we touch around 200,000 farmers out of which 110,000 are only milk farmers. This would mean our extension services would rank amongst the larger ones in any private company. Our focus on developing reliable supplies and good quality raw material is a strong multiplier for rural development and is helping the communities to prosper. We have special programs for women in supply chain and our village women dairy development program will create awareness about good feeding and breeding practices for cattle and sustainable farming practices benefiting close to 60,000 women dairy farmers.
Regarding water, Nestle and in fact the entire food industry requires agricultural raw material, which depend on sufficient, and reliable water availability. Water tables across the world are depleting and India is heavily impacted. We have a long story of leadership of water stewardship through continuous improvement and efficient use of water in our factory operations and programs with farmers. In June last year we published a Nestle national commitment on water stewardship which elaborates our commitments. It is important for us that we find solutions and Nestle is working with the International Water Management Institute and the 2030 water resources group to restore and implement solutions. At the same time restoration of resources is a priority within our factories and in areas under our control. To give you an example we have embarked on a project to replace the water used in milk processing by reusing the water contained in the milk itself. Since milk is made up of 90% water this would lead to a considerable reduction in water extraction. We also provide clean water facilities in village school, sanitation facilities for girl students to encourage attendance of girls in schools and conduct water education programs for students. This is widely appreciated by the local communities.
A very important focus area for us is nutrition. Lot of work has been accomplished in this area. About 15 years ago we announced our intention to be the world’s leading nutrition, health and wellness company and since then globally Nestle has invested over 18 billion Swiss franks in new nutrition businessess and initiatives as well as embedding nutrition into our existing businessess. As a company Nestle spends over 1.3 billion Swiss franks on research and development every year. This includes developing 45 products extensively consumed by lower income groups around the world. In North West Africa, for instance, we were selling 100 million fortified boyong servings everyday. In India we sell Masala-e-Magic. It makes iron, iodine and vitamin A available at an affordable price of Rs 4 per pack. One of the biggest concerns that India faces is the burden of malnutrition. As a company that understands food and nutrition we have already set in motion many initatives to create awareness. We have rolled out the Nestle healthy kids program. This non branded program helps students in village schools understand the basics of nutrition, good health and how to have a balanced diet from locally available foods. We also engage with health care professionals and other stakeholders to improve the nutrition status of the community.
In summary I would like to emphasize that CSV is based upon pragmatic, sound and long term thinking. It is about creating sustainable shareholder value in a way it enables long term social progress at the same time. We strongly believe in this and ensure that it is part of our business strategy.