Creating Shared Value

Today, the values and behavior of global businesses face unprecedented scrutiny, and trust in corporations appears to be at a very low ebb. Never in the last 80 years has so much value been compromised for both shareholders and for the general public in such a short period of time, with catastrophic consequences for the individuals and families affected. The financial crisis which resulted in the current deep recession revealed once more a basic business axiom: if you fail to work on behalf of the public interest and take shortcuts that place the public at risk, you also will fail your shareholders.

It is interesting that some of the companies that diminished shareholder value and damaged hundreds of thousands of ordinary citizens were at the same time highly rated on corporate social responsibility measures. That is because these measures rarely deal with the fundamental function of the business, which is creating value for society and shareholders.

For Nestle, and I suspect many other global companies, our challenge is to move beyond playing the role of "good corporate citizen". Instead, we should create a fundamental connection between shareholder value and community value. We need to integrate the improvement of the lives of families, workers and communities into our core business strategy. While this may sound more like a government policy platform than a commercial objective, the truth is that community investment aligns with business investment across a wide range of Nestle units from supply chain to production and distribution. From labor policies and human rights to development, sustainability and the environment, successful global companies will be those who identify outcomes desirable to both shareholders and communities and work aggressively to bring these outcomes to fruition.

At Nestle, we call it Creating Shared Value. That is, to have long-term business success, you must create value for both shareholders and for the public. This is the fundamental principal behind the way we conduct business at Nestlé. One example: We strive every day to make a difference in the areas of nutrition, water, and rural development. These are core to Nestlé's business strategy and essential to creating a better and healthier world in the 21st century. Nestlé works directly with 600,000 farmers throughout the world, providing over $26 million worth of microfinance in 2008. Today, about 2.4 million people in developing countries earn their livelihoods from the Nestlé supply chain. These are staggering numbers, and they remind us that the health of the community from which Nestle draws its labor and raw materials is vital to our success as a business and to our shareholder value.

Here's another example closer to home for Americans. Nestlé recently made its largest ever capital investment at an aseptic manufacturing facility in Anderson, Indiana. We've committed over $400 million and created more than 500 jobs in an automobile-manufacturing town that has fallen on hard times. But our business success in Anderson will depend on more than the facility itself. As a result, we've turned to the community and established programs for literacy, mentoring and nutrition, bringing Anderson schools into the Reading is Fundamental program, which gives books to elementary-aged children. In fact, Nestlé's nutrition education programs reach at least 10 million children worldwide, with a total investment of more than $11 million -- and we believe there is room for improvement.

That's why in the coming days, Nestle will announce a series of Shared Value initiatives intended to foster improved nutrition and food safety, accelerated rural development in Africa, and innovation. These initiatives are aimed at leveraging partnerships with government, non-governmental organizations, and promising microenterprises in the developing world to achieve objectives related to the United Nations Millennium Development Goals.

We will be announcing, among other things, a new investment in agricultural productivity, food safety, and availability of nutritious food in Africa. We will unveil and new program to reward and seed creative approaches to solving problems of water conservation, rural development and nutrition. Finally, we will attack childhood malnutrition and obesity with a new global education initiative that will be implemented in the more than 100 countries around the world where Nestlé operates.

Nestle has long been the world's foremost nutrition, health and wellness company, with half our factories and employees in the developing world. We owe our success in large part to those communities, and it's that understanding that guides us to do even more than ever we have before. And though it's difficult to do in these uncertain times, it's my hope that other companies will follow suit, remembering as we do that corporate social responsibility is not just an add-on. It should be at the heart of the business we conduct collectively, no matter where we conduct it in the world. That's what Creating Shared Value means.

Comments

[StoneTroy]

If you'd like to view the web cast, of today's announcement you will find the archived version at:

http://clients.world-television.com/nestle/Nestle%5FGlobal%5FForum09%5Fpress/#

[themodernleader]

You are the CEO. Your values and goals become the values and goals of every member of your organization. Your recognition of corporate responsibility is to be commended.
My problem with organizations such as Nestles is that they are so gigantic that they become monopolies, if only by default. Maybe, Nestles. by its very function is a naturally occurring monopoly, such as a railroad, or a utility line, of a gas line. If so, it must be regulated fairly and strictly to protect the citizens' interests. If not, it must be broken up as Teddy Roosevelt broke the monopolies at the start of the Twentieth Century. If not broken of their unnatural power, monopolistic corporations will redesign and regulate the American democracy with the lost of our independence and liberty.

[Anthony B]

Nestle's Chairman has it right. The recent failures by corporations is partially a result of their failure to focus on the needs of individual regions of the world. Nestle' uses research and development to develop foods based on regional needs. I've read that they fortify lower cost foods in developing countries to help combat malnutrition. Educating the public about better nutrition (either malnutrition or obesity) is important, but helping developing countries improve their water and agricultural practices is just as important to solving many of the world's environmental and food sustainability problems. Nestle' is doing all three. Sure, they made some mistakes years ago, but they seem headed in the right direction now.

[ProgressiveVoice]

No one exists in a vacuum. I used to tell my employees to remember, when they are serving the customers, that they too are customers of someone and should treat each person who walks up to the counter in the same manner that they want to be treated when they are the customers.

Wal-Mart is an excellent example of the corporate mindset today. They advertise how important it is to them to provide their customers with low priced goods, yet fail to see how their policies of outsourcing and keeping employees low paid without benefits are diminishing the very customer base they claim to be working to help! Frankly, I wouldn't mind paying a little bit more if I knew that the few cents extra was keeping another US community alive. However, given the amount of profit being divided between "shareholders" (heirs of Sam Walton; Wal-Mart is privately owned), a better answer would be a combination of higher taxes on all income over a few million and lower priced goods because of lower profit margins rather than lower COG.

[LeonBNJ]

Nestle is one of the largest makers of candy, is one of the largest bottled water sellers (Poland Spring et. al), a major maker of infant formula, probably the world's largest ice cream and related products maker and based in Switzerland a great hiding place for a company. Despite their attempts to look good in the communities the have facilities in, they are complicit in exessive consumerism, a maker of fattening, low benefit, empty calorie foods and so on.

[Amanda Hohman-Foos]

"That is, to have long-term business success, you must create value for both shareholders and for the public. This is the fundamental principal behind the way we conduct business at Nestlé. One example: We strive every day to make a difference in the areas of nutrition, water, and rural development. "

Is this why you sue residents of small towns because they won't let your bottling plants in? Is this why you've banned worker's right to assemble in India? Is this why you refuse to clean up the damage you've done to third world countries' minimal water access with the toxins for your bottling of water for "rich people".?I look forward to the day when oligarchy companies like yours rest deeply in the dirt.

[Facts]

Nestle, is one of the world's great class companies and you are looking at the darkside but there is many very good sides about what they are doing regarding nutritious foods, clean water awareness, good management and caring for the consumer and their shareholders. Mr. Brabeck has been an impeccable manager which is hard to say for many CEO's...

[Dynamohum]

Tell us details about the nutritious foods please....­..........­zzzzzzzzz zzzzzzzzz I didn't think so. There are no nutritious Nestle foods.

[petef59]

they tried to pull off a bottling plant - I meant to say

[petef59]

Yes, if I remember correctly they tire to pull off a bottling plant in Wisconsin. Environmental studies showed that many local communities aquifers would be drastically affected, lawsuits followed and locals prevailed.
His sentiments are admirable, but such large corporations inherently become removed from local communites. How about more small, locally owned businesses?