THE BLOG
05/26/2010 11:11 am ET Updated May 25, 2011

Valuing Food Security

Last year I wrote in the Huffington Post about creating shared value, Nestlé's guiding principle that in order to create long term value for our shareholders, we must at the same time create value for society at large.

Establishing this connection between shareholder and societal value will be on the agenda this week as stakeholders from intergovernmental, humanitarian and religious organisations and academia gather in London to join Nestlé for the second annual Creating Shared Value Global Forum. One issue on the agenda which is fundamental to human survival but rarely receives the international attention it so desperately deserves, is food insecurity. Food insecurity is a spectre that haunts international development; in the first half of this century it will be drawn into even sharper focus and it is critical that businesses, governments and NGO's work together relentlessly and responsibly to communicate the dangers we face and to provide concrete solutions.

More than one billion people go to bed hungry every night and 200 million more people are malnourished today compared to the mid 1990s. This represents a reversal of nearly 30 years of progress. At the same time global demand for food increases at a vigorous rate: every day 200,000 people are being added to the global population and yet our agricultural productivity per hectare is falling. If we are to feed these additional mouths we are going to have to double agricultural output in the next 40 years. We can do this, as we have done with cereal production in the last 40 years, but it requires innovation and immediate action to address the key areas that threaten the growing and sustainable food supply that we need. I will try and highlight some areas that must be immediate priorities.

Water is the life blood of food production and the most important factor in the sustainability of myriads of businesses contributing to international food supply. I have been arguing for some time now that the biggest resource challenge humanity faces over the short to medium term is not oil but water. The 2030 Water Resources Group, of which Nestlé is a member, has estimated that global water requirements will grow by over 50 percent over the next 20 years. Such levels of usage will be 40 percent greater than what can currently be sustainably supplied. What this means in human terms is that unless things change, 5 billion people will live in water-scarce areas by 2025.

To address this challenge requires broad strategies for each watershed; the water cost curve of the 2030 Water Resources Group provides the tool. Business can and must be part of the solution. Last year alone Nestlé saved 10 million cubic metres of water whilst continuing to build water treatment facilities wherever insufficient local ones supplied our plants. However, like all supply chain issues, we are aware that we need to engage more with our stakeholders: action by business alone is never enough. As such we have worked in partnership with the World Economic Forum, the UN Global Compact CEO Water Mandate and the World Bank, amongst others, to move water up the global agenda.

The political encouragement of biofuels is only exacerbating this situation. Every litre of biofuel made from irrigated maize or soybeans requires between 2,000 and 9,000 litres of water. It is a phenomenally water-intensive approach and the real value of the fuel is far from proven. Depending on crop type and geography, CO2 savings compared to fossil fuels can be very small -- in some cases only 10 percent. In light of agriculture already accounting for 70 percent of global water usage, it is clear that biofuels represent an obsolete means of addressing the legitimate concern of reducing our reliance on fossil fuels

A further area of importance is new technologies and product innovation, an area that goes to the heart of our business. A well-intentioned debate around the use of technology in food production has sadly resulted in the over-influence of well-fed Westerners making poor decisions at the expense of those who are starving. We are urgently in need of the new innovation and discovery we have seen in previous centuries. Research and Development must remain an essential part of any food producing business, as well as the sustainable livelihoods of employees and the nutrition of consumers.

One example of this is Nestlé's Regional Development Centre in Abidjan, Côte d'Ivoire, opened a year ago and which focuses on research into improving yields and productivity of indigenous agricultural raw materials. We currently provide free technical assistance and about USD 50 million of micro-credits to about 600,000 farmers in developing countries. To expand this work, the centre will distribute over one million high-yield plantlets to the region every year from 2012 onwards. Not only will this help us create value for our shareholders by assuring our supply of cocoa; it will also help ensure sustainable incomes for the rural communities that are our suppliers. By generating sustainable incomes for farmers, businesses can help agricultural communities reach new markets and gain access to financing, which in turn will help protect against degradation of topsoil through access to plant protection and fertilisers. This is a simple cycle that epitomises the benefits of a shared value approach for businesses.

The United Nations Food and Agricultural Organisation estimates the world will need to boost agricultural investment by $83 billion a year until 2050 if we are to feed our growing population. Businesses must recognise the crucial role that they must play in meeting this most audacious target. For Nestlé, a key element to securing investment is by using our position as the world leading nutrition, health and wellness company, to raise the profile of these issues and open up debate between businesses and stakeholders. We very much look forward to helping to facilitate these discussions at the Creating Shared Value Global Forum in London and beyond.

Peter Brabeck-Letmathe is Chairman of the Board of Nestlé S.A. He began with Nestlé in 1968 and held a variety of assignments, including 17 years as a manager in Latin America. He served as the Chief Executive Officer of Nestlé from 1997 to 2008 and was appointed Chairman of the Board of Directors in 2005. He serves on the Board of L'Oréal S.A., Roche Holdings S.A., and the Foundation Board of the World Economic Forum.