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2 Part I. The Nestlé Corporate Environmental Strategy
2 Part I. The Nestlé Corporate Environmental Strategy
Introduction 2
2
Introduction
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From production operations to distribution and consumer purchasing,
Nestlé has developed an integrated approach for considering the
environment throughout the supply chain process. According to the
Environmental Progress Report Highlights (2000), Nestlé states the
objective in company factories is to maximize “eco-efficiency”, or to
maximize the production of goods while minimizing the consumption of
resources. The environmental performance of manufacturing
processes is measured through worldwide factory surveys and
environmental performance indicators (EPIs) that are verified against
action plans, and are used to assess the progress toward “eco-
efficient” objectives. Nestlé also claims the support of sustainable
agricultural practices, as it does not own or operate farms where raw
materials are obtained, and boasts a monetary overall investment for
the protection of the environment (Figure 1) that amounted to more
than 3% of total capital expenditure from 1997 to 1999(NESTEC 2001).
4
The components of the NEMS aim to facilitate continuous improvement
and communication while integrating innovation and renovation
strategies throughout Nestlé’s long-term environmental commitment
(NESTEC 2001).
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general, the certification process (including EPIs, auditing, and facility
surveys) is inefficient and inaccurate for such a number of reporting
facilities. The margin of error is much larger when considering that
individual factories are manually reporting measurements of
performance based on facility inputs and outputs (i.e. waste water
generation, greenhouse gases, energy consumption, etc.) The
accurate consolidation of all this environmental performance data is
skeptical. Further, as a global food company, Nestlé has been
criticized for establishing characteristics of “bluewashing” in its
environmental strategy (Corpwatch 2002). This idea stems from the
tendency of some global companies to associate themselves with the
blue flag of the United Nations in order to connect themselves to
United Nations themes such as human rights and environmental
protection. In this way, large corporations are able to appear more
environmentally responsible to consumers (Corpwatch 2002).
Nestlé’s position on GMO use in their food products has also attracted
recent criticism from environmental groups. Although Nestlé recently
phased out biotech foods in the UK, the company continues to use
genetically modified foodstuffs in all other countries including the
United States (Environment News 1999). Nestlé’s states their position
in the following words: “In those countries where consumers are
reluctant to accept the use of GM crops as a source for ingredients,
Nestle products do not contain these ingredients, in as far as
practically possible” (FOE 2000). The environmental group, Friends of
the Earth, also reported that following Nestlé’s statement, Nestlé was
unable to list in which countries this policy operates.
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A visit to the Nestlé website also reveals the company’s struggle with
environmental information dissemination. The site contains many
different attributes of the corporate environmental approach that are
accessible with the click of a button. Explanations and descriptions of
company environmental activities, however, are clouded in general
language and fancy graphics. It seems that information is being
hidden somewhere, and this does not make the company look very
environmentally responsible. Nestlé provides a few reports available
for downloading from the site, but the majority that is listed is not
accessible to the public. In our attempts to contact Nestlé USA in
Glendale, California, we requested the most recent corporate US
annual report, and received a pamphlet describing recycling tips in the
mail.
Successful Implementation?
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The Nestlé Corporate Strategy
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product sector. Nestlé is still outperforming Unilever and P&G, two of
its major competitors in the packaged-foods industry. Supplier power
is relatively low since Nestlé has contracts for specific raw materials
and products with its suppliers. Those crucial suppliers that have a
contractual relationship with Nestlé are audited to ensure compliance
with Nestlé Corporate Business Principles (NCBP 2002). Similarly,
Nestlé has a direct procurement system with farms for agricultural raw
materials. Nestlé’s close relationship with its farmers ensures that
Nestlé’s policies for safety and quality are met. The bargaining power
of buyers, on the other hand, is quite high. Consumers of food
products tend to be fairly price sensitive, so that customers influence
pricing.
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innovation and renovation and channel growth (Nestlé 2002). In terms
of geographic expansion, the management of Nestlé’s businesses in
the food industry takes place in three geographic zones: Europe, the
Americas, and Asia, Oceania and Africa (AOA). The business activities
in water and pharmaceutical products are managed on a global scale.
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One of Nestlé’s strengths lies in ability to diversify while still
maintaining a line of products and strategic brands that support the
company. Although Nestlé owns Alcon and L’Oreal, synergies do exist
among the different product lines so that innovations in eye care or
health care can be transferred over and applied to food and beverages.
Nestlé is able to maintain a focused product line in those sectors in
which it has already invested.
In the U.S., for example, Nestlé stood on the sidelines while Unilever
bought Bestfoods and Phillip Morris bid for Nabisco (Tomlinson 2000).
This was strategic decision on the part of the CEO and Nestlé in
general since another acquisition would only counteract the company’s
efforts to re4duce overcapacity. As mentioned earlier, Nestlé would
like to turn its large size into a strength and eliminate liabilities
associated with overcapacity. As a result, Nestlé is using its current
array of brands and products as a strength against uncontrolled growth
and overcapacity accumulation.
Successful Implementation?
One of the major areas in which Nestlé has not been so successful is in
reducing its overcapacity. Although GLOBE is targeted to improve the
company from the inside, this program is only in the preliminary
phase. With almost 500 facilities in nearly 80 countries worldwide,
Nestlé has not been able to cut back overcapacity and reduce
inefficiency (Nestlé 2002). The company has had difficulty in doing
this, particularly in Europe where employees have formed unions
making cutbacks to the labor forces a difficult task. At the Perrier plant
in France, for example, strong labor unions have formed strikes when
Nestlé has tried to cut employees. As a result, restructuring in order to
downsize and increase efficiency has been a nightmare for Nestlé.
Analysis of Strategic Approach
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successful environmental strategy has yet to take the lead in the
corporate ‘green’ competition. As a prominent corporation in the
global market, Nestlé has failed to create a convincing link between
the company’s business and environmental strategies. Although both
strategies exhibit a common organizational structure (i.e. NEMS) that
incorporates aspects of conservation, innovation, and profitability,
many of the claims Nestlé makes regarding its environmental
management strategy are inconsistent with the components and
objectives of the corporate strategy.
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In order to determine willingness-to-pay, we asked how much more
consumers would be willing to pay if Nestlé used a) non-GMO raw
materials/ingredients in their products, b) organic food ingredients in
their products, and c) recycled packaging materials for their products.
To assess brand loyalty, we asked a) what consumers’ favorite
chocolate candy manufacturer is and b) whether consumers purchase
from a variety of manufacturers or from one. We also asked whether
consumers own pets and whether they purchase pet care from Nestlé.
Information availability was assessed by asking consumers if they were
aware of some of Nestlé’s main brands other than chocolate. Finally,
we evaluated the consumers’ feelings on Nestlé’s potential for
environmental differentiation by asking whether they thought Nestlé
would be successful if it used environmental differentiation as a
strategy.
Nestle provides a variety of food products that we use in our every day
lives. Therefore, it important to assess how the company could
improve its environmental strategy to benefit consumers and
simultaneously maintain a competitive advantage.
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In addition to a revised marketing program, it would be in the best
corporate interest of Nestlé to establish an environmental eco-labeling
program to identify and promote environmental responsibility. The
ESM 210 consumer survey illustrates this, and Nestlé would benefit
from taking a more global proactive approach to environmental
management as opposed to instating changes in the environmental
program in response to criticism and regulation. Through these
actions, industry also has the opportunity to "reinvent" itself in the
eyes of many who have otherwise been adversaries in the past in
reaction to boycotts and publicized safety concerns.
Appendices
Environmental Investments
0.4
0.35
0.3
0.25
% 0.2
0.15
0.1
0.05
0
Packaging
products/waste
Energy
Water
Other
Air
By-
14
15
Figure 3.
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Male Willingness To Pay For
Figure 4. Environmentally Differentiated Nestle Products
0.7
0.6
0.5
0.4
%
0.3
0.2
0.1
0
0 0.1 0.3 0.5 0.75
Non-GMO $
Organic
Recycled Packaging
0.4
% 0.3
0.2
0.1
0
0 0.1 0.3 0.5 0.75
Figure 6. $
29%
29% 17
Ghiradelli
29% Nestlé
bibliography
Environment News: Giant Companies to Phase Out Biotech Foods. April 28,
1999. Accessed May 25, 2002. http://ens.lycos.com/ens/apr99/1999L-04-
28-03.html
Friends of the Earth (FOE) Campaigns Against Genetic Foods Across Europe.
Accessed May 27, 2002. http://ens.lycos.com/ens/mar2000/2000L-03-08-
02.html
Friends of the Earth (FOE) Europe GMO Foods Survey, 7 March 2000.
Accessed May 27, 2002. http://www.foe.org/safefood/foeesurvey.html
Nestlé Corporate Business Principles (NCBP), 2nd Edition. March 2002. 28p.
Retrieved on May 15, 2002 from www.nestle.com
Stevenson, Philippa. May 9, 2002. Rich Pickings Await Fronterra. The New
Zealand Herald. Retrieved on May 17, 2002 from
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http://www.nzherald.co.nz/storydisplay.cfm?
thesection=business&thesubsection=agriculture&storyID=1844216
Tomlinson, Richard. November 13, 2000. Can Nestle Be The Very Best?
Fortune. Retrieved on May 28, 2002 from
http://www.fortune.com/indext.jhtml?
channel=print_article.jhtml&doc_id=00000261
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