Nestlé’s Breakthrough 1

NESTLE’S BREAKTHROUGH HIGH YIELD COFFEE PROJECT

Student Name

BMO5501: Business Ethics & Sustainability

Professor

Victoria University

Melbourne

October 26, 2023

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Table of Contents

Executive Summary………………………………………………………………………………3

Problem Identification………………………………………………………………………..4-5-6

Analysis and Connection between Concepts…………………………………………………6-7-8

Opportunities and Challenges…………………………………………………………...………8-9

Value Creation……………………………………………………………………………………9

Recommendations…………………………………………………………………………..…9-10

Reference List………………………………………………………………………………..11-12
 Nestlé’s Breakthrough 3

Executive Summary

In 2022, Nestlé announced its “groundbreaking” success in developing two new Robusta

coffee varieties that produce 50% higher yield and thus generate 30% less carbon footprint.

While this success can potentially contribute to the global coffee industry and improve the

livelihood of Nestlé, it also generates problems such as greenwashing, deforestation and Nestlé’

monopoly of the coffee industry. This case study examines Nestlé’s success under the lens of

Creating Shared Value (CSV) and other ethical concepts. It dives into Nestlé’s value creation on

the business level and on the societal level. Additionally, the case study also discusses

opportunities and challenges as well as offers recommendations for Nestlé.

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I. Problem Identification

In 2022, Nestlé publicly announced in an article on its website that it successfully

developed two new Robusta coffee varieties that produce 50% higher yield and thus generate

30% less carbon footprint. The company considers the success a “breakthrough” in advancing

regenerative food systems and in Creating Shared Value (CSV), claiming that the new coffee

varieties would benefit farmers and the environment. However, there are three main problems

with Nestlé’s project.

Firstly, Nestlé’s “break-though” claim lacks evidence. Both new Robusta coffee varieties

are in the preliminary development stage and only one has shown success in Nestlé’s farm. Of

the two new varieties, only one was being grown in Central America, with no quantifiable

metrics or statistics. Additionally, Nestlé only provides scientific evidence and statistics from its

employed scientists and does not link any external research for cross verification. Here, it is

evident that Nestlé is solely focused on attracting publicity with its “break-though” rather than

investing more effort into perfecting its research.

Secondly, Nestlé is trying to establish an excessive and misleading link between higher

yield and lower carbon footprint. On the one hand, Nestlé is trying to mask its profit driven

intention with seemingly good social causes. Higher yield has always been a desired goal in

agriculture operations because higher yield means higher profits. However, Nestlé has been

advertising its investment in higher yield coffee R&D as a social obligation to reduce carbon

footprint. This practice is called greenwashing, which can be difficult to notice, prove or resist in

public discourses. On the other hand, there is no guarantee that higher yield will result in lower

carbon footprint. To understand this point, let’s take one coffee tree for example. When growing

the new variety, Nestlé’s farmers would still start with the same amount of land, fertilizer,
 Nestlé’s Breakthrough 5

energy, labor and water to grow one tree, like with the normal variety. While it is true that

Nestlé’s farmers would be producing more coffee beans, the excess coffee beans would generate

carbon footprint during the manufacturing and sales process. Hence, the new coffee bean

varieties would actually add more carbon footprint to the environment.

Thirdly, Nestlé’s “breakthrough” will not result in a new generative food system, which

refers to one that "produces sufficient, nutritious, and accessible food in a way that enhances

ecosystem services, conserves biodiversity, and supports social justice and economic

opportunity" (Diamond, et al, 2019). At the most basic level, a food system can only be called

generative when it enhances the ecosystem and biodiversity. However, there is no evidence that

Nestlé’s new coffee varieties enhance the ecosystem. For instance, there is no evidence that

Nestlé’s “breakthrough” satisfies the key principle of “equity” to ensure that everyone has access

to safe, nutritious, and affordable food (Union of Concerned Scientists, 2020). Additionally,

Nestlé’s “breakthrough” can actually harm the ecosystem and biodiversity. Coffee by itself is not

a nutritious source of food, and thus not an essential part of the ecosystem. The invention of

higher yield coffee would incentivise farmers to abandon traditional, essential agricultural

production or destroy the natural landscape to grow more coffee beans. For instance, according

to Tefera & Pelletier (2017), in some regions, coffee farms have expanded by deforestation,

which can have significant ecological impacts, including the loss of biodiversity and disruption

of local ecosystems. Furthermore, in a monoculture system of growing just coffee, soil

degradation can occur, reducing fertility and long-term productivity of the land. In addition,

coffee cultivation often requires substantial amounts of water for irrigation and processing. In

regions with limited water resources, this can lead to over-extraction of water, potentially

depleting local water sources and impacting surrounding ecosystems. The pesticides and
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fertilizers in coffee farming can also leach into waterways, harm non-target species, and

contribute to soil and water pollution. All of these have a significant negative impact on

biodiversity (Coffee, S. M., & others., 2015).

II. Analysis and Connection between Concepts (300)

a. Creating Shared Value (CSV)

According to Nestlé Creating Shared Value Report 2011, Creating Shared Value (CSV)

is “a holistic and sustainable approach to business, which addresses the needs of society, while

meeting the needs of shareholders” (Nestlé, 6). This model consists of

reconceiving products and markets, redefining productivity in the value chain and building

supportive industry clusters at the company’s location.

Firstly, regarding reconceiving products and markets, Nestlé’s “breakthrough” is a

positive contributor to meet the growing demand. According to Pimentel et al. (2022), the global

coffee market is valued at over $200 billion and factors such as increasing urbanization, rising

incomes, and growing demand for specialty coffee are pushing the industry growth. In fact, the

global coffee industry is expected to grow at a CAGR of 2.5% over the next five years, with

coffee consumption expected to reach 181.1 million bags by 2025, up from 167.1 million bags in

2021. By developing a cost effective and resilient coffee variety, Nestlé is furthering the

potential of the global coffee industry. Nonetheless, by pioneering the invention of new coffee

beans and incentivizing farmers to use its seeds and follow its practice (Angel, 2023), Nestlé is

assuming monopoly and domination over the global coffee industry, which can devastate small-

scale, independent farmers and processors.

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Secondly, regarding redefining productivity in the value chain, the new coffee varieties

not only cut internal production cost but increase the value of the coffee industry value chain,

which can generate a positive impact on Nestlé’s employees and coffee farmers.

Thirdly, regarding building supportive industry clusters at the company’s

location, Nestlé’s continued investment in R&D is a supportive industry cluster that enhances the

company’s productivity and competitiveness on the market.

Overall, under the lens of the CSV model, it is evident that the beneficiary of Nestlé’s

“breakthrough” is the company itself. In this case, it appears the Shareholder theory is still more

applicable than the Stakeholder theory as the company favors narrow economic objectives

instead of its social responsibility to broad communities such as farmers, other smaller and local

competitors and vendors (Marcola, 6).

b. Ethical Concerns

As discussed above, Nestlé’s focus on leading the coffee industry toward its vision of

sustainable coffee farming presents several ethical concerns. Firstly, Nestlé is overvaluing the

outcome rather than focusing on ethical issues and repercussions that may result from its R&D in

new coffee varieties. In particular, Nestlé’s only focus is on the goal of making higher yield

coffee with the same amount of resources. However, this approach endangers traditional, local

coffee varieties. The invention of superior lab-developed coffee beans would eliminate

traditional coffee varieties and make a market oversaturated with one type of high yield coffee

bean. This approach diminishes the diversity of coffee culture and also threatens the livelihood

of farmers who refuse to join under Nestlé’s umbrella. For instance, farmers and of low-yield,

specialty coffee varieties would not be able to compete with Nestlé and would be forced into

bankruptcy. Additionally, Nestlé has been controlling the global price for coffee for decades
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(Hardings, 1) and the new invention of high yield coffee beans would only extend the company’s

monopoly, which threatens the marketing share of small, independent coffee brands. Secondly, it

can be said that Nestlé is engaging in motivated blindness, which refers to when people only see

what they want to see and ignore contradicting information (Bazerman and Tenbrunsel, 61). By

advancing its high yield coffee monopoly, Nestlé is knowingly ignorant to the plight of the

traditional coffee industry.

III. Opportunities and Challenges

Nestlé’s “breakthrough” invention presents several opportunities and challenges. On the

one hand, the company is positively endorsing SDG #13 Climate Action. The company serves as

a brilliant example of corporate responsibility toward climate change, which can inspire other

corporations to join the fight against climate change. Additionally, the new high yield coffee

varieties save resources while increasing yield, which create a better living environment for

Nestlé’s employees and farming communities. In this sense, Nestlé’s action is in accordance with

SDG #1 No Poverty, SDG #2 Zero Hunger, SDG #11 Sustainable Cities and Communities, SDG

#15 Life on Land and SDG #17 Partnership for the Goals. On the other hand, Nestlé's monopoly

power makes it a dangerous force for the diversity of the global coffee market. Firstly, since

Nestlé is one of the largest food and beverage companies in the world, with over 2,000 brands

and 291,000 employees, and immense economic as well as political influence, it is difficult to

hold Nestlé accountable for its actions. Even if there are institutions that recognize Nestlé’s

wrongdoings, it is unlikely that they can resist such a powerful corporation or induce relevant

change from Nestlé. Secondly, many consumers are not aware of or do not care about Nestlé’s

greenwashing or monopoly tendencies. Customers may be easily misled by Nestlé’s false

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environmental claims and media campaigns. Additionally, some customers only care about

product price and quality rather than product source or the ethical background of the product.

IV. Value Creation

Nestlé’s investment in new coffee varieties R&D generates positive values on both the

business scale and the social scale. On the one hand, Nestlé invests in the sustainable

development and long term prosperity of its business model. By leading the trend with its coffee

bean and coffee cultivation method, Nestlé strengthens its position as the industry leader and

secures a larger portion of the global coffee market. On the other hand, Nestlé indirectly benefits

its employees, farmers and partners. For instance, thanks to Nestlé’s domination of farming

communities around the world, many farmers earned a “living income” and were able to

transform the faith of their families, which was not a common scenario before the entrance of

Nestlé (Nestlé Sustainability).

V. Recommendations

There are a number of strategies that Nestlé and the global community can adopt to

address current flaws in Nestlé's “groundbreaking” project. Firstly, more institutions and global

governments should call out Nestlé’s wrongdoings. For instance, Nestlé should be held

accountable for its greenwashing technique and environmental impact. This can be done by

supporting shareholder activism and by boycotting Nestlé products. When Nestlé receives

enough backlash, it is more likely to adopt more humane and sustainable approaches. Secondly,

it is important to raise awareness in the public so that customers are more aware of companies’

wrongdoings and more active in defending social issues. This can be done through public

education campaigns or social media campaigns. According to Grabs (2017), customers are the

greatest influence force in the global economy and should use their collective power to push for
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“buyer-driven” sustainability governance of the global coffee industry. Finally, it is important to

support companies that are really committed to sustainability. This can be done by buying

products from companies that have been certified by independent third-party organizations. By

taking these steps, we can help to create a world where companies like Nestlé are rewarded for

their environmental performance, not for their greenwashing.

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Reference List

Angel, M. (2023). Nestle trials giving cash to coffee farmers who grow beans sustainably.

Reuter. https://www.reuters.com/sustainability/nestle-trials-giving-cash-coffee-farmers-

who-grow-beans-sustainably-2023-06-06/

Bazerman, Max H., and Ann E. Tenbrunsel. (2011). Ethical Breakdowns: Good People often Let

Bad Things Happen. Why? Harvard Business Review, 89(4).

Coffee, S. M., & others. (2015). The impact of coffee cultivation on biodiversity: A review.

Conservation Biology, 29(1), 109-121.

(2011). Creating Shared Value at Nestlé. Nestlé, https://www.nestle.com/sites/default/files/asset-

library/documents/library/documents/corporate_social_responsibility/2011-csv_creating-

shared-value.pdf

Diamond, S. E., Foley, J., Goldstein, J. E., & Fanzo, J. L. (2019). Generative food systems: A

framework for designing and assessing food systems that support human health,

environmental resilience, and social equity. Frontiers in Sustainable Food Systems, 3,

102.

Grabs, Janina. (2017). The Rise of Buyer-Driven Sustainability Governance: Emerging Trends in

the Global Coffee Sector. ZenTra Working Paper in Transnational Studies No. 73,

https://ssrn.com/abstract=3015166

Harding, Erika. (1992). Brief On Nestle's Control Over Cocoa, Coffee & Milk Prices."

https://digitalrepository.unm.edu/notisur/10446

Marcola, M. (2018). Stakeholder Theory in Ethical Business Decisions: The Case of Nestle.

https://scholarworks.wmich.edu/honors_theses/3069
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We are helping to close the living income gap for cocoa-farming communities. Nestle

Sustainability. Nestle. https://www.nestle.com/sustainability/human-rights/living-

income/cocoa

Pimentel, D., Fonseca, F. G., & Corbeels, M. (2022). The global coffee market: a review of

trends and drivers. Food Security, 14(2), 341-358.

Tefera, D., & Pelletier, J. (2017). Environmental impacts of coffee production: A review.

Agronomy for Sustainable Development, 37(3), 32.

(2020). The generative food system: A vision for a future where food and nature thrive together.

Union of Concerned Scientists.