Sustainability and Industry 4.

0 in the supply chain of Nestlé

Akram Amraoui1, Anna Lievonen2, Brielle Miaguine Wakouwa3, Julia Talvitie4, Trang Dang5,
Sajal Kabiraj6*

1,2,3,4,5,6
School of Entrepreneurship and Business, Häme University of Applied Sciences Ltd.
(HAMK), FI-37630, Valkeakoski, Finland.
6
*Corresponding author: Sajal Kabiraj, Email. Sajal.kabiraj@hamk.fi

ABSTRACT

Nestlé has continued its evolution by letting innovative technological developments

of the industry 4.0 play as a crucial driver. To support manufacturing automation, Nestlé has
deployed artificial intelligence and collaborative robotics initiatives. To enhance the degree
of responsiveness across the supply chain network, Nestlé leverages predictive big data
analytics and communication optimization. Nestlé has expanded cyber-physical systems and
digitalization to go beyond its current success in customer-centricity, manufacturing agility,
carbon footprint reduction, water management and transparency. In this article, the authors
discuss about Nestlé’s value chains operations, their costs, and benefits, by applying the
Upright Net Impact measurement model. The key focus is to understand the marks of
Industry 4.0 era and scrutinize how Nestlé is investing its efforts for productivity, positive
changes to environmental and societal impacts.
Keywords: Nestlé, sustainability, Upright Net Impact model, ecological footprint,
digitalization.

INTRODUCTION

Nestlé is one of the world’s biggest companies in the grocery business, producing all
kinds of human and animal foods from bottled water to baby formulas. Nestlé operates
globally and is estimated to have 273 000 employees and over 2000 brands. The company is
established in Switzerland, and they have their headquarter in Vevey, Switzerland.
According to the claims of Nestlé, one of its biggest aims is the continuous development to
provide healthier products for all its customers from babies to seniors, to ensure better
nutrition, health, and wellbeing for its customers. Their aim is also to make good nutrition
accessible and affordable to everyone (Nestlé, 2022).
Their slogan Good food, Good life brings out their values of food’s power to enhance
life. Nestlé continues the legacy of their founder Henri Nestlé who created a life-saving
infant food already in 1860’s. Nestlé started with production of condensed milk under the
Milkmaid brand (Nestlé, 2022).
Nestlé group’s sales at 2020 were 84.3 billion CHF wherefrom over 22 billion of the
sales consists of powdered and liquid beverages, 14 billion of PetCare-products and 12.2
billion of nutrition and health science-products. Their products include baby food, bottled
water, breakfast cereals, coffee and tea, confectionary, dairy products, ice cream, frozen
food, pet foods and snacks. Their well-known brands are for example Friskies, KitKat, Maggi,
Mövenpick, Nescafé and Purina (Nestlé, 2022).
Nestlé has done different contradictory campaigns f. ex. pushing breastmilk
substitutes in a very aggressive way into developed countries. They made it seem that the
infant formula was almost as good as breast milk, which is highly unethical. It is not clear
how many children were lost directly or indirectly due to their marketing campaign and
Nestlé does not claim responsibility for these lives. Many people and many companies even
nowadays still boycott Nestlé for its actions. Nestlé has also been associated with issues
relating to child labour, pollution, price fixing and mislabelling. Nestlé has been titled for one
of the world’s most hated companies (Andrei, 2021).

LITERATURE REVIEW

Fourth industrial revolution

Development of the concept of the fourth industrial revolution
The industry has been developing on an ongoing basis since the ancient times. First
Industrial Revolution took place in the 18 th century, and it took handmade production into
mechanization. Second Industrial Revolution took place in the 19 th century and is known as
the age of steam and electricity. The Third Industrial Revolution has continued until
nowadays and computerization, automation and use of new energy sources are its
characteristics. Industry 4.0 was started in Germany in 2011 when a project from the
government intended to promote computerization of manufacturing processes. The
working group created a concept implementation: devices communicate using the operating
principle of social media. Industry 4.0 does not only refer to changes in factories but also in
distribution and procurement (Szozda, 2017).

Nestlé’s initiative to reduce its carbon footprint

Carbon footprint has system boundaries - commonly called tiers or scopes - which can
be classified as scope 1 emissions, scope 2 emissions and scope 3 emissions. Direct
emissions that come from manufacturing or producing products, are classified as scope 1
emissions. Indirect electricity and energy production emissions are classified as scope 2
emissions. All other indirect emissions are classified as scope 3 emissions (El Geneidy &
Baumeister, 2019, p. 16). These scopes are used in Nestlé’s roadmap to net zero. Nestlé has
made a promise to reach net zero by 2050, and to halve their greenhouse gas emissions by
2030 (Nestlé, n.d.a). Nestlé has provided statistics for their GHG emissions in 2018 by scope.
Direct emissions (scope 1) cover 3% of Nestlé’s total emissions. Indirect emissions from
electricity, heating, and cooling (scope 2) cover 2.2% of total emissions. The rest of Nestlé’s
emissions are caused by other indirect sources (scope 3), such as sourcing and the use of
products (Nestlé, 2021, p. 6). More information is included in the Figure 1.
 Figure 1: Nestlé´s total GHD emissions by Scope (2018)
Nestlé has identified that 94.8% of their greenhouse gas emissions are caused by
their supply chain operations in 2018. Sourcing the ingredients is the largest emitter of CO2
for Nestlé, totaling at 65.6 tons. In 2018, the biggest GHG emissions of sourcing ingredients
are caused by sourcing dairy and livestock. Nestlé’s dairy and livestock accounted 34.2
million tons of CO2 in 2018 alone, which is over half of the emissions that are created in
Nestlé sourcing their ingredients (Nestlé, 2021, p. 9). Second largest emissions from Nestlé’s
ingredient sourcing are from agricultural ingredients, which they have classified as soil and
forests. The emissions from this sector were 25 million tons of CO2 in 2018, which equals to
27% (Nestlé, 2021, p. 14).
Companies like Nestlé are trying to find ways of reducing emissions in several ways.
Not only has Nestlé promised to achieve net zero by 2050, but they have also committed to
changing all their packaging to be recyclable or reusable by 2025. This initiative received a
large investment from Nestlé, 2 billion CHF (Istrate-Scrădeanu et al., 2021, p. 340). Nestlé
also lists their key actions in their roadmap to net zero, listing actions like changing their
product lists, using renewable energy, using natural solutions to remove GHG from the
atmosphere, as well as engaging with people in the industry, such as farmers, NGOs,
communities, and governments who have the largest impact in the problems (Nestlé, 2021,
p. 8). All of the steps Nestlé needs to take, must start from the very beginning of the supply
chain for them to be able to reach their goal by 2050. All the changes and steps they take,
will impact many communities and industries. As the biggest emitter is agriculture, the steps
they must take start from the very root, impacting farmers. They need to source smarter,
protect the local ecosystems and make sure to help farmers to have a good livelihood as
well. Investing in new innovations on the agricultural sector is important, so that they can
cut their emissions. Nestlé’s roadmap mentions cutting methane productions, using more
sustainable feeds, and having better management of herds so that the farms can be more
productive (Nestlé, 2021, p. 11).
Nestlé can work towards their goal of reaching net zero by 2050, while also
empowering local farmers and workers, and investing in new innovations that will help
keeping their emissions lower. Being a large company, they also can use their voice to
transform policies and advocating for a cleaner future. Working towards net zero will be a
large change for their supply chain, but with constant new innovations and by keeping focus
on the people who will be affected, Nestlé has the resources to reach their goals. It is
important for Nestlé to stick to their promises, when these days manufacturing can be
streamlined to reduce costs, time spent manufacturing, while still having a good quality
product. The technologies in the fourth industrial revolution make it possible for Nestlé to
create products cheaper and faster (Szozda, 2017). This will be the struggle for many
companies like Nestlé, who have promised to reduce their emissions, even though it might
be more expensive and time consuming overall for their business.

RESULTS AND DISCUSSION

Measurement of net impact of Nestlé using the Upright Net Impact model
The Upright model measures net impact by four dimensions: environment, health,
society, and knowledge. Following the assessment criteria, in this article, we investigate
Nestlé’s range of products and the revolving operations, using its published reports, peer-
reviewed research, statistical databases, and public presses, specialized in looking into these
outstandingly popular valuations:

GHG emissions and biodiversity

Nestlé reported it discharged in 2018 alone 92 million tonnes of greenhouse gases.
To combat the toxic substances trap in the atmosphere, it pledged to set the emissions 20%
down by 2025 and 50% lessened by 2030 and invested 3.58$ billion (Kelley, 2020). However,
according to reports and reality numbers from The Corporate Climate Responsibility
Monitor and Carbon Market Watch, the Swiss food giant’s emissions objectives may
exaggerate its actions and really mean only an 18% reduction by 2030 compared to its entire
2018 footprint. Besides, the climate groups also critiqued, Nestlé failed to indicate for what
reductions will be accomplished within their up- and downstream value chains due to
ambiguous scope coverage. In defence of conglomerate’s operations, Benjamin Ware,
Global Head of Climate Delivery & Sustainable Sourcing, retorted that: “Our Roadmap to Net
Zero is a starting point, and we remain focused on delivering against our public ambitions
now and into the future.” (Askew, 2022).
Just a short time ago, the world largest food enterprise has created the Nestlé
Institute of Agricultural Sciences, which focus on the areas of plant science, dairy livestock,
and agricultural systems science. The institute is to work alongside with academic
institutions and research organizations, start-ups, industry partners and farmers to assess
and develop science-based solutions and adapt them for implementation and scale-up
across the company’s supply chain (Askew, 2022).

Water management and food waste

As of 2020, Nestlé has achieved its objectives to grant 600,000 beneficiaries in local
communities the access to water, sanitation and hygiene projects around manufacturing
facilities and key agricultural supply chains. Further in 2020, Nestlé signed on to 10x20x30
plan, which brings together more than 10 major retailers and providers, each engages with
20 of their priority suppliers to halve food loss. 95% of Nestlé factories have now reached
zero waste for disposal status (Nestlé, n.d.c). To ensure no food was unnecessarily lost,
Nestlé sends surplus ingredients to charities and distribution centres; additionally
implements these tactics:
 Reducing use of packaging material
 Scaling reusable and refillable systems
 Pioneering alternative packaging materials to facilitate recycling
  Supporting infrastructure that helps to shape a waste-free future
 Sustainable packaging education, training program to drive new behaviours to lead
lasting and impactful change

Diet, nutrition and farming knowledge

In July 2017, Nestlé has held the second international conference on “Planting Seeds
for the Future of Food: The Agriculture, Nutrition and Sustainability Nexus” to promote
better understanding of healthy and sustainable diets and the roles of the food supply
chains in meeting nutritional needs and demands of growing population. Following the
success of the conference, which brought nearly 500 participants from non-government
organizations and internal Nestlé experts, it helped tackle a vast majority of topics, such as
farming systems, seeds, plant science, that have implication for farmers, the food systems
and consumers (Winley Online Library, 2018).
Furthermore, a cross-sectional study conducted in Kenya and the Philippines showed
that the Nestlé Healthy Kids Global Program raised levels of nutrition knowledge, impacted
dietary behaviours and habits, improve attitudes of students in primary schools around
hygiene practices and portion management (Ajfand, 2019).

Human rights
In early 2022, the world largest producer of food and drinks announced that it is
proudly to be recognized in the Human Rights Campaign Foundation’s 2022 Corporate
Equality Index (CEI) for the fourth year in a row as a mirror of their partnership with
employees to assert everyone can bring their whole self to work and feels empowered, plus
supported along the paths of growing in their careers (Nestlé, 2022).

Value-addition of Upright net impact measurement for Nestlé’s supply chain

The Upright Net Impact measurement in terms of environmental, health, society and
knowledge impact can be a positive profit-gain to these initiatives of Nestlé:
 Life Cycle Approach (LCA)
 The Nespresso AAA Sustainable QualityTM Programme
 Packaging Impact Quick Evaluation Tool (PIQET)
 EcodEx
 Nestlé’s Creating Share Value
Those are a few amongst well-recognized steps the company has taken to green their
entire supply chain. They are performance indicators that help the conglomerate to identify
what they have achieved and from where the improvement needs to take place. To date,
their value chains have been remarkably adapted to customers’ needs and sustainability
sensitivity, environmental friendliness and innovations for compostability and renewability,
care for human rights and the workforce (Nestlé Nespresso, 2018; European Commission,
n.d.). Obviously, once done annually, the Upright Net Impact assessment can become a
fundamental activity contributing to Nestlé sustainable development goals (Nestlé, n.d.d).

Facilitating change based on the development of an ecological footprint at Nestlé

Long before now, Nestlé has taken a commitment to work regarding reducing
greenhouse gas emissions. Since 2014, Nestlé has decided to reduce greenhouse gases
across its value chain which is equivalent to taking 1.2 million of its cars off the road to
maintain good atmosphere. To maintain a good climate, Nestlé has been lowering the
greenhouse gas emission associated with the production and distribution of their foods and
beverages by improving energy sufficiency and using cleaner fuels and investing in
renewable resources. The fact that Nestlé takes all these into consideration is to avoid any
form of air pollution which might be harmful to the society (Nestlé, n.d.b).
In addition to this, is the fact that, Nestlé has also stepped-up their efforts to ensure
responsible sourcing of raw materials and maintain progress towards deforestation which
also comes with a lot of toxicity and because of the chemicals used, they therefore, adopted
the commitment on Nestlé climate change. Switching from long distance road
transportation to rail and short sea shipping to Europe is another option this company is
looking forward in implementing, Nestlé is out to take measures which they think can be
safe to their consumers and to the population at large.
As their ambition, Nestlé is striving for zero environmental impact in their operations by
2030 with special focus on reducing water withdrawals, increasing renewable energy use
and achieving zero waste while taken into consideration sustainable packaging solutions.
They like most companies rely on raw materials to make their products and order for them
to keep ahead with this, they must use these raw materials appropriately and saving these
resources for the future (Nestlé, n.d.f).
Considering the fact that climate change is one of the biggest threats to the society and
also to the future of businesses which might even affect water availability and also the
quantity and quality of food grown, Nestlé has taken as an action to focus on supporting
farmers and suppliers to go ahead with agriculture by helping them plan millions of trees in
the next ten years so as to spark agriculture across their supply chain as more trees mean
more shade for crops, more carbon removed from the atmosphere and also improved soil
erosion (Deccan Herald., 2020).
Nestlé has it as their vision to ensure that none of their packaging including plastics
ends up in lakes, oceans and even rivers. They are working hard on it to ensure a waste-free
future and to achieve this, Nestlé also has it as their commitment that 100% of their
packaging is recyclable or even reusable by 2025. A great number of global commitments
has been put in place including the elimination of non-recyclable plastics. As of now 88% of
Nestlé total packaging is reusable and recyclable but despite this fact, they are still looking
for measures to ensure that it is 100% reusable. Nestlé seeks to continue working with
farmers, suppliers, industry employees, consumers, government and communities where
they operate so as to implement new engagement on climate issues for the betterment of
the society (Nestlé, n.d.c).

Replication of Szozda’s case study in the context of Nestlé

The rules of business are changing, we used to live in a world where a good company
was the one that first makes some profit (money) then it uses some of it for “doing good”.
However, this is no longer applicable, especially with the new era of new trends, such as:
circular economy, corporate social responsibility, and net impact. Indeed, nowadays
companies that can make it in the global competition are those that have been able to align
their net positive impact and their profit in the same direction.
As it was mentioned previously, Nestlé has taken several initiatives in order to improve
its net impact. However, it has been reported that these actions and initiatives are not
enough, since there are still some issues especially when it comes to supply chain
management, and product packaging. See matrix below (Takahashi, 2021, p. 87).

In fact, when we go through this matrix, it appears that supply chain management
and product packaging related issues are one of the significant/major problems that impact
Nestlé’s success. And if we take the Szozda’s case study, especially the example of electric
toothbrushes, the improvements in the supply chain were taken in the beginning and the
end of the chain, by implementing the idea of planning and designing tailored products
instead of just the classic “mass production” and using cloud technology to enable an
effective storage of data that could be useful and beneficial for different external entities
(Szozda, 2017).

Discussion on the development of an ecological net impact leading to sustainable supply

chains in the era of industry 4.0 at Nestlé
Nestlé has a huge number of retailers all around the world, and in the era of industry
4.0, each retailer has its own customer loyalty card, that provides valuable data about
customers’ behavior. Via simple cooperation with its direct retailers, Nestlé could use these
data to know for example in advance and in real time, which kind of its products are
consumed mostly in a specific area/zone, and which ones are used the less. This will enable
a more targeted production, and then minimize the costs of shipment, of non-relevant
(unsold) products, which will decrease the number of “useless” stocks in warehouses and of
course the quantity of waste.
In addition, these data could be very relevant for the research and development
department, which can improve the packaging of these particular relevant (well sold)
products, to follow the 21st century’s trend of circular economy, and thus increase the
company’s actions towards environment (by optimizing the net impact related to
environment), which will definitely have a good impact on the whole brand commitment.
In the other hand, when talking about food industry, and Nestlé’s 413 factories in 86
countries around the world, comes to mind the huge investments in automation (robots and
machines) involved in the production. And even if Nestlé has its own technicians and
personnel in charge of some particular repeated and usual technical issues, still exist other
challenges of more sophisticated ones, that could be solved only by an expert of the
machine/robot in question. The problem here is related to logistics, and timing, since Nestlé
has different implementations in almost 100 countries, thus, inviting an expert (for example)
from Japan to Europe, to resolve any possible challenging technical issue, is going to be time
and cost consuming. For this, Nestlé could benefit from the Augmented Reality (AR), that
allows experts located anywhere to resolve any specific issue, which will make the
production more efficient and avoid any possible delays in the supply chain process (Hand,
2018).

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