Is Nestlé Waters really creating 'shared value'?
When a company labels its annual CSR report as Creating Shared Value, you have to stop and wonder if they're responding to the latest buzzword in the market or leveraging its potential by truly embedding it into their reporting and cultural framework.
In its third cycle, Nestlé Waters North America's [NWNA] latest report attempts to accomplish the latter. Among its headlines:
- What the company is doing to advance recycling in the U.S.
- The company’s path to achieving a zero-waste future
- Its continued efforts to be the most efficient user of water within the beverage industry
To gain some firsthand perspective and background on these goals and the accompanying challenges for North America's largest seller of bottled water, I reached out to EVP for Corporate Affairs Heidi Paul. Among my questions: how does the company balance criticism for selling bottled water while promoting healthy choices, what it is doing to shift its supply chain and use of plastic, its well-acknowledged work in the area of Extended Producer Responsibility (EPR), and how her team plans on including consumers in its drive for sustainability.
Defining "Shared Value"
Paul started the conversation by setting the record straight on the company's definition of what's quickly gained momentum as a replacement for CSR: Creating Shared Value: "We define CSV as a strategic way to achieve triple bottom line sustainability. In other words, be financially, environmentally and socially sustainable. At the end of the day, Nestlé seeks to create shared value in those areas where we can make the most impact and that are material to our business. "
For NWNA, that's healthy hydration, packaging responsibility and watershed management. But has the terminology helped NWNA's citizenship team – 28 people strong across the company – integrate its sustainability goals more effectively within its business units?
It has done wonders, according to Paul. "CSV focuses our engagement on critical topics and asks the whole company to see what can be improved for society and ourselves. We get the benefit of input from our supply chain, employee groups, community partners, etc.," she said.
Coding the impact of bottled water
Let's get to NWNA's main product then: bottled water. With widespread and consistent criticism levied at the company for commoditizing water, adding plastic to landfills and turning what many feel is a basic human right into a sellable product, how can the company legitimately say it is creating shared value? Does it feel the twinge of irony every time that is said in the same sentence as "shared value"?
According to Paul, the answer lies in consumer research. She elaborated: "Seventy percent of what Americans drink – according to the Beverage Marketing Corporation – today comes from a package, not from a cup or the tap. In fact, our research indicates that if people don’t have access to bottled water, 63 percent say they will buy some other beverage from a package instead, often a sugared or caloric drink with a greater environmental impact."
Explained like this, NWNA plays a key role in increasing Americans' consumption of water. "As the data indicates, there is a crucial role that bottled water plays in consumer choice. Everywhere there is a high-calorie sugary, packaged drink available; we want to make sure there is water as well," she emphasized.
Which should then logically be supported by sales data. According to Paul, in 2012 "the volume sales increase for the bottled water industry was 6.2 percent."
With per capita consumption reaching nearly 31 gallons, which increased more than 5 percent from 2011. Further, "51 percent of people who stop drinking sugared soft drinks are switching to bottled water. In fact, bottled water is outselling sugared soft drinks in grocery stores in eight major markets across the country," she supplied.
At the end of the day, though, Paul believes that the company's job is to talk about why bottled water is a choice – an amply available one – and why it should be available anywhere packaged beverages are being sold.
Is Nestlé Waters North America's business model sustainable?
That brought us to the next obvious thread: the plastic being used to produce the bottles. Recalling a keynote given by former NWNA CEO Kim Jeffery at a Net Impact conference years ago, I asked Paul how the company handles its fiercest critics regarding its use of plastic. In a jungle of facts, fiction and emotions around environmental issues, Jeffery confronted the audience back in 2009 with a firm and resolute stand: we sell bottled water and we are doing everything we can to make that process sustainable.
Where there was a finality of "take it or leave it" to Jeffery’s remarks four years ago, for Paul its not a black or white subject – yet it is a conversation about natural resources, conservation vs. regeneration and global development.
"Limited resources need to be used again and again. We have taken the mantle of becoming part of that solution. The larger point is there are billions of servings of beverages being sold everyday in some sort of package. Some populations are getting most of their calories from bottled drinks. And every time they choose water over a different drink, they're making a more healthy and environmentally friendly choice," she said.
Taking into account the fact that the U.S.' recycling rate for PET plastic alone was 28 percent when NWNA came out with its goals years back, 60 percent recycling meant significant changes ahead – not only for the company's operations but an entire nation's infrastructure. So Paul's team took to months of intensive research. "We had a lot to learn. We began to study recycling programs and the patchwork of policies and systems that were in place but were not moving overall recycling rates very much. There are big opportunities for increasing recycling by improving collection in public places, business and industry and in urban residential buildings. Today, however, there is no money going to fund this expansion of infrastructure.”
Then there is the issue of competing systems, she says, along with a lack of leadership or ownership within the consumer products industry to take account of its own impact and costs of recycling.
As Michael Washburn recently discussed in an interview with Francesca Rheannon on CSRwire Talkback, "There's no defense for $11.4 billion worth of recyclable packaging being landfilled in the United States. I cannot be convinced that there is an environmental, financial or a societal upside to letting that continue.”
Paul added more context: "Bottle bills, for example, raise the recycling rates for bottles and cans, but actually reduce the efficiency of curbside because it is taking the most valuable commodities -- which reduce the revenue potential from curbside."
Environmental villain or a case of facts vs. emotions?
Of course the plastic of the bottled water we consume is bad for the environment.
Turning the argument on its head though, would we be wasting as much or filling up landfills as quickly as we are if we didn't have the choice of bottled water to begin with? Where does consumer choice end and producer responsibility kick in?
But for Paul, the argument is salient: "If bottled water isn’t available, people routinely purchase another packaged drink, one with calories and with a heavier environmental footprint." The argument becomes especially heightened in times of natural disasters when often tap water is compromised or unavailable.
So when your business model is set around selling a product that is healthy and encourages nutrition while understanding and targeting its impacts through a well laid out sustainability strategy – as Jeffery succinctly put it in his exit interview with Greenbiz Executive Editor Joel Makower earlier this year – is it fair to be labeled an environmental villain?
Perhaps, perhaps not.
As Paul reiterated, the journey of tackling facts vs. reality has been full of challenges and continues to be an uphill task. "Like anything else, our work in the area of recycling, water conservation and reducing our social and environmental footprint has been a constant education," she said, citing the lack of modern and efficient recycling system as one of the company's top challenges.
"Not too many people understand the current system in place. There are numerous questions like who is funding what, how does it work, who are the middle men, how do we get to the next stage, where can we build in efficiencies, etc. And if the goal is to accept our responsibility as a producer to recycle efficiently toward a goal of zero waste, then we need answers to these questions."
"We've always said we're open to options, and so far the option that we have seen with the highest potential to be low cost and efficient is a well-constructed EPR system, run by industry. What makes this complicated is there are a dozen different ways EPR has been implemented globally…Even if you convince people that, done well, EPR in the form being proposed is the best solution, there are doubts about implementation across the board," she said.
Finally, the consumer argument. With a clear preference for bottled beverages, can the company leverage its marketing budgets and brands to shift consumer behavior?
"In the 1970s, recycling meant 'putting it in the bin.' Today, this is old news. What motivates people now is when they understand its benefits. If a consumer recycles a water bottle after use, the greenhouse gas impact of that bottle can be reduced by more than 15 percent. Also, we need to close the loop on what happens to the bottles after they are recycled. They are not trash; they are a resource that can be used again and again," she said.
As for the company's top challenge moving forward, the executive falls back on an argument about zero waste. "At the end of the day, you want zero impact, but is that possible? You need to find the next frontier every time – that’s the goal. And the challenge."