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Saturday, September 6, 2014

Nestlé: How climate change is affecting the world’s biggest food company

by Roberto A. Fernman, The Washington Post, September 6, 2014

I sat down with Nestle S.A.'s vice president and global head of operations José Lopez, who's also often described as the company's head of sustainability, even though the company doesn't technically have someone with that title. We discussed how climate change is affecting the company, how the company is working to affect climate change, what sustainability means in the corporate food world, and the company's responsibility to the people who eat its food, especially given its size.
Why doesn't Nestlé have a head of sustainability? 
I am seen by the outside world as the head of sustainability here, because I do attend to issues of sustainability, but in essence we don't have one. The problem is that these positions are often part of public affairs or corporate affairs, or corporate communications, but the story shouldn't be how we talk about sustainability—it should be about what we do about sustainability. So for us, operations comes first and talking comes next.
For some time this was actually a little frustrating to some of our management members, because people didn't know what we were doing behind the scenes. But you cannot work to tell people; you have to work to do the right thing.
What then does sustainability mean for Nestlé?
Sustainability is not only making sure that our business model is able to survive but that we live in a society that is in harmony with what we want our business to be in the future. You have to be relevant, you have to be in tune with what society needs, so that your business can continue to work over the long term.
We are a very long-term oriented company. There was a time when our company decided to take its stock from all trading stock markets aside from the one in Zurich. The reason was that we no longer wanted to do quarterly reporting, because we found that this was nonsense for a company like ours. To change your decision-making on numbers you're going to have to give each quarter, when it takes years to put products in place, build factories, find distribution, and bring forward a brand, doesn't make sense.
But sustainability isn't a static term. It has a very different meaning today than it did, say, 150 years ago, when Nestlé was founded. How has its meaning changed?
On one side of the equation, you have technology, and access to technology. This has a big and positive impact. Society now demands more transparency, because we're able to provide more transparency. Corporations have received a renewed mandate by society. We have to take responsibility for things that in the past we didn't feel we had the legitimacy to. The role that we are given by society is changing, and rapidly, and, in my mind, in a very positive manner.
But we also now know a lot more about what can be done. The science and technology that we already know, and information that we already have, is sufficient to tackle the very pressing issues that the planet, the earth, is facing. We know how to achieve sustainable farming, we know how to achieve sustainable harvesting of many of our key ingredients, but when you look around, you realize that this is just a drop in the ocean. It's just starting.
So the question is how can we scale this up. For that we need to engage everyone, including the media.
What about specific sustainability issues, like climate change. How is climate change affecting Nestlé on the back end, and behind the scenes?
Climate change has many impacts on the value chain. We source a tremendous amount of raw materials, as you can imagine. We are the biggest buyer of cocoa in the world, and one of the biggest buyers of coffee in the world. Both of those commodities have gotten more expensive as a result of climate change.
Are those prices reflected in profit margins for farmers?
They are, and they must be. Otherwise this whole thing will become unsustainable. If there isn't a means for farmers to adapt to climate change, as we see it, then the children of today's farmers will not become farmers.
Farming has to become a different player in the eyes of the consumer. I am convinced that consumers will accept and understand that food cannot be the place where you save most of your money. It has to be the place where you have to have a value understanding. We need to educate everyone about the real value of their purchasing activities.
But what if everyone simply can't afford more expensive food? How do we feed a growing population, given the amount of hunger and poverty that already persists in the world?
The first thing is we need to stop waste. Food waste is an incredible and absurd issue for the world today. The numbers that come around are always in the neighborhood of 30-35% -- meaning that a third of what is produced is wasted, which also has an environmental impact. But beyond that environmental impact is the impact on soil, on water, on the resources and our natural capital that we impose for the benefit of no one.
Unfortunately what happens is poorer countries can't afford to waste food, because it's such a large part of their disposable income, while in the Western world, it is such a small part of disposable income that it's okay to waste from an economic standpoint. Because of that waste, you have to raise prices, which the people in those poorer countries, the ones who don't have the money, then have to pay. You see this happening with all kinds of goods around the world.
What is important for companies like ours is to make sure that we don't participate in processes that produce unintended consequences that go against our interests in the long term. That is a perfect example. And we are not going to sacrifice the long-term sustainability of our business for short-term gains.
There's another form of sustainability that more directly affects consumers: Health. We don't know a lot about how foodstuffs affect people, because the narrative is constantly changing. How does a company like Nestlé reconcile that, and deal with those violent swings?
When people talk about the food industry and food companies, they are intuitively referring to packaged goods, and, specifically, branded packaged goods. When you look at the amount of food a human being ingests, the part that is branded packaged goods is actually a very small part. But in terms of total calories or total nutrients, it happens to be the most attractive part, partly because they have been adapted using science to make them taste better.
We have to take responsibility for that. I will be the first one to say that we have done a very poor job explaining to the world why we exist as an industry, what we bring to society, and what the world would look like if we didn't exist.
It's like speaking about packaging. Packaging is a huge source of littering and other negative environmental impact. But can we take packaging away from food? You know what will happen, and immediately? The amount of waste will multiply by who knows how much if we take away packaging from our food system.
Instead we need to sit back and understand that we have an issue with packaging, agree that we have an issue with caloric intake, especially attractive caloric intake because of branding, and take responsibility for improving the health status down the road.
We need to lower the amount of sugar and sodium we have in our food. We also have to apply a better understanding of nutrition and portion control. We have done a terrible job explaining to consumers why we existed, because we were too busy competing with each other.
So, why then does Nestlé exist?
Because it would be impossible to feed 7 billion people, let alone billions more to come, without it. Because we need to preserve food, and safely, so consumers can eat and drink under any condition and in any season. The reason why we exist, primarily, is that human beings decided to live together, because of urbanization.
Today there is a very close relationship between urbanization and the food industry. We have to provide food all the time, during every season, and it needs to be safe, affordable, and so on and so forth. That's our job.
Now, in order to do that job, you shouldn't hurt anybody. You shouldn't hurt the people who produce the food or the people that consume the food. That's what we need to work on.
How far is Nestlé willing to go to achieve that? If there were a product that wasn't good for people to consume, would the company stop selling it?
I don't think there are any products that aren't good for people to consume. There are substances that aren't good for people to consume, and there is always the notion of quantity and portion control. Human beings are able to process a lot of things, and we have the mechanism to live in an environment that isn't always friendly, but we adapt.
What we need is to understand [food] microbiology better. That's where science needs to go. We need to have a better understanding of how food interacts with out health. If we found that something was toxic, we would stop using it. No question.
Every time there is a concern that surfaces from a study, we investigate. The health and safety of our consumers has to be our primary concern, but once we fail that, we're gone.
How can Nestlé and other major food companies ensure that developing countries like India and China don't suffer the same sort of health issues, such as obesity, that are crippling developed countries like the U.S.?
We have to find solutions.
Knowing what we know, we have to make sure that the products we sell are formulated in a way that will not induce excessive consumption or will not imply strict replacement of healthy food by less healthy food. We know how to make a more balanced food, and also a more balanced diet.
The most important thing, though, is education.
When you go to a medical school and ask how many hours students spend on nutrition, it's incredible, because it's so few. When you know that the number one medicine for human beings is food, and yet doctors spend so little time learning what is the right nutrition, that's baffling.
The whole system requires a reset—from health professionals, from food companies, from the producers, but also from the marketers, from the media, and from all the other stakeholders—because, the reality is that population will continue to increase, demands on the food system will continue to stress the system, and our collective lifestyles are driving climate change, which is putting even more stress on producing food.
There is a real sense of urgency here on the need to align the positive impact that every stakeholder can have on this process.
Roberto A. Ferdman is a reporter for Wonkblog covering food policy, consumer business, and Latin American economics. He was previously a staff writer at Quartz.

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