Commentary on 2007 Consolidated Nestlé Environmental Performance Indicators

General Comments
1. This report covers 446 factories. It excludes 14 Alcon factories (reported at Alcon website ) and 7 other new or recently acquired Nestlé factories.
2. Factories sold or closed during 2007 are not included.
3. Data is presented for the current reporting year and 4 previous years, as well for 1998, so as to provide both 5 and 10 year reference periods for highlighting trends.

Indicators
Production tonnage
3. Production tonnage continued to grow (a 7.4% increase versus one year ago and a 23.1% increase over 5 years) whilst at the same time, key environmental parameters such as energy consumption, water withdrawal and greenhouse gas emissions have remained almost constant or declined on an absolute basis.

The proportion of Nestlé production tonnage accounted for by bottled water increased by 3% over the period 2003-2007, accounting now for over 54% of the total production of Nestlé.

Inputs
Total water withdrawal
4. Total water withdrawal in 2007 showed a slight rise of 1.4% versus 2006, though the 5 and 10 year trends are still positive and reflect a decrease of 39 billion litres and 61 billion litres respectively over these periods. The amount of water required to make one tonne of Nestlé products has reduced by 33.9% reduction over the past 5 years and 59% over 10 years.

This figure is a result of both extensive efforts by Nestlé engineers and environmental professionals to reduce water consumption in our operations, as well as a reflection of the changed product mix within Nestlé over the past decade. The growth within Nestlé of less energy and water intensive operations such as dry pet food and bottled water has also had a beneficial impact on total water withdrawal.

Energy consumption
5. Total energy consumption showed a slight rise in absolute terms of 0.9PJ versus 2007, whilst 5 and 10 year trends continue to be positive. Compared to 5 years ago, Nestlé now uses some 6.9% (9.1 PJ) less energy in the production of its products. The amount of energy required to make one tonne of Nestlé products has decreased by 24.3% over the past 5 years and 46.5% over the past 10 years.

As for water withdrawal, this figure is also a result of both extensive efforts by Nestlé engineers and environmental professionals to reduce energy consumption in our operations, as well as a reflection of the changed product mix within Nestlé over the past decade. Again, the growth within Nestlé of less energy and water intensive operations such as dry pet food and bottled water has also had a beneficial impact on total energy consumption.

Ongoing data quality checks determined that, in 2006, a number of Nestlé factories used Gross Calorific Value (GCV) instead of Net Calorific Value (NCV) to calculate energy released from the combustion of natural gas. (In line with published IPCC and IEA values, we use a value for GCV of 37800 KJ/m3 and for NCV 34020KJ/m3 with the option to input different values based on supplier data, whilst GRI G3 uses a single default value of 39000 GK/m3). The result of this was that reported energy consumption in 2006 was higher than it would have been if all sites had used the lower NCV only. We corrected this situation in 2007 by ensuring that only NCV data is used for calculations. However, when we calculated energy reduction we found that the energy reduction achieved in 2007 versus 2006 was also larger than it should have been because the 2006 energy consumption data had been inflated slightly due to the use of GCV.

Assessing the issue, we estimated that approximately half of our energy reduction achieved in 2007 in our internal, uncorrected figures was due to the overstatement of energy consumption due to the use of GCV in 2006. To account for this overstatement and in consultation with Bureau Veritas (the independent, external assurance providers for our Creating Shared Value Report released 3rd March 2008), we have chosen to discount the energy reduction achieved according to our internal figures by 3% to produce the value of 3.1% reduction in energy comsumption from 2006 to 2007 as included in this report.

We calculated that there also is a smaller flow-on effect associated with this in the calculation of Greenhouse Gas emissions and Air Acidification Potential which also rely on the NCV/GCV values and where possible we have adjusted our figures accordingly. We have now modified our internal reporting systems to ensure that from 2007 onwards, all natural gas data will be calculated on a NCV basis.

JULY 2008 UPDATE: Indirect Energy data available
As part of our Creating Shared Value reporting we are pleased to present for the first time our data on indirect energy consumption, related to our manufacturing operations. This data provides an important baseline against which to measure our future improvements.

Outputs
Total Water Discharge
6. Total water discharge in 2007 shows a large decrease of 14.4% versus 2006 and a 5 year reduction of 30.4% in absolute terms. The publication of the Nestlé Water Report in 2007 helped created additional awareness across the company on the need to reduce water consumption, which combined with our ongoing water reduction activities and efficiency improvements, as well as changes in product mix, have led to this improved performance.

When considered on a per tonne of product basis, Nestlé has decreased the water discharge intensity of its operations by 43.5% since 2003 and 65.4% since 1998. In 2007, we estimated that Nestlé discharged a total of 6250 tonnes of COD (Chemical Oxygen Demand) into the environment through its water discharges, which represents an average Chemical Oxygen Demand (COD) level of 63 mg/L, which is well below typical regulatory limits.

Greenhouse gases
Since 2007, the indicator "Greenhouse Gases" includes for the first time CO₂ equivalents from refrigerants as required by GRI G3 EN16. As such, the 2007 reported figure of 4.13 million tonnes of CO₂, which shows a slight increase versus 2006, is not directly comparable with previous years. When the greenhouse gas emissions due to refrigerants are removed, the data shows that Nestlé emits 12.9% and 20% less greenhouse gases compared to 2003 and 1998, respectively, when measured on an absolute basis. On a per tonne of production basis and including refrigerant global warming potential, Nestlé's operations now produce less than half the Greenhouse Gases (101 kg CO₂ per tonne) than they did in 1998 (212 kg CO₂ per tonne).

Our ongoing reductions in greenhouse gas emissions have been achieved both as a result of efforts to reduce energy consumption as well as through fuel-switching projects where fuels such as coal and heavy fuel oil are replaced by cleaner-burning fuels such as natural gas.

JULY 2008 UPDATE: Indirect CO2 data available
As part of our Creating Shared Value reporting we are pleased to present for the first time our data on indirect CO2 emissions, related to our manufacturing operations. This data provides an important baseline against which to measure our future improvements.

Air acidification potential
8. In 2007 Nestlé changed some of the conversion factors available to be used by our factories to calculate air acidification potential, so as to better align our reporting with industry standards. Typically, the IPPC value used is higher than those previously used by some factories, which results in an increase in calculated air acidification potential. The result of this has been an increase of 12.2% in the reported value of air acidification potential expressed in terms of tonnes SOx equivalents compared to 2006. However, both 5 and 10 year reduction trends on an absolute (8.6% and 30.6%) and per tonne production (25.%7 and 61.2%) basis remain positive and it is expected that this trend will continue in future years.

Ozone depletion potential
9. In 1986 ozone-depleting substances were first reported at 36 g R-11 equivalents per tonne of product. The 2007 figure of 0.21 g R-11 equivalents per tonne of product represents a reduction of 99.4% since that time.

By-products
10. Definitions of by-products and waste (for disposal) were aligned with newly emerging industry standards in 2006. The reported figures for 2006 and 2007 are therefore not directly comparable with previous years.

Nonetheless, 5 and 10 year reduction trends remain positive, with a 38.5% reduction in by-products produced per tonne of product versus 2003 and a 58.5% reduction since 1998.

Waste (for disposal)
11. Definitions of both by-products and waste (for disposal) were aligned with newly emerging industry standards in 2006. The reported figures for 2006 and 2007 are therefore not directly comparable with previous years. Nonetheless, 5 year and 10 year reduction trends on a per tonne product basis remain positive, with 9.1kg of waste (for disposal) now produced per tonne of product versus 10.6 kg per tonne in 2003 (a 14.9% reduction) and 21.8 per tonne of product in 1998 (a 58.4% reduction).

Ongoing data quality checks revealed that the 2006 "Waste (for disposal)" indicator was overstated by approximately 51000 tonnes, due to a misapplication of internal definitions by two large Nestlé factories. The corrected value for absolute waste (for disposal) in 2006 of 0.40 x 106 tonnes is now included in this table. This correction has impacted the 5 year trend in absolute tonnage in waste generated, showing a slight 5% increase over the 5 year period. However, the 10 year trend remains positive with absolute waste for disposal having been reduced by 27% over the period.