Dairy is our single biggest category by volume. We bought 14 million tonnes of fresh milk and milk derivatives in 2015* either directly from our milk districts (through Farmer Connect) or sourced from Tier 1 suppliers. Fresh milk and milk derivatives are used not only in dairy and infant nutrition products, but also as ingredients in ice cream, beverages and confectionery. Milk is an important ingredient in nutrition, as it contains large quantities of first-rate protein, and is also an important source of energy, calcium, magnesium and phosphorus, as well as many essential vitamins and trace minerals.
How we source dairy
Fresh milk: Our ‘milk district’ model
An integral part of our Farmer Connect programme, our milk district model supports our direct milk sourcing. It helps us develop shorter, more sustainable supply chains and drive positive change through direct relationships with around 353 000 farmers and farming communities in 30 countries around the world.
Farmer advice, training and assistance
The expertise and dedication that make it possible for us to assist with quality and other issues comes from 8900 Nestlé sourcing staff and supply chain support staff working in the field worldwide. Their knowledge and relationships with small-scale dairy producers and co-operatives help build a responsible milk supply chain, from farm to factory. The assistance we offer our dairy farmers ranges from direct technical advice on silage and fodder production to linking up with local veterinary services.
Besides providing farmers with technical assistance and access to CHF 21 million of finance, we have also embarked on a programme called agripreneurship. Through this, we help farmers to develop long-term sustainable businesses in the form of professional family farms.
Dairy 4 You
Dairy 4 You is a new initiative launched in 2016. It acts as an umbrella for a range of activities we have been carrying out for many years. Its main objectives are:
- To help continuously improve our sourcing operations, with special focus on four pillars: traceability, trusted milk quality, responsible sourcing and agripreneurship; and
- To proactively share information with consumers on the entire value chain, on the work done with local farmers and communities and on all the projects to enhance environmental sustainability (particularly on water, emissions and natural resources).
Dairy 4 You is focused on creating transparency towards the consumer as to what is in their dairy product, where it comes from and how it has been made. In doing so, it shares success stories of actions that are taking place every day in the rural communities where our milk comes from.
Dairy 4 You contributes to the Sustainable Development Goals around good health and wellbeing, sustainability and socio-economic development.
Procurement of milk derivatives: Tier 1 suppliers
We buy large quantities of milk derivatives, such as whey protein, lactose, cheese and milk powders from Tier 1 suppliers. These are used in many applications, including healthcare products, beverage mixes, ready-to-drink milk and infant formula.
Dairy supply chain challenges and solutions
Sourcing safe, high-quality milk is a chief priority for us. Our milk is sourced from many countries around the world, from small-scale producers to large dairy farms. Each farming environment has different individual, regional or national characteristics and challenges, so we don’t impose a one-size-fits-all approach; the relationships we build with farmers enable us to identify their particular issues and we work together to resolve them. We also make use of tools such as the Response-Inducing Sustainability Evaluation (RISE) tool to help farmers get a holistic view of the sustainability of their agricultural production at farm level.
These challenges influence the quality of the milk supply, responsible sourcing and environmental sustainability. Our approach means that whether it’s an individual farmer with one cow in Sri Lanka or a large farming business in the United States, every litre of milk we purchase will meet our stringent quality and safety standards.
During the assessments, we met engaged farmers who were open to visits and discussions. On some farms, assessments identified improvement areas such as chemical storage and animal welfare. Together with farmers, we are gradually implementing remedial actions, including animal welfare, at farm level.
We recognise and share our stakeholders’ concerns about the welfare of animals within our supply chains and the need to ensure sustainable animal production systems.
Our mandatory Nestlé Supplier Code (pdf, 1.67Mb) requires our suppliers of animal-derived ingredients or our direct farmers to meet all applicable laws and regulations on animal welfare. This code is communicated to their suppliers, farmers and employees. Our Nestlé Commitment on Farm Animal Welfare (pdf, 1.41Mb) helps to further improve the health and care of the farm animals in our supply chain.
We are committed to eliminate specific practices not consistent with the internationally accepted Five Freedoms:
- Freedom from hunger, thirst and malnutrition;
- Freedom from fear and distress;
- Freedom from physical and thermal discomfort;
- Freedom from pain, injury and disease; and
- Freedom to express normal patterns of behaviour.
This commitment provides the basis of our responsible sourcing requirement on dairy-based foods and beverages, as well as meat, poultry and eggs.
Improving dairy farmer income in Pakistan: Muhammad’s story
Pakistan is one of the world’s largest milk producers, but the sector relies mostly on farmers with just two or three cows. Using agripreneurship and our Response-Inducing Sustainability Evaluation tool (RISE), we help farmers increase milk yields and incomes.
Muhammad Amjad had kept poultry before switching to dairy cows in 2008. However, with only two cows, each yielding just 5 litres of milk a day on average, his expenses exceeded earnings. Nevertheless, we saw the potential in his business and together we developed an action plan. The Nestlé Dairy Training Farm provided training in good practices, with ongoing support. We then used RISE to identify further improvements.
Thanks to this, Muhammad’s daily yields rose sharply to 13 litres of milk per cow, while his earnings tripled to PKR 30 000 (USD 300) per month. These major improvements have enabled him to increase his herd to 17 cows, renovate his house and install a milking machine and a maize chopper for silage production – and even send his children to a better school.
How we assess suppliers
We work with independent auditor SGS to assess our dairy suppliers. SGS conducts farm assessments in our suppliers’ upstream supply chains against our Responsible Sourcing Guideline, with a focus on farm animal welfare, labour practices and environmental impacts. It uses the Responsible Sourcing Assessment protocol we developed with World Animal Protection.
Our annual objectives
Dairy supply chain traceability results
||14 million tonnes*
|Percentage of volume traceable
||71% (2016 target: 65%)
|Percentage of volume Responsibly Sourced
||65% (2016 target: 60%)
Our Dairy 4 You initiative, described above, was launched in 2016, and continues to be rolled out.
In 2016, 445 dairy farm assessments were carried out worldwide. Issues found ranged from missing documentation (e.g. training and fertiliser application records) to issues concerning painful procedures, such as thermal disbudding without local anaesthetics and analgesia.
Some of the SGS assessments were attended by representatives from World Animal Protection, which supports Nestlé in training SGS auditors and Nestlé milk sourcing staff on animal health and care issues. Furthermore, World Animal Protection is supporting our operations with aligned monthly training material on animal care. In 2016, Nestlé’s Global Procurement Team continued to deliver training sessions to SGS auditors, covering Nestlé’s Responsible Sourcing Guideline requirements and the assessment process, while World Animal Protection conducted training on farm animal welfare. We are gradually implementing our Responsible Sourcing Guideline (assessment) and category-specific requirements along our global supply chains. These reinforce our specific commitments on farm animal welfare, and cover breeding, feeding, housing and husbandry, health, transport and slaughtering.
In 2016, we also began development of an Animal Welfare Roadmap. This is based on research from farm assessments over the last two years, strengthening our approach going forward. Working closely with suppliers will be a key part of delivering the policy, and all our suppliers will be expected to meet the standards required.
Our position on performance enhancers and anti-microbial resistance is set out on our website.
Business Benchmark on Farm Animal Welfare
In recent years, we have contributed to the stakeholder consultation process on the Business Benchmark on Farm Animal Welfare (BBFAW), a global measure of animal welfare standards in food companies supported by World Animal Protection and Compassion in World Farming. In 2016, Nestlé remained in the ‘Tier 3: Established but work to be done’ ranking.
Farm animal welfare management ISO working group
We are actively involved in an international, multi-stakeholder working group to develop an ISO technical specification (TS) on farm animal welfare management. The goal of the proposed TS is to improve the living conditions of animals bred and kept for food production, and to provide a management tool to facilitate the implementation of the animal welfare principles of the OIE’s Terrestrial Animal Health Code. We contribute to the ISO TS working group through the Swiss Association for Standardization (SNV) and SSAFE (Safe and Secure Approaches in Field Environments), a public–private partnership dedicated to integrating food safety with animal and plant health. A draft TS was approved in 2016, and is expected to be published by December 2016.
The foundation of ensuring sustainable supply is a robust traceability of our raw materials. In fresh milk, we are solidifying our traceability through the gradual complete digitalisation of our supply chains. Through this transparency, we aim to enhance consumers’ trust in our brands and our commitment to drive sustainability down to farm level.
* Nestlé's milk report for 2016 is published in April 2017, which falls out of scope of the 2016 CSV reporting cycle. The 2015 figure is, therefore, the most recent year for which we have complete data.