Materiality

To be successful, a company cannot afford to ignore what the world thinks about it. Intergovernmental bodies and NGOs, think tanks and socially responsible investors all take a forensic interest in different aspects of a company’s activities and their impacts. Social media gives everyone direct access to a communications suite that would have been impossible a decade ago. We listen to our critics and engage with them.

Often, our stakeholders have very specific interests and this can be a challenge for us. Which issues should be prioritised? Nestlé uses a formal materiality process to identify the most important issues for our critics, our stakeholders and our business. We have shared the process and analysis in this chapter.

The materiality process

To identify the issues that matter most to our business and our stakeholders, we work with an independent organisation, using a formal materiality process. After extensive consultation, they plot environmental, social and governance issues of concern. The findings are used to determine associated risks and opportunities for Nestlé’s reputation, operations and finances. The issues are placed on a materiality matrix (see below) that displays their position relative to the degree of stakeholder concern and potential business impact. Together, the results represent the material issues facing our business. In 2014, we extended our materiality analysis as part of our G4 reporting. The process featured a broader sample of stakeholders and value chain analysis, allowing for greater precision in the scoring and ranking of our material issues than in previous years. It also included a robust assessment of business impact, with greater attention to the concerns of socially responsible investors and an independent review of commercial relevance.

Since publication, we have continued to collect feedback and input on the 2014 results. We have not identified substantive changes to the issues Nestlé faces, our business impacts or the interests of our stakeholders. We will complete a full refresh of the materiality process for the 2016 report and we expect to update the materiality results every two years.

The Nestlé value chain

Value Chain

Our material issues are considered and mapped with regard to where they may impact our value chain. In the chain, agriculture also includes smallholder farmers with whom we do not have direct relationships. Tier 1 refers to suppliers in direct commercial relationships with Nestlé.

Our material issues

Our 19 material issues have been organised under our six Creating Shared Value categories. Each issue is made up of sub-issues, which are explored in associated chapters of this report. Please select a material issue from the table to learn more about the sub-issues. The results continue to emphasise the priority of the issues of over- and under-nutrition and water stewardship, and the primacy of food safety for our business. They reflect acute and global stakeholder concern over the issues of climate change, natural capital and human rights. They also indicate our growing understanding of the potential business impacts on the supply chain for a number of issues, including climate change, animal welfare, food waste, natural capital and human rights. Our table provides a synthesis of the value chain analysis for each material issue. It should be considered in conjunction with the overall materiality matrix.

  • Overnutrition and undernutrition

    Supporting optimal nutrition, health and wellness through the life course. Helping to address overnutrition, undernutrition, related micronutrient deficiencies, conditions such as overweight and obesity, and non-communicable diseases (NCDs) through portfolio transformation, product and service development and renovation, and popularly positioned products.

    -Micronutrient deficiencies
    -NCDs
    -Obesity
    -Overweight
    -Stunting
    -Underweight

    Food and nutrition security

    Contributing to the availability of and affordable access to sufficient, safe, nutritious food.

    Maternal, infant and young children nutrition

    Improving the nutrition of mothers, infants, and children for better health and wellbeing outcomes.

    Responsible marketing

    Marketing in ways that are appropriate to consumer audiences and shaping consumer behaviour to promote better health and environmental outcomes.

    -Environmental literacy and communication
    -Infant formula marketing
    -Nutritional literacy and communication
    -Product labelling
    -Responsible marketing to children

  • Rural development

    Directly and indirectly promoting economic activity and improving livelihoods of agricultural workers in the supply chain to promote sustainable agricultural communities.

    -Rural living wage

    Traceability

    Ensuring that priority ingredients have been grown and processed responsibly and can be traced back to origin where possible.

    Animal welfare

    Safeguarding the well-being of animals in the supply chain and promoting farm animal health and welfare.

    Women’s empowerment

    Empowering women to participate fully in society and the economy across the value chain, in the workplace, marketplace, and community.

    -Women farmers

    Community development and unemployment

    Improving people’s lives through community and societal participation and improving access to employment, education and skills development.

    -Community relations
    -Income and wealth inequality
    -Living wage
    -Youth unemployment

    Notes:

    These issues have sub issues that are shared across Rural Development and Our People

  • Water stewardship

    Implementing the actions, individually and/or collectively, needed for the sustainable management of shared water resources, including enabling access to water, sanitation and hygiene.

    -Hygiene and health
    -Water quality
    -Water security
    -Water use

  • Resource efficiency and waste

    Improving the direct and indirect use of resources, reducing waste and optimising opportunities for recovery, reuse or recycling of by-products, and disposing of waste appropriately.

    Resource efficiency and waste combines packaging, manufacturing and transport and distribution that were distinct issues in the 2013 matrix.

    -Consumer behaviour
    -Energy consumption
    -Land use
    -Littering
    -Manufacturing environmental impacts
    -Packaging
    -Transport and distribution

    Food waste

    Avoiding food waste and losses along the value chain, including consumer and post-consumer use, distribution, manufacturing and agriculture.

    Climate change

    Reducing GHG emissions and contributing to the mitigation of, and adaptation to, the effects of climate change.

    -Climate change adaptation
    -Climate change mitigation

    Natural capital

    Identifying and preserving elements of ecosystem services that generate value, both directly and indirectly.

    -Biodiversity
    -Deforestation
    -Soil fertility

  • Business ethics

    Upholding ethical principles in the business and workplace.

    -Consumer privacy
    -Executive compensation
    -Fair taxes
    -Governance and transparency
    -Fraud, bribery and corruption

    Human rights

    Promoting respect for the basic rights and freedoms to which all people are entitled.

    -Child labour
    -Labour rights*
    -Land rights
    -Human rights in the upstream supply chain

    * Issue is covered in the chapter on Our People

    Food safety

    Ensuring a high-quality product and preventing health risks arising from handling, preparation and storage throughout the value chain.

  • Human resources

    Maintaining positive relations with employees and promoting positive working conditions (in last year’s matrix, this was called Employee Relations).

    -Employee benefits, remuneration, attraction, retention
    -Employee diversity
    -Employee engagement
    -Employee training and learning

    Safety and health

    Targeting zero accidents in the workplace and promoting safe and healthy employee behaviours.

    Women’s empowerment

    Empowering women to participate fully in society and the economy across the value chain, in the workplace, marketplace, and community.

    -Women farmers

    Community development and unemployment

    Improving people’s lives through community and societal participation and improving access to employment, education and skills development.

    -Community relations
    -Income and wealth inequality
    -Living wage
    -Youth unemployment

    Notes:

    These issues have sub issues that are shared across Rural Development and Our People

Using our materiality assessment

We use the materiality assessment to refine commitments and identify areas for improvement. It is used by our Issues Round Table (which includes a member of the Executive Board), as well as by our markets and the corporate Risk Management team. The contents help us select the information contained in this report, providing data that responds to stakeholder needs. We recognise that more evidence is needed to quantify the value delivered by linking business performance and social impact, and we are working to address it. In 2014, we asked Accenture to use our materiality analysis and review the commercial relevance of our material issues. Overall, our analysis concluded that all of the issues have a significant relationship to our business success. Some are essential for protecting and growing our revenues. Others have significant influence on our cost structure, supply chain and risk. While many can impact our reputation among customers and important stakeholders; this is somewhat intangible to measure, but nevertheless key to our success. In general terms, if we manage these issues poorly, it exposes us to risks, but if managed well, we can turn them into commercial opportunities. To learn more about the analysis, see our 2014 report.