Materiality

Materiality is about identifying the issues that matter most to our business and to our stakeholders. We plot the economic, social and environmental issues that are of most concern to our stakeholders, against the impacts they may have on our reputation, operations and finances. Together, the results highlight the material issues that are facing our business, which may be ongoing, evolving or new. We use them to help select the information to feature in this report, in order to meet stakeholder expectations. This section provides an outline of our material issues, in accordance with GRI G4 requirements, and highlights their level of impact throughout Nestlé’s value chain.

Refreshing our materiality assessment

In 2014, we engaged SustainAbility, an independent think tank and strategic advisor, to re-assess Nestlé’s material issues. Working together with Accenture for perspective on the commercial impact of material issues, they applied a structured method to quantify the relative materiality of the issues. The method allowed for greater precision in the scoring and ranking of our material issues than in previous years.

Distinctive features of this year’s materiality process include:

  • A broader sample of stakeholders – desk research was conducted on a sample of stakeholders representing NGOs, multilaterals, governments, think tanks, consumer organisations and socially responsible investors (SRIs) in key geographies;
  • Value chain analysis – material issues were considered and mapped with regard to the degree of importance stakeholders place on the issue in different parts of the value chain and with regard to where financial, operational and reputational impacts would be felt in the value chain;

    The Nestlé value chain Value Chain

    Agriculture covers small-holder farmers with whom we do not have direct relationships. Tier 1 refers to suppliers in direct commercial relationships with Nestlé.

  • Greater attention to the concerns of SRIs – greater attention was paid to the interests and priorities of the socially responsible investment community by tracking sources such as the Access to Nutrition Index, Dow Jones Sustainability Index, shareholder resolutions and analyst reports on the food sector;
  • Robust assessment of business impact – a combination of surveys, interviews and research informed the evaluation of the impact of material issues on the drivers of business value for Nestlé; and
  • Accenture – undertook analysis of the commercial relevance of the issues we seek to address with our Creating Shared Value commitments.

SustainAbility uses opinion survey data from Globescan, the sustainability research company, to inform its assessment of stakeholder interest. SustainAbility draws on two Globescan surveys of the perspectives of key opinion leaders:

  • A 2014 Globescan/SustainAbility key opinion leader survey of the corporate sustainability issues that drive perspectives on corporate leadership on sustainability. (This survey includes insights from 887 expert stakeholders from 87 countries). The survey results are available here
  • A 2013 Nestlé commissioned Globescan survey of key opinion leader perspectives on the importance of different CSV issues to Nestlé.

Survey data was used to inform scoring of the interests of key opinion leaders.

New or reframed material issues

As a result of the assessment, the following material issues are new or have been reframed from the 2013 analysis:

  • Business ethics;
  • Maternal, infant and young child nutrition;
  • Resource efficiency and waste;
  • Responsible marketing;
  • Human resources;
  • Community development and unemployment;
  • Traceability; and
  • Women’s empowerment.

The changes reflect evolving priorities for our stakeholders and our business, and align with the new reporting requirements under GRI G4. They were framed, with input from Nestlé experts and Group Risk Management, to ensure an appropriate level of insight on priorities.

Nestlé’s material issues

Our 19 material issues are organised under eight categories that relate to our commitments for Creating Shared Value. Each issue is made up of a number of sub-issues, which are explored in greater detail in associated chapters of this report.

Our material issues were considered and mapped with regard to the degree of importance Nestlé stakeholders place on the issue in different parts of the value chain, and to where financial, operational and reputational impacts would be felt in the value chain.

Although it is not possible to make a direct comparison between our 2012 and 2014 materiality matrix due to the changes in methodology, the following key trends are present:

  • The revised materiality assessment 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;
  • The revised assessment reflects the acute and global stakeholder concern over issues including climate change, natural capital and human rights; and
  • The revised assessment reflects our growing understanding of the potential business impacts (both risk and opportunities) on the supply chain for a number of issues, including climate change, animal welfare, food waste, natural capital and human rights.
  • 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

    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


2014 Nestlé materiality matrix


Assessing the commercial value of Creating Shared Value issues

Nestlé recognises that more quantifiable evidence is needed to demonstrate the value delivered by linking business performance and social impact, and we are working to address it. This year, we asked Accenture to use our materiality analysis and review the commercial relevance of the issues we are seeking to address through our Creating Shared Value commitments. The work has been valuable in enhancing our understanding of the synergies between societal interest and shareholder expectations. We have shared a summary of our findings and our process here, to assist others when researching the area.

Overall, while the particular commercial relevance of the different issues we address varies significantly, our analysis concluded all of them 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, and many can impact our reputation amongst customers and important stakeholders; somewhat intangible to measure, but nevertheless key to our success as a business. In general, if we manage these issues poorly, this exposes us to risks; if managed well, we can turn them into commercial opportunities.

Our revenues are primarily dependent on our ability to deliver nutrition to our consumers. Food safety, as well as over- and under-nutrition are global challenges which present not just a strategic and operational challenge, but also a commercial opportunity for Nestlé. Nestlé has the knowledge, capabilities, scale and reach for contributing solutions to these societal challenges, and where we are successful, we are seeing corresponding revenue uplifts. Our ability to produce and provide nutritious food to our consumers, however, is also dependent on water. Growing water scarcity may jeopardize our growth potential by compromising the availability of raw materials; it may also impact Nestlé’s operating licenses to access water for production. Another issue highly significant for our revenues is the safety of the global food supply chain. In a marketplace where consumers are given frequent cause for concern with regards to the safety of their food, it is valuable to be a trusted, safe brand – particularly for important revenue streams such as child and infant nutrition.

Our cost structure is, again, heavily influenced by water. It is the number one input factor for our production and also influences the prices of raw materials. Therefore, managing it diligently in our own operations as well as within the supply chain is a commercial imperative. Other Creating Shared Value issues, at first sight, primarily seem like cost drivers: nutritious products require substantial R&D investments, ensuring food safety requires investments into traceability and the avoidance of human rights and labour violations require dedicated people and processes. Yet, the latter for example also bring us closer to our suppliers, enhance our understanding of their operating circumstances and can help us realise efficiencies and enhance the security of our sources – ultimately helping us to realise cost-advantages.

When it comes to our reputation, all of the issues that we address with Creating Shared Value have the potential to influence our corporate standing. Food safety is, arguably, the most important one, but our reputation is also linked to perceptions of Nestlé’s respect for social equity, for ethics and human rights. If our actions are perceived to demonstrate a lack of respect for such critical societal issues, customers and consumers could desert us, and other influential stakeholders who shape our operating environments could also be unwilling to treat us as partners.

In summary, the independent research confirmed that the areas we are seeking to address with our Creating Shared Value initiatives are important to our business, to our consumers, our customers, to investors and society at large. Addressing them is of mutually reinforcing benefit, and we look forward to continuing to do so in collaboration with our partners, suppliers, customers and shareholders.

Notes:

Material issues: according to the Global Reporting Initiative’s (GRI) G4 guidelines, material issues (or ‘material aspects’) are “those that reflect the organisation’s significant economic, environmental and social impacts; or that substantively influence the assessments and decisions of stakeholders”.