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Why CEOs should be worried about the

environment

Peter Brabeck-LetmatheChairman of the BoardNestlé S.A.

Stein am Rhein, 5 October 2009

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The Nestlé story 1867 1866

1929

1938

1947

1960s

1970s

1980s

1990s

2000s

456 factories in 84 countries280,000 employeesSales of CHF 109.9 billion in 2008135,000 different products(more than 1 billion productssold every day)Environmental improvement since1999:

• Energy per Tonne: -42%• GHG per Tonne: -48% • Water per Tonne: -58%

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Creating Shared Value, the way we do business

SustainabilityProtect the future

ComplianceLaws, Business Principles, Codes of conduct

«Going beyond sustainability, by creating value for shareholders andsociety simultaneously»

«Development that meets the needs of the present without compromising the ability of future generations to meettheir own needs»

«We will not sacrifice long- term development for short- term gain»

Sustainability

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UN World Commission on Environment and Development: Our Common Future

• Concerned about the accelerating deterioration of the human environment and natural resources and the consequences of that deterioration for economic and social development,

• Believing that sustainable development, which implies meeting the needs of the present without compromising the ability of future generations to meet their own needs,

• should become a central guiding principle of the United Nations, Governments and private institutions, organizations and enterprises.

Brundtland Commission, December 1987

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“This is certainly one of the most pertinent, if not, the definition for Sustainability.”

• “Nous n'héritons pas la terre de nos ancêtres, nous l'empruntons à nos enfants.”

• “We do not inherit the Earth from our ancestors. We borrow it from our children”.

African proverb, promoted by Antoine de Saint-Exupéry

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World’s sustainable capacity already exceeded by 25%

The world was «sustainable» until 1987

Source: WWF & Global Footprint Network

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The origins of sustainability

• Thomas Malthus: An Essay on the Principle of Population (1798)

– "The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. »

• Paul Ehrlich: The Population Bomb (1968)– "India couldn't

possibly feed two hundred million more people by 1980"

500 million

Today: 1’100 million

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If 6.7 billion peoplewould live like 330

million North Americans

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Global Drying – The other „inconvenient truth“

• 25% of world population lives under water stress (= less than 1700 m3/person/year).

• By 2050, household water needs predicted to rise by 61%, agricultural use by 140%.

• In parts of India (Gujarat) the water table is dropping up to 6 meters per year. – Over 20 million motorised water pumps in India today (cf 100,000 in 1955).

• Increasing amounts of water is from fossil (= non-renewable) aquifers.– The Ogallala aquifer - a major source for agriculture from Texas to South Dakota -

is being pumped at a rate 14 times greater than it can be replenished.

• A human being needs about 5 litres of water/day for basic hydration and 20-50 litres/day for basic sanitation.

• Every single day we eat between 2000 and 6000 litres of water through the food we consume.

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The key issue: From water shortage to food shortage

“If present trends continue the livelihoods of one third of the world’s population will be affected by water scarcity by 2025.

We could be facing annual losses equivalent to the entire grain crops of India and the US combined.”

Frank Rijsberman, former Director General International Water Management Institute

http://dlc.dlib.indiana.edu/DLCImage/images/Mali2006-303-full.jpg

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Sustainable Development =

Im > P x A x C x T

Im = Impact (Earth’s «carrying capacity»)

P = Population size A = Affluence C = Consumption intensityT = Technology to deliver consumption

(eco-efficiency)

Waggoner & Ausubel (2002): A framework for sustainability; based onCommoner (1972) “The Environmental Cost of Economic Growth”

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Sustainable Development (Brundtland Report)

• The concept of sustainable development does imply limits - not absolute limits but limitations imposed by the present state of technology and social organization on environmental resources and by the ability of the biosphere to absorb the effects of human activities.

• Sustainable development is a process of change in which painful choices must be made consistent with future as well as present needs.

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Ecologies of Scale

• Economies of scale: Strong degressive relationship between production cost and number of produced items

• Similar relationship applies to « environmental cost » and number of produced items

• Small may be beautiful, « locally grown » is popular and home- cooking is fun…

• …but scientific assessments indicate that mass-production often has a lower per-unit impact on the environment

Schlich & Fleissner (Int J LCA, 2005) – The Ecology of Scale

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Humbert S, Loerincik Y, Rossi V, Margni M and Jolliet O (2009). Life cycle assessment of spray dried soluble coffee and comparison with alternatives (drip filter and capsule espresso). Journal Cleaner Production

Environmental Life Cycle Assessment of Filter and Instant Coffee

Instant coffee has a lower environmental impact than filter coffee

Energy savings opportunities at consumer

Waste recovery:

Positive effects

Raw materials

Manufacturing/ Packaging Consumer

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Significant losses along the value chainPlanted food

Ready to harvest food

Processed food

Food at consumer/food service

Eaten food

Pre-harvest losses: 7% 8

Harvesting and processing losses: 12% 3-37% 8-9

Retail losses: 1% 3- 25% 3

Use losses: 3% 5-40% 5

Best case

21% loss

Worst case

74% loss

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Agrifuel from food crops: Solution… ?

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

Petrol Whey(Sw itzerland)

Sugar cane(Brasil)

Sugar beet(Sw itzerland)

Maize(Sw itzerland)

Air pollution by GreenHouse Gases

Ethanol

Sugar cane from Brazil saves 70% CO2 compared to petrol

Maize from Switzerland produces 15% more CO2 than petrol

Source: SWISS Federal

Office for the Environment, 2006

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… or pollution !

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

Petrol Whey(Sw itzerland)

Sugar cane(Brasil)

Sugar beet(Sw itzerland)

Maize(Sw itzerland)

Raw materialconsumption andw aste treatementWater and soil pollution

Air pollution (w ithoutGHG)

Air pollution by GreenHouse Gases

All crop-based agrofuels pollute more than fossil fuels

By-products (whey, wood, used vegetable oil) may be the only sustainable form of biofuels

Placing value only on ONE element of

ecosystem services may lead to severe

market distortions and destroy the

ecosystem it was intended to protect !

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More at: www.nestle.com/csv