Nestlé in society Creating Shared Value and meeting our commitments 2015

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Nestlé in society: Creating Shared Value Nutrition, health and wellness Rural development Water Environmental sustainability Human rights and compliance Our people G4-EN27, G4-EN31 Mandatory rating system We use a mandatory environmental rating system for all new product and process developments. It uses a five-point scale to evaluate potential impacts, both negative and positive, and is designed to inform our decision-making at the earliest possible stage – well before a project goes into development. Environmental hotspots for dehydrated culinary products All the product categories within our Food business unit have undergone LCAs, with hotspots identified and addressed. As an example, the main hotspots in our core dehydrated culinary category (including dehydrated soups, sauces, bouillons and seasonings) are in the agricultural and consumption stages. Almost half the GHG emissions (49%) and 85% of the water impact occur during the agriculture stage, while consumption and product use are responsible for 32% of the GHG emissions and 11% of the water use. To address these issues, we are working to improve the agricultural practices of our direct suppliers through our Responsible Sourcing programme. We also encourage consumers to prepare and use our products efficiently, by using as little water and energy as possible, minimising food waste through appropriate portion sizes and recycling product packaging whenever feasible. Promoting access to data Our objective By 2017 – Further enlarge the scope of our databases on agricultural raw materials used in EcodEX. To make informed decisions, our teams require accurate data, and we are continuing to work with external collaborators to develop databases that benefit not only Nestlé but the LCA community at large. In particular, we are focusing on enlarging the scope of the input data on agricultural raw materials, as they constitute the main environmental impact of many products. For example, we are continuing to develop and improve EcodEX through a collaboration with the Montreal-based International Reference Centre for the Life Cycle of Products, Processes and Services (CIRAIG). We are currently working on incorporating information on statistical uncertainty into EcodEX and regionalising life-cycle inventory datasets for water flows and land use. We are also co-sponsoring the development of a World Food LCA Database, coordinated by LCA consultancy Quantis and 11 other partners. During 2015, more than 750 critically reviewed datasets were added to EcodEX. Nestlé is also funding further data development, in collaboration with Quantis, to focus on ingredients not yet considered in other major databases. To stay at the forefront of LCA and ecodesign, we are continuing to promote Sustainability by Design and provide our product development teams with opportunities for continuous learning and knowledge sharing. In addition to staff at our 40 R&D centres disseminating their expertise throughout our R&D community and across our operations, the experts in our global Sustainability by Design Network are responsible for building sustainability into the earliest phase of product development. To evaluate the opportunity to extend our sustainability analyses beyond just environmental factors, we have been collaborating with global science company DSM to trial tools that will conduct integrated assessments of environmental, social and health impacts. The test case was a fortified milk product in the Asian market. The project has resulted in new insights and recommendations for using sustainability in innovation decision-making and communication, and opportunities to develop products with favourable environmental, social and health impacts. Piloting the EU Product Environmental Footprint Category Rules In 2014, the European Commission launched a three-year pilot to develop a common environmental footprint methodology for 25 product categories and two business sectors. Nestlé was selected to co-lead the development of Product Environmental Footprint Category Rules (PEFCR) in three areas: Nestlé Waters for packaged water; Nespresso and Nescafé for coffee; and Nestlé Purina for pet food. This project is designed to establish and validate an open and transparent multi-stakeholder process for developing PEFCRs across all categories, including performance benchmarks for compliance and verification systems, and for testing communication channels. The EU Environmental Footprint Steering Committee approved the scope and definition of representative products in the three product categories co-led by Nestlé. The rules that eventually result from these pilots will be adopted by all stakeholders to assess the environmental performance of their products. Next year, we will test different communication vehicles for our products. This is a major milestone in the development of a common environmental footprint methodology per product category. Nestlé is committed to the systematic assessment and optimisation of environmental impacts in the design of new and renovated products.” Pascal Gréverath, Assistant Vice-President – Environmental Sustainability, Nestlé Nestlé in society – Creating Shared Value and meeting our commitments 2015 178
Nestlé in society: Creating Shared Value Nutrition, health and wellness Rural development Water Environmental sustainability Human rights and compliance Our people Materials G4-DMA, G4-EN1 Raw materials We source millions of tonnes of agricultural raw materials, and millions of farmers depend on our business for their livelihoods, whether through our Farmer Connect programme (which we use to source raw materials directly from farmers, co-operatives and selected traders) or our procurement activities. All our suppliers are required to meet our high standards but we help them improve their environmental sustainability practices through advice, training and other services. This leads to increased yields and quality, and better resistance to disease and drought, helping ensure a secure source of high-quality ingredients for our products. By 2016 – 40% of the volume of our 12 priority categories of raw materials has been assessed against our Responsible Sourcing Guideline requirements and is compliant, or improvement plans to preserve natural capital are ongoing. By the end of 2015, we had purchased 14.4 million tonnes of our 12 priority categories of raw materials: 54% of purchased volumes was traceable and 43% was Responsibly Sourced, in accordance with our RSG requirements. This means we met our 2015 target, and will report on the final 2016 achievement in next year’s report. Our approach We use around 25 million tonnes of raw materials. We source directly from farmers, and procure fresh and semi-processed raw materials from our Tier 1 suppliers (those in direct commercial relationships with Nestlé). Where possible, we prefer to source materials that have been produced near our factories. To promote environmentally sustainable agricultural practices, we help our suppliers evaluate the environmental performance (and other aspects) of their farms and plantations, and of their upstream supply chains. We do this through a number of initiatives, some of which are outlined below. Consumers and other stakeholders increasingly want to know where their food comes from and how it was produced. Working alongside non-governmental organisation (NGO) partners, we map our supply chains, and conduct supplier audits and farm assessments to ensure the procurement of our 12 priority categories complies with our Responsible Sourcing Guideline (RSG) criteria. Please see Rural development for details of progress against our objective for Responsibly Sourced commodities. Raw materials used (million tonnes) 2015 25.0 2014 25.8 2013 22.5 Key categories of raw materials used (tonnes) Fresh milk and milk derivatives 2014 2015 14.2 million 14.2 million Palm oil 445 000 420 000 Cocoa 430 000 394 000 Coffee 842 000 849 000 Our commitment Preserve natural capital, including forests Our objectives By 2015 – 30% of the volume of our 12 priority categories of raw materials has been assessed against our Responsible Sourcing Guideline requirements and is compliant, or improvement plans to preserve natural capital are ongoing. Nestlé in society – Creating Shared Value and meeting our commitments 2015 179
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Nestlé in society Creating Shared Value and meeting our commitments 2015

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