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-EC2, Energy G4-DMA, Emissions G4-DMA We use industrial refrigeration in our factories, which represents 90% of our refrigeration use, and small-scale units such as commercial ice cream freezers at point-of-sale. We continue to phase out synthetic refrigerants with high global warming and ozone-depleting potential, and have invested CHF 289 million since 1992 to replace synthetic refrigerants with natural alternatives in 91% of our industrial refrigeration systems. This slight decrease is due to some divestures of installations using natural refrigerants as well as better accuracy in our reporting. We have also expanded the use of natural refrigerants by installing 33 new refrigeration systems, and phased out 208 old refrigeration systems. For example, using ammonia and CO 2 together in a cascade refrigeration system can offer better environmental performance, improved efficiency and high operating performance. For more than 15 years, we have expanded our use of natural refrigerants in various cooling applications in factories, small distribution centres, R&D centres, offices and Nestlé Shops and, in 2015, we inaugurated a CO 2 /ammonia cascade cold store in the Greater China Region (see case study). The deadline for our objective to expand the use of natural refrigerants in our industrial refrigeration systems has been extended, enabling us to continue this work for another year. We will also report on progress towards our new 2020 objective for Nestlé Professional next year. Ice cream chest freezers Our objectives By 2015 – All of our new ice cream chest freezers will use natural refrigerants. By 2016 – All of our new ice cream chest, upright and island freezers will use natural refrigerants. We have been systematically introducing more commercial refrigeration units across Europe that use natural refrigerants and are more energy efficient. Back in November 2013, we pledged that all our new horizontal chest freezers in Europe will use natural refrigerants and, in 2014, we made this pledge global, committing that all our new ice cream chest freezers will use natural refrigerants. From January 2015, every new horizontal chest freezer Nestlé buys to store ice cream will use natural refrigerants rather than synthetic refrigerants. These new freezers represent 70% of Nestlé’s total spend on freezers. They also consume 50% less energy than earlier models and are more efficient for customers to run. Nestlé’s first CO 2 /ammonia cold store in China In support of our commitment to expand the use of natural refrigerants in our industrial refrigeration systems, Nestlé inaugurated its first CO 2 /ammonia (NH 3 ) cold store in Guangzhou, China, in June 2015. The CO 2 /ammonia cascade system confines ammonia charge to the machine room, providing a safer working environment for cold store operators and uses less energy than other systems. The 3200 m 2 cold store also features other energy-saving technology such as variable temperature settings and built-in intelligent LED lights. Local contractors provided more than 110 000 incident-free work-hours to build the CNY 50 million (CHF 8 million) site, which was completed in May 2015 and will serve consumers across the South China region (including Hong Kong and Macau). This first project of its kind for us gave us the opportunity to transfer knowledge from our global refrigeration experts to our local team, which will further facilitate the implementation of new CO 2 refrigeration systems.” Zhang Hao, Corporate Engineer, Nestlé Greater China Region Nonetheless, challenges remain in deploying natural refrigerants universally. As the CGF recognises: ‘Barriers exist to wide-scale adoption of more climate-friendly refrigeration, namely legislative restrictions in some countries, availability, cost, safety, maintenance and servicing.’ To help overcome such challenges, we continue to work with major equipment suppliers and organisations to test and monitor different refrigerants in various applications. To overcome these barriers, our refrigeration experts around the world contribute to knowledge transfer, and we continue to work with major equipment suppliers and other organisations to test and monitor different refrigerants in various applications. Combined, our actions to date have helped us move beyond meeting the CGF Resolution on Refrigeration, which encourages businesses to take action towards phasing out some HFC refrigerants from 2015. See Transport and distribution for details of our new objective to use only natural refrigerants in our refrigerated trucks. Nestlé in society – Creating Shared Value and meeting our commitments 2015 212
Nestlé in society: Creating Shared Value Nutrition, health and wellness Rural development Water Environmental sustainability Human rights and compliance Our people G4-EC2, Energy G4-DMA, Emissions G4-DMA Adapting to climate change We are only part of the climate change solution; business can play a role, but more needs to be done at a wider, collaborative level. So increasingly, we are working with our suppliers to help them adapt to climate change: both to support their livelihoods and the environment, and to reduce the risk to the long-term supply of materials for our business. Agroforestry project in Rosières, France Nestlé France’s Rosières factory, located in Santerre, northern France, sources about 110 000 tonnes of select varieties of potatoes for its Mousline brands; three-quarters of this volume comes from the 190 producers who form the Santerre Producers Group (SPG). Audits performed in 2012 and 2013 among the SPG suggest that the use of water for irrigation, fertilisers and pesticides are high, putting long-term soil fertility at risk. To make land use more sustainable, production practices have been adapted to involve agroforestry – the use of trees within agriculture to protect natural habitats, regulate water availability and reduce soil erosion. Mousline promotes agroforestry projects with willing SPG producers, while Pur Projet, an NGO that assists companies in regenerating and preserving ecosystems, provides operational support; the producers themselves are responsible for soil preparation, planting and general maintenance. In 2014, three agroforestry pilot projects were set up at farms close to the Rosières factory, each involving different types of hedge. A total of 3500 trees and shrubs were planted, forming 3.3 km of hedging, and the agricultural school Lycée Le Paraclet has started to assist with soil analysis. Looking ahead, we hope to identify new potato farmers to join the initiative, and to assess the impact of the hedges planted to date. We are especially committed to helping farmers adapt to climate impacts and become more resilient. Supported by training and advice, they can continue to grow crops in the face of changing patterns of climate and agricultural production. We use our scientific expertise and resources to help improve crop resilience and yield, with our R&D centres in Tours, France, and Abidjan, Côte d’Ivoire, working to develop drought-resistant cocoa and coffee plantlets, and varieties that are less vulnerable to disease. Our work to assist cocoa and coffee farmers adapt to environmental challenges was recognised as an example of best practice by the United Nations Framework Convention on Climate Change (UNFCCC) and shared as part of its Adaptation Private Sector Initiative. We have shared case studies on private sector engagement as part of an online tool that showcases how businesses and communities can adapt to the effects of climate change (see an example here). Nespresso AAA agroforestry programme Nespresso sources coffee beans from regions across the world, many of which are already experiencing the first signs of the adverse impacts of climate change. Extreme weather conditions, leading to increased incidence of disease, landslides and water scarcity, are becoming a threat to the availability of coffee beans. A 2014 paper by the International Center for Tropical Agriculture in Colombia suggests that, due to increasing temperatures driven by climate change, Latin American countries (where Nespresso sources a large share of its high-quality coffees) would lose 15% to 30% of the current area suitable for Arabica coffee bean cultivation by 2050. Since 2003, in partnership with the Rainforest Alliance, Nespresso has been committed to ensuring farmers’ livelihoods and securing its supply of high-quality sustainable coffee via the implementation of its unique coffee-sourcing model, Nespresso’s AAA Sustainable Quality Program. At the end of 2015, 85% of Nespresso coffee supply was sourced from the AAA Program. A dedicated agronomists’ network has promoted sustainable farming practices to mitigate negative environmental impacts, while increasing farm productivity and coffee quality. In 2014, conscious of the impact of climate change on landscapes, Nespresso decided to amplify its actions to build resilient coffee ecosystems by investing in agroforestry as part of its AAA Program. We plan to replicate the activities piloted in the Cauca region of Colombia and the Huehuetenango region of Guatemala in other relevant AAA sourcing regions. Nespresso commissioned Pur Projet, specialists in the development of community ecosystem management, to run the pilot projects in Guatemala and Colombia along with local farmers’ organisations (ADESC and FNC). The field assessments carried out at the early stage of the process highlighted the key challenges to be addressed in both regions. In Huehuetenango the primary concerns are landslides, coffee rust and drought, while in Cauca, the key challenges are watershed regeneration and degraded pastures. Far-reaching community and corporate benefits Nespresso is convinced that agroforestry is an efficient investment to reinforce its coffee supply chain while having a positive impact on natural capital and creating additional economic value from each hectare of coffee farm. The positive effects on land, biodiversity and water include: • Preventing erosion; • Enhancing the fertility of soils, and increasing the presence of pollinators and biological control; • Limiting water evaporation and regulating fresh water availability; • Naturally protecting ecosystems and preserving biodiversity; • Improving water quality; • Absorbing carbon from the air; and • Creating economic benefits for farmers through crop diversification and carbon certification. Nestlé in society – Creating Shared Value and meeting our commitments 2015 213
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Nestlé in society Creating Shared Value and meeting our commitments 2015

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