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 Investment G4-DMA, G4-HR4, Assessment G4-DMA, G4-HR9 Our achievements in 2015 In 2015, we identified 40 high risks that have all been reflected in the list of salient issues. In addition to this list, we have also identified opportunities for improvement, for example around the level of awareness, skills and capacity from local management on human rights, and our capacity to deal, in a proactive manner, with labour-related issues in the agricultural supply. We will continue to address these challenges in 2016, through the roll-out of our Human Rights Due Diligence Programme in our operations globally and the inception of the Market Compliance Committees, and by strengthening our resources on responsible sourcing. Pillar 5: Impact assessment Our approach: we assess human rights impacts in our business activities to address them effectively. HRIAs are an invaluable source of information about the positive and negative impacts that our business activities may have on people with whom we work, do business with and interact with along our entire value chain – i.e. the rights holders – in a specific country. We described the full methodology that we use to conduct our HRIAs in the Talking the Human Rights Walk publication that we released together with the DIHR in December 2013. HRIAs provide us with a unique opportunity to get feedback and input from Nestlé employees, including trade union representatives, suppliers, farmers, local communities and other stakeholders (i.e. international organisations, local NGOs, academics, etc.) in high-risk countries. They enable us to learn a great deal about the challenges we face on the ground, and to implement action plans that address any gaps between international human rights standards and current practice within the countries where we operate. Our objective By 2018 – Carry out six additional human rights impact assessments in countries where we have significant business operations. Our achievements in 2015 We conduct specific HRIAs in high-risk countries, based on the list of Countries of Concern established by FTSE4Good. In 2015, we carried out two HRIAs, in Myanmar and China, taking the cumulative total conducted since 2010 to 11. Planned HRIAs in Egypt and Saudi Arabia were postponed due to the countries’ political and security situation. We now have a new objective to complete a further six by 2018. Assessing Nestlé’s potential and actual impacts in Myanmar: the perspective from the Danish Institute for Human Rights Given the country’s human rights record and ongoing conflict, doing business in Myanmar does not come without serious risks of having adverse impacts on human rights. Labour rights violations, land confiscations and the lack of consultation of communities are a few examples of human rights abuses associated with foreign investment in Myanmar. Companies operating in the country are expected to practice heightened human rights due diligence. In February 2015, Nestlé decided to carry out a HRIA with the DIHR. Before the in-country assessment, the team conducted thorough desk-based research to understand relevant human rights issues for a food and beverage company operating in Myanmar. The two-week, in-country assessment was kicked off by a workshop on human rights and business for the Nestlé Myanmar management team, followed by more than 70 interviews with stakeholders to assess the potential and actual human rights impacts of Nestlé Myanmar’s operations. This included Nestlé Myanmar management and staff, business partners, civil society and trade union representatives, UN agencies and community-based organisations, as well as coffee farmers and workers. The assessment team looked at three areas of business activities: • Nestlé Myanmar’s current activities, which focused on distribution through its joint venture partner Myanmar Distribution Group; • Nestlé’s future activities, focusing on its packaging factory in an industrial zone in Yangon; and • Potential coffee-sourcing activities in two regions, Shan State and Kayin State. Currently, Nestlé operates a demonstration farm and conducts training for coffee farmers in Kayin State only. During the assessment, the team identified a number of potential impacts on human rights common among companies operating in a context like Myanmar. Generally, in Myanmar there is a lack of awareness of what responsible business means; in the local context, this is often considered as philanthropy rather than doing no harm. Other challenges include a lack of awareness of labour rights, including freedom of association among company staff and employees. To address this, Nestlé Myanmar and its joint venture partner will take part in training on responsible business conduct in Myanmar and will ensure an ongoing engagement with labour rights experts. While Nestlé currently does not source coffee and is not directly involved in land acquisition, for future operations the company will need to be particularly careful to make sure it is not linked to abuses of land rights, which are widespread throughout the country. Other risks relate to doing business in conflict-affected regions in the country, where local communities may like to see peace first before foreign investors enter. To mitigate such risks, Nestlé Myanmar will engage with organisations specialising in the nexus between business and conflict, and will consult local communities. Nestlé in society – Creating Shared Value and meeting our commitments 2015 234
Nestlé in society: Creating Shared Value Nutrition, health and wellness Rural development Water Environmental sustainability Human rights and compliance Our people Investment G4-DMA, Assessment G4-DMA, G4-HR9 As a multinational operating in Myanmar, Nestlé will need to ensure that in all its activities and business relationships – from factories to demonstration farms – labour, land and community rights are respected. Further to this, Nestlé can draw on lessons from its business activities in other contexts to demonstrate and share its best practices, for example in the areas of occupational health and safety and wastewater treatment. Pillar 6: Governance Our approach: we establish clear roles and responsibilities at different levels of the company. Nestlé’s top management commitment and leadership on human rights is reflected at different stages of the company. Someone who leads an organisation like the one I have the privilege of leading has an obligation and responsibility to be outspoken about this, to show full commitment and leadership on the human rights agenda, not out of convenience but out of conviction.” Paul Bulcke, Chief Executive Officer, Nestlé (Keynote speech at the annual UN Forum on Business and Human Rights, Geneva, Switzerland, December 2014) The heads of the following departments and functions are members of the HRWG: Human Resources (Co-Chair); Public Affairs (Co-Chair); Legal; Compliance; Security; Procurement; Safety, Health and Environment; and Risk Management. In addition to the HRWG, other groups that are chaired by an Executive Board member have human rights as part of their scope of work, including: • Group Compliance Committee; • Issues Round Table; • Child Labour and Women’s Empowerment Steering Group; • Operations Water Task Force; • Nestlé Water Task Force; and • Seafood Task Force. Our achievements in 2015 In 2015, the HRWG played a pivotal role in defining what the company’s human rights priorities (salient issues) should be. Clear responsibilities have been attributed to the relevant HRWG members for the elaboration and implementation of the action plan for each priority, further strengthening the role that the HRWG plays in the coordination of Nestlé’s overall human rights approach. Starting in 2016, the HRWG will, therefore, be in charge of monitoring the development and implementation of these action plans. The HRWG has also identified the Market Compliance Committees as the main channels for driving the human rights agenda at the country level. This approach will be piloted in 2016. The Nestlé in Society Board is the highest level where an update on human rights is provided to Executive Board members on a regular basis. The Nestlé in Society Board is assisted in this task by the HRWG, which meets to: • Supervise and coordinate the progress made on the implementation of the HRDDP at the corporate and market levels against Nestlé’s commitments; • Provide strategic orientation on areas that need to be prioritised to embed human rights further into the mainstream of Nestlé’s structure and operations; • Contribute technical expertise to ongoing and future human rights initiatives and activities; and • Pre-empt and discuss specific Nestlé-related human rights issues and any action to be taken. Nestlé in society – Creating Shared Value and meeting our commitments 2015 235
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Nestlé in society Creating Shared Value and meeting our commitments 2015

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