Three-tiered approach to responsible sourcing
The diagram above shows how we manage responsible sourcing on three levels:
- Tier 1 major suppliers – Audit programme: We audit our tier 1 suppliers against our Supplier Code requirements, using the Sedex Members for Ethical Trade Audit 4 Pillars protocol (pdf, 2 Mb)
- Extended value chains – Traceability programme: Where we don’t purchase direct from the farm or feedstock, we have a programme to establish transparent supply chains back to the origin and develop suppliers that meet our commitments and policies
- Direct from farmer – Farmer Connect programme: All our purchases direct from the farmer, or farmer organisation, are monitored via the Farmer Connect programme
Below we explain our approach at each level in more detail.
Addressing Tier 1 supplier issues
Tier 1 suppliers are those from whom we purchase directly, with the exception of farmers who we purchase from through the Farmer Connect programme.
We acknowledged that communicating our Supplier Code to suppliers was not ensuring that good ethical practices were in place in their operations. So in 2010, we launched the Responsible Sourcing Audit Programme, both to verify supplier compliance and help them improve their practices if necessary. This programme forms an integral part of the Vendor Approval Process used to assess vendors for their financial stability, quality capabilities, ensuring supply practices and responsible sourcing.
Through this programme, our Tier 1 suppliers are audited using the Sedex Members Ethical Trade Audit (SMETA) 4 Pillars protocol, which covers best practice in labour standards, health and safety, the environment and business ethics. When required, these reports are shared by suppliers in Sedex with 32 members of the Fast-Moving Consumer Goods (FMCG) industry members (AIM-PROGRESS platform). This encourages sharing, and means that suppliers don’t have to undergo a separate audit for each of their FMCG customers.
Following the audit, [Sedex] gives the supplier a report of its findings highlighting any breaches of our Supplier Code. If the supplier doesn’t change poor practices within an agreed timeframe, we remove the supplier from its list.
We have 28,000 ‘single company’ or family group suppliers, excluding Farmer Connect. In 2010-2011, the candidates for audit were direct materials suppliers in emerging economies, who represented a spend of more than CHF 50,000.
In 2012, we expanded these parameters to include all suppliers in all the countries we operate in. Which means that the speed and ambition of the programme has doubled in the last year: our audit target has doubled from 2,000 audits in 2010–2011 to 4,000 in 2012–2013; and we plan another 4,000 audits in 2014–2015. By 2015, we will have audited 10,000 of our 28,000 single company suppliers.
Responsibility in extended value chains
The Responsible Sourcing Traceability Programme promotes compliance with our Responsible Sourcing Guidelines in our extended value chains, back to the level of primary production. The Guidelines cover materials relating to agriculture, forestry, fishery or aquaculture origin. They provide a framework for continuous improvement with the ambition that all our purchases will come from responsible sources that are committed to a process of continuous improvement towards environmental, social and economic sustainability, supported by supply chain transparency and credible verification.
The Guidelines are a key instrument for us to create shared value for society and for our business and implement our corporate commitments. They focus on the following areas:
- Human rights
- Forest stewardship
- Water stewardship
- Elimination of child labour in agriculture
- Rural development
- Sustainable fisheries, and
- Animal welfare
Our responsible sourcing traceability journey
We officially launched the Nestlé Cocoa Plan in 2009, and the Nescafé Plan in 2010. Also in 2010, we launched Responsible Sourcing Action Plans on palm oil and paper and board to implement our commitment to combat deforestation in our supply chains.
In 2011, we launched Action Plans on sugar cane, hazelnuts and natural vanilla.
In 2012, we put in place an Action Plan for soya and we developed Responsible Sourcing Guidelines for fish and seafood, dairy, meat and poultry and eggs, which will be implemented from 2013 onwards.
For each of these material categories, Responsible Sourcing Guidelines have been developed to define the priorities for continuous improvement of our suppliers’ environmental, social and economic performance, back to the farm or feedstock level.
In 2012, we consolidated these requirements into general Responsible Sourcing Guidelines for all materials of agriculture, forestry, fishery or aquaculture origin. The general guidelines cover the following priorities:
The Traceability Programme is based on:
- Defining our requirements: by applying Responsible Sourcing Guidelines (RSGs) to key raw and packaging materials
- Transparency: by mapping supply chains back to their origins
- Transformation: by assessing and developing suppliers against the RSGs in a process of continuous improvement. Where appropriate, we support suppliers that are not yet able to meet all our RSGs, but that are committed to becoming compliant over time
- Monitoring of progress and transparent reporting on a regular basis
Farmer programmes and Farmer Connect
Our farmer programmes and Farmer Connect sourcing operations mainly applies to farmers supplying our main raw materials: milk, cocoa (The Nestlé Cocoa Plan), coffee (Nescafé Plan), as well as fruit and vegetables.
Maintaining a constant and consistent supply of raw materials begins with our core suppliers, and most of these are farmers. We work with more than 690,000 farmers around the world, from small farmers with a single cow to large-scale farmers with more than 10,000 cows. Having good, productive relationships with our farmers is critical both to meeting our growth targets and to truly creating shared value.
This is what lies behind Farmer Connect, our programme for buying directly from farmers or cooperatives that we partner with to achieve higher agricultural standards.
It’s a win-win approach. We help farmers get consistent and fair prices for their products and improve their methods and yields in ways that minimise harmful impacts on the environment. For our part, Farmer Connect offers security of high-quality supply coupled with traceability back to farmer level. As well as providing technical help and training in best agricultural practices, we promote compliance with our Supplier Code. These activities together form our Sustainable Agriculture Initiative Nestlé (SAIN).The Farmer Connect programme only operates in countries where we have factories. Based on a survey conducted in 2010, about 46% of our factories were located in emerging countries and 73% of those were in rural areas.
We assess the farm’s sustainability and address any gaps identified with an approach that’s appropriate to the raw material involved:
- For instance, we support our milk farmers by offering veterinary services, support on silage and fodder programmes, financing, and are supporting research in silvopastoral agriculture (the practice of combining forestry and grazing of domesticated animals). This is aligned with the RISE programme (see below)
- For coffee and cocoa we support improving quality, yield improvement, tools to help with adjustment to changing climate conditions, soil and leaf analysis, wastewater management, gender and youth empowerment, improvements on traceability as well as preparation for the Common Code for the Coffee Community (4C) and Sustainable Agriculture Network (SAIN) compliance. This is aligned with our commitments to only source 4C-compliant coffee within Farmer Connect and to increase our UTZ-certified sourcing within the Cocoa Plan
- In addition to these commodity-specific programmes, we also offer water management programmes and water source protection support as well as support in the identification and production of alternative crops
We are active members of 4C, SAI and the IDH sustainable coffee programme.
We assess our farmers through Response-Inducing Sustainability Evaluation (RISE), a computer-based tool for assessing the sustainability of agricultural production and trends at farm level, and providing an early warning system for potential problem areas.
The tool identifies strengths and weaknesses across environmental, economic and social dimensions, as well as ‘intervention points’ where improvements can most effectively be made.
Employee training and engagement
In each of the three pillars of our Responsible Sourcing Programme, our effort is complex and ever-changing, and we recognise the need to help our employees at all levels keep up-to-date with its principles and practices.
- Internally, during 2011, all 700 of our strategic buyers worldwide had to pass ‘strategic driving licence’ training, which included a formal training chapter on the Supplier Code and its verification through the Responsible Sourcing Audit programme. In total, some 1,250 employees in the Procurement function, including the 700 strategic buyers, have completed this course
- Also in 2011, we developed an internal training programme on the implementation of the Nestlé Responsible Sourcing Guidelines. In 2012, the training has been rolled out to procurement professionals in all three Nestlé Zones globally
- Our Agricultural Service Teams, which include 1,140 agricultural specialists working directly with farmers and 12,000 support staff, are trained in our Supplier Code
We seek to maximise our impact by working with other major food industry players, public authorities, international organisations, NGOs and other relevant stakeholders. Our work with food industry partners includes the Sustainable Agriculture Initiative (SAI) platform, which we founded with Danone and Unilever in 2002. As one of 40 members, we aim to promote sustainable agricultural practices at field level through six working groups (cereals, coffee, dairy, fruit, potatoes and vegetables, and water and agriculture).
Our work with the UN Development Programme in Pakistan, for example, involved a public-private partnership to deliver training and make financial assistance available to dairy farmers near our Kabirwala and Sheikupura factories.
In Malaysia, we are working with the state government of Sabah and other community partners to protect water resources, protect biodiversity and reduce the impact of palm oil plantations in the region.
Since 2010, we have been partnering with The Forest Trust (TFT) to implement our commitment on no-deforestation in our palm oil and paper supply chains. Since 2010, we have been working with Proforest on responsible sugar sourcing. Since 2012, we are working with Conservation International and with Proforest on the responsible sourcing of soya.
We are also working with Conservation International to improve our understanding of the regions we source from and where deforestation occurs. We are currently using these maps to overlay our commodity sourcing in order to focus our responsible sourcing programmes and reduce negative impacts.
In February 2012, we became an affiliated member of the Fair Labor Association (FLA) that supports us in eliminating child labour from our agricultural supply chains, including cocoa in Côte d’Ivoire and hazelnuts in Turkey.
Land acquisition has become a high profile political topic in recent years due to concerns about the impact of such activity on human rights and local food security. The worst cases of abuse are referred to as “land grab”. We do not directly acquire or lease agricultural land, though we do acquire land for factory sites and some small demonstration farms. We also buy commodities such as palm oil, soya and sugar, which are some of the common commodities driving land acquisition and 'land grab'.
Land acquisition is included within our global corporate risk assessment, and is also incorporated into risk assessments at the national level. We have included safeguards such as “free, prior and informed consent” as a requirement in our responsible sourcing guidelines for major commodities such as palm oil, soya, paper and sugar, and it is one of the criteria that our partners assess in carrying out our responsible sourcing assessments on the ground. We have also been carrying out Human Rights Impacts Assessments in high-risk countries. These look at the process by which we have acquired land for factory construction (see also Human rights).
To advance our understanding of the issue in 2012, we carried out a review of two major public databases of countries and commodities where land acquisition is happening and is a potential risk in our commodity sourcing. This analysis is helping us further refine our approach to assessing risk in our supply chains and deciding in which countries to focus our Responsible Sourcing activities. We also recognise that this issue is a rapidly advancing one and we welcome information and guidance from stakeholders to help us improve our understanding of the situation.