'From Promise to Action on Net Zero' is a series of publications and events exploring how companies are translating net zero emissions goals into practice. This interview presents one of our discussions with senior executives responsible for delivering on their companies’ climate ambitions.
Nestlé is the world’s largest food and beverage company. Heavily reliant on water, air, and land to grow and distribute food around the world, Nestlé has been a global leader on corporate sustainability. In 2019, the Swiss-based company made a commitment to achieve net zero emissions in its operations and supply chain by 2050. It will do so by transitioning to products that have a better environmental footprint and which contribute to a balanced diet, and by scaling up initiatives in agriculture to absorb more carbon, using 100 percent renewable electricity, and other initiatives.
Emily Farnworth, Global Director of Low Carbon Economy Transition at ERM, recently talked with Magdi Batato, Executive Vice President and Head of Operations at Nestlé, who is working to address the challenges of climate change and sustainability in the food and beverage industry.
Emily Farnworth: What was the driver behind Nestlé’s net zero goal?
Magdi Batato: Nestlé is an agriculture-based company that has been around for 154 years. Sustainability is at the core of our business, and we would like to be around for at least another 150 years.
As a food and beverage company that is reliant on agriculture, we take our resources from the earth. Water, soil health, and air quality are all essential for our operations. Without good ingredients, we will no longer be able to produce high quality products.
Climate change is at the core of the net zero question. If we are careless, we might end up with a global temperature rise of more than 5°C in the next few decades. The consequences for all of us are almost unthinkable, and the impacts on societies and the environment everywhere would be devastating. Every commodity would be impacted. To give just one example, we would run out of Arabica coffee – which is what we use for Nespresso and Nescafé – by 2050.
So sustainability is a real issue for us, and we believe that we need to be part of the net zero journey.
The second key driver is our values. At Nestlé, we have a multitude of ethnicities, languages, and cultures. Our values emphasize respect for each other and our consumers. Respect of future generations is not possible without operating sustainably, so the goal of net zero was the obvious thing for Nestlé to do.
What is the process you go through to identify and prioritize the steps to deliver your net zero goal?
We have developed a net zero roadmap that we have presented to the Executive Board. We will be sharing more information publicly in December.
The roadmap represents a “highway” with two “streets.” On one side of the “highway,” we have our long-term targets, with a focus on achieving net zero by 2050. It includes 54 climate initiatives such as achieving 100 percent renewable electricity in our factories and is in full alignment with the Science-Based Targets Initiative.
The other side of the roadmap represents initiatives around specific brands. For example, three of our international water brands will be carbon neutral by 2023, and all our water brands will reach this milestone by 2025. We recently announced that Nespresso will be carbon neutral by 2022 and are also working to bring other brands to the party.
Another key step is establishing the carbon database for all our operations. Between CO2 reductions, removals, insetting, and offsetting, we are working on many projects, and we want to establish comprehensive tracking of all data.
How do you balance and justify the costs of these climate initiatives?
It is no secret that the net zero journey will come with a cost. Unless major taxes are introduced to reward companies with low carbon operations, we are unlikely to realize a financial benefit.
We have promised investors that we will increase our operating profits, and we have delivered on this goal. We will not deliver less because we are focused on sustainability.
Our climate agenda is not about resetting the clock on the bottom line. It includes growth and can help us expand our operations in a sustainable manner. We are moving into an era where sustainability is a must-have, and the consumer will punish companies that are not being sustainable or acting in such a way.
What has been your progress to date?
Ten years ago, we made a commitment to achieve zero deforestation by 2020 for all our commodities. We are currently at 85 percent and will be at 90 percent by the end of the year. The reason we are not at 100 percent is that we have small-holder farmers as part of our supply chain, and we need to protect their interests.
It would have been easy for us to say that we only work with large farms, but we believe that small farmers’ livelihoods are also important. If they don’t have a customer like Nestlé, they will not survive.
We decided to apply a pragmatic lens. It will take us a little longer to reach zero deforestation, but this will be achieved in a way that enables the smaller farmers to be part of the journey. They need training and support to make this feasible, and we are providing such support with the help of NGOs and various technologies.
Back in 2010 when we made the commitment, we had no idea about the difficulties we would face.
I am pragmatic and will not go into any of these areas thinking that it will be easy. If we always focus on moving fast, we may end up sacrificing quality.
For example, offsetting may seem to be easier than insetting. However, we need to do it in a way that ensures high quality outcomes.
I do not have the arrogance to think it is easy or that it’s a quick win.
What is your advice to companies that are starting on the net zero journey?
Make sure that your climate ambition links to the company’s core values. Once you have that, get the CEO and the management team behind to ensure execution.
My advice is to take time to reflect on why your organization is doing it and reach alignment that it is the right thing to do. Also get to know what you will be up against as you make a commitment.
We are all learning and discovering more complexities in the process. A company that wants to commit to net zero does not have to know everything. Accept that achieving net zero will require a lot of effort and resources.
What do you think will be the key challenges ahead?
We believe the potential of natural solutions, for example, forests and soils, is huge.
For a company of our size, data will be a constant challenge. We have now recruited an expert specializing in IT and sustainability who will be developing our tools and database.
The data to run a company is not the same as data required for sustainable operations. For instance, we have had embedded environmental metrics in our operations for a long time, but we don’t have a program that with a click of a button would calculate the tons of CO2 or the weight of plastic.
Standards is also an important area. Lack of alignment between standards is a challenge, and it is outside of our hands.
What future trends should companies take into consideration as they pursue their climate goals?
Generation Z and millennials will be a major force shaping corporate sustainability. They want more, they want faster delivery, and, in most cases, they are not willing to pay more for sustainable products.
On the technology front, we have many trendy solutions, but few of them are cost-effective. The technologies that offer practical, scalable solutions are the ones that will survive.
Another trend is the growing complexity of the issues we are facing. For this reason, partnering with other companies, NGOs, and governments is essential.
Decision-makers often get impatient and push for drastic environmental laws. Raising awareness through collaboration is important but we need to focus on solutions, making sure that we have standards that make sense.
On the other hand, some standards are too loose. We have to partner with governments to make sure that we arrive at standards and solutions that make sense.
But above all the challenges, it is an exciting journey. It is part of our purpose. We are excited to be doing something that will enable us to leave a better place for our children and future generations.