Nestl

Organisational Information
As the worlds largest food and beverage corporation, Nestl commands wide brand name recognition
and significant influence with consumers, businesses, and governments. Its product lines range from
coffee, water, ice cream, and baby food to performance and healthcare nutrition, pet care,
confectionery and pharmaceuticals. Nestls main brand names include Nescafe, Perrier, Nestea,
PowerBar, Lean Cuisine and Toll House.
Nestl was founded in 1866 by Henri Nestl, who developed baby food for children who were unable
to stomach breast milk. The company experienced rises in production and sales during both World
Wars despite difficulties in the interwar period. Through mergers and acquisitions and growth in
developing countries, the company expanded operations and market share throughout the remainder
th
of the 20 century.
Nestl boasts thousands of brands and conducts operations in over 130 countries. Based in Vevey,
Switzerland, the company employs approximately 250,000 people and had a net income of
1
approximately US$6 billion in 2005.
Nestl actively engaged in the data collection process for the 2006 Global Accountability Report.
They completed a questionnaire, provided access to internal documentation and representatives of
the organisation were interviewed as part of the research.

Organisational Structure
Like most corporations, Nestls governing body is the Annual General Meeting of shareholders
(AGM). The companys executive body is the Board of Directors. Leading the company is the
Chairman of the Board and Chief Executive Officer. Nestl allows the same person to hold both
positions (the current Chairman and CEO is Peter Brabeck-Letmathe).
Supporting the Board of Directors in corporate governance are four committees: Chairmans and
Corporate Governance Committee, Compensation and Nomination Committee, Audit Committee, and
Finance Committee. The Board currently has 14 members, 13 of which are independent.
Nestl also has an Executive Board composed of company executives and department heads. The
Executive Board manages the companys operations and implements strategy and policy created by
the Board of Directors.

Transparency Dimension
Nestl rank first among the ten assessed corporations for their transparency capabilities with a score
of 54 percent.
Nestl are one of the few companies to have an Information Policy. The overall quality of the policy
however is very low with no good practice principles being satisfied. To improve their transparency
capabilities Nestl should develop a more detailed policy that clearly identifies the conditions for nondisclosure (e.g. contractual confidentiality, staff issues), and commits the company to responding to
information requests.
Nestls systems for transparency include the Corporate Affairs department and a Board Director
responsible for Corporate Affairs overseeing company-wide transparency. Nestl provides training to
staff on the Information Policy, and to ensure the policy is accessible to stakeholders, they also
disseminates it through multiple mediums and translates it into five languages.

Nestle, 2005 Financial Report, http://www.ir.nestle.com/NR/rdonlyres/3F8AFD09-F844-42EA-B80E41250D49F7EE/0/FS_WEB_E_060224a.pdf

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Participation Dimension
With no external stakeholder engagement policy and mixed internal member control, Nestl rank sixth
among the ten assessed corporations for their participation capabilities with a score of 38 percent.

External Stakeholder Engagement

While Nestl does not have an external stakeholder engagement policy, it does make a commitment
to engaging with external stakeholders such as NGOs in its Corporate Business Principles. The
Principles are very general, however. They only identify that engagement with stakeholders should
take place rather than providing details on how they should be undertaken. It fulfils none of the good
practice principles identified in the 2006 Global Accountability Report..
Nestls systems for external stakeholder engagement are average. The Head of Corporate Affairs
has responsibility for overseeing engagement with NGOs, while consumer engagement is handled by
the communications department. Without a detailed policy guiding the process though, there is no
way to ensure consistency in how different types of stakeholder engagements are conducted. Nestl
provides training to managers on stakeholder engagement through the Rive Reine International
Management Training Centre and their commitment to engage stakeholders can be accessed through
more than one medium and in 5 different languages. Nestl however, has yet to institutionalise the
engagement of external stakeholder into corporate decision-making.

Member Control
Nestl receives a mixed score for member control. Shareholders are given equal representation at
the Annual General Meeting and can add items to the agenda. However, instead of allowing
shareholders to freely nominate candidates to the Board of Directors, the Nomination Committee
selects candidates. Also, while Nestl commits itself to the one share, one vote principle, it does not
allow shareholders with over 3% of the total share capital to vote with more than 3% of the total share
capital. In other words, a shareholder with shares equal to 6% of the total share capital may only use
half of their shares (or 3% of the total share capital) to vote. While this practice does limit the power
of large shareholders, and provides smaller shareholders with a bigger voice, it also runs counter to
the one share, one vote rule.

Evaluation Dimension
With specialized policies that guide the evaluation of both social and environmental impact along with
well developed organisational systems, Nestl rank second among the ten assessed corporations for
their evaluation capabilities with a score of 74 percent.
In regard to its social impact, Nestl have Project CARE, which is the Compliance Audit of Human
Resources, Safety, Health, and Environment. Project CARE uses independent auditors to evaluate
human resources, safety, health, and environmental practices at all its factory sites against the
Corporate Business Principles and local legislation. The document that guides the CARE process
was not made available during the research, so it was not possible to identify if it commits to key good
practice principles.
To supplement the CARE process, Nestl is also establishing an organisation-wide system of
measuring the impact of their operations on society. The company is developing impact indicators in
three key areasagriculture/ raw materials (how they source them and from where); manufacturing;
and productsas well as running a number of projects to explore how these can be expanded.
For measuring environmental impact, Nestl has an Environmental Management System (NEMS) that
collects data on all in-company environmental activities. The system has environmental indicators
that include energy, water, raw materials as well as outputs such as waste, waste water, and air
emissions. NEMS includes a commitment to informing future decision-making and to being
transparent about evaluation results. There is no commitment to providing external stakeholders with
an opportunity to engage in NEMS however.
The systems that Nestl has in place to support the implementation of NEMS are well developed.
The President for Health, Safety and Environment provides executive oversight, while training is
organised in each market and plant by a Safety Officer. The training sessions include a specific focus
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on impact evaluations. To ensure lessons are disseminated and that the company is learning from
evaluations, Nestl conducts at least three regional conferences each year on environmental, health
and safety issues.

Complaint and Response Dimension

Nestl rank fifth among the ten assessed corporations for their complaint and response capabilities
with a score of 44 percent.
The company does not have a broadly applicable policy for handling complaints from either internal or
external stakeholders on issues of non-compliance. The company only has a product specific
complaints policy in the form of an internal ombudsman system for handling incidences of potential
non-compliance with the International Code of Marketing of Breast Milk Substitutes.
This is open to companies in the group and all agents and distributors who market Infant Formula in
developing countries under trade marks owned by the Nestl Group. Although it is not stated
specifically in the document that guides the implementation of the ombudsman system (the Nestl
Instructions for implementation of the WHO International Code of Marketing of Breast-milk
substitutes), the Corporate Business Principles state that this mechanism is also open to external
stakeholders.
The 2006 Global Accountability Report took the Nestl Instructions as the unit of analysis for
assessing Nestls complaints capabilities. While as a stand-alone complaints policy the Nestl
Instructions are of a relatively good quality, meeting a number of good practice principles, they are
only related to one of the companys products. To strengthen their complaints capabilities Nestl
need to develop a policy and the systems to support it that enable stakeholders both internal and
external stakeholder to file complaints on a wider range of issues.
An ombudsman oversees compliance with the International Code of Marketing of Breast Milk
Substitutes and is outside the line of direct management. One of Nestls Executive Board members
acts as Company Ombudsman, reporting directly to the CEO. Nestl also provides training on the
Code, with staff from the 14 departments that are part of the Codes compliance system participating
in yearly or twice yearly training.

Conclusion
Nestls evaluation capabilities are the most developed dimension of their accountability ,while their
participation capabilities are the worst. With the exception of evaluation, Nestl either does not have
the necessary policies for fostering consistent implementation of accountability, or has policies that
lack key good practice principles.
In transparency, Nestl is one of the only companies to have developed an information disclosure
policy. But the policy includes no good practice principles. To strengthen their capabilities for
ensuring consistent public disclosure of information across the company Nestl should identify
narrowly defined conditions for non-disclosure and commit to responding to information requests
within a defined period of time. In participation, Nestl only make a general commitment to engaging
with those outside the company through their Corporate Business Principles. They should go further
and develop a detailed policy on external stakeholder engagement that identifies the conditions under
which stakeholder can expect to be engaged in company decision-making and commits to
incorporating stakeholder input into decision-making else providing an explanation. Furthermore,
Nestl needs to strengthen their complaints and response capabilities; the company needs to put in
place a complaint mechanism that covers more than a single product and allows both internal and
external stakeholder to submit complaints for issues of non-compliance in relation to all the companys
policies and practices.

The 2006 Global Accountability Report assessed the accountability of 30 global organisations from
the intergovernmental, non-governmental and corporate sectors according to four key dimensions of
accountability transparency, participation, evaluation, and complaint and response mechanisms.
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The study investigated the extent to which these organisations have in place the capabilities policies
and systems at headquarters or the global office that foster accountability to communities they
affect and to the wider public. At the global level, organisations need to have in place enforceable
policies on key dimensions of accountability in order to promote consistency in approach both at
different levels throughout the organisation and in relation to their diverse stakeholder groups. The
presence of a policy at the global office indicates a public commitment to the dimensions of
accountability and enables stakeholders to demand compliance with these policies; yet how these
commitments translate into practice is equally important. The project team at the One World Trust is
actively seeking innovative ways to assess accountability in practice both at the global office and field
levels. Such assessments will help build a more comprehensive understanding of an organisations
accountability.
For a full list of indicators against which each of the 30 organisations were assessed click here or for
further information on the 2006 Global Accountability click here.

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