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How Nestlé and Unilever Are Gaining Value by Leading in Sustainable Agriculture
October 27, 2016
Nestlé and Unilever are helping set the standard for sustainable agriculture, according to a survey of over 150 global sustainability heads conducted by Pure Strategies. The responses identified these firms as the leaders and revealed that farm-level engagement is a top priority across industries such as apparel, home and personal care, and life sciences.
Addressing agricultural impacts and improving resilience of inputs from cotton to palm oil is critical for most companies. However, food and beverage firms are leading the way. This may be no surprise given the imperatives that agriculture faces with 70 percent more food needed to feed the growing population and ever-increasing environmental challenges from water scarcity to herbicide resistance.
The survey also found that sustainable agriculture engagement is expected to grow across industries in the next three years and with it, companies are sure to gain value and make meaningful progress.
Growth of Unilever’s Sustainable Living brands proves value of sustainable agriculture focus
More than 70 percent of the carbon footprint for beef and dairy products is at the farm level and even more of the water footprint stems from the agriculture stage. Such farm-level impacts come with risks. Cargill lost about 10 percent in profits from a four-year drought in the U.S. that affected beef pastures. Similar impacts have been felt in other commodities, with a drought in China and floods in Pakistan bringing 15-year+ high prices for cotton in 2010, more than doubling the price of the raw material.
Firms such as Unilever that are engaging with their supply chains to build resilience and advance improvement opportunities are reporting gains in business value. The companies surveyed identified the expected benefits of supply chain cost savings and risk reduction, but they also cited achievements in employee engagement, manufacturing cost savings, and innovation with new products and revenue streams.
Unilever reported 30 percent faster growth for its brands with a sustainability purpose, compared to the rest of the business, with these contributing nearly half of the firm’s total growth in 2015. Three of the top five brands driving this value are engaged in sustainable agriculture, including Knorr, Lipton and Hellman’s. Jonathan Atwood, VP of Sustainable Business, notes: “We made a commitment to mainstream sustainable agriculture because we believe it’s the best way to achieve food security and improve nutrition. Consumers increasingly want to know where their food comes from and how it’s made, and are rewarding brands that show leadership in this area.”
Over 90 percent of Knorr's top vegetables and herbs used for sauces, soups and seasonings are sourced sustainably and products carry brand messaging, such as “made with sustainably grown tomatoes.” The company connects this achievement to increased share and growth in its global markets. Hellman’s has been advancing sustainable soy production, to meet Unilever’s 2020 sustainable sourcing goal, and through its Sustainable Agriculture Code and partnerships helped farmers improve yield, soil erosion, and conservation tillage, providing greater supply chain resilience.
Nestlé establishes requirements and builds supplier capacity
There are various entry points for companies to address sustainable agriculture; companies indicated in the survey that they are focusing their efforts on communicating, building capacity, and collaborating through sustainable sourcing and direct farm engagement.
Successful sourcing strategies embed sustainability into purchasing. The Sustainable Agriculture Initiative Platform (SAI) suggests doing this by:
- Identifying priority raw materials and issues to focus the program, based on high impacts, ability to improve, and importance to the business.
- Developing sustainability goals and requirements for the priority materials using internal or external standards.
- Implementing programs through the supply chain with appropriate support (e.g. training, local partners) and verification (e.g., audits).
- Monitoring progress by tracking, measuring, and continuously improving to meet goals.
For Nestlé, this translates to specific requirements for palm oil, paper and board, sugar, soy, cocoa, coffee, dairy, fish and seafood, meat/poultry/eggs, vanilla, hazelnuts and shea. The company sourced 43 percent of these commodities from sustainable sources in 2015, such as palm that is RSPO-certified and sugar that is Bonsucro-certified.
Nestlé also implements comprehensive sustainable agriculture approaches for many of its top commodities, including direct farm engagement. For cocoa, the program includes:
- Communicating: clear requirements (e.g., UTZ), rewarding successes
- Capacity building: farmer training, developing higher yielding plants, providing access to better inputs
- Collaboration: supporting community improvement (water, sanitation, schools)
Nestlé sourced 30 percent of its cocoa through this program in 2015. Cocoa certification, used by Nestlé, is linked to improved yield and helps build supply security and higher product quality. The company also provided training to over 44,000 farmers, distributed 1.6 million cocoa plants, and built or refurbished 40 schools over four years. While the survey indicated that incentives and supporting livelihood improvement are areas of little activity for most firms, Nestlé integrated these approaches into its shared value approach to sustainable sourcing providing “better farming, better cocoa, and better lives.”
Adoption of key practices is increasing
Survey respondents aim to expand sustainable sourcing over the next three years. To do that, many more firms will need to identify their priority issues and commodities and integrate requirements, support, and tracking into purchasing. Apparel companies, for example, expect to increase from just 50 percent using sustainable sourcing to over 80 percent in three years.
Additional areas expected to grow in sustainable agriculture are supporting farmer training and ecosystem services enhancement. Producer education and capacity building are important and can extend beyond the company if executed through collaborative programs. The joint supplier/retailer/non-profit Midwest Row Crop Collaborative, launched last month, is such a solution, working to provide technical information and resources to scale best practices across grain production in the U.S.
Ecosystem services initiatives, addressing areas such as pollinator habitat and agroforestry, can focus at the farm level - such as Unilever’s work expanding the science on bees in food production - or engage through credit markets. Similar to carbon credits or renewable energy certificates, ecosystem markets provide a useful entry point for companies. Markets are available, and expanding, to support on-farm projects that improve water quality or biodiversity. Companies interested in advancing such efforts can purchase credits to provide payment for this kind of investment at the farm. Just BARE Chicken supported the development of water quality certificates for corn and soybean acres in the U.S. and is purchasing certificates.
Not every company may see themselves attaining the level of activity Nestlé and Unilever demonstrate. However, there are several starting points for companies to engage in sustainable agriculture, with more emerging. Communicating requirements, supporting capacity building, and collaborating with suppliers and across the industry all promote environmental and social improvements on the farm while delivering important business value.
As Unilever’s Atwood points out: “The strong performance of our brands shows that there doesn’t need to be a trade-off between sustainability and profitable growth.”