Sustainability Through Governance Engagement | Nestlé Waters NA
Article originally published 9/12/16 by Sustainable Brands.
News Deeply, in partnership with Sustainable Brands, has produced a series of profiles looking at how brands are tackling some of the world’s biggest challenges. The goal is to examine trends and gather insights from a new wave of corporate citizenship – in an era when the private sector is increasingly expected to play a positive role in improving our lives and societies. This is the 9th article in the series.
In February, Nelson Switzer took on the job of VP and Chief Sustainability Officer at Nestlé Waters North America. The organization produces and distributes 15 bottled water brands including Perrier, San Pellegrino, Acqua Panna, Arrowhead, Calistoga,Deer Park, Ice Mountain, Ozarka, Poland Spring, Zephyrhills and Nestlé Pure Life.
Switzer came to the job with 15 years’ experience in environmental and social sustainability, from Europe to Canada to the United States. He previously worked with PricewaterhouseCoopers, Centrica plc N.A. and the Royal Bank of Canada. Switzer is also former executive in residence at the Ivey Business School and adjunct lecturer at the University of Waterloo.
We caught a few minutes with him at SB’16 San Diego in June to learn more about how Nestlé is tackling the many challenges around bottling water sustainably.
What do you do in your role at Nestlé Waters North America?
Nelson Switzer: My mandate is to work with our team both internally and our external stakeholders to understand what issues impact both our ability to operate, and the ability of our communities to thrive. I do that by engaging people in dialogue. First, I inventory their issues; then I learn to understand the impact of each issue on them and their community and on our business. Then we come up with collaborative activities for managing the impact.
Bottled water consumption is expanding dramatically, especially in the United States. How do you make it a sustainable operation?
Switzer: First, I try to understand our impact. Secondly, I ask: How do we take that impact and incorporate it into an overarching philosophy of creating shared value? We want to create not just economic value, but environmental and social value for us as an entity, as well as the communities in which we live and work.
From a bottled water perspective, we have growth rates greater than 10 percent a year, which I think is a testament to the fact that so many people have recognized that if you cut down the number of calories you’re getting from sugar-added drinks and use water instead to hydrate yourself, the health impacts are terrific.
In terms of making it more sustainable, we look at our portfolio around three operational side areas. The first is our products and services. What is it that we make? How do we make it? The second is around our operations and culture. How do we function and what’s the culture and the types of decisions that allow us to operate? The third is about engagement. How do we speak, and how do we listen? How do we ensure that we have an ongoing dialogue?
I think one of the things that makes our practice unique is that we don’t just go out and say, “Tell us what your issues are,” and then go away and make a plan. We engage to find out what the issues are, sit back and make a plan, and then take that plan back to our stakeholders and say, “Do you think these actions will address the issues that are of concern to you?” We make sure that it’s iterative.
We take that framework around our products and services, operations and engagement, and we pair that against priority issues: water, packaging, community and climate. When we think about those in a matrix, we’re able to figure out our gaps in the process. Now that we’ve got that, we say, “What is our aspiration for each? Can we be water neutral, or even water positive?”
Can you? Tell us about that.
Switzer: When we look at a watershed, we ask, “Is the spring site sustainable?” That is, if we were to draw water, would we be able to continue drawing water in perpetuity? Of course, it’s in our interest to do so. We look for systems and methods to ensure that the water quality and quantity is protected.
Some of the studies that we are beginning to do will help us understand: What is that mass balance of water? If we were not there, would that water continue to flow? Would the flow be reduced? How would it be used? Would it be used efficiently? Would it be packaged? Would it go into agriculture and then be exported somewhere? All those things help us understand that there is absolutely a way to be water positive in some of these areas.
Frankly, what we have found is, in some of the sites, when we are not there, they are not protected. They are not managed, and so sometimes those sources are exposed or more vulnerable. In those cases, we are able to protect this catchment area, and this gets down into science about measuring what is the net value of water, the net quantity of water and so on.
Any early strategies that come to mind?
Switzer: We have a plant that’s transitioning to zero water. This is a plant where we take milk and it’s turned into condensed milk or evaporated milk; with evaporated milk, there’s a lot of water left over, so instead of discharging that water to the environment, we’re harnessing that water. We’re purifying and treating that water, and then using it as part of our process so we don’t have to draw any water from the local aquifer or the local municipal system. That plant will end up being a water-neutral facility, a zero-water facility, and that’s not the only one. By the end of this year, 144 million gallons will be saved by a number of these facilities.
How do you scale such efforts?
Switzer: First, we have a series of important governance tools. I think people think governance is all about the board, but it’s not. Management governance is about how you make and communicate decisions. We have a series of tools that allow us to do that very well. One of them is called an operational master plan.
In this operational master plan, we outline what our priorities are, what is driving us around those priorities, the metric that we’re going to use, and then the specific activities over our multiple-year time horizons that are going to help us move that metric. To drive that and scale up, we also ensure that we know who’s responsible, accountable and who to consult. Members on those governance teams are not necessarily all from the same business. We bring in people from other businesses, as well, with other expertise.
I mentioned at the beginning, we’ve got four priority areas of water, packaging, community and climate. We have set up a task force for each. For example, in the packaging task force, we’ve pulled in people from brand, we’ve pulled in people from legal, we’ve pulled in people from corporate affairs, community affairs, you name it, and we’ve also pulled in people from some of our other businesses, from our sister businesses. We ask them all: “What are you doing on these issues around policy, around innovation and around recycling?”
The last part I’ll tell you about, in terms of how we are scaling this, is in the metric. A lot of people will say, “Our strategy is to do this activity. Tick. I'm moving on.” Instead, our metrics are directly related to what we are trying to achieve. It’s not necessarily about the amount of greenhouse gases you’ve reduced, but the impact of that greenhouse gas reduction. It’s not necessarily around the number of liters of water you have or how efficient you have become, it’s about the impact of becoming more efficient.
Water sourcing in particular has been tricky, especially here in the Western U.S. Where is your water coming from now and how are you thinking about where it’s sourced and how much is drawn out?
Switzer: We have an adaptive management plan. California is in a drought. Other parts of the country are in a drought. I’m from Canada. British Columbia is in a drought. Alberta was in a drought last year. That’s a really significant outcome of climate change. So, how do we adapt?
Firstly, in whatever we are doing, we understand how the water in that spring is delivered. Springs flow naturally – water comes up through the ground. We’re not pumping groundwater, we are collecting water from a spring. In California, for example, we use a gravity-operated catchment system that only captures water that naturally flows to the surface. We do not actually go into the aquifer.
By doing that, it’s almost self-regulating. In conditions in which water flow is decreased, so are our takings. We never take more than the natural system allows. It makes no sense for us to do so. If you can imagine, when you’re setting up a factory and you’re embedding $35-50 million or more into the factory, why would you operate in a way that would not allow you to continue to source from that spring?
California is a great example because we have been operating in California for over 120 years. If you think about the amount of water that has been bottled over a 120-year history, I think that’s an important testament to the manner in which we have been stewards of those springs. I think water manages us more than we try to manage water.
What have been some of the biggest challenges to making bottled water production more sustainable and how do you overcome them?
Switzer: Number one is packaging. One big project that’s been significant is lightweighting the bottle. We have reduced that packaging by about 60 percent, which is enormous. I would put that in the innovation bucket.
Number two is trying to work with partners – whether it’s government or civil society groups – to come up with the right tools and mechanisms to ensure that people can provide the material back - in other words, resource recovery.
The third is around rates of recycling. What can we do to encourage people, to educate people? We live, for better or for worse, in a disposable culture, which is a huge problem. We’re trying to drive toward sustainability with closed-loop packaging – looking at how we can take that material back and recover it, and put it back into the same form.
What are the deepest lessons you’ve learned?
Switzer: Over the last 20 years, I have learned that it does not matter how good the strategy that we develop is. What matters is how willing the organization is to accept it, to take it on, to embrace it and to make it real.
One person in a sustainability function does not mean you are a sustainable enterprise. But one of the strengths of Nestlé is that creating shared value - the proposition, the principle, the practice - is all about distributing that responsibility and making it belong to everybody. Everywhere I go, people point out examples of how we are creating shared value.
The other thing I’ll say is that we have a lot of long-term employees at Nestlé, a lot of people who’ve been there for decades, which is an incredible opportunity to mine data and information and institutional knowledge that I think most other companies don’t get the opportunity to do.
Those are two things I’m really looking forward to leveraging as terrific tools for further implementing Nestlé’s strategy.
What lessons do you draw for other organizations that want to fuse business and purpose? How do all these initiatives somehow tie back into the bottom line?
Switzer: First, you have to understand what your purpose actually is. I think a lot of people jump into something, and they don’t necessarily understand how it aligns with their proposition and their business.
Second, make sure that it means something to your employees and your principal stakeholders – be it your consumer, your customer, your investor. Develop your program from those whose decisions affect your ability to operate and profit. Never run before you walk.
Third, don’t be satisfied with small moves. Everybody talks about, “Well, we can transition people if we give them a small win here and a small win there.” I won't disagree that you can win people over that way, but I think you win a lot more people over with a big move. So I focus on making a real big difference that everybody can point to and say, “This is the thing I'm going to brag about to my friends – I was there when that happened.”
How does sustainability help support the business as a whole?
Switzer: It does in a lot of different ways. From a product and service perspective, it’s still too niche, I think, in terms of increasing your sales, although it does have some impact. But more importantly, it helps you make better decisions - as an organization, you get better governance because you have better data. Number two, it helps you understand and manage your risks and your costs far better. Number three, it helps you engage with your stakeholders more readily and proactively.
Is there anything else that people should understand about the sustainability efforts at Nestlé Waters?
Switzer: I think they should know that Nestlé is too quiet. We do so much tremendous stuff. But because we live in a world where you can be standing at the top of a mountain in the middle of nowhere and use your satellite smartphone to tweet something, one person can unfortunately undo the good work of many very quickly, especially those who didn’t really have a presence out there and weren’t communicating. That’s one of the things we’re working on now, but I’m incredibly proud of so many of the things that we already do.