Financing Sustainable Food Systems with Nestlé

Transitioning food systems to Net Zero isn’t going to come for free. But who pays? The consumer? Government? The private sector?

To navigate this complex issue, we're joined by Owen Bethell, Environmental Impact Lead for Global Public Affairs at Nestlé. Owen has been instrumental in shaping Nestlé's Net Zero Roadmap and is in a unique position to share his approach to achieving environmental goals on time and at cost.

‍So here goes… how does a business achieve ambitious environmental targets without breaking the bank?

‍It’s obvious but… you need to start with buy-in:

Instead of dwelling on environmental doom, focus on the business value (relationships with retailers, business resilience, supply chain security) and address the elephant in the room… the financial impact.

Nestlé’s approach to financing:

Nestlé has established a dedicated ESG Finance Team to oversee sustainability initiatives. Internal teams submit ideas for scrutiny to ensure funding. How does this work?

• Using a Net Impact Value (NIV): an internal calculation method that assigns a monetary value to emission reduction efforts. This helps evaluate the cost-effectiveness of projects and is a useful benchmark to assess the “true” cost of a project.

However, it’s not all about the money. You also have to layer on the “qualitative” benefits. For example:

• Brand value: What this project will mean for Nestlé’s brand reputation, with customers, consumers and investors.
• Long-term supplier relationships: Highlight the value of leveraging existing relationships with key suppliers in your business’s core ingredient areas e.g., cocoa, milk, and coffee. Strong, collaborative relationships can lead to a more secure and efficient supply chain.
• Enhanced traceability and control: Focus on supply chains with strong traceability, like dairy in specific countries. Emphasise how this will allow easier decarbonisation monitoring and verification.

For example, Nestlé prioritises investments in traceable supply chains. The dairy sector, with its short chain and cooperative structure, is a prime example. Nestlé Brazil runs a program rewarding farms with bronze, silver, or gold certifications based on their sustainable practices, providing a premium on each farm’s milk corresponding to their certification category.

On the flip side, the complex soy supply chain with its many intermediaries poses a bigger challenge. Unlocking investment for projects in this supply chain is more challenging so consider collaboration or non-financial investments (more on that later).

You don’t have to pay for projects alone. Share the burden:

• Supplier Collaboration: Partner with existing suppliers to co-create decarbonisation projects within current sourcing agreements. Look for long-standing existing relationships in high-materiality areas.
  ‍Nestlé's collaboration with the National Fish and Wildlife Foundation and Cargill to promote regenerative ranching in their beef supply chain is a great example. Nestlé and Cargill invested US$15 million together which was matched by federal funds. This will be deployed in grant funding for regenerative ranching over the next 5 years.
• Customer Engagement: Work with retailers to integrate sustainability into the relationship and explore opportunities for enhancing engagement with consumers. Consider what is important to them and align your projects accordingly.
• Competitor Collaboration: This is the toughest area of collaboration and tends to be a long, slow process due to legal and operational hurdles (you have been warned…). Make sure you are clear on what you want to achieve from the collaboration and align appropriate resources.
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Beyond Money: Innovative Support Systems

Direct financing isn't everything. There are many other types of innovative mechanisms to use:

• Weather Insurance Programs: Nestlé is piloting an insurance program (in collaboration with Blue Marble) with 800 farmers in Indonesia that supply coffee to Nescafé. The insurance provides financial protection to help farmers cope with unpredictable weather patterns. Newsflash: most farmers, all over the world, struggle to get insurance, leaving their livelihoods at the mercy of nature.
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• Supplier Contracts: Long-off-take agreements with farmers who are implementing regenerative agriculture practices can provide stability and incentives.

Owen's top piece of advice: When working on progress internally, don’t be too ideological about climate change. Always rely on science to maintain urgency. But to be a real agent of change, pragmatism is king. Listen to people’s concerns and adjust your communication and engagement techniques accordingly. Don’t be too hung up on principle.
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Check out Nestlé’s Net Zero roadmap here.

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