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Does Nestlé’s Bottled Water Pass the ‘Creating Shared Value’ Test?

Raz Godelnik
| Friday June 28th, 2013 | 9 Comments

resource_bottleI’ve been intrigued with the concept of shared value ever since Michael Porter and Mark Kramer first wrote about it in 2006. I think the idea of creating economic value by creating societal value has the potential to be a game changer for many companies and help make progress on important societal issues. Yet, I have to admit that until last week, I didn’t connect it with selling bottled water.

I followed the conversations we had here and on Twitter with Heidi Paul, Nestlé EVP for Corporate Affairs, following the release of Nestlé Waters North America’s (NWNA) latest Creating Shared Value Report, and one question kept bugging me – can selling bottled water really be considered creating shared value (CSV)?

To find an answer I first went to Porter’s and Kramer’s 2010 HBR article to find their definition of creating shared value:

“The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”

So basically, CSV is about companies creating economic value by tackling a societal issue.

Now, let’s see what societal issue Nestlé is tackling by selling bottled water in North America. NWNA explained it in its Creating Shared Value report:

“Calories from sugared drinks have more than doubled in the past 40 years. More than 65 percent of adults and 33 percent of children in the U.S., and more than 30 percent of Canadians are overweight or obese. Much of the increase in calories consumed during the last 30 years comes from beverages.”

In other words, the societal problem is obesity and Nestlé is tackling the root of the problem, drinking too much soda, by offering the alternative of healthy hydration. “We play a key role in increasing Americans’ consumption of water, which is the healthiest beverage choice. As the data indicates, there is a crucial role that bottled water plays in consumer choice. Everywhere there is a high-calorie sugary, packaged drink available; we want to make sure there is water as well,” Heidi Paul explained.

So, if I got it right, Nestlé’s rationale is that people drink too many sugared drinks which result in increased obesity rates. Since people are used to drinking from packages (Paul says that it’s 70 percent of what Americans drink) it’s easier to convert them to bottled water and hence lower their caloric intake from beverages and improve their health and wellness.

According to Paul, 51 percent of people who stop drinking sugared soft drinks are switching to bottled water. Other data also supports this notion that people have been switching in growing numbers from soda drinks to bottled water due to increasing concerns over the impacts of sugary drinks as well as the emergence of single-serve water bottles.

This trend helped water pass soda in 2008 as the number one drink in the U.S. – right now, according to industry tracker Beverage Digest, Americans drink an average of 44 gallons of soda and 58 gallons of water a year. Of the 58 gallons of water, bottled water equals 21 gallons and the rest includes tap, sparkling, flavored and enhanced waters.

So back to our question, taking all of this data into consideration, can we say bottled water is an example of shared value creation? Well, the answer is complex. Technically, we could say “yes.” Selling more water creates economic value for Nestlé while improving the health of the American consumers buying them because many buy them as a substitute to soda and hence (hopefully) improve their health and wellness.

So where’s the complexity? Well first, Nestlé’s offering is not that different than many other products that provide a similar premise, such as cola with natural no-calorie sweetener, low sodium soup, or McDonald’s McWrap. All of these new products are supposed to provide American customers with greater value, enhancing their health and wellness, and yet none of them is presented as creating shared value.

Second, looking at the “how to create shared value” part of Porter’s and Kramer’s article, you can see that the authors identified three distinct ways to do it, “By reconceiving products and markets, redefining productivity in the value chain and building supportive industry clusters at the company’s locations.”

Would Porter and Kramer think that bottled water should be seen as an example of “reconceiving products and markets” (the other two ways seem less relevant in this case)? I’m not sure. They talk about food companies concentrating on better nutrition (which Nestlé does very well in developing markets) and use as examples GE’s Ecomagination products or Wells Fargo’s line of products to help customers to better manage their credit and budget. Some might claim that Nestlé’s new hydration product, Resource water, aimed at stylish, trendy, higher income women might be a good fit, but I doubt if Porter and Kramer would agree, especially after the treatment this product got from Steven Colbert.

Last, but not least, there’s the question of sustainability. In a presentation he gave last year on shared value, Porter said that “if there’s an important societal problem and we can use a business model and we can advance that societal problem and we can do that sustainably, then that’s what we should do.”

The question is if the part of “do that sustainably” can be applied to bottled water. No doubt they’re more sustainable than sugary drinks, but shouldn’t sustainable future be about clean tap water available to all rather than bottled water, especially in developed countries like the U.S.? I leave it to you to decide.

[Image credit: Nestlé Waters North America]

Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and Parsons The New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.


▼▼▼      9 Comments     ▼▼▼

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  • Eric Justian

    It’s also worth pointing out that tap water tends to stay within the watershed from which it was drawn. Exportation of beverages displaces water from its original watershed. Increased use of bottled water in lieu of tap water exacerbates that problem.

  • Marc de Sousa Shields

    I have always applauded Nestle’s work in sustainability as it is a leader in some areas, but the company’s position on this is nonsense. Water is a human right not a tool for shared value creation. The more it is commoditized the more we become desensitized to the fact that governments have the responsibility to provide free or very very low cost and easily accessible water to all. If you live in a water stressed region as I do (Central Mexico) you get this immediately!

    Moreover there are 8 billion disposable containers used every day in the world, how many of these are used bottles of water? Companies who want to create shared value on water issues need only aggressively work to minimize the water they use and support government efforts for free, clean and accessible water for all (e.g., Nestles could sell durable, reusable bottle and fund public water fountains for refilling)! see http://www.csrcounts for more….

  • Dave Shires

    This is a great article. If bottled water *truly* is a substitute for soda then I think there’s some value being created here. ie – if we’re shipping water around with sugar in it already why not skip the sugar. But I’m still not 100% convinced how accurate this is.

    If Nestle really wants to create shared value they should corner the market on water filters and sell them to cities to put on every corner with a nice spout where people can fill up their own bottles or just drink … wait, we had that in like 1885 in most cities :-)

  • JeffMowatt

    Marc says it below. Water is a human right and this is the area in which Shared Value is most deficient. It borrows from earlier thinking about social business, applying profit for social purpose but CSV is about creating profit from a social purpose.

    http://www.p-ced.com/1/node/93

  • Jane Lazgin

    Raz, Thanks for the thoughtful comments. From our standpoint at Nestlé Waters North America, creating shared value is how we approach business. For example, we believe our activities to promote healthy hydration, water education, watershed protection, and advocating for more effective recycling efforts through an Extended Producer Responsibility model all create shared value. It’s true that bottled water is a calorie-free alternative to sugary beverages and offers clean water in times of crisis. Jane Lazgin, corporate communications for Nestle Waters

  • murthy

    If I collect drinking water in a bottle from tap(processed) free, it has no value. But, if the same is collected, processed & bottled in factory and SOLD, it has Created Shared Value? What a Business Terminology?

  • CV

    Interesting. I’m not sure if this counts as Shared Value! Nestle is certainly being socially responsible but is it really creating any value, I cant be certain. If it is creating SV, then is it any different from car manufacturers producing hybrid models, from mobile providers selling apps on phones with the argument that is makes ppl more productive etc etc. This comes across as flogging product like any other company labelling it SV. I’d be interested in knowing if value is being created across the chain of activities that goes into producing the bottle of water – such as use of environment friendly material, use of local suppliers, hiring local labour at optimum wages etc

  • Guest

    At the most basic level, this is why Porter & Kramer distinguishes between a shared value initiatives vs. enterprises – Nestle’s bottled water may be a shared value initiative in a limited sense, but imho these kinds of products will not ‘level Nestle up’ into a shared value enterprise unless it addresses issues of sustainability, access, etc.

    More broadly, as practitioners building the field of shared value, we need to develop more a more sophisticated way of thinking about gradations of shared value. Whether something is a shared value initiative vs. enterprise may not be a yes/no distinction, but a spectrum – very crudely, from initiatives that create business or social value (not both) weak shared value initiatives strong shared value initiatives shared value enterprises. We need to develop criteria for situating initiatives and enterprises along this spectrum, as well as gauging whether enterprises are moving towards becoming shared value entperirses (which in-itself should be a criterion). We could then say, for example, that Nestle’s bottled water product is a weak shared value initiative, and to become a strong initiative, Nestle would need to demonstrate commitment to increasing shared value, e.g. by making packaging more sustainable or even non-disposable.

    How do you conceive of different gradations of shared value? What tools do we need as practitioners, to gauge where initaitives/enterprises are at and ensure that they’re moving towards deeper shared value adoption? I recommend joining the Shared Value Initiative to engage in this conversation: http://sharedvalue.org/groups/shared-value-initiative-community

  • http://www.stephanieland.co/ Stephanie Lepp

    At the most basic level, this is why Porter & Kramer distinguishes between a shared value initiatives vs. enterprises – Nestle’s bottled water may be a shared value initiative in a limited sense, but imho these kinds of products will not ‘level Nestle up’ into a shared value enterprise unless it addresses issues of sustainability, access, etc.

    More broadly, as practitioners building the field of shared value, we need to develop more a more sophisticated way of thinking about gradations of shared value. Whether something is a shared value initiative vs. enterprise may not be a yes/no distinction, but a spectrum – very crudely, from initiatives that create business or social value (not both) weak shared value initiatives strong shared value initiatives shared value enterprises. We need to develop criteria for situating initiatives and enterprises along this spectrum, as well as gauging whether enterprises are moving towards becoming shared value enterprises (which in-itself should be a criterion). We could then say, for example, that Nestle’s bottled water product is a weak shared value initiative, and to become a strong initiative, Nestle would need to demonstrate commitment to increasing shared value, e.g. by making packaging more sustainable or even non-disposable.

    How do you conceive of different gradations of shared value? What tools do we need as practitioners, to gauge where initiatives/enterprises are at and ensure that they’re moving towards deeper shared value adoption? I recommend joining the Shared Value Initiative to engage in this conversation: http://sharedvalue.org/groups/shared-value-initiative-community