Can a Bottled Water Company Create “Shared Value”?


ED NOTE: We’ll have a synopsis of today’s twitter chat with Nestle Waters North America up tomorrow!

By Aman Singh (originally published on CSRWire’s Blog)

When a company labels its Annual CSR Report as Creating Shared Value, you have to stop and wonder if they’re responding to the latest buzzword in the market or leveraging its potential by truly embedding it into their reporting and cultural framework.

In its third cycle, Nestlé Waters North America‘s latest Creating Shared Value Report attempts to accomplish the latter. Among its headlines:

  • What the company is doing to advance recycling in the U.S.
  • The company’s path to achieving a zero-waste future
  • Its continued efforts to be the most efficient user of water within the beverage industry

To gain some firsthand perspective and background on these goals and the accompanying challenges for North America’s largest seller of bottled water, I reached out to EVP for Corporate Affairs Heidi Paul.

Among my questions: how does the company balance criticism for selling bottled water while promoting healthy choices, what it is doing to shift its supply chain and use of plastic, itswell-acknowledged work in the area of Extended Producer Responsibility, and how her team plans on including consumers in its drive for sustainability. 

Defining “Shared Value”

Paul started the conversation by setting the record straight on the company’s definition of what’s quickly gained momentum as a replacement for CSR: Creating Shared Value.

“We define CSV as a strategic way to achieve triple bottom line sustainability. In other words, be financially, environmentally and socially sustainable.  At the end of the day, Nestlé seeks to create shared value in those areas where we can make the most impact and that are material to our business. Globally, that is in the areas of Nutrition, Water and Rural Development. For our bottled water business in North America, our focus is on healthy hydration, packaging responsibility and watershed management.”

Has the terminology helped NWNA’s citizenship team – 28 people strong across the company – integrate its sustainability goals more effectively within its business units?

“It has done wonders. When you’re looking at philanthropy unconnected to business, it is not really sustainable. CSV focuses our engagement on the three critical topics and asks the whole company to see what can be improved for society and ourselves. We get the benefit of input from our supply chain, employee groups, community partners, etc.,” she said.

Coding the Impact of Bottled Water

Let’s get to NWNA’s main product then: bottled water. Does it feel the twinge of irony every time that is said in the same sentence as “shared value”? Paul chose to answer that with some data:

“Seventy percent of what Americans drink – according to the Beverage Marketing Corporation – today comes from a package, not from a cup or the tap. In fact, our research indicates that if people don’t have access to bottled water, 63 percent say they will buy some other beverage from a package instead, often a sugared or caloric drink with a greater environmental impact.”

“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,” she emphasized.

Does the company’s sales data support Paul’s emphasis? “The volume sales increase for 2012 for the bottled water industry was 6.2 percent. And per capita consumption reached nearly 31 gallons, up more than 5 percent from 2011. Further, 51 percent of people who stop drinking sugared soft drinks are switching to bottled water. In fact, bottled water is outselling sugared soft drinks in grocery stores in eight major markets across the country,” she supplied.

At the end of the day, Paul believes, the company’s job is to talk about why bottled water is a choice –
an amply available one – and why it should be available anywhere packaged beverages are being sold.

Is Nestlé Waters North America’s Business Model Sustainable?

NWNA_BrandsThat brought us to the next obvious thread: the plastic being used to produce the bottles. Recalling a keynote given by former NWNA CEO Kim Jeffery at a Net Impact conference years ago, I asked Paul how the company handles its fiercest critics regarding its use of plastic.

In a jungle of facts, fiction and emotions around environmental issues, Jeffery confronted the audience back in 2009 with a firm and resolute stand: we sell bottled water and we are doing everything we can to make that process sustainable.

Where there was a finality of “take it or leave it” to Jeffery’s remarks four years ago, Paul took a more nuanced approach to respond.

“Limited resources need to be used again and again. We have taken the mantle of becoming part of that solution. The larger point is there are billions of servings of beverages being sold everyday in some sort of package. Some populations are getting most of their calories from bottled drinks. And every time they choose water over a different drink, they’re making a more healthy and environmentally friendly choice,” she said.

And is a goal of reaching 60 percent recycling ambitious enough considering the climate and environmental challenges we face?

“At the time we were setting the goals, the nation was at a 28 percent recycling rate for PET plastic and thought that a goal to double that rate was ambitious and would require big changes. We had a lot to learn. We began to study recycling programs and the patchwork of policies and systems that were in place but were not moving overall recycling rates very much. There are big opportunities for increasing recycling by improving collection in public places, business and industry and in urban residential buildings. Today, however, there is no money going to fund this expansion of infrastructure.”

“There is also the issue of competing systems. Bottle bills for example do raise the recycling rates for bottles and cans, but actually reduce the efficiency of curbside because it is taking the most valuable commodities, which reduce the revenue, potential from curbside. Our goal was to work with others and find the most efficient system with the highest impact,” she emphasized. “

Environmental Villain or a Case of Facts vs. Emotions?

Of course the plastic of the bottled water we consume is bad for the environment. But so is almost every other product and consumer packaging we use in our day-to-day lives as study after study has shown.

Turning the argument on its head though, would we be wasting as much or filling up landfills as quickly as we are if we didn’t have the choice of bottled water to begin with? Where does consumer choice end and producer responsibility kick in?

Identifying that as another area for impact, Paul picked up:

“If bottled water isn’t available, people routinely purchase another packaged drink, one with calories and with a heavier environmental footprint. The availability of bottled water in times of natural disasters, where often tap water can be compromised, also creates a role for bottled water that goes beyond most product categories. Bottled water provides a reliable second source of water in these situations – that’s something everyone in our company is proud of.”

NWNA_prioritiesSo when your business model is set around selling a product that is healthy and encourages nutrition while understanding and targeting its impacts through a well laid out sustainability strategy – as
Jeffery succinctly put it in his exit interview with Greenbiz Publisher Joel Makower earlier this year – is it fair to be labeled an environmental villain?

Perhaps, perhaps not.

The Challenges of Sustainability

As Paul reiterated, the journey of tackling facts vs. reality has been full of challenges and continues to be an uphill task. “Like anything else, our work in the area of recycling, water conservation and reducing our social and environmental footprint has been a constant education,” she said, citing the lack of modern and efficient recycling system as one of the company’s top challenges.

“Not too many people understand the current system in place. There are numerous questions like who is funding what, how does it work, who are the middle men, how do we get to the next stage, where can we build in efficiencies, etc. And if the goal is to accept our responsibility as a producer to recycle efficiently toward a goal of zero waste, then we need answers to these questions.”

“We’ve always said we’re open to options, and so far the option that we have seen with the highest potential to be low cost and efficient is a well-constructed EPR system, run by industry. What makes this complicated is there are a dozen different ways EPR has been implemented globally. Many of those are not efficient. This uncertainty about the ability to do it “right” makes others in the dialogue want to take more of a “wait and see” approach. Even if you convince people that, done well, EPR in the form being proposed is the best solution, there are doubts about implementation across the board,” she said.

Other challenges?

Consumer vs. Producer Responsibility

Paul cited the potential of collaboration in building more sources for wind and solar energy, as well [“we’re not there yet but this is definitely on our radar”].

There is also a need for collaboration in the area of water stewardship. “Improving watersheds will require collaborations among the various stakeholders within a watershed, be that users, scientists, environmental groups or government. Nestlé Waters North America manages the watershed areas around the 40 springs we use that are overseen by our 10 Natural Resource Managers. We have also made a commitment to collaborate on two watershed projects per year,” Paul said.

And what about NWNA’s consumers? How does the company leverage its brand to shift consumer behavior?

“In the 1970s, recycling meant ‘putting it in the bin.’ Today, this is old news. What motivates people now is when they understand its benefits. If a consumer recycles a water bottle after use, the greenhouse gas impact of that bottle is estimated to be reduced by more than 15 percent.”

“Also, we need to close the loop on what happens to the bottles after they are recycled. They are not trash; they are a resource that can be used again and again. Right now our 50 percent r-pet bottles in our Arrowhead, Deer Park and Resource brands shows consumers what happens when they recycle. It becomes a new bottle. The visibility of this message on our bottles helps us tell the story that we need much better recycling to become a more sustainable world.”

The company’s top challenge moving forward?

“At the end of the day, you want zero impact, but is that possible? Our challenge is to keep finding those ways to improve when it feels like you’ve reduced the impact to the minimum,” she said, finishing with a flourish: “You need to find the next frontier every time – that’s the goal. And the challenge.”

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5 responses

  1. Great article. I still strongly believe, despite Nestle’s best intentions, that having 70% of what people drink come from a package is a sign of a disfunction in society. If people are not happy with tap water, if cities can’t provide drinking fountains that people will use, it’s a sign of something really wrong. I’ll continue to drink from the tap and to pressure buildings and governments to make tap water more viable.

    1. Well said Dave. This is a complex problem with equal share of
      responsibility falling on consumers as well as the producers and our
      governments. While its good that companies like NWNA are starting to do
      their bit, we’re still pretty far from shifting consumer behaviors.

  2. Shared Value comes from Michael Porter’s research. I think Amen didn’t get the story right, here. You’ll see in the introduction that Porter believes Shared Value differs from CSR.

    Porter is the towering figure in global strategy. This research is all over the EU’s 2020 plan and other smart corporate policy and governments these days. It is worth the effort to understand the research and direction better.

  3. It’s hard to articulate what I find irritating about this. On the one hand I do accept that there’s some utility in bottled water and that if it’s going to exist then, of course, we want it done in a way w/the minimum impact. Consequently I’d like to see those companies who are pro-active, even if that means Nestlé, get more market share & squeeze out brands who are _not_ making an effort.

    And yet I find these reports, and the accompanying sense of self-justification grating. Maybe it’s just me, but don’t you find it ironic (& kinda sad) when you attend a biz ethics conf in NYC (which has some of the best water in the world) and every table is set w/bottled water. What happened to pitchers and glasses or cups? You get the point. Bottled water is not just competing w/soda. It’s squeezing out other, cheaper, much-lower-impact sources of water.

    While the following is an imperfect analogy maybe it’ll be useful anyway. This report felt like a cigarette company heralding its use of organic tobacco and recycled paper wrappers. In both the NWNA ex, and the hypothetical cigarette ex, it feels like:

    1) the sustainability efforts are tweaks to the margins

    2) core issues are being ignored (trucking & warehousing water, all the refrigeration, the carbon footprint of that, further promoting a disposal lifestyle, etc.)

    3) both products have negative society-wide impacts that go beyond the choices of the individual consumer (e.g. cigs & public health, bottled water & the undermining of public infrastructure investments, previously ubiquitous water fountains, etc.)

    4) the heavy promotion of a basically problematic product is also ignored

    5) the rationale offered for the product itself is exaggerated

    6) that the onus for negative consequences is put only on the consumer (they should stop smoking, they should recycle, etc.)

    With that said I do think there are other actions that bottled water brands can take that would more sincerely a commitment to their purported ESG/CSR goals:

    – Start selling and promoting reusable bottles

    – Move into the selling/distributing/promoting water fountains, especially the new types designed to re-fill bottles

    – Stop selling to places like schools, office buildings, coffee shop chains, McD’s, & other food service business where tap water should be the default alternative to soda, etc.

    I know such steps would seem like “uni-lateral disarmament” but at least it’d be convincing and would actually constitute “creating shared value” for society. And in the meanwhile I’ll be happy to find some bottled water at a convenience store when driving across Texas or Utah.

    1. Rodney, I am with you, and maybe I can help you to articulate or if not, maybe you can help build something on top of this post? 1. The article is lopsided, we have the vague counter argument of an emotionally driven environmentalist, its not really a counter argument just a writing style that allows the opposing side to win the argument by default. In other words, they try to make it out to be a dialogue but the article is a monologue. Next time, get a credible opposition sources withing the framework and timeline of the article. 2. Whenever data is being pulled all the data should be available to the reader in full and come from sources other than those that are bought and paid for by companies such as Nestlé, e.g., the Beverage Marketing Corporation. 3. Companies should not be setting the narrative in society on how to reach sustainability goals particularly when there is a conflict of interest. 4. It is no surprise people in some markets buy lots of beverages in bottles or cans as they have been bombarded with marketing for 100 years to do exactly that…basing decisions on consumer demand is often a self fulfilling prophecy as either the data can be manipulated to say so or the population can be manipulated. Ban bottled product advertising and replace it with water utility advertising and surely the numbers would be flipped on their head in a few decades. 5. There is no standard, measure, or audit the article is being held up to, there is no label on their product that tells me its environmental impact, especially compared to water from the tap. 6. The article sounds like advertising not journalism and surely not investigative journalism and this is why responsible people hate articles such as this and instead spend their time amassing enough evidence and political power to counter companies such as Nestlé at every turn because such companies business models were designed before the challenges the planet faces today arose…the same goes for our governments…I mean, if Nestlé wanted to be responsible they would start off by having dialogue with a wide set of actors in society and not limit the context of the conversation to what was just acceptable to them. However, Nestlé and such companies cannot do that, they just are unable to, so they must be competed out of the marketplace via the same tactics they use: a combination of economic and political power grabs…The flip side of that coin is divesting from the FMCG industries starting with water. In all honesty though, most of us are tied up getting the world to divest from fossil fuels so Nestlé has a few years left before real dissent starts to splash over their gunwales.

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