What matters to you when you buy a product? Perhaps it is quality: is it well made, does it do the job it is supposed to, is it safe to use?
Maybe you want to know more about how it was manufactured: if the materials used to make it were sourced responsibly, if the people who produced it were paid properly and well treated?
A successful company today cannot afford to ignore what the world thinks about it. It must be willing both to listen to its critics and engage with them.
Intergovernmental bodies and non-governmental organizations (NGO’s), think-tanks and socially responsible investors take a forensic interest in different aspects of a company’s activities and the impact they have.
And social media gives people the kind of direct access to the C-suite that would have been impossible a decade ago.
Often though stakeholders have very specific areas of interest and ideas about what is important.
This can be a challenge for the company. Which issues should be prioritized?
To help get some perspective each year, Nestlé works with partners to create a Materiality Matrix which plots the economic, social and environmental issues of most concern to stakeholders against the impacts they may have on the company’s reputation, operations and finances.
After extensive consultation both inside the company and with stakeholders on the outside, the most important issues identified are placed on a grid that displays their position relative to the degree of concern for stakeholders and the potential impact on Nestlé’s business.
The analysis considers where the financial, operational and reputational impacts would be felt strongest in Nestlé’s value chain.
The company’s Head of Public Affairs Janet Voûte believes the matrix is not just useful for ‘social’ audiences, but for the financial community too.
“If you are a socially responsible investor you want to know whether this company is well run, and whether it understands societal risks and how they impact the business.”
The new matrix, published next month in the full 2014 Nestlé in society: Creating Shared Value Report, emphasizes the priority both Nestlé and its stakeholders place on addressing global challenges such as over and under nutrition and water stewardship.
It also highlights acute stakeholder concern over climate change, natural capital and human rights, as well as Nestlé’s growing understanding of the potential business impacts (both risks and opportunities) of these and other issues, including animal welfare and food waste (pdf, 2 Mb).
These issues do not just present strategic or operational challenges; they can be commercial opportunities too.
For example, ensuring the safety of the global food supply chain is a cost, requiring investment in R&D and monitoring to ensure products are safe, but also an opportunity, as brands that are trusted as safe and high quality, do better in the market place.
Nestlé has the knowledge, capabilities, scale and reach to contribute solutions to some of the biggest challenges the world faces. Where these are successful, they could help increase the company’s revenues.
Growing water scarcity across the globe may jeopardize this potential for growth however, if it has an impact on the availability of raw materials, or leads to restrictions being placed on access to water for production.
That is why water stewardship is designated as an issue of major concern.
The matrix helps ensure that decisions are taken on what is covered in the 2014 Nestlé in society: Creating Shared Value Summary Report (pdf, 4 Mb), ensuring the document meets the needs of different stakeholders looking for information about the company’s activities, rather than just concentrating on areas where there is a ‘good’ or ‘positive’ story to tell.
It ensures that Nestlé’s actions, and the consequences of these actions, are highly visible, helping the company to connect with different stakeholders, to show transparency and build trust.
It also helps frame the 38 public commitments Nestlé has made that guide management and different parts of the business in their collective efforts to create shared value for shareholders and for society.
Nestlé recognizes that more quantifiable evidence is needed to demonstrate the value delivered by linking business performance and social impact, and there is work going on inside the company to address this.
The challenge, according to Nestlé Chairman Peter Brabeck Letmathe and Chief Executive Officer Paul Bulcke, “is to find a consistent method of measuring the business value of Creating Shared Value, as well as to assess societal impacts and not just activities.”