CEO interview: inside Nespresso's 2020 sustainability strategy

by Rahim Kanani | rahimkanani | Rahim Kanani Media Group, Inc
Wednesday, 17 December 2014 01:10 GMT

Jean-Marc Duvoisin, CEO of Nestlé Nespresso S.A.

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“We are committing to 100% sustainably sourced coffee, 100% sustainably managed aluminium and 100% carbon neutrality,” explained Jean-Marc Duvoisin, CEO of Nestlé Nespresso S.A. In an in-depth interview, we discussed Nespresso’s sustainability strategy and performance over the years, the details and motivations behind their 2020 commitments, how these strategies are implemented on the ground, the company’s unique relationship with its farmers, and much more.

Before we get into the new 2020 sustainability strategy for Nespresso, tell me a little bit about how you think about sustainability more broadly at the company and why it's an important part of your business.

Sustainability is a business imperative for us, as we depend on a natural resource to deliver quality and consistency to consumers. Only 1-2-% of the worldwide coffee crop meets our strict quality and aroma requirements. We believe that the best way to protect our supply of these rare coffees is to ensure the protection of the environment where our coffee is grown, as more sustainable farming increases the ability to produce consistent quality far into the future, and to provide a more sustainable and equitable outcome for farmers.

We began embedding sustainability into our value chain in 2003, with the launch of our unique coffee sourcing approach, the Nespresso AAA Sustainable Quality™ Program. We then integrated sustainability across our business in 2009. 

In 2009, you laid out a sustainability agenda and key targets for the next 5 years -- up to 2013. Looking back at those efforts, were you able to meet those targets successfully?

We have met and even surpassed the 2013 sustainability commitments we set out in 2009 in regards to coffee sourcing, aluminium recycling and carbon footprint reduction. We believe that the ambitious targets we set in 2009 played a significant role in reducing our overall impact. We are pleased that we have been able to make significant progress that has improved our environmental performance and created shared value throughout our value chain. But, while our 2013 targets are a measure of our progress, they are only a step on our sustainability journey. Our approach to sustainability is based on continuous improvement. We will continue working hard on driving positive impact and reaching the 2020 commitments we set as part of the “Positive Cup”.

What were some key insights you learned during that period on how to realize these goals?

Pursuing our targets enabled us to be a catalyst for greater impact and better outcomes for the farmers, our business and our consumers. Sustainability and shared value can only be achieved by working with partners acting jointly. This is why we engage in many partnerships to drive relevant projects, such as with the Rainforest Alliance, Fairtrade, coffee suppliers and government bodies, and why we have also set up our Sustainability Advisory Board. We also need to look after the farmer and secure their welfare in the long-term, which is why we launched a pilot retirement fund in Colombia. We have learned that yield is essential in driving farmers’ income and have been focusing on improving farm productivity, alongside coffee quality and sustainability. We have also learned that shifting consumer behaviour towards increased participation in the recycling effort requires a lot of time and efforts and that we need to communicate a lot more to increase awareness on our recycling solutions. Which is something we are taking into consideration moving forward.

In unveiling the 2020 strategy, named "The Positive Cup", you commit to achieving 100% sustainability over the next 5 years. What does that mean in practice, and what kinds of practices need to change or evolve for you to realize this ambitious goal?

We are committing to 100% sustainably sourced coffee, 100% sustainably managed aluminium and 100% carbon neutrality. These ambitious 2020 goals will be supported by a CHF 500 million investment (approximately US$521M). We will build on our current projects and introduce new innovative ones to drive further positive impact. For example, in terms of new things, we will pursue innovative solutions to farmer welfare, such as the retirement fund I mentioned earlier. We will start recycling used capsules into new Nespresso capsules wherever it makes sense environmentally. We will source 100% of virgin sustainable aluminium capsule material, compliant with the Aluminium Stewardship Initiative standard, being developed within a multi-stakeholder programme led by the IUCN. And we will also increase farm climate resilience and become carbon neutral through planting 10 million trees in the AAA coffee producing regions.

How would you characterize the relationship you have with the farmers you source from, and what do you think makes that relationship so successful?

We nurture long-term direct relationships with over 60,000 coffee farmers that take part in our AAA Program. With our partners, we provide them with support and technical assistance to improve quality, sustainability and productivity via 250 agronomists. As part of the AAA Program, we also pay on average premiums of 30%-40% above market prices and 10%-15% above coffees of similar quality. These are all elements that farmers value.

As farmers are not contractually obliged to sell their coffee to us, they must see positive benefits from selling to us. Loyalty is thus earned and not bought. Farmers value the deep commitment we make towards them through the AAA Program and our regular buying of their coffee. Indeed, we don’t change supplying regions for price reasons, we consistently purchase from the same farmers to ensure the same aroma profiles for our consumers. The trust we manage to build with farmers is key to ensure successful relationships overtime.

In this new strategy, you mention the creation of the Nespresso Sustainable Development Fund. Tell me a little bit about how this idea began, and what you hope to achieve with this new financial instrument?

The Sustainable Development Fund will finance technical assistance via agronomists, and dedicated projects and public-private partnerships that form part of our 2020 sustainability strategy and will allow us to isolate investments into such projects from on-going business and attract additional external funding to build impactful private-public partnerships (PPP). Among many examples, the fund will help restore coffee cultivation in South Sudan and will support our ambitious agroforestry program to compensate our carbon footprint.

Finally, is doing good, good for business?

Yes, absolutely! Sustainability is our way of securing our brand promise of quality and taste, so it is about building a sustainable future for our business. It is also about securing the future of the farmers we work with and ensuring they run sustainable businesses, so we can deliver on our brand promise to our customers. Without farmers being sustainable, we couldn’t be sustainable ourselves.

Our sustainability approach has always been designed to do more than simply minimize impacts. The development of even more innovative sustainability programs with our partners demonstrates our commitment to continuing creating shared value and generating positive impacts for all stakeholders across our entire value chain. With our 2020 sustainability commitments, we have set our ambition of providing the highest quality and most sustainable portioned coffee worldwide.