nestle case study 2020

Nestle PESTEL Analysis

Before we dive deep into the PESTEL analysis, let’s get the business overview of Nestle. Nestlé S.A. is a Swiss multinational food and beverage company considered one of the largest in the world. Here is a brief overview of their business:

Foundation and History:  Nestlé was founded in 1866 by Henri Nestlé in Vevey, Switzerland. Initially, the company specialized in selling infant cereal, but over the years, it expanded its product portfolio through a series of acquisitions and brand developments.

Product Portfolio:  Nestlé has a diverse product range covering various categories such as dairy products, beverages, processed food, confectionery, infant nutrition, health science, and pet care. The company owns several well-known brands, including Nescafé, Kit Kat, Smarties, Nespresso, Stouffer’s, Gerber, Purina, and Maggi, among others.

Operations:  Nestlé operates in nearly every country globally, with over 400 factories across different continents. This vast presence enables the company to cater to various consumer tastes and preferences.

Sustainability and Corporate Social Responsibility:  Nestlé has committed to several sustainability initiatives, such as aiming for zero environmental impact in their operations by 2030 and using more recyclable packaging. The company also invests in various corporate social responsibility initiatives in nutrition, water, rural development, and responsible sourcing.

Future Direction:  The company continuously invests in research and development to create new products and improve existing ones. As consumer preferences shift towards healthier and more sustainable products, Nestlé is focusing on improving the nutritional value of its products and reducing its environmental footprint.

Financial Performance 2023 : Total reported sales were CHF 93.0 billion, a decrease of 1.5% (FY-2022: CHF 94.4 billion).

Good food, Good growth: Nestle’s way of doing business!

Here is the PESTEL analysis of Nestle

A PESTEL analysis is a strategic management framework used to examine the external macro-environmental factors that can impact an organization or industry. The acronym PESTEL stands for:

• Political factors: Relate to government policies, regulations, political stability, and other political forces that may impact the business environment. 
• Economic factors: Deal with economic conditions and trends affecting an organization’s operations, profitability, and growth. 
• Sociocultural factors: Relate to social and cultural aspects that may influence consumer preferences, lifestyles, demographics, and market trends.
• Technological factors: Deal with developing and applying new technologies, innovations, and trends that can impact an industry or organization. 
• Environmental factors: Relate to ecological and environmental concerns that may affect an organization’s operations and decision-making.
• Legal factors: Refer to the laws and regulations that govern businesses and industries. 

In this article, we will do a PESTEL Analysis of Nestle.

PESTEL Analysis Framework: Explained with Examples

• Regulatory Compliance:  Given its global presence, Nestlé must comply with various food safety, labeling, and product regulations across different countries. Any changes in these regulations can significantly impact Nestlé’s operations, costs, and strategies.
• Political Stability:  Political stability in a country or region can significantly impact Nestlé’s operations. Political instability or conflicts can disrupt supply chains, production, or market access. Conversely, political stability can offer a conducive environment for business operations and growth.
• Trade Policies:  Tariffs, import/export restrictions, and other trade policies can impact Nestlé’s business. For instance, changes in international trade agreements could impact the costs of raw materials or finished products, affecting the company’s profit margins.
• Tax Policies:  Changes in corporate tax policies in the countries where Nestlé operates can impact its financial performance. For example, increased corporate tax rates could reduce the company’s net profits.
• Government Initiatives:  Government initiatives can either positively or negatively affect Nestlé. For instance, government programs promoting healthy eating could impact the demand for some of Nestlé’s products. Conversely, subsidies or incentives in agriculture could lower costs for some raw materials.
• Geopolitical Issues:  These could also have an impact on Nestlé’s operations. This includes Brexit, international relations, and other geopolitical shifts that could affect the company’s access to certain markets or its supply chain.
• Global and Regional Economies:  The overall health of the global economy and specific regional economies can significantly impact Nestlé. Economic downturns or recessions may reduce consumer spending, affecting demand for Nestlé’s products. Conversely, economic growth can increase demand.
• Exchange Rates:  As a multinational company operating in numerous countries, Nestlé deals in multiple currencies. Fluctuations in exchange rates can affect the company’s revenues, costs, and profits. For example, a strong Swiss Franc (Nestlé’s reporting currency) can reduce the value of sales and profits made in other currencies.
• Inflation Rates:  Changes in inflation rates can affect both the cost of raw materials and consumers’ purchasing power. High inflation can increase costs and reduce demand if consumers cannot afford products.
• Interest Rates:  Interest rates can impact Nestlé’s cost of capital. For instance, high-interest rates can increase the cost of borrowing for capital investments, while low-interest rates can make borrowing cheaper.
• Unemployment Rates:  High unemployment rates can reduce consumer spending power, which may affect the demand for Nestlé’s products. Conversely, low unemployment rates might increase consumer spending, potentially boosting sales.
• Consumer Confidence:  This measures how optimistic consumers are about their financial future. When consumer confidence is high, consumers are more likely to spend on non-essential goods, potentially benefiting companies like Nestlé.
• Nestle’s Marketing Strategy of Expertise in Nutrition
• Nestle SWOT Analysis

Sociocultural

• Changing Consumer Preferences:  Consumer tastes and preferences are constantly changing. Trends such as health consciousness, organic products, and plant-based diets could impact the demand for various Nestlé products. Nestlé must anticipate and adapt to these changes to stay relevant.
• Demographics and Lifestyle:  Age distribution, income levels, and lifestyle changes can influence the demand for Nestlé’s products. For example, an aging population might boost the demand for health and wellness products, while rising income levels could increase the demand for premium products.
• Cultural Sensitivities:  As a global company, Nestlé operates in diverse cultures. Understanding cultural sensitivities, local customs, and tastes is crucial for product development, marketing, and overall business strategy.
• Social Awareness and Ethics:  Consumers are increasingly concerned about ethical issues such as sustainability, fair trade, and animal welfare. Nestlé’s practices regarding these issues can affect its brand image and consumer loyalty.
• Consumer Health Consciousness:  There’s a growing trend of health consciousness among consumers globally. People are becoming more aware of nutritional value and are often willing to pay premium prices for healthier alternatives. This trend influences the demand for Nestlé’s healthier and ‘better-for-you’ product ranges.
• Attitudes towards Foreign Companies:  In some markets, consumers may prefer local brands or negatively perceive foreign companies. This can affect Nestlé’s market share and performance in these regions.

Technological

• Production Technology:  Technological advances can improve efficiency, cost savings, and quality control in Nestlé’s manufacturing processes. This includes things like automation, AI, and other advanced manufacturing technologies.
• Supply Chain and Logistics Technology:  Technology can significantly enhance supply chain and logistics management, leading to cost savings, better inventory management, and improved efficiency. Technologies such as IoT, blockchain, AI, and machine learning can significantly improve these areas.
• Digital Marketing:  The rise of digital marketing and social media has transformed how companies interact with customers. Nestlé can leverage these platforms for advertising, customer engagement, brand awareness, and market research.
• E-commerce:  The growth of online retail has created new sales channels for Nestlé’s products. This could affect Nestlé’s sales strategies and distribution channels.
• Research and Development:  Technological advancements can support Nestlé’s research and development activities, leading to the development of new products or improvements to existing ones. This could be crucial for staying competitive and meeting changing consumer needs.
• Data Analysis and Forecasting:  Technology has improved companies’ ability to collect, analyze, and use data. This can help Nestlé better understand market trends, consumer behavior, and operational performance, aiding in strategic decision-making.
• Sustainability Technology:  Technological innovations can also contribute to sustainability efforts, an area of increasing importance for businesses. This could include technologies for reducing energy usage, waste, and emissions in production processes or creating more sustainable packaging.

Environmental

• Climate Change:  Climate changes can affect the availability and cost of key raw materials for Nestlé, such as cocoa, coffee beans, and milk. This could impact the company’s supply chain and product costs.
• Sustainability:  There’s a growing expectation from consumers, governments, and investors for businesses to operate sustainably. Nestlé’s strategies around waste management, energy use, water conservation, and sustainable sourcing can impact its brand reputation and compliance with regulations.
• Packaging:  Nestlé, like other food and beverage companies, uses a lot of packaging for its products. The environmental impact of packaging is a significant concern, leading to regulations and consumer demand for more sustainable packaging solutions.
• Regulations:  Environmental regulations can affect various aspects of Nestlé’s operations. This could include regulations around emissions, waste disposal, water use, and the use of genetically modified organisms (GMOs) in products.
• Biodiversity:  Companies are increasingly expected to consider their impact on biodiversity. For Nestlé, this could relate to the sourcing of raw materials and the impact of its operations on local ecosystems.
• Natural Disasters:  Natural disasters, which may be exacerbated by climate change, can disrupt Nestlé’s operations, including production facilities and supply chains.
• Food Safety Regulations:  As a food and beverage company, Nestlé must comply with stringent food safety regulations in all its countries. These regulations cover product quality, ingredients, labeling, and packaging. Non-compliance can lead to fines, recalls, or damage to the company’s reputation.
• Employment Laws:  Employment laws vary significantly across countries. These laws cover wages, working conditions, diversity, and employee rights. Nestlé must adhere to these laws to avoid legal issues and maintain a positive corporate image.
• Environmental Laws:  Nestlé must comply with environmental laws related to waste disposal, emissions, energy use, etc. These laws can influence Nestlé’s production processes, costs, and sustainability initiatives.
• Trade Regulations:  International trade regulations affect how Nestlé imports and exports goods across borders. Changes in tariffs, customs regulations, and trade agreements can impact Nestlé’s supply chain and profitability.
• Advertising Laws:  There are laws and regulations governing how products can be marketed and advertised, which Nestlé must follow. Non-compliance could lead to legal consequences and harm the company’s reputation.
• Intellectual Property Laws:  Nestlé, like any company, must manage its intellectual property rights, such as trademarks, patents, and copyrights. It must also ensure it does not infringe on the intellectual property rights of others.

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Nestlé publishes 2020 Annual Report, spotlights sustainability at the Annual General Meeting

This press release is also available in Français (pdf) and Deutsch (pdf)

.............

Vevey, March 16, 2021

Nestlé publishes 2020 Annual Report, spotlights sustainability at the Annual General Meeting

Nestlé today published its 2020 Annual Report. The report highlights the company’s financial and non-financial performance for the year and gives an update on strategy, innovation, digitalization and sustainability.

Nestlé has also sent the Annual General Meeting (AGM) invitation and agenda to shareholders.

2020 Annual Report Despite the challenges of COVID-19 in 2020, Nestlé delivered strong results, achieving improvements in organic sales growth, profitability and capital efficiency for the third year in a row. Nestlé also continued to make progress on its portfolio transformation through targeted acquisitions and divestments that focus on attractive, high-growth businesses.

A key contributor to Nestlé's growth is its consumer-driven innovation that also strives to reduce the company's environmental footprint. Some examples highlighted in the report include the launch of Sensational Vuna , a plant-based tuna alternative, and the increased use of paper packaging for brands such as Maggi . The company further reduced the average time to market of such innovative products by another 10% and increased the number of multi-market launches by 23%.

Nestlé's continued digital transformation enabled it to accelerate growth and better engage with consumers in a year that saw a surge in online shopping. Nestlé's e-commerce sales grew by 48.4% and accounted for 12.8% of total Group sales in 2020. Additionally, more than 60% of all of the company’s digital media campaigns used a data-driven, audience-first approach to personalize messaging to consumers.

In the Creating Shared Value (CSV) section of the report, Nestlé highlights that it has fully achieved 28 of the 36 commitments it had previously defined to support the United Nations' Sustainable Development Goals. Those commitments focus on promoting healthier lives, improving livelihoods and protecting and restoring the environment. The full CSV and Sustainability Report will be published on March 23.

The full Annual Report contains Nestlé's Annual Review as well as the Corporate Governance & Compensation Reports and the Financial Statements, which were published on February 18, 2021.

Read about these topics and more in the Annual Report

Annual General Meeting and Sustainability In addition to the traditional AGM agenda items, Nestlé will ask its shareholders to support its recently published climate roadmap in an advisory vote at this year’s meeting. In December 2020, the company published its detailed, time-bound plan for cutting greenhouse gas (GHG) emissions in half by 2030 and for achieving net zero emissions by 2050. The reporting of non-financial performance is becoming increasingly important, and as previously announced , the company believes that shareholders should have a say on Environmental, Social and Governance (ESG) matters. Nestlé welcomes upcoming changes to Swiss legislation in this area. In the interim, the Board of Directors is seeking the support from shareholders on its climate roadmap.

Each year at the AGM, shareholders have the opportunity to vote on the total compensation of Nestlé's Board of Directors and Executive Board. This year, Nestlé is changing the structure of Executive Board members' short-term bonus. Fifteen percent of that bonus will now be linked to the achievement of ESG-related objectives. The Nestlé Board of Directors sets those objectives at the beginning of each year, in line with the company's strategy.

As already communicated , Nestlé is also splitting the existing Nomination and Sustainability Committee into a separate Nomination Committee and a focused Sustainability Committee. This reflects the importance of sustainability in Nestlé's corporate governance and allows Board members to dedicate more time, focus and action on each of these important topics.

Ahead of the upcoming AGM on April 15, Nestlé will also publish its first Task Force on Climate-Related Financial Disclosures (TCFD) Report . The TCFD report assesses the strength and resilience of the company's strategy and business model under different climate scenarios.

• Annual Review (pdf, 15 Mb)
• Corporate Governance Report (pdf, 2 Mb)
• Financial Statements (pdf, 2 Mb)

Contacts: Media: Christoph Meier  Tel.: +41 21 924 2200 [email protected] Investors: Luca Borlini  Tel.: +41 21 924 3509 [email protected]

Comparing companies - Danone and Nestlé

Case Study 18 March 2020 by Triodos Investment Management

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Investing only in companies and institutions that actively contribute to the transition towards a sustainable society, we build integrated opinions of each prospective investment. We look at their contribution to one of our seven transition themes and ensure they comply with our minimum standards.

Danone and Nestlé are comparable, multinational food producing companies. Both companies have high ESG-ratings, and both are committed to becoming more sustainable in their products and business practices and have a strong reputation in this regard. We invest in Danone, not in Nestlé . In this case study, we explain why.

Positive impact

Danone is a French multi-national food producer that is on track to become the world’s largest B Corp. The company operates on the premise that health of the people and of the planet are closely interconnected. The company is best known for dairy products, but it is quickly expanding into the plant-based alternatives market. It has three main business lines: essential dairy and plant-based products, waters, and specialised nutrition. Danone products are sold in over 120 countries.

We selected the company for its strong fit with our Sustainable Food and Agriculture transition theme. Danone aims to continuously improve the nutritional quality of its products and constantly designs and promotes healthier alternatives, based on in-depth knowledge of local food cultures, food habits and public health challenges. The company is expanding into plant-based food, thus playing an important role in the transition from animal proteins to healthier plant-based proteins. An additional advantage of plant-based food production is its much small environmental footprint regarding water use and CO2 emissions, compared to meat and dairy production. Danone also stands out for its non-GMO offering and its efforts to reduce GMOs in its supply chain, including cow feed in its dairy farming activities.

Danone’s B-Corp certification proves its strong ESG-performance. Other positive aspects are Danone’s strong animal welfare programme, turning the company over the last five years from laggard to frontrunner in this regard. And in countering climate change, the company has set itself the target to be carbon neutral across its entire value chain by 2050.

Danone is part of the Triodos Global Equities Impact Fund portfolio and fits our Sustainable Food and Agriculture transition theme.

Danone contributes to the following UN Sustainable Development Goals:

Negatives outweigh the positives

Swiss multinational food and beverage company Nestlé in many respects also has a strong sustainability reputation. In the Dow Jones Sustainability Index/CSA Annual Review 2019 Nestlé got an overall score of 92 out of 100, receiving industry-best scores in all three dimensions Economic, Environmental and Social. This recognises the company’s commitment to ensuring that its products and processes are as environmentally and socially friendly as possible.

Despite its sustainability reputation, the company is associated with controversies more than any sector peer. These controversies range from child labour, price fixing and unethical behaviour to promoting unhealthy food and mislabelling. Another important reason for us to exclude Nestlé is the company’s position on genetically modified (GMO) ingredients in its products. Even if we do not exclude companies that use GMOs, we require them to take a precautionary stand and to try to diminish or avoid the use of GMOs and offer clients a well-diversified choice for non-GM products. Even though it offers alternative, GMO-free products, the company has a positive view on GMO, whereas Danone takes a far more precautionary approach.

We therefore concluded that the negative aspects around Nestlé are likely to outweigh its positive impact, making the company unsuitable for inclusion in our impact portfolios.

Download our whitepaper A call for radical transformation to learn more about our seven transition themes.

Explore our Impact Equities and Bonds impact report  ‘Moving the needle’  to find out more about our role as impact investor. The report presents our 2019 results in a context of numbers and stories and showcases our mission to make money work for positive change.

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Please note you do not have access to teaching notes, nestlé south africa: leading multi-stakeholder partnership response in the covid-19 context.

Publication date: 7 August 2020

Teaching notes

Learning outcomes.

The learning outcomes are as follows: identifying and prioritising of stakeholders’ needs during crises; gaining insight into applying contextual intelligence in leaders’ decision-making on philanthropic investments; and evaluating initiatives by differentiating between creating shared value and corporate social responsibility.

Case overview/synopsis

On 15 March 2020, Bruno Olierhoek, Chairman and MD, Nestlé East and Southern Africa considers his dilemma of where to focus his community support initiatives during COVID-19, which could reflect their company’s purpose of enhancing quality of life and contributing to a healthier future in their response to the crisis? Also, creating shared value (CSV) was in their DNA as a company, and they wanted to do more than philanthropic gestures; therefore, they had to decide carefully about leveraging their strategic partnerships in the relief effort. The case highlights existing community involvement projects, pre-COVID-19, which illustrate multi-stakeholder collaboration. These existing trust relationships and partnerships are then leveraged during the COVID-19 pandemic. The case highlights unintended consequences of Nestlé’s gesture of donating food products to the 5,000 frontline health-care workers for specific stakeholder groups, such as the positive emotional responses of Nestlé’s own employees. These events in the case relate to existing theoretical frameworks, such as corporate citizenship which elicits pro-organisational behaviour in stakeholder groups.

Complexity academic level

Postgraduate programmes MBA or MPhil.

Supplementary materials

Teaching Notes are available for educators only.

Subject code

CSS: 7 Management Science

• Sustainability
• Multinationals
• Stakeholder management
• Strategic management/planning

Pillay, R. and Scheepers, C.B. (2020), "Nestlé South Africa: leading multi-stakeholder partnership response in the COVID-19 context", , Vol. 10 No. 3. https://doi.org/10.1108/EEMCS-05-2020-0167

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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Case Study: A Deep Dive Into Nestlé’s Supply Chain

By michael wilson.

When it comes to the food and beverage market, Nestlé dominates over the competition as the world's biggest company of its kind. Established in 1866 by Swiss pharmacist, Henri Nestlé, the organization originally specialized in infant cereal. From these humble beginnings, Nestlé...

1. Profiling the Consumer

To create products that appeal to consumers, Nestlé believes in a strategy they call "Brand Building the Nestlé Way (BBNW)". One of BBNW's six founding principles is focused on profiling their brand's consumers. Indeed, Nestlé is very engaged with their customers, specifically over online venues. The company goes far beyond market research to reach their clientele, as they strive to see who their demographic is and what makes them tick.  As a company, Nestlé excels at interacting with real-life consumers on social media. For instance, their 850 Facebook pages for various brands carry a total of 210 million fans. It's an inspiring way to quickly and efficiently gather customer responses. To receive a high response level, the company posts around 1,500 new items per day across their online platforms! When it comes to supply chain analysis, having an intimate knowledge of what your customers want from your products is imperative in running a successful operation.

2. Focusing on Responsible Sourcing

During the supply chain analysis of Nestlé, it's immediately clear that responsible sourcing is a huge concern for the company. With 700,000 farmers working for Nestlé, the Swiss company puts a strong emphasis on acting respectfully toward the many families and agricultural communities who are dependent upon them. Consequently, Nestlé goes to great lengths to track their food product's origins, thus ensuring that they're compiling with ethical practices. This honorable attitude gains Nestlé loyalty from both their suppliers and their consumers.

3. Acquisition for Better Product Diversity

With over 2,000 unique brands and 10,000 products on the market, Nestlé certainly has its fingers in a lot of pies. Much of the company's supply chain relies on acquisition, as they're consistently bringing new companies into their fold. This wave of buyouts happened after the Berlin Wall fell in 1989, opening up the European and Chinese markets.

Nestlé's first major acquisition was Ralston Purina Company, a popular pet food maker, in 2001. They followed this purchase up with Dreyer's, Movenpick, Jenny Craig, and Gerber over the following years. Nestlé commitment to investing in other companies allows them to continuously put new, exciting products on the market. Plus, by buying former competitors, they're eliminating any threats and gaining access to these companies' suppliers in the process.

4. Transforming Into a Zero-Waste Company

After a media backlash in 2010 against Nestlé's environmental practices, the company moved quickly to revamp its policies. Their first change was implementing a "no deforestation" policy, in response to Greenpeace's allegations over Nestlé's methods for gathering palm oil. The company's current priority is to eliminate waste in their upstream supply chain. By 2020, Nestlé has committed to becoming fully zero-waste-to-landfill , according to Pascal Gréverath, Nestlé's Head of Environmental Sustainability. Through these practices, the company is invested in improving its supply chain's efficiency. It's clear that Nestlé will save itself money in the long run, since no amount of food will be wasted.

Overall, supply chain analysis shows that Nestlé's business model has a lot to offer all companies. Whether you're a fledgling start-up or a long-standing cooperation, this Swiss conglomerate displays the true importance of market research, responsible sourcing, product diversity, and going waste-free. After all, Nestlé didn't reach a $247 billion net worth by accident.

About Michael Wilson

Michael Wilson is AFFLINK'S Vice President of Marketing and Communications. He has been with the organization since 2005 and provides strategic leadership for the entire supply chain team. In his free time, Michael enjoys working with the Wounded Warrior Project, fishing, and improving his cooking skills.

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Cost of environmental damage linked to Nestlé, Danone and Mondelez rises sharply

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After declining for many years, the environmental damage costs linked to three of the biggest packaged food producers — Nestlé SA, Mondelez International Inc. and Danone SA — are once again starting to rise, challenging their stated ambitions to become more eco-friendly.

The analysis by S&P Global Market Intelligence shows that while the cost of environmental damage as a proportion of revenue linked to Nestl é , Danone and Mondelez fell at a sustained pace between 2009 and 2015, that cost has risen sharply since then. The vast bulk of this damage arises from the companies' supply chains, not direct operations. The findings are based on data compiled by Trucost, a unit of S&P Global that measures risks related to climate change, water use and other environmental impacts.

"A lot of major global corporations have effectively outsourced their environmental impact to their supply chains," said Dexter Galvin, global director of corporations and supply chains at CDP, a nonprofit group that collects environmental data from companies. "It's a blind spot, which means that most of their carbon emissions, water use and impact on deforestation escape public scrutiny."

Big food and drink players face increasing pressure from investors, regulators and environmental groups to operate in a more sustainable manner. The companies have responded by trying to lower greenhouse gas emissions, curtailing water use, reducing plastic packaging and cutting ties to beef, palm oil and other raw material suppliers linked to deforestation.

One recent report suggested that among nine of the largest publicly traded food and drink companies, Danone and Nestl é performed best across various environmental sustainability measures, while Mondelez was near the bottom of the list. Another CDP report published in January put Nestl é and Danone in a grouping of 179 "A list" companies for their efforts on climate change, while Mondelez was among the "C list." The calculation of those grades, though, was "heavily biased towards their own operations, not the supply chain," said CDP's Galvin.

Danone has pledged to cut carbon emissions in its supply chain by 50% between 2015 and 2030, and to eliminate deforestation in its supply chain by 2020. Mondelez says it has adopted a science-based approach to cut absolute carbon dioxide emissions from manufacturing by 15% by 2020 and to reduce absolute water use by 10% at priority manufacturing sites where water is most scarce. Nestl é said its reduction in greenhouse gas emissions since 2014 is equivalent to taking 1.2 million cars off the road, and that it plans to achieve zero net greenhouse gas emissions by 2050.

"We are running out of time to avoid the worst effects of global warming," said Mark Schneider, Nestl é's CEO, in a September 2019 statement. "That is why we are setting a bolder ambition to reach a net-zero [emissions] future."

The Trucost data suggests it could be a struggle.

A key measure is the impact ratio, a figure that captures the overall environmental damage costs attributed to a company for every dollar of revenue earned, and thus accounts for the business' growth over time. It is calculated by adding up the company's total (direct plus supply chain) environmental damage costs linked to factors such as greenhouse gases, air pollutants, water use and waste, and dividing it by its revenue. Trucost obtains the data from annual reports, earnings statements and other corporate disclosures.

Nestl é's environmental impact ratio fell from 20.6% in 2009 to 16.2% in 2015, but then shot up to 21.1% in 2017 and 22.7% in 2018 — higher, even, than the decade-earlier level. The impact ratio shows a broadly similar pattern for rival Mondelez, owner of Nabisco, Oreo and Cadbury, and for yogurt maker Danone, which sells its products under the Dannon name in the U.S. For each of these companies, the 2018 figures are the latest available; thus, it was not possible to assess whether the same trend was sustained through 2019.

The rise in the impact ratio for the three companies may partly be explained by increased corporate disclosure of environmental data. But the figures also indicate that these companies' far-flung supply chains, whose activities are much larger and tougher to track, are responsible for a growing amount of environmental damage. For example, Trucost data shows that the environmental damage cost of Mondelez's own, direct operations in 2015 totaled $48 million, while costs ascribed to its supply chain added up to $3.13 billion. By 2018, its direct damage costs had barely changed, while the costs ascribed to the supply chain jumped 27% from $3.13 billion to $3.96 billion.

The three companies declined requests for interviews. Nestl é and Danone referred Market Intelligence to environmental information published on their websites. Mondelez declined to comment.

To measure the impact in dollar terms, Trucost says it uses estimates from published academic studies to calculate the financial cost of different types of environmental harm and thus arrives at "the consequential costs borne by society." These are costs a company would at least partially be on the hook for, were it required to pay them. For investors, they increasingly represent material risks.

Trucost noted that there were some discrepancies in Nestl é's 2016 and 2017 greenhouse gas emission, or GHG, data and similar figures for Danone in 2014 and 2015. However, it maintained that the overall trend observed in the 2007-2018 period was not undermined by the inconsistencies. Trucost said it had asked Nestl é's and Danone for further clarification on the discrepancies, but did not get a response.

Nestl é is the world's largest food and drinks company, and its annual revenue of CHF91.44 billion in 2018 was more than triple the revenue for either Mondelez or Danone. So it is no surprise that the maker of KitKat and Gerber baby food has a far greater environmental impact in absolute terms across its supply chain. That impact is rising: measured financially, Nestl é's annual damage to the environment dropped from CHF22.37 billion in 2009 to CHF14.40 billion in 2015, before rising again to reach CHF20.71 billion in 2018.

"Trucost methodology looks into environmental performance as a proportion of revenue," a spokeswoman for Nestl é said in an emailed response. "To consolidate our environmental performance, we use operational control not a financial control. Thus, we use indicators per unit of production volume which provide with more consistent results for our sector."

Nestl é does not publish data calculating its overall environmental impact across the entire supply chain, but it does closely measure the impact of its own, directly controlled operations. On that front, the Swiss company has made significant strides. According to Nestl é data, its factories' total water withdrawal (in cubic meters) per ton of product fell 35.1% between 2008 and 2018, while its factories' direct and indirect GHG emissions (measured in kilograms of CO2 equivalent) per ton of product fell 37.2% over that same period. Nestl é also noted that in 2018, 293 of its 400 factories had achieved zero waste for disposal and that 34% of its electricity came from renewable sources.

Heavy water use is a particular concern. Many companies around the world are now reporting water risks as withdrawals from freshwater resources climb at a worrying rate. That especially applies to packed food manufacturers, whose single biggest environmental impact is their supply chains' impact on local water supplies.

For example, milk production accounts for more than two-thirds of Danone's extended water footprint. To safeguard that milk supply, Danone says on its website that it "strives to protect broader water ecosystems in the places where we operate, especially when these areas are water-stressed." It is working with The Nature Conservancy and other partners to put water fund models in place in water-stressed areas including Mexico, France, China and Indonesia.

The water gap has widened. In 2009, when Danone's revenue was €16.24 billion, its supply chain's external cost for water use was €1.40 billion, according to an analysis of Trucost data. In 2018, corporate revenue increased 52% to €24.65 billion but the supply chain's water-related impact increased by a much larger 72% to €2.4 billion.

In its annual financial report for 2018, Danone said it had done a water risk assessment across 20 countries and over 8,000 farmers that led to a "detailed map of suppliers and dairy farms in potentially water-stressed areas under a 2030 scenario. The assessment drilled down into the details, looking at animal feeding methods ... to pinpoint where the company might be able to reduce its water footprint."

Mondelez is Kraft Foods Inc.'s former snacks business that was spun off into a stand-alone publicly traded company in 2012. Trucost figures prior to 2012 represent Kraft overall, before the spinoff. Today, Mondelez continues to rely heavily on water, and its website notes: "Our goal is to reduce absolute water use by 10% at priority manufacturing sites where water is most scarce."

It might need to do more to hit its goal. Between 2013 and 2018, Mondelez's revenue fell 26.5%, while the external cost of water used by its supply chain fell by a smaller 18.3%.

Trucost's aforementioned GHG measure captures carbon intensity — the amount of greenhouse gases emitted by the supply chain for every million dollars of revenue earned by the company. The footprint is measured in financial terms. Nestl é's direct and supply chain GHG footprint in 2009 was CHF912.5 per million Swiss francs of revenue reported. That figure rose to CHF1,047 in 2011 and dropped sharply to CHF776.3 in 2015. Then the GHG footprint reversed course, rising from CHF813 in 2016 to CHF839.7 in 2018.

A figure such as CHF839.7 of GHG damage for every million Swiss francs of revenue may not seem like much, but in the context of the CHF91.44 billion in revenue that Nestl é generated in 2018 alone, the impact on society is not insignificant.

"These companies' business model depends on the sustainability of their supply chains," said Ignacio Gavilan, environmental sustainability director at the Consumer Goods Forum, a network of consumer companies. "It's in their own interest to do the right thing."

• Gautam Naik
• Retail & Consumer Products