CEO Dialogue:
Nestlé Chairman Paul Bulcke reveals his views on creating shared value (Part 2)
    Nestlé Group Chairman and former CEO, Mr. Paul Bulcke, sat down to chat with Hong Kong business leader and Convenor of Hong Kong's Executive Council, The Honourable Mr Bernard Chan, at a forum organised by Business for Social Good (BSG), an initiative of Our Hong Kong Foundation.

    Chan invited Bulcke to share candidly with local CEOs in Hong Kong about some of the challenges that companies face when considering shared value strategies. Below are some of the insights that were discussed.

    Click here to read the first part of the dialogue.
    Published on June 2, 2018
    — What's an ideal font size for footnotes and is there any reason the footnote font needs to be smaller?
    — Bulcke
    Remuneration is linked with certain measurable dimensions. The problem is, how do you measure creating shared value? Yes, there have been some efforts to translate shared value into a number, but I feel this is a bit dangerous, because how do you measure attitudes, or long-term commitments?

    [At Nestlé], we do frame it to include short-term factors like top line, bottom line, capital efficiency, and so on. We also, however, have quite a lot of qualitative dimensions linked to CEO remuneration – like our commitments.

    We are explicit towards the outside world on our commitments. Many of these individual commitments are measured, and reflected in the bonuses of people within our operations. Water usage, innovation, calorie reduction in our products… these are all dimensions with metrics, and people in operations and factories can be compensated accordingly. It's difficult to replicate at the highest level, however, because then you are trying to distil all of that into one figure. Therefore, we try to have people who are by nature interested in these dimensions, and can drive them within the company.

    It may seem strange, but at Nestlé we don't spend much time talking about, or calculating, the bonuses we're going to get… because that's not how we work. It's simply as a result of doing the right things that we achieve a certain level of bonus. We also have a long-term bonus that is linked with long-term continuous results.

    We try to have people who are by nature interested in these dimensions
    Paul Bulcke
    The most precious thing
    we have is the trust in our company

    The most important thing is having commitments that are visible. That obligates management, de facto, because there's no better punishment for failing to create shared value than not delivering on promises that you have put out externally. The compensation is that you connect well with society.

    Again, it's attitude. Trying to construct one KPI for creating shared value is a little over-ambitious. And I do think that, over time, a company should certainly work towards top line, bottom line, and cash flow – but do it the right way. The combination of these two ideas is what Nestlé wants to do.

    At the end of the day, the most precious thing we have is the trust in our company, and we should remunerate our management based on how they maintain trust of the company.
    — Chan: Shared value is about creating positive impact to society, and this is something Nestlé, and other big multinationals, do well. There's a dilemma, however, when you have companies that might be creating positive impact, but at the same time creating significant negative effects on society through their businesses or products. If you try to address this, often the response is, "If we change, our competitors will benefit and we'll suffer!" So how do you strike the balance there? Do you still consider it shared value in this case?
    — Bulcke: Look, it's true; you cannot hide behind your finger. If you look at Nestlé, well, we do make products with calories. Part of the enjoyment of having an ice cream, for instance, is linked with sweetness. We are part of a society that has a problem with obesity, and we are an actor that provides calories. So, we have to assume a responsibility.

    Although obesity is a societal problem, and not going to be solved just by reducingsugar in Nestlé's ice creams, it doesn't mean we can say, "We're not changing, society has to." We have to do our part. At Nestlé we call it "shaping our own reality as part of the solution."

    We reformulate thousands of products every year to reduce [sugar content]. We also invest in nutritional education, because it is the best solution to obesity – having consumers who are aware, and can make nutritional decisions for themselves. Transparency is also vital; nowadays, technology can offer consumers greater access to product details, and you need to be open to that.

    It's our obligation to shape our reality, yet at the same time be part of the societal discussion. [Obesity is] a huge societal problem, and when we have a problem, we want to have one culprit to blame, but in reality it's more complex than that. So, being part of that discussion is important.
    — Chan: Nestlé has over 300,000 employees, 400 factories, and numerous joint ventures around the world. How do you convince your joint-venture partners to buy into Nestlé's purpose and value of the company? Do you train them ahead of time?
    — Bulcke: Honestly – and this also applies to suppliers, not just joint-venture partners – there are so many entrepreneurs who understand that long-term success is linked with positive impacts on society that it's actually not that difficult to find partners to work with. There are some non-negotiables, which we are very explicit on, and sometimes that 'framing' helps them to set up the same thinking… but at the end of the day, there aren't many people waking up and saying, "Hey, how can I screw the world today?"

    It's not as though we're so exceptional that there is no one on our level. There are! In fact, quite a lot of people are proud to be part of that equation. And I think that is also part of creating shared value: to have partners that want to be a part of what you do.

    Natalie Chan
    Director & Principal Sustainability Consultant, PIE Strategy Limited

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