The CEO of consumer goods giant Nestle told CNBC Thursday that sustainability concerns among its younger customers were “off the charts” and a major influence on purchasing decisions.
“If you win their hearts and minds, I mean, this is the future growth of the business,” Mark Schneider, a founding member of the CNBC ESG Council, said. “Basic rule No. 1 in consumer goods marketing and food and beverage marketing is never, ever lose the younger generation.”
Schneider, who was speaking to CNBC’s Geoff Cutmore on the outskirts of Lausanne, Switzerland, cited two reasons for this. “Not only will they come into prime earning and consuming years, they’re also the role model for the other generations on what to do.”
The largest food and beverage company on the planet, Nestle has a significant environmental footprint. In 2018, its total emissions amounted to 113 million metric tons of carbon dioxide equivalent, with just under 95% of these stemming from its supply chain, which are part of its “Scope 3” emissions.
By the year 2030, Nestle wants to cut its greenhouse gas emissions by 50%. It’s aiming for net zero emissions by 2050 “at the latest.”
This target does include most Scope 3 emissions — including things such as ingredient sourcing and the management of logistics — but there are also some exclusions from the category.
At the moment, Nestle’s target does not cover emissions from what it describes as “consumer use of sold products” and “purchased services, leased assets, capital goods, investments.”
These accounted for 12.7 million and 8.6 million metric tons of carbon dioxide equivalent emissions for Nestle in 2018, respectively.
Supply chain woes
Schneider went on to highlight what he felt would be a key area of focus for his business going forward. “If last year was all about Covid and safety and keeping shelves stocked, this year is clearly all about supply chain,” he said.
He described the global shipping industry as being “under significant stress” and pointed to energy price increases which had in turn led to cost increases in trucking.
“Packaging costs are up because during Covid there was so much more demand for packaging, and then you have a number of agricultural commodities shoot up,” he said.
“So clearly, for ’21, there’s a strong inflationary pressure. We see from our forward contracting [that] … quite a lot of that will also extend into ’22. So it’s a safe bet to assume that ’21/’22 will see some significant inflation because of those supply shocks.”
The “$64,000 question,” Schneider explained, was whether this would be a one- or two-year blip, or the beginning of a new inflationary cycle which would in turn feed into the following years. “Either way, we’ve got to be prepared.”
Schneider’s comments come as the world gears up for the COP26 climate change summit due to be held in the Scottish city of Glasgow from Oct. 31 to Nov. 12.
A lot is riding on COP26. The U.K.’s official website for the summit says it will “bring parties together to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.”
Described by the United Nations as a legally binding international treaty on climate change, the Paris Agreement, adopted in late 2015, aims to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.”
The stakes are high when it comes to climate action, if the Intergovernmental Panel on Climate Change’s latest findings are anything to go by.
Published last month, its report warned that limiting global warming to close to 1.5 degrees Celsius or even 2 degrees Celsius above pre-industrial levels would “be beyond reach” in the next two decades without immediate, rapid and large-scale reductions in greenhouse gas emissions.
The Nestle CEO was asked what his hopes were for the summit. “I hope that global regulatory convergence will get reconfirmed and that you’ll see more hard commitments from governments and also from companies, that we’re all pulling in the same direction,” he said.
Work that has already been done should get recognized and rewarded, Schneider went on to state. “So in our case, for example, peak carbon is behind us, it was 2019,” he said. “We’re on our way down and it’s no longer about plans, it’s about making things happen.”
— CNBC’s Sam Meredith contributed to this report