Environmental Management System of Nestle - Case Study Example

Environmental Management System of Nestlé Introduction Environmental management system (EMS) is followed by an organization to control its environmental risks and improve performance. EMS is an important factor in terms of the company’s image in the industry and it also promotes competitiveness in the market. Most corporate firms follow the EMS in order to reduce cost, prevent pollution and improve resource optimization. Multinational companies which operate globally are now asking their clients to implement EMS in their company. EMS also poses certain problems in the operations of the organization, like increasing cost of production, hindrance to research and development, etc. Nestlé has been chosen for the study of its Environmental Management System. The company was founded in 1866 by Henri Nestlé. Nestlé manufactures food and confectionary products worldwide in 194 countries (Find A Grave 2014). The company holds the 9th rank in FT Global 500 2013 with a market capitalization of $233 billion USD (FT Global 500 2013). This study covers the sustainability roles played by Nestlé in order to create value for the society, environment and shareholders as a whole. It also focuses on the advantages and disadvantages of the Environment Management System and how strongly it is implemented in the practices of the company. EMS has now become an important factor in global business. Nestlé implements all the rules of standardization and follows ISO 14001. ISO 14001 is the best known among all the environment management systems. Over the years, more and more companies are conforming to the ISO 14001 standard Concept of EMS Implementing an Environment Management System or EMS has become a primary step in enhancing the environmental performance. The EMS is composed of internal policies which help and organization monitor the impact on the environment and it also provides guidelines in order to improve the optimization of the firm. EMS has two standards: European Eco-Management & Audit Scheme (EMAS) developed by European Commission 2001 and ISO 14001, by International Standards Organisation, 1996. The EMS stands on three pillars: Compliance, Prevention and Improvement. Compliance is adhering to the legal standards of the system (EPA 2013). In case the company fails to comply with the standards, it may put penalty charges on the company and their operation may be ceased by the government. Prevention is the next step of compliance where the company is required to reduce the environmental impacts caused by its operations. Reducing carbon footprint, waste reduction by recycling is the primary motive of prevention. Improvement is a continuous process where the company monitors its current activity and tries to improve them in every step. The EMS follows a “Plan Do Check Act” cycle also known as PDCA cycle. The process involves creating an environmental policy followed by the planning of the environmental management system and then its implementation. The ‘check’ system in the process is to make sure that the implementation is as per the planning. The PDCA cycle is continuous in nature because EMS is a process of continuous improvement where an organization constantly keeps on reviewing and revising their system (Nancy 2004). Figure1: The PDCA Cycle Source: (Nancy 2004). Use of PDCA cycle: It is used for the continuous improvement of the organization and creating a new improvement projects. It is also used to develop a new product, service or process design and to monitor a repetitive work process. PDCA is followed when planning the analysis of a data in order to recognize and verify the problems and when making any changes in the organization. The procedure of PDCA cycle: Planning: Recognizing an opportunity and planning for a change. Doing: Making a test run of the plan by making a small scale study. Checking: Analyze the results of the test run. Based on the analysis, prospects of the planning are identified. Acting: Taking action or implementing the changes based on what the organization has learned from the previous steps. If the change is unsuccessful, then the cycle is repeated with a different plan. On the other hand, if it is successful, then the learning is incorporated on a wider scale. The organization uses this cycle to implement new changes and continuously improve itself (Nancy 2004). Figure 2: PDCA cycle example Source: (Nancy 2004). Nestlé successfully follows the environmental management system to take care of the society and environment as a whole. The company calls this process “Creating Shared Value” or CSV. The CSV not only sticks to all the applicable legal rules but also ensures the sustainable development in its activities, products and branding as a whole. This means taking care of the future by making the proper choices. The company is aware of the increasingly water scarce environment, where all the natural resources are limited. So, in order to make a future proof progress Nestlé has to go hand in hand with the environment. The company strictly follows the three pillars of EMS by committing itself to full compliance with all the legal environmental rules that are applicable. The company also regulates its internal requirements where environmental legislation is insufficient. Continuous improvement is made on their environmental performances of their activities. Nestlé has its own EMS called the ‘Nestlé Environmental Management System’ or ‘NEMS’. NEMS conforms to ISO 14001, which is a widely followed environmental standard (ISO 14000 2014). ISO 14001 The rules of ISO 14001: The ISO 14001 standard is composed of seventeen rules, which an organization is required to meet. Then only the organization is officially ISO 14001 certified. The rules are summarized as follows. Design an environmental policy that is supported by the senior management of the organization. Identifying the environmental aspects and recognizing the impact that the organization may cause on the environment by its practices. Identify the environmental compliance which is required. Develop the objectives, goals and the environmental management programs. Define roles, authorities, resources and responsibilities for environmental management. Develop the proficiency and awareness of the procedures. Proper communication should be made with all the stake holders and interested parties regarding the EMS. Proper documentation should be made containing the details of the system. Develop document control procedure. Develop operational control procedure. Be prepared to handle emergency situations and develop response procedures. Develop process which monitors and measures the activities that put impact on the environment. Evaluate the compliance procedure. Develop procedures of non- conformance, preventive and corrective actions for the management. Keep records of the management procedure. Create programs for internal EMS audits and corrective measures. Review of the EMS is done by the senior management (ISO 14001 2014). Nestlé strictly follows all the rules of ISO 14001. It fully complies with the legal requirements and makes continual improvement on their environmental activities to make sure that the company is in terms with the standardization. Its new product design and renovation is made after the systematic assessment and optimization of environmental impacts. The company not only follows the EMS internally, but also makes sure that its clients also do the same. The clients, from whom Nestlé outsources its raw ingredients and packaging materials, must comply with the rules of ‘Nestlé Supplier Code’ and must show continuous improvement in environmental performance. Nestlé makes sure that not only their products are world class in terms of quality but they are also good for the environment (ISO 14001 2014). Figure 3: EMS followed Nestlé Source: (Nestlé 2013) The strict adherence to the compliance has not only made Nestlé a trustworthy brand among the customers, but also it lives up to the expectations of the stakeholders and its employees. The company is committed to accurate scientific evidence and environmental information about their products and operational activities at product and brand level. Proper environmental auditing and verification of the supply chain is done following the rules of the standardization. The company also gives recognition to the employees’ efforts and initiatives to the environmental activities. Long term engagement with the stakeholders, including the scientists, regulators, business partners, customers is maintained in order to face complex environmental issues. The PDCA cycle of Nestlé: Nestlé’s own PDCA cycle is known as “Nestlé Continuous Excellence” (NCE). The effectiveness of the Nestlé’s EMS lies on the proper use of the NCE. The NCE provides methodologies, tools and models on which the developmental process is carried on. The planning is done by the Board of directors, which is in line with the business purpose and long term sustainability value creation. Followed by the planning, the CEO hands over the powers and authority necessary to the Board of Directors for carrying out the responsibilities. A number of governance bodies and audit committees help the board of directors to achieve their plans. The operation sustainability council, the R&D department, the CSV advisory team and the group compliance committee team up at the executive level along with the board of directors. The CSV Alignment board, headed by the CEO, oversees the implementation process. The implementation is carried out across the entire business. The continuous improvement is achieved by through monitoring of the results and making necessary changes. The entire process follows a cyclic or spiral pattern, which is shown below. Figure 4: The NCE Model Source: (Nestlé 2013) In order to ensure a sustainable and coherent worldwide implementation of its EMS process, Nestlé submits all its production sites to ISO 14001 certification, which is done by independent accredited bodies. The certification process is carried out across all its business units. Advantages and Disadvantages of EMS Standards like ISO 14001 oversee all the processes in the organization, so they are more system dependent and not person dependent. The structured management system created by the EMS, establishes a cycle of continuous improvement. A lot of environmental issues are brought to light by the stakeholders in the day to day business operations, which leads to development of long term plans and programs. A better understanding is established among the personnel, the environment and various roles of other groups. The EMS results in both environmental and business benefits. It helps to improve environmental performance, enhance compliance, prevent pollution, and reduce risks as well as costs. It also helps in attracting new customers, increase efficiency, penetrate new market, enhance employee morale and improve public image of the company. However, implementing and developing an environmental management system involves costs. The company may incur cost due to investment in internal resources including employee time, training of employees, hiring consulting assistant and investment in technical resources. Some organizations, mainly government or public organisations, may face administrative and political barriers in applying the requirements of the EMS effectively, particularly in case of ISO 14001 (IIED 2014). Companies are often reluctant in making necessary financial commitments. Lack of technological knowledge is also common. EMS usually suits larger companies. The larger the company is, the more likely it is to develop a systematic approach to the process of management. Small companies can find the development and implementation of EMS to be cumbersome and challenging, therefore, they often opt for joint EMS and group certification. Many SMEs (small and medium enterprise) lack the necessary resources and training for implementing the necessary procedures or establishing formal review process. Thus, implementation of EMS fails. Many organizations take decision to certify under the pressures of the stakeholders. Implementation and advantages of EMS in Nestlé Nestlé applies a ‘product life cycle’ type approach which involves their partners starting from farm to end users and beyond. Specific to their food manufacturing operations, they focus on preservation of water, natural resources, conservation of biodiversity, carbon foot print and waste reduction. Research and Development: Nestlé’s R&D department focuses on two primary objectives: new product development and improving existing products. In order to integrate the environmental sustainability in to the products, its “Sustainability by Design Program” assesses and enhances environmental performance across its entire business at the earliest stage of development. The continuous improvement of the existing products and services is taken care by the “Sustainability by Design network”. Sourcing: The raw materials are directly sourced from farmers or traders. Nestlé prefers the locally available sources. Environmental sustainability is fostered in the supply chain through the “Responsible Sourcing Audit Programme”, “Responsible Sourcing traceability”, “Farmer Connect Programme” and “Sustainable Agriculture Initiative”. Manufacturing: It comprises of all processes which are necessary to convert perishable raw materials in to valuable food products. The factories are built under ISO 14001 Certification, where the company focuses on optimization of resources and reducing waste to a minimum. The overall efficiency is improved by creating value for both the consumers as well as the environment. Packaging: Nestlé’s packaging is crucial to food waste prevention. It also guarantees their high quality standards. The packaging material is made from renewable resources and they recycle old package materials. Disadvantages of EMS in Nestlé Sometimes companies cannot always follow the rules set by the EMS. It hinders their operation process. The R&D department of Nestlé used to test their products on animals (Macrae 2013). Nestlé used animals like rabbits, piglets and mice in their testing process. The test involved unethical process including some which caused their painful death. The marketing strategy used by Nestlé in 1977, caused mass boycott of Nestlé products. Nestlé used aggressive campaigns which promoted breast milk substitution (Savethechildren 2007). This boycott was primarily led by World Alliance for Breastfeeding Action or WABA. Conclusion EMS helps a company in making optimized production and to carry on its operation seamlessly without any negative impact on the environment. On the other hand, it also incurs certain costs that the company may want to avoid. Certain policies of EMS may come in the way of the operating process of the company, like research and development and marketing campaigns. If the company chooses to avoid them, it may cost the company a lawsuit from the government, or even boycott their products. From this study it can be concluded that EMS is undoubtedly necessary for a proper environment friendly operation, but the company should also keep in mind if its activities are causing any negative impact on the society and environment. In relation to Nestlé’s business, it can be stated that, the company should avoid any further controversies. Failing to do so will decline the brand valuation and the company may lose its valuable stakeholders. Recommendation Nestlé should conform to every regulation of the EMS, in order to gain more stakeholders’ trust as well as gain brand preference from customers. The animal testing should be reduced to a level where it no longer affects the ecosystem. Instead of aggressive campaigns that can upset the social structure, the company should make campaigns on environmental awareness. This will not only advertise the brand, but also gain the trust of the consumers. The advertisement campaigns should promote breast feeding, protection of the environment and focus on creating a better society. References EPA. “Pollution Prevention (P2)” (2013) Accessed October 9, 2014 http://www.epa.gov/ems/ Find A Grave - Millions of Cemetery Records. "Henri Nestlé-Ehmant (1814 - 1890) - Find A GraveMemorial." Accessed October 9, 2014. http://www.findagrave.com/cgi-bin/fg.cgi?page=gr&GRid=20156053. FT Global 500 March 2013. “Prices and market values at 28 March 2013 (2013)” Accessed October 9, 2014 http://im.ft-static.com/content/images/67c810a4-ae5b-11e2-bdfd-00144feabdc0.pdf IIED. “Environmental Management Systems” (2014) Accessed October 9, 2014 http://www.environmental-mainstreaming.org/documents/EM%20Profile%20No%205%20-%20EMS%20(6%20Oct%2009).pdf ISO 14000 - Environmental management. “ISO 14001:2004” (2014) Accessed October 9, 2014 http://www.iso.org/iso/iso14000 ISO 14001. “ ISO 14001 Requirements” (2014) Accessed October 9, 2014 http://www.iso14001.com.au/iso-14001-requirements.html Macrae, Fiona. “Food giants caught in animal testing scandal” (2013) Accessed October 9, 2014 http://www.dailymail.co.uk/sciencetech/article-2345276/Food-giants-Nestlé-Unilever-caught-animal-testing-scandal.html Nancy R. Tague’s . “Plan-Do-Check-Act (PDCA) Cycle”. The Quality Toolbox. 2/e (2004): 390- 392) Nestlé. “The Nestlé Policy on Environmental Sustainability”. Policy Mandatory February 2013 (2013) Accessed October 9, 2014 http://www.Nestlé.com/asset-library/documents/library/documents/environmental_sustainability/nestl%C3%A9%20policy%20on%20environmental%20sustainability.pdf Savethechildren. “A Generation On: Baby milk marketing still putting children’s lives at risk” Accessed October 9, 2014 (2007)http://www.savethechildren.org.uk/resources/online-library/a-generation-on-baby-milk-marketing-still-putting-childrens-lives-at-risk Read More