CO-AGR

CREATING SHARED VALUE –Nestle’s Sustainable Solution to Sustainability

Nestlé Malaysia Agriculture Services

HEART of BORNEO+5 AND BEYONDKOTA KINABALU 6THNOV.2012

GREEN CONSUMERISM (GC)- Consumer driven- Emotion centric- Reactive

CORPORATE SOCIAL RESPONSIBILITY (CSR)- Philanthropic- Social and welfare- Public relations

SUSTAINABLE AGRICULTURE INITIATIVE- NESTLÉ (SAI-N)- 11 years and still running strong- Precede GC and CSR before these evolved into ‘flavors of the day’ - Business-need driven

CREATING SHARED VALUE (CSV)- Proactive, active and innovative- Real value for all stakeholders in supply chain- True sustainability

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1.Creating Shared Value2.Responsible Sourcing3.Nestlé Sustainable Agriculture Initiatives4. Global and Local SAI-N5. Sabah CSV and SAI-N

AGENDA

Creating Shared Value

“At Nestlé, we believe that to have long termbusiness success, you must simultaneously create value for our shareholders and for the public. We call this Creating Shared Value and this is a fundamental principle behind the way we conduct business at Nestlé.”

Mr Paul BulckeCEO Nestlé S.A

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In Creating Shared Value, a company consciously identifies areas of focus, where shareholders and society’s interest intersect; and where value creation can be optimized for both.

At Nestlé, we have analyzed our value chain and determined that areas of greatest potential for joint value optimization with society are Nutrition, Water, and Rural Development, and all which should meet the needs of the present, without compromising the ability of future generations to meet their own needs”

Creating Shared Value: Definition

Creating Shared Value and Nutrition

Value for Nestlé; greater consumer loyalty; long term enhanced growth, market share and profitability.‑Value for society: Greater access to safe, high quality, nutritious food greater knowledge about nutrition‑

• 7552 products innovated or renovated for nutrition or health reasons in 2009• 3374 products reduced sugar, fat, salt; 3878 added more nutritious ingredients• Products improved or confirmed via 60/40+ programme: CHF16.8 billion• Popularly Positioned Products: sales CHF 8.8 billion, 3950 skus • Healthy Kids programmes to be implemented in all countries where Nestlé

operates directly

In Sri Lanka, Nespray, fortified affordable milk for school children, provides employment in local factories and uses locally sourced milk. Nutrition education programmes are also run locally

Nestlé Brazil’s “Nutrir”programme teaches 1.2 million low income children about good nutritio‑

• Water withdrawal down 33% 2000-2009, -143 m3, or -3.2% per tonne of product yoy• Despite 63% production increase• 10 Sustainable Agriculture Initiative Nestlé Water programmes• Project RiLeaf and Semi-Aerobic Rice Contract Farming - Malaysia• Leadership on water: UNGC CEO Water Mandate, WEF, Sust Rice Platform.• Led joint project with McKinsey and others: “Charting our water future”• Rehabilitated pumps and provided toilets for 50 000 people in Côte d’Ivoire with IFRCValue for Society: reduced impact on water availability / vocal advocacyValue for Nestlé: risk and cost reduction

Helping tomato farmers use 50% less water, Parma, Italy

Clean water and sanitation for 50,000, especially women, in Côte d’Ivoire

Creating Shared Value and Water

Irrigating dairy farms in Moga, India, while mapping supply chain water use with IWMI

Creating Shared Value and Rural Development: overview

Value for Society: knowledge sharing, improved agricultural & water management practicesValue for Nestlé: quality supplies from motivated, enabled farmers

• CHF 20.4 billion of raw materials purchased

• 3.4 million people in developing countries earn livelihoods from Nestlé’s supply chain

• 540 000 farmers supply Nestlé directly and receive technical assistance

• 165 497 suppliers received and acknowledged Nestlé Supplier Code

• In Malaysia, involvement with fresh chilli, white and red rice, spices and oil palm across length and breadth of country.

Nestlé’s supplier development Programme in India has reduced reliance on imports, identifying 70 new suppliers

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Nestle Products are found all over the World…

Responsible Sourcing

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• Deforestation

•High Conservation Values

• Water Stewardship

• Soil

• Wild Populations

The Nestlé Supplier Code

• The Nestlé Supplier Code establishes certain non-negotiable minimum standards that we ask our suppliers to respect and adhere to when conducting business with Nestlé Business Integrity – Compliance with applicable laws and

regulations Sustainability – We support and encourage operating practices,

farming practices, and agricultural production systems that are sustainable

Labour Standard - Prison/forced labour, child labour, working hours, non-discrimination in employment

Safety and Health – Safe & healthy work condition. Product & services supplied must meet quality & safety standards as required by applicable law

Environment – Suppliers must operate with care for the environment and ensure compliance with applicable laws and regulations.

The Four Pillars of Sedex, Supplier Ethical Data Exchange, and Key Principles

LabourStandards

Health & Safety

Environment Business Integrity

And these also are the key pillars of Responsible Sourcing !

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by implementing Sustainable Agriculture Initiative Nestle, SAI-N, practices to impact

• Food safety• Quality Assurance• Farm income generation• Crop and yield improvements• Cost improvements• Animal health• Transport and logistics• Water use & irrigation• Technical extension• Corporate Communications• Certifications• Etc

How do we achieve our goals?

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Develop farmers & suppliers

building capacity for growth

Secure availability of adequate agricultural raw materials

Ensure safety & quality of raw materials

SAI-N approach... fully in line withCreating Shared Value Concept

COMPLIANCEInternal: Nestlé Corporate Business Principles

External: Laws, Regulations, Codes of Conduct

SUSTAINABILITYProtect the future

CREATESHARED VALUE

Nutrition, WaterRural Development

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Global : The Cocoa Plan

Key Issues, background and context: • Partnership with International Federation of Red Cross and Red Crescent Societies (IFRC), World Cocoa Foundation (WCF), International Cocoa Initiative (ICI) • CHF 110 million investment will be spent predominantly in plant science and sustainable production

Business Benefit: • Increased quality and yield of cocoa harvest • Reduced complexity of supply chain Societal benefit: • Improve and protect incomes by teaching good agricultural practices • Sustainable farming methods • Better living conditions through access to basic healthcare, education, water and sanitation

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Fresh Chilli Contract Farming - Spicing Up the Community

Project Objectives:Commenced in 1995 to create new income opportunities and provide sustainable source of income for local farmers.

Through transfer of technology on GAP and application of SAI-N, farmers improve their yield and quality of crops to meet strict Nestle standards, and with a minimized environmental footprint.

Approximately 80% of the chilli produced under this scheme is purchased by Nestlé, which is meets about 60% of Nestlé’s fresh chilli requirements for its products.

Nestlé (Malaysia) BerhadNestlé (Malaysia) Berhad

November 7, 2012TPM - AM Pillar 18

Nestlé Initiative on Sustainable Rice

Nestlé Malaysia Agricultural Services

Expected “PPP” Benefits

• People : Easy and environment-friendly way to increase yields, minimized exposure to hazardous chemicals, safe and responsible handling of agri.inputs, pride in work and networking.

• Planet : Water conservation (30-40% less), methane emission reduction, reduced environmental footprint, natural augmentation of soils.

• Profit : Better potential for farmers to get extra real income. Nestlé has access to a reliable, traceable and controllable source of rice for infant cereals manufacturing, at most optimum cost.

Sarawak Red Rice

Biodiversity

Nestlé will ensure that all its raw material sourced from forested areas:

• Has not led to deforestation• Has not led to loss of high conservation values

- including high carbon stock soils/forests• Complies with the Nestlé Supplier Code

•- business integrity, legal, human rights & working practices• Creates Shared Value for society and local communities

•- delivers rural development & small holder benefits, FPIC•- water stewardship plans

Nestlé Commitment onDeforestation & Forest Stewardship

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Water GuidelinesGeneral•Water Management Plan•Wetland Management•Pollution of Surface and Groundwater

Water Stressed Areas•Farming Systems and Crops•Alternative Water Sources•Irrigation Plan•Monitoring

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WRI Global Water Tool: 2025 Projection

Project RiLeaf : Kinabatangan Riparian Reforestation and Oil Palm Sustainability Engagements

Operations area are strung along a 110km riparian zone of the Lower Kinabatangan, that aims to achieve forest connectivity, as well as minimise water pollution from

sedimentation and agricultural run-offs by the restoration of a ‘green’ buffer zone-in effect to provide “RiLeaf” such that the river has a better chance to repair itself.

KAPOK and HABITAT

Riparian reforestation is done by actively involving local community within the area

to supply forest tree seedlings and provide services to plant the trees back

into degraded riparian forests

Project RiLeaf’s Oil Palm Sustainability Activitiesseek to reduce env.impact of oil palm plantings via optimization of agri-inputs, focus on ‘back-to-nature’ approaches, and active and innovative engagements with smallholders to produce CSPO.

Project RiLeaf Progress…

• Officially launched Sept 27 2012, project infrastructure fully in place and running.• Riparian plantings actually commenced June 2011, and to-date 120000 forest

seedlings have been planted, with another 100000 targeted for 2013.• Commissioned UMS to conduct two scientific studies on natural soils

augmentation and ganoderma control using microbes. Ongoing since June 2012, and scheduled to run over a 3year period. All results here will be fully shared with the industry, and applied to our needs where and when needed, and viable.

• Two oil palm smallholder showcase in place since Jan 2012, to serve as ‘best-practise’ demo-farms using natural approaches with minimum chemical fertilizers and pesticides, as well as for experimentations on creating additional income for oil palm smallholders using the conducive canopy afforded by the oil palm stands.

• Project UpLeaf : Detailed baseline assessment of Phase 1 Kinabatangan oil palm smallholders completed by WildAsiaGroup in Sept 2012, and expect to kick-off in Dec 2012, pilot of first 30 smallholders engagement with view of certifying as CSPO by Q3 2013.

In Conclusion…

• ……………………….• ……………………….• ……………………….

There is no conclusion, because sustainability is not about concluding, but about continuing…

“While we are still a long way from solving allshared problems, SAI has shown us that if the foodindustry unites around sustainable agriculture issues, it can be an effective catalyst for change. As we look ahead to the next decade or so, it seems wrong to talk about the ‘future of sustainable agirculture’ because simply put, there is no future without sustainable agriculture!”

Mr Paul Brabeck-Letmathe, Chairman Nestle S.A

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“ …after the last grain is harvested and consumed,…after the last fish is caught and eaten,

…only then will man realise that he can’t eat money”

THANK YOU

Nestlé (Malaysia) BerhadNestlé (Malaysia) Berhad