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Nestlé is paying a premium to UK farmers to try out interventions such as planting hedgerows, reports Angeli Mehta
Nestlé is taking advantage of partnerships to develop the sustainability of its raw materials in the face of risks like climate change, erosion of top soils and species decline. In the UK, there’s also Brexit to contend with, and potential threats to farm incomes.
As part of the Natural Capital Impact Group, Nestlé has been looking at interventions farmers could make to increase productivity, cut costs and protect the natural capital that the dairy industry depends upon.
We’re applying the principles of natural capital valuation, although the thinking around that is still evolving
“We’re applying the principles of natural capital valuation, although the thinking around that is still evolving ... in effect we’re using risk and opportunity as a proxy in the short term,” explains Andy Griffiths, head of environmental sustainability for Nestlé UK and Ireland. That’s a language business understands, he adds.
Nestlé’s farmers produce 1% of the UK’s total milk output: that’s some 110m litres that goes into KitKat, Yorkies, and Nescafé pre-packaged drinks. Now they’re getting a price premium per litre for trying out a range of natural capital interventions.
Sustainable sourcing lead Robin Sundaram, pictured above, says work with the First Milk dairy co-operative revealed that “farmers were probably already doing stuff, but not in structured way”. Surveys provided a baseline for how many hedgerows, and stone walls they had on their land. Farmers made upfront investments in interventions such as hedge planting, and fencing restored hedges and watercourses. This year, Nestlé’s farmers will tackle soil and water specific interventions.
Have they been able to measure actual benefits so far? The answer is that it is hard to measure impact at the farm level. “We believe it’s having an impact but it’s difficult at this stage to explicitly report against, because we need more effective measurement.”
Which is why Nestlé is now part of a four-year project – the N8 AgriFood programme – which aims to make the UK dairy industry more sustainable. The work, led by Newcastle University, has a range of partners and is funded by three UK science research councils. The project is itself part of a wider effort to address challenges of global food security, and will look at multi-functional benefits of interventions across animal health, habitat, water, soil quality and CO2 emissions, to see what works at scale.
Natural capital valuation drives insights, but to get interventions at scale you need collaboration
“Our project asks: do things work ... and what are the benefits and trade-offs?” says Mark Reed, who leads the research project. “What is the magnitude of effect: is it worth a price premium?”
Nestlé and Newcastle University have been working closely with sustainability advisers 3Keel to develop a Landscape Enterprise Networks (LENs) model. The approach, says Reed, “looks at all the natural capital benefits across the landscape and matches them to buyers who might benefit, then pools resources from across those buyers”.
Griffiths adds: “Typically you’d choose a particular commodity or product as a gateway in, for analysis.” Here it’s dairy. “You start to identify where natural assets are and when you understand those, you understand what functions they deliver and then the risks ... Once you start to get into assets and functions you’re going beyond dairy, and then you can identify other interested parties or beneficiaries – like water companies.”
This year, Nestlé’s farmers will tackle soil interventions. (Credit: Sharon Kingston/Shutterstock)
Natural capital valuation, he says, “drives insights but to get interventions at scale you need collaboration.” Nestlé is, he says, “very focused on sharing the insights and outcomes to engage more partners”.
Nestlé is currently funding the price premium for its dairy farmers, but as others come on board they might be persuaded to put their hands in their pockets if evidence of the benefits can be demonstrated.
“The project signifies a change in tone of debate around natural capital ... [which has] remained stuck for some time as a form of CSR,” says Reed. “Only when companies begin to see how important [it is] for increasing resilience against future shocks will it become possible to make the business case for investment in natural capital.”
This article is part of the in-depth briefing Natural Capital: See also:
Nestlé natural capital impact group supply chain Landscape Enterprise Networks dairy industry 3Keel