Nestlé’s Supply Chain Relationships

Paving the Way for Sustainable Development

Introduction

Nestlé, as one of the largest global food and beverage companies, offers a vast portfolio that includes leading brands across coffee, dairy, nutrition, and more. However, it faces a pressing challenge in sourcing raw materials—such as palm oil, coffee, and cocoa—sustainably within its complex supply chain. Unsustainable sourcing practices can lead to significant environmental and social issues, which contradict the company's commitment to ethical production and corporate responsibility. To address this, Nestlé can enhance sustainability by building strong, transparent relationships with its suppliers. These partnerships can foster accountability and promote responsible practices throughout the supply chain, aligning with sustainability goals.

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The Relational-Based View in Nestlé's Supply Chain

The Relational-based View (RBV) emphasizes the importance of building enduring, collaborative relationships with suppliers, stakeholders, and customers to gain a competitive edge. By fostering trust and cooperation among organizations, RBV supports sustainable development, particularly beneficial in complex supply chains where stakeholder interdependence is high.

Nestlé recognizes that sustainable sourcing is closely linked to the well-being of small farming communities and individual growers. Through direct partnerships with farmers, Nestlé can ensure both the quality and sustainability of its raw materials, which, in turn, contributes positively to local economies. For instance, the Nescafé Plan has enabled farmers in Brazil, Colombia, Ivory Coast, and other countries to access training on advanced farming techniques and crop diversification, resulting in higher incomes and environmental preservation. Since 2010, Nestlé has provided farmers with over 290 million resilient. Thanks to this, more than 100,000 hectares of coffee-growing land have been restored worldwide.

Nestlé partners with NGOs to drive its environmental initiatives forward. Nestlé launched Starling, in collaboration with the Earthworm Foundation and Airbus, a satellite-based program designed to monitor the entire palm oil production process. Using data from Starling, Nestlé keeps stakeholders informed on the progress of its zero-deforestation commitments. Additionally, Nestlé works with suppliers Golden Agri-Resources and Forest Carbon to conserve and restore large areas of flooded forests in the Merang region of South Sumatra, known for its rich biodiversity.

Through the Relational-based View (RBV), Nestlé aligns its corporate objectives with broader social and environmental goals, positively impacting communities while securing a sustainable supply of raw materials. This relationship-focused strategy not only strengthens Nestlé’s reputation but also provides a competitive advantage in a growing market.

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Sustainability Challenges in Nestlé's Supply Chain

Nestlé encounters significant challenges in maintaining an eco-friendly supply chain for cocoa and palm oil, often hindered by weak or strained supplier relationships. These issues can lead to deforestation, worker exploitation, and environmental degradation.

Nestlé’s palm oil sourcing has been a particularly pressing concern, with links to deforestation in Southeast Asia. Environmental groups like Greenpeace highlight the devastating effects of palm oil farming, including habitat destruction and biodiversity loss. Limited oversight, partly due to fragile relationships with some suppliers, has allowed unsustainable practices to persist. While Nestlé aimed to achieve a deforestation-free palm oil supply chain by 2023, the company still faces obstacles in ensuring all suppliers fully adhere to these standards.

Nestlé has faced significant criticism regarding child labor and inadequate working conditions within its cocoa supply chain. Limited direct communication with small-scale farmers often creates barriers to enforcing ethical labor standards. A 2020 report by the U.S. Department of Labor revealed that child labor remains a pervasive issue in the cocoa industry, with millions of children exposed to hazardous working conditions. To combat these concerns, Nestlé introduced the Nestlé Cocoa Plan, aiming to address these issues; however, difficulties in fully engaging suppliers have hindered its effectiveness.

Building stronger, cooperative relationships with suppliers, coupled with enhanced transparency, could help address these concerns. By fostering trust and open communication, Nestlé can improve monitoring, encourage sustainable practices, and work towards its sustainability goals. Strengthening these connections will allow Nestlé to better oversee its supply chain in a responsible and community-supportive way.

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Linking Nestlé’s Efforts to the UN’s SDGs

Nestle is focused on advancing three key Sustainable Development Goals (SDGs): SDG 12 (Responsible Consumption and Production), SDG 2 (Zero Hunger), and SDG 8 (Decent Work and Economic Growth).

To address SDG 12, Nestlé responsibly sources palm oil to prevent deforestation and strengthens its coffee and cocoa supply chains, underscoring its commitment to sustainable sourcing, responsible consumption, and environmental conservation. The Nestlé Cocoa Plan supports SDG 2 by helping small-scale farmers adopt sustainable and efficient farming practices, which can improve product quality and boost farmers’ incomes, contributing to food security and sustainable agriculture. In alignment with SDG 8, Nestlé seeks to foster economic growth in disadvantaged areas through employee training and better working conditions. The company prioritizes fair wages and safe work environments throughout its supply chain, reflecting a commitment to economic and social progress in the communities it serves. Through these efforts, Nestlé demonstrates its dedication to integrating sustainability within its global operations.

Conclusion

Nestlé's dedication to sustainable supply chain management underscores the critical role of building strong, transparent relationships with suppliers to achieve lasting environmental and social impacts. By applying the Relational-Based View (RBV), Nestlé strengthens collaboration and accountability with its suppliers, addressing key challenges like deforestation, child labor, and environmental degradation. Initiatives such as the Nescafé Plan, Nestlé Cocoa Plan, and partnerships with satellite technology providers for palm oil monitoring serve not only to protect vital resources but also to uplift local communities through farmer training, fair wages, and improved working conditions.

This approach is closely aligned with the United Nations Sustainable Development Goals, particularly SDG 12 for responsible production, SDG 2 for sustainable agriculture, and SDG 8 for decent work and economic growth. These efforts collectively build a more ethical and resilient supply chain that balances environmental stewardship with social responsibility. Nestlé’s experience illustrates that fostering collaborative supplier relationships is essential to driving impactful change, paving the way toward a more sustainable and conscientious food and beverage industry.

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