Writing by Becky

Expectation versus Reality: Metrics and Nestle’s Reports

Being a purpose-led or sustainable business requires reporting on metrics. With Nestle buying B-Corps and connecting the company with improved corporate social responsibility, I’d been curious to learn if this was transforming their company. I looked and discovered reports. Lots of reports. I recently took time to review them. Read on to see what lessons I discovered through evaluating Nestle’s assurance reports.

Earlier this month, I started looking into the reports from Nestle. Being a purpose-led or sustainable business requires reporting on metrics. Nestle started buying B-Corps and connecting the company with improved corporate social responsibility. This was in stark contrast to some of their previous business practices, so I’d been considering changing my long-held, negative opinion about Nestle.

Before long, I had to put my analysis aside.

I’d been expecting to provide a summary for the twenty-five external audit and assurance reports. After discovering the format of the reports, I’d planned on charting the results over time. Charting the metrics would be a clear indication of Nestle’s improved compliance over the years. Part of the purpose of metrics is to demonstrate that someone has been doing what they said they were going to do, after all.

I’d really wanted to see how Nestle had improved over time – assuming that’s what they did. And if they hadn’t changed, then I’d still avoid their products, including Kit-Kats.

So, why did I have to postpone my project?

Inconsistent reporting.

The information available in reports changed from one date and location to another.

Now, some of this inconsistency might be because the reporting methods got better over time. However, if that was the case, you’d also expect that the more recent reports would be more clear than the earlier reports. And while they did start to improve, they took a step backwards in newer reports.

It’s also possible that the intended application of the reports impacted the presentation of the data. But whatever the reason behind the variances in reporting, the results weren’t comparable year-to-year.

If you’re a business exploring corporate social responsibility, you probably know you need to track your progress. But before deciding on what to report, what to track, and what to analyze, remember to keep in mind why you’re looking at metrics in the first place.

When you report on your metrics, are you wanting to just share the information? Do you plan to provide comparative analytics later? How will you present your information?

Going back to Nestle’s assurance reports, based on my review of nine reports, I discovered that considering comparative analytics wasn’t kept in mind by Nestle or the company commissioned for the reports, Bureau Veritas

Let’s take a closer look at the reports commissioned by Nestle.

Report Structure

The report structure and format was easy to follow; that wasn’t the problem.

The reports I viewed had the same basic, five- to six-page structure. A quick glance at them lead me to believe my chart would be pretty straightforward to create. They had similar introductions and identified a similar scope of work and general methodology. It was when I began to read them that I discovered the problem.

The purpose of the reports was to provide an independent review for one specific country’s Nestle entity/company. Each entity/company is reviewed to ensure they are in “compliance with the World Health Organisation (WHO) International Code of Marketing of Breast-Milk Substitutes (1981) and subsequent World Health Assembly (WHA) resolutions as defined by the FTSE4Good inclusion criteria for the Marketing of Breast-milk Substitutes1 (herein referred to as the ‘WHO Code’)” as well as the specific country’s local policies. (This phrasing was from the China report completed in 2013.)

The Bureau Veritas assurors (their term) interviewed Nestle staff and stakeholders, including health care providers, and they visually inspected health care facilities and retail locations. They provided the numbers of individuals interviewed, which group they were part of, and any clarification required. Comparing this information would be straightforward.

The main portion of the report included the summary, an opinion, and recommendations. And this is where the reports’ inconsistency became obvious. Each report ended with standard limitations and statement of impartiality.

The reports sometimes, but not always, clarified the definition of a major or minor non-compliance. The reports also included a more detailed summary, describing any compliance issues and giving a more thorough understanding of what happened in the various situations. However, inside that description, the levels of the non-compliance weren’t clear. And the opinion and recommendations didn’t clarify the question. (If you’re curious about the breakdown of five of the reports I reviewed, I summarize them below.)

So why does this ambiguity matter? Let’s look at that next. 

Consequences of Inconsistent Reporting

This ambiguous information meant that the charting became guesswork on my part. This made me nervous since it’ll be harder to prevent my bias from coloring my analysis.

Plus, I thought about how a good friend would respond to this information. She’s already made it clear that she will need significant proof that Nestle’s not simply trying to sugarcoat their questionable ethics. These reports would only further indicate a lack of authentic change. I can’t say that I fault her for that. What better way to hide a lack of effort than through unclear reports? How many people will bother looking at them?

And then I wondered if these reports were intended to be analyzed later. Why would they be created otherwise? Wouldn’t someone make sure the goal of the report was successful before continuing to create over two dozen of them? I’m assuming, based on the report itself, that Nestle commissioned these reports for the purpose of assuring the public or stakeholders that they’re following international and local guidelines. So if they’re doing that, shouldn’t they review the reports and make sure they’re getting the information they need?

Alternatively, if you look at the role of Bureau Veritas, they’ve been hired to provide assurance reports. Not only that, these reports are for a company that has come under fire for unethical and questionable actions or policies. Why not make sure your reports are as useful as possible?

But this type of careful reporting isn’t what I found. My expectations and reality didn’t match, even though the entire purpose of the reports was to provide verification that Nestle was following the rules.

There’s a lesson here for any sustainable or purpose-led business. If you’re taking the time and putting in the effort to track metrics, ensure that your reporting clearly demonstrates how you’ve improved over time. Without that, you only look like you’re trying to hide questionable policies. And chances are, that’s not accurate.

By taking extra time to make sure the tracking and reporting are accurate and clear, you’ll give your efforts authenticity. And for your shareholders and other stakeholders, including the public, this authenticity is becoming more and more critical.

Interesting Summaries

Even though I couldn’t properly analyze the results of the reports, the summaries were still interesting to read.

They helped me better understand the strict guidelines under which Nestle and other manufacturers of breast milk substitutes function. Granted, regulations almost always are in response to someone, somewhere acting unethically or at least questionably. Nestle played a role in the existence of the restrictive requirements, so I have no sympathy for the challenges they experience in following them.

I also better understand Nestle’s challenges in transforming their business (giving them the benefit of the doubt). In some of the assurance reports, the recommendations included Nestle re-educating stakeholders about proper marketing. And in one instance, Nestle had only recently purchased another company. Their efforts to retrieve old marketing materials – including items located in doctor offices – was still in process.

And then I wondered if individual staff members were not following company policy. When it comes to big organizations, compliance only goes as far as the responsible employees take it. However, this is where oversight is required. This is (presumably) one reason why Nestle commissioned Bureau Veritas to evaluate their compliance. Expecting subordinates to draw attention to inappropriate behavior is a challenge in North America. In other parts of the world, whistle-blowing could have serious and significant consequences.

But finding the summaries interesting and gaining an expanded understanding of the wide variety of situations in marketing formula isn’t the same as being able to evaluate compliance. Providing useful and usable metrics has a different purpose. And this is one effort at transformation where Nestle failed.

When you are considering tracking and reporting metrics, learn from the mistakes of Nestle. Carefully consider what you want to measure, how you can measure it, and how you will report it. You’ll very likely make improvements along the way. But making improvements in tracking, analyzing, and reporting will rarely be criticized. Through diligent reporting, your commitment to your corporate social responsibility will only increase loyalty by clients and other stakeholders.

 

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For the curious, here’s a breakdown of five of the reports I reviewed.

Report Breakdown

Argentina (2012)
In Argentina’s report, Bureau Vertias didn’t label the events as major or minor, nor did they use the term ‘non-conformance’. They described the problems but left any value judgments on compliance levels up to me. This makes any chart I create suspect. However, this format was used in prior years as well.

Ukraine and Armenia (2012)
In the Armenia portion of this report, an NGO interviewee noted that while Nestle was the only manufacturer that responded to a report, they felt “Nestle had rescinded on some of the commitments made in its response to the monitoring report, with the interviewee highlighting the continued presence of complimentary foods labelled as suitable for infants aged 4 months and above in market. Bureau Veritas did not observe any complimentary foods labelled as suitable from 4 months during the audit.”

Additional claims by interviewees were made in both the Ukrainian and Armenian markets, but these were not able to be verified or appeared to be atypical events. This left Bureau Veritas stating their opinion as “No significant evidence came to our attention to indicate that Nestlé Ukraine and Nestlé Caucasus are systematically or intentionally operating in contravention of the WHO Code, local legislative requirements or the Nestlé Instructions in Ukraine and Armenia respectively.”

China (2013)
The report on China classified non-conformance as major or minor and identified if the non-compliance was Nestle’s doing or if the retail location advertised inappropriately. This seemed reasonably straightforward and helped shape my chart, as it was the first report I read. In the body of the report, Bureau Veritas stated that they had to break their rule of no-contact with Nestle. Their staff had to resort to contacting Nestle representatives to arrange interviews with 80% of the health care providers.

Columbia (2016)
Columbia’s report used the major and minor definitions and described the offenses more clearly, making it easier to understand the definitions. In the opinion, Bureau Veritas identified three minor non-conformances and “[a] number of opportunities for improvement”.

Cambodia (2017)
In the Cambodia report, Bureau Veritas found “Two Non-Conformances with the Nestle Policy and Instructions” and “Three Opportunities for Improvement”. However, the non-conformances weren’t separated into major or minor.

As I read the report, the problems with Nestle appeared to encompass sponsorship for health care professionals at scientific events; inappropriate product displays (by the retailer rather than Nestle); not including appropriate statements in educational or information material (granted, approved by the Ministry of Health, but Nestle’s responsibility); and incomplete contracts with their third-party representative company. For the first non-conformance, the report uses the plural for events, which implies it wasn’t a single event that was sponsored incorrectly, even though it apparently counted as one non-conformance. The second non-conformance dinged Nestle even though they or their distributor didn’t appear to encourage for the retailer’s actions.

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