CR Leaders Corner: Jose Lopez
AccountAbility interviews Jose Lopez, Executive Vice President, Nestlé S.A., Operations and GLOBE (Global Business Excellence, IS/IT) at Nestlé.
Jose Lopez, an engineer and Spanish national born in 1952, is the Executive Vice President of Operations and GLOBE at Nestlé S.A. In a career spanning more than 30 years at Nestlé, Mr. Lopez has held a number of positions, including Operations Director of the Oceania region and CEO of Nestlé Japan. In February 2007, he began his current role on Nestlé’s Executive Board, where he is responsible for procurement, manufacturing, supply chain, engineering, quality management, agriculture, safety, health & environment, and operations performance. Mr Lopez is active in non-profit organizations: he was Chairman of the GS1 Management Board (Global Standards), and since 2010 has served on the Advisory Board of the University of Cambridge’s Programme for Sustainability Leadership. Mr. Lopez has participated in a number of civil society activities, including serving as President of the Malaysian International Chamber of Commerce and Industry, and as Ambassador for Kobe during his tenure in Japan.
AccountAbility (AA): Jose, what is your vision for sustainability, or creating shared value at Nestlé? Where has your vision come from and where do you want to take it going forward?
Jose Lopez (JL): At Nestlé, creating shared value describes the way the company deals with its responsibilities towards society, which allows us to focus on key priorities that are relevant for our company. As some readers may know from our literature, creating shared value at Nestlé starts with compliance. It's very important for Nestlé as an organization to understand that our primary responsibility is to comply with laws and regulations. The second element of creating shared value is to link the company with its responsibilities over the long-term, which really is sustainability. This means sustainability of our existence in terms of corporate citizenship, our business model, and also in terms of how we manage resources and impact natural capital. The third element for Nestlé is our areas of focus – we have chosen three areas: nutrition, water and rural development. These elements are intimately linked to our business and the future of Nestlé. Moreover, we have a responsibility and the necessary skills and understanding to be able to make an impact in these areas.
AA: How does Nestlé balance the need to make profits with acting sustainably and addressing societal needs?
JL: I personally don't like the singular notion of making profits. I think the notion is to create value, and making profits is the financial consequence of creating value, but creating value is also providing healthy products to consumers and behaving responsibly.
AA: What kind of value does an integrated framework add to your leadership and management practices, specifically as it relates to sustainability, or creating shared value efforts? Have you seen your executive leadership practices changing over time?
JL: The information available to leadership about a company’s impact, both financial and non-financial, is much deeper than ever before. This depth of information helps leadership at Nestlé understand the importance of both efficiently using resources, and preserving natural capital. Responsible and integrated resource and natural capital management will create a reservoir for future generations. So there is no doubt that executive leadership understands new dimensions of our responsibility. That said, right from the beginning of my career at Nestlé, I was involved with projects aimed at protecting the environment. Even though the payback for some of these projects was questionable, the company always agreed to do them because they were the right thing to do. For example, we built our first wastewater treatment plant in 1947 because we did not want to use impure water to irrigate the fields where cows pastured for our milk.
AA: How do you measure success, how does Nestlé measure success?
JL: A lot of instruments have been developed over time to measure economic performance. It's important that we evolve into an environment where we measure the impact we have on society as well as the impact we have on our shareholders. It's a very difficult thing to do, as everybody knows, because many of the benefits that we give to society cannot be monetized easily. Not everything is economic. This is an area where academics can help business understand and report non-economic or societal performance better.
AA: Do you have any favorite examples that show how integrating or embedding sustainability into your operations has brought about quantitative commercial value?
JL: Definitely. We have a wonderful case with Nespresso, which you can read about on our Nespresso website at www.nespresso.com. We focused on rural development in areas that grow coffee beans for Nespresso. This program has improved yield and productivity in farms. Focusing on rural development has also allowed for a reduction in the environmental impact from coffee-growing activities, particularly the impacts from depulping coffee berries, and washing coffee beans. In the end, focusing on rural development keeps Nespresso ahead of competition in terms of making the best cup of coffee in a sustainable manner.
AA: What challenges have you encountered in mainstreaming sustainability in your global operations? How about challenges with consumers and business partners in mainstreaming sustainability?
JL: Well, in our global operations, the challenge is innovating and engaging the whole organization. This is part of life for a leading company, you have to be a trailblazer. You can't just follow the steps of others. We have to
continue to reformulate, review, use relevant ingredients, improve our offerings, simplify our operations, and so on.
With our consumers, sustainability is also becoming part of the dialogue, but I have a view on that which I'd like to express. Sustainability includes our commitment to provide consumers with better nutrition, and to make the consumer’s life healthier and better. Additionally, we cannot be in the business of walk the talk. We have to be in the business of talk the walk. Meaning, first you have to demonstrate and deliver, including committing money to R&D and operations. Only THEN do you tell a story to consumers and society. And then you are a lighthouse able to inspire others. Nobody has ever built their reputation and trust based on promises, you need results.
AA: To some extent you're sitting in the same boat as your peers in the industry. How do you handle sustainability issues at Nestlé where you may have a shared responsibility with your peers (at least from the view of somebody watching your industry)?
JL: The best way to influence and inspire our peers is by realizing real improvements, and then hoping that together with them we will be able to scale up these improvements.
Too much work has been done in defining and deepening the silos that are part of this whole value chain of creating sustainable business models. Instead of deepening the silos, we have to break them.
No company, no matter how big, can solve sustainability issues at the world scale. What you can do is choose a category, region, or business model, and prove that you can actually address the notion of “creating shared value” by doing well in terms of business and social impact. Then others will be inspired and want to join in, follow, or to add to what you’re already doing. The main issue in sustainability today is not deepening our understanding, it’s scaling up. We have a good understanding of sustainability, I'm convinced of that.
AA: How have senior executives at Nestlé come to embrace sustainability and shared value and how has this impacted your own role as a member of the executive board? How about your employees?
JL: Well, I would almost answer in one word: “naturally.”
The reason why I'm here is because our top leadership thinks I can contribute to their long-term vision that they have, that’s why I say naturally. I simply would not be in a position where I can impact the end result if I didn't share the same values and the principles with management.
With our employees, it has also been very natural. Just recently we had an internal event called, “We Make Nestlé Sustainable.” We asked our employees to create posters that explain how they are making Nestlé sustainable, and it was a resounding success. We had a huge amount of examples, and after management and other employees saw all the different posters, many people were surprised by all the things that Nestlé is doing around the world. They were surprised and inspired by seeing not only environmental performance, but also social sustainability programs, such as programs like our Cocoa and Nescafé Plans.
One specific point about Nestlé’s environmental performance is that year after year, we’ve been able to increase our total production and reduce our environmental impact in both relative and absolute terms.
AA: What leadership advice would you give executives to help them advance sustainability efforts? What experience could you share that would also apply to other businesses?
JL: Advancing sustainability efforts is not a process of changing your company. You have to be true to your beliefs and your values. You have to define the purpose of your company, the reason you exist, and ask if that reason is a good thing for society or not. You have to come to grips with that. Then, base your vision for sustainability on the purpose of your company and have top management clearly state the company’s vision for sustainability.
You know us, we don’t have, and will not have, a Chief Sustainability Officer in the company because we believe that someone in this position can have the effect of undermining or weakening the responsibility that every part of the organization has towards sustainability. Instead, we have integrated sustainability into every level of our company. Sustainability cannot be one person’s responsibility, it has to be understood by everybody.
AA: You mentioned that you don't have a functional leader in terms of a Chief Sustainability Officer. Another defining characteristic of Nestlé is that the company has a very decentralized management culture. Where do you see the advantages and/or challenges for implementing a framework like creating shared value in a decentralized management structure?
JL: Well you can argue both sides. You can argue that it is easier when you are centralized because you just have to deal with a small team. Whereas in a decentralized structure, you have to inspire people more – I like to tell people that, especially in a decentralized management structure, implementing policies or initiatives is not about command and control, it's about climate control. You have to create an atmosphere where people want to move in the same direction that you define as the way forward.
AA: Is stating a strategic direction and then actually having it done in a decentralized way the new management culture of the 21st century?
JL: I’m not sure whether this is the case. Our company has close to 150 years of history. I think that in the end, things may be simpler than they appear at first glance and I believe that creating shared value describes the underlying way of doing business at Nestlé. It's been like that, and it will continue to be like that. And that's independent of changes in management culture.
Of course, we have a new reality out there, particularly in the area of information, technology and social media. This might change the discourse out there, but it doesn’t change the course. That is why it's so important that we actually focus on getting things done and talk the walk.
