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Nestlé’s President of the Board, Peter Brabeck-Letmathe, Sees Murky Future for Water, by Mia Doornaert

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Nestlé’s President of the Board, Peter Brabeck-Letmathe, Sees Murky Future for Water, by Mia Doornaert
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Peter Brabeck-Letmathe excuses himself briefly during our interview. His assistant tells him that Mr. Ban Ki-moon is on the line.  The Secretary-General of the United Nations and the president of the Board of Nestlé share a pressing concern: the conservation of the most vital resource of our planet, water.

Peter Brabeck-Letmathe is sounding the alarm bell: “We will run out of water before we run out of oil – water to grow food, for our daily needs at home, to generate energy, to make the industry function. Everybody worries about the exhaustion of world fossil fuel resources. But urgent attention is needed for the depletion of a much more vital resource, he says.  “We are using 10 percent more water than what is sustainable in the long term.”

This concern for the greater good is totally in line with his position at Nestlé, Peter Brabeck-Letmathe says. From its small origins in the lovely city of Vevey on lake Geneva, on which the Nestlé headquarters offer a spectacular view, the worldwide food giant has been concerned with creating shared value.

“Henri Nestlé, the company founder, created a milk-based baby food, his farine lactée. It was a very important discovery, for it saved many children’s lives. There was a very high infant mortality at the time. Rich women could afford to have what was called a wet nurse to breastfeed their babies. For poorer families, there was no such solution. Henri Nestlé’s invention was of very great help to those people.”

“The term ‘creating shared value’ did not exist at the time, but that is what Henri Nestlé did, and what remains our philosophy: creating value for the shareholders and value for society at large. If you would only focus on working for society at large, you would be a not-for-profit organization, which is a different kind of company. If you only think about creating value for your shareholders, your company will have a short life. You have to do both.”

“This is what we have done for 150 years, and this is what we are still doing now. Now, it is called creating shared value.”

How did you come to this concern about the future availability of water on our planet?

“Well, that again is linked with Nestlé. We were celebrating our 140th anniversary. And I was leaning back and thinking about what the world would look like when we would celebrate our 280th anniversary. What would be the most urgent problems then? Or, in other words, what were the issues we should address today to make sure that there would be a 280th anniversary?”

“So I went through all the things our planet needs to survive, and at the end of the day I came down to only one urgent, vital issue and that was water. Why? It is very simple. Because without water there wouldn’t be agricultural raw materials, and without agricultural raw materials there would not be a factory running, and there wouldn’t be consumers preferring our products to others because most of our products need water to be made. Or to put more starkly: without water, there simply would be no life.”

Still, it seemed an unexpected conclusion to come to at a time when everybody was and is talking about global warming and climate change?

“Yes indeed, it took me some time to get there. When I first started thinking about the water situation, I thought there might be no problem because nobody seemed concerned about it. Everybody was talking about CO2 and how we were going to have climate change and global warming and we were all going to be grilled.”

“But when I looked more closely, I saw that basically, we were already using substantially more water than what is sustainable. And I said, wait a moment, we are now seven billion people on this earth, we are going to be between ten and eleven billion people. If already today we are using 10 percent more water than is sustainable, my project to get to 280 years for Nestlé is not going to happen.”

How did you manage to draw attention to this underestimated and underreported issue? Did you find a kind of international soap box?

“I’m on the foundation board of the World Economic Forum. I asked our founder, Klaus Schwab, whether I could talk about water one day in Davos. That took everyone by surprise, as the CO2 issue was the big worry of the day.  I said, just let me have a small room to give a talk and see if I’m the only one who is worried about it. We were ten people in the room, but ten people who knew about water. There was the World Bank, there were some NGO’s, there were two other large companies. And we started to discuss…”

“The outcome of that discussion was loud and clear: we’re running out of water now. We might have a global warming in a hundred years, but we were running out of water now. From there, we went on to create the Water Resource Group. The first thing we did, we asked McKinsey to make us a water analysis on the 154 water basins of the world.”

“That is very important to realize: the water problem is not global. It’s not of very much use if here in Vevey we do not shower today, for that will not solve the water problems in other parts of the world. But neither is the problem local because most of the water basins are spread across national borders, especially the big water basins. So what you really have to do, is a basin to basin analysis. We had this analysis of the 154 water basins of the world made, and the outcome confirmed our figures and our fears: we are using 10 percent more water than what is sustainable in the long term.”

If we use up 10 percent more water than the earth can sustain, where does that water come from?

“The answer is very simple: we get part of it from our environment.  We are drying out the lakes, we are drying out the rivers. The Aral lake has in the last 50 years diminished by 56.000 square kilometers; in some places, the shore has retreated by more than 100 kilometers. The lake of Chad was 25.000 square kilometers, it is 1350 square kilometers now. Eight of the biggest rivers run dry from overuse, as the National Geographic has written. In North America, for example, the Rio Grande for months does not bring a drop of water to the sea. The same goes for  the Yellow River in China.”

“And the other part we are taking from the aquifers, the geologic formations where groundwater is stored and which were created hundreds of thousands or millions of years ago, exactly like oil. We pump water out of huge aquifers, but there again, we do it to a degree where we risk depletion. Take Punjab for example, a very important agricultural center. When we built a factory there 30 thirty years ago, the water level was one and a half meter below the surface. Today, it is more than one hundred meters below the surface. An added danger is that when you dig deeper, you’re getting into arsenic ground, which is natural arsenic coming from the Himalaya’s, and you start to pump arsenic water. That is the reason why, for instance in Bangladesh, you see up to 30 percent of people with very dark spots on their skin. They have arsenic poisoning.”

“So we have an absolutely unsustainable situation concerning the water of our planet, and that is why I say, we will run out of water long before we run out of oil. As a matter of fact, we have proven oil reserves, today, for 120 years. We have proven gas reserves for 240 years. We have proven coal reserves for 550 years. And we have proven uranium reserves for tens of thousands of years. We will not run out of energy, even if we were not able to invent some new ones which I’m sure we are. But water is a fixed. Water cannot be created.”

You present an alarming picture indeed. But cannot science and technology help? Our oceans are wide and deep. Is desalination not one of the avenues to be explored?

Desalinization is not a solution. To begin with, it’s extremely costly because it is so energy intensive. In the best desalination technology, it takes 2,5 to 3 liters of diesel to desalinate 1000 liters of water. Secondly, the process has a negative impact on the environment and contributes to the problem of climate change.

On your blog, you describe the problem eloquently and strikingly. “Because it is more gradual than hurricanes or volcanic eruptions, fires or floods, yet harder to escape than local drought and hunger, the risk posed by water scarcity is complex, silent, invisible and global.” How can you break through the silence and invisibility of this long-term threat to our planet?

“We already came a long way since we started with ten people in a room at Davos five years ago. We attracted more and more people who were all knowledgeable about the issue. We became a hundred and, as I said, we established ourselves as the Water Resource Group in the World Economic Forum. We then integrated development agencies, for instance, the Swiss development agency. Today we have the Swedish development agency, the Korean one. We also have development banks. The Inter-American Development Bank, the African and Asian Development Banks are all part of our group. We have the World Bank with us, and a member of the World Bank Group, the International Finance Corporation (IFC ). Today, our group is a fund of the World Bank, housed in the IFC.  Not only Nestlé but other private companies are helping with the financing. We already work with five governments, on pilot projects. And this year we are going to expand into another three.”

“So what we are doing now is to bring all the know-how that we have, all the possible solutions we have worked out, and work with governments in order to establish national water plans which try to re-equilibrate the water demand and the supply.”

Whenever the water issue is discussed publicly, there seems to be a highly political-emotive charge. Some important NGO’s distrust all and every involvement of private companies. They say water is a human right, not a matter for profit. What is your answer to that?

My answer is, yes, of course, water is a human right, the five liters of water a person needs for hydration, and the 25 liters a person needs for minimum hygiene. That’s a human right. And every government should assure that everybody has access to that. But this water accounts for 1,5 percent of the water that humans are using.”

“What I am saying is, washing my car, filling up my swimming pool, watering the golf course, is that a human right? I don’t think so. As long as you are not willing to put a price on this water, it’s going to be used in the most irresponsible manner. Just drive around on a summer day in Spain or Italy or even in the south of Switzerland. At noon, in the full heat of the day, the sprinklers are working happily although we all know that 75 percent of that water will not even get to the ground. If you have 30 degrees celsius, the minuscule droplets coming out of the sprinklers evaporate immediately. Normally, in your own garden, do you get up early on a summer morning to water your plants? Because then you get the full amount to the ground. But if you do not pay for water? You just spray happily.

Is it counterproductive to say water should be free?

Of course. Anything that is free is not going to be efficiently used. It’s as simple as that. You have to give water a value. Think for instance of biofuel which some years ago was the big new thing. That is the worst aberration that you can have. And again it has to do with the undervaluation of water. Do you realize that you need up to 4600 liters of water to produce one liter of bioethanol? And that is not even the one the Europeans want. The Europeans want to have biodiesel. Well, it takes up to 9100 liters of water to produce one liter of biodiesel. Now if water would have a value of a cent, nobody would think up such an idiotic process. But because water is practically free of charge, nobody cares. So we are taking away the most precious of our raw materials, which we are running out of, in order to produce oil, for the substitution of which we can afford a hundred years of research.”

We waste water on a gigantic scale because it is too cheap?

“Yes, that is indeed what we do. As I said, water is a human right as far as the basic needs of every human being are concerned. But the waste of water is not a human right, on the contrary, it will deprive people of this right. “

“If we use water more efficiently, we can feed and sustain ten or eleven billion of people? But we have to completely change the way we are using the water. Today we withdraw 2.5 times more water for agriculture than what crops really need. We would not do so if water had a higher cost. About seventy percent of the water is used in agriculture. Well, if we all had the efficiency of a country like Israel in the agricultural usage of water, we would not have a problem.”

“I give you another shocking instance of waste. In large cities, we are losing between 30-35 to 65-70 percent of water due to leakage. In a metropolis like London, it is 35 percent. Old installations under the ground are leaking and are not being replaced. In London, you still today have people going around with a kind of wooden stethoscope which they then put down to listen if there might be leakage somewhere down there. Whereas in Cambodia, in Phnom Penh, the leakage is 5.6 percent because they have new installations. In Yokohama in Japan, the loss came down from 40 to 5 percent because they invested in modernizing the equipment. So we have solutions, but there is no political interest, no political will.

How do you explain that the situation being so urgent, there is so much less attention from NGO’s, press, media? No one is creating the pressure on governments to do something about it, compared to all the noise there is about the greenhouse effect.

We are making progress. Every year, at the beginning of the World Economic Forum in Davos, there is a poll on what are the biggest challenges for the world. Last year and this year, water came up second. So we have come a long way from five years ago when we were ten people in a room.”

“I just talked to UN Secretary General Ban Ki-moon, and he will make water a major issue. We now have the World Water Day which helps to raise consciousness. We have today more governments that are willing to work with us, and we have real capabilities to work with them, to provide them with advice, people and training. So, the awareness of the problem is really growing.”

To come back to Nestlé, is this awareness part of the corporate culture of the group? And more generally, is there still an ‘esprit Nestlé’ in a company with so many very different brands, with their own global, regional, local positioning?

“To start with the first part, yes, we take our corporate social responsibility very seriously, and using the precious resource of water responsibly is certainly part of that.”

“On the question of corporate culture, if you are very global, if you have many different businesses, you can only run your company in a very decentralized manner.  I always say: ‘Anything that the consumer can perceive, whether it is the quality, the taste, the packaging, the advertising, has to be decided on the local level’. We cannot decide here in Vevey what is the right product design for China or for Chile. Only the people over there can decide on that.”

“But what we all share is one culture. Just because you run such a big company in a decentralized manner, you have to have a very strong corporate culture. Because people have to know in which environment they have to take those decisions. Therefore corporate culture is perhaps the most important characteristic of Nestlé, for this is what gives the group its unity and sense of purpose. It also creates a feeling of belonging to a family. Our figures show that indeed this is a culture, a family that people feel good in. We have 339.000 people working for us, and when they retire, they have on average, worked 27 years with Nestlé. That demonstrates the strong link between the company and its people all over the world. And it shows that also in this respect, we are looking for the long term and not for the short term.

Being a global company, you are vulnerable to slogans and campaigns and of individuals or single issue groups. Even false rumors, like “the baby killer”, can be very damaging. How do you guard against that in an era of instant worldwide communication?

“It is very typical that you should come up with that slogan, which is 40 years old. Let me first remind you how it started. In 1974 a very young South African activist wrote a booklet, called ‘the baby killer’, a plea for breastfeeding and a fierce attack on baby bottles based on milk powder. No company name was mentioned in the title. Then a Swiss NGO published it and put on the title ‘Nestlé the baby killer’. We won a libel case over that, but in the meantime, the damage was done, and that slogan had enormous consequences for our company.”

“Now, what are the lessons of that? The first one is that the CEO of a company should never take those things personally. NGO’s, or groups that have a specific interest, want to attract attention, and for that, they need so to say a screen on which to project their message. Of course, they will look for the largest screen they can find. And the largest screen is the most successful company. So by being as successful as we are, by being as global as we are, we are constantly the preferred screen for all kinds of interest groups, for that is the way they can best project their message. You have to understand that. You cannot each time see it as a personal attack on you or on your company. For instance, in the morning we can have an NGO discussing with us, very constructively, about two issues, and in the afternoon some of their people are climbing over my walls here at the headquarters because we have a different opinion on GMO.”

“The second lesson is that in this world of instant communication, you have to be very, very attentive to what is happening in social media. Attacks are not good for your corporate image. They require a lot of repair work, and repairing is always difficult, even in the case of rumors which are proven false. We have an alert room here where we constantly monitor social media. It’s programmed to pick up mentions of our company and the way it is mentioned. So we can intervene immediately the moment we see something building up.”

“The third lesson is that, to be successfully pre-emptive, you have to be extremely well informed and prepared to answer straight away, the moment anything hits. To give you an instance, there was this scandal about horse meat being used in prepared food that was sold as 100 percent beef. The fraud was first discovered in some products of the Findus brand. The moment a thing like that hits, you must be able to come out and say: ‘This has nothing to do with our products. Findus does not belong to us, with one exception, Switzerland. And we can tell you that Findus Switzerland has one hundred percent beef, and we can prove it.’ Which, for instance, Coop could not prove. In order to do that,  you have to have full transparency, full traceability in your products. That is quite costly but that is the price to pay.”

“Also, you need the same transparency when something does go wrong. And we later did get caught up in the European-wide horse meat scandal as well. Do not try to hide it, don’t be defensive, admit it and explain what you do or have done to solve the problem. In the long run, this is being recognized by the consumer. We monitor our corporate image on a global basis all the time, and we see that when there is a crisis, our image is becoming even stronger because we are open, and that inspires trust. That’s extremely important.”

As a world-wide company, you have a kind of overview on which regions are growing, or slowing down, or stagnating. The Latin-American dream of two decades ago has not really materialized, Asia was the hype of the past decade, where do you see the next growth region? Some people talk of Africa, is that realistic?

“Indeed, absolutely. Of the ten fastest growing countries of the world, the majority is African. Of course, when you start from a lower level, it’s easier to achieve high percentages. But still, the growth is there. There are several reasons. The first and fundamental one is demographics. There are close to one billion Africans. That number will grow, if everything goes according to the projections, to about three billion. Africa is a demographic powerhouse, the biggest one in the world today. China is going to stabilize, India will still grow, but the biggest population growth will come from Africa. As everyone has to eat, this alone makes it a powerhouse for the years to come. Add to this that about 38 countries now have a relative political stability. The media do not talk a lot about a country like Botswana. But it is very stable and has a very good development. Several countries with a troubled past are also stabilizing their political system.”

“And then you have of course the fact that Africa is the raw material treasure trove of the world and that enormous investments are coming in from highly industrialized countries. China has become the biggest new investor, but South-Korea and countries from the Middle East are all investing heavily in Africa. We are quite convinced of the development potential of this continent, and as a matter of fact, in our business the fastest growing region again was Africa.

But what with the huge internal problems and violence in large, important countries like Congo or Nigeria?

I did not say that all the 58 countries are stabilizing, I said 38. As the media focuses on the problem countries, there is little attention for the rest. But I can tell you, we are building six new factories in Africa, our investment is quite strong, and we feel very comfortable about it.

Last question, what would be your advice to MBA graduates starting out on a career?

“Well, the first thing I always say is, do not believe that what you have learned now is going to be decisive for your career. The most important thing your study gives you is learning how to learn. Things are changing so fast, so rapidly, that you have to constantly update yourself. I learn something new every day. That’s why I always say that a diploma per se is not decisive, it’s what you do with it, it’s keeping your mind open, being committed to lifelong learning. That is the most important thing.”

“The other important thing is, whatever you are going to do, do only that what you really want to do. Do not choose on the basis whether you’ll earn ten thousand more or ten thousand less in one job or another. Do what you really want to do. Otherwise, you will have a frustrated life. We all have to get up in the morning. It makes a great difference whether you get up to do something which really inspires you, or if you get up simply to earn money to spend afterward in your free time.”

“And with that, do not think about a career plan, just do what you like to do. Because, if you do what you like to do, you will do it better than those whose heart is less in it. And if you are doing it better, the management will notice that. In short, do your work well and others will take care of your career.’

I can imagine many people thinking, this is the former CEO of one of the biggest companies in the world, he is the current president of the board and he never had a career plan?

“But it is true. I have more often said that I did not want my next career step than I said that I wanted it. I have several times chosen not to have a promotion. I remember when Mr. Helmut Maucher, the then CEO, called me in from Venezuela for a promotion to the headquarters, I said: ‘Look, I’m not yet so old that I have to come to Vevey’. And he said: ‘I did not ask your opinion, I need you here, that’s all’. That’s why I accepted the promotion.”

“Anybody of our people who come in here and want to talk to me about his or her career plan I say: That’s not for you but for us to worry about. We have an interest in promoting our best people. So, you go and concentrate on doing your job well, for that is in your interest. And we will take care of your career because that is in our interest.”