2010 csvreport eng

8/2/2019 2010 Csvreport Eng

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REPORT2010

Creating Shared Value


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Businesses can only be successfulin the long term by creating value

for Shareholders and Society.CSV is embedded in all that we do.It goes beyond Sustainability.Paul Bulcke

, CEO, Nestl S.A.

Cover:

The Nestl Healthy Kids Programmeis designed to educate young childrento better understand the valueof nutrition and physical activity.


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inside

2 Message to Stakeholders4 Fast Facts6 Organisation Structure7 The Nest & GOOD FOOD, GOOD LIFE8 The Nestl Global Creating Shared Value Strate

10 Nestl Malaysia and CSV12 Engaging Our Stakeholders16 Corporate Governance18 Performance Data20 Our Respect and Care for the Community

36 Our Commitment to the Environment52 Our People and the Workplace64 Our Consumers and the Marketplace80 Awards & Achievements82 GRI Table90 Independent Assurance Report92 Nestl Contact Details

U T A A

U T T

O U R P E O P L E

A N D T H E W O R K P L A C E

O U R C O N S U M E R S

A N D T H E M A R K E T P L A C E

20

3652

64


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Message toStakeholders

Corporate Social Responsibility can beinterpreted in many forms. At Nestl it means Creating Shared Value (CSV).This extends beyond compliance andsustainability, as we believe that anybusiness that thinks long-term and followssound business principles creates value forits shareholders and for society through itsactivities.

At Nestl, we have analysed our value chainand determined that the areas of greatestpotential for our joint value optimisationwith society are Nutrition, Water and RuralDevelopment. These areas are core to ourbusiness strategy and vital to the welfare ofthe people of every community we operatein, be it Malaysia or beyond, as Nutrition isan important element of good health; Wateris essential for the production of food andsustains life; and Rural Development helps

improve the social and economic livelihoodsof the communities. By embedding CSV rmly in our business,we are able to embark on results-orientedinitiatives that have a long-term impact

on society. We aim to create a thrivingand sustainable society by addressinghealth-related issues such as malnutritionand obesity, sedentary lifestyles, agingpopulations and increasing health costs, aswell as agriculture practices, rural povertyand environmental concerns.

As we approach our 100 years in Malaysia,

we can clearly identify the progress wehave made in creating value for societyand our shareholders. We have investedsubstantial resources both in terms ofpeople and resources, in areas that needassistance and that yield high prospectsfor joint value creation. We have activelycollaborated and engaged with the rightpartners to ensure strong and sustainableresults.

Our fth stand-alone Creating Shared

Value Report aims to demonstrate howwe embed CSV in our daily business andhow we deal with some of the growingenvironmental and societal concerns thecountry faces.

As we set new benchmarks for our CSVinitiatives, we also strive to improve ourreporting process. This years report isbetter aligned with the Global ReportingInitiative (GRI) standards and we haveengaged PricewaterhouseCoopers (PwC)to provide independent assurance onselected data and information in our 2010CSV Report. The assurance is performed

in accordance with the internationallyrecognised standard ISAE3000 issued bythe International Auditing and AssuranceStandards Board (IAASB). ISAE3000 iswidely adopted by independent assuranceproviders to provide guidance for theperformance of assurance on sustainabilityreporting which sets out the purpose andelements of all assurance engagements.PwC has checked our reporting and hasconrmed it to be GRI Application LevelC+. We seek to further improve the level of

assurance in future reports and welcomeyour feedback on our report.

Peter VogtManaging DirectorNestl (Malaysia) Berhad

Tan Sri Dato Seri Syed ZainolAnwar JamalullailChairman of the Board

Nestl (Malaysia) Berhad

2 Nestl (Malaysia) Berhad 110925-W


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FastFactsThe Nestl Group Founded in 1866 by Henri Nestl

Worlds largest food manufacturer,with headquarters in Vevey, Switzerland

Present in almost every country in the world Employs over 280,000 people worldwide

449 factories in 83 countries

Over 10,000 different products

Around 1 billion products sold every day

Worlds largest private nutrition researchcapability based in Switzerland

29 R&D Centres worldwide

RM6 billion global investment in R&D annually



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Established inMalaysia in 1912

Produces over300 Halal products

Head Ofcein MutiaraDamansara,Selangor

Biggest Halalproducer in theNestl world andthe Halal Centre ofExcellence for theNestl Group

RM4.0 billionin turnover in 2010

7 factories

Employs more than5,000 people

Public-listed onBursa Malaysiasince 1989

1 NationalDistribution Centre

Categories of Products in Malaysia Coffee and Beverages Culinary Aids / Prepared Foods Milks Liquid Drinks Junior Foods Breakfast Cereals Chilled Dairy Ice Cream Chocolate and Confectionery HealthCare Nutrition Performance Nutrition Nestl Professional

Nestl Malaysia

Nestl (Malaysia) Berhad 110925-W


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Organisation Structure

Head, Corporate Legal / Company Secretarial

CommunicationsDirector

NIHONCANPACK

Executive Director,Finance & Control

Executive Director,Technical & Production

Executive Director,Human Resource &

Group Corporate Affairs

Executive Director,Supply Chain

Executive Director,Sales

Region Head MY/SGManaging DirectorNestl (Malaysia)

Berhad

Country Manager,Singapore

CountryBusinessManager,PURINAPetCare

CountryBusinessManager,

Cereal PartnersMalaysia


InfantNutrition

Country BusinessManager,HealthCareNutrition &

PerformanceNutrition


NestlProfessional

ExecutiveDirector,Ice Cream

ExecutiveDirector,Coffee &

Beverages

BusinessExecutiveManager,

Milks

ExecutiveDirector,Foods


Confectionery


Chilled Dairy

BusinessManager,

NESTL LiquidDrinks

BusinessManager,Exports

ExecutiveCommittee

Locally ManagedBusiness

Regionally/GloballyManaged Business

Shared Services Joint Venture



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The Nest &

GOOD FOOD, GOOD LIFE

FOUNDED ON THE PREMISE OF SHARED VALUE

Nestl was founded by Henri Nestl a Swiss pharmacist whodeveloped a milk food to save his neighbours child who was unableto accept his mothers breast milk. Back in 1867 - his goal was tocombat the problem of infant mortality due to malnutrition. Newsof this product spread throughout Europe and demand surged.Thus began a legacy of creating value that is embedded within ourvalues and corporate business principles that still stands rm morethan 140 years on. Today, Nestl, as the worlds leading Nutrition,Health and Wellness company is as committed as ever towardsbuilding a business based on sound human values and principles.

THE NEST THE PRIDE OF NESTL

Henri Nestl adopted his coat-of-arms as a trademark in 1867, andthe word Nestl which means little nest in his native tongueis today universally understood to represent warmth, security,nourishment, family togetherness, nurturing and caring values.

GOOD FOOD, GOOD LIFE. WHAT IT MEANS TO US

Nestl believes that Good Food is the foundation of Good as insufcient access in terms of quality and quantity could rein nutritional deciencies, malnutrition and other complex hissues, while unbalanced and excessive consumption can lto obesity. Nestl wants to be the leading Nutrition, Health Wellness company and also a reference for nancial performaWe want to ensure that we are trusted by all stakeholders.

...captures the very essenceof Nestl and the promisewe commit ourselves to everyday,everywhere as the leading Nutrition,Health and Wellness company.


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The Nestl Global

Creating SharedValue StrategyNutrition, Water and Rural Development

Creating Shared Value is part of the Nestlbusiness ethos; stating that in order tocreate long-term value for shareholders,we have to create value for society. Inaddition to operating in an environmentallysustainable manner and creating sharedvalue for shareholders and society, wemust also comply with our CorporateBusiness Principles.

OUR FOCUS AREAS

Nestl is committed to reporting itsperformance openly; reecting those areaswith a signicant current or potential impacton the Company. These include areas thatare of signicant concern to stakeholdersover which we have a reasonable degreeof control.

At Nestl, we have analysed our value chainand determined that the areas of greatestpotential for joint value optimisation with

society are Nutrition, Water and RuralDevelopment. These areas are core toour business strategy and operations, andwe have joint programmes with over 100organisations around the world in thesethree areas:

Nutrition : because food and nutritionare the basis of health and of ourbusiness it is the reason why weexist.

Water : because the ongoing qualityand availability of it is critical to life,the production of food and to ouroperations.

Rural development : because theoverall well-being of the farmers andtheir rural communities are intrinsic toour ability to continue to do business inthe future.

These three areas are fundamental to ouroverall business goal, which is To becomethe recognised leader in Nutrition, Healthand Wellness, trusted by all stakeholders.



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Creating Shared Value is part ofthe Nestl business ethos; statingthat in order to create long-termvalue for shareholders, we haveto create value for society.

CHALLENGES

Our challenges are varied in nature,spanning social, environmental andeconomic issues, and range from local toglobal in scale. These include:

Meeting the nutrition needs of low-income consumers : To provide consumerswith the best tasting, most nutritious

choices in a wide range of food andbeverage categories and eating occasions,from morning to night in line with ourmission of GOOD FOOD, GOOD LIFE.

The global water crisis : In recent years,water has been increasingly recognisedas equal to climate change as a pressingenvironmental issue. With approximatelytwo-thirds of water being withdrawn byagriculture, the future of agriculture andfood security is at stake if we are not ableto solve the worlds water crisis. We have

adopted rigorous standards to reduce waterconsumption at our plants and facilities,help farmers to become better stewardsof water and support water resourceawareness and education programmes.

The Nestl Creating Shared Value Model

CREATINGSHARED VALUENutrition, Water,

Rural Development

SUSTAINABILITYEnvironmental Stewardship: Acting todayin a way that protects the Earth for the future

COMPLIANCELaws, Business Principles, Code of Management Conduct

Packaging : Nestl has signicantly reducedthe volume of packaging material usedper tonne product. In addition to weightreduction, improvements in environmentalperformance are also relevant, and ourpackaging eco-design tool can assist in theselection of the most appropriate packagingfor many products.

Sustainable palm oil : We share theconcern about the serious environmentalthreat to rainforests and peat elds causedby oil palm plantations, and participate inmulti- stakeholder solutions to this complexproblem. We only buy processed palm oiland processed oil mixes, we do not usecrude palm oil and we have no direct linkwith plantations. We have also undertakenan in-depth review of our supply chainand committed to using only CertiedSustainable Palm Oil (CSPO) by 2015.



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Nestl Malaysia

and CSVWe are conscious that strategicpartnerships are key to thesuccess of our initiatives.

Our Creating Shared Value (CSV) work inMalaysia has evolved over the years andwe are now in a better position to evaluatethe effectiveness of the initiatives weembark on. We are more streamlined in ourapproach and better equipped to measurethe outcomes.

While the global direction of CSV is focusedon Nutrition, Water and Rural Development,each market is at liberty to determinethe scope, nature and investments of itsinitiatives. It is thus important that eachmarket assesses and evaluates everyinitiative to ensure that it is sustainable andyields the desired results.

In line with the Brundtland Commissionsdenition of sustainable development -development that meets the needs of thepresent without compromising the abilityof future generations to meet their ownneeds - we strive to ensure sustainabilityin all our efforts across the value chain.

A good example of partnership is theproject in Setiu which Nestl embarked onin 2007 with WWF-Malaysia, which wasaimed at empowering the local community,in particular, the women, with skills andknowledge to participate in sustainabledevelopment activities that will enhancetheir livelihood. The women were alsoencouraged to spearhead conservationawareness activities and eventually becomethe environmental guardians of the area toconserve the Setiu Wetlands.

Setiu was chosen as it is home to theworlds largest remaining population ofcritically endangered painted terrapins andnesting ground for the endangered greenturtle. It also boasts a rich repository offauna and ora, and an important breedingground for freshwater and marine sh.

Today, the Setiu Wetlands has beenrejuvenated through activities such asmangrove replanting where more than3,000* seedlings have been plantedsince the project started while turtle andenvironmental conservation awarenessis at an all time high amongst the localcommunity.

Motivated with a new sense of condence,the women of the Setiu wetlandshave now progressed using their basicentrepreneurial knowledge, environmentalawareness as well as communication skillswhich allow them to be involved in smalleconomic activities and play a bigger role indeveloping the local eco-tourism industry.

Similarly, ensuring the well-being ofthe communities where we source theraw materials for our products is key toour continued success and the nationsdevelopment. By creating new jobopportunities and sources of income, or byempowering the poor through education,and by encouraging sustainable productionpractices and purchasing directly from smallscale suppliers, we will have a bearing onthe local economy and the way people live.

We are conscious that strategic partnershipsare key to the success of our initiatives. Wedo not intend to reinvent the wheel. Rather,we seek to create shared value by workingwith the best partners, be it NGOs, theGovernment or any other organisation thatcan help ensure that we deliver long-termresults.

* Refer to PWCs assurance report on pages 90 to 91



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Managing Director Mr. Peter Vogt,WWF-Malaysias CEO Dato Dionysius

Sharma and the PEWANIS ladiesreplanting the mangroves.

Nestl Malaysias red rice projecthelps to create shared valueamong farmers in Sarawak.

Consumers trying out ournew beverage innovation

at the NESTL NOURISHINGMALAYSIA Showcase.

We have many examples of how we createvalue for society in Malaysia and this reportaims to demonstrate how Nestl is CreatingShared Value. To meet Bursa Malaysiasrequirements, we have segmented theinitiatives in four areas:1. Our Respect and Care

for the Community2. Our Commitment to the Environment3. Our People and the Workplace4. Our Consumers and the Marketplace

BOUNDARY AND SCOPEOF THE REPORT

The information contained in this annualCSV Report (the previous report was dated31 December 2009) covers the operationsof Nestl Malaysia for the year ended 31December 2010 unless otherwise stated.Data is provided for the Companysbusiness units, excluding joint venturesand suppliers, unless specically stated.The environmental data refers to NestlMalaysias seven factories only, while

health and safety gures cover all 5,004Nestl Malaysia employees.

We continue to prioritise those materialissues, which have a signicant currentor potential impact on the Company, areof signicant concern to stakeholders andover which Nestl has a degree of control.


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Engaging Our Stakeholders

STAKEHOLDER ENGAGEMENT

Following its rst stakeholder convening inOctober 2007, Nestl Malaysia has sinceheld similar sessions on an annual basis.Two convening sessions were held in Juneand December 2010, which were attendedby experts relevant to our three CSVfocus areas Nutrition, Water and Rural

Development. These experts representvarious sectors including CorporateGovernance, Community, Environment,Sustainable Development, Nutrition &Health, Consumers & Womens Issues,and Human Rights among others.

Stakeholders sharing their feedbackand suggestions at the two convening

sessions held in 2010.

The objectives of the convenings were to:

Update stakeholders on the progressmade

Discuss our Creating Shared Valueapproach

Obtain feedback on:- Creating Shared Value Initiatives

- Priority Issues- Actions and Measures

- Communication and Reporting

Two conveningsessions were held inJune and December2010, which were

attended by expertsrelevant to our threeCSV focus areas Nutrition, Water andRural Development.



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The following is a summary of what was discussed during the two Stakeholder Convening sessions held in June and December 20

Topic Issues Highlighted Stakeholder Recommendation Action Plans by Nestl

Nutrition &Health

Lack of communication / awareness on reformulationof products

To extend communicationon product innovations tonutritionists

Continue to improve public education acommunication on nutrition.

Introduction of Guideline Daily Amou(GDA), to insert information on nutritivalues, calories etc.

Promoting healthy lifestylesand healthy foods

N / A Promote healthy eating habits amoMalaysian children through the NesHealthy Kids Programme, a partnership wthe Nutrition Society of Malaysia.

World Walking Day initiative to promexercise and healthy living.

Launch of the How Am I campaign to hMalaysians keep track of their health statu

Internally encouraging wellness amongemployees everyday of the week i.e. StaircaMondays; distribution of fruits on Tuesdand Thursdays; Exercise Wednesdays; LunN Learn Thursdays.

Concerns on high levels ofsugar and MSG in products

Communicate clearly onproducts with reduced sugar,fat or salt content

Use of alternatives to replace ingrediensuch as sugar.

Continuous product innovation and renovati.e. accelerate where possible the reductioof fats, sugar and salt in products.

Introduction of MAGGI TASTYLITE Noodles; MILO Kurang Manis; KIT Singles; use of different types of grains CHEERIOS cereal; use of natural colourfor SMARTIES confectionery, MAT KOOLconfection and NESTL Chilled Dairy ran



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Topic Issues Highlighted Stakeholder Recommendation Action Plans by Nestl

In what ways has Nestlcontributed to the reductionin the use of packagingmaterials and recycling?

Raise awareness onimportance of packaginginnovations and recycling.Educate consumers onbenets of innovations toreduce use of packagingmaterials.

Continue with packaging source reduction. Reduced thickness of MILO and NESCA

RTD aluminium cans. Use of a thin-wall plastic cup for MAGGI

Cup.

YOCO yogurt drink cups 60% thinner.

Reduced height of packs e.g. NESPRAY mpowder

Recycling activity with Tetra Pak and TeStores preservation of the Belum-Temengrainforest.

Others Increase in prices ofconsumer products dueto increase in cost of rawmaterial, packaging materials,transportation/ distributionetc.

Maintain or minimise increasesin product prices

Maintain existing prices or minimise increasethrough: Improved production processes and

operational efciencies

Reduction in packaging materials Improved farming practices

Higher efciencies at supply source toimprove distribution



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Corporate

Governance

Nestl is committed to high standardsof corporate governance. The Board ofDirectors and each individual are directlyaccountable to the shareholders andstakeholders for ensuring that goodgovernance is committed and practised atevery level of the Companys operationsincluding relationships with third parties.Our guiding documents include, inter

alia, the Nestl Corporate BusinessPrinciples and the Nestl SupplierCode. The Company has adopted theNestl Corporate Governance Principlesof its holding company, Nestl S.A. inVevey, Switzerland, as its best practice incorporate governance. The principles ofcorporate governance covers the followingfour areas:

The rights and responsibilitiesof shareholders;

The equitable treatmentof shareholders;

The duties and responsibilitiesof directors; and

Disclosure and transparency.

Our Directors being briefed on identifying

good corporate governance practices alongwith their personal roles, responsibilitiesand liabilities at the Non-Executive DirectorsDevelopment Series.

Mr. Peter Vogt accepting theACCA MaSRA from Datuk Mohd. NasirAhmad, President of ACCA MalaysiaAdvisory Committee.

Mr. Marc Seiler accepting the Best CSR Awardat the Malaysian Corporate Governance Index2010 Awards, organised by the MinorityShareholder Watchdog Group.



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These principles are in line with theMalaysian Code on Corporate Governance[Revised 2007] and paragraphs 15.26and 15.27 of the Main Market Listingrequirements of the Bursa MalaysiaSecurities Berhad.

Note: The full statement on Corporate Governance appears in the Nestl Corporate Report 2010.

TRAINING FORNON-EXECUTIVE DIRECTORS

The Non-Executive Directors DevelopmentSeries (NEDDS) a one-day trainingprogramme conducted by the SecuritiesIndustry Development Corporation (SIDC)and PricewaterhouseCoopers AdvisoryServices Sdn. Bhd. (PwC) in November2010, provided an overview of the keyprinciples of Corporate Governance.

At the end of the programme, theparticipants were able to:

Analyse the fundamentals of CorporateGovernance and best practices;

Nestl in Malaysia pursuesa strategy of best practiceof corporate governance.We believe that complying

with laws and internal regulationsprotects the Companys reputationand provides the basis for thecreation of sustainable shared value.

Judge how the legal and statutoryframework will affect effectiveCorporate Governance;

Evaluate the importance of corporateboard and its composition, the duciaryduties of the board, managing directorsand non-executive directors;

Assess the risk management of non-compliance of corporate governance byorganisations.

The participants were: Tan Sri Dato SeriSyed Anwar Jamalullail (Chairman of theBoard of Directors, Tengku Tan Sri DatoDr Mahaleel Tengku Ariff (Independent,Non-Executive Director), Datuk Rakbin Shah Mohamad (Independent, Non-Executive Director) and Datuk Raah Salim(Independent, Non-Executive Director).From Nestle: Peter Vogt (ManagingDirector), Marc Seiler (Executive Director,Finance & Control), Chew Soi Ping(Executive Director, Ice Cream), ZainunNur Abdul Rauf (HR & Corporate AffairsDirector) and Abdul Wahab Abu Bakar(former Human Resource Director).

CREATING SHARED VALUE

Creating Shared Value is part of the Nebusiness ethos and embedded into tbusiness operations of the Company.

We comply to the ISO standards and loregulations as well as to the Nestl InterStandards & Guidelines, and our practare validated by third party SGS audduring the annual ISO 14001 audits.

The Companys CSV activities monitored internally by the CorpoAffairs Department, where the targets aachievements are compiled and reporin accordance with the Global RepoInitiative (GRI) guidelines.

In 2011, a CSV Council consistinrepresentatives from the Business Unand Corporate Affairs will be establiwith the objectives of expanding Cactivities across all categories and brands, and ensuring that they areline with the Companys policies sustainability.



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Performance Data

CREATING SHARED VALUE - PERFORMANCE SUMMARY

In line with the Global Reporting Initiative, we have included a set of economic indicators in this years CSV Report:

GRI Reference 2008 2009 2010

EconomicMY total sales EC1 RM4,026,319,000Net prot EC1 RM391,398,000The MarketplaceNUTRITIONProducts meeting or exceeding Nutritional Foundation prolingcriteria (as % of sales)

N/A 74%

Products meeting or exceeding consumer taste preference(as % of sales)

81%

Products with nutritional plus over competitors (as % of sales) 54%Products with a nutritional claim on front of pack 64%Products covered with Nestl NUTRITIONAL COMPASS(as % of sales)

100%

Products with GDA labelling (as % of sales) 57%

NUTRITION, HEALTH & WELLNESSTotal number of visitors received at both NESTL NOURISHINGMALAYSIA Showcase events

24,696

Our Environmental FootprintTotal energy consumption (GJ) EN3 / EN4 1,469,618 1,435,477 1,468,294Total energy consumption (GJ per tonne of manufactured product) N/A 4.84 4.68 4.39Total energy greenhouse emissions (tonnes CO2e) EN16 147,048Water Usage (m3) EN8 1,716,318 1,595,692 1,693,838Water Usage (m3 per tonne of manufactured product) N/A 5.65 5.21 5.07Non-hazardous waste disposed of to landll (t) EN22 3,622 3,418 2,473Materials recycled (t) EN22 17,974 15,043 21,315

Our PeopleWorkforce size LA1 5,004Lost Time Injury Frequency Rate LA7 0.78Leadership positions held by women LA13 23%Employee turnover LA2 8%Nestl & I Employee Opinion Survey Participation # 98%Employee Engagement score # 77%



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Our CommunityNumber of children impacted from the Kg. Maliau LayungKindergarten Project with Raleigh International

40-5

Total Number of PEWANIS members impacted from the SetiuWetlands Project with WWF-Malaysia (active & non-active)

1

Number of students impacted through the Nestl Healthy KidsProgramme

2,60

Number of camps launched under the MILO PLAY MORELEARN MORE campaignNumber of participants who took part in the World Walking Day event 10Number of farmers impacted from the Red Rice Projectin Serian, Sarawak

30

Nestl Employee Volunteer Programme (ROCKS)Total number of volunteers participating in 2010 activities(employees & non-employees)

# 7

Number of hours (total) # 39

# Nestl-specic indicator

ECONOMIC

GRI Reference 20

Operational FootprintNumber of factories #Number of product lines # 2Value GenerationMY total sales EC1 RM4,026,319,0Value Distribution EC1

Net proceeds of sales RM4,026,319,00Operating costs RM856,801,0Taxes RM74,346,0Net prot RM391,398,0

# Nestl-specic indicator



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The recently launched NestlHealthy Kids Programmecan be accessed onlineat www.healthykids.org.my

Sharing our knowledge onnutrition, good agriculturalpractices and R&D are waysof Creating Shared Valuefor the communitieswe engage with.


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Our Respect and Carefor the Community

While being part of the local community andseeing positive and sustainable growth hasbeen one of the Companys key objectivessince the launch of the United NationsMillennium Development Goals (MDG), theconcept of Creating Shared Value furtherreinforces this need.

Adopted by world leaders in 2000 with atarget date of achieving the goals by 2015,the Millennium Development Goals (MDG)set benchmarks and provide a frameworkfor the global community to join handstowards a common cause developmentfor everyone.

Through our work with non-governmentalorganisations (NGOs) in local communitieswe are able to contribute to some of theeight MDGs:

Goal 1: Eradicate extreme povertyand hunger

Goal 2: Achieve universal primaryeducation

Goal 3: Promote gender equalityand empower women

Goal 4: Reduce child mortalityGoal 5: Improve maternal health

Goal 6: Combat HIV/AIDS, malariaand other diseases

Goal 7: Ensure environmentalsustainability

Goal 8: Develop a Global Partnershipfor Development

We choose our community initiativescarefully and we leverage on our expertisein nutrition, good agricultural practices andR&D to maximise our impact.

HEALTHY KIDS LEAD TO HEALTHYADULTS (PLEASE REFER TO CASESTUDY)

A global programme designed to addressone of the worlds complex challenges undernutrition and obesity, particularlyamongst the young was launched byNestl Malaysia in 2010. The objective ofthe programme is to nd the right way toinuence children to move towards healthyproducts, teaching them what they need toeat, teaching their parents what to eat andto make sure that only healthy products areavailable at the schools.

1

ERADICATEEXTREME POVERTYAND HUNGER

ACHIEVE UNIVERSALPRIMARY EDUCATION

2

PROMOTE GENDEREQUALITY ANDEMPOWER WOMEN

3

REDUCECHILD MORTALITY

4

IMPROVEMATERNAL HEALTH

5

COMBAT HIV / AIDS,MALARIA AND OTHERDISEASES

6

ENSUREENVIRONMENTALSUSTAINABILITY

7

GLOBALPARTNERSHIP FORDEVELOPMENT

8

Participants having fun during the cooking activityat the Nestl Healthy Kids Programme Parent-Child Workshop.

The United Nations MillenniumDevelopment Goals



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We leverage onour expertise innutrition, good

agriculturapractices and

R&D to maximisour impact

A partnership with the Nutrition Societyof Malaysia, the Nestl Healthy Kids Programme , is part of the Groups globalinitiative using education as a tool to helpeducate and empower children to leadhealthier lifestyles. The global programmeaims to improve the nutrition, health andwellness of children through better eating,exercise and other key health measuressuch as hygiene.

Aimed at school children aged between7-12 years old, parents and teachers aswell as canteen operators, the programmeincludes an awareness campaign onnutrition and physical activity; and alongitudinal intervention programme with

monitoring to improve knowledge, attitudeand practices on nutrition and physicalactivity.

The programme also offers educationalcollaterals for children including comicbooks, bookmarks and posters andguidebooks for the parents.

NEXT STEPS: The intervention study willtake place in early 2011 in sixschools, reaching 250 students,and this will be carried overthe next three years.

Milo pix

Under the MILO PLAY MORE LEARN MORE campaign,children learn through participating actively in coaching clinics. MILO PLAY MORE

LEARN MORE CAMPAIGN

This initiative, which is aimed at usingknown sporting icons as role modelspread the message about the importanof a sports culture gained momentin 2010 where 6 camps were launchduring the November and Decemschool holiday period. A unique feais that all 6 camps were organised by Rukun Tetangga Committees consisof parents from the local neighbourhowith the full backing of MILO. Actiincluded coaching clinics followed by atournament. To ensure these activities sustainable, MILO contributed sports itsuch as netballs, footballs and basketbto the Rukun Tetangga communiinvolved. Apart from being involved iactivities, what brought smiles to the faof all involved was the presence of ubiquitous green MILO van. Consumcan visit the dedicated website for minformation: www.milo.com.my/playm



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NEXT STEPS: Nestl Malaysia will be sharingthe walking story with otherNestl markets across the globewith the hope of getting thewhole world walkingfor wellness.

WALKING THE WAYTO GOOD HEALTH

One of the key ndings of a majorlongitudinal survey of 47 urban and 41 ruralprimary schools involving 12,000 students

conducted by Nestl Malaysia andUniversiti Kebangsaan Malaysia (UKM) in2009 was that the prevalence of overweightand obese children had jumped to 26.5%from 20% in a span of six years.

Alarm bells prompted a team at Nestl todevise an initiative that would encourageMalaysians to start exercising slowly butsurely. This gave birth to the World WalkingDay, which was launched in six differentlocations simultaneously:

Kuala Lumpur: Taman Tasik Titiwangsa Penang: Polo Ground, Jalan Sepoy Line Kuantan: Padang MPK 1

Johor: Taman Sri Stulang, Johor Bahru Sabah: Penampang Sports Complex

Stadium

Sarawak: Waterfront, Kuching

Taman Tasik Titiwangsa attracted the largestcrowd (3,000) and the total number of peoplegathered in the six locations was 10,000.Every participant in the event would havewalked 3,000 steps that morning which is30% of the 10,000 steps recommended forindividuals daily.

Nestl hopes that the World Walking Daywill gain considerable momentum across thenation, inspiring communities everywhere towalk together daily for wellness.

Moving forward, Nestl hopes to encouragelocal communities to take up Walking Dayswith their neighbours and friends throughoutnext year.

FROM LEFT:

Nestl hosting World Walking Dayfor employees and members of thepublic to raise awareness onwellness and the benets of walking.

Local women from Kelantancarefully selecting quality chilliesfor MAGGI Chilli Sauce.



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CONTRACT FARMINGIMPROVES THE LIVES OFLOWER INCOME COMMUNITIES

Nestl, through its Agricultural ServicesDepartment began working with the localFarmers Association Board by engaginglocal farmers in Kelantan to produce chilliesfor MAGGI Chilli Sauce and help create newand sustainable income opportunities forthe poor farmers with an average incomeof less than RM650 a month*. The farmersare screened, interviewed and selectedby the project management committee toensure that they meet the criteria of thescheme. All the chillies produced are soldto the board, thus eliminating the needfor middle-men and also ensuring thatthere is a ready and assured buyer for allthe chillies produced, at a pre-determinedprice. This is in line with the NestlPolicy on Environmental Sustainability,which stipulates that, When selectingagricultural raw materials, Nestl prefersto use agricultural materials which areproduced based on sustainable practicesand are locally available.

The number of farmers involved in theproject has grown substantially over theyears, from a mere four* farmers in 1995to more than 150 farmers to date*. Thefarmers involved have beneted from thescheme, having been able to generateadditional income during the off-seasonfrom their other agricultural activities.

The project has won the Prime MinistersAward for Socio-Economic Development;and the farmers have been accordedthe respected and acknowledged SALM(Skim Amalan Ladang Baik Malaysia)accreditation for excellence in Malaysianfarming practices. SALM recognises andcerties farms that adopt good agriculturalpractices (GAP) and is benchmarked

against approved international agricustandards such as Europes EUREP GThe accreditation is a signicant testamto the quality of the produce as well areection of the agricultural practiceplace and embodies the principles of TQuality Management from farm to fork

With the success of the chilli contfarming in Kelantan, this scheme has breplicated for red rice farming in Saraw

When selecting agricultural raw materials,Nestl prefers to use agricultural materialswhich are produced based on sustainablepractices and are locally available.




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RED RICE PROJECTIN SERIAN, SARAWAK

Nestl (Malaysia) Berhad is the regionalmanufacturer for infant cereal, the keyingredient of which is red rice that isprevalent in Sarawak. Teaming up withthe Malaysian Agricultural Research &Development Institute (MARDI), theAgricultural Research Centre (ARC)Sarawak and the Sarawak Department ofAgriculture on a contract-farming scheme,Nestl hopes to boost the local agriculturalsector.

Under the contract farming scheme inSerian, more than 500 farmers coveringsome 350ha of rural farmland weretasked to plant and produce traditionalred rice; guided by optimum utilisation ofagricultural resources and the introductionto new farming innovations to lower costsand improve yields.

Five years after commencement, theproject achieved enough maturity tobenet from full scale commercialisation,

backed by the Companys commitment tocontinue with the R&D and increasing eldproductivity while maintaining the naturalfarming systems of traditional red ricefarmers in Sarawak. New red rice varietiesare also being explored.

Aimed at creating new income opportunitiesfor the farmers in the area, while stayingtrue to the Nestl philosophy of shared valuecreation and meeting the U.N. MillenniumDevelopment Goals, the project exposesthe farmers to Good Agricultural Practices(GAP) and helps them be self-reliant.

The project is also the beneciary of atripartite agreement between Nestl,MARDI and the Ministry of Science,Technology and Innovation (MOSTI)for a formal R&D collaboration foragriculture, and for the management andimplementation of the MOSTI Techno fundwhich saw RM500,000 channeled to Nestlfor commercialisation purposes. This wasused to procure agricultural machinerysuitable for small traditional farmers,reducing their burden of harvest.

FROM LEFT:

Our traditional red rice contract farmingscheme helps improve the socio-economicstandards of rural farmers in Sarawak.

Local kindergarten children in Sabahin their new classroom built by Nestland Raleigh International.



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In 2010, a kindergarten was built inKg. Maliau Layung in Pitas. The MaliauKindergarten was built over a period of 10weeks involving a team of 34 volunteers.The kindergarten will facilitate the pre-school education of an estimated 40 - 50young children between the ages of 4 6

years.

EMPOWERING WOMENTO TAKE THE LEAD

In 2007, Nestl and WWF-Malaysiaembarked on a project to empower thelocal community in Kampung Mangkok,in particular the women, with skills andknowledge to participate in sustainabledevelopment activities that will enhancetheir livelihood while empowering themto spearhead conservation awarenessactivities and eventually become theenvironmental guardians of the area toconserve the Setiu Wetlands.

The wetlands in Setiu is home to the worldslargest remaining population of criticallyendangered painted terrapins and nestingground for the endangered green turtle. Italso boasts a rich repository of fauna andora, and an important breeding ground forfreshwater and marine sh.

Today, the Setiu Wetlands has beenrejuvenated through activities such asmangrove replanting where more than3,000* seedlings have been plantedsince the project started while turtle andenvironmental conservation awarenessis at an all time high amongst the localcommunity.

The project, which involves one ofMalaysias richest and unique habitats andhas achieved better awareness of coastalforest conservation as well as capacitybuilding of the local community, is nowcoming to the end of its 3-year cycle.

Since the project began, employees fromNestl have on six occasions visited

Kampung Mangkok to meet and sharewith the women who call themselvesPEWANIS (Women Entrepreneurs of Setiu) some of the Companys know-how ongood manufacturing practices, productpackaging and marketing. In addition to theworkshop and dialogue sessions, Nestlalso recently presented the Group with acomputer and printer to help them withtheir marketing and bookkeeping.

Since 2007 Nestl and WWF-Malaysiahave provided training to enablethe women of Setiu to participate in

conserving the wetlands while enhancingtheir livelihoods. We hope that our longand fruitful partnership will continueinto a bright future, so that we canleave our children a living planet, saidDato Dr. Dionysius Sharma, ExecutiveDirector/CEO of WWF-Malaysia.

NEXT STEPS: Nestl will continue to workwith Raleigh in 2011 to ensurethat more underprivilegedchildren in rural Sabah willhave access to early education.Raleigh has identiedKg. Songsogon Magandai,a remote village about

60km from Kota Marudu.A kindergarten facility, whichwill also serve the nearbycommunity of SongsogonSuyad, will be built toaccommodate up tothirty children.





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NEXT STEPS: Nestl will proceed with thesecond stage of the Setiu

Wetlands Sustainability Projectwith WWF, focusing onDiversication Strengthening,in order for the project to beexpanded and replicated inother communities, and to befully sustainable in the long run.

2010 saw the conclusion of the rst phaseof the partnership with WWF Malaysia,where the establishment of PEWANIShas seen the members improve theirentrepreneurial skills and develop their roleas leaders in ensuring the sustainability oftheir community. In February, PEWANISwas ofcially registered under the SocietiesAct 1966 and Societies Regulations 1984(Akta Pertubuhan 1966 dan Peraturan-Peraturan Pertubuhan 1984).

In addition to their traditional banana chipventure as a means to gain supplementaryincomes, PEWANIS has also organisedfree English classes for the local children,conducted conservation awarenessactivities for the local community and are

active in mangrove replanting efforts.As testimony to their on-goingdevelopment, they are now exploringother entrepreneurship opportunities suchas eco-tourism in consultation with touroperators and government agencies todevelop a home-stay programme for localand international visitors.

The Setiu Sustainable DevelopmentProgram Project is in line with the U.N.Millennium Development Goals that seekopportunities to improve the lives of therural impoverished population througheducation, skills training or incomegenerating activities.

Today, the SetiuWetlands hasbeen rejuvenatedthrough activitiessuch as mangrove

replanting wheremore than 3,000*seedlings have beenplanted since theproject started.

FROM LEFT:

The children of Kg. Maliau Layungand Raleigh volunteers celebratingafter building the sixth kindergarten.

PEWANIS (Women Entrepreneursof Setiu) replanting mangrovesin the Setiu Wetlands.



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monitoring to improve knowledge, attitudeand practices on nutrition and physicalactivity.

To measure the impact of the awarenesssession on the target audience, 30 studentsfrom each school visited are selectedrandomly for a pre- and post-surveyon basic nutrition knowledge to gaugewhether there is an increase in knowledgeafter the session. A Body Mass Index (BMI)check was also conducted to assess theirnutritional status.

The Healthy Kids programme will

undoubtedly contribute positivelytowards raising awareness levels onthe importance of nutrition, healthand physical activities among children,parents and teachers. We look forwardto actively roll-out the activities underthis programme, said Dr. Tee E Siong,President of the Nutrition Society ofMalaysia at the launch of the event.

Having developed nutrition expertise overthe decades, Nestl believes that it cancontribute to the knowledge of nutrition,using education as a tool to help youngchildren understand the value of nutritionand physical activity.

The Global Nestl Healthy Kids Programmewas born out of the need to addresscomplex issues plaguing society globally under-nutrition and obesity, and aims toimprove the nutrition, health and wellnessof children between 4-16 years throughimproved diets, physical activity andhygiene.

The initiative has been designed incollaboration with national healthauthorities, child nutrition experts, andeducational foundations and will beextended to every Nestl market by theend of 2011, with each market adaptingthe programme based on its own needs.In more developed markets like the United

States of America for instance, obesity isa key challenge while for developing andunder-developed countries, under-nutritionis a great concern. The solution for bothproblems is a good nutritional diet andadequate physical activity.

In Malaysia, Nestl partnered with theNutrition Society of Malaysia (NSM) toroll-out its Healthy Kids chapter. Launchedin August 2010, the Programme reachedout to some 2,600 students in ve schoolsacross the Klang Valley within a three-month period.

The Healthy Kids Programme in Malaysiaentails the implementation of a two-prongprogramme, which runs concurrently.Aimed at school children aged between7-12 years old, parents and teachers,the programme includes an awarenesscampaign on nutrition and physical activitythat is done in an interactive manner; anda longitudinal intervention programme with

CASE STUDYNestl Healthy Kids Programme

Our Respect and Care for the Community



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More notably, the programmeincludes a research component aimedat developing and determining theeffectiveness of appropriate educationalmaterials to facilitate teaching ofnutrition to primary school children.We hope that by the end of this, we willhave the right approaches and materials

for teaching nutrition in primary schoolswhich we can share with the Ministry ofEducation, said Dr. Tee.

Activities for the Nestl Healthy KidsProgramme in Malaysia include:

A Parent-Child Workshop for parentsand children to discuss and learn aboutchild nutrition and healthy lifestyle withexperts.

The Nestl Healthy Kids Programme

website (www.healthykids.org.my)that contains educational tools andinteractive games to educate bothparents and children about healthyeating and active lifestyle.

School roadshows to impart simplehealthy eating messages to schoolchildren in a fun way.

A longitudinal intervention study -Evaluation of Nutrition EducationPackage for Primary School Children- to improve knowledge, attitude andpractices on nutrition and physicalactivity among children, parents andteachers which will begin in early2011.

The Programme will also offer educationalcollaterals for children that include comicbooks, bookmarks and posters; guidebookfor parents; and many more.

The Healthy Kids initiative has been runningfor several years in countries such asAustralia, France, Brazil, Russia, Italy andHungary, and has reached approximatelyfour million children worldwide. Allprogrammes are designed in collaborationwith the health and nutrition professionalbodies, national health authorities,child nutrition experts and educationalfoundations of the respective countries.In Southeast Asia, countries such asSingapore, Thailand and the Philippineshave also implemented this programme.

Nestl believes thatit can contributeto the knowledgeof nutrition, usingeducation as a tool tohelp young childrenunderstand the valueof nutrition andphysical activity.

86% of parents learnta lot from the workshop

19

3

95% of parents interestedto attend future workshop

21

1

Note: 1 parent mentioned that itshould be more interactive



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TARGETS AND ACHIEVEMENTS

RESPECT AND CARE FOR THE COMMUNITY

Rural Development, Education and Nutrition Awareness

What we set out to achieve What we have achieved to date Our way forward

Nestl supports equaleducation opportunities forcommunities in rural areasthat lack basic facilities forpre-school education, for ahead-start in life compared totheir peers in more privilegedareas.

Through a partnership with Raleigh International, Nestl has helpedbuild six kindergartens in some of the most desolate parts of Sabah,the most recent being a kindergarten in Kg. Maliau Layung in thePitas district.

To ensure the sustainability of the venture, Nestl, together withthe local education department, has also identied candidatesfrom the respective communities to be trained as teachers for thekindergartens.

Nestl will continue to work wRaleigh to ensure continuand reach out to more rurcommunities in Sabah.

In addition to the kindergarteallocations will also be mato build quarters for teacheassigned to the communities.

Nestl aims to introduca nutrition component this initiative to improve tnutrition, health and wellnessthe children through improvdiets, physical activity ahygiene.

Provide physically andmentally-challenged childrenwith learning opportunities.

Nestl visited its Learning Corners in Sekolah Khas Cheras andSekolah Khas Klang the two special schools under the Selangorand Federal Territory Association for the Mentally Handicappedto monitor the progress and evaluate their needs. The schoolsrequested for new computers, printers and learning materials.Unfortunately, no new Learning Corners were established in 2010.

Nestl Malaysia sponsored several activities organised by TheJumping Jelly Beans (JJB) a company responsible for bringingback theatre to children through different acting techniques andinteraction. The activities include Theatre Trainings at the SpecialNeeds Learning Centre (SNLC) and the Malaysian Association ofGuardians for the Intellectually Challenged (MAGIC), a storytellingperformance and sponsorship of students at the Magic of theMusicals event.

Nestl to provide necomputers, printers anlearning materials for the twschools. Nestl plans to seup another Learning Corner2011.

To consider sponsoring futuJJB activities or collaborawith other organisatioinvolved in initiatives mentally-challenged childre

Promote gender equality andempower women throughtraining and education in linewith the U.N. MillenniumDevelopment Goals that seeksopportunities to improve thelives of the rural populationthrough education, skillstraining or income generatingactivities.

In 2007, Nestl and WWF-Malaysia embarked on a project toempower the womenfolk of Setiu in Terengganu, with skills andknowledge to participate in sustainable development activities thatwill enhance their livelihood while empowering them to spearheadconservation awareness activities.

Today, the Setiu Wetlands has been rejuvenated through activitiessuch as mangrove replanting where more than 3,000* seedlingshave been planted since the project started while turtle andenvironmental conservation awareness is at an all time highamongst the local community.

Nestl will proceed with thsecond stage of the SetiWetlands SustainabiliProject with WWF, focusion Diversication, whcontinuing to provieducation and knowledge owetlands conservation.





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The Setiu Sustainable Development Project has since encouraged

the local women to explore other entrepreneurship opportunitiessuch as eco-tourism and they are currently developing a home-stayprogramme for local and international visitors.

Nestl is studying avenues

to provide support for thewomen to seek new incomeopportunities.

To provide new incomeopportunities for self-starters.

Nestl Ice Cream introduced a mobile business opportunityfor individuals interested in a self-sustaining entrepreneurshipmodel by providing upfront investment with subsidised interestrate repayment; free uniforms, road tax, Personal Accident andInsurance coverage.

Training was provided on the products, sales and supply chain.The 29 participants were also given various incentive schemes toreward their achievement.

The end result - individuals are able ensure a long-term sustainableincome to supplement their welfare.

To provide ongoing trainingfor the individuals as mobilevendors and provide themwith incentives to recruit andmanage other individuals tojoin the programme.

They will also be encouragedto recruit physically challengedindividuals.

Nutrition and HealthAddress complex issues plaguing society globally under-nutrition and obesity through improved awareness and activities.

Improve the nutrition, healthand wellness of childrenthrough better eating, exerciseand other key health measuressuch as hygiene.

In 2010, Nestl Malaysia launched the Nestl Healthy KidsProgramme in collaboration with the Nutrition Society of Malaysia a pilot project aimed to educate and inuence children to movetowards healthy diets and lifestyles and designed to address thechallenges of under-nutrition and obesity amongst the young.

The awareness programme reached some 2,600 students acrossve schools.

A website (www.healthykids.org.my) was also developed to makelearning about nutrition easier, more fun and effective for parentsand children. The website features interactive tools and practicaltips on nutrition and healthy lifestyles.

In 2011, Nestl Malaysia willimplement the interventionprogramme - a pilot projectacross six schools, reaching250 students.

Raise awareness amongkey stakeholders aboutthe problems of obesity,and educate them on theimportance of exercise.

In 2010, with the high prevalence of overweight children and adultsand obesity among Malaysia, Nestl initiated World Walking Day toencourage more Malaysians to walk for their health.

The initiative was launched in six locations around Malaysiasimultaneously attracting more than 10,000 participants.

In 2011, we will encouragethe public to have WalkingDays with neighbours andfriends throughout the year.Nestl will support the walkinggroup by giving free t-shirts orproduct sampling.

Nestl Malaysia will be sharingthe walking story with otherNestl markets across theglobe with the goal of gettinga large global populationwalking for wellness.



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Disaster Relief

Provide assistance duringnatural disasters to relievethe burden of the victims andensure they remain nourisheddespite being displaced.

Nestl provided nourishment in the form of MAGGI noodles,NESTL Breakfast Cereals, MILO and NESCAF drinks to thepeople affected by oods that hit the Northern States in November2010. Food was also donated through the Malaysian Red CrescentSociety.

In addition to the local disasters, Nestl Malaysia also joined itscounterparts from Nestl markets globally to raise funds for victimsof the Haiti earthquake and Pakistan oods.

To continue these efforand provide aid efcienand swiftly to affectecommunities.

To explore the possibility incorporating a hygiene anutrition element in futuactivities.

Agriculture

Win-Win Situation for allthrough Contract Farming.

One of the focuses of theCompanys Creating SharedValue initiative is RuralDevelopment and among theactivities undertaken by thecompany includes ContractFarming initiatives.

This is in line with the NestlPolicy on EnvironmentalSustainability, which stipulatesthat, When selectingagricultural raw materials,Nestl prefers to useagricultural materials whichare produced based onsustainable practices and arelocally available.

The Nestl Chilli contract farming scheme was established inKelantan in 1995.

The number of contract farmers today is over 150* and incomelevels of the participating farmers have increased.

A chilli puree factory has been set-up by the Farmers AssociationBoard, with technical assistance from Nestl, to process freshchillies when there is over-production, and thereafter to potentiallysupply to Nestl.

The contract farming fred chilli is a sustainable ogoing effort, and Nestl wcontinue to work closely withe Farmers Association anthe farmers to further improvyields and quality of cropsmeet global standards.

Boosting the localagriculture industry throughimprovements in processesand yields, and to improve thelivelihoods of farmers.

In March 2010, a full-scale commercialisation programme waslaunched in Tebedu, Serian, Sarawak. Under the contract-farmingscheme, more than 500 farmers were given the task to plant andproduce traditional red rice for the manufacture of Nestl range ofinfant cereals.

To continue working closewith the Farmers Associatioand the farmers.

To consolidate the Sarawak RRice Programme to indu

farmer loyalty and complianas well as to intensify the R&efforts.


Good Progress Satisfactory Requires Improvement




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Our Commitmentto the Environment

Improving agricultural productivityis absolutely fundamental in helping toaddress water shortages and increasingthe crop per drop, particularly in thedeveloping world.Peter Brabeck-Letmathe , Chairman, Nestl S.A.

SHARING OUR VISION

OUR ENVIRONMENTAL FOOTPRINT

Our goal across the Nestl group is toproduce tasty and nutritious food andbeverages with the lowest environmentalfootprint. To achieve this, we have tocontinuously improve our operationalefciency and environmental performance.Every Nestl market is required to publishve performance indicators - production,water withdrawal, discharge, energy andgreenhouse gases which keeps track ofour progress.

This naturally means radical changes acrossthe Group and ensuring that every singleperson associated with the Companyunderstands the importance of our efforts.One of the things we do is apply a life cycleapproach to assess the impact of our own

operations and those associated with thewider value chain, in an effort to create abetter future and Creating Shared Value for both Nestl and society.

The year under review has seen a strong drivetowards further reduction in the consumptionof energy and water. Investments to achievethese reductions were realised in all factories.We successfully reduced electricity and steamconsumption and further reduced waterutilisation in our processes.

In terms of energy consumption, ourgoal is simple - optimise the equipmentto ensure that we use the right energyfor the right job. We have optimised theequipment used at the main factories inShah Alam, Petaling Jaya and Chembong,and have installed equipment adjustments

like variable speed drives to ensure thatthe energy used is according to the actualprocess demand. This includes processoptimisation. An example is steam pressurereduction that ensures optimum pressureis supplied, allowing for further energycuts without affecting the quality of theproduct. Nestl Malaysia has also installedhigh efcient chillers, which requires lessenergy. This is made possible by havingclose links with equipment manufacturersto understand the latest technologicaldevelopments that can help us reduce ourenergy consumption.

Progress has been made, as reectedin our data, between 2009 and 2010,Nestl achieved a 9% reduction in energyat constant volumes of 2009, which issignicant considering the breadth of ouroperations.



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At the beginning of 2010, a dedicatedSenior Engineer was appointed to drive thevarious environmental-related projects andspeed up the cross fertilisation of bestpractices in our facilities.

ADDRESSING CLIMATE CHANGE

Climate change presents many challengesto our business, with global warmingaffecting our agriculture supply chain andfurther exacerbating the issue of waterscarcity and supply.

At Nestl, we are doing our part to addressthe problem by reducing our total annualenergy consumption and the emission ofgreenhouse gases from our operations.

Throughout 2010, several initiatives wereintroduced to optimise our energy usage,i.e. to maximise reduction in energyconsumption at all our facilities withoutcompromising production volume andquality. A stable delivery of products as perour production plan has strongly contributedto a sharp reduction of energy usage pertonne of product in all our factories.

In 2010, we achieved a total reductionat constant volume, of 9.0% in energyconsumption per tonne product. Thissurpassed the annual equivalent target of2% reduction at constant volume. In yearlyenergy reduction terms, this translatesfrom 4.68 GJ per tonne in 2009 to 4.39 GJper tonne in 2010.

The reduction in consumption can dirbe attributed to operational efcienat our new Non-Dairy Creamer PlantSoluble Coffee plant in our Shah Afactory; reduction of the steam pressfrom boilers to the noodle manufactuplant in Kuching; installation of economin the Petaling Jaya, Chembong and SAlam factories to recover waste enefrom boilers; installation of chillers aChembong factory to improve operatiefciencies; and deploying Variable SDrives to automate equipment that high energy which eliminates electrwastage during low demand periods.

Nestl creates shared value by working with farmersto source its raw materials locally.

Approximately 165,553 farmers and suppliers are trainedthrough capacity building programmes worldwide.



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At the same time, we formed partnershipswith external specialists in the eld ofenergy management to audit our operationsand explore opportunities to eliminatewaste energy.

The reduction of energy consumptionalso had a positive effect on the emissionof greenhouse gases (CO2) and AirAcidication Potential gases (SOx), with atotal reduction of 10% direct CO2 emissionper tonne product and 11% SOx emissionper tonne product.

In 2011, we expect to record furtherimprovements through our partnershipswith external experts; reduction of steampressure at the noodle plant in Batu Tiga,installation of Air Diffusers in Chembong,and the further optimisation of existingequipment and processes.

WATER MANAGEMENT

- OUR TOP PRIORITY

Agriculture uses around 70% of freshwaterwithdrawals globally and combinedwith increasing afuence and lifestylepatterns, Nestl believes that the worldis headed for a water crisis that will haveserious ramications on food security.The entire food chain from agriculture tomanufacturing and consumption contributesto water availability and quality.

As a founding signatory of the UN GlobalCompact CEO Water mandate which waslaunched in July 2007, we have madewater management our top priority, wherewe continuously:

Work to reduce the amount of waterwithdrawn throughout our productionprocesses.

Assure that our water activities respectlocal water resources.

Ensure that excess water dischargedinto the environment is clean.

Engage with vendors and suppliers topromote water conservation.

Collaborate with others to createawareness within the variouscommunities and educate them on thecritical nature of water conservation.

* NB: In addition to being a signatory tothe UN Global Compact CEO Mandate,Nestl S.A. is also a key member of theWEF Water Task Force and 2030 WaterResources Group.

Nestl Malaysia has set itself an annual

target of 4% reduction at constantvolume of 200 in the utilisation of waterresources, which will be measured onthe usage per tonne product produced.To achieve this, we have put in placea Water Savings Programme whichincludes the following initiatives:

Creating awareness among the factorystaff to eliminate waste and re-use thewater resources in daily operations.

Optimising our main cooling toweroperations through the installation ofautomatic fan speed controllers andautomatic blow down controllers,which eliminates unnecessary waterwastage.

Reducing and optimising the watersupply pressure in our factoriesresulting in additional water savings.

FROM LEFT:

Water is a joint responsibilityand Nestl continuously

promotes water conservation.

Guided by The Nestl Policyon the Environment, we continue to

research and explore waysto protect the planet through

conservation and recycling initiatives.

Packaging innovationreduces waste as well as energy

and water consumption.



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Our Commitment to the Environment

Exploring the use of rainwater forvarious applications - a small scalepilot project was implemented in ourNational Distribution Centre to collectrainwater that was used for variouscleaning applications.

In 2010, we achieved a total reductionat constant volume of 4.85% in waterconsumption per tonne product. Thissurpassed the annual equivalent target of4% reduction at constant volume. In yearlywater reduction terms, this translates from5.21m3 /tonne in 2009 to 5.07m3 /tonne in2010.

The savings in water utilisation rate of46,785 m3 /year in 2010 is enough to sustain855 people annually.

In addition to the direct usage of water inour operations, we are also looking at waysto reduce water consumption throughoutthe supply chain. This includes ongoingR&D with Malaysian Agriculture Research& Development Institute (MARDI), Ninamajuand BERNAS, on semi-aerobic rice farming

where initial results have shown between30% to 50% water savings compared toconventional wetland rice farming.

Further to that, we also conductedawareness and education programmeswith our contract farmers and therelevant agencies and shared our bestpractices with local Authorities, BusinessPartners and Colleges. For example, oursuccess in water savings and wastewateroperations in the Chembong factory wasshared with the Federation of MalaysiaManufacturers (FMM), International IslamicUniversity Malaysia, Negeri Sembilan StateGovernment and our regular suppliers.

Looking ahead, we will explore opportunitiesto optimise water usage through newinitiatives such as the recycling of rainwater,treated water recycling and furtheroptimisation of processes. Simultaneously,we are also working with our watertreatment consultants to seek otheravenues to reduce water consumption inour operations.

SAVINGS THROUGH

INNOVATIVE PACKAGING

Packaging materials indirectly impactenvironment through water and eneconsumption during production and waste that end up in landlls.

At Nestl, we continuously seek wayreduce this impact and have adopted following criteria in the renovation

innovation of our product packaging: Reduce weight and volume of

packaging materials.

Lead in the development of renewaresources.

Strongly support recycling of upackaging materials where appropr

PIQETWe successfully rolled-out thePackagiImpact Quick Evaluation Tool (PIQin 2010 with six packaging speciaselected to receive the rst training at Nestl R&D Centre in Singapore. PIQan eco-design tool that helps compare form of packaging to another in termenvironmental impact, developed bySustainable Packaging Alliance in ccollaboration with RMIT UniversAustralia.



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The tool will be used by trained packagingspecialists to determine packagingsolutions with minimal impact on theenvironment, while meeting quality andsafety standards.

The year under review saw an increasein packaging issues related to foodcontact safety and compliance. Despitethis, through packaging innovation andrenovation, we made progress in packagingreduction, contributing to 370 tonnesmaterial reduction in 2010. As a result, theoverall packaging material usage per metrictonne of product was reduced by 4% ascompared to 2009.

Among the major initiatives completed in2010 include:

Conversion of the 25kg carton box tothe 500kg big bag for instant coffee forthe export market.

Down-gauging exercise for MILO andNESCAF ready-to-drink aluminiumcan thickness to 0.26mm for the exportmarket, contributing to 60 tonnes ofpackaging reduction.

Conversion of all MILO retail soft packsfrom aluminium based material tometalised lm, enabling the reduction

of aluminium usage from 7 micron toonly 2.5 micron, and contributing to 38tonnes of packaging material reductionper year.

A systematic packaging review toreduce packaging material usagewas also conducted by the packagingspecialists. One of the key outcomeswas the successful reduction in heightof the MILO 2kg soft packs thattranslated to 46.8 metric tonnes.

RecyclingWhere appropriate, we strongly advocaterecycling of used packaging materials.In 2010, we teamed up with Tesco Storesand Tetra Pak to raise public awareness onthe importance of preserving our naturalrainforest through a beverage packetrecycling campaign.

Throughout October 2010, consumerswere encouraged to bring their usedbeverage packets (regardless of brand,shape and size) for recycling at any of the14 participating Tesco Hypermarkets inKlang Valley, in support of the MalaysianNature Societys (MNS) efforts to protectthe Belum-Temengor Rainforest.

For every kilogramme of beverage packetcollected, Tesco Stores, Nestl Malaysia andTetra Pak collectively donated RM10.00 toMNS. A total of 240,005 packets weighinga total of 3,429 kilogrammes was collected.This worked out to RM34,290 being raisedduring the campaign. Additionally, Nestlalso gave away free packets of MILOUHT 250ml to consumers who brought in10 empty Nestl product packets.

NEXT STEPS: In the coming year, packagingsource reduction remains astrong focus and we expectfurther reduction especially withthe implementation of PIQET inthe reviewing and evaluationprocedures.

Nestl factories ensuringcontinuous improvementin packaging safetyand compliance.

Nestl, Tesco Stores and Tetra Pakjoined forces to raise awareness onrainforest preservation through abeverage recycling campaign.



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SUPPLY CHAIN

The Nestl Supplier Code speciesand supports the implementation ofnon-negotiable minimum standards forsuppliers, their employees, agents andsubcontractors.

Beyond legal compliance, the SupplierCode provides orientation and support,encompassing six key areas: BusinessIntegrity, Safety and Health, Sustainability,Labour Standards, Environment, andSupplying Farmers. To ensure full compliance with the Code,Nestl has put in place ResponsibleSourcing standards, which requires vendorsand suppliers to do the following:

1. Register with SEDEX to provide asecure platform to share information onthe suppliers social and environmentalperformance, avoiding multipleassessments.


2. Self-assessment

3. Third Party Audit

4. Gap Closing and Full Compliance

In 2010, Responsible Sourcing was appliedto 60 suppliers of direct materials.

Currently, major gaps have been identiedin the areas of labour standards (overtimecharges), safety and environmentalcompliance.

Sustainable logistics andenvironmental initiativesIn 2010, Supply Chain continued the drivetowards sustainable logistics. One ofthe key initiatives was to convert expiredproducts into animal feed, and liquid wasteinto organic fertiliser. The project hasprogressed well, with the total conversionrate improving from 45% in 2009, to 95%by October 2010.

Our Nestl Policy on EnvironmentalSustainability adheres to the localMalaysian regulations and ourpractices are validated by thirdparty SGS auditors duringthe annual ISO 14001 audits.

Another initiative was to minimise empty return trips by delivering nigoods to our distributors and collecempty pallets for the return journey. Tresulted in a reduction in the numbetrips, further reducing our carbon footp

COMPLIANCE

Our Nestl Policy on EnvironmSustainability adheres to local Malayregulations and our practices are validby third party SGS auditors duringannual ISO 14001 audits.

Nestl Malaysia has been complying wthe ISO standards and local regulatas well as to the Companys interstandards and guidelines.



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The Companys commitment to helpreduce greenhouse gas emissions and tomeet the challenges of depleting energyresources has seen the implementation ofseveral initiatives to reduce energy usage.Our goal to be an energy efcient companyhas seen us investing in new technologies toreduce wastage and increase efciencies.

In a typical food industry, the boiler houseis one of the main energy users with plainboilers having an energy efciency of 70% 80% depending on its usage. The diagramprovides a breakdown of the various lossesthat occur in a boiler.

From the diagram on the left, it is clear thatsignicant savings can be achieved withreduced losses from Flue Gas discharge,optimising the use of excess air andautomating the blow-down operations.

Our partnerships with external specialistsin the eld of energy management haveled to new opportunities to eliminatewaste. These include implementing newtechnologies to address losses in the threementioned areas of the boiler operations.

We have installed the appropriatetechnologies at the Chembong Factory torecover losses in these three key areas.

Our goal to be an energyefficient company has

seen us investing in new

technologies to reducewastage and increase

efficiencies.

Radiation1%

Blow Down Losses2-4%

Excess Air Losses3-5%

Flue Gas Losses8-10%

CASE STUDY

Implementing Energy EfficientTechnologies in Nestl Malaysia



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A. ENERGY RECOVERY

FROM FLUE GAS

The exhaust air emitted from the boilerscontains a signicant amount of energydue to its high temperature that rangesbetween 250C 300C.

To recover this potential energy, thefactory installed a heat exchanger,also known in the industry as anEconomiser. Feed water ows withinthe tubes in the Economiser, allowingheat to transfer from the hot ue gas asit passes through the unit. This resultsin raising the temperature of the feedwater to about 30C 50C which isthen recycled for the boilers heatingprocess.

Following installation of the economiser,an average fuel saving of 0.0011m3*per tonne of production volume wasachieved.

B. RECOVERING LOSSES FROM THE

EXCESS AIR IN FLUE GAS

In the burning process of Light FuelOil within the boiler, using too muchexcess air leads to energy loss.However, too little excess air wouldlead to high Carbon Monoxide (CO)and Black Smoke emissions into theenvironment.

To ensure compliance of emissionlevels and to achieve higher energyefciency, the factory installed aBurner Management System, whichcontinuously monitors and controls thesystem for the burning process.

The unit tracks the pollutants (CO)and excess air, and adjusts the burneraccordingly to minimise losses andensure environmental compliance.

The nal result was an averagefuel saving of 0.01m3* per tonne ofproduction volume.

C. EFFICIENT BLOWDOWN OF

BOILER WATER

To prevent the build-up of scale inboiler drum, it is necessary to dischawater from the boiler from time to tiHowever excessive and uncontromanual blowdowns would resultenergy wastage.

To optimise the blowdown operaand minimise energy loss, an automblow down system was installed whmonitors the chemical contents in boiler drum and triggers a dischof the right amount of water whneeded.

View of the Economiser

installed in theChembong factory.

The Burner ManagementSystem Display Unit.

RESULTS: The average fuel savingsrecorded from the installationof the burner managementsystem, automatic blowdownsystem and economiser in theboiler operations contributedto signicant savings at the

Chembong factory in 2010.Economisers have been installedin our Petaling Jaya and ShahAlam factories, and we will beequipping all remaining boileroperations at the other facilitieswith a similar unit.




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Nestl sees its environmental performanceas an increasingly important strategicelement for competitive differentiation, inaddition to taste and nutritional value. TheCompany believes that the environmentaland social impacts of products all along theirvalue chains will become an increasinglyimportant purchasing criterion for manyconsumers, both in industrialised countriesand emerging regions.

At Nestl, caring for the environment isnot only an absolute necessity to ensurethe future availability of agricultural rawmaterials but it is also the very basis forfuture business success as well as foodsecurity. Across the Companys operationsglobally, Nestl works towards developingproducts and value chains that deliver notonly great taste and sound nutrition, but alsohelp consumers to lower their individualenvironmental footprint of eating.

This also means addressing issues thathave an impact on our business, suchas palm oil. Nestl shares the concernabout the serious environmental threatto rainforests and peatelds in SoutheastAsia caused by palm oil plantations. Palm

oil is one of the most versatile vegetablefats used. This widely used in a variety ofproducts. Nestl as a group uses about0.7% of the global supply (320,000MT).

While palm oil is not a major raw materialfor Nestl, as the Company only usesprocessed palm oil and has no direct link tothe plantations, the Company recognisesthe need for effective multi-stakeholdersolution to this complex problem. At Nestl,the way we make our products is just asimportant as the quality of the productsthemselves.

Nestl views the destruction of tropicalrainforests and peatlands as one of themost serious environmental issues facingmankind. It is estimated that rainforestdestruction contributes to around 20% ofcarbon dioxide emissions more than theentire transport sector.

Due to increasing concerns pertaining tothe issue of palm oil and sustainability,Nestl organised a special forum entitledCommitted towards Sustainable PalmOil and Diversity with key stakeholdersand the media to create better awareness

on the issues plaguing the industry andunderstand the action taken by the keyprotagonists involved.

Participants included the Roundtable forSustainable Palm Oil (RSPO), MalaysianPalm Oil Council (MPOC), WWF-Malaysiaand United Plantations Berhad. NestlS.A. was represented by Mr. Jos Lopez,Executive Vice President for Operations.

Participants at the forum addressed issuesplaguing the industry including accusationsof various human rights violations suchas low pay, poor working conditions andtheft of land. Palm oil production has beendocumented as a cause of substantial andoften irreversible damage to the naturalenvironment, with deforestation, habitatloss of critically endangered species, anda signicant increase in greenhouse gasemissions listed as some of its impacts.The fact that palm oil is now used asan ingredient in bio-diesel adds evenmore pressure: this is a new marketfor palm oil which has the potential todramatically increase global demand forthis commodity.

SPECIAL FOCUS Committed towards SustainablePalm Oil and Diversity

Nestl forumon palm oil

sustainability withkey stakeholders.

Our Commitmentto the Environment



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What is clear is that palm oil is an importantagricultural product that has an impacton the lives of thousands of farmers inMalaysia alone. As Mr. Jos Lopez pointedout, there is also good news to be reportedfrom the sector.

There have been instances wheresome social initiatives use prots frompalm oil to nance poverty alleviationstrategies. It has brought aboutimproved livelihoods to smallholders inMalaysia; and research has shown it tobe a healthy choice of edible fat.

Another project in Malaysia, done jointlywith WWF, entails a smallholder oil palmsustainability project in the ecologicallysensitive Kinabatangan river basin. If theefforts are successful, it will greatly reducethe level of agricultural contaminants fromoil palm plantings, into this importantwaterway. Additionally, Nestl will alsoshare agricultural experiences with WWFin the area of riparian reforestation, withthe hope that these efforts can lead to anincrease in both the survival and growthrate of jungle sampling plantings along theriverbank.

The current challenge, Mr. Jos Lopezpointed out, is to balance the strong appetiteand dependence on palm oil and how wecan continue consuming and producingpalm oil in a sustainable manner.

The world population is growingand this combined with our growingafuence have resulted in us demandingmore from this planet. The challengefor everyone today is how to feed theneeds of this growing population, yetmaking the lowest impact possible onthe environment.

The Nestl Policy on EnvironmentalSustainability, commits to givingpreference to suppliers who continuouslystrive towards improving the efciencyand sustainability of their operations anduse of resources as part of this policy. TheCompany has undertaken a detailed reviewof its supply chain to establish the sourceof its palm oil supplies. Nestl has publiclyannounced that it is committed to usingonly Certied Sustainable Palm Oil by2015, when sufcient quantities should beavailable.

Nestl has also been closely associawith the Roundtable on SustainaPalm Oil (RSPO) through the SustainAgriculture Initiative Platform sincinception and the Company has joint Ras full corporate membership.

To build a global movement to supthe development, implementation disclosure of sustainable forestry practiNestl is intensifying its cooperation international organisations. Nestl is in discussions with a number of NGwith expertise in this area and acticontributes to seek practical solutionthis complex problem.

With one of the largest private R&D faciin the world, Nestl has also commiresources and intensied its work on ground, particularly in tree science anagronomy where the Company gives diassistance and share best practices wlocal farmers by leveraging its extenexpertise in R&D.

Nestl as a group has communicated commitment to achieve sustainable poil by 2015 and is making progresscertied palm oil and palm oil certieven more rapidly. For 2010, 18% opurchases were covered and the Compaexpects to reach 50% by the end of 201

At Nestl, caring for the environmentis not only an absolute necessity

to ensure the future availability ofagricultural raw materials but it is

also the very basis for future businesssuccess as well as food security.

Mr. Jos Lopez urged Malaysia,as one of the biggest producersof palm oil in the worldto take the lead in this matter.



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NESTL MALAYSIA ENERGY USAGETarget to reduce 2% Energy Usage at constant volume of 2009

PACKAGING MATERIAL USAGE PER METRIC TONNEOF PRODUCT

READY-TO-DRINK CAN THICKNESS

AIR EMISSIONS - KILOGRAMME SO PER TONNE PRODUCT AIR EMISSIONS - TONNES CO2 PER TONNE PRODUCT

NESTL MALAYSIA WATER USAGETarget to reduce 4% Water Usage at constant volume of 2009

Year

2001

ear

2001

3.20

3.844.20

1.931.44

1.00

0.47 0.55 0.55 0.49

0

1

2

3

4

5

2002 2003 2004 20052006 2007 2008 2009 2010

2008 2009 2010

5.65 m 3 /tonne

5.21 m3

/tonne5.07 m 3 /tonne

m 3 /tonne5.0

5.1

5.2

5.35.4

5.5

5.6

5.75.8

5.9

6.0

Year

0.0

0.1

0.2

0.3

0.4

Year

0.280 0.285 0.280

0.229 0.2120.182

0.1990.180 0.165 0.158

2001 2002 2003 2004 2005

2006 2007 2008 2009 2010

0.0

0.1

0.2

0.3

0.4

Year

0.340.36

0.33

0.23 0.220 .1 9 0 .1 9 0 .20 0 .20 0.18

2001 2002 2003 2004 20052006 2007 2008 2009 2010

4.0

4.1

4.2

4.34.4

4.5

4.6

4.74.8

4.9

5.0

Target 4.27GJ/tonne

4.84 GJ/tonne

4.68 GJ/tonne

4.39 GJ/tonne

2008 2009 2010

Year

0.29mm0.28mm

0.27mm

0.26mm

Year

1999 2001 2005 2010

0.20

0.21

0.220.23

0.24

0.25

0.260.27

0.28

0.29

0.30



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OUR ENVIRONMENTAL FOOTPRINT - OUR PERFORMANCE


ProductionProduction volume (tonnes) 303,576 306,489 334,1Direct energy consumption - scope1 (GJ) EN3Total energy consumption (GJ) 1,469,618 1,435,477 1,468,2Total energy consumption (GJ per tonne of manufactured product) 4.84 4.68 4Greenhouse Gas Emissions EN16

Scope 1 - Direct energy emissions (tonnes CO2e) 61,822 61,984 60,10Scope 2 - Energy indirect emissions (tonnes CO2e) 86,94Total energy greenhouse emissions (tonnes CO2e) 147,04Scope 1 -

2010 csvreport eng

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