Nestlé’s shareholders have a golden opportunity to call on the food giant to promote healthier lives in almost two hundred countries by backing a bold resolution at the multinational’s Annual General Meeting this week. Doing so can protect their profits in the long-haul.

Backed by a coalition of five institutional investors with $ 1.68 trillion in assets under management, the resolution calls on the world’s largest food and drinks company to transparently disclose the sales of its products by drawing on government-approved nutrient profiling methods.

In addition, the resolution urges the company to strategically boost the proportion of sales from healthier products. The resolution is supported by ShareAction, a UK charity that champions responsible investment. It coordinates the Healthy Markets Initiative (HMI), a coalition of 40 institutional investors that engages with the world’s largest food and beverage companies to ramp up access to affordable and healthy food.

The resolution comes at a time when diet-related sickness claims the lives of 11 million people a year. In the past two decades, virtually no progress has been made to stem the tide of childhood obesity. Adolescents are now four times as likely to live with obesity as compared to thirty years ago. 

While obesity is a multifactorial condition, research has demonstrated that the food industry plays an important role in shaping what we eat by flooding the places in which we grow up and live with cheap and less healthy foods. 

Obesity is a financially material issue that harms the health of the economy by driving absenteeism, presenteeism, unemployment, and lower wages. The price tag of obesity is predicted to escalate to $4 trillion a year by 2035, equating to 4% of global GDP. That is comparable to the cost of one Covid-19 pandemic every year.

First of its kind resolution 

The draft resolution going before Nestlé shareholders is the first of its kind to escalate to a vote at an Annual General Meeting (AGM) of a major food and drinks company. In the past, similar resolutions urging companies to enhance the proportion of sales from healthier products have been proposed. However, they never progressed to the voting stage because companies responded with concrete commitments to enhance access to healthier products, prompting the resolutions to be withdrawn.

The resolution is aligned with the WHO’s broader thrust to address the global upsurge in chronic diseases, as well as its Acceleration Plan to Stop Obesity and recommended “Best Buys”. The WHO’s strategy aims to foster healthy environments where healthier food is easily available, accessible, and desirable. The Best Buys harness a suite of regulatory and fiscal measures to achieve this, from subsidies for healthier foods; taxes on sugar-sweetened drinks; restrictions on the marketing and advertising of unhealthy foods; nutrition labelling policies; as well as policies to eliminate trans fats and to reduce the levels of salt, sugar, and fat in foods that are sold in public spaces like schools.

A need for greater transparency and ambition at Nestlé

Nestlé says it is committed to driving global improvements in nutrition. Its website states that “being transparent about our portfolio is key to building trust”. But in three years of engagement with ShareAction and the Healthy Markets investors, it has made little tangible progress to achieve those goals. 

Peer-reviewed research has demonstrated that three quarters of Nestlé’s sales across seven major markets stem from less healthy products that are high in sugar, salt, and fat. Nestlé, however, maintains that 52% of its sales come from “healthier” products, an estimate that has been contested by investors. 

On the one hand, it is laudable that the food giant assessed the nutritional value of different foods by using a government-approved nutrition model, in this case the widely recognized  “Health Star Rating” (HSR). The HSR is used by Australia, New Zealand, and the Access to Nutrition Initiative (ATNI), which draws on the HSR to benchmark companies’ efforts to promote healthier lives.

However, in Nestlé’s disclosure of “nutritious” food sales, the food giant included coffee, infant food, and milk formula. This is likely to have inflated Nestlé’s estimate of “healthier” food sales. It has also raised eyebrows among health experts, who have pointed out that such products should not be categorized as “healthy” in this way. 

Formula milk, for instance, is not recommended by the WHO for the first six months of an infant’s life, and concerns over the aggressive marketing of infant formula as an alternative to breast-feeding remain acute. While coffee may confer some health benefits, prepared coffee products containing sugar and milk change their nutritional balance. Strikingly, research has found that a third of major coffee shops in the UK serve drinks and sweet products that surpass an adult’s maximum daily sugar intake of 30 grams in just one serving. And coffee is considered to be a “non-nutritive” product in the Health Star Rating.  

As a result of Nestlé’s deviation from the standard methodology it says it is using, its estimate of “healthier” food sales cannot be compared to its peers like Unilever and Danone UK, which have followed best practice guidelines. Unilever is paving the way in responsible reporting of its sales by providing relevant information about the healthiness of its product portfolio against six government-endorsed nutrition models. Nestlé has an opportunity to follow suit.

Targets need to align with truly nutritious foods

Nestlé’s existing target to boost sales of “nutritious” foods by 50% by 2030 will not necessarily have any positive impact on public health. The target can be met simply by selling more coffee or infant foods. The target is also aligned with Nestlé’s overall growth projections for the company (four to six per cent a year). This implies that sales of less healthy products could climb by 50% by 2030. In theory, Nestlé could achieve this target without having to increase the amount of healthier food it sells or reduce the share of less healthy food it sells. 

Meanwhile, UK manufacturers such as Premier Foods have made bold commitments to double the sales of healthier products by 2030. The giant retailer Tesco has pledged for 65% of total sales to stem from healthier products by next year. 

Nestlé could align with the approaches of such trend-setting food and beverage producers and distributors by adopting a time-bound and proportional (rather than an absolute) target to increase the share of healthier foods. Investors are not asking Nestlé to stop selling less healthy products, but to reduce its heavy reliance on their sales.

Nestlé is not the only multinational food and beverage producer that remains over-reliant on the sales of less healthy food and drinks. Still, because of its size, the food giant sells more food and drink that is high in fat, salt or sugar than any other around the globe (aside from PepsiCo). A strategic shift in its business decisions has the power to set the global norm across the entire sector, with potential to create powerful ripples across the 188 countries where it operates. 

Stronger leadership in global nutrition is financially prudent for Nestlé 

A potential shift in Nestlé’s business decisions is in the interest of the public and policy-makers struggling to reach the Sustainable Development Goals by 2030. Investing in public health is also a financially prudent decision that has potential to reap tangible benefits for shareholders in the long-run. 

This is what forward-thinking investors like Legal General Investment Management (LGIM), the UK’s largest asset manager, have stressed. LGIM has emphasized that rising rates of obesity represent a “systemic” risk to diversified investors, since their returns rely on the broader health of the economy. This perspective is backed by studies indicating that broader economic factors account for 75 to 94 per cent of average portfolio returns for diversified investors.

In this video, Sophie Deleuze discusses the alarming rise in obesity rates globally and the pressing need for food companies to improve the nutritional properties of all their food products. Candriam co-files shareholder resolution for healthier food initiatives at Nestlé AGM. pic.twitter.com/lrqdrKP7Ad

— Candriam (@candriam) April 8, 2024

Nestlé’s existing business decisions also carry reputational, legal, and regulatory risks – with potential to hamper its profits in the long-haul. Nestlé’s brand reputation is at stake as consumers grow suspicious of the corporate sector and increasingly demand healthier products. A recent McKinsey study in the US, France, Germany, and the UK revealed that half of consumers consider healthy eating to be a “top priority”. The survey also found that less than a third of consumers were “satisfied with the healthy options that were available at their local grocery store”. Nestlé has an opportunity to capitalize on shifting consumer demand for healthier foods. Such foresight might even protect Nestlé from significant legal risks in the future, which may carry important financial costs and implications for its brand. 

Nestlé might benefit from shifting its product sales sooner rather than later as governments tighten their grip on corporations through more stringent regulation on unhealthy foods, in line with the WHO Best Buys. In spite of industry pushback, taxes on sugar-sweetened drinks have already been rolled out in 50 countries. Even at the WHO, there appears to be growing appetite to hold health-harming companies responsible for the externalities they create.

Le poison, c’est la dose (the poison is the dose). That is what Paul Bulcke, Chairman of the Board of Directors, told ShareAction at Nestlé’s AGM last year, in response to concerns about its over-reliance on the sales of less healthy foods. We agree with Paul Bulcke. After all, that is why investors have urged the company to enhance access to healthier food options worldwide. Doing so is in everyone’s interest – the public, shareholders, and Nestlé. 

Thomas Abrams is the co-head of health at ShareAction, a UK-based charity that champions responsible investment. Thomas holds a degree in social policy and has previously led efforts at The London Early Years Foundation (LEYF) to promote food and health for the youngest children. He has also worked as an impact consultant supporting social purpose organisations to maximise their impact.

Holly Gabriel is the campaign lead for consumer health at ShareAction. Holly is a registered nutritionist with a degree in public health nutrition. She has previously worked with Action on Sugar, a UK-based NGO, to encourage the government to commit to an evidenced-based obesity strategy. Holly has also worked as a child weight management nutritionist and as a nutritionist for UK retailer Waitrose.

Svět Lustig Vijay is a senior campaign officer at ShareAction. He holds a degree in public health at the London School of Tropical Hygiene and Medicine, and has previously worked with Partners in Health in Peru on the social determinants of health, including on family health and early childhood development projects. 

Image Credits: Famartin, University of North Carolina, Nestlé, Bite Back.