March 22, 2011 / 9:28 PM / 8 years ago

Nestle head emphasizes profiting from doing good

* Nestle’s chairman challenges concept of ‘giving back’

* Aim is creating shared value for business, society

By Michelle Nichols

NEW YORK, March 22 (Reuters) - Chief executives should not use shareholders’ money for philanthropy, says Nestle NESN.VX Chairman Peter Brabeck-Letmathe, who instead focuses the world’s biggest food maker on making money by doing good.

The growing corporate trend has been dubbed “creating shared value” and Nestle now publishes an annual progress report on goals such as increasing the nutritional value of products and reducing its use of water and quantity of greenhouse gas emissions.

Brabeck spoke about the concept at the Council on Foreign Relations in New York on Tuesday. He said Nestle concentrates its efforts on rural development, water and nutrition.

“Creating shared value has a big attractiveness because it really takes into consideration the interests of both sides (business and society),” Brabeck told Reuters on Tuesday. “We have integrated this now into the purpose of our company.

“Philanthropy basically is doing good for no other reason that doing good,” he said. “This you can do with your own money but I don’t think you can use the money of your shareholders to do philanthropy, to do good.”

Brabeck said creating shared value certainly had its challenges, such as dealing with issues like deforestation and child labor, a problem that Nestle was trying to address by providing education for the children.

“If they have the access to good schooling, then the child labor as such if it is helping the fathers in the field and helping with the harvesting, I don’t think this is a problem,” he said. “The problem is when you use the children only for that and don’t allow them to go to school.”

Charitable contributions by corporations were valued at $14.1 billion in 2009, according to a Giving USA Foundation report researched by The Center on Philanthropy at Indiana University. Two-thirds was cash and in-kind contributions from company budgets and the rest grants by corporate foundations.

Five years ago Brabeck said he stunned global and business leaders at the World Economic Forum in Davos when he declared that corporations did not need to give back because they had not stolen anything from the world.

“I was just shocked that in a very short period everybody started to say, ‘Yes, I agree we have to give back to society,’ and I was thinking, ‘Well, we’re creating value for society,’” he said. “If you have to give back it means you have taken something that doesn’t belong to you.”

Since then Nestle has established a Creating Shared Value Advisory Board, which includes Michael Porter of the Institute for Strategy and Competitiveness at Harvard Business School, who is responsible for the creating share value concept.

Brabeck said there are 600,000 small poor farmers around the world who work exclusively for Nestle and the company has helped them produce higher yields and quality, increase their income, reduce their environmental impact and boost Nestle’s reliable supply of good coffee.

Most of Nestle’s 443 factories are in rural areas and more than half are in poor countries. Nestle said it was working to provide skills training, clean drinking water for communities, literacy and numeracy programs, and infrastructure, among other things.

“It was always difficult to justify the spending of an important amount of money when you had this old concept of corporate social responsibility,” he said. “Should the company get into a nonprofit situation and do it as a business purpose? I don’t think my shareholders have given me money to do this.” (Editing by Mark Egan and Bill Trott)

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