Issue: Getting Nestlé Waters' Green Story Out

With the bottled water industry under fire, Nestlé Waters North America needed to communicate about the company's green initiatives

What do you do when you're a company that believes it's always been environmentally responsible and yet environmentalists are calling for you to step up your actions and play a greater role in sustainability? And what do you do when you reach the limit with your most visible effort? Those are the challenges facing Nestlé Waters North America, best known for its Poland Spring brand of bottled water.

"Being environmentally responsible is part of our DNA and has been in the 30 years that I've been with the company," contends CEO Kim Jeffery. "Obviously, protecting the source of our product is important to us. We wouldn't have a long-term business otherwise."

He concedes, though, that for many years the company never felt a need to tout its environmental bona fides, and that the company found itself having to rethink that strategy. The light bulb moment came on what Jeffery describes as a sleepless night a couple of years ago when Wal-Mart (WMT) announced its plans to "go green." "They were talking about what they were going to do, and when I thought about it, I could name 10 things that we had done [along the lines of going green] but no one knew about them." Among those efforts: continually working with vendors to reduce the plastic content of its Poland Spring, Deer Park, and other spring water brand bottles, building LEED-certified (Leadership in Energy and Environmental Design) factories, and working collaboratively to seek comprehensive recycling solutions

Part of the reason Nestlé Waters wasn't touting its environmental efforts, according to Jeffery, was that he and the rest of management considered such actions business as usual. "For us at Nestlé Waters, sustainability is a continuous process and has led me, like many others, to view it not as a destination, but rather as a journey," he says.

Getting Proactive

Yet as Corporate America, the media, shareholders, and consumers have all begun to place a higher premium on sustainability, and individual companies' transparent efforts in that direction, it was critical the Nestlé Waters become more proactive in relating its message and pushing the envelope with its bottles and packaging. "For years, I thought it was enough to take good care of our lands, protect our spring water resources and comply with regulations," says Jeffery. When he realized that is wasn't enough, he engaged his entire team to think "as creatively and as boldly as possible" about all the parts of the business where they could be greener.

To that end, the company first mapped its carbon footprint and found that the biggest impact was coming from the plastic resin Nestlé Waters North America purchased from vendors to bottle its water. Jeffery and his team were thrilled to realize this. "It meant that our decade-long drive to reduce the weight of our packaging had material, dollar, and now carbon emissions savings." In 2007 alone, the company took another 15% out of the weight of its bottle, saving some 65 million pounds of resin, and has reduced its energy production costs by 10%.

By 2010 the company plans to reduce plastic in its half-liter bottles—already the lightest on the market—by yet another 15%, while continuing to reduce its environmental footprint in the areas of transportation, production, and water use. Stepping up these efforts are critical as the company thinks the further 15% weight reduction for that bottle will be as far as it can go. Also, Jeffery is acutely aware that the bottled water industry is criticized because some 75% of water bottles aren't recycled. "That's bad for business, bad for the environment, and wasteful."

Taking on Recycling

He points out that PET (polyethylene terephthalate) beverage bottles account for less than 1% of all municipal waste in the U.S. and water bottles comprise just one-third of 1% of the waste stream. And while the company can control the packaging of its water and the weight of the bottles, it can't control what happens to the product once it's in consumers' hands. Nevertheless, he believes that it's his responsibility to help tackle the recycling issue.

"I've become an outspoken advocate of comprehensive recycling initiatives to recover all—and I mean all—recyclable containers in our society. I won't be satisfied until we reach our goal, no matter how long it takes." With the American Beverage Assn., the company is working on a model recycling program in Hartford, Conn., to improve recycling rates among citizens. Once the results of that program are measured, it's hoped that the program can be replicated in other cities.

Jeffery says the vigilance is worthwhile. "These efforts have saved us money, created better work environments, and have helped to create a culture of sustainability within our company. Eventually, we trust the marketplace will recognize and reward our efforts."

Nestlé Waters can't rest on its laurels as an innovation leader. It must think about what consumers will want three years from now

How do you keep the innovation spirit alive—not to mention how do you get the message out there—when you're a company that has been a leader in innovation, but not exactly an apostle about it?

That's the situation Nestlé Waters North America and its CEO, Kim Jeffery, found themselves in. Best known for its Poland Spring water brand, Nestlé Waters North America was feeling increased pressure to let the public know about its efforts to reduce its carbon footprint, which it had done most notably in reducing the weight of the Poland Spring bottle to make it the lightest on the market, and to find avenues beyond the bottling efforts. The last challenge was particularly acute, because Jeffery admits that eventually the company will reach its limit with reducing bottle weight. "After a point, we can't make it any lighter," he says.

"When you're the underdog or when you're behind, it's easy to rally people where you have a target of what you're trying to achieve," says Judy Estrin, Chief Executive Officer of JLabs and author of Closing the Innovation Gap. She says it's not as easy when you're a leader, as is the case with Nestlé Waters North America and its lightweight bottle. People—especially internally—get used to their position and don't see it or their efforts as remarkable. That's why she recommends that companies constantly think about innovation in multiple planning horizons.

She sees the process as a three-phase one: "You want to have the current product that you're continually improving, and that's what I call incremental innovation," she says of Phase 1. In the case of Nestlé Waters North America, it was about the company's initial efforts to reduce the weight of the bottle. "That phase of innovation is really about a current-generation product that you are incrementally approving to meet the customer's needs."

Leap and Look

The next phase, she says, is about the "next-generation product," which usually has what she calls "some leapfrog element." In the case of Nestlé Waters North America, that next-generation product is the bottle it plans to introduce by 2010. "Their issue was, 'How do I get beyond just making this lighter,' and an example of that is when they first came up with a new type of bottle that hadn't been done before," says Estrin. But now that it is "leapfrogging" to the point where it won't be able to make the bottle any lighter, the company must focus on other things and can't rest on its laurels of having been the leader in producing a light, more environmentally friendly plastic bottle.

Where many companies miss the mark, according to Estrin, is in focusing only on the first two stages of innovation. "They're being driven by customer needs to either incrementally improve or leapfrog a little bit to what the customer might want in a year or two years. But you always have to have a small group or multiple groups that are focusing on what I call future-generation innovation, and that actually is not driven by your customer." Future-generation innovation should be driven by what your core competencies are and what people might want in a few years. "The reason it can't be driven by the customers is the customer often doesn't know [what it will want]," she says.

One smart approach to this is to look at an adjacent business, an adjacent market, with a completely different customer base than your current one. "A great leader will not just be running a business for today, but planting those seeds with small programs trying multiple things that will allow you to have that future growth, that market for the future," she advises.

"With Nestlé Waters North America, it might be a completely new technology for a completely different bottle, or it might be some new drink or some new product that doesn't have to do with the bottle but has to do with the content of the bottle that drives their growth, three, four, five years from now."

    Before it's here, it's on the Bloomberg Terminal.