table of contents - nestle · 2 nestlé – the world food company 4 the nestlé corporate business...

2 Nestlé – The World Food Company

4 The Nestlé Corporate Business Principles6 National Legislation and International Recommendations7 Consumers8 Infant Health and Nutrition9 Human Rights

10 Human Resources and the Workplace12 Child Labour13 Business Partners15 Protection of the Environment17 The Nestlé Water Policy19 Agricultural Raw Materials21 Compliance

22 Appendices23 1. Nestlé Corporate Governance Principles28 2. Summary of Nestlé Infant Formula Marketing Policy

Second Edition, March 2002

Nestlé Corporate Business Principles

Table of contents

NestléThe World Food Company

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Since Henri Nestlé developed the first milkfood for infants in 1867, and saved the lifeof a neighbour’s child, the Nestlé Companyhas aimed to build a business based onsound human values and principles.

While our Nestlé Corporate BusinessPrinciples were first published as a singledocument in 1998, most of the individualbusiness principles contained in thedocument had existed for many years inindividual form as a result of Nestlé’s focuson principle-based business practices.

We are now issuing this update of ourNestlé Corporate Business Principles for threebasic reasons:

First, we have had three years of experiencein using the Nestlé Corporate BusinessPrinciples as a management tool. They havebeen translated into over 40 languages and given to all our management worldwide,which has provided us useful feedbackabout their application.

Second, additional relevant areas have beendeveloped, which needed to be added,including The Nestlé Water Policy and theNestlé Corporate Governance Principles.

Third, the United Nations Global Compacthas been created, under the leadership of Secretary-General Kofi Annan. Nestlé haspledged support of the Global Compactand a reference to it has been included inour revised text. All nine of the GlobalCompact Principles are now reflected in the Nestlé Corporate Business Principles.

While our Nestlé Corporate BusinessPrinciples will continue to evolve and adaptto a changing world, our basic foundation is unchanged from the time of the origins of our Company, and reflects the basic ideas of fairness, honesty, and a general concernfor people.

Given the growing public interest in the area of corporate social responsibility, we openly share these Principles, not onlywith all our employees, but also withanyone in the public who is interested inunderstanding the Principles on which this Company is based.

As CEO, I am committed to making surethat our Company is managed according tothese basic Principles, and commend themto all our employees worldwide.

P. Brabeck-LetmatheChief Executive Officer

The Nestlé Corporate Business Principles

Nestlé is committed to the followingBusiness Principles in all countries, takinginto account local legislation, cultural andreligious practices:

– Nestlé’s business objective, and that of management and employees at all levels,is to manufacture and market the Com-pany’s products in such a way as to createvalue that can be sustained over the long term for shareholders, employees,consumers, business partners and the largenumber of national economies in whichNestlé operates;

– Nestlé does not favour short-term profit at the expense of successful long-termbusiness development, but recognises theneed to generate a healthy profit each year in order to maintain the support of our shareholders and the financial markets,and to finance investments;

– Nestlé recognises that its consumers have a sincere and legitimate interest in the behaviour, beliefs and actions of the Company behind brands in which theyplace their trust, and that without itsconsumers the Company would not exist;

– Nestlé believes that, as a general rule,legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business principles is beneficial in order to ensure that the highest standards are met throughoutthe organisation;

– Nestlé is conscious of the fact that the success of a corporation is a reflectionof the professionalism, conduct and theresponsible attitude of its management and employees. Therefore recruitment of the right people and ongoing training and development are crucial;

– Nestlé operates in many countries and in many cultures throughout the world. This rich diversity is an invaluable source for our leadership. No single document can capture every legal obligation that maybe required in each of these countries.Indeed, there may be conflicting legalrequirements. Nestlé continues to maintainits commitment to follow and respect allapplicable local laws in each of its markets.If an interpretation of anything contained in this document is construed as contrary to local laws, such interpretation should not be followed in that country.

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Nestlé emphasizes that, as a minimum, its employees must comply with the laws applicable in the countries in which it operates.

Nestlé ensures that the highest standards of responsible conduct are met throughoutthe organisation, by complying in aresponsible way with the Nestlé CorporateBusiness Principles, which guide Companyactivities and relationships worldwide ineach sector of business interest.

Nestlé supports and publicly advocates the United Nations Global Compact and itsnine principles, an initiative of the UnitedNations Secretary-General. The GlobalCompact asks companies to embrace,support and enact, within their sphere ofinfluence, a set of core values in the areas of human rights, labour standards and the environment.

Nestlé recognises that increasing globali-sation is leading to the development ofmore and more international recommen-dations. Although, as a general rule, these recommendations are addressed togovernments, they inevitably impact onbusiness practices. Among others, Nestléhas incorporated relevant InternationalLabour Organisation Conventions, and the International (WHO) Code of Marketing of Breast-milk Substitutes intoits policies.

Nestlé endorses relevant commitments and recommendations for voluntary self-regulation issued by competent sectoralorganisations, provided they have beendeveloped in full consultation with the parties concerned. These include theInternational Chamber of Commerce (ICC)Business Charter for Sustainable Develop-ment. Also, Nestlé uses the revisedOrganisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, approved inJune 2000, as a reference point for itsCorporate Business Principles.

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National Legislation and International Recommendations

Nestlé aims to create value that can be sustained over the long term by offeringconsumers a wide variety of high-quality,safe food products, at affordable prices. The Nestlé Seal of Guarantee is its basicpromise to the consumer.

Nestlé believes that consumer communi-cations such as advertising play an impor-tant function in enabling consumers toexercise their right to informed choice. TheCompany is committed to responsibleconsumer communications that:– do not mislead as to the benefits derivedfrom use of the product;– do not exploit violence, sex or profanity;– do not depict discriminatory or offensive attitudes to religious, political,ethnic, cultural or social groups;– avoid demonstrations that encouragedangerous, or inappropriate use of the product;– do not portray competitors’ productsinaccurately, nor denigrate competitors’products;– avoid the exploitation of media eventsthat could be in bad taste.

In addition to the above principles, Nestlédoes not sponsor consumer communicationvehicles such as television and radioprogrammes or magazines whose strategyof attracting viewers or readers is to exploit violence, sex or offensive attitudesto consumers.

When collecting consumer data, Nestlécomplies with applicable data protectionregulations and applies Nestlé standardswhere specific legislation is not yet in place.

Children as Consumers

Nestlé has developed the following princi-ples for advertising to children:– advertising to children should not attemptto undermine the authority, responsibility or judgement of parents or care providers;– advertising to children should not portraychildren in unsafe situations nor encouragethem to accept invitations from people they do not know;– communications should not demonstrateeither unsafe or irresponsible consumption.As programming is increasing in importanceas a marketing communications vehicle, the principles applied to other forms of communication will be applied here.

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Consumers

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When Henri Nestlé developed his milk foodfor babies over 130 years ago, it saved the life of a baby who could not be breast-fed. Nestlé’s invention responded to theneed for safe and nutritious alternatives tobreast milk. Today, Nestlé research anddevelopment creates high quality infantformula products for use when a safe alter-native to breast milk is needed, as wellsuperior complementary (weaning) foods.

Henri Nestlé also insisted that every motherable to do so, should breast-feed. This prin-ciple is still the cornerstone of Nestlé policytoday, and is in line with the aim of theInternational (WHO) Code of Marketing ofBreast-milk Substitutes, which was adoptedby the World Health Assembly in 1981. The International Code recognises a legiti-mate market for breast-milk substitutes andprovides recommendations to governmentson how its marketing should be regulated.

Therefore Nestlé:– encourages and supports breastfeeding as the best start in life;– carries out research and developmentaimed at the constant improvement of infant formula products for use when a safealternative to breast milk is needed;– ensures that its infant food marketingpractices conform strictly to national legis-lation, regulations, or other measures taken by governments to give effect to theaim and principles of the International Code.

In addition, in all developing countries,whether or not their governments have taken action to fully implement theInternational Code, Nestlé:

– gives detailed instructions and ongoingtraining to its staff on how to implement the International Code; – provides a summary of its policy for the information of employees and the public in the form of the Nestlé Instructions, which is translated into many languages and used as a basis for internal training;– develops its infant formula labels and educational materials in line with theInternational Code, after field research and consultation with the World HealthOrganisation;– regularly conducts training of employeesto ensure complete understanding of the Company’s responsibilities under theInternational Code;– has initiated an ombudsman system foremployees to report alleged violations of the International Code outside the normalline management structure. In each market,an ombudsman is designated from the legal, auditing or human resources depart-ments, who reports alleged violations of the International Code directly to a memberof the Nestlé S.A. Executive Committee atthe Company’s global headquarters;– conducts audits on a regular basis of its companies’ infant formula marketing practices.

Nestlé is a founding member of the Inter-national Association of Infant FoodManufacturers (IFM), which was formed tofacilitate industry dialogue with WHO andgovernments, and to encourage highlyresponsible marketing standards for theinfant food industry.

Infant Health and Nutrition

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Nestlé fully supports the United Nations Global Compact’s two guiding principles onhuman rights.

Nestlé therefore: Supports and respects the protection of international human rights within itssphere of influence (Principle 1)and Ensures that its own companies are not complicit in human rights’ abuses(Principle 2)

Nestlé aims to provide an example of goodhuman rights’ practices throughout itsbusiness activities and has an interest inencouraging the improvement of socialconditions, which are an important factorfor sustainable development. Nestlé alsorecognises that governments are ultimatelyresponsible for the establishment of a legalframework for protecting human rightswithin their markets. Nestlé expects each market to respect and follow the locallaws and regulations concerning humanrights’ practices.

Human Rights

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Human Resources and the Workplace

Nestlé fully supports the United NationsGlobal Compact’s four guiding principles on labour.

Nestlé therefore upholds:Freedom of association and the effective recognition of the right to collective bargaining (Principle 3)

The elimination of all forms of forced and compulsory labour (Principle 4)

Nestlé regards its personnel as its most valuable asset. Involvement

at all levels starts with open communication, whether on specific

aspects of the business, or about the activities of the Company

in general. Suggestions for changes and proposals for improvements

of Nestlé’s practices are encouraged.

The effective abolition of child labour (Principle 5)

The elimination of discrimination in respectof employment occupation (Principle 6)

Nestlé also respects the local laws andregulations applicable to human resourcesin each of its markets. Human ResourcePolicy is also set by the local markets,which must follow local legal requirements.

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The Company’s business practices aredesigned to: – establish staff relations based on trust,integrity and honesty;– maintain respect for basic human values,attitudes and behaviour;– respect employees’ privacy;– comply with applicable data protectionregulations and apply Nestlé standards in those countries where specific legislationis not yet in place;– promote a sense of integrity among all employees all over the world, and apply a number of common rules while at thesame time adapting the expression of theserules to local customs and traditions; – encourage continuous improvementthrough training, and the improvement ofprofessional skills at all levels in theorganisation;– offer career opportunities based uponmerit, irrespective of colour, age, nationalorigin, religion, gender, disability, veteranstatus, or any other protected class asdefined by local law. Professional skills,experience, and the capacity and willing-ness to apply The Nestlé Basic Managementand Leadership Principles are the maincriteria for promotion;

– offer competitive salaries and benefits.Working hours, wages and overtime pay comply with applicable local laws andare competitive with those offered bysimilar companies; – limit overtime to a reasonable level;– create a safe and healthy working envi-ronment for each employee;– respect the right of employees to formrepresentative organisations and to join – or not to join – trade unions, provided thisright is freely exercised, and establish a constructive dialogue with these unions;– refrain from any action restricting the employee’s right to be, or not to be,affiliated to a union;– treat every employee with respect and dignity, and not tolerate any form ofmobbing, harassment or abuse; – forbid the use of forced labour orinvoluntary prison labour.

It is generally acknowledged that the causes of child labour

are complex and include poverty, differing stages of economic

development, social values and cultural circumstances.

Nestlé believes policy development must take into account the

social and legal situation of individual countries.

Action to eliminate child labour must be guided by the best

interests of the child, as ill-considered policies and commercial

measures can make the situation worse for children.

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Therefore, Nestlé:– is against all forms of exploitation ofchildren. The Company does not provideemployment to children before they have reached the age to have completedtheir compulsory education, as defined by the appropriate authorities, and expectsits business partners and industry suppliersto apply the same standards;– abides by national laws in all countries inwhich it has operations and complies withthe International Labour Organisation (ILO)Convention 138 on the Minimum Age for

Child Labour

Employment and the ILO Convention 182 on the Worst Forms of Child Labour.The ILO recommendations are based on the United Nations Convention of theRights of the Child (Article 32);– offers its co-operation with the relevantUnited Nations agencies, governments and the business community in their effortsto deal with the problem of child labour,which include the encouragement ofuniversal primary education and all aspectsof economic development worldwide.

Nestlé insists on honesty, integrity andfairness in all aspects of its business and expects the same in its relationshipswith all business partners and suppliers ofmaterials, goods and services.

Nestlé therefore supports and applies:– The International Chamber of Commercerevised rules on extortion and bribery ininternational business transactions, whichrecommend governments to prohibit extortion and bribery for any purpose(adopted by the ICC Executive Board onMarch 26, 1996);– OECD Recommendations on Briberyand International Business Transactions ofMay 1994 and the OECD Convention tocounteract corruption, which was signed byall the member countries and by Argentina,Brazil, Bulgaria, Chile and Slovakia in 1997(the signatories undertake to considercorruption of foreign officials a penal actunder their national law);– Nestlé also supports OECD efforts to have non-member nations adhere to theOECD recommendations for fighting against corruption.

Conflicts of Interest

Nestlé requires its management andemployees to avoid even the appearance of impropriety in its business dealings on behalf of the Company. What constitutesa conflict of interest is defined by eachmarket in accordance with these principlesand local laws and practices.

Relationship with Suppliers

Nestlé aims to deal only with reputablesuppliers who are willing to apply Nestléquality standards. Supplier relationships arebenchmarked and evaluated with the objec-tive of striving for continued improvement in the areas of quality, service, etc. As arelationship between a supplier and Nestléstrengthens and progresses, it may evolveinto one of preferred supplier status.

Key suppliers with which Nestlé has acontractual relationship are audited in orderto ensure that they comply with the NestléCorporate Business Principles or that theyare working actively to achieve compliance.Whenever instances of non-compliance are brought to the Company’s attention,Nestlé will demand that corrective measuresbe initiated.

Nestlé personnel will maintain the higheststandards of integrity and professionalcompetence in all business relationships.Sanctions will be applied in the event of misconduct or abuse of establishedcorporate standards and guidelines.

Competition

Nestlé supports free enterprise andtherefore competes fairly and recognisesother companies’ equal rights to do so. The Company supports the development ofcompetition laws to protect this principle.In particular:– Nestlé sets its commercial policyindependently and does not fix prices inagreement or collusion with competitors;

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Business Partners


Business Partners

– Nestlé does not allocate customers,territories or product markets in agreementor collusion with competitors;– Nestlé deals fairly with its customers and suppliers, in accordance with competi-tion laws;– Nestlé will look towards mergers andacquisitions as a means to improve its effectiveness, not to restrict competition;– Nestlé’s trade payments are based oncustomer efficiencies and services provided.

External Relations

Authorities: Nestlé supports ongoing dia-logue between all industry sectors in whichit is active and the appropriate governmentand regulatory authorities at both nationaland international levels, in order to promoteand implement relevant legislation, regula-tions and/or agreements which protect the rights of the consumer while ensuring a healthy, competitive environment.

Business Relations: Nestlé’s businessrelations are based on the principles of mutual trust, fairness and professionalismin the context of a free-market economy.

Academic/Professional Relations: Nestléencourages two-way communication and co-operation with academic and profes-sional bodies to foster continual updating of knowledge for mutual benefit, leading tothe constant improvement of the Group’sproducts, policies and services.

Financial: Nestlé communicates openly,directly and accurately and takes advantageof appropriate communication tools to

ensure that information is available simulta-neously to the financial community andgeneral public. No individual or institution is given preferential treatment.

Local Communities: In addition to the directinvestment and employment providedthroughout the world, Nestlé contributes inmany countries to the well-being of localcommunities in other ways. The personalinvolvement of Nestlé people in manyprojects, together with financial assistanceand sharing of know-how with local organi-sations helps to develop long-term commu-nity relations and mutual understanding.

Non-Governmental Organisations: Nestléengages in dialogue with non-governmentalorganisations that have a record of con-structive engagement and principled behav-iour. We encourage discussion that canresult in improved understanding andcollaboration in the economic, social andenvironmental betterment of the community.Nestlé is involved in project partnershipswith a significant number of non-govern-mental organisations.

Internet Privacy Policy: The Internet ischanging the way of doing business. It concerns business-to-business relationsand also the Company’s interaction withconsumers. In this respect Nestlé S.A. hasan Internet Privacy Policy which is availableon the Corporate Website. This policy aimsto protect the privacy of the users; it covers,for instance, the accessing, deleting or cor-recting of information, the security of information, and relates also to trackingtechnologies. Nestlé supports industry self-regulation and respects the local lawsof the markets it serves in this domain.

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Nestlé fully supports the United NationsGlobal Compact’s three guiding principles on environment.

Nestlé therefore:Supports a precautionary approach to environmental challenges (Principle 7)

Undertakes initiatives to promote greaterenvironmental responsibility (Principle 8)

Encourages the development and diffusion of environmentally friendlytechnologies (Principle 9)

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Protection of the Environment

Since its early days Nestlé has been committed to environmentally

sound business practices throughout the world and continues

to make substantial environmental investments. In this way Nestlé

contributes to sustainable development by meeting the needs of

the present without compromising the ability of future generations

to meet their own needs. The Nestlé Policy on the Environment

underlines this commitment. Nestlé also adheres to the

International Chamber of Commerce (ICC) Business Charter for

Sustainable Development. This Charter requires the establishment

of policies, programmes and practices for conducting operations

in an environmentally sound manner.

Nestlé:– integrates environmental policies, pro-grammes and practices into each businessas an element of management in all its functions;– develops, designs and operates facilitiesand conducts its activities taking intoconsideration the efficient and sustainableuse of renewable resources, the minimi-sation of adverse environmental impact andwaste generation, and the safe and respon-sible disposal of residual wastes;– respects and complies with existing lawsand regulations in local markets concerningenvironmental issues;– applies Nestlé internal standards suitableto local conditions in those regions wherespecific environmental legislation is non-existent or insufficient; – improves environmental protection rele-vant to its activities on a continuous basis;

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Nestlé Corporate Business Principles Protection of the Environment

– provides appropriate information, commu-nication and training to build internal and external understanding about its envi-ronmental commitment and action;– supports professional associations suchas the International Chamber of Commerceand the World Business Council for Sustainable Development in their work relative to environmental protection, as well as efforts to set up environmental management guidelines;– establishes environmental objectives,monitors progress, checks results anddefines future actions. This activity, carriedout by Nestlé specialists, ensures thecontinuous improvement of environmentalperformance throughout the supply chain,from producing and purchasing of rawmaterials, to manufacturing, packaging,distribution and finally to the consumer.

Water is a universal resource that is indis-pensable for life. Nestlé recognises that theresponsible management of world-widewater resources is an absolute necessity.Preserving both the quantity and the qualityof water is not only an environmentalchallenge, but also one that spans agricul-tural, economic, political, social, culturaland emotional considerations.

As a leading food and beverage company,Nestlé considers water to be a key priorityfor the manufacturing of its food products,for their preparation by consumers, and forbottled waters. To play its part in assuring along-term, high-quality, adequate globalwater supply, Nestlé supports the sustain-able use of water, strictly controls its use inthe Company’s activities, and strives forcontinuous improvement in the manage-ment of water resources.

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The Nestlé Water Policy


The Nestlé Water Policy complements The Nestlé Policy on the Environment andincludes the following:

1. Water is essential for nutrition. Nestlé,through its Perrier Vittel Company, providesa wide range of pure, safe, wholesome andconvenient bottled waters of high quality to meet the increasing and varied needs ofconsumers throughout the world. Protectionof springs and their surroundings is of pri-mary importance in this endeavour.

2. Nestlé directs its world-wide researchand development network towards:– the innovation and renovation of itsproducts and processes, including manu-facturing methods that minimise waterconsumption and waste water generation; – scientific research conducted at thePerrier Vittel Institut de l’Eau that is centredon the physiological and qualitative aspectsof water.

3. Agricultural raw materials are dependenton water. Although, in general, Nestlé is not involved in the production of rawmaterials, it supports and encourages sus-tainable, environmentally sound farmingmethods, including best possible practicesfor water use and conservation and genetechnology in this context. As a raw mate-rial for food processing, water must satisfyboth local legal requirements and internalquality criteria.

4. Nestlé strives to achieve optimalperformance in its manufacturing activities,including water management: – without compromise to the safety andquality of its products, fresh water use isreduced as much as possible and, whereverfeasible, water is reused and recycled; – used water is treated and returned to theenvironment according to local legislation;where none exists, internal Nestlé standardsare applied.

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5. The Nestlé Environmental ManagementSystem (NEMS) ensures the continuousimprovement of Nestlé’s environmentalperformance, including management ofwater resources: objectives are established,progress is monitored, results are checkedand corrective and preventive actions are implemented.

6. As part of its broader commitmenttowards the good of the community, Nestlé: – in co-operation with health authorities,promotes to consumers the importance of using safe water for food and drinkpreparation; – provides education, supports initiativesand fosters awareness on the importance of water resource conservation amongemployees, governments, local communi-ties, schools, industry, consumers and other stakeholders.

The Nestlé Water Policy

Agricultural raw materials, principally milk, coffee, cocoa, cereals,

vegetables, fruit, herbs, sugar and spices, are vital factors affecting

the quality and costs of Nestlé manufactured food products and,

as a consequence, the Company’s business performance. Sourcing

strategies and production methods are subject to an ever-changing

environment. New technological developments in the field of

agriculture, changes in agricultural policies or trade regulations,

new technologies in food processing, and evolving consumer

preferences, mean that Nestlé must adapt its sourcing strategies

accordingly. This is a continuous process.

Governments and/or political institutions regulate farming and

the trade of farm products. Because of the effect of such regulation

on pricing, availability, domestic and international trade, and

on the economic, social and ecological aspects of farming and

consequently on food safety and quality aspects, Nestlé

engages in constructive dialogue with government institutions

(primarily through professional organisations), and co-operates

with local authorities.

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Agricultural Raw Materials

Agricultural Raw Materials

In this context Nestlé:– supports farming practices and agri-cultural production systems that are sustain-able; that is those practices and systemsthat satisfy long-term economic, ecologicaland social requirements;– sources its agricultural raw materialseither through trade channels or directlyfrom farmers and is not engaged itself in its own commercial farming activities;– supports mechanisms that contribute toa more regular income for farmers;

– where appropriate, provides agriculturalassistance to farmers in order to:

- transfer know-how- ensure ongoing supply at competitiveconditions- obtain raw materials that meet qualityand safety specifications

– supports an agricultural productionsystem that is economically viable, socially acceptable and ecologically soundand therefore encourages sustainable farming practices;– supports the application of new techno-logies and advances in agricultural science,including the opportunities offered bytoday’s bioscience when their positive effecton food safety, environment, agriculturalpractices and production efficiency are scientifically confirmed and accepted by consumers; – recognises the importance of geneticdiversity as a pillar for future developmentsin agriculture and life science, and supportsits preservation as a public good.

Agricultural raw materials procured directly from farms

The decision to establish or maintain a direct procurement system depends on a number of factors.

They include:– company requirements in terms of quality,safety, quantity and cost;– proprietary characteristics of individual raw materials;– reliability in supply and the local condi-tions for sustainable production.

Direct procurement provides the followingbenefits to farmers and co-operatives:– an understanding of Nestlé’s quality andsafety requirements;– objective and transparent evaluation ofraw material quality; – transparent price policy providing farmersa reference level of prices for their rawmaterials, thus leaving them with the choiceas to where to sell their produce;– quality premiums that encourage farmersto achieve and maintain high qualitystandards.

If warranted, Nestlé may assist farmers to improve their quality, yield and economiccompetitiveness.

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Nestlé is committed to the application of its Corporate Business Principles in allcountries where it operates, provided, however, that they are not in conflict withrelevant local legislation.

Nestlé’s compliance with its CorporateBusiness Principles is regularly monitoredby its internal auditors on the basis of clear auditing instructions, which are certi-fied by the external auditing firm KPMG, and published for all employees to consulton the Nestlé S.A. Intranet.

Findings and recommendations are reportedthrough the Board Audit Committee to theNestlé S.A. Board of Directors.

The Nestlé Corporate Business Principles areregularly reviewed and updated.

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Compliance

Appendices

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Since its foundation in 1866, Nestlé has:– built consumers trust through the quality of its products;– respected the social, political and cultural traditions of allcountries in which it operates;– taken a long-term approach to strategic decision-making,which recognises the interests of its shareholders, consumers,employees, business partners and industrial suppliers as wellas those of all the national economies in which it operates.

Nestlé’s commitment to sound Corporate Governance goesback to its very early days. Today, as both legislation andinternational recommendations indicate growing public interestin the issue, we take the opportunity to publish the NestléCorporate Governance Principles. These reflect and highlight ourongoing commitment to ensure the highest level of responsiblecorporate conduct in all of our Company’s activities.

R. Gut P. Brabeck-LetmatheChairman Chief Executive Officer


September, 2000

Nestlé Corporate Governance Principles

Appendix 1

Legislation and International Recommendations

Nestlé:– complies with the laws applicable in thecountries in which it operates;– ensures that the highest standards ofconduct are met throughout the organisa-tion by complying in a responsible way withthe Nestlé Corporate Business Principles,which guide Company activities andrelationships worldwide in each sector of business interest;– is aware that increasing globalisation is leading to the development of more international recommendations. Although,as a general rule, these recommendationsare addressed to governments, theyinevitably have an impact on business prac-tices. Nestlé takes such recommendationsinto account in its policies;– generally endorses commitments andrecommendations for voluntary self-regulation issued by competent sectoralorganisations, provided they have beendeveloped in full consultation with the parties concerned; these include the ICC Business Charter for SustainableDevelopment (1991), the OECD Guidelinesfor Multinational Enterprises (1976), and the OECD Principles of Corporate Governance (1999).

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Nestlé Corporate Business Principles Appendix 1

Preamble

They cover four areas:I. The rights and responsibilities of shareholdersII. The equitable treatment of shareholdersIII. The duties and responsibilities of the Board of DirectorsIV. Disclosure and transparency

and are based on Swiss legislation, sinceNestlé S.A. has its registered offices inSwitzerland (Cham and Vevey), as well as onNestlé S.A.’s Articles of Association.

I. The rights and responsibilities of shareholders

The shareholders’ rights are protected by law, by the Articles of Association, andby the Corporate Governance Principles,which are also intended to ensure the sus-tainable development of Nestlé S.A.

Nestlé S.A.’s basic shareholders’ rights andresponsibilities include the right to:– secure methods of ownership registration;– obtain relevant information on Nestlé S.A.on a regular and timely basis;– participate in, and vote at, GeneralMeetings of the Shareholders in person or in absentia (by proxy), subject to the Nestlé S.A.’s Articles of Association;

– approve the Management Report and theannual Financial Statements of Nestlé S.A.;– approve the Consolidated Financial State-ments of the Group;– grant the release to the Board of Directors(hereafter referred to as the “Board”) and tothe Management;– decide on the appropriation of profitsresulting from the balance sheet ofNestlé S.A., in particular determine theamount of the dividend;– elect and remove the members of theBoard, and the Auditors of the annual finan-cial statements and of the consolidatedfinancial statements;– adopt and amend the Articles ofAssociation;– take all decisions, which by law or underits Articles of Association, are within the jurisdiction of the General Meeting;– participate in decisions in extraordinarymeetings;– be informed sufficiently ahead of time of the date, location and agenda of GeneralMeetings;– place items on the agenda and ask ques-tions at General Meetings in accordancewith the Articles of Association, and – forthe questions – subject to reasonable limita-tions inasmuch as the topics are related tobusiness activities.

Any Nestlé S.A. shareholder has the right torequest effective redress of violation ofhis/her rights in accordance with Swiss law.

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The Principles

II. The equitable treatment of shareholders

VoteNestlé S.A. applies the principle “one share– one vote”. As far as the voting rights are concerned, they are limited to 3% (own shares have no voting rights).Any Nestlé S.A. shareholder can obtaininformation about voting rights.Changes in voting rights are submitted tothe shareholders’ vote.

Processes and ProceduresProcesses and procedures for the GeneralMeeting of Shareholders allow for equitabletreatment of all shareholders.Nestlé S.A.’s procedures are designed tofacilitate the shareholders to cast votes.

DealingsInsider trading is prohibited and specific“close periods” have been defined forpeople concerned.

III. The duties and responsibilities of the Board

The Board ensures the strategic guidance of Nestlé S.A. and the effective monitoringof its management. The Board is account-able to the shareholders.

In order to fulfil their duties and theirresponsibilities, Board members receive and can request accurate, relevant andtimely information.

Board members act on a fully informedbasis, in good faith, with due diligence andcare, and in the best interest of Nestlé S.A.

Board members provide equal treatment toshareholders in similar situations.

The Board has the following non-transferable and inalienable duties to:a) provide the ultimate governance of Nestlé S.A. and issue the necessaryinstructions;b) determine the organisation;c) discuss and approve the strategy;d) organise accounting and financial controlas well as financial planning;e) provide the ultimate supervision of thepersons entrusted with the management,and grant signatory powers to personsrepresenting the Company;f) ultimately supervise the personsentrusted with the management of the Com-pany, ensuring in particular their compliancewith the law, the Articles of Association,regulations and instructions given;g) evaluate the persons in top management;h) prepare the management report inaccordance with provisions of the law;i) prepare General Meetings and carry outits resolutions;j) notify the court in case of over-indebtedness.

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Nestlé Corporate Business Principles Appendix 1

The Chairman’s role is to supervise Nestlé S.A.’s governance structure and tolook after the shareholders’ relations and interests in particular.

The Board consists of non-executivemembers who delegate the management ofNestlé S.A. to the Chief Executive Officerwho is also a Board member. It alsodelegates special duties/responsibilities to specific committees.

Members of the Board and managementdisclose any personal interest in anytransaction of significance for the businessof Nestlé S.A.

The Board has the following sub-committees:– the Committee of the Board, whichconsists of the Chairman, the Vice Chairman/Chairmen, the CEO and othermember(s) of the Board. It has a wide dele-gation of responsibilities from the Board andalso functions as a nomination committee;– the Audit Committee, which consists of non-executive Board members only;– the Remuneration Committee, whichconsists of the Chairman, Vice Chairman/Chairmen or, in the case of only one ViceChairman, together with a member of theCommittee of the Board.

IV. Disclosure and transparency

Nestlé S.A. aims to ensure that shareholdershave access to relevant, up-to-date andconsistent information in a timely and con-sistent fashion. This information shouldallow shareholders as well as prospectiveinvestors to make informed judgementsabout the Nestlé S.A. shares.

Nestlé S.A. pursues a policy of disclosureand transparency. This policy may bemodified only when it is necessary to protect the Company’s competitive,commercial or legal position.

Nestlé S.A. complies with all legal andregulatory requirements applicable where its shares are listed. Nestlé S.A. will monitorall changes and take part whenever possiblein discussions preceding such changes inlegislation and listing regulations.

Nestlé S.A. fulfils its obligation to makeinformation that is relevant to the marketpublicly available in simultaneous fashion; independent auditors elected by the share-holders conduct the annual audit in order toprovide an external and objective assuranceon the way in which financial statementshave been prepared and presented.

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– donate free infant formula for use by healthy new-born babies except in excep-tional social cases (e.g. where the govern-ment policy allows manufacturers torespond to a specific medical request, forexample if the mother dies in child birth);– permit their staff whose responsibilitiesinclude the marketing of infant formula to make direct contact with mothers exceptin response to consumer complaints;– give incentives to their infant foodmarketing personnel based on infantformula sales;– give financial or material incentives tohealth professionals for the purpose ofpromoting infant formula;– use pictures of babies on their infantformula packs;– allow educational material relating to the use of infant formula to be displayedpublicly in hospitals and clinics.Nestlé will take disciplinary measuresagainst anyone employed by the Companywho knowingly violates Company policies.

Nestlé invites government officials, healthprofessionals, and consumers to draw to its attention any Nestlé infant formulamarketing practices, in developingcountries, that they consider are not inconformity with the above commitment.

Nestlé follows governments’ implemen-tation of the World Health Organisation’sInternational Code of Marketing of Breast-milk Substitutes in all countries. Nestlérecognises that the International Code waspassed as a universal recommendation to all governments to implement in nationalmeasures “as appropriate to their social and legislative framework” (Article 11.1).Therefore, in all countries Nestlé followsnational measures that implement thisInternational Code. Nestlé furthermore:– supports efforts by governments to imple-ment the International Code through legisla-tion, regulation, or other appropriate meas-ures; – believes that parents have the right to choose how their babies are to be fed on the basis of adequate and objectiveinformation;– encourages and supports exclusivebreastfeeding as the best choice for babiesduring the first months of life;– encourages sustained breastfeeding afterthe introduction of complementary foods;– advises mothers of the consequences of incorrect or inappropriate use of infantformula.

In addition, in developing countries1, Nestléapplies unilaterally the World Health Organ-isation’s International Code of Marketing ofBreast-milk Substitutes whether or not thegovernment fully implements the Interna-tional Code. Nestlé policy, therefore, forbidsits operating companies to:– advertise infant formula or otherwisepromote to the public;– distribute free infant formula samples to mothers;

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Summary of Nestlé Infant Formula Marketing Policy

Appendix 2

1 Not including: USA, Canada, New Zealand, Australia,

Switzerland, EU member states and prospective EU

states of Poland, Czech Republic, Slovenia, Slovak

Republic, Hungary and the Baltic states; and in Asia:

Japan, Republic of Korea, Singapore, Taiwan and Hong

Kong. In these developed countries, Nestlé respects

National Codes, regulations and/or other applicable

legislation which implement the International (WHO)

Code, including the EU Directive on Infant Formula.

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