Corporate responsibility to the environment and society: how nestle does it.

Corporate responsibility to the environment and society: how nestle does it.

Corporate Responsibility to the Environment and Society: How Nestle does it.

Introduction

Corporate Social Responsibility is defined as a concept whereby companies incorporate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis (European Commission n.d.). As most corporations are profit-driven, social obligations such as are often neglected, resulting in negative impacts on the society and environment (Shah 2009). Nestlé, a Swiss multinational corporation is the largest food group in the world, trading in almost every country (Simonian 2006). In relation to that, the society and media expect large companies to surpass the minimum regulations that the government sets on the work situations and ecological impact. In addition, society expects large corporations that rake in massive earnings annually to contribute to the community, employees, and environmental causes (Clapper 2007). This paper will review the social performance of Nestlé in terms of the impacts on Nestlé's stakeholders. It will review Nestlé's involvement in the infant formula controversy and their efforts with the establishment of The Cocoa Plan, displaying both positive and negative sides in their operations and their impact on stakeholders.

Case against Nestle.

One of the biggest cases Nestle has starred in is the infant formula controversy. It all started in the late 1800s when Henri Nestle and the company created and marketed infant formula as a substitute to human milk for mothers who do not breast feed. However, due to profit motive reasons, Nestle also began irresponsibly marketing the infant formula to mothers perfectly capable of breastfeeding. A large proportion of mothers in the Third World were coaxed into believing that infant formula was better for their children than human milk. But the fact is that breast milk is essential for babies because it provides them with certain nutrients and antibodies that cannot be substituted (Mokhiber 1987). Nestle has deeply impacted the lives of numerous stakeholders, especially the consumers and their family by the irresponsible marketing of the infant formula causing deaths and suffering to infants. Besides that, an economic impact can be seen to negatively affect the society's lifestyle because as more women in the Third World do not practice breast feeding, the demand for infant formula imports from other countries increases which causes a decline in national and household economies (Pettigrew 1992).

The results of infants being fed with infant formula were severe. Approximately 1.5 million infant deaths were recorded annually throughout the world due to infants being inadequately breastfed(Global Strategy for Infant and Young Child Feeding 2001). The deaths occur not only because of the lack of natural nutrients, but also because people were trying to prolong the supply of infant powder by diluting it and some of the consumers were not educated enough, leading to the misuse of infant formula (Baker 1985). For example, in Tanzania it was reported that the instructions for the preparation of Nestlé's Lactogen, a type of infant formula was in English and therefore could not be read by the mothers. Other than that, the lack of supply of clean water forces the Third World women to use contaminated water to prepare milk and the bottles they use are not properly sterilized (Mokhiber 1987). In relation to that, WHO estimated that annually, ten million cases of malnutrition or disease could be the result of improper use of infant formula and one tenth of the babies die (Baker 1985).

Following that, a boycott towards Nestle products was announced by the Infant Formula Action Coalition (INFACT) in 1977 to protest the marketing of infant formula in the Third World (Akhter 1994). It has been reported that Nestle violated the rules set by the World Health Organization (WHO) which promoted breastfeeding instead of milk substitutes to ensure infants get a safe and adequate nutrition. A notion supported by the WHO was that the marketing of breast milk substitutes required suitable marketing practices appropriate for infant formula. However, Nestle broke 25 WHO recommendations in 56 countries within a year in 1990 to 1991 (Pettigrew 1992). For example, in Singapore, Nestle hired women to dress up as nurses and convince mothers that infant formula was a better way of feeding their infants. Besides that, in 1983, INFACT criticized Nestle for taking no notice of the important sections of the WHO International Code of Marketing of Breastmilk Substitutes (1981), for the company had given out excessive amounts of free infant formula to a hospital in Malaysia (Mokhiber 1987). The Nestle boycott stretched beyond its area of operations. This could be seen through the incident where when the American Public Health Association was to take place in Ohio. After realizing that the hotel was owned by one of Nestlé's subsidiary, the conference was called off, resulting in a loss of 6000 convention room rentals. In efforts to deal with the boycott, Nestle reported a severe loss in earnings in 1980 and 1981.

Several strategies were adopted by Nestle in 1991 to cushion the blow of the boycott. One of the major strategies included formally supporting the WHO code, which was eventually progressed in 1982 to prevent further loss. In the last attempt for damage control, Nestle launched the Infant Formula Audit Commission (IFAC) to go over claims that Nestle did not adhere to WHO or national codes. IFAC submitted a report that included promises to give out free or provide discounted infant formula specifically to mothers who cannot breastfeed their children, discourage the promotion of infant formula by promoters and applying the WHO Code to infant formula for all used by children. After a few more of such reports, the boycott was finally lifted in 1984 due to the fulfilment of the Code (Baker 1985). Overall, although Nestle did not deliberately violate laws, there were many social costs. Many deaths and suffering of infants have occurred throughout the world because of Nestlé's infant formula. The fact remains, those lives cannot be replaced and all Nestle can do is minimize the impact by being more socially responsible. Nestlé's sincerity in their cleaning up efforts are questionable because a about decade later, the Advertising Standards Authority lodged a complaint to Nestle about unethical advertising of infant formula in the newspaper (Ferriman 1999).

Case for Nestle.

On the other hand, Nestle has also shown great concern for the society. This is shown through the launch of their concept of Corporate Social Responsibility in 2006, Creating Shared Value (CSR). A statement made in the report was that business and society are interdependent, one fails to survive without the other (Kramer 2006). Since the launch of CSR, Nestle has undertaken many projects to help the society. One particular project that has brought upon significant change to the society is The Cocoa Plan. Being one of the biggest buyers of cocoa beans, Nestle launched The Cocoa Plan project to facilitate African cocoa farmers and the society take advantage of mounting market prices by increasing their productivity (Media Club South Africa 2009). Furthermore, on top of the 60 million Swiss francs invested in cocoa sustainability projects over the last 15 years, Nestle has planned to invest 110 million Swiss francs over a decade in Côte d'Ivoire and Ghana which produce over half of the world's cocoa supply (Bhatti 2009). The investments include distributing 12 million disease-resistant plantlets to the cocoa farmers which is claimed to be able to produce up to double the amount of trees being used in several plantations in Côte d'Ivoire and Ghana. Since the launch of the Plan in 2009, Nestle has funded farmer schools in West Africa so that farmers can learn more efficient up-to-date ways which could enable them to produce better quality cocoa and increase their income. Besides that, Nestle also set up a research and development centre in Côte d'Ivoire that worked in hand with Nestlé's plant science base in Tours. The result of the collaboration is the allocation of one million high-yield cocoa plantlets every year starting 2012 (The Cocoa Plan: Nestle and sustainable cocoa 2010).

As a result of The Cocoa Plan initiatives, many have benefited. Nestle, as a partner of International Cocoa Initiative and the World Cocoa foundation tackled problems such as child labour and lack of excess to health and education. For example, sending farmers to field schools not only educates the farmer on methods to increase cocoa productivity, but they are also educated on diseases and prevention methods. Also, because of the boost in the production of cocoa, household incomes have increased. This is shown through the increase in income by more than 20% for 80,000 West African households, thus improving their lifestyles (The Cocoa Plan: Nestle and sustainable cocoa 2010). Besides that, the boost in production of cocoa could also increase their exports and in turn reduce their foreign debt. By setting up the research centre in Côte d'Ivoire, the locals sent to work and learn there could gain new skills, study the technology and share the information with the other locals towards having useful technological advances of their own. Needless to say, Nestle has demonstrated that they are corporately responsible towards their stakeholders, particularly the farmers who supply them with cocoa and their families, impacting their lives positively.

Conclusion

With all that, the social performance of Nestle in relation to their consumers and workers has scraped both negative and positive results. In a positive light, Nestle impacted the lives of many by introducing The Cocoa Plan. Several communities in Côte d'Ivoire and Ghana have been given many opportunities and advantages towards a more sustainable development. It shows that Nestle has upheld its part of the social contract by giving back to the society that supplies them with resources to produce their goods. In contrast, Nestle started the infant formula controversy by irresponsibly marketing infant formula and it had caused unnecessary death and suffering to millions of babies. Their greed and inability to take action earlier resulted in irreversible consequences. Although they cleaned up their act a few years later, the damage had been done; those dead babies cannot be brought back to life. Regardless of the corporation's efforts, it is obvious that they have not withheld their part of the social contract. Their actions clearly do not meet the expectations of the society and up till now, they are dealing with more controversies. The business power invested in them could go a long way towards affecting peoples' lives positively, but instead is sometimes being misused.

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