GRENOBLE GRADUATE SCHOOL OF BUSINESS

MSC INNOVATION STRATEGY ENTREPRENEURSHIP
2013-14

NESTLES CORPORATE SOCIAL RESPONSIBILITY (CSR)

BY: MOHAMED DALLY TANAY JADHAV

Content

Executive summery ………………………..3
Introduction………………………………...4
Nestle in the eye of Elkington’s TBL……...5
CSR review and analysis…………………..9
Stakeholder’s perspective and criticism….12
Conclusion………………………………….14
Recommendation…………………………..15

Executive summary

Nestle is a well known multinational company, they operate all around the world and deliver some good quality FMCG, but at the ethical level they don’t really score very well, they have a long history in boycotting from their origin which is Switzerland going to the UK and USA. Their more significant problem comes from their baby milk formula that for many human rights activist was the reason for the death of many kids around world. Nestlé’s story don’t stop here, they are also accused of child labour in Brazil and manipulating farmers, where they were trying to look ethical through helping them when their real intention was actually to regulate the market prices. Aside of the human level, Nestle is also criticised for testing their products on animals like coffee carcinogenicity on mice. But with all this problems, the image is not completely bad for the company as they are trying to act ethical at some levels, such as water, where with the help of some international organisations, they are raising awareness about the important of water and how it can become a major problem in the future if it’s not treated seriously soon. Therefore, since Nestle is a powerful multinational company it should act like a role model to other companies and try to be more ethical and transforming the world into a better place by contributing the society and humanity alike especially when we talk about babies and future generations, it is Nestlé’s responsibility to make sure that kids are brought up in a safe environment and through healthy nutrient and quality food.

Introduction

In today’s world, CSR and ethics are becoming an essential part of success of any company especially if it was a multinational one, like Nestle. So how is Nestle dealing with CSR and its responsibility toward the society and environment? Thus, through our work we will explore in details Nestlé’s Elkington’s TBL and how they are dealing with the 3Ps, especially the Planet and People parts when they are doing business. We will also take a look at the initial scope concerning the aspects including Carroll’s CSR widened by economic, ethical and legal spheres. Unfortunately there are many examples which identify the drastic actions of Nestle that are not complying with the ethical and morality laws which is leading a negative effect on the Stakeholders and future generation.

Nestle in the eye of Elkington’s TBL
For its CSR, Nestle created what they call ‘Creating Shared Value’ (CSV). Through their CSV, they try to focus mostly on the nutrition, human rights, progress in areas of water and rural development, as well as in environmental sustainability. In the words of its chairman: ‘We believe we can make an important contribution to society, by going a step beyond corporate social responsibility to create value through our core business both for our shareholders and society. We prioritize the areas of nutrition, water and rural development to create shared value; this requires long term thinking...’ (Peter Brabeck-Letmathe, Chairman, Nestlé). And their CEO, Paul Bulcke says ‘Creating Shared Value is built upon fundamental commitments to society, both to achieve the highest standards of compliance with laws, codes of conduct and our own Nestlé Corporate Business Principles as well as to protect the environment for future generations.’
So according the TBL, Nestle puts its focus in one specific field when it comes to each bottom line. For the sake of the study and because we are focusing on ethics, I will be talking about the social and environmental part, while ignoring the economic part.
For the social part, Nestle focus on nutrition and rural development.
Nutrition: by enhancing the quality of their product and trying to make it as affordable as possible.
Rural development: by supporting the farmers in rural area where raw materials they use are grown which create a win-win situation, enhance the quality of their products and help the farmer get a better life.
For the environmental part, Nestle focus on Water.
Water: by calling for the protection of scarce water resources, efficiently use water in their production and distribution channels.
As opposite to the way companies used to see CSR, as obligations or philanthropy where it added cost to minimize risk and protect the reputation, Nestle through its Creating Shared Value as opportunities to strengthen its long term business and create value for its shareholders and stakeholders.
So what actions did Nestle take so far in terms of Nutrition, Water and Rural Development to enhance its CSR position?
When it comes to nutrition, Nestle have opened a new Clinical Development Unit to support our research and streamline the way we evaluate the impact of our foods and ingredients on human biology, health, taste and pleasure. The Nestlé Research Center (NRC) has published new research, exploring ways in which human behaviour towards food influences dietary choices. They also launched new health economics studies in order to better understand how to maximize the health ‘return on costs’ for nutritionally-vulnerable consumers buying fortified products. Another contribution, Nestlé Health Science has developed an eating assessment tool that can help healthcare professionals and careers identify dysphagia problems early in at-risk patients. They have launched new bio fortification research in Côte d’Ivoire.
When we talk about water, Nestle have continued our work to address water challenges with partners that include the 2030 Water Resources Group, the UN Global Compact CEO Water Mandate, the Water Footprint Network and the Alliance for Water Stewardship. They also worked with suppliers to promote good water management through the Sustainable Agriculture Initiative at Nestlé (SAIN). They have also incorporated guidelines on water into their Responsible Sourcing Guidelines. They have conducted 16 additional Water Resource Reviews at their factories. And finally, they have contributed to helping communities around the world address water issues following natural disasters.
In terms of rural development, Nestle have developed a new Rural Development Framework which we will start to rollout in 2013. It is their goal to roll out the Rural Development Framework to 21 countries by 2015. They have launched Responsible Sourcing Guidelines for sugar. They are the first food company to partner with the Fair Labor Association. They also have updated their Commitment on Child Labor in Agricultural Supply Chains in three key commodity areas: cocoa, hazelnuts and vanilla.
So as we see, Nestle is trying to be as active as possible when it comes to the 3Ps, through their Creating Shared Value program they address some of the world’s severe problems such as water where According to the latest figures by UNICEF and the World Health Organization, 8% of the world’s population still rely on unimproved water sources for drinking water, and 3% drink surface water – for example, from rivers, ponds, or lakes. In rural areas of least developed countries, 97 out of every 100 people do not have piped water. And according to Nestlé’s Chairman: ‘the current rate of overuse, we will run out of water long before we run out of oil.’ And Nestle are aggressively addressing this issue with the help for other worldwide organizations to raise awareness about how huge and dangerous this problem is to future generations. Moreover, we can’t ignore their work when it comes to Rural Development where they provided services worth USD 37.8 million to assist more than 44 000 farmers worldwide and direct financial assistance up to USD 27 million as well as training 273,808 farmers through their capacity building programs. Therefore, we can’t but acknowledge the work done by Nestle at those levels.
But with all this, Nestle is still criticized at many points when it comes to CSR and ethical behaviour, especially with baby milk formula and promoting the use of this formula for infants as a replacement for breastfeeding. In his book, ‘The Baby Killer’, Mike Muller explains how multinational milk companies like Nestle are the reason behind the death and illness of many infants in poor communities by promoting bottle feeding and discouraging breast feeding. Things went even farer with the Swiss associate which they titled their report ‘Nestle Toten Babies’ (Nestle Kills Babies) which drove the judge to warn Nestle about their sales behaviour where they make their sales persons to dress like nurses to appeal more to consumers and try to look as expert in the field so they can sell more of their milk formulas.
The problem even created a negative reaction with the public, where Nestle was boycotted from Switzerland and Britain to the US. According to the International Baby Food Action Network (IBFAN) and Save the Children there are four major problems when mothers in poor areas switch to the milk formula: Formulas are usually mixed with contaminated water in these areas which leads to many diseases in vulnerable babies. Lack of means in these countries to perform sanitation standards required to protect the infant from illness and bacteria. Many mothers use less dosage of the bottles, in order to last longer, which leaves the infants with inadequate nutrition. Those formulas don’t contain all the nutritional benefits that exist in breast milk.
So to summarize when we talk about the 3Ps, it’s true that Nestle is working very hard in problems such as water and helping farmers, but on the other hand promoting their milk formula in a way that is causing the death of many infants around the world is a huge human problem and human rights activist can never ignore it no matter how much Nestle try to do good in other aspects. Thus, Nestle should find a way to better address this issue if they wish to continue producing this milk, like for example even while selling this product, raise awareness among customers, that this milk should not completely replace breastfeeding and it does not that the nutritional benefit as breast milk. Moreover, they should find a way to better enhance the sanitation process in rural areas while selling their milk formulas.

CSR review and analysis
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The social responsibility of nestle company results from its strategy as well as investors and shareholders beliefs, who think that a key element of long-term profit is value brought to the society. Nestle company concentrated on the cooperation and support activity of agricultural farm above all, contributes to the economic development, for example teaching farmers how to proceed so that their raw materials meet requirements put by nestle, which apply in developed and developing countries.
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The pyramid of corporate social responsibility (Carroll, 1991) illustrates the four layers of responsibilities that constitute the CSR concept. The first layer in the pyramid is the economic responsibility, which aims to maximize the long-term financial purpose of the company. The second level is the legal responsibility, referring to national and international laws which the company has to obey. The ethical responsibility is the obligation to do what is right, just and fair, and treat stakeholders the best way possible. The final level is philanthropic responsibility expects the company to be a good corporate citizen and to contribute to the community and its quality of life.
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By use of Carroll (1991) the pyramid of corporate social responsibility and stakeholders theory to analyse nestles CSR activities is done via discovering consequences of nestle company actions that influence the various stakeholders by focusing on the value chain.
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Nestles engagement of stakeholders is based on their creating shared value (CSV), which is allowing them to identify and determine emerging issues, to share the responses among the stakeholders and to continue to drive performance improvements. Nestles global stakeholder network is vast, it ranges from people nestle regularly engages with as part of their operations, to those whose public positions influence their activities.
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We identify the following group of stakeholders engaged with nestle:
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Communities
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Consumers and general public
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Customers
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Employees
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Governments
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Industry and trade associations
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Non- governmental organisations
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Shareholders and financial community
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Suppliers(including farmers and smallholders)
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The company activities it is possible to divide on three stages:
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The farming and supplies,
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Production and distribution,
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Products and consumers.
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One of the crucial issues considered for nestle is farming and sourcing raw materials:
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Nestle interfering this zone to keep the high standard of raw materials which purchases from agricultural farms, it also helps local entrepreneurs in obtaining greater effectiveness in the production, achieving the best quality. This has a positive effect on consumers by offering very good quality product in the competitive price. Nestle activity influences developmental on the society, environment and supports the economic progress. Nestle cares about genetic diversity. Coffee and cocoa are indispensable nestle raw materials therefore this company largely commissions examinations concerning the possibility of agronomic improvement. These examinations are aimed to improve the effectiveness of receives crops and to increase resistance to illnesses, which are tedious during the production as well as to improve the taste and facilitate processing. Nestle established cooperation with the international centre of tropical farming I order to improve the efficiency of milk production. Promoting farming methods by applying fertilizers to the soil such as nitrogen, phosphoric salt enriches energy value of grass, and in addition cow increase their productivity of milk.
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Next aspect above which CSR nestle focuses is production and distribution:
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The main factor to which nestle puts emphasis is the quality of production. Nestle company tries to meet individual consumer expectations concerning the nutritional value of offered products, designing packaging. Nestle products are pointed separately for individual age groups, because there is a demand to different elements and supplement in every country. Nestle appointed Early Warning System for Food Safety, which deals with the examination of products chemical composition, examine the pollution, packages and safetyfor health. Nestle human resource policy determines relations among the staff, which care honest and friendly atmosphere. Nestle cares about ecology by reduction waste as well as by water management which is essential for the production. Using good relations with the farmers encourages them to use reserves of local water, sources as well as reusing water if it is possible (nestle 2012)
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The final stage is the problematic relationship between the product and consumer:
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Nestle published a lot of examinations, which arguments positive effect of nestle products on the consumers health. Nestle presented to the world health organization all charges in products elements, which took place in final years, e.g. reduce of calorie, fat or sugars.
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Analysing every nestle problem tries to care about its stakeholders, but not in every situation is so that all interested parties achieve their intended objective. Not always nestle cares about customer’s health. An example is sale of baby milk I Nigeria. Nestle published examinations proof thesis that mother milk isn’t as nutritious as the product offered by them. Were as in this product bad substances were detected for child health. Many non- governmental organisations intervened looking after human health and rights. The companies’ goal was to get rid of the already produced batches so as not to notice the additional start taking care of the investors and shareholders. A similar situation took place in several African countries and China, but with bottled water.
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Stakeholder’s perspective and criticism
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Nestle is extremely criticised for its marketing policy concerning the baby formula. Nestle has half of the milk market for children and babies as well as still bears the consequences of negligence in 1981 year WHO Code regulating. Advertised by handling samples were gaps of basic information Health Organization contradicted and suggested the lack of evidence in the thesis advanced by nestle that undernourished mothers and double pregnancy mothers aren’t able to breast-feed. In twenty countries breaking the code regulating the marketing of baby milk formulas, because on offered products weren’t any health warnings and instructions.
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In 1989 year in Brazil biggest strike was recorded in nestle. The reason of strike was noncompliance of existing standards in company, because of very bad working conditions there was no available protective clothing necessary to preserve safety regulations, as well as discrimination against women. Nestle reacted to this strike, within short time 40 employees were dismissed, mainly participants of the strike.
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Company is also criticized because of testing finished products an animals. Nestle tested coffees carcinogenicity on mice.
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Initially the farmers and agricultural enterprises were very pleased by the effectiveness of production growth and guaranteed market as result of first phase of cooperation raw material producers of milk or cocoa with nestle. However in consecutive phases of cooperation, the majority of agricultural enterprises will depend on nestle and in these stages nestle lowers price of bought raw materials. I such conditions farmers which submit to its productions according to nestle requirements are forced to sell it at the minimum price. Nestle explained that this is reaction to maintenance of the market, because the total price of raw materials drops.
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In 2006 no child could be employed in this corporation worldwide. Nestle did not perform the orders of liquidation child labour in their supply chain. International labour rights fund summoned nestle to appear in court in response to the lack of any activities taken fighting with the child labour. Nestle is such large corporation that institutions caring about labour law or human rights, as well as intervention of senators or prime ministers aren’t affecting their actions. Therefore there are very high threats from nestle, because they create their own law and act according to their principles not paying attention to the society.
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To summarize conducted analysis CSR and stakeholders of nestle, the company’s self-interest is to achieve the greatest profits. Which only benefits one group, they are the shareholders and investors. In many articles, the term appears as nestle murderer a children. This clearly points out that the company does not care for the youngest generation, which is very important in society. Nestle is dangerous because most of the food products on the market comes from nestle and cannot be sure that it does not contain harmful substances.
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The following table contains chronological list of broken laws or rebellion provoked by the functioning of nestle company in early years.
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To summarize conducted analysis CSR and stakeholders of nestle, the company’s self-interest is to achieve the greatest profits. Which only benefits one group, they are the shareholders and investors. In many articles, the term appears as nestle murderer a children. This clearly points out that the company does not care for the youngest generation, which is very important in society. Nestle is dangerous because most of the food products on the market comes from nestle and cannot be sure that it does not contain harmful substances.
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Conclusion:
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To conclude, we saw that Nestle are trying hard to enhance their image with the creating shared value program, but that is not hiding or changing the fact that they are harming the society in many ways such as the baby milk formula, which is leading to the death of many babies around the world and threaten the future generations since Nestle has a dominant market share in different product lines in FMCG. Therefore, while looking somehow ethical, the real fact is that only Nestlé’s shareholders are the only stakeholders benefiting from the company’s strategy and work. That’s why if they aim to succeed in the future, Nestle should start taking care and looking more for their other stakeholders, to mention babies, farmers, future generation and employees.
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References:

Nestle in society. (2012) Creating Shared Value and Meeting our Commitment. [Online] [Accessed on 2 January 2014] Available from: http://admin.csrwire.com/system/report_pdfs/1299/original/Nestle-CSV-Full-Report-2012-EN.pdf
Muller, M. (2013) Nestle baby milk has grown up but not gone away. [Online] [Accessed on 2 January 2014] http://www.theguardian.com/sustainable-business/nestle-baby-milk-scandal-food-industry-standards -------------------------------------------------
Baby milk action: ‘nestle boycott list’, 2010 [Online] [accessed on 3 January 2014] http://info.babymilkaction.org/nestleboycottlist
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Nestlé’s corporate website. 2013[online] [Accessed on 3 January 2014] www.nestle.com
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Carroll’s (1991) CSR pyramid [Online] [Accessed on 3 January 2014] www.csrquest.net
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Nestle corporate business principles [Online] [Accessed on 4 January 2014] http://www.research.nestle.com/asset-library/documents/corporate-business-principles-en.pdf
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Nestle stakeholder criticism [online] [accessed on 4 January 2014] http://www.nestlecritics.org/index.php?option=com_content&task=category&sectionid=8&id=26&Itemid=53
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Nestle stakeholder engagement [online] [accesses on 4 January 2014] http://www.nestle.com/csv/nestle/stakeholder-engagement
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