Law and Ethics Case Study – Nestle

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Many lawful and ethical issues in Public Relations come from large corporations drive to maximise profits. An example of this is Nestles unethical conduct regarding their infant milk in the early 70’s, causing a huge scandal. Along with other aggressive marketing techniques Nestle was appointing uniformed Nurses to distribute the baby formula and leaflets for free in hospitals and maternity wards in the developing world, such as in Ethiopia and Indonesia. Nestle gave new mothers this formula long enough for their own milk to dry up, therefore leading them becoming dependent on the formula, and at the time United States Agency for International Development official Dr Stephan Joseph blamed ‘reliance on baby formula for a million infant deaths every year though malnutrition and diarrheal diseases’, showing the possible effects of Nestles unethical advertising in the developing world.

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http://www.businessinsider.com/nestles-infant-formula-scandal-2012-6?op=1 Nestle gave poor health workers gifs to promote their products as well as sponsoring hospital products such as branding newborn wrist bands and nurses prescription pads to get the brand in the forefront of people’s minds and believe it has beneficial products due to healthcare support.

Nestle undermined new mothers confidence in breast feeding by the promotion of its infant milk and abused the want for westernisation in the developing world. There are many issues surrounding Nestles infant milk and its promotion. Formula is less healthy for a newborn baby and considerably more expensive than breast milk. In the developing world most could not afford this expense so gave their child weak milk to make the formula last, leading to children getting sever lack of nutrients and vitamins that they require for healthy growth.

The formula also requires clean water which in many places in the developing world is not available, increasing the spread of diseases and diarrhea within infants. The infant formula also lacks basic nutrients that a newborn baby needs. This shows how Nestle took advantage of the undereducated who do not understand sanitation and nutritional needs. Labels were also not translated to the countries in which the product was been distributed, so a full understanding of the product was being withheld.

Nestles promotion and widespread distribution of baby formula in the developing world led to huge damage to the brands reputation globally, especially in the developed world which in turn led to a global boycott of Nestle in the late 70’s leading to a huge fall in sales figures and lack of trust in the brand. Many made Nestles unethical behaviour public including the New Internationalists expose describing the controversial marketing practices used to get thirds world mothers ‘hooked’ on formula, published in 1973. In 1974 London’s War on Want organisation also published a booklet on Nestles behaviour called the ‘baby killer’ exposing the consequences of baby formula and unethical marketing techniques. This organisation and its translators were later sued by Nestle for its publication.

* Even though Nestles behaviour was seen as extremely unethical it was not illegal as no laws were in place surrounding marketing of baby food products. However, due to public outrage and awareness of Nestles unethical marketing practices hearings were held in 1978 between the US Senate, the World Health Organisation, UNICEF and the International Baby Food Action Network which led to a new set of marketing rules for baby formula and food products and by 1981 the international codes of marketing breast milk substitutes had been created. Key points of these rules are shown below. Baby food companies may not:

* promote their products in hospitals, shops or to the general public * give free samples to mothers or free or subsidised supplies to hospitals or maternity wards
* give gifts to health workers or mothers
* promote their products to health workers: any information provided by companies must contain only scientific and factual matters
* promote foods or drinks for babies
* give misleading information
* There should be no contact between baby milk company sales personnel and mothers.
* Labels must be in a language understood by the mother and must include a clear health warning.
* The labels must not include language which idealises the use of the product. http://www.who.int/nutrition/publications/code_english.pdf Companies must also describe the costs and possible consequences of using the formula as an alternative to breast milk and it must be made clear that breast milk is the healthiest option for a newborn baby.

These guidelines are rules and are not laws so are not legally enforceable unless they have been incorporated into the legislature of a nation state. Many countries have incorporated the rules into law however this does not include the US or the UK. Therefore enforcement of these rules can sometimes be seen as being weak. In 1995 advertising on newborn formula was banned however many companies use loopholes to promote their products such as brand name and follow on formula advertising, and many social rights groups still accuse Nestle and other companies of stretching the rules.

There are many ethical issues surrounding Nestles baby milk formula and its advertising and distribution, but due to lack of regulations at the time, no laws were broken. The product that was being distributed and marketed was infant formula which has been proved to hinder infant growth and contributes to unnecessary harm, suffering and death of babies, especially in developing countries where clean water, needed for the formula is rarely available. At the time the World Health Organisation found that babies on formula in developing countries had mortality rates five to ten times higher than those of breast fed babies, and Save the Children’s State of the World report says that ‘six months of exclusive breastfeeding are said to increase a child’s chance of survival by six times’. http://www.businessinsider.com/nestles-infant-formula-scandal-2012-6?op=1

Nestle is also seen to have abused the poor, taking advantage of the undereducated and illiterate as well as abusing the want for westernisation in the developing world. By doing this Nestle is also encouraging poverty by creating more costs for the poor as well as creating more health issues in poverty stricken areas. By providing lack of information Nestle also undermined mothers’ right to be properly informed. Nestle also used unethical promotion methods, undermining the benefits of breastfeeding and falsely advertising the need for and the nutritional value of its baby formula by using women dressed as nurses to distribute the product.

On this UNICEF has said, ‘marketing practices that undermine breastfeeding are potentially hazardous wherever they are pursued: in the developing world WHO (The World Health Assembly) estimated that some 1.5 million children die each year because they are not adequately breastfed. These facts are not in dispute.’ http://info.babymilkaction.org/nestlefree. These facts show that unethical behaviour and promotion methods by companies such as Nestle can cause greater infant deaths in the developing world. Codes and PR practise

Nestles unethical behaviour, although at the time was not seen to be breaking any laws, was breaking many of the Public Relations Consultants Association codes of conduct. Below is listed the codes that Nestle breached during its push to sell infant milk in the developed world. - Inducement – Neither directly or indirectly give any financial or other inducement to public representatives - Influence – Neither propose nor undertake any action which would constitute an improper influence on public representatives, the media or other stakeholders - Accuracy – Take all reasonable steps to ensure the truth and accuracy of all information provided - Falsehood – Make every effort not to intentionally disseminate false or misleading information, exercise proper care to avoid doing so unintentionally and correct any such act promptly - Deception

- Observance – Observe the principles of the UN Charter and the Universal Declaration of Human Rights - Conduct professional activities with proper regard to public interest - Have a positive duty at all times to respect the truth and shall not disseminate false or misleading information knowingly or recklessly, and to use proper care to avoid doing so inadvertently - Every member in healthcare public relations shall ensure that information disseminated is balanced and accurate and not likely to mislead http://www.prca.org.uk

http://www.ipra.org

Along with breaking these codes through deception, little regard for public interest or safety and influence, Nestle can also be seen to be breaking Human rights by not providing a balanced view on the implications and effects of infant milk, an issue which is also morally and ethically wrong.

Nestles behaviour, as previously mentioned did lead to a new set of marketing rules for baby formula and food products and new codes around the marketing of breast milk substitutes. Even though they could not be legally punished or prosecuted, the implications to Nestle from this campaign were huge and greatly damaged the company’s reputation long term.

Due to the huge media coverage of the scandal, as well as the many exposes that were published Nestles sales dropped considerably due to the global boycott of the brand and trust in the company was greatly damaged long term. Only time has managed to rebuild the brand as well as the release of many healthcare related products, however this is still a widely talked about unethical campaign due to the nature of the scandal, especially at a time when poverty in the developing world was at an all time high.

This case study shows how large corporations will break ethical and moral codes purely to boost sales and increase profits, and also how laws and codes will be stretched and loopholes will be found to make this behaviour possible. However it also shows how long the effects of breaching ethical codes term can be and how damaging it can be to a brand reputation long term. Even though Nestle also damaged the trust in the use of infant milk and many rules were implemented on its advertisement, baby formula and follow on milk is now an eleven and a half billion dollar market worldwide, and I believe that Nestle influenced this growth, showing how companies can also benefit from public relations scandals.

Bibliography

* http://www.ipra.org/secciones.php?sec=1&subsec=3
* http://www.prca.org.uk/assets/files/AboutUs/Files/PRCA_Codes_of_conduct_and_Professional_charter.pdf * Article, ‘Real world examples of bad business ethics’, 18th May 2011, N Nayab http://www.brighthub.com/office/entrepreneurs/articles/115557.aspx * Business Insider, Article, ‘Every Parent should know the scandalous history of infant formula’, Jill Krasny, 25th June 2012 http://www.businessinsider.com/nestles-infant-formula-scandal-2012-6?op=1 * Baby Milk Action Briefing, January 2009 http://www.babymilkaction.org/pdfs/nestlebriefings0109.pdf * Baby Milk Action Article and Press Releases, 2012, ‘The Nestle Boycott’ http://info.babymilkaction.org/nestlefree * World Health Organisation,