Nestle Ethical Issue

The multinational business and ethical responsibility are parallel topic. Nestle faced with the rising of consumer boycott which came to be a broadly issue in case of business ethics. This essay extends three specific ethical issues of excessive price of bottled water which provided quality as similar as tap water and should not be placed value by money, child labours in cocoa supply chain that are threatened by hard job tasks and low wage, and powdered breast-milk formulation which is impractical for uneducated mothers and leads to the number of infant death in poor countries.

Those ethical dilemmas are approached by Nestle responsibility. It reveals that Nestle deals with those difficulty issues through CSR program which this company could protect and achieve brand image at the same times. The essay offers some possible future actions which are related to international business management theories to prevent unethical problems happening in the future.

Nestle is the one oldest multinational businesses which was established in Switzerland since 1866 by a Swiss pharmacist, Heinrich Nestle.

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He developed a milk food formula for infants. This company had gone in many name changes from 1866 to 1947, and the last name Nestle has used since 1977. There are eleven categories such as Baby Foods, Sports Nutrition, Chocolates, Waters, Coffee, Beverages, Frozen Meals, Ice Cream & Frozen Treats, Imported Foods, Healthcare Nutrition, and Pet Foods. Base around the world is in 83 countries 461 factories, and 45% of all factories are approached to settle manufacture in developing countries where include 48% of employees (Nestle 2010). In this essay, it will be evaluated that Nestle has faced with ethical issues in three product segments of unethical water supply, child labor in cocoa supply chain and breast powdered-milk boycott which this firm has some keys to dealing with those challenges.

Moreover, this essay will be provided about further improvements which are implied to international business management theories.

The multinational company such Nestle, agricultural raw material in particular milk, coffee, cereals, vegetables, cocoa, or spices through farmers or trade channels directly. Nestle has provided technicians to improve production quality, output and efficiency. Those technical assistances have observed the sustainable development of domestic fresh milk and coffee production, for instance; they have to improve yield and quality of coffee farms in China as similar as in Indonesia, Mexico, the Philippines and Thailand (Nestle 2006). According to Nestle (2012), it enhances with highly successful with innovative organic growth. There are seven brands which get high sales volume and the percentage each brand is as below.

In the role of multinational business and corporate social responsibility (CSR), Nestle has chosen corporate strategy to handle business and society together and changed CSR to the concept of Shared Value Creation. Those activities are improved skills and job stability of employees, improved life quality of consumer and greater stability of economic and social development. Alby (2012) mentioned that every Nestle segment contributes with their own CSR projects, and those use the same theme of Shared Value Creation. Goals of this project are to wipe out extreme poverty and hunger, achieve global primary education, push gender equality and empower women, decrease child fetality, improve mother health, fight with HIV/AIDS, Malaria and others, certify environmental sustainability, and progress global partnerships. Challenge Issues and Current Actions

Since Nestle founded, this company has confronted with numerous human rights and ethical issues while expanding a new section of bottled water to global market, especially in developed countries. Vaccari and Fletcher (2006) examined that bottled water selling was steady growth because people consumed as an alternative of tap water, in the past three decades. Currently, bottled water consumption threat to water natural resources and developed world trend to over consumption. This issue concern to environment and human right that water should be free of charge. Moreover, this product price tends to be excessive. Water in production might not over AUS$ 0.02 per bottle but other expenditures are come from processes such as bottling, packaging, labelling, marketing, retailing and others. In contrast, in undeveloped countries, the population lack of basic sanitation which is involved lack of clean water that Nestle should not be considering to charging natural resource.

Generally, Nestle gain benefits and create brand image as well as create a competitive advantage from social responsibility management process which related to business ethics, and it is an idea that business has a responsibility to society beyond making profits. Nevertheless, there is a conflict of interest with government, non-government organizations and stakeholders. Not only take human rights difficulties when doing overseas business, but ethical behaviour has to apply in difference cultures.

In 2006, Nestle focused a company commitment on position of health and nutrition although this company faced with a question of selling water, which is free natural resource. However, Nestle has sold out bottled water which low cost production and promote brand image through social and ethical groups. This company finds the way to wipe out those barriers through keep going on cooperating environmental considered actions and social corporate responsibility. Division of bottled water faced with the poorest performing between 2008 and 2009. Sales volumes had dropped in developed countries. Despite of environmental organization promoting high quality of tab water, people in those countries were acknowledged that quality of tab water as similar as bottled water.

Percentage of organic sales growth of Nestle

For human right in Ivory Coast, Nestle buy 10% of global cocoa production which is greater than 30% of cocoa supply chains produced in the Ivory Coast. Doherty and James (2012) stated that there is 89% of child labour in Ivory Coast and their duties include growing cocoa. Those labours are poverty and lack of education or they have to work during semester break with unsafe conditions and often work excessive hours. One cocoa farmer household gets income US$30 to US$108 per year.

Additionally, not only child labours are harmed by pesticides that are able to make serious health, but they are also threatened as slaves such as hitting and cruel activity (International Labour Rights Fund 2012). While Nestle became to first class food company in the world, it attends to Fair Labour Association (FLA) this year. This company is requested to improve worker condition and set clearer labour standard. Fair Labour Association (2012) examines that child in the cocoa farms are worked as slave. They surveyed 24% of child labour does not come from the Ivory Coast.

Cocoa is called seasonal agricultural business. Labours are peak hired during harvest period. The Ivory Coast government provides child labour regulation to monitor working of them in agriculture (Doherty & James 2012). While International Labour Rights Fund (2012) stated that Nestle should have responsibility to its cocoa producing supply chain and Nestle should monitor all cocoa farms to prevent child labour. After tolerate child labour issue happening, Nestle have response to solve the problems in working condition and addressed other benefits to child labours, for instance; supporting education opportunity, paying greater wage, or making safety workplaces. Next, it is looking forward to cooperate with the Fair Labour Association (FLA) to achieve an action plan for labour standard issues.

In terms of breast-milk substitutes, Nestle is trading to EU under brands of Nestle Nidina and Nestle Beba while in Africa, it uses Nestle Nanhas. This company is getting lost in the international marketing because infant in undeveloped countries dead from consuming Nestle breast-milk. Chanyamba (2002) examined that Nestle breast-milk substitutes should be banned, especially in Africa region. Those are poor countries, water is high bacteria and cannot consume as well as people lack of educated milk nutrition. Central Finance Board of the Methodist Church (2010) mentioned that the health risk of infant is caused from impure water when prepared milk formula and almost infants die from diarrhoeal which comes from contaminated water. As the result of poor and uneducated mothers, making milk by using water ratio excessive than Nestle formula, and consuming non-sanitation water leads to deaths of many infant which they lack of nutrition or get diarrhea.

Possible Future Action Nestle failed in bottled-water marketing in developing countries where people are able to consume clean water from tap directly. While Nestle use tap water to produce its bottled-water and mark up price higher than product quality. Mills (2002) suggested that there are many factors influencing customer’s decisions such as price, product specification, product brand, package size, location of store where product. Generally, customers place money on the extra product value while bottled-water of Nestle uses water resources from normal tap which had been perceived as free resources. Nestle should improve product differentiation in terms of quality to higher than normal water from tap and shift its brand targets to product differentiation, for example; purify water and add mineral before marking up product price as equal as product quality.

As per this ethical challenge, Nestle is responding to set rules of labour standard in workplaces. Eyre (2008) examined that Nestle should be protecting its supply chain from the Ivory Coast and should be focusing on five methods, for example; setup the organization, build cocoa supply chain networks, work out traceability, organize the legal rights, and set up discussion periods with stakeholders. Those five actions have success experience in coffee segment, and might be worked in cocoa sector. In the future, Nestle could look forward to some philosophical approaches to ethics. Hill (2009) implied that there are many moral philosophy approaches which are useful for businesses and Nestle could adapt to manage ethical behaviour.

Regarding to Friedman theory, Nestle should promote social responsibility to the global market to increase profits in cocoa supply chain, for example; providing education for child labour because education is a vehicle to flee of the cycle of poverty. Child labours contribute less income than adult labours in market. When they have knowledge and skill, they might get a high return of well-being than working as labours. After that Nestle might combine Rights and Justice Theories. Not only consider human right, but national cultures are important for managing in multinational segments. Even though child labour difficulties are happened for long period and it is not easy to solve problem, Nestle still aims to support basic human right such as a fair income and security at work.