business ethics group assignment case study nestlé and its ethical issues

Participants: Đoàn Quang Huy : 11222765 Nguyễn Ngọc Phương : 11225263

Tran Phuong Thao > 11225977

D6 Tran Tri Nghia : 11224616 Lé Hai Yén : 11227060 Bùi Thái Hòa : 11222411

Class: — International Business Management 64B

Hanoi, 2023

Contents

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ABSTRACT

This abstract provides a critical analysis of Nestlé's business ethics, focusing on its corporate practices Nestlé, a prominent global food and beverage company The two main issues raised in this abstract about Nestlé's business practices are child labor and sanitation/food safety Concerns have been raised concerning Nestlé's adherence to ethical labor standards as a result of claims of child labor in its cocoa supply chain, notably in West Africa The hygiene and food safety standards of Nestlé have also come under scrutiny, as there have been incidents of product contamination and recalls in Buitoni Pizza These problems have drawn criticism and legal challenges, highlighting how crucial it is to address child labor and make sure that Nestlé's operations follow strict cleanliness and food safety regulations To preserve customer confidence and uphold ethical standards in the industry, Nestlé must take aggressive steps to end child labor and improve its cleanliness and food safety policies.

INTRODUCTION

I HISTORY

1866: Foundation of Anglo-Swiss Condensed Milk Company- The precursor to Nestlé, the Anglo-Swiss Condensed Milk Company, was established by Henn Nestlé, a Swiss chemist, and two English brothers, Charles and George Page 1905: Merger with Nestlé- Nestlé merged with Anglo-Swiss Condensed Milk Company, expanding its product range to include chocolates and other confectionery

1938: Invention of Nescafé- Nestlé introduced Nescafé, an instant coffee product, which revolutionized the coffee industry and became a global success 1947: Introduction of Nestlé Chocolate- Nestlé launched its chocolate brand, offering a variety of chocolate bars and confectionery products that gained widespread popularity

1984: Acquisition of Carnation: Nestlé acquired Carnation Company, a major producer of evaporated milk and other dairy products, expanding its presence in the United States

2002: Formation of Nestlé Health Science: Nestlé established Nestlé Health Science, a subsidiary focused on personalized nutrition and medical nutrition products

2018: Launch of Starbucks Global Coffee Alliance: Nestlé formed a global coffee alliance with Starbucks, allowing Nestlé to market, sell, and distribute Starbucks packaged coffee and tea products worldwide

2021: Nestlé sells Nestlé Waters North America brand and acquires functional brands Essentia and Nuun

2022: The creation of the Nestlé Institute of Agriculture Sciences which aims to strengthen the business’s agricultural science expertise

Now, Nestlé is administrated by U Mark Schneider, Chief Officer on the left and Paul Bulcke, Chairman on the right.

IIL BUSINESS SCALES

In 2022, Nestlé was the world’s largest, most diversified food and beverages company This company has a unique global footprint and sells its products in 188 countries worldwide and is the employer of 275,000 workers

Where we sell (in CHF billion)

III BUSINESS SEGMENTS

Nutrition has been the cornerstone of Nestlé Company since its inception in the year 1867 Therefore, most products and services provided by the company revolve around nutritional needs The company strives at providing quality productsand services which will help in promoting the better and healthy well-being of its consumers Nestlé has gained a world reputation for its consistency in providing quality and safe products

Nestlé provides a diversified range of products with over 2,000 brands, which can be classified into 7 categories: (1) Powdered and Liquid Beverages ; (2) PetCare; (3) Nutrition and Health Science; (4) Prepared dishes and cooking aids; (5) Milk products and Ice cream; (6) Confectionery (7) Water (Nestlé, 2022) Nestlé’s portfolio covers almost every food and beverage category This enables the company to serve customers of all age brackets thereby increasing the opportunities for return and spread the risks of investments.

What we sell (in CHF billion)

Nestlé is the world's leading nutrition, health and wellness company Mission of Nestlé is "Good Food, Good Life" that is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night

Vision: To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier selling preferred products.

ETHICAL ISSUES IN NESTLE

I CHILD LABOR IN CACAO FARM

Chocolate is one of life’s guilty pleasures; a nibble here, a cheeky bar there Nothing excessive, Just a morsel or two of sugary joy to brighten our days Yet, the delights of chocolate are not universal Over recent years, the multibillion-dollar chocolate industry has been rocked by reports of pervasive child labor deep within its supply chain

1.1 Definition of “Child Labor”

+ According to the International Labor Organization (ILO): The term “child labor” is often defined as work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development

+ Three main international human and labour rights standards — the Convention on the Rights of the Child, the ILO Minimum Age Convention (No 138) and the universally-ratified ILO Worst Forms of Child Labour Convention (No 182) — set legal boundaries for child labour and provide grounds for national and international actions to end it

+ In more technical terms, child labour encompasses work performed by children in any type of employment, with two important exceptions: permitted light work for children within the age range specified for light work; and work that 1s not classified as among the worst forms of child labour, particularly as hazardous work, for children above the general minimum working age

+ The definition of child labour can include hazardous unpaid household services, commonly referred to as hazardous household chores Statistical standards for measuring child labour in household chores are less developed, however The estimates of child labour published in the Report excluded household chores except where otherwise indicated

+ The detailed concepts and statistical definitions are referred to in the Annex of the global estimates report as well as the separate publication “Methodology of the global estimates of child labour”

+ This unethical practice violates international labor standards and human rights principles.

+ Here is a graph that could illustrate more about child labour all around the world

In the world, 160 million children — 63 million girls and 97 million boys - are in child labour accounting for almost 1 in 10 of all children worldwide Nearly half of whom 73 million children are in hazardous work

BH n Child labour in Hazardous work

- The modern slave trade is common in many business institutions with long, complex supply chains and those that operate in areas without strict laws And Nestlé violated international labor standards and human rights principles

+ Children younger than 15 continue to work at cocoa farms connected to Nestlé, more than a decade after the food company promised to end the use of child labor in its supply chain

+ There is plenty of evidence, however, that the world’s chocolate supply depends heavily on child labor and that despite two decades of industry promises, it remains

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widespread While much of it occurs on family farms, some is also arranged by traffickers who ferry in children from neighboring Mali and Burkina Faso To human rights advocates, the persistence of child labor in the world’s cocoa supply amounts to, at best, tragic negligence

+ A new report by the Fair Labor Association (FLA), commissioned by Nestlé, saw researchers visit 260 farms used by the company in Ivory Coast from September to December 2014 The researchers found 56 workers under the age of 18, of which 27 were under 15

-The way Nestlé treat the children: The workers alleged that they had been captured in Mali and then sent to work in the Ivory Coast They say that they were held against their will, beaten and forced to work long hours for no pay on farms where Nestlé sourced its

+ With all the criticism and tackle, Nestlé responded: “Child labor has no place in our supply chain Our Nestlé Corporate Business Principles and Supplier Code explicitly cover child labor and we are taking action to progressively eliminate it by assessing individual cases and tackling the root causes These efforts are part of the Nestlé Cocoa Plan, which aims to improve the lives of cocoa farming communities and the quality of the cocoa we purchase.”

+ In 2014, the company set up our Child Labour Remediation and Monitoring System (CLMRS) in Céte d’Ivoire This comprehensive mechanism includes the Fair Labour Association (FLA) to identify children at risk in each cocoa community and the specific conditions that put them at risk Moreover, Nestlé worked with individual households and the community to raise awareness, address and prevent the problem CLMRS has been introduced in 22 farmer co-operatives and will be rolled out to all Nestlé Cocoa Plan co-operatives, around 70, by the end of 2016.

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Identify children in child labour through active, regular and repeated monitoring, using standardised data collection tools

and Remediation System :

+ Creating opportunities for children in cocoa growing communities to attend school is one of the ways known to help reduce the incidence of child labour In 2014, the 17 schools we refurbished or built in Cote d’Ivoire enabled 2,908 children to go to school for the first time This means the company achieved their target of building or refurbishing 40 schools in only four years; one year ahead of schedule These efforts, which have benefited more than 11,000 children so far, are part of our ongoing long-term commitment to tackle this issue

1.2.2 The reaction of consumers

The scandal of Nestlé's involvement in child labor has evoked various reactions from consumers worldwide Here are some common consumer reactions observed in response to the scandal:

¢ Social Media Activism: Consumers often turn to social media platforms to express their concerns and share information about the child labor scandal They may use

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hashtags, create online campaigns, or share news articles to raise awareness and encourage others to take action

« Demanding Transparency: Consumers demand transparency from Nestlé regarding its supply chain practices and the measures taken to combat child labor They expect the company to provide detailed information on its sourcing methods, audits, and remediation efforts to regain their trust

¢ Support for Ethical Brands: Some consumers shift their preferences towards brands that are known for their ethical practices and commitment to labor rights They seek out alternative products from companies that have a track record of responsible sourcing and fair labor practices

- Engaging with NGOs and Activist Groups: Consumers may choose to support or collaborate with non-governmental organizations (NGOs) and activist groups working to address child labor issues They contribute through donations, volunteering, or participating in advocacy campaigns to bring about change and hold companies accountable

« Demand for Regulatory Action: Consumers often call for stronger government regulations and stricter enforcement of labor laws to prevent child labor in supply chains They may engage in petitions, write to policymakers, or join initiatives advocating for legislative changes that protect vulnerable workers, including children

e Expectation of Corporate Accountability: Consumers expect Nestlé and other companies involved in similar scandals to take responsibility for their actions, acknowledge any wrongdoing, and implement robust measures to prevent future instances of child labor They demand transparency, accountability, and visible commitment to ethical practices

> It is important to note that consumer reactions can vary in intensity and duration, and they may have a significant impact on a company's reputation and bottom line As a result, companies like Nestlé face pressure to address the concerns raised by consumers and take meaningful steps to eliminate child labor from their operations and supply chains

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1.3 Consequence

Children: they must endure physical and psychological suffering as they work for long hours, often stitch balls, in cramped and toxic sweatshop environments These working conditions deny them access to education Increasing demand for products made through child labor perpetuates the cycle, leading to more exploitation, slavery, and discouragement of education supporting child labor not only robs children of their innocence and freedom but also deprives them of their right to education

Company:

Damage to Reputation: Child labor allegations and instances can severely damage Nestlé's reputation as a responsible and ethical company Such incidents can lead to public outrage, negative media coverage, and a loss of consumer trust This can impact the company's brand image and customer loyalty Consequently, this awareness is likely to result in consumer backlash and boycotts Ethically conscious consumers may choose to avoid Nestlé products, leading to a decline in sales and revenue

Legal and Regulatory Consequences: Child labor is illegal in many countries, and Nestlé could face legal consequences if it is found to be involved in such practices The company may be subjected to fines, legal penalties, and sanctions by regulatory authorities, which can have financial and operational implications

Supply Chain Disruption: If child labor is discovered in Nestlé's supply chain, it can lead to disruptions in sourcing and production Nestlé may need to sever ties with suppliers found to employ child labor, leading to the need for alternative sourcing and potential delays in production

Increased Scrutiny and Monitoring: Nestlé may face imcreased scrutiny and monitoring from stakeholders, including NGOs, labor rights organizations, and regulatory bodies This can result in more rigorous audits, investigations, and demands for transparency, placing additional pressure on the company to address child labor issues effectively

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