Nestle Ethical Audit - Assignment Example

Nestle Ethical Audit a) Identify the main ethical dilemmas facing Nestle. You might note the differing perspectives on this issue held by the various stakeholders. Ethics can be involved in many human activities. In the commercial sector, ethics are often related with the alignment of business practices with the social and legal orders. The identification of ethical dilemmas appeared in firms worldwide can be achieved only through studying the relevant theory. In accordance with Crane et al. (2007, 5) ‘business ethics is the study of business situations, activities and decisions where issues of right and wrong are addressed’. From a different point of view, it is noted that ‘business ethics often acts as a technology for the reduction of un-decidability’ (Jones et al., 2005, 8). Ethics in business can have similar characteristics with the ethics developed in the context of society. The specific view is supported by Fort (2001) who noted that ‘Aristotelian views of ethics are not bad, but may not be enough to prevent abuses of power by bosses or cynical reactions by workers’ (Fort, 2001, 91). In other words, ethics is a framework particularly valuable for controlling the development of activities in all organizations – in a similar way with society; however, quite often ethics in business activities are not applied leading to the development of conflicts and turbulences. In order to understand the ethical dilemmas in Nestle it is necessary to present primary the main aspects of the firm’s environment – both internal and external. Nestle is a firm well developed in the international market. The firm was established in 1866 by Henri Nestlé – a French pharmacist. Through the decades the firm expanded its activities worldwide – including the markets of Britain, USA and German since the beginning of 1900s. One of the firm’s priorities has been the protection of the health of the consumers – mainly infants, babies and children. As the corporate activities were developed, adults were included in the firm’s potential clients. Nestle has expanded its activities in many industrial sectors. Today, the firm can be characterized as a ‘nutrition, health and wellness company’ (corporate website, 2009). The ethical dilemmas that the firm currently faces can be categorized as follows: a) protection of the health of infants/ babies – the material used in the firm’s products need to be carefully processed in order to avoid any harm when being consumed by infants or babies; the above remarks refer to a specific part of the firm’s products – however this part is extremely valuable especially if taking into consideration the fact that the firm has been traditionally related with the nutrition of babies; In accordance with the corporate website ‘Nestlé's global efforts to increase the delivery of high-quality, nutritious food products that add to consumers' health and well-being should be highlighted’ (Nestle, 2009, CSV section); b) protection of the environment – the material used for the firm’s products has to be processed through methods that do not lead to environmental pollution or damage of other type – limitation of plants developed in a specific region; the specific issue is highlighted by the firm’s managers – see the CSV section of the corporate website; more specifically, it is noted that ‘the Nestlé Policy on Environmental Sustainability, that was updated in 2008 has ensured that preserving natural resources and minimising waste have become an integral part of the day-to-day activities in all Nestlé operations worldwide’ (Nestle, 2009, CSV section); it should be noticed that in the corporate website - in the CSV section – there is a particular reference to the efforts of the firm to reduce the water spent worldwide – the Nestle Waters, a firm that offers bottled water to the public focuses on the provision of water of high quality at a rather low price; in other words the use of water for the needs of the specific firm has two aspects: a direct aspect, as a product promoted to the public and an indirect aspect – being used in the various stages of the production and process of the firm’s products ; Within the context of the environmental sustainability scheme adopted by the firm, the following issues are taken into consideration by the firm’s managers when having to develop the firm’s strategic plans: 1. the fuel required for the transportation of the firm’s products, 2. The energy required for the production, process and storage of the firm’s products, 3. the emissions of the firm’s production and operation units, 4. the emissions of the vehicles of various types used for the transportation of the firm’s production, 5. the material required for the packaging of the firm’s products and the effects of this material on the environment, 6. The life-cycle of the firm’s products; The value of ethics related with the environment is highlighted in the work of Beatley (1989). In the relevant study it is stated that ‘the subject of environmental ethics asks questions such as the following: based upon what ethical criteria or principles should individuals and society make decisions about the use of the environment?’ (Beatley, 1989, 1); c) the effects of the firm’s activities on the rural development of regions worldwide - see corporate website, CSV, including the life of people in communities where production or operation units of the firm are established. All the above ethical dilemmas are taken into consideration by the firm’s managers when the organizational strategic plans need to be developed. It should be noticed that the above ethical dilemmas may be interpreted differently by the firm’s stakeholders. More specifically: a) for consumers, the priority of the firm should be the protection of consumers’ health, b) for suppliers, the firm should focus on the increase of its products’ line – environment would be an issue for consideration only if there are specific indications that the firm’s activities cause damages to the environment, c) for the firm’s shareholders, the profit would be the priority – consumers and environment would be taken into consideration at the level that the potential cause of harm on the consumers’ health or the pollution of the environment because of the firm’s activities could lead to the obligation of the firm to compensate the individual or the state for the damages caused; d) for the state, the firm should try to align its activities with the existing legal and ethical rules – those that regulate the relevant commercial activities; the profit of the firm would be of importance for the state only within the context of the tax paid to the relevant authorities. b) Evaluate the relative importance of these dilemmas and how Nestle is currently dealing with them. In accordance with the issues developed above, ethics are quite important for the successful development of business activities. In the literature, it is noted that ‘ethics is a practical common sense brand for those organisations that position themselves in a market niche’ (Jones et al., 2005, 133). Moreover, it is supported that ‘business ethics is primarily concerned with those issues not covered by the law, or where there is no definite consensus on whether something is right or wrong’ (Crane et al., 2007, 7). In other words, business ethics tend to refer to issues that are not regulated by the law – there are cases that ethics are used in order to explain the specific aspects of practices that are regulated by the law – not precisely; ethics can be used in order to express the will of legislator in cases that a legal provision is not accurate or complete – or if there is no legal principles regulating a specific issue. All the dilemmas described above are equally important – each one of them has a different influence on the firm’s performance but also on the firm’s image in the market. The firm has introduced a series of measures in order to ensure that all ethical issues – as described above – are carefully taken into consideration when the organizational plans are developed. More specifically: a) the firm’s managers have set three criteria on which the firm’s strategic plans are based: 1. compliance with the existing legal rules – referring to the legal principles and the ethics that govern the activities of the firm in accordance with the local legal framework – the firm operates in many countries and its activities need to be developed within the context of the local commercial ethics and legal principles; compliance is extremely important for Nestle. In fact in the corporate website it is noted that ‘Nestlé's Corporate Business Principles and the Code of Business Conduct are our non-negotiable worldwide minimum standards which are observed in addition to complying with locally applicable legislation’ (Nestle, 2009, CSV section, Compliance); 2. Sustainability, which is being translated by the firm’s managers as the ‘development which meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Nestle, 2009, CSV section) is extremely important for Nestle and is taken into consideration in every case that the firm’s strategic plans are reviewed or updated, 3. The scheme characterized as the ‘Creating Shared Value’, referring to the ‘value created for shareholders, employees, farmers, consumers and the communities where the firm operates’ (Nestle, 2009, CSV section). The application of these criteria can ensure that the firm’s employees – at all levels of the organizational hierarchy – follow the ethics related with the specific commercial activity – any potential violation of existing legal and ethical framework can be appropriately controlled by the relevant authorities; b) the firm participated in the development of a scheme called the ‘Sustainable Agricultural Initiative’; the specific scheme was established in 2002 under the firm’s pressures and with the active participation of other two firms – also well known in the international market – Unilever and Danone; c) the firm’s owners established in 1966 the Nestle Nutrition Foundation, an organization that deals with the examination of the nutrition problems around the world; the Nestle Nutrition Institute has been part of the above organization (see relevant website); d) the firm has developed an advanced Research Center – Nestle Research Center – which focuses on the examination of the material used for the production of the firm’s products – also for available practices regarding the limitation of energy – including water – required for the production/ transportation and storage of the firm’s products. Other schemes have been also developed by the firm in order to ensure that the commercial and social ethics of the regions in which the firm operates are not violated. We could indicatively refer to the following ones: a) the Nestle Consumer Communication Principles, a series of guidelines that set the rules on which the communication of the firm with its clients has to be based, b) the Nestle Corporate Business Principles, a series of rules regulating the various aspects of the firm’s operations and its relationship with its stakeholders, c) the Nestle Code of Business Conduct – a guide on the firm’s ethical priorities when conducting business, d) the Nestle Policy on Health and Safety at work – a guide including the firm’s provisions regarding the protection of its employees’ health, e) the Nestle Supplier Code – a series of guidelines regarding the cooperation between the firm and its suppliers and so on. The policies used by the firm regarding the promotion of commercial and social ethics through the corporate activities – in the context described above – can be characterized as quite satisfactory – at least taken into consideration the position of the firm in the market and the resources available; the firm’s managers have tried to address all ethical aspects of the firm’s activity – either direct and indirect – and make sure that the firm’s operation will not cause damages or harm on the consumers or the environment. c) Explain what you deem to be the Nestle´s ethical best practices and values. This should include discussion and application of appropriate ethical theory. In order to identify Nestle’s ethical best practices and values it is necessary to refer primarily to the general context of ethics – in business and in society. At a first level, it should be made clear that ethics is a different concept from values. For this reason, it is noted that ‘ethics and values have different sources; ethics are drawn from the books and debates in which philosophical theories about right and wrong are proposed and tested; values are acquired informally through processes of socialisation’ (Fisher et al., 2006, 152) Many efforts have been made in the literature in order to relate business ethics with the work of particular theorists, like Foucault; however, these efforts did not have up to now the expected result – mostly because not all theories can be used for the explanation of the role and the context of business ethics. In this context, it is noted that ‘Foucault-inspired postmodern organization theorists reject culture, history, and reason, and have little to offer in terms of ethics, action and change’ (Chan et al., 2002, 683). The above view is in accordance with that of Smith (2001) who supported that ‘contemporary social theory has often failed to reflect on the disciplinary limitations of its own critique’ (Smith, 2001, 49). Being influenced by its own weaknesses, social theory cannot be quite successful when it is used in order to interpret concepts and frameworks that are developed in various industrial sectors (White et al., 2004, Mayer et al., 2008). On the other hand Avio (1997) states that the views of social theorists can be used in order to interpret ethics – the views of Habernas are used as an example. However, it is noted that ‘the possibility of a successful synthesis depends on blending aspects of strategic and communicative action’ (Avio, 1997, 533). Business ethics can be related with different business activities. Marketing is a business sector in which ethics should be also used. More specifically, it is noted that ‘all theoretical works have focused on developing guidelines or rules to assist marketers in their efforts to behave in an ethical fashion’ (Hunt et al., 1986, 5). At a next level, deontological and teleological theories are used in order to explain the role of ethics in businesses. Deontological theories express the necessity of following a specific plan of action; teleological theories are based on the view that each decision should be based on a specific purpose. Ethics in Nestle can be characterized as being closer to the Contractarian business ethics (explained in the study of Wempe, 2008); Contractarian ethics ‘are related with the following two domains: political authority and social justice’ (Wempe, 2008, 1337). Indeed, ethics in Nestle are related with the business interests, the rules of the state but also the needs of the society. In these terms, ethical dilemmas in Nestle would not be interpreted using traditional social theorists, like Foucault and Kant. They could be rather explained by referring to the role of the company within the society, the organizational culture and aims and the social context in which the firm’s units operate. In accordance with the above remarks, Nestle’s ethical best practices would be the following ones: a) the use of a corporate code of business, b) the establishment of the Nutrition Foundation, c) the development of the CSV scheme for the evaluation of the firm’s initiatives and needs and d) the development of the environmental sustainability scheme, the Nestlé Policy on Environmental Sustainability. d) Make recommendations for Nestle to answer its critics. -Provide a Snapshot of Nestle´s Business ethics The activities of Nestle – as in all multinational firms – have been criticized as of their necessity and their consequences on local populations – on populations of the countries in which the business units operate. In accordance with Cory (2005) ‘one of the most acute dilemmas of managers is the dilemma between cases, which a priori seems equally ethical, but from different angles’ (Cory, 2005, 8). There can be no specific criteria for evaluating a firm’s ethical values and policies – social theories can be used along with practical schemes in order to explain the role and the needs of ethical frameworks used in organizations worldwide (Toens, 2007, Parker, 2003). Managers in firms worldwide decide on the criteria employed in such task. Regarding this issue, it is noted that ‘if businesses are going to directly manage business ethics, then at some stage they are likely to face the question of how best to organize the various components and integrate them into the company in order to achieve their goals’ (Crane et al., 2007, 202). In any case, business ethics are closely related with the social values, i.e. the aspects on right and wrong held in the society. In accordance with Johnson et al. (1999, 1351) ‘Business Ethics may be seen as a socially constructed "field" of study which reflects broader changes and controversies within society’. It would be necessary to refer to Nestle’s business ethics – even shortly. The specific firm’s ethics can be considered to be the following ones: a) the protection of consumer’s health is a priority, b) environment is respected and is protected by appropriate schemes, c) the interests of stakeholders are reviewed but the interest of the public is set as a priority, d) marketing and HR management follow specific guidelines making sure that ethics are respected and applied, e) the promotion of social values is set among the firm’s priorities. Nestle could effectively face its critics if the following issues are addressed: a) the needs of individuals – especially in the long term, b) not all firms operating in the sector follow the principles set by the social environment, c) the potential conflicting interests within the organizational environment should be taken into consideration. Nestle could effectively answer its critiques if an appropriate framework of ethical behaviour would have being developed in advance. Despite the fact that a specific board have been established in Nestle – for facing such conflicts – yet, the effectiveness of this measure cannot be guaranteed. References Avio, K. (1997) Constitutional Contract and Discourse Ethics. Journal of Theoretical Politics, Vol. 9, No. 4, 533-553 Beatley, T. (1989) Environmental Ethics and Planning Theory. Journal of Planning Literature, Vol. 4, No. 1, 1-32 Chan, A., Garrick, J. (2002) Organization Theory in Turbulent Times: The Traces of Foucault's Ethics. Organization, Vol. 9, No. 4, 683-701 Cory, J. (2005) Business ethics: the ethical revolution of minority shareholders. Springer Crane, A., Matten, D. (2007) Business ethics: managing corporate citizenship and sustainability in the age of globalization. 2nd Edition. Oxford University Press Fisher, C., Lovell, A. (2006) Business ethics and values: individual, corporate and international perspectives. 2nd Edition. Pearson Education Fort, T. (2001) Ethics and governance: business as mediating institution. Oxford University Press Hunt, S., Vitell, S. (1986) A General Theory of Marketing Ethics. Journal of Macromarketing, Vol. 6, No. 1, 5-16 Johnson, P., Smith, K. (1999) Contextualizing Business Ethics: Anomie and Social Life. Human Relations, Vol. 52, No. 11, 1351-1375 Jones, C., Parker, M., Bos, R. (2005) For business ethics. Routledge Mayer, A., Louise, J. (2008) The ethics of Community Empowerment: tensions in health promotion theory and practice. Promotion & Education, Vol. 15, No. 3, 5-8 Parker, M. (2003) Introduction: Ethics, Politics and Organizing. Organization, Vol. 10, No. 2, 187-203 Smith, M. (2001) The Face of Nature: Environmental Ethics and the Boundaries of Contemporary Social Theory. Current Sociology, Vol. 49, No. 1, 49-65 Toens, K. (2007) The Dilemma of Regress - Social Justice and Democracy in Recent Critical Theory. European Journal of Political Theory, Vol. 6, No. 2, 160-179 Wempe, B. (2008) Contractarian Business Ethics: Credentials and Design Criteria. Organization Studies, Vol. 29, No. 10, 1337-1355 White, J., Taft, S. (2004) Frameworks for Teaching and Learning Business Ethics within the Global Context: Background of Ethical Theories. Journal of Management Education, Vol. 28, No. 4, 463-477 Online sources Nestle, corporate website, 2009, available from www.nestle.com The Nestle Nutrition Institute http://www.nestlenutrition-institute.org/en/What_is_the_NNI/ Read More