Corporate Social Responsibility Practices of Nestle Food Corporation - Case Study Example

Corporate Social Responsibility Practices of Nestle Food Corporation By Your Name For PM104 Management [2015] Corporate Social Responsibility (CSR) Practices of Company X “We make a living by what we get, but we make a life by what we give.” - Winston Churchill ("Winston Churchill quotes," n.d., para. 1) Definitions and Importance of CSR Corporate Social Responsibility is, in the broadest sense, an umbrella concept meant to convey business’ role in society (Werther and Chandler, 2011). The early concept of CSR, also commonly referred to as corporate citizenship or sustainability, grew from the seminal 1987 Brundtland Report, commissioned by the United Nations, which first described sustainability in environmental terms as “meeting the needs of the present without compromising the ability of future generations to meet their own needs” (cited in Werbach, 2009, p. 8). Soon after, Carroll (1991) developed the seminal definition of CSR (as shown in figure 1): “The total corporate social responsibility of business entails the simultaneous fulfillment of the firm’s economic, legal, ethical, and philanthropic responsibilities” (p. 43). Thereafter, the notion of corporate citizenship grew out of Carroll’s study of CSR and was adopted as the preferred terminology by the World Economic Forum’s (WEF) 2002 joint statement with 34 of the world’s global corporate CEOs. Hence, CSR as a broad-based movement has largely advocated corporate values around sustainability, transparency, ethical behavior, and human rights (Strugatch, 2011; World Business Council for Sustainable Development, cited in Hoebink, 2008). CSR has also become synonymous with social capitalism, social responsiveness, sustainable development, sustainable business, ethical business, business responsibility, environmentally responsible business, global business citizenship, community engagement, corporate stewardship, strategic philanthropy, socially responsible business, resilient business, green business, conscious capitalism, stakeholder capitalism, natural capitalism, creative capitalism, conscientious capitalism, new capitalism, collaborative consumption for sustainable brands, purpose branding, meaningful brands, and brands with belief (Carroll and Buchholtz, 2012; Googins, Mirvis, & Rochlin 2007; Mainwaring, 2011; McElhaney, 2008), and the latest term “capitalism with a conscience” (Horovitz, 2013). Figure 1. Pyramid of Corporate Social Responsibility. Reprinted from “The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders” by A. B. Carroll, July/August 1991, Business Horizons, p. 42. Copyright 1991 by Elsevier. As a result of the various terminology and nuances of definitions, “conceptual confusion” ensued in academic and business circles (Matten and Crane, 2005, p. 174). Googins, Mirvis, & Rochlin (2007) point out that “confusion over definitions and a proliferation of terms are common in any field where the territory is changing rapidly and new ideas and entrants from many disciplines are, in some sense, competing for space” (p. 21). The variance in terminology and definitions, coupled with underdeveloped measurement metrics, diluted the universal intention and application of CSR (Googins, Mirvis, & Rochlin 2007; Werbach, 2009). So, “everybody, it seems, is for it whatever ‘it’ means” (Werbach, 2009, p. 8). Social entrepreneurs and small-medium enterprises (SMEs) have been the innovators and early adopters who entered the business world with creative designs that both matched consumer interests and provided solutions to environmental and social concerns (Mainwaring, 2011; Visser, 2011; Zadek, 2007). As a result, CSR landed squarely on the desks of business executives and corporate boards (Mainwaring, 2011; McElhaney, 2008). Importance of Different Aspects of CSR. As a result of these efforts to build a better understanding of the impact expected of corporations, three over-arching aspects of CSR begin to emerge from the literature. First, the activities around philanthropy, compliance, marketing, and PR are not to be discounted or rebuked entirely. On the contrary, they are necessary business practices that can be foundational and even valuable when they are found in organizations that practice CSR development (Googins, Mirvis, & Rochlin 2007; Mainwaring, 2011; Visser, 2011; Zadek, 2007). Second, the genuine essence of responsibility emerges from values and principles that society considers virtuous (Cameron, 2011), and it is embedded throughout the DNA of the business strategy, operations, leadership and ongoing learning (Googins, Mirvis, & Rochlin 2007; Mainwaring, 2011; Visser, 2011; Zadek, 2007). Only then can the business functions of philanthropy, PR, and marketing genuinely augment the other aspects of CSR development. Accordingly, these values and principles drive “being a good corporate citizen” and can be achieved by pursuing true sustainability in four equally important areas: social, environmental, economic, and cultural (Werbach, 2009, p. 9). Although Werbach’s (2009) construct produces a “quadruple bottom line,” in either case both constructs represent a “sustainable bottom line” (p. 111). Visser’s (2011) concurs by stating that “CSR is the way in which business consistently creates shared value in society through economic development, good governance, stakeholder responsiveness and environmental improvement” (p. 7). Simply, any level of activity short of this puts a company’s CSR commitment in jeopardy of being realized (Campbell, 2007). Third, developing CSR in any organization does not happen overnight. In fact, to embrace CSR is to accept it as a journey or expedition (Grayson et al., 2008; Lake and Calandro, 2012). The Merriam-Webster dictionary defines an expedition as a “sending forth” and a journey undertaken by a group of people with a specific purpose (“Expedition,” n.d., para. 1). Furthermore, much like other endeavors to explore new territory, each organization’s expedition is unique to itself. Categorically, CSR development is an undertaking, both in frame of mind and in strategic intent, and is influenced by where an organization starts, where it wants to go, and how quickly it wants to get there. There are moral, rational, and economic arguments for undertaking a CSR expedition. Morally, a business must assume that it does not exist in a vacuum and must act congruently with societal values. Rationally, an organization wants to minimize operational and financial constraints. Economically, a business must ensure long-term viability and legitimacy (Werther and Chandler, 2011). Indeed, the world needs the involvement of global corporations in social and environmental challenges because society’s problems are escalating on a scale that puts the planet at risk and jeopardizes society’s ability to thrive in generations to come (Visser, 2011; Werbach, 2009). As a result, many individuals and small entrepreneurial companies have adopted a heightened responsibility in the business community to leave the world a better place than when they entered it. They are independently taking a more conscious and active part in creating a sustainable future by designing innovative solutions, products, and services that counteract the bleak future predicted by scholars, scientists, and activists (Visser, 2011). In fact, social entrepreneurs - social and environmental individuals who have started companies like Patagonia, The Body Shop, TOMs, Seventh Generation, and Timberland - have been cited across the board as early adopters, innovators, and catalysts in defining a movement in the business community towards a more holistic, ethical, transparent, strategic, and advanced business model. Furthermore, CSR represents a more contemporary, balanced scorecard approach to measuring corporate success rather than the traditional one-dimensional approach of exclusively evaluating financial results (Savitz and Weber, 2006). With the growing impact of consumers, potential government regulations, and societal expectations, businesses have realized in light of their own interests and profits that CSR is an important business strategy, and not simply a passing trend (Bagley, Clarkson, & Power 2006; Haigh and Jones, 2006). CSR Techniques of Nestle Food Corporation Nestle Food Company used a variety of CSR initiatives which they actively developed and communicated, and in fact, the company faces a wide range of risks and criticisms from the public on corporate social responsibility issues. The company has been under particularly high pressure for responsible and ethical business practices, compared to other food corporations due to several reasons. First, food and eating is linked to the fundamental human needs, while dependency on the use of natural resources is high in food manufacturing; thus, consumers are highly conscious of the food products they eat (Hartmann, 2011). Secondly, the company’s impact on human health, environment, and society at large is far-reaching, since it consists of a “complex, labor-intensive nature of food supply chain” (Maloni and Brown, 2006, p. 38). In this regard, a number of previous studies (Maloni and Brown, 2006; Hartmann, 2011; Heyder and Theuvsen, 2012) pointed out that CSR issues in the food industry range from animal welfare to labor rights. It is notable that CSR issues in the food industry are not only limited to companies’ environmental or societal involvement, but also are widespread to the ethical business practices and efforts towards consumer health and food safety, which provides reasonable evidence for this report to consider food manufacturing-related CSR efforts as well as environmental and society initiatives as primary CSR activities. As CSR technique, Nestle Company uses three domains of CSR claims – eco-friendly packaging, employee welfare, and food manufacturing - were described with the food product images. On the food package, company name, product name, total weight, single serving size, the title of the CSR claim (e.g., “We value our employees” “We package using recycled materials” and “We oppose the use of GMO ingredients”) and descriptions about the company`s CSR activity were presented. Eco-friendly packaging CSR. Based on the existing CSR reports of Nestle Company, they provided an eco-friendly packaging CSR claim of “eco-friendly packaging” on packaged food products as one of the stimuli: We package using recycled materials. Employee welfare CSR. Support of local farmers and growers, employee welfare, and animal welfare have been widely used as CSR initiatives of Nestle Food Company. Based on the Nestle Corporate Business Principles, employee welfare CSR was highly developed and operationalized. More specifically, provision of competitive wage, health care support, and fair treatment and support were included as the content of employee welfare CSR claim: We value our employees. Food Manufacturing CSR. Nestle Food Corporation is a leader in implementing product safety-related CSR initiatives, since it is highly involved with human health and physical resources, and food is also a fundamental element of basic human needs (Hartmann, 2011). Nestle company endeavors in consumers’ health benefits and product safety was labeled as “food manufacturing CSR”. The CSR in this domain is defined as the commitment to practicing safe food manufacturing methods, by providing food ingredient information: We oppose the use of GMO ingredients and support farmers that minimize the use of antibiotics in cow. Advantages CSR can help customer relationships by building loyalty and brand reputation, and can improve business performance by surfacing new revenue streams and creating a positive marketing image (Carroll and Buchholtz, 2012; McWilliams and Siegel, 2011) because “People want to build relationships with strong brands…They want to give them their business, and they want to work for the winning team” (McElhaney, 2008, p. 36). Thus, CSR generates innovation, creativity, and ongoing learning that continue to push the organization and society to new initiatives and solutions (Werbach, 2009). Another significant advantage of developing CSR is employee management and relations (Carroll and Buchholtz, 2012). Sound practices inside the firm will fuel satisfaction with work, intrinsic motivation among the employees, and a solid reputation in the marketplace. This, in turn, enables the firm to attract top talent (McWilliams and Siegel, 2011). Another, having a good reputation is instrumental to fostering trust between a corporation and its stakeholders that, in turn, builds overarching norms. The pursuit of a reputation as a driver in the social contract is a rational incentive for a corporation, but it must be grounded in ethical governance. Otherwise, the punishment from the public will be worse than it would be in the absence of such pursuits (Sacconi, 2007), though Frances-Gomez and del Rio (2008) argue against Sacconi’s (2007) thinking that corporations are driven to provide explicit codes of conduct for fear of public punishment and that corporations suffer more in the eyes of the public if they do not comply with their codes. Disadvantages CSR may not always help an organization, particularly if an organization engages in controversial business practices. Societal members may compare a company‘s external good deeds with other company activities, including internal actions such as treatment of employees, and decide that the company is not a good corporate citizen after all (Cohen, 2007). In turn, CSR activities in some areas may not make up for irresponsibility in other areas, and often result in the organization being perceived as hypocritical (Whitehouse, 2006). Recommendations This individual report believes that there are valuable insights to provide to the business organization, and better and further use of other CSR models could be considered by Nestle Company. First, the company should systemically examine how CSR claims influence purchase decisions. Much research revealed that a company’s CSR activities promote purchase intentions. However, ice, which product attribute contributes to higher purchase intentions is still unknown, when CSR claims were presented on packaged foods. By identifying which product attribute is associated with greater purchase intentions, the effect of CSR claims on health or taste inferences will be more supported in relation to the influence on consumers’ purchase decisions. Moreover, future company endeavor can explore the effect of different employee welfare CSR issues. For instance, as more food companies are supporting local and/or family farms, it is important to examine if the similar effect takes place as the employee welfare CSR issue of employee welfare. As the company showed, the virtue of fairness carried by a company’s fair treatment of employees and provision of welfare were one of the key factors favorably perceived as an advantage for the employee welfare CSR and the company engaging in this issue. Indeed, Nestle Company provided evidence that employee-oriented CSR issues are considered with greater emphasis than other CSR issues, as people involved in producing packaged foods are also a critical part of food supply chain. Therefore, other people-oriented (e.g., fair treatment of suppliers, support of local farmers, etc.) CSR issues are worth examining to find if those CSR claims influence health and/or taste inferences. Finally, by examining the effect of CSR claims with objective nutrition or health information (e.g., nutrition facts), more evidence on the CSR halo can be provided. Health benefit perceptions of packaged foods can vary by different combinations of CSR claims and nutrition information. Similarly, it remains questionable if consumers still perceive the company of employee welfare CSR caring and committed, when the packaged food has the information of bad calories and nutrition ingredients. The CSR activities of companies with bad reputations are known to negatively affect company evaluations, a combination of positive CSR information (e.g., protection of labor rights) with negative health cues (e.g., high saturated fat) might generate unexpected outcomes. Therefore, Nestle Company should consider more studies with regards to combining different on-package messages such as health, nutrition, and CSR claims. REFERENCES Bagley, E., Clarkson, G., & Power, R. 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