Analysis of Ethical Issues Confronting Nestle Group - Case Study Example

Name) (Instructor) (Institution) (Course code) (Date) Executive Summary Failure to adhere to ethical consumerism leads to devastating consequences for the performance of international brands. This article describes what ethical consumerism is and how it product boycotts of the Nestle company has been successful. The Nestle Company is a big global company product and selling a broad range of foodstuffs. Some of its processes have been ethically right. Many of its products have been boycotted as a result. The boycotts have been effective against the company that is operating at the expense of the public and worst being the under-five children who are affected by the baby milk. The baby milk produced by the Nestle has an effect on the health of the under-five children who mainly die before celebrating their 5th birthday in the process (Babymilkaction.org, 2014) Table of Contents Executive Summary 2 Introduction 4 Ethical Consumerism 4 Company Preview Profile 5 Analysis of ethical issues confronting Nestle Group 5 Infant Formula Controversy 5 Environment and Product Safety 6 Water Controversies 6 Product Safety 7 Palm Oil and Global Warming 7 Labor Relations 7 The results of a short opinion survey and 8 Conclusion 8 From the research and the short survey indicate that level of ethical consumerism by customers is high. This is unlike in the years before where the consumers lacked regarding the manufacturing process as well as ethical behaviour by the manufacturers. The consumers are no longer passive about what was being offered. In the past, they were receptive to anything that was offered. The current crop of customers are not only Individualistic but also autonomous and actively involved in the business process. This, therefore, justify the fact the ethical consumerism means buying and utilising products that are not only ethically produced but doesn’t harm the environment as well 8 Recommendations 8 Introduction For the last twenty-five years, Nestlé Company has been voted as the least ethical company. It is now facing the longest boycott mostly as a result of Baby Milk due to failure to comply with the set standards of marketing. The company has been irresponsibly marketing the baby milk formula. As a result of irresponsible marketing, it infringes the International Code of Marketing of Breast Milk Substitutes. At the same time, the Nestlé Company has been criticised palm oil, use of child labour and its failure to label GM ingredients (Google+, 2015). According to a survey conducted by Tim Hunt, an ethical consumer reveals that people still strongly fee about Nestle despite the company efforts to clear itself off the mess. The company tried to greenwash by use of Fairtrade Chocolate in some of its products. The Baby Kit Kats was one the product which the survey reveals that it was part of the ethical consideration of a chain of its products Ethical Consumerism In the current corporate world, ethical consumerism plays a critical role in the success of the business. Ethical consumerism is where the clients or the customers are aware of the history of the product they are using. This means that the product or service is not only ethically sourced but also ethical made and distributed as well (Thornton, 2012) On the other hand, an ethical consumer is someone who goes for products and services that are produced ethically. Ethical consumerism considers many facets, therefore, depend on the context. It may mean the product is recycled. Sound ethical consumerism means the production process of a product or service does not used child labour, slavery. Ethical consumerism considers if the product was produced either organic or free range (Arnold, 2009, p. 79). Anyone who buys and uses the products and services can be an ethical consumer or not. The critical part about ethical consumerism is aware of if the product or service is either ethically produced or not. The consumer should know what he or she is using is either ethically produced or not because ignorance about the same leads to abuse and exploitation (Thornton, 2012) Ethical consumerism has been on the rise leading to the boycott of products that does not comply with the set standards and rules. Whatever the customers use in spending the wages and hard earned money has led to the formation of a strong political movement overlooking the old practices of 20th Century. In the product process boycott by the consumers has been considered as a third political tool that the society can free itself from the potential strangled self-interested actions of trade unions and employers (Guido, 2009, p.1) Products and services boycotts internationally have seen the best of ethical consumerism. This article is going to highlight on the how Nestle Company has not been ethical in the about their products and how it affects the consumers negatively. Nestle has been on the forefront going against the set standards by the World Health Organisation in especially concerning baby milk among others. Company Preview Profile Nestle is a global food and drink firm based in Switzerland. It is the leading food firm in the globe based on its returns. Some of its products include breakfast cereals, dairy products, tea, coffee, baby food, pet food, bottled water, snacks and pet foods among others. Their yearly sale from its 29 products is approximate US$1.1 billion. The company operates in 194 countries with 447 factories worldwide. The company has the human resource of over 330,000. Nestle are dedicated to offering with its customers merchandises that are of high quality and meet the utmost safety standards possible. This is applicable not only to food and beverages but also to its systems, services and portfolio. Nestle policy is to guarantee quality and food safety as per the firm’s policy that they are devoted to sticking and maintain it. The company builds its reputation by delivering products and services that meet its customer’s choices and expectations. Nestle aims to meet both its internal and external food safety supervision and quality needs. It also works towards zero-defect policy by the aim to eliminate waste in the company. Analysis of ethical issues confronting Nestle Group In trying to be in line with the new trade theory, Nestle group has faced many challenges and setbacks along the way but it has emerged victories in many ways. This is because of it is still the leading company worldwide food company. Many of the issues that have affected them are as discussed below Nestle is one of the global most controversial companies. For more than twenty years, its name was massively linked to controversy, including a long-lasting boycott, over the sale, promotion and marketing of infant formula in third world countries. Lately, the firm has been one of the main targets of the international pressure against its bottled water. The firm’s hard-line workforce relations in developing nations have made it a worst in the eyes of global union movement (Doole and Lowe, 2005, p. 395) Infant Formula Controversy In the 1970s, while the company was growing gradually throughout the developing countries, was targeted by a campaign opposing the promotion of infant formula in third world countries. Advocates from institutions and organizations like INFACT and other faith and religious groups claimed that massive promotion and marketing of formula by firms like Nestle was triggering health burdens, in that poor mothers frequently had to mix the formula with dirty water and often diluted the expensive powder so much the infants remained malnourished (Babymilkaction.org, 2014) Nestle responded to the campaign and boycott of its merchandise with a counter-campaign, they donated money to study and research centers the financed Herman Nickel, a journalist of Fortune Magazine, to provide a crucial report on the boycott campaign. Instead of writing the report, Nickel wrote an article in the Magazine with the same function. He called the piece of article “the Corporation Hater” depicting the spiritual groups’ involvement in the campaign as Marxist parading under the umbrella of Christ. Nickel was sacked from the Fortune workforce, but he was named an ambassador to apartheid in South Africa by the Reagan Administration as a reward Nestle eventually changed its stand, assenting to obey the marketing code demanded by Who Health Organization. This led to the suspension of the boycott in 1984. This did not last long as protest campaign was resumed in 1988 with the reason that the company was found breaking the World Health Organization code by issuing large quantities of free sample primarily in hospitals. Interagency Group on Breastfeeding published a report giving more evidence that Nestle and other firms were acting against the WHO code (Babymilkaction.org, 2014) Environment and Product Safety Water Controversies After venturing in bottled water business by purchasing upscale brands like Perrier and San Pellegrino, the company started selling cheap water in third world countries in the late 1990s. Right from the beginning, critics pointed out that the ready availability of bottled water, branded as Nestle Pure Life, would make the authorities of those countries sluggish on the investment of infrastructure required for consistent public water systems. In 2005, a report was published questioning the purity of Pure Life water sold by Nestle in Pakistan by the Swiss Coalition of Development of Development Organizations (Gehriger, 2015) Nestle faced more hurdles on its activities in the US, including Zephyrhills, Poland Springs and Arrowheads brands it acquired from Perrier deal of 1992 and Deer Park of 1993 For instance, when Ozarka subsidiary required authorization to extract water from Rohr Springs in Eustace, Texas in 1995 the local inhabitants raised complaints. Finally, they got approval from the state agencies to go on, but the proprietor Bart Sipriano took the firm to court appealing that his well was dried up after the subsidiary company started pumping. The case was eventually concluded in the State Supreme Court which was ruled for company in 1999 In 1998 Nestle firm faced demonstrations and legal encounter when it wanted to increase the quantity of it was permitted to extract each day from the Crystal Springs, Florida from 0.31 to 2.6 gallons. The company promptly reduced the amount of water, but the local water authority disallowed the demand. The company lost the court case about it (Gehriger, 2015) The same case occurred again in the year 2001 when the firm sought the authority to pump water to construct a huge bottling plant in Big Rapids, Michigan for its Ice Mountain brand. Nestle got the green light for the plant, but the antagonist led by the Michigan Citizens for Water Conservation laid a supremacy battle in court over the water rights. In the year 2003 the case ruled against the company and ordered that the construction is stopped, citing that it was causing environmental damage. Nestle was not satisfied with ruling and appealed in Texas. The Supreme Court eventually rule for Nestle Group (Mattera, 2015) Come the year 2003, the company secretly negotiated an agreement to extract water from three springs in Mount Shasta in Northern Carolina. Nestle also intended to construct largest ever water bottling industry in the same place. In 2008 the company decided to roll back its plans but that did not satisfy its opponents. In 2009, the company decided to abandon the project in the area. It tried to put the project in Sacrament, but also faced demonstrations and active resistance A similar scenario occurred in the town of Salida, where the said company planned to extract 65 million gallons annually to be wired to a plant in Denver. Nestle shocked the world following massive local demonstration by promising to replace the water extracted. They were going to replace with water that would be harvested from Denver suburb of Aurora. Commissioners from the Chaffee County permitted Nestle with the Salida idea in the year 2009 but enclosed it with 44 conditions to the permit. Critics declared to continue the fight (Mattera, 2015) The company has also been one of the key victims of the Think Outside, a bottle campaign flung in the year 2006 by Business Accountability International. Product Safety In June 2009, the was an epidemic of E.coli causing food poisoning in the US which was associated Toll house frozen cookies made by the company’s plant in Danville, Virginia. Nestle recalled its all products from Toll Houses in the whole country. Nestle did not escape the hook as it was discovered that Toll House had earlier denied giving inspectors from state FDA access accounts and records linking to issues such as consumer complaints and the control of pests (Smith, 2015) Palm Oil and Global Warming In the year 2010 Greenpeace International started an operation against the company’s use of palm oil. The linked it to the damage of rainforest in Indonesia which causes the worsening global warming. The Greenpeace attacked the company’s merchandise like Kit Kat bars. Two months later the Nestle Group cave in (Smith, 2015) Labor Relations The company has always had a good reputation with unions and organizations representing its small internal human capital, contrary to that are that the company’s foreign workforce record is discordant. Nestle has had misunderstandings with unions in many countries, mostly the South and US (Mattera, 2015) In the past decade, the company has been under condemnation for its workforce handling practices by the International Union of Food Workers, a worldwide group concerned with the food-sector unions. The year 2003 the International Union of Food Workers question Nestle for not adhering steadily high standards in its workforce practices globally and condemn it for taking advantage nations and countries having less rigorous regulations; these are countries with fragile legislations sanctions union busting. The company is usually not to averse to busting unions (Mattera, 2015) The results of a short opinion survey and According to the survey carried out at the institution, a variety of factors affect consumer behaviour. These factors range from psychological, economic, situational, societal and personal in nature. The key determinant of purchasing a product is their disposable income. Other factors are the perception of brands available in the market and the social class. Interestingly 75 percent of the participants are influenced by the firm’s ethical production as well as the marketing process Conclusion From the research and the short survey indicate that level of ethical consumerism by customers is high. This is unlike in the years before where the consumers lacked regarding the manufacturing process as well as ethical behaviour by the manufacturers. The consumers are no longer passive about what was being offered. In the past, they were receptive to anything that was offered. The current crop of customers are not only Individualistic but also autonomous and actively involved in the business process. This, therefore, justify the fact the ethical consumerism means buying and utilising products that are not only ethically produced but doesn’t harm the environment as well Recommendations Nestlé being one of the leading international brands, should operate ethically so win part of its market share. The company should focus on making profits alone. The health of its customers should become number priority as part of the corporate social responsibility. The public and activists should relentlessly be watching out for the company that has been adamant are observing standards and regulations set by international bodies like World Health Organizations. References Arnold, C. (2009). Ethical marketing and the new consumer. Chichester, U.K.: Wiley, p.79. Babymilkaction.org, (2014). Nestlé boycott successes | Baby Milk Action. [online] Available at: http://www.babymilkaction.org/nestle-boycott-successes [Accessed 6 Dec. 2015]. Doole, I. and Lowe, R. (2005). Strategic marketing decisions in global markets. London: Thomson Learning, p.395. Gehriger, R. (2015). The Story - BOTTLED LIFE – The Truth about Nestlé's Business with Water (Documentary). [online] Bottledlifefilm.com. Available at: http://www.bottledlifefilm.com/index.php/the-story.html [Accessed 7 Dec. 2015]. Google+, E. (2015). The best and worst of the last 25 years. [online] Ethicalconsumer.org. Available at: http://www.ethicalconsumer.org/aboutus/ethicalconsumerat25/thebestandworstofthelast25years.aspx [Accessed 6 Dec. 2015]. Guido, G. (2009). Behind ethical consumption. Bern: Peter Lang, p.1. Mattera, P. (2015). Nestlé: Corporate Rap Sheet | Corporate Research Project. [online] Corp-research.org. Available at: http://www.corp-research.org/nestle [Accessed 7 Dec. 2015]. Smith, S. (2015). 5 shocking scandals that prove it's time to boycott Nestlé. [online] The Daily Dot. Available at: http://www.dailydot.com/opinion/nestle-california-bottled-water/ [Accessed 7 Dec. 2015]. Thornton, L. (2012). What Does Ethical Consumerism Mean for Business?. [online] Leading in Context. Available at: http://leadingincontext.com/2012/10/10/what-does-ethical-consumerism-mean-for-business/ [Accessed 6 Dec. 2015]. Read More