Business Ethics - Nestle's Baby Milk Scandal - Case Study Example

Business Ethics Essay: the case of Nestles baby milk scandal Introduction Crowther & Rayman-Bacchus (2004) d that the issue of business ethics can be summed up by articulating on the facets of the corporate social responsibility (CSR). With the continued competition and the need for businesses to endorse all forms of sustainability, many businesses have been on the spotlight for having failed to observe business ethics as expected by all stakeholders. What many organisations would underestimate to be a normal business operation could actually become a mega scandal worldwide (Sims, 2003). Nevertheless, business experts argue that encountering such situations is normal to any organisation, but the indispensable thing to do is to develop a mechanism of rectifying the mistake. However, a clear consideration of the problem must be understood in order to initiate a recovery process. Well structured strategic plans must be designed while implementation process is closely monitored to evaluate the progress. If no practical progress is noted, decision makers are entitled to have a wide consultation of the problem from all stakeholders before restructuring the recovery process. As Melison (2012) says, in the management of a business, one has to make ethical decisions. Sometimes, these decisions are not easy and in most cases it requires a lot of analysis to determine what is ethical from what is unethical. A good example is ethical decision making and how it can affect the stakeholders is the Nestle firm. Nestle is a food manufacturer and seller. The company has been involved in several ethical situations and which has put it in the spotlight. The following are different cases whether Nestle has been involved in ethical situations: Partnering with human rights violators Buying milk form Mugabe In Zimbabwe, the firm has been buying milk from president Mugabe firms. Mugabe has been known to be a human rights violator who has no respect for human rights or democracy in his country. While the rest of the international community disagrees with the way Mugabe treats the issue of human rights, Nestle has not been shy to work with him as a business partner. Analyzing the ethical dilemma in this situation The main ethical dilemma is whether it is a good thing for Nestle to partner its business with a known human rights violator. Partnering business with Mugabe is seen as an unethical issue for nestle because it is an indirect support of a person who does not research human rights. However, it is indispensable to note that the firm only buys milk from the Mugabe dairy firms and not further business relations. Mugabe is not a shareholder in Nestle and just because the firm buys from the Mugabe dairy firms does not mean they necessarily support the actions of the president. Buying cocoa from farms that use child and slave labor in Ghana Apart from partnering with Mugabe in Zimbabwe, nestle has also been accused of knowingly buying raw materials from farms in Ghana that use child labor as well as slave labor. In fact, the children are also slaves who work in farms without pay or with minimal pay. This is seen as an unethical way of doing business because this action directly supports unfair labor and also suits child labor which is unacceptable in the current time. This action is also another ethical issue that the management has to deal with. Buying from these suppliers is like a direct support for unfair and child labor (Westen, 2012). However, nestle seems to like the arrangement since buying from farms that use this kind of labor also mean lower prices from the raw materials. Nestle is a big firm with big financial muscle that it can use to set the standard and force the suppliers to conform to labor practices. How it handled it In the above two cases, Nestle’s management still went on to partner with the business that were not respecting human rights. This was a difficult ethical situation because the firm had to decide to either disrupt its business by refusing to buy from these supplies or continue buying form them and be supporting businesses that don’t respect human rights. As a result, in the case of buying cocoa from suppliers who were using unfair labor practices as well as child labor the stakeholders continues to be affected as follows; The society; The communities in which the slave labor was being used could not develop since the locals were earning too little and the children were not going to school but rather having to work long hours in the firms. The future of the children is of course destroyed. In the case of buying milk from Mugabe, this supports the Mugabe regime and this perpetuates the human rights violation in Zimbabwe. Alternative Nestle is a big firm with big financial muscle that it can use to set the standard and force the suppliers to conform to labor practices. The Nestles baby milk scandal The food industry has been under siege 1970s owing to the fact that many health issues that emanate from the industry have affected people’s health worldwide. For Nestle Company, the facts clearly spell out the challenges that it has gone through especially because it had to learn the hard way. In the 1970s, the company experienced many challenges ranging from being accused of harming the health of nations through its promotion of bottled milk to court battles over the same (Muller, 2013). One of the controversies the company found itself in was the use of sales representatives that dressed in nurses’ uniform. This was seen as ironical given that the advocacy of bottled milk over breast feeding was associated with deaths of babies. Breast milk has been argued to be the best for babies as it has nutritional value that keeps babies healthy. The decision makers did not see the criticism coming when they decided to have the sales representatives use nurses’ uniforms. This translates to a change of marketing gimmicks that only aims at convincing customers or better still convincing them about the health value of the bottled milk. Nevertheless, better options such as focusing on the content of the bottled milk could have worked better since the issue was not with the attire the sales representatives used. In another dimension, the company ought to have considered consulting widely to establish the cause of the allegations against its brand (McNeil & Malena, 2010). For instance, the World Health Organisation (WHO) could have helped in establishing the cause of the health problem that was allegedly pointed out by people who opposed the use of bottled milk. This way, the company could have investigated different means of improving quality of the milk. Additionally, the company’s campaign of promoting bottled milk and discouraging breast feeding was a wrong idea. Alternatively, it would have been worked well for the company if it decided to initiate programs that would encourage breastfeeding while introducing its bottled milk as complement to breast milk. On the other hand, venturing in developing countries with the high spirit of encouraging the use of bottled milk while discouraging breast feeding was considered unethical since most people in these countries by then knew little about the importance of breastfeeding or rather the implications of abandoning breastfeeding. The issue of CSR focuses on the need for companies to conduct businesses in a manner that they do not endanger their customers and the environment as well (Gossling, 2011). Such an allegation ought to have elicited a quick solution by focusing on the alternatives or means of advancing the quality of its products. Deliberation of maintaining competitive advantage comes with the need for companies to have business ethics that makes them relevant even during challenging times. A study conducted by Cloke (2009) revealed that organisations that take the issue of CSR seriously and especially on enlightening their customers stands chances of maintain competitive advantage over those which do not since they have the trust and loyalty of their customers (Idowu, 2009). The other concern over the decision by the company not to critically articulate on the issue rests on the fact that there has been increase of health problems associated with bad eating behavior across the globe. Complications such as obesity, heart diseases and diabetes are some of the examples associated with diets. In light of this, the company ought to have considered the idea of consulting the health organisations on the best practices that could help prevent deaths related to diets problems. For instance, the company could have decided to have educative strategies that aim at educating its customers on how they could keep off bad eating habits (Heller, Meaney & Murphy, 2001). Issues like consumption of fatty foods without physical exercise could have been highlighted on its campaign of staying healthy. Effect of the Nestles baby milk scandal to the stakeholders group Although the company has of the late decided to form a risk management team, it has not set out guidelines on how to mitigate any risks that might emanate (Burke, Graeme & Cooper, 2011). The continued production of bottled milk without complying with the international code has led to a campaign called “boycott Nestle-Protect infants”. Many parts of the world have even set banners with the Nestle boycott message as part of the campaign (Muller, 2013). The decision making of the Nestle Company can also be termed as the one that elicited the boycott campaign because after the scandal, the company did not figure out the practical consequences of its failure to agree to the international code. Instead, the company sued a German translator of War on Want’s expose. Although Nestle won the case, the trust of its customers had already faded away. Lastly, the baby formula scandal led to tarnishing the Nestle products. Studies have documented that the issue of CSR is imperative for any business that want to thrive in a highly competitive market to develop and maintain competitive advantage. For this to happen, organisations must practice business ethics that culminates review of decisions made to find viable solutions that might emanate as a result of the consequences of the decisions made. Coombs & Holladay (2012) argued that pressure for businesses to act ethically is a good ingredient for the success of the business. For instance, the company under the attack of the external forces can use the attack as a way of improving its operations. Instead of running away from the criticism, the company can develop a mechanism of looking at the allegations made against it and designing ways to remedy the crisis if any (Carroll & Shabana, 2010). However, even in situations where the attack is not true, the company can still learn from such allegations by evaluating the situation as it would be if that is to happen in the future. This way, the company gets prepared for such an eventuality. In his research, Souto (2008) pointed out that ethical behavior by companies generate higher revenue. This is as a result of increased demand from positive consumer. Unethical behavior by companies leads to loss of customer’s trust thus low revenues. It is also argued that ethical behavior leads to improved brand and business awareness. On the other hand, unethical behavior leads to higher costs especially due to low demand of the product or services as well as law suits that might emanate as a result of the unethical behavior (Wagner, Bicen & Hall, 2008). There is also a danger of building up bad reputation of the company, something that pushes the company out of the market. The way forward for Nestle in regard to the milk scandal With many deliberations on the Nestle baby milk scandal, it is apparent that there is a big problem which the company must address to help it recover its reputation like it used before. Although the company has made some steps to rectify its mistakes, they are not adequate to turn around the situation. With the issue of continued diet related complications on the increase, there is a need for the company to reassess its strategies to cover the recommendations by the WHO on best approach by the food industry in regard to promoting health. Failure to adhere to these requirements, the company will continue to experience boycott calls from across the globe (Jamali & Mirshak, 2008). This is detrimental to the company especially at a time when every organisation and all other stakeholders are fighting to adhere to the issue of CSR. Unethical use of natural resources Nestle has also been involved in unethical exploitation of natural resources. This has been seen in cases like the destruction of natural forests by the firm to extract palm oil from natural forests. The decision to use natural resources in a manner that is not sustainable is an issue that nestle has been accused of for a long time. At the same time, the ethical issue here is not the use of natural resources, but rather failing to use these resources in a sustainable way. How Nestle handled the situation In this scenario, Nestle tried to handle the situation by trying to come up with a CSR programs which involved programs which were intended to improve the communities. However, this did not solve the problem because the affected stakeholders did not feel that CSR matched the damage the firm was doing to the environment. Alternative Nestle could have used a better approach to deal with the issue. As already pointed out, the ethical issue in this case was not to exploit natural resources but rather doing it in an unsustainable way. To come up with a sustainable way to exploit the resources, Nestle should have worked closely with the local people so that they can be part of the process and help in identifying the ways in which the natural resources can be exploited in positive way. Conclusion It is apparent that there is a lot that Nestle has to do in order to improve its current issues involving business ethics. The only important thing for the company to do is to deliberate on the best course of action and follow the CSR principles that help organisations in conducting their businesses. In the contemporary business world, people are very keen on business ethics where organisations are rated according to their accountability in regard to quality of products and services offered and sustainability of the business operations. In light of this, Nestle has to form some strategic plans that will help in identifying ethical issues that require special attention. Apart from designing such strategies, the company must establish serious implementation committee that will spearhead the strategies that will clear the company from its current mess. Reference list: Burke, R., Graeme, M. & Cooper, C. (2011). Corporate reputation: managing opportunities and threats. 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