Full Time MBA 2012-2013

Ethics Assignment (MBA 4645) Nestland Child Labour Violations

Authors ArpitaGokhale (M00429589) MayurAmlani (M00419491) MeghdadMostafaei (M00422521) NithiyananthanAntony Anton (M00429713) Olatunji Benjamin Alamu(M00387351) Sophia SurayaBintiRidzaAbdoh (M00426047)

MBA 4645 |Ethics Assignment

Lecturer Dr. Andrea Werner

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TABLE OF CONTENTS

1.0 INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01 1.1 AIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01 1.2 OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01 2.0 KEY ISSUE: CHILD LABOUR AT IVORY COAST. . . . . . . . . . . . . . . . . . . . . . . . 02 3.0 COMPANY EVALUATION W.R.T. ACADEMIC FOUNDATION . . . . . . . . . . . . . . 03 4.0 SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06 5.0 RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08 APPENDICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09 APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .09 APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 10

MBA 4645 |Ethics Assignment

1. INTRODUCTION AND COMPANY OVERVIEW

Founder of worlds leading nutrition, health and wellness company- Mr. Herri Nestl, a German pharmacist now employs more than 250 thousand people in 80 countries and has employed 3.4 million people worldwide secondarily (Nestl, 2012). Nestl has reached our homes in every form of product, but the company is drifting away from social and ethical values. The same is highlighted in this piece of writing.

1.1 AIM
To explain the drift of Nestls CSR activities and to help them eradicate child labour and produce slave-free chocolate with cautious methods.

1.2 ISSUE BACKGROUND

Nestls motto of Good Food, Good Life is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions. But the question is have Nestl practiced what they preach? Good food for sure, but is there no good life for the children who work in providing the customers pallet a sweet taste. Bitterness is profound in the chocolate business. Unfortunately the truth is child labour is persistent.

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MBA 4645 |Ethics Assignment

2. KEY ISSUE: CHILD LABOUR AT IVORY COAST

Worlds Cocoa production comes from the farms and plantation located at Ivory Coast, a country in West Africa. Survey conducted by ILO/IPEC, published in July 2002, reveal that child labour is being used extensively in these farms. Around 284,000Children were being used at Ivory Coast and other cocoa producing countries in western Africa. In November 2011, Fair Labour Association (FLA) sent 20 local and international experts to assess Nestls cocoa supply chain in the Ivory Coast.

According to the information provided by the company, Nestl purchases around 10% of worlds cocoa supply, of which 37% is produced from Ivory Coast(Fair Labour Association, June 2012)hence it is in a position to have a resonant influence on peoples life in Ivory Coast(Fair Labour Association, June 2012)and thus can avoid violating some of the business principles such as human rights, safety & health and supplier customer relations (Appendix A).Nestl does not possess or maneuver farms in Cte dIvoire, but is in a good position to make a positive impact on lives of workers in the cocoa supply chain as it has good influence on its suppliers and the volume of cocoa beans it procures is the highest. The Fair Labour Association (FLA) suggests the same(Nestl Cocoa Plan, June 2012). Executing the principles mentioned above child labour could be gradually demolished which is currently deserted by Nestl in its 'Cocoa Plan (Nestl Cocoa Plan, June 2012).

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MBA 4645 |Ethics Assignment

3. COMPANY EVALUATION W.R.T. ACADEMIC FOUNDATION

BBC reported in Nov 2011 "Nestl to act over child labour in cocoa industry" (BBC News, Nov 2011).Company leverage over the food industry and the consumption of the cocoa had taken a step in initiating a good cause. Nestl needed to evaluate itself based on its contribution towards the society and the environment. They decided to review their own Corporate Social Responsibilities (CSR). This activity is an aspect which the company has to take into account for its welfare and social endurance.

Carroll's pyramid of CSR, the company has four types of responsibilities as mentioned in the pyramid(Andrew Crane and DrikMatten, 2010, business ethics) Nestl believes that they practice all the four responsibilities mentioned in Carrolls model. The analysis of th e same is seenbelow.

Philanthropic Responsibilities Ethical Responsibilities Legal Responsibilities Economic Responsibilities

Figure 1: Carroll (1991)

With respect to Carroll's Model: Economic Responsibilities: Data suggests that there sales for 2012 showed a growth of 12.3% in emerging markets and 4.3% in developed markets (BBC News, Feb 2012). Nestl is definitely fulfilling their economic responsibilities by providing good products & services and making profits but the other three responsibilities (Andrew Crane and DrikMatten (2010). business ethics) which are based on economic success remain unfulfilled.

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MBA 4645 |Ethics Assignment

Legal Responsibilities: Nestl being the leader of the food industry must fulfil legal obligations and also comply with the laws and regulations. In the light of Nestl's illegal practises; FLA stated that Nestls four-fifths supply of cocoa comes from unknown channels and the information for the same is unclear (Bloomberg, June 2012). Nestl not only lacks transparency of reports but also lacks transparency on the supply chain. This questions their legal responsibilities. Excessive work hours and unpaid workers were also mentioned in the violations of Nestl's own supplier code in an investigation done by the FLA (The CNN freedom project, June 2012).Lack of legal commitments causes unethical issues. The organisation's code of practice which forbids child labour should be strictly followed and hence people must be trained accordingly.

Ethical Responsibilities: To overcome this, Nestl decided to be the first multinational chocolate manufacturer who let FLA investigate their cocoa supply chain to be completely mapped out and evaluated (The CNN freedom project, June 2012). As discussed earlier the key issue concerns child labour, Nestl affirms to concentrate on their ethical responsibilities by purchasing cocoa from farms that are certified of no involvement of child labour. But the Tropical Commodity Coalition 2010 Barometer (Oliver Nieburg, Confectionery News, Oct 2012) stated that only 1.1% of cocoa purchased by Nestl came from certified farms, which seek to eradicate child labour.

They are underperforming when it comes to their ethical responsibility. Mr.Hawksley from BBC who travelled to Ivory Coast in Nov 2011 reported: Children work on cocoa farm under hazardous condition. Children live away from their families and have no access to first aid kits (BBC News, Nov 2011). In Nov 2012, Nestl Company was questioned by KPMG (Oliver Nieburg,Confectionery News, Oct 2012) on the deficient schemes Nestl's Cooperatives1 had on prohibiting child labour. They were obligated to reframe their Ethical responsibility.

1 Cooperatives-

Cooperatives in Ivory Coast that supply Nestl which maintain farmer database and ensure greater respect of child labour regulations

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MBA 4645 |Ethics Assignment

Philanthropic Responsibilities: Nestl (2010) intended to invest $110 million (Slave free chocolate, June 2012) in the cocoa farming as a part of creating shared value initiatives. The 'Cocoa plan adopted by Nestl asserts in improving the livelihoods of cocoa farmers and their children. It states that the plan helps the cocoa farmers run profitable businesses, value the environment and have a good quality of life. It also claims to help the children working in cocoa plantation in Ivory Coast to have quality education. Nestl is also involved with World Cocoa Foundation to renovate 40 schools in Ivory Coast within four years (Bloomberg, June 2012) .Nestl affirms to concentrate on their philanthropic responsibilities by executing cocoa plan But a recent report(Oliver Nieburg,Confectionery news, Oct 2012) suggests that, the cocoa plan only covers 15%of their total cocoa supply. Also as per the theoretical framework developed by Immanuel Kant (Ethics of duties) known as categorical imperative, which explains the morality and the decision taken by Nestl for their child labour violations? Nestl took the first step in evaluating their own supply chain and making it traceable for the FLA to scrutinize. Being the world leader in chocolate manufacturing, it also inspired other competitor companies to be traceable in their supply chain and helped them in committing to 100% certified cocoa(Oliver Nieburg, Confectionery News, and Oct 2012). Thus functioning out of its boundaries to help their indirect laborer and making it a universal motive to eradicate child labour from IvoryCoast. (Kant, Maxim 1 and 2). According to Maxim 3 by Kant, Nestl made this cocoa plan universal and made a law of fair trade for thecocoa supply.

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MBA 4645 |Ethics Assignment

4. SUMMARY
In summary of the above, it is understood that Nestl approach was ineffective in eradicate child labour because: Weak Supplier Code; Low percentage of Certified cocoa; Less number of cooperatives and deficient in data.

5. RECOMMENDATIONS
Due to stakeholders pressure, FTA labelled chocolates is available to certain countries (i.e. UK and Ireland) and is desolately unavailable worldwide. To do so, Nestl needs to increase awareness amongst their global suppliers. Additionally, Nestl should start looking at reinforcing its supplier code of conduct by encouraging traceability of its supply chain. A vigorous&broad internal and third party monitoring on regular basis is needed. Nestls suppliersmust adhere to the standards of zero tolerance for child labour.
Registrat ion Publication of Statement Revie w of Policy Revie w of Site

Verificati on

Introduction of Managemen t Programme Site Based Interna l Audits

Preparation of Environmen tal Satement

Setting of strateg ic objecti ves

Figure 2: Framework for social accounting and traceability should be adopted by Nestl to austere their surveillance on supply chain mechanism.

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MBA 4645 |Ethics Assignment

As mentioned in Figure 2 they can review, revalidate and reinstate their policies of cocoa plan to help eradicate child labour.

CHALLENGES IN OUR RECOMMENDATION Unlike the association with FTA, Nestle needs to affiliate with different organisations to spread the concept of fair-trade globally. The main hindrance in this process is time.

Being a large multinational company, they have multi-layered suppliers hence monitoring and controlling all of them meticulously is problematic.

The cost involved in adapting to the framework suggested is the additional funds which will be incurred to exercise their plan.

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MBA 4645 |Ethics Assignment

REFERRENCES
1. Andrew Crane and Drik Matten (2010). Business ethics. 3rd Ed. New York: Oxford University Press. 53-54. 2. Fair Labour Association, June 2012, Cocoa Report Final. Available:

http://www.fairlabor.org/sites/default/files/documents/reports/cocoa-report-final_0.pdf. Last accessed 27th Nov 2012. 3. Fair Labor Association. (June 2012). FLA maps complete cocoa sourcing process in Ivory Coast for the first time.Available: http://www.fairlabor.org/blog/entry/flahighlights-underlying-challenges-child-labor-after-extensive-investigationnestl%C3%A9. Last accessed 30th Nov 2012. 4. Fair Labor Association. (June 2012). Nestl sets out actions to address child labour. Available: http://www.Nestlcocoaplan.com/Nestl-sets-out-actions-to-

address-child-labour/. Last accessed 27th Nov 2012. 5. BBC News. (Nov 2012). Nestl 'to act over child labour in cocoa industry'. Available: http://www.bbc.co.uk/news/world-africa-15917164. Last accessed 28th Nov 2012. 6. BBC News. (Feb 2012). Nestl cautious on sales in 2012. Available:

http://www.bbc.co.uk/news/business-17059195. Last accessed 28th Nov 2012. 7. Bloomberg, June 2012, Nestl Audit Finds Child Labor Violations in Cocoa Supply. Available: http://www.bloomberg.com/news/2012-06-29/Nestl-must-

address-child-labor-in-cocoa-supply-fla-says.html. Last accessed 29th Nov 2012. 8. The CNN freedom project. (June 2012). Nestl advances child labour battle plan. Available: http://thecnnfreedomproject.blogs.cnn.com/2012/06/29/Nestladvances-child-labor-battle-plan/. Last accessed 29th Nov 2012. 9. Oliver Nieburg. (Oct 2012). Nestl UK goes Fair-trade with Kit Kat two-finger. Available: http://www.confectionerynews.com/Markets/Nestl-UK-goes-Fairtradewith-Kit-Kat-two-finger. Last accessed 29th Nov 2012. 10. Slave free chocolate. (June 2012). Nestl in the news again. Available: http://slavefreechocolate.org/tag/ivory-coast/. Last accessed 29th Nov 2012. 11. Oliver Nieburg. (Nov 2012). Cocoa certification: Pros, cons and costs. Available: http://www.confectionerynews.com/Markets/Nestl-UK-goes-Fairtrade-with-Kit-Kattwo-finger. Last accessed 29th Nov 2012. 12. Wheeler, D and Sillanp, M (1997). Stakeholder Corporation: A Blueprint for Maximize Stakeholder Value. London: Pitman cited in the body shop approach to ethical auditing 1998.

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MBA 4645 |Ethics Assignment

APPENDICES
APPENDIX A: BUSINESS PRINCIPLES
Nestl is committed to the following Business Principles in all countries, taking into account local legislation, cultural and religious practices:

1. Nutrition, Health and Wellness:Our core aim is to enhance the quality of consumers lives
every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle. We express this via our corporate proposition 'Good Food, Good Life'.

2. Quality Assurance and product safety:Everywhere in the world, the Nestl name represents
a promise to the consumer that the product is safe and of high standard.

3. Consumer

Communication:We are committed to responsible, reliable consumer communication that empowers consumers to exercise their right to informed choice and promotes healthier diets. We respect consumer privacy.

4. Human rights in our business activities:We fully support the United Nations Global
Compacts (UNGC) guiding principles on human rights and labour and aim to provide an example of good human rights and labour practices throughout our business activities.

5. Leadership and personal responsibility:Our success is based on our people. We treat each
other with respect and dignity and expect everyone to promote a sense of personal responsibility. We recruit competent and motivated people who respect our values, provide equal opportunities for their development and advancement protect their privacy and do not tolerate any form of harassment or discrimination. 6. Safety and health at work:We are committed to preventing accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain.

7. Supplier and customer relations:We require our suppliers, agents, subcontractors and their
employees to demonstrate honesty, integrity and fairness, and to adhere to our non-negotiable standards. In the same way, we are committed towards our own customers. 8. Agriculture and rural development:We contribute to improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentally sustainable. 9. Environmental sustainability:We commit ourselves to environmentally sustainable business practices. At all stages of the product life cycle we strive to use natural resources efficiently, favour the use of sustainably-managed renewable resources, and target zero waste. 10. Water:We are committed to the sustainable use of water and continuous improvement in water management. We recognise that the world faces a growing water challenge and that responsible management of the worlds resources by all water users is an absolute necessity. Nestl continues to maintain its commitment to follow and respect all applicable local laws in each of its markets.

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