Nestlé S.A. sells its products in 189 countries worldwide, has a history of 152 years and is the world’s largest food company. The company has been in the headlines many times over the past 30 or 40 years and not for good reasons. Throughout the years, the Switzerland based company has been accused of union busting, false advertising and tricking poor, disenfranchised mothers into buying their baby formula, and contaminating drinking water in areas in which they have factories for their numerous bottled water brands.
When evaluating (un-) ethical behaviour of a company of this size it often becomes to the political issue. A soberer approach represents the following paper where we discuss about Nestlé’s ethical principles, visible aspects of corporate culture, hidden aspects that influence the company’s ethical behaviour and “questionable” ways of doing business. In our presentation and this article, the corporate social responsibility and general corporate practices of the Nestlé brand will be reviewed and analysed.
1. Ethical Principles highlighted by Nestlé
Nestlé highlights the company’s fundamental guiding principle on how to make business: the “Creating Shared Value” strategy tool. While complying with laws, business principles, cods of conducts, and committing to sustainability, the company emphasises its efforts to create value for shareholders and society in fields of nutrition, water, and rural development. Nestlè identifies five main fields for commitments with 42 individual liabilities: The promise to provide consumers with products and nutrition held to a high standard of safety and to promote a healthy food environment; the commitment to rural development; a special role in ensuring water efficiency and sustainability; a long-term engagement in climate policy; a commitment to improve workers’ livelihoods and to comply with human rights across all business activities.
If, and in what quantity the company is committing and creating value for society is not possible to evaluate at this point. However, it is for sure that share- and stakeholders today expect from a company of this size, this impact on society and this exposure to society, to highlight ethical principles and to develop strategies to ensure a “sustainable” business environment. Big international companies have a high social responsibility. E.g. commitments towards their own workforce and supply chain can also increase loyalty among their staff and decrease the risk of default due to injuries among workers.
2. Visible Aspects of Nestlé’s Corporate Culture and how they contribute to Ethical Behaviour
Part of the company’s vision is to ‘respect other ways of thinking, other cultures, and all facets of society’. In Germany, Nestlé helps to train and encourage women into leadership roles. Nestlé Germany has participated in this cross-mentoring project since 2007, which encourages the career development and personal growth of key female employees and at the same time, allows Nestlé to benefit from greater diversity at leadership levels. Those women who complete then programme the mentor junior females within the organisation. Nestlé will continue their participation in the cross-mentoring scheme following their success to-date. In Pakistan, there is traditionally a lack of women in fields like sales and engineering, so Nestlé has introduced an apprenticeship programme to help encourage more women to take permanent roles in these areas. They are holding ‘unconscious bias’ sessions across Nestlé to help break down some of the unseen barriers that prevent them from achieving gender parity.
According to Nestlé a diverse workforce brings about different ways of thinking, leads to better decision-making, and builds more creative and competitive teams. The company aims to have a talent pool that reflects the diversity of the societies in which it operates and to promote a culture within the workplace that supports diversity in all its forms, with a focus on gender balance. The company is implementing development plans for women to support their progression into future roles.
In the UK, Nestlé treats its wastewater with bio-digestion. They use municipal wastewater treatment facilities for ensuring the liquid effluents they generate are safe before their release. If the facilities are not up to their environmental standards, they will operate treatment plants. Nestlé’s Fawdon confectionary factory in the UK invested CHF 4.9 million in an anaerobic digestion system, which was completed in September 2014. The system converts solid and liquid sewage waste into clean water and methane gas using a natural biological digestion processes. The facility will save 1,000 tonnes of carbon dioxide every year, cut solid waste by 4,000kg per day, and reduce effluent discharges by 95%. In 2014 Nestlé committed CHF 18 million on new state-of-the-art treatment facilities to meet the targets for discharged water quality.
The company conducts their business operations to a set of principles based on ‘fairness, honesty and a general concern for people’. These three main values should be ‘non-negotiable’ for anyone that works for Nestlé and are therefore visible, or should be, throughout the company. Nestlé’s motto of ‘good food, good life’ captures these beliefs and shows that despite their power and dominance within the food and beverage industry, they must also focus on the wellbeing of society and the environment around them.
3. Hidden Aspects that influence the Company’s Ethical Behaviour
Due to the high exposure to civil society, which places them under scrutiny by governments, civil liberties groups and consumers, the organization must have formed a special hidden sensitivity with influence on the company’s ethical behaviour; everything must be done to avoid the next scandal. A scandal in one of the 189 countries they are operating in, can eventually harm the brand image and revenues all over the world. Their history and the public perception has therefore created a set of unwritten rules and shared assumptions, that when working for Nestle, there is a need for caution concerning ethical behaviour.
With 165,000 direct suppliers and 695,000 individual farmers worldwide, it is likely to say that there are hidden aspects such as unwritten rules regarding Nestlé’s supply chain and decision making. Even without direct communication, the importance of selecting an ethical supplier is paramount. Nestlé’s supply chain and procurement managers must realise how important their decisions can be for the global image and overall success for the company.
Within Nestle’s employees, there are a wide range of nationalities, religions, and ethnic backgrounds from all over the world. The consequence is that the company’s corporate culture is influenced by a variety of environmental factors, such as social norms, orthodoxies, moralities, educational attainment, political beliefs, national events, and history. Only some of them, and often only with great effort, can be clearly and permanently identified by outsider or even by the company itself. Such factors will however still have an influence on how members of the organisation perceive ethical behaviour, and on how society will interpret the actions of Nestlé. Those who determine and/or implement the company’s ethical, or sometimes unethical behaviour, are often members of the very same society as those who have no direct impact on Nestle’s decision making.
Those who do have an impact on the decision making of the company do, however, enjoy a high level of independence. Nestlé’s organisational structure is decentralized, which permits subordinate branches to enjoy a proportionately high-level of responsibility for operating decisions. The fact that daily operations are left up to subordinate branches could encourage local managers to react to ethical perceptions of societies, which will be often hidden or too vague for the headquarter level. This could potentially lead to issues if, for example, the decision-maker is not interculturally competent. As mentioned before, the need for a special hidden sensitivity regarding ethical behaviour now becomes even more vital.
Finally, Nestlé is selling more than food. Apart from international food standards and regulations, there must be a general and more hidden awareness that defective products can have serious impacts on the environment of Nestle itself, and on society in general. Their motto “good food, good life”, suggests they care more about just producing quality food and that they also aim to improve the world around them. They are not selling something like a computer that can be repaired when defective. Nestle has a role in society that is much more than what meets the eye.
4. Union busting and the Theory of Contractualism
As mentioned in the abstract of this essay, Nestlé is infamous for union busting. They choose to put their factories in countries with lax labour laws and supervision as to not be detected or hindered in the way they handle organized labour. Nestle replaces workers who complain with those willing to take lower wages, they threaten violence; and once in India, they got an injunction banning union meets from being near their facilities, although it was later retracted after a lawsuit. But can this really be labelled as unethical? In these societies, the laws, the societal contracts, that have been written do not call this illegal. Therefore, in these countries, Nestlé really is not doing anything “wrong”. The theory of Contractualism supports Nestle fully. In that case they are not breaking any social contracts in India, or China, or the other countries they have their factories in. This would not work if they chose to manufacture products in say Switzerland or the United States. Union busting is wrong, in the eyes of most of the world, even in the countries that have these lax laws. Therein lies the flaw of contractualism, the laws don’t always match up with what society really wants, many times laws progress slower than society.