Essay on Nestle Corporate Social Responsibility

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Essay on Nestle Corporate Social Responsibility

“Children are like buds in a garden and should be carefully and lovingly nurtured, as they are the future of the nation and the citizens of tomorrow” – Jawaharlal Nehru. Unfortunately, child labor heartlessly engulfs children across the world. The term “child labor” is defined as children who “are either too young to work or are involved in hazardous activities that may compromise their physical, mental, social, and educational development” (UNICEF, 2019). According to the International Labour Organization (ILO) worldwide, there are 218 million children aged 5 to 17 are in employment while 158 million are victims of child labor; accounting for almost 11% of the child population (ILO, 2017).

This paper examines the child labor practices of American company Coca-Cola and Suisse company Nestle and their child labor practices in Cote d’Ivoire (Ivory Coast). Although governments and corporations are trying to tackle child labor, it remains a large-scale issue worldwide. Hence, companies must make a sustainable effort to stop child labor in their system and supply chain. Coca-Cola is well-known for its strict prohibition of child labor. In contrast, Nestle faces a lawsuit for affirmatively misleading customers about the use of child labor in its supply chain. Both Coca-Cola and Nestlé have productions occurring in the Ivory Coast, the world’s largest exporter of cocoa beans yet an extremely impoverished country where citizens suffer from poverty, dangers of farm work, and lack of access to education. As a result, multinational companies often outsource their production to the Ivory Coast to take advantage of the existing child labor and keep their prices competitive.

Nestlé has been a prime contributor to child labor, with countless media outlets and organizations exposing their unethical business practices. Many of these unethical practices stem from their management systems. If we look at the Principles of [Global] Corporate Citizenship, we see multiple violations of ethical business practices. First and foremost is their information accuracy. Over the last 15 years, Nestlé has been criticized for its promotion of baby formula over traditional breast milk. This campaign was used to encourage mothers to use Nestlé’s baby formula instead of breast milk in hopes of higher product sales. There were even reports that Nestle was using advertising campaigns to target groups of people in certain countries, such as Malaysia, South Africa, and Ireland (Wolf, 2015). This directly violates the international symbols of breast milk marketing substitutes and the WHO code, showcasing Nestlé’s promotion of unhealthy foods (Wolf, 2015).

Nestle has also suffered backlash for how they treat their employees, with countless accusations made by Columbian workers that Nestle was threatening to fire employees if they didn’t leave their union (Wolf, 2015). This violates workers’ rights and the Principles of [Global] Corporate Citizenship. The media has also been pressuring Nestle to cease its use of cocoa farms in the Ivory Coast and Ghana.

Many of their suppliers are known to use child slaves purchased or stolen from their families. These children are living in unsanitary conditions, being overworked, beaten, underfed, and unpaid. Nestle has acknowledged that they don’t intentionally use child labor, but only know where 49% of their supply comes from (Whoriskey, Siegal, 2019). All of these examples not only show poor business practices but ignorance of their products, impacts, and their workers.

Coke provides a more positive model for an ethical company. The lack of disputes involving Coke is in part due to its management system which is built around ethics. A series of checks and balances are in place to ensure that management, suppliers, and stakeholders are all held to a standard (Ethical Business Conduct, 2018). Coke also has a more proactive outlook when it comes to correcting any mistakes in its business model. If we look at their ethical business practices, we can see that they’ve been very active in combating child labor and have been involved in beach cleanups in the Ivory Coast, a region where Nestle has exploited child labor (Cola Ivory Coast Saves a Day to Save the Beaches). They’ve also been forward when working with unethical suppliers, having repeatedly ceased work with different companies even before any business interaction has occurred. Coke’s only ethical issue has stemmed from its production of plastic waste. When looking at Coke objectively we can see they have a firm grasp on ethical issues regarding child labor but are not quite as successful when it comes to environmental practices.

The journey towards good corporate citizenship requires planning, funding creating new programs, and a clear initiative. A five-stage model developed at the Center for Global Citizenship can be used to demonstrate a company’s level of corporate citizenship. Although the model offers five distinct stages a company can be operating in multiple stages at once. Coke has taken on the issue of child labor by addressing it both internally and externally. Using strict anti-child labor policies and third-party organizations that assess Coke’s 28 largest sugar-supplying countries Coke can ensure that no breaches occur (Wilton, 2018). In a report for the Ivory Coast done by Coke’s partner organization, Partner Africa, it was found that there was “ no evidence of child labor in the sugar supply chain…”. Coke also plays a role in the complete eradication of child labor worldwide. By joining the Child Labor Platform with the hope of ending Child labor by 2025, Coke demonstrated its support of the cause on a global scale (Wilton, 2018). The integration of Child Labor into Coke’s key initiatives, shown through their internal policies and global support, places Coke in the highest stage of corporate citizenship, the Transforming stage. In this stage, companies are leaders of the issue, have proactive systems to address them, and also have strong multi-organizational alliances to ensure that the problem is given the most attention possible.

Nestlé, on the other hand, has pledged for over two decades to fight against child labor but has been unsuccessful in doing so. Although aware of the issue as seen through the creation of the Cocoa Plan, which specifically aims to identify and eradicate child labor used by Nestle suppliers in the Ivory Coast, in 2018 a lawsuit was brought against the company for their use of children. The Nestle Cocoa Plan Report from 2017 states that 51% of children involved in the Cocoa Plan program are no longer involved in any form of child labor, (Introducing the Nestlé Cocoa Plan) however, Nestle can only trace 49% of its cocoa supply back to a specific farm Therefore, Nestlé could be unaware of child labor occurring due to their inability to trace cocoa directly back to farms (Whoriskey, Siegal, 2019). The ineffectiveness of the Cocoa Plan places Nestle in the Engaged stage of the Global Corporate Citizenship Model. Although aware of the issue and its impact on their ability to operate their programs are unable to effectively solicit change and still allow for violation to occur.

Social auditing is the act of looking at the business activities of an organization and analyzing their impact. A company can either design specific standards for the company or adhere to industry-wide standards. Both Coca-Cola and Nestle follow a mix of company-wide standards and industry-wide standards which are overlooked by Audit Committees.

At Coca-Cola, the audit committee is selected by the Board of Directors. Coke’s audit committee charter states that “Each Committee member shall meet the requirements of the New York Stock Exchange listing standards, and federal laws and regulations, concerning audit committees,” (Audit Committee Charter, 2019). Both Coke and Nestle’s stated purpose of the audit committees is to oversee both the independent and external auditors and create annual reports stating compliance with legal requirements, company conduct codes, and ethics programs. At Nestlé the committee is also appointed by the Board of Directors but is required to have at least two board members present on the committee who are not the CEO. The information gathered in audits is then used by both Coke and Nestle to produce annual sustainability reports documenting their environmental and ethical impact.

Based on the analysis and assessment provided in Exhibit 1, both companies have stated their commitments and publicly addressed the child labor issue. Therefore, Coca-Cola earns an A on its corporate social responsibility in both the United States and Ivory Coast since the company has been realistically making efforts to maintain child labor in its supply chain. In contrast, Nestlé receives an A in Switzerland and a C in Ivory Coast as obviously child labor still exists in its supply chains. In conclusion, it is recommended that Coca-Cola should continue to help end child labor. Whereas, Nestlé should be more proactive in promoting human rights in the workplace and combating the use of child labor in its global supply chains. As such, Nestlé should establish strong contractual agreements with its suppliers to enforce child labor laws and incentivize good labor practices through price premiums or long-term contracts. Additionally, Nestlé should conduct more audits of its suppliers to measure compliance with child labor laws and its supply chain standards. The process could include non-scheduled visits to the production facilities or farms, interviews with workers, and document reviews (KnowTheChain, 2018). The benefits of eradicating child labor will far outweigh the costs as it will help save more than 150 million children around the world from the worst form of child labor and eventually reap rewards in the form of enhanced reputation, legitimacy, and customer loyalty.

Commitments

The company makes the following commitments:

Working with the Fair Labor Association (FLA) since 2011 to reduce children working in hazelnut supply chain
Making progress in tackling child labor in cocoa and improving farmers’ lives and their communities with the Nestle Cocoa Plan
Building schools in cocoa-growing communities to allow children to attend school and prevent child labor

The company makes the following commitments:

Establishing two contractual agreements, Supplier Guiding Principles (SGP), and Human Rights Policy with direct and authorized suppliers to strictly prohibit the use of child labor and embrace responsible workplace practices
Since 2013, the company has been working with third-party organizations to examine the realities of forced labor and child labor rights issues in the company supply chain (Wilton, 2018)

What steps does the company take to ensure no child labor in their facilities and supply chain systems?

Information is included in the Nestle Responsible Sourcing Standard. However, the company uses the word ‘shall not employ under the age of 15’ and has a different section saying if the suppliers employ young workers, ‘it shall demonstrate that the employment of young people contributes to their education and does not expose them to undue physical risks’ (Nestect Ltd., 2018)

Information is included in the SGP and Human Rights Policy. The policy says, ‘We prohibit the hiring of individuals that are under 18 years of age for positions in which hazardous work is required. And adhere to minimum age provisions of applicable laws and regulations (Wilton, 2018)

What steps does the company audit its suppliers to ensure regulations are properly enforced?

The company does not mention how they would audit their suppliers. Instead, the company encourages suppliers to make internal programs for continuous improvement and report any suspected violations of regulations, laws, and standards

It completes approximately 2,500 independent audits within the company system and supply chain. Additionally, it works on a due-diligence process through third-party organizations to examine the company’s 28 largest sugar-sourcing countries

Does the company conduct any labor rights monitoring or inspections of its facilities and suppliers in Ivory Coast?

Running a Child Labour Monitoring and Remediation System (CLMRS) in all its cooperatives. This system includes monitoring, training, and awareness of child labor. However, the company does not run any inspections

Farm and mill owners were asked what policy, management, and monitoring systems were in place to ensure no child labor occurred in the supply chain. This process is done by one of the largest sugar mills in Ivory Coast, which directly feeds into the Coca-Cola supply chain

Does the company have any corrective action plans with suppliers if found to violate child labor laws?

Nestlé has known for a decade that child labor exists in its supply chain. However, the company does not seem to make any significant impact or change to tackle child labor, especially in Ivory Coast

In 2004, Coca-Cola was claimed for purchasing sugar from El Salvador that used child labor. Since then, the company has been making huge efforts to ensure direct or authorized suppliers are not involved in any form of child labor

Does the company conduct any child labor practices in their headquartered countries?

No. Due to the strict child labor laws of the United States and Switzerland

References

(2018, August 22). Ethical Business Conduct. Coca Cola. Retrieved from https://www.coca-colacompany.com/stories/ethical-business-conduct.
(n.d.). Cola Ivory Coast Saves a Day to Save the Beaches. Coca Cola. Retrieved from https://www.coca-colaafrica.com/stories/coca-cola-ivory-coast-saves-a-day-to-save-the-beaches.
(n.d.). Quality and safety. Nestle. Retrieved from https://www.nestle.com/aboutus/quality-and-safety
Audit Committee Charter. (2019 February). Retrieved October 27, 2019, from https://www.coca-colacompany.com/investors/audit-committee-charter
International Labour Office (ILO). (2017). Global estimates of child labor: Results and trends, 2012-2016. Geneva: International Labour Office (ILO). Retrieved from https://www.ilo.org/global/publications/books/WCMS_575499/lang–en/index.htm
International Labour Organization (2017). Global Estimates of Child Labour. Results and Trends 2012-2016. Retrieved from https://www.ilo.org/global/topics/child-labour/lang–en/index.htm
Introducing the Nestlé Cocoa Plan. (n.d.). Retrieved October 28, 2019, from https://www.nestlecocoaplan.com/read-more#our-progress.
Jawaharlal Nehru. (n.d.). AZQuotes.com. Retrieved October 27, 2019, from https://www.azquotes.com/quote/1059491
KnowTheChain. (2018). 2018 Food and Beverage Benchmark. Know The Chain. Retrieved October 28, 2019, from
https://knowthechain.org/2018-food-and-beverage-benchmark/
Nestec Ltd (2018). Nestlé Responsible Sourcing Standard. Vevey: Nestec Ltd. Retrieved Oct 30, 2019, retrieved from https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/suppliers/nestle-responsible-sourcing-standard-english.pdf
UNICEF. (2019, October ). Child Labour. Retrieved Oct 29, 2019, from https://data.unicef.org/topic/child-protection/child-labour/
Whoriskey, P., & Siegel, R. (2019, June 5). Hershey, Nestle, and Mars won’t promise their chocolate is free of child labor. The Washington Post. Retrieved from https://www.washingtonpost.com/graphics/2019/business/hershey-nestle-mars-chocolate-child-labor-west-africa/.
Wilton, B (2018, June 11). How Coke is Doing its Part to Help End Child Labor by 2025. Retrieved from https://www.coca-colacompany.com/stories/how-coke-is-doing-its-part-to-help-end-child-labor-by-2025
Wolf, C. (2015, August 21). Has Nestle Gone Too Far? Forbes. Retrieved from https://www.forbes.com/sites/clarkwolf/2015/08/20/has-nestle-gone-too-far/#4cb5794e146c

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