Nestle CSR report

GRENOBLE GRADUATE
SCHOOL OF BUSINESS

MSC INNOVATION STRATEGY

ENTREPRENEURSHIP
2013-14
NESTLES CORPORATE SOCIAL
RESPONSIBILITY (CSR)

BY: MOHAMED DALLY

TANAY JADHAV

Nestle CSR report

Content

Executive summery ..3

Introduction...4
Nestle in the eye of Elkingtons TBL...5
CSR review and analysis..9
Stakeholders perspective and criticism.12
Conclusion.14
Recommendation..15

Nestle CSR report

Executive summary
Nestle is a well known multinational company, they operate all around the
world and deliver some good quality FMCG, but at the ethical level they dont
really score very well, they have a long history in boycotting from their origin
which is Switzerland going to the UK and USA. Their more significant problem
comes from their baby milk formula that for many human rights activist was the
reason for the death of many kids around world. Nestls story dont stop here,
they are also accused of child labour in Brazil and manipulating farmers, where
they were trying to look ethical through helping them when their real intention
was actually to regulate the market prices. Aside of the human level, Nestle is
also criticised for testing their products on animals like coffee carcinogenicity
on mice. But with all this problems, the image is not completely bad for the
company as they are trying to act ethical at some levels, such as water, where
with the help of some international organisations, they are raising awareness
about the important of water and how it can become a major problem in the
future if its not treated seriously soon. Therefore, since Nestle is a powerful
multinational company it should act like a role model to other companies and
try to be more ethical and transforming the world into a better place by
contributing the society and humanity alike especially when we talk about
babies and future generations, it is Nestls responsibility to make sure that kids
are brought up in a safe environment and through healthy nutrient and quality
food.

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Introduction

In todays world, CSR and ethics are becoming an essential part of success of
any company especially if it was a multinational one, like Nestle. So how is
Nestle dealing with CSR and its responsibility toward the society and
environment? Thus, through our work we will explore in details Nestls
Elkingtons TBL and how they are dealing with the 3Ps, especially the Planet
and People parts when they are doing business. We will also take a look at the
initial scope concerning the aspects including Carrolls CSR widened by
economic, ethical and legal spheres. Unfortunately there are many examples
which identify the drastic actions of Nestle that are not complying with the
ethical and morality laws which is leading a negative effect on the Stakeholders
and future generation.

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Nestle in the eye of Elkingtons TBL

For its CSR, Nestle created what they call Creating Shared Value (CSV).
Through their CSV, they try to focus mostly on the nutrition, human rights,
progress in areas of water and rural development, as well as in environmental
sustainability. In the words of its chairman: We believe we can make an
important contribution to society, by going a step beyond corporate social
responsibility to create value through our core business both for our
shareholders and society. We prioritize the areas of nutrition, water and rural
development to create shared value; this requires long term thinking... (Peter
Brabeck-Letmathe, Chairman, Nestl). And their CEO, Paul Bulcke says
Creating Shared Value is built upon fundamental commitments to society, both
to achieve the highest standards of compliance with laws, codes of conduct and
our own Nestl Corporate Business Principles as well as to protect the
environment for future generations.
So according the TBL, Nestle puts its focus in one specific field when it comes
to each bottom line. For the sake of the study and because we are focusing on
ethics, I will be talking about the social and environmental part, while ignoring
the economic part.
For the social part, Nestle focus on nutrition and rural development.
Nutrition: by enhancing the quality of their product and trying to make it as
affordable as possible.
Rural development: by supporting the farmers in rural area where raw materials
they use are grown which create a win-win situation, enhance the quality of
their products and help the farmer get a better life.
For the environmental part, Nestle focus on Water.
Water: by calling for the protection of scarce water resources, efficiently use
water in their production and distribution channels.
As opposite to the way companies used to see CSR, as obligations or
philanthropy where it added cost to minimize risk and protect the reputation,
Nestle through its Creating Shared Value as opportunities to strengthen its long
term business and create value for its shareholders and stakeholders.
So what actions did Nestle take so far in terms of Nutrition, Water and Rural
Development to enhance its CSR position?
When it comes to nutrition, Nestle have opened a new Clinical Development
Unit to support our research and streamline the way we evaluate the impact of
our foods and ingredients on human biology, health, taste and pleasure. The
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Nestl Research Center (NRC) has published new research, exploring ways in
which human behaviour towards food influences dietary choices. They also
launched new health economics studies in order to better understand how to
maximize the health return on costs for nutritionally-vulnerable consumers
buying fortified products. Another contribution, Nestl Health Science has
developed an eating assessment tool that can help healthcare professionals and
careers identify dysphagia problems early in at-risk patients. They have
launched new bio fortification research in Cte dIvoire.
When we talk about water, Nestle have continued our work to address water
challenges with partners that include the 2030 Water Resources Group, the UN
Global Compact CEO Water Mandate, the Water Footprint Network and the
Alliance for Water Stewardship. They also worked with suppliers to promote
good water management through the Sustainable Agriculture Initiative at Nestl
(SAIN). They have also incorporated guidelines on water into their Responsible
Sourcing Guidelines. They have conducted 16 additional Water Resource
Reviews at their factories. And finally, they have contributed to helping
communities around the world address water issues following natural disasters.
In terms of rural development, Nestle have developed a new Rural Development
Framework which we will start to rollout in 2013. It is their goal to roll out the
Rural Development Framework to 21 countries by 2015. They have launched
Responsible Sourcing Guidelines for sugar. They are the first food company to
partner with the Fair Labor Association. They also have updated their
Commitment on Child Labor in Agricultural Supply Chains in three key
commodity areas: cocoa, hazelnuts and vanilla.
So as we see, Nestle is trying to be as active as possible when it comes to the
3Ps, through their Creating Shared Value program they address some of the
worlds severe problems such as water where According to the latest figures by
UNICEF and the World Health Organization, 8% of the worlds population still
rely on unimproved water sources for drinking water, and 3% drink surface
water for example, from rivers, ponds, or lakes. In rural areas of least
developed countries, 97 out of every 100 people do not have piped water. And
according to Nestls Chairman: the current rate of overuse, we will run out of
water long before we run out of oil. And Nestle are aggressively addressing this
issue with the help for other worldwide organizations to raise awareness about
how huge and dangerous this problem is to future generations. Moreover, we
cant ignore their work when it comes to Rural Development where they
provided services worth USD 37.8 million to assist more than 44 000 farmers
worldwide and direct financial assistance up to USD 27 million as well as
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training 273,808 farmers through their capacity building programs. Therefore,

we cant but acknowledge the work done by Nestle at those levels.
But with all this, Nestle is still criticized at many points when it comes to CSR
and ethical behaviour, especially with baby milk formula and promoting the use
of this formula for infants as a replacement for breastfeeding. In his book, The
Baby Killer, Mike Muller explains how multinational milk companies like
Nestle are the reason behind the death and illness of many infants in poor
communities by promoting bottle feeding and discouraging breast feeding.
Things went even farer with the Swiss associate which they titled their report
Nestle Toten Babies (Nestle Kills Babies) which drove the judge to warn
Nestle about their sales behaviour where they make their sales persons to dress
like nurses to appeal more to consumers and try to look as expert in the field so
they can sell more of their milk formulas.
The problem even created a negative reaction with the public, where Nestle was
boycotted from Switzerland and Britain to the US. According to the
International Baby Food Action Network (IBFAN) and Save the Children there
are four major problems when mothers in poor areas switch to the milk formula:
Formulas are usually mixed with contaminated water in these areas which leads
to many diseases in vulnerable babies. Lack of means in these countries to
perform sanitation standards required to protect the infant from illness and
bacteria. Many mothers use less dosage of the bottles, in order to last longer,
which leaves the infants with inadequate nutrition. Those formulas dont
contain all the nutritional benefits that exist in breast milk.
So to summarize when we talk about the 3Ps, its true that Nestle is working
very hard in problems such as water and helping farmers, but on the other hand
promoting their milk formula in a way that is causing the death of many infants
around the world is a huge human problem and human rights activist can never
ignore it no matter how much Nestle try to do good in other aspects. Thus,
Nestle should find a way to better address this issue if they wish to continue
producing this milk, like for example even while selling this product, raise
awareness among customers, that this milk should not completely replace
breastfeeding and it does not that the nutritional benefit as breast milk.
Moreover, they should find a way to better enhance the sanitation process in
rural areas while selling their milk formulas.

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CSR review and analysis

The social responsibility of nestle company results from its strategy as well as
investors and shareholders beliefs, who think that a key element of long-term
profit is value brought to the society. Nestle company concentrated on the
cooperation and support activity of agricultural farm above all, contributes to
the economic development, for example teaching farmers how to proceed so
that their raw materials meet requirements put by nestle, which apply in
developed and developing countries.
The pyramid of corporate social responsibility (Carroll, 1991) illustrates the
four layers of responsibilities that constitute the CSR concept. The first layer in
the pyramid is the economic responsibility, which aims to maximize the longterm financial purpose of the company. The second level is the legal
responsibility, referring to national and international laws which the company
has to obey. The ethical responsibility is the obligation to do what is right, just
and fair, and treat stakeholders the best way possible. The final level is
philanthropic responsibility expects the company to be a good corporate citizen
and to contribute to the community and its quality of life.

By use of Carroll (1991) the pyramid of corporate social responsibility and

stakeholders theory to analyse nestles CSR activities is done via discovering
consequences of nestle company actions that influence the various stakeholders
by focusing on the value chain.
Nestles engagement of stakeholders is based on their creating shared value
(CSV), which is allowing them to identify and determine emerging issues, to

Nestle CSR report

share the responses among the stakeholders and to continue to drive

performance improvements. Nestles global stakeholder network is vast, it
ranges from people nestle regularly engages with as part of their operations, to
those whose public positions influence their activities.
We identify the following group of stakeholders engaged with nestle:
Communities
Consumers and general public
Customers
Employees
Governments
Industry and trade associations
Non- governmental organisations
Shareholders and financial community
Suppliers(including farmers and smallholders)
The company activities it is possible to divide on three stages:
The farming and supplies,
Production and distribution,
Products and consumers.
One of the crucial issues considered for nestle is farming and sourcing raw
materials:
Nestle interfering this zone to keep the high standard of raw materials which
purchases from agricultural farms, it also helps local entrepreneurs in obtaining
greater effectiveness in the production, achieving the best quality. This has a
positive effect on consumers by offering very good quality product in the
competitive price. Nestle activity influences developmental on the society,
environment and supports the economic progress. Nestle cares about genetic
diversity. Coffee and cocoa are indispensable nestle raw materials therefore this
company largely commissions examinations concerning the possibility of
agronomic improvement. These examinations are aimed to improve the
effectiveness of receives crops and to increase resistance to illnesses, which are
tedious during the production as well as to improve the taste and facilitate
processing. Nestle established cooperation with the international centre of
tropical farming I order to improve the efficiency of milk production. Promoting

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farming methods by applying fertilizers to the soil such as nitrogen, phosphoric

salt enriches energy value of grass, and in addition cow increase their
productivity of milk.
Next aspect above which CSR nestle focuses is production and distribution:
The main factor to which nestle puts emphasis is the quality of production.
Nestle company tries to meet individual consumer expectations concerning the
nutritional value of offered products, designing packaging. Nestle products are
pointed separately for individual age groups, because there is a demand to
different elements and supplement in every country. Nestle appointed Early
Warning System for Food Safety, which deals with the examination of products
chemical composition, examine the pollution, packages and safetyfor health.
Nestle human resource policy determines relations among the staff, which care
honest and friendly atmosphere. Nestle cares about ecology by reduction waste
as well as by water management which is essential for the production. Using
good relations with the farmers encourages them to use reserves of local water,
sources as well as reusing water if it is possible (nestle 2012)
The final stage is the problematic relationship between the product and
consumer:
Nestle published a lot of examinations, which arguments positive effect of
nestle products on the consumers health. Nestle presented to the world health
organization all charges in products elements, which took place in final years,
e.g. reduce of calorie, fat or sugars.
Analysing every nestle problem tries to care about its stakeholders, but not in
every situation is so that all interested parties achieve their intended objective.
Not always nestle cares about customers health. An example is sale of baby
milk I Nigeria. Nestle published examinations proof thesis that mother milk
isnt as nutritious as the product offered by them. Were as in this product bad
substances were detected for child health. Many non- governmental
organisations intervened looking after human health and rights. The companies
goal was to get rid of the already produced batches so as not to notice the
additional start taking care of the investors and shareholders. A similar situation
took place in several African countries and China, but with bottled water.

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Stakeholders perspective and criticism

Nestle is extremely criticised for its marketing policy concerning the baby
formula. Nestle has half of the milk market for children and babies as well as
still bears the consequences of negligence in 1981 year WHO Code regulating.
Advertised by handling samples were gaps of basic information Health
Organization contradicted and suggested the lack of evidence in the thesis
advanced by nestle that undernourished mothers and double pregnancy mothers
arent able to breast-feed. In twenty countries breaking the code regulating the
marketing of baby milk formulas, because on offered products werent any
health warnings and instructions.
In 1989 year in Brazil biggest strike was recorded in nestle. The reason of strike
was noncompliance of existing standards in company, because of very bad
working conditions there was no available protective clothing necessary to
preserve safety regulations, as well as discrimination against women. Nestle
reacted to this strike, within short time 40 employees were dismissed, mainly
participants of the strike.
Company is also criticized because of testing finished products an animals.
Nestle tested coffees carcinogenicity on mice.
Initially the farmers and agricultural enterprises were very pleased by the
effectiveness of production growth and guaranteed market as result of first
phase of cooperation raw material producers of milk or cocoa with nestle.
However in consecutive phases of cooperation, the majority of agricultural
enterprises will depend on nestle and in these stages nestle lowers price of
bought raw materials. I such conditions farmers which submit to its productions
according to nestle requirements are forced to sell it at the minimum price.
Nestle explained that this is reaction to maintenance of the market, because the
total price of raw materials drops.
In 2006 no child could be employed in this corporation worldwide. Nestle did
not perform the orders of liquidation child labour in their supply chain.
International labour rights fund summoned nestle to appear in court in response
to the lack of any activities taken fighting with the child labour. Nestle is such
large corporation that institutions caring about labour law or human rights, as
well as intervention of senators or prime ministers arent affecting their actions.
Therefore there are very high threats from nestle, because they create their own
law and act according to their principles not paying attention to the society.

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To summarize conducted analysis CSR and stakeholders of nestle, the

companys self-interest is to achieve the greatest profits. Which only benefits
one group, they are the shareholders and investors. In many articles, the term
appears as nestle murderer a children. This clearly points out that the company
does not care for the youngest generation, which is very important in society.
Nestle is dangerous because most of the food products on the market comes
from nestle and cannot be sure that it does not contain harmful substances.
The following table contains chronological list of broken laws or rebellion
provoked by the functioning of nestle company in early years.

To summarize conducted analysis CSR and stakeholders of nestle, the

companys self-interest is to achieve the greatest profits. Which only benefits
one group, they are the shareholders and investors. In many articles, the term
appears as nestle murderer a children. This clearly points out that the company

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does not care for the youngest generation, which is very important in society.
Nestle is dangerous because most of the food products on the market comes
from nestle and cannot be sure that it does not contain harmful substances.

Conclusion:
To conclude, we saw that Nestle are trying hard to enhance their image with the
creating shared value program, but that is not hiding or changing the fact that
they are harming the society in many ways such as the baby milk formula,
which is leading to the death of many babies around the world and threaten the
future generations since Nestle has a dominant market share in different product
lines in FMCG. Therefore, while looking somehow ethical, the real fact is that
only Nestls shareholders are the only stakeholders benefiting from the
companys strategy and work. Thats why if they aim to succeed in the future,
Nestle should start taking care and looking more for their other stakeholders, to
mention babies, farmers, future generation and employees.

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References:
Nestle in society. (2012) Creating Shared Value and Meeting our Commitment.
[Online] [Accessed on 2 January 2014] Available from:
http://admin.csrwire.com/system/report_pdfs/1299/original/Nestle-CSV-FullReport-2012-EN.pdf
Muller, M. (2013) Nestle baby milk has grown up but not gone away. [Online]
[Accessed on 2 January 2014]
http://www.theguardian.com/sustainable-business/nestle-baby-milk-scandalfood-industry-standards
Baby milk action: nestle boycott list, 2010 [Online] [accessed on 3 January
2014]
http://info.babymilkaction.org/nestleboycottlist
Nestls corporate website. 2013[online] [Accessed on 3 January 2014]
www.nestle.com
Carrolls (1991) CSR pyramid [Online] [Accessed on 3 January 2014]
www.csrquest.net
Nestle corporate business principles [Online] [Accessed on 4 January 2014]
http://www.research.nestle.com/asset-library/documents/corporate-businessprinciples-en.pdf
Nestle stakeholder criticism [online] [accessed on 4 January 2014]
http://www.nestlecritics.org/index.php?
option=com_content&task=category&sectionid=8&id=26&Itemid=53

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Nestle stakeholder engagement [online] [accesses on 4 January 2014]

http://www.nestle.com/csv/nestle/stakeholder-engagement

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