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In today’s ferociously competitive business environments, the ability of a business to create ethical organisational culture may determine whether a business succeeds or fails. Many companies find themselves under increased pressure to adhere to ethical business practices since doing otherwise may lead to revenue loss and negative backlash.
The term corporate social responsibility (CSR) was created to describe companies’ readiness to adhere to such business practices which positively affect social well-being (Porter & Kramer 2006, p. 78; Brunk 2010, p. 255). Businesses strive to maintain some level of social responsibility to create a positive corporate image. CSR is especially important for large companies which are in a constant public view.
In spite of the shift towards CSR, once in a while a company fails to operate responsibly and finds itself amid a media scandal. Global food manufacturer Nestlé was accused of many unethical practices, including exploiting farmers and using child labour.
Child Labour Exploitation on Nestlé’s Farms
Nestlé is a transnational food manufacturer, one of the largest food manufacturers in the world. The company, which was established in Switzerland in 1866 and first specialised in selling milk, today produces a variety of products under over 7500 brands (Kose 2007). Today, Nestlé is best known for chocolate and confectionery, produced under such brands, as Nestlé, Aero, and Kit Kat.
Over the course of its long history, Nestlé has been accused of many irresponsible activities, including unethical marketing and production techniques (Pping & Klopping 2013). One of the biggest scandals which happened in the early 2000s concerned the exploitation of child labour on Nestlé’s cocoa farms.
Cocoa farms, which are located in the West region of Africa, became the subject of media debates after an investigation done by the BBC (Nestlé SA: Corporate Crimes 2005, par. 4). In spite of the fact that slavery has been condemned for over a century, in 2001 slavery flourished in several regions in West Africa. Children from these areas, aged from 12 to 14 years, were sold as slaves to work on the Ivory Coast and Ghana.
The working conditions were described as inhumane: children worked for over 80 hours a week for free and were subject to physical violence (Nestlé SA: Corporate Crimes 2005, par. 4). The areas where children slaves were forced to work were the main suppliers of Nestlé cocoa beans.
When the reports surfaced that Nestlé was buying cocoa from the farmers using child labor, the company faced a huge wave of backlash from the media and consumers (Nestlé SA 2005 par. 5). In the following 15 years, the issue of child labour on African cocoa farms would become a cause célèbre and Nestlé would struggle to improve its image amid constant child labour scandals. Although the company would quickly establish a supplier code aimed at finding responsible suppliers and publicly express discontent with child labour use in cocoa production, the company would not take sufficient actions to support such agenda.
In 2005 Nestlé together with several other companies became involved in a legal battle against the use of child labour initiated by the International Labour Rights Fund (Andrei 2015). The lawsuit stated that several children were sold as slaves to work on a cocoa plantation, that they were subject to regular beatings, and that the companies, including Nestlé, were “aware of the problem of child slavery in the region yet provided financial and technical assistance to local farmers” (Revesz 2016, par. 2).
In 2010 California court dismissed the suit in a controversial decision which was appealed at a later date. The court argued that as a corporation, Nestlé could not be held accountable for the use of child labour on its suppliers’ farms abroad, at least not on legal grounds. A 2014 ruling of the Ninth U.S. Circuit Court of Appeals revived the case which since then has been held at the Supreme Court (Revesz 2016).
Nestlé faced similar accusations in other regions of the world. In 2014 the Fair Labour Association (FLA) published a report which analysed working conditions at Nestlé’s top-tier hazelnuts suppliers in Turkey. The FLA concluded that Nestlé failed to establish acceptable labour standards among their suppliers (Independent External Monitoring of the Nestlé, Olam, and Balsu Hazelnut Supply Chain in Turkey: 2014 – 2015 2015, p. 2).
The Company’s Response to Child Labour Allegations
As a result of the continuous legal battles which, due to their controversial subject, receive extensive media coverage, Nestlé brand became associated with child labour use in West Africa. The company’s response focused on PR activity and was aimed at minimizing damage to its reputation. Such PR activity involved creating and promoting the company’s initiatives to eliminate child labour from the company’s cocoa supply chain. The official position of Nestlé is that of a company which is striving to eliminate child labour use on cocoa farms. The company’s public position is somewhat compromised by the stance Nestlé’s lawyers take in courts.
In response to the International Labour Rights Fund lawsuit against Nestlé, the company’s lawyers claimed that the company’s Code of Conduct was only aspirational and did not make the company legally responsible for not performing activities to eliminate child labor (Cocoa and Child Labor n.d., p. 2). This fact highlights the focus of Nestlé on PR activity, rather than on fair trade. It also highlights the fact that the issue of farmers exploitation and child labour in this case is not a legal issue, rather an ethical issue.
Ethics is a concept which describes the systematic reflection on what is right and what is wrong (Van de Poel & Royakkers 2011, p. 71). Ethical values are established principles which should be followed by an individual or an organization in order to achieve ethical integrity. Achieving ethical integrity is not required by law, at least not explicitly. In the CSR model suggested by Caroll, legal and ethical responsibilities are clearly separated (Visser 2005, p. 34).
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Indeed, from a legal point of view, by the United States law Nestlé is not required to take responsibility for the actions of their suppliers, which happen to be located in a different part of the globe. From an ethical point of view, working with suppliers who rely on child labour is irresponsible, and in order to achieve ethical integrity, the company should focus its efforts on eliminating child labour, rather than exploiting it for the company’s gain.
The response created by Nestlé took shape as the Nestlé Cocoa Plan. The aims of this plan are to “increase [the] suppliers’ profitability, secure high-quality cocoa for our business, and address supply chain issues such as child labour, gender inequality and poor social conditions” (Nestlé Cocoa Plan n.d., par. 1). The plan involves establishing better working conditions by farmers’ education, building schools, and providing child labour monitoring.
Recommendations for Nestlé to Address Child Labour Exploitation
While Nestlé has responded to the accusations by introducing Nestlé Cocoa Plan, the issue of child labour use in cocoa production remains unresolved (Esq 2012). This fact necessitates the revision of the company’s current strategy.
Nestlé’s efforts to stop exploiting farmers have not been very robust. While the company does take a clear and vocal position against child labour, the company’s efforts were mainly focused on de-emphasizing consequent damage (Dutta & Pullig 2011, p. 1282). As such, the company took responsibility and created Nestlé Cocoa Plan, which, in essence, aims to gradually phase out child labour usage through regulations and education. However, gradual implementation of the plan means continuous damage to the company’s reputation. In the light of an ongoing legal debate, it is important to take immediate action and ban child labour on the suppliers’ farms. Several strategies are proposed:
- Buying out the suppliers’ farms. Today Nestlé does not own any farms or plantations and as such, its ability to enforce ethical working practices is limited. Nestlé could manufacture its own cocoa and oversee the establishment of ethical working practices at the farms first-hand.
- If the buyout is not possible, it is important to take a proactive position and inform every worker in the cocoa supply chain of their rights. Ethical organizational culture is to be established at the plantations with strict limitations on the age of the workers. Nestlé could also subsidise payment for workers to reduce the need of parents to send their children to work on cocoa farms.
- It is important to closely work with the local government to ban child labour. Many of the violations occur due to the fact that West African region does not have any laws to ban child labour and human rights abuse. Nestlé could offer deals such as financial support, building schools and hospitals, and sharing a part of the profit in exchange for more strict governmental regulation.
- It is necessary to consider bigger investment in education. It can be argued that children are forced into labour due to the lack of schools and creating schools would naturally reduce child labour usage. Nestlé has the financial resources to build thousands of schools across West Africa. Nestlé could attract teachers from other African region and quickly improve the level of education in the region.
Ethics is an important part of today’s business practice. Many companies recognise the need of the contribution to society and implement CSR as a part of their business model. While ethical culture is not a legal requirement, today’s consumers become increasingly more sensitive to unethical business practices. The interconnectedness of today’s world also means that if a word about unethical practices goes out, it will be very difficult to contain.
Nestlé is a textbook example of a company which puts profits before people. It can be argued that the company existed long before CSR was invented. However, in order to remain competitive today, Nestlé should focus on ethical practices, in particular, on stopping exploiting farmers for a financial gain. This can be done through merger or acquisition of suppliers, working with the local government, investing in education, and creating an ethical working culture.
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