Nestle Company Social Responsibility and Shared Value Essay

Company Background

Nestle is the largest beverage and food company located in Switzerland. Its formation occurred as a merger between Anglo-Swiss Milk Company and Farine Lactee Henri Nestle in 1905 and has since then acquired other companies like Crosse and Blackwell (1950), Findus (1963), Libby’s (1971), Rowntree Mackintosh (1988) and Gerber (2007). It specialises in producing baby foods, coffee confectionery, snacks, pet foods, ice cream, bottled water and a variety of dairy products.

This is a multinational company that employs around 328,000 people in its 450 factories located in 86 nations. Its 2012 annual financial report shows that it had an enormous capital base (operating income about 14.44, revenue 92.18, profit 10.61, total assets 126.22 and total equity 62.20-figures in CHF billions).Its rivals include Uniliver, Cadbury, PepsiCo, Sara Lee, Kraft Foods and Dano.

Corporate Social Responsibility (CSR) and Creating Shared Value (CSV)

Corporate social responsibility is a deliberate action taken by investors to ensure they participate in activities that promote positive development in the community around them. It involves the establishment of programmes that ensure a business pays back to the society through participation in community activities. This may include constructing schools, establishing sponsorship programmes, easing the implementation of environmental conservation policies and empowering local communities to safeguard their future.

Creating a shared value involves the implementation of policies that ensure businesses get quality raw materials and offer awareness and education programmes to their suppliers to help them get better rewards for their participation in promoting businesses. This includes issues like research on production activities to ensure producers use modern technology and improved seed and animal breeds to boost their harvests. CSR and CSV help organisations to create a good public image and avoid conflicts with local communities and authorities.

Primary and Secondary Industries

A primary industry is one that acquires raw materials from its natural habitats and processes them to produce finished goods that are ready for consumption. This includes processing and service industries. On the other hand, a secondary industry is one that uses the products of other businesses and converts them into finished goods for consumption. Nestle can be classified as a primary and secondary industry because it uses raw materials (cocoa berries) from farmers’ cooperative societies and processes them to produce cocoa, chocolate and other products. On the other hand, it is a primary industry because it uses milk from farmers to produce a variety of its products. It combines primary and secondary production processes to maximise its profits and reduce costs.

Differences between Creating Shared Values and Corporate Social Responsibility

CSV differs with CSR in the following ways. First, CSV focuses on improving the value of products and services offered by a business. Nestle embraces this aspect by conducting research on seed breeds and quality and working with local organisations to help farmers to get high yields. This enables this company to get quality raw materials that improve the value and taste of its products. However, CSR focuses on ensuring that a business uses responsible approaches in its production processes. In addition, it includes the establishment of policies that compel an organisation to reward the local community because of its continued support.

An example of CSR is the establishment of various sponsorship programmes that encourage the children of cocoa farmers go to school to safeguard their future. Secondly, CSV involves the establishment of long term projects that enables businesses to work with local communities in ensuring the products of an organisation benefits it and the society. An example of this includes the establishment of research centres to help farmers to know and use high yielding seeds. On the other hand, CSR focuses on establishing programmes or participating in activities that help local communities to improve their lives and become responsible in the society.

Examples of Nestle’s CSR include the establishment of programs like school sponsorships to eliminate child labour and paying farmers reasonable amounts of money to alleviate poverty. Thirdly, CSV concentrates on the activities of a business and its publics while CSR involves participation in issues that may not be related to a company like sports, environmental conservation and social activism. For instance, Nestle’s CSV aims at creating value for its products and farmers by investing in research, water supply and nutrition. Its CSR includes the construction of schools near cocoa farmers to motivate their children to stop migrating to urban centres to look for jobs and instead attend schools to benefit them in the future.

Benefits of Adopting a Creating Shared Value Approach

Nestle is striving to ensure its CSV approach satisfies its needs and those of its consumers and suppliers. The following advantages will be realised when this company continues to invest in a suitable CSV. First, investing in research will allow this company to have a steady supply of quality cocoa. This will increase farmers’ production by about 50%-200%; therefore, they will grow more and sustain a reliable high income. The research and development centre established in Abidjan conducts studies on how to produce high yielding and disease resistant crops. This will guarantee a steady supply of raw materials for nestle and at the same time guarantee a safe financial future for farmers.

Secondly, it has invested in training farmers to know and embrace proper crop management skills. This will make sure their harvests are of high quality and enable the company to produce cheap and healthy products. Investing in pest management training ensures the efforts of farmers are not frustrated by poor yields due to infections. In addition, the creation of awareness of children’s rights will reduce instances of child labour and equip children and parents will relevant skills that will help them to do what is appropriate for their ages. This ensures Nestle will have farmers in the future that will continue to supply raw materials for its production processes.

Improving social conditions through partnership with the World Cocoa Foundation to construct schools and repair old ones in the cocoa growing regions will help the local communities to benefit from the profits generated by this company. This effort is important in supporting cocoa farmers to educate their children and ensure their future is bright. The welfare of cocoa farmers will be improved and they will work hard to make sure this company has a steady supply of raw materials. It is necessary to explain that farmers will be discouraged from investing in cocoa farming or other economic activities if they have difficulties providing basic needs for their families.

Nestle’s decision to pay premiums for its cocoa beans when they are certified by the Fairtrade and UTZ improves the quality of its products and this means that farmers get good pays on their harvests. In addition, its membership in the Fair Labour Association helps its activities to be assessed independently and openly. This promotes the public image of Nestle and attracts investors and customers.

How Creating Shared Value Contributes to Corporate Social Responsibility

CSV enables businesses to improve the welfare of their suppliers. Nestle has well established ways of ensuring cocoa farmers do not waste time transporting their produces to farmers cooperative societies. This gives them time to concentrate on other activities and rest. This is part of its corporate social responsibilities that help farmers to work without inconveniences. In addition, this company has invested in constructing new and repairing old schools to enable children get quality education. This is part of its social responsibility of ensuring that farmers’ children have a bright future. Moreover, investing in research helps this company to get raw materials of high quality.

This means that farmers will benefit from increased yields and have adequate money for their needs. This is a creating shared value approach that guarantees both farmers and Nestle benefit from high quality products. In addition, it leads to corporate social responsibility by ensuring farmers earn decent income from selling their products to Nestle. Lastly, Nestle has established mechanisms of making sure that farmers do not use their children as farm labourers. This CSV leads to CSR because it ensures this company is committed to eliminate child labour amongst cocoa farmers by encouraging local communities to take their children to schools and sponsoring those that want to pursue higher learning.

How the Values of an Organisation Benefit Stakeholders

Values of organisations should benefit stakeholders so that they can appreciate their presence and help them to improve their performance. Nestle is committed to ensuring that farmers get value for their sweat. It has invested heavily in research and partnered with several local and international organisations to ensure the quality of seedlings given to farmers will boost their production. In addition, the introductions of pest and disease resistant cocoa seedlings will ensure the future of farmers is guaranteed.

It is necessary to explain that farmers will get high yields and good profits on their investments when Nestle introduces new varieties of cocoa plants. In addition, consumers will get products of high quality when Nestle gets raw materials that have been produced through appropriate farming methods. Therefore, consumers will enjoy the products of this company and continue benefiting from their nutritional values. Lastly, the local community and government will benefit from the construction of new schools and repair of old ones and this means that the future of farmers’ children will be secured.

Limitations of Corporate Social Responsibilities and Creating Shared Values

The greatest disadvantage of CSR is that it diverts the attention of businesses from generating profits to providing social infrastructure to local communities. This makes organisations to focus on activities that may affect their production and sales. For instance, Nestle is participating in education programns and this is different from its area of specialisation. Moreover, it focuses on farmers’ families instead of concentrating on their roles in supplying raw materials to the company.

In addition, not all organisations participate in corporate social responsibilities and this means that others may take advantage of weak companies and edge them from markets. For instance, other companies that produce drinking chocolate, soft drinks, chocolate bars and other related items will take advantage of Nestles involvement in CSR and develop propaganda to deform its public image. Thirdly, CSV and CSR are matters of public relations and most of them do not have positive impacts on local communities or even the management of an organisation.

The lives of cocoa farmers in Abidjan have remained poor despite the efforts of Nestle to improve their livelihoods. Moreover, there has not been a significant improvement in Nestle’s performance after it established its CSV and CSR programmes. Furthermore, the process of offering social support to local communities may make businesses to indulge in illegal activities like corruption, bribery and discrimination that may interfere with their operations and affect the lives of consumers. For instance, it is not easy to decide which schools to repair or where to build new ones because all communities would want to have improved learning institutions.

Therefore, farmers may not properly perceive the intentions of this company if it does not give them first priorities over those from other regions. Lastly, CSR and CSV force businesses to incur additional expenses and does not offer long term benefits to farmers. Nestle may be forced to recruit additional staff that is required to fulfill CSR jobs that were not in its initial plans. These expenses are usually reflected in increased prices of commodities. Therefore, consumers are forced to spend more money on buying products yet their qualities and quantities remain poor. Moreover, farmers do not get reasonable compensations even if companies register improved sales and this makes Nestle’s CSR and CSV inappropriate ways of rewarding farmers.

Conclusion

Nestle has a rich history of participating in community development though its expansive CSR programmes. In addition, it has been reecognised as an active investment that considers its need to generate profits and improve the lives of its suppliers. This company has not achieved its targets and this may not be easy due to increased competition, political influence and rigidity of local communities. Its involvement in CSR and CSV should be evaluated to ensure this company does not divert its focus by participating and incurring unnecessary expenses on profitable activities. The local communities should make use of the opportunities offered by this company to ensure their children are educated and farmers get good pays for their produces.

Appendix

Differences between CSR and CSV