CRSE108 - Analyzing Nestle's Ethical Failures & CSR Implications

This report examines the ethical failures of Nestle, a multinational food company, focusing on incidents such as health threats, water controversies, promotion of unhealthy food, child labor, Ethiopian debt issues, and a deal with Mugabe. It discusses the impact of these failures on the company's economic performance and long-term value. The report uses secondary data from various sources to analyze these events. Findings reveal significant damage to Nestle's reputation and financial stability due to these ethical lapses. Recommendations are provided for Nestle to improve its ethical practices and rebuild trust with stakeholders, emphasizing fairness, equity, and respect for human rights.

Ethics and Corporate Social Responsibility
9 / 2 7 / 2 0 1 8

Ethics and Corporate Social Responsibility 1
Executive summary
The report talks about the failure of the ethical behaviour of the selected company. Ethical
behaviour is mainly characterized by the honesty, fairness and equity in the interpersonal,
professional and ethical relationships related to the research and the activities. The ethical
behaviour of the company always respects the dignity, diversity and the rights of individuals and
the people who are in a group. The company that has been selected for conducting the analysis is
NESTLE. The findings of the report include the summary of the events due to which the
company is facing the criticism. In addition, it includes the ways through which the events faced
by Nestle can be resolved. Moreover, the impact on the failure of the ethical behaviour is on the
long-term value of the company. In the end, the suggested has been given to the company related
to their actions and future behaviour.

Ethics and Corporate Social Responsibility 2
Contents
Introduction......................................................................................................................................3
About Nestle................................................................................................................................4
Products...........................................................................................................................................4
Revenue of company.......................................................................................................................4
Information Analysis/Findings........................................................................................................5
Events of company......................................................................................................................5
Health threats...........................................................................................................................5
Nestle and water......................................................................................................................6
Promotion of mislabelling and unhealthy food.......................................................................7
Child labour, abuse, and trafficking........................................................................................7
Ethiopian debt..........................................................................................................................8
A deal with Mugabe.................................................................................................................8
Conclusion.......................................................................................................................................9
Recommendations..........................................................................................................................10
References......................................................................................................................................11

Ethics and Corporate Social Responsibility 3
Introduction
In the current era, the companies are obliged to follow the ethical behaviour for the business
practice and the failure of the same can affect the business practice and brand value of the
company. The report is related to the failure of the ethical behaviour of the Nestle Company who
is one of the leading consumer food companies. In the current era, the large company are not
able to meet the ethical behaviour.
Background
The background includes the company on which this report is prepared which is Nestle. Nestle is
a multi-national company who is offering the wide range of products with the services in the
different areas of the world. This is the fact that with the operations at different areas it is hard
for the company to manage the ethical practices in every area across the world. This is the reason
the company faced numerous failure in the ethical behaviour.
Aim
The aim of the report is to through the light on the ethical behaviour failure of Nestle Company
and their impact on the economic performance as well as on the long-term value of the company.
Scope
The scope of the report is laminated to the events that the report talks about which are health
threats to the customers, Nestle and water, the deal of company with Mugabe, Ethiopian debt,
and promotion by the company for the unethical food and mislabelling and child labour, abuse
and trafficking.

Ethics and Corporate Social Responsibility 4
Methodology
The methodology that has been used for collecting the data is secondary sources which mainly
include internet, news, website and many others.
About Nestle
Nestle company is well-recognised German Pharmacist company that was founded by Henri
Nestle in the year 1867 with the headquarters in Switzerland. “Farine Lactee”, a known baby
product was launched by Henri Nestle which helped the company to rapid expand their business
in the market of America and Europe. This leads to the expansion of the company in different
areas across the world and presently it is operating its business operations in 194 countries with
468 factories (Nestle, 2012). The company is able to offer the wide range of products with the
help of its research and development centres as the company has 34 research and development
centres in 4 continents.
Products
Nestle company offers a wide range of products to their target segment with this they have more
than 2000 brands. These brands offer the different products with their brand name in the market.
The major categories of the products that are offered by the company include coffee, bottled
water, beverages, cereals, healthcare nutrition, infant foods, milkshakes, frozen and refrigerated
food, seasoning and pet food and soups with sauces (Nestle, 2012).
Revenue of the company
The wide range of the products with the quality is able to support the company in generating the
high revenue in the market. The revenue of the company which was registered in the year 2017

Ethics and Corporate Social Responsibility 5
was equal to CHF 89.791 billion. Further, the operating income of the company was CHF10.112
billion with the net income of CHF 7.538 Billion in the year 2017 (Nestle, 2012). In addition to
this, the equity and total assets of the company was registered as CHF 62,777 million and
CHF130, 380 million in 2017.
Information Analysis/Findings
Events of company
Nestle company faced the criticism due to the numerous events which show that the company
were not able to meet their ethical behaviour. Some of the events include health threats to the
customers, Nestle and water, the deal of company with Mugabe, Ethiopian debt, promotion by
the company for the unethical food and mislabelling and child labour, abuse and trafficking. All
these events show that the company was not able to meet their ethical obligations towards their
stakeholders and society.
Health threats
The health threat to the consumer is one of the major failures of the ethical behaviour. Food and
drug administration (FAD) and centres for the disease control (CDC) warned the customers of
Nestle to prevent pre-packaged Nestle Tollhouse refrigerated cookie dough. This is not safe for
customer’s health and the administration has suggested customers not to consume the same due
to the risk of the contamination with E.coli O157: H7. This is a foodborne bacterium that leads to
the illness in the body. In addition, the melamine was found in the Chinese made nestle milk
product in the 2008 September. Apart from this, Nestle Maggie was also in highlight because
there was monosodium glutamate in Maggie which is beyond the safe limit of customers (Brunk,
2010).

Ethics and Corporate Social Responsibility 6
Impacts
The impact of this health threats was on more than 50 American people in 30 states of America.
This shows that the event has directly affected the people due to which they got hospitalized.
Further, due to the Chinese made nestle milk 860 babies were hospitalized and 6 infants died due
to milk that was produced by the company. The produced milk created the impact on the kidney
which leads to the damage of the kidney. In the research, the Taiwan health ministry declared
that 6 types of milk that are manufactured in China by the company contain low-level traces of
melamine in 2008 October.
The rise in the number of affected people has damaged the image of the company and also
affected the economic performance of the company as people stop making a purchase of the
product not only in America but also in the different areas across the world where the operations
of the company was conducted (Choudhary and Mitra, 2015). Nestle Maggie issues made the
New Delhi government banned Maggi due to which the share of the company decreased by 11%.
This results in the low profit to the company due to the failure of the ethical behaviour.
Nestle and water
This is another event in which the failure of ethical behaviour took place because of the drought
in California. The drinking water was affected in drought due to which it became the need to sell
the water instead of the selling the right water. This made the company to source the water
without the permit from San Bernardino forest (Archer and Bezdecny, 2016).
Impacts
The consequences of the event were clear when the village of Bhati Dalwan started suffering
from the crises related to the water. In addition, Nestle faced the allegation which is related to the

Ethics and Corporate Social Responsibility 7
false labelling water bottles which they are selling as clean water. This hampered the image of
the company but also affected sales of the company.
Promotion of mislabelling and unhealthy food
Nestle ethical behaviour gets fail when they started to step to promote the unhealthy food and
mislabelling of the products in the market. According to the UK consumer association, 7 out of
15 the breakfast cereals that are offered by the company offer the high levels of sugar fat and salt
(Andrei, 2017).
Impacts
This event has forced the police due to which they ordered Nestle Colombia to decommission
200 tons of falsely relabelled imported powdered milk in November 2002. This directly affected
the sales of the company in the market and affected the economic performance of the company
(Balasubramanian, Gopal and Reefana, 2016).
Child labour, abuse, and trafficking
The Dark Side of Chocolate is documentary film 2010 that shows the exploitation and slave
trading of children’s that are present in Africa who performs the activity of harvesting chocolate.
The harvested chocolate is also used by the Nestle Company for selling it further in the market.
Impacts
Nestle didn't carry out any actions against the child labour due to which they have exploited their
image in the market. In addition, the international labour rights fund has filed a lawsuit against
the company. This has affected the image due to which the sales of the products also get affected
and people start shifted towards the other brands.

Ethics and Corporate Social Responsibility 8
Ethiopian debt
The company claimed US$G million from the famine-hit country that is Ethiopia. This shows
that the company is not considering the present condition of the government of the world’s
poorest state.
Impacts
This will impact the image of the company in the market that they are aware of the condition of
the state and still they are asking for the debt from the Ethiopia who is dealing with famine-hit.
A deal with Mugabe
The deal which was made by Nestle with an infamous dictator from Zimbabwe Robert Mugabe’s
wife was one of the evidence for the failure of the ethical behaviour. Mugabe has taken 6 of
Zimbabwe most valuable white-owned farm since 2002 (Smith, 2009).
Impacts
Nestle Buys Milk from farms which were seized by Mugabe because the company has broken
the deal with the Mugabe of making the purchase of milk. This has directly impacted the
working of the company in the market.
All this failure of the ethical behaviour has affected the long-term value of the company because
the trust of customers shakes when they find that their company is not following the ethical
obligations (Korthals, 2015). This makes the company suffer from the loss of the goodwill and
profits as a customer don't make the purchase of products on a frequent basis.

Ethics and Corporate Social Responsibility 9
Conclusion
In the end, it can be concluded at present all the large companies are facing the incidents,
accidents and scandals. Nestle also shows that by the time they are dealing with some or other
ethical issues. They also have little interest in the real social responsibility. The concepts related
to the ethics in the organisation are considered the essential aspect of the management duty. The
report includes the details related to the products, revenue and the ownership of the company.
Further, the discussion related to the events of Nestle company are discussed which are being
criticised for the failure of the ethical behaviours. This failure in the ethical behaviour events
leads to the impact on the economic performance of the company which is a thing that needs to
be considered by them. In addition, it is must for the company to resolve the events which are
discussed the impact of these events on the long-term value of the Nestle.

Ethics and Corporate Social Responsibility 10
Recommendations
 It is recommended to the company to create the economic added value with the help of
equity and justice.
 Nestle company should become more focuses on the supply of the products and service in
a fair manner.
 Nestle company should follow the ethical obligations while offering the job opportunities
in relation to the human rights and human dignity.
 Nestle company needs to understand the responsibility of being a good corporative
citizen for which they need to think beyond their core activities of the business.

Ethics and Corporate Social Responsibility 11
References
Andrei, M. (2017). Why Nestle is one of the most hated companies in the world [Online].
Available from: https://www.zmescience.com/science/nestle-company-pollution-children/
[Accessed on 27th September 2018]
Archer, K. and Bezdecny, K. eds. (2016) Handbook of Cities and the Environment. Edward
Elgar Publishing.
Balasubramanian, P., Gopal, A.V. and Reefana, S. (2016) A Case Study on Misleading Celebrity
Endorsements and its Impact on Consumer Behavior. Bonfring International Journal of
Industrial Engineering and Management Science, 6(3), pp.93-95.
Brunk, K.H. (2010) Exploring origins of ethical company/brand perceptions—A consumer
perspective of corporate ethics. Journal of Business Research, 63(3), pp.255-262.
Choudhary, V. and Mitra, S. (2015) Nestlé pushes chocolates, dairy products in Maggi’s absence
[Online]. Available from:
https://www.livemint.com/Consumer/L6fSrlClhkmVpuj3j1yk1N/Nestl-pushes-chocolates-dairy-
products-in-Maggis-absence.html [Accessed on 27th September 2018]
Korthals, M. (2015) Ethics of food production and consumption. The Oxford Handbook of Food,
Politics, and Society, pp.1-15.
Nestle (2012) All about Nestle [Online]. Available from:
https://www.nestle.in/aboutus/allaboutnestl%C3%A9 [Accessed on 27th September 2018]