Diploma in Business: Fonterra's Ethical and Legal Considerations

This report analyzes the ethical behavior of Fonterra, a major dairy cooperative in New Zealand, addressing the issue of "dirty dairying" and its environmental impact. It examines the perspectives of various stakeholders, including Fonterra itself, employees, suppliers, shareholders, society, and the environment, highlighting the adverse effects of the company's practices. The report identifies Fonterra's organizational expectations for ethical behavior, covering economic, legal, and societal responsibilities. It assesses the company's ethical performance, particularly in relation to waterway, effluent, and nitrogen management, and discusses potential ethical decision-making options. The report concludes with recommendations for improving Fonterra's ethical conduct and mitigating the negative impacts of its operations.

Diploma in Business
and Enterprise Management
(Level 7)
ABD 705
LEGAL, PROFESSIONAL & ETHICAL ASPECTS OF BUSINESS & MANAGEMENT - 2018
ASSIGNMENT
STUDENT NAME: KEYUR SOLANKI
STUDENT ID:181008C
ATTEMPT: 02
DATE OF SUBMISSION: 22TH OF JUNE , 2018
DUE DATE: 22ND JUNE, 2018 (FRIDAY) (05.00PM) (2ND ATTEMPT)
TUTORS:
BRYCE HARTELL AND DR ABDULLA NIYAZ
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ABD 705 ASSIGNMENT 2
Table of Contents
Acknowledgement...........................................................................................................................3
Executive Summary.........................................................................................................................3
1 Introduction...................................................................................................................................3
1.1 Dirty dairying......................................................................................................................4
1.2 Stakeholders........................................................................................................................4
1.2.1 Fonterra...........................................................................................................................4
1.2.2 Employees.......................................................................................................................5
1.2.3 Suppliers..........................................................................................................................5
1.2.4 Shareholders....................................................................................................................5
1.2.5 Society.............................................................................................................................6
1.2.6 Environment....................................................................................................................6
2.0 Identify and discuss Fonterra’s Organizational expectations for ethical behavior....................6
3.0 Assessment of ethical behavior.................................................................................................8
4.0 Ethical decisions are making options........................................................................................9
4.1 Strategic option......................................................................................................................9
4.2 Assessment option..................................................................................................................9
5 Conclusion..................................................................................................................................10
6 Recommendations.......................................................................................................................10
7. References..................................................................................................................................11
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ABD 705 ASSIGNMENT 3
Acknowledgement
I, Keyur Solanki acknowledge Abacus Institute of Studies. I would like express my deepest
gratitude to Dr. Abdulla Niyaz and Bryce Hartell for guiding in completing the assignment. They
helped by providing the necessary resources in order to complete the assignment successfully. I
would not have completed this assignment without the support and co-operation from my
classmates. They had helped me by giving suggestions so that I could give my best efforts in
doing the assignment. I am indebted to other professors who have guided in applying different
tools and strategies in this assignment. Additionally, I would like to thank every individual who
have helped directly and indirectly during the time of this assignment.
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ABD 705 ASSIGNMENT 4
Executive Summary
The purpose of this paper is to find out issues facing Fonterra Company. Dirty dairying is
the critical challenge in the organization. The effects of dirt dairying are brought into the picture,
and the individuals affected either directly or indirectly. Different measures to minimize the
water pollution in the waterways have been discussed. For a business to meet its set standards,
goals as well as its objectives, various ethical behaviors must be considered. In the paper, there
are expectations of ethical practices in the organization as well as the areas of expectations.
Keywords: dirty dairying, ethical behaviors.
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ABD 705 ASSIGNMENT 5
1 Introduction
Fonterra cooperative group limited engages itself in dairy products. The cooperative
company was started in 2001 after merging with kiwi cooperative diaries after the deregulation
by the government. Fonterra is the largest company existing as a single organization in New
Zealand. Fonterra accounts a quarter of the country’s exports making its performance in the
economy of New Zealand very important. Globally, Fonterra is the leading company in
supplying dairy products and account for about 21% of international exports in approximately
100 countries (Balaraman, 2017).
1.1 Dirty dairying
Dirty dairying can be referred to as the mutilation of the ecological health of the fresh
waters and the surroundings of the New Zealand as a result of unscrupulous farming by the
agriculturalists in the country. The dairy products post adverse effects on the environment in
their daily activities.
Fonterra is one of the largest firms dealing in dairy products, unfortunately, has severally
been mentioned to be involved in most of the dirty dairying in New Zealand. For example, the
dumping of the waste products from the production into the fresh waters, therefore, causing
adverse effects on the environment (Blackett, 2016).
1.2 Stakeholders.
Stakeholders are people affected by the policy of an organization both directly or
indirectly. By the administration of the organization refers to the structures, goals, objectives as
well as all the activities taking place in the company. Stakeholders can also include an individual
or a group of persons who have interests in the company to achieve the set goals and objectives
of the company. Stakeholders can be divided into two types;
Internal stakeholders are the individuals in the firm such as the interested investors, the
managers, directors as well as the employees.
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External stakeholders are those individuals outside the company and are not involved in
the company’s activities, but they are affected indirectly by its performance. These stakeholders
are the consumer of the products and the dealers of the dairy products in Fonterra.
1.2.1 Fonterra
Effects of dirty dairying issues on the company.
Dirty dairying is the critical challenge facing Fonterra as a dairy company. Fonterra is
faced with the challenge of managing the excess nitrogen from the area of the animals and also
the effective management of the water bodies. The problem emerges due to the large farms
which consist of very many dairy animals whose waste products mostly the urea from the urine
post an adverse effect on the waterways as well to the environment.
1.2.2 Employees.
Employees in the Fonterra Company mostly come from around the company, and since
they share the same environment, they are affected by the polluted fresh waters as well as their
families. It is also the desire of each employee to work with a company which concerns itself
with the well-being of the environment. Working with Fonterra may not be the pride of an
employee regarding the issue of pollution of the surroundings by the firm. The employee might
also be affected to being goal oriented since the outcome behind the firm’s success is ugly.
1.2.3 Suppliers.
Dirty dairying similarly affects the dealers of the Fonterra firm. This effect comes from
the excess dumping of the urea in waterbodies. If the same water is given to the animals for
drinking, those animals might get infected with diseases. A sick dairy animal means a reduction
of milk per cow. Reduction of milk collected per cow implies a decrease in dairy products, and
this directly affects the supplier through the shortage. Normal profits incurred will reduce since
the supplier will have few products compared to the times all cows are healthy.
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1.2.4 Shareholders
Fonterra has a sum of 35 shareholders who act as the council body in New Zealand. The
shareholders of Fonterra company are affected by the reduction of the supply of the dairy
products in case the animals get sick from the contamination of water by urea. The company may
incur losses because liters of milk per cow reduce as well as the money committed to treating the
animals. Damages in a company are dived equally as well as the profits. In this case, the
shareholders will have to cater for the expenses hence incurring a loss opposite of their
expectations (Lowea & Mars, 2016)
1.2.5 Society
The society comprises of those people surrounding the company. These people are
affected directly by water pollution by the company. Nitrogen in the form of urea from the
animals affects the freshwater bodies since its composition covers a high percentage based on the
large farms and many animals. The society lacks fresh drinking water, therefore, incurring extra
expenses to buy clean water which it could be unnecessary if the company were cautious of the
effects of its activities. The society also faces the problem of environment degradation (Bain &
Dandachi, 2015).
1.2.6 Environment.
Fonterra industry has adversely affected the environment of New Zealand. In the report
given is that about 28 % pollution of the situation was from those large farms used in dairy
farming. The Aotearoa report shows that water pollution in these areas is the most ideal of the
entire aspect of pollution. This pollution is from the animal’s waste mostly urea that makes the
fresh waters toxic and unsafe for human consumption (Tipples, Hill, Wilson & Greenhalgh,
2013). Considering that one cow can give waste products 15 more times than an individual
makes the matters worst due to the large herd of cattle at hand. Regarding the report from the
national institute of water and atmosphere research has confirmed that dairy farming which has
occupied 40% or more of the country’s land area is the critical source of pollution and the
pollution of the water bodies around New Zealand is increasing (Tipples, Hill, Wilson &
Greenhalgh, 2013).
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2.0 Identify and discuss Fonterra’s Organizational expectations for ethical behavior
Ethical behavior enhances the smooth running of the business; it entails the act of
practicing the moral principles which include equality, honesty, dignity, fairness, and human
rights. In the employment set up, ethics and behavior are the most crucial ingredients for success
(Holland, 2015).
The Fonterra management has a last closed-door approach to the public, for instance, its
involvement in the mass poisoning that aroused in China that dissatisfied their market and their
stakeholders. Due to many reasons, Fonterra lost its sense of pride, and the management had an
enormous task of restoring back their customers’ credibility, investors and the urge to secure
their market position globally (Robson and Edmeades, 2010). Consequently, the melamine crisis
in China damaged Fonterra product status based on the audience who interrogated the Fonterra
executive reputation (Tipples, Hill, Wilson & Greenhalgh, 2013).
Areas of ethical expectation from Fonterra.
Economic expectation
Laws and regulations apply to their business operation that takes care of the suppliers’
compliance be it locally, nationally and globally.
Shareholders
The Fonterra stakeholders are both internal and external, they anticipate for a supreme
friendly environment process that will enhance them achieve great dairy products. This will, in
turn, increase their sales in the market (Ryan, 2014).
Suppliers
Farmers supply the maximum amount of the dairy products to the Fonterra Company to
achieve an adequate profit. Consequently, as their doubts on the company arise they, in turn,
urge the company to apply the ethical behavior measures that consider the suppliers (Stahl and
Pless, 2013).
Society
The audience expects the company, to produce the goods that are of good quality and
standard, harmless on human consumption. Manufacturing process should be environmentally
friendly to avoid pollution. Fonterra should ensure ethical behaviors are upheld to prevent
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ABD 705 ASSIGNMENT 9
employees’ discrimination and to ensure their safety and rights are followed to the later (Haung,
2016).
Environment
New Zealand is significantly affected by the dirty dairying activity. The organization has
to find a solution to the problem to avoid significant damage to farmers and suppliers. Fonterra
should ensure environmental safety by enacting disposal legislation and appropriate measures to
enhance emission, noise and waste reduction.
Employee
Every organization has its set ethics that has to govern each employee; the expectations
often vary from one individual to another regarding one’s perception. Employees thus prefer
working in an organization that fully deploys its ethical behavior within the environment
(Tipples, Hill, Wilson & Greenhalgh, 2013).
To provide farmers with minimum standards which are clear, education on environment
issues and a better information practice, Fonterra has initiated the supply Fonterra Program
which govern the waterway, nitrogen and effluent management which are detailed in 2012/2013
Suppliers Handbook that entails the rules and regulations as well as the terms and conditions of
supplying Fonterra (Bird & Mendenhall, 2016)
x
3.0 Assessment of ethical behavior
The Fonterra’s moral behavior and appraisal are deliberately outlined, they came up with
new programs namely:
1) Waterway management
2) Effluent management
3) Nitrogen Management
Nitrogen management
Mike Joy says that nitrogen from the farms has become one of the challenges in the NZ.
Increasing application of nitrogen and phosphorous in the last 25 years has been a downside
immense (Jiménez, Winkler & Dunkl, 2017). The leach of the nutrients from the soils into the
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ABD 705 ASSIGNMENT 10
waterways has increased the growth of plants and algae in the waters. Cadmium had been
another problem which is found in the phosphates mined overseas and imported to New Zealand.
Fonterra as an industry has set policies to assist in nutrients management. Fonterra advice the
farmers to be aware of the rules and regulations applicable in the dairy farms. There is no theory
of “wasted water” as a concept and the one way to change the scenario is to ensure that people
are made to believe there is water and that is it not available to everyone. This will diminish the
chances of pollution. efficient use of nutrients, the Fonterra Nitrogen management program
should achieve the set objectives. This is attained by collecting statistics from farmers on
nitrogen loss and nitrogen efficiency conversion (Smale, 2014). Farmers’ performance can be
done about the nitrogen efficiency conversion and the nitrogen leaking risk to generate clear
reports. There is a lot if life in these waters and therefore it is very important to preserve the
water. The water bodies have evolved over time and they have constantly grown with the help of
the biology. The natural flow of waters have also ensured that water be preserved and it be
allowed to blow back to where it started. The aim is to claim that there has been no pollution and
that the waterways have not degraded. The state of the art equipment be allowed to advocate for
a safer environment and to allow a proper state of affairs for the environment. the right standard
to accept the levels of freshwater is to maximize the essentiality of scientific approach for the
water bodies. The new MfE regime also allows a set level of algae that is said to be 6.9 mg/l. this
level is higher than the prescribed guidelines of Anzec. The 6.9 mg/l is the set at a higher level of
15 times the guidelines. There are a few ‘water quality brands’ that talk about nitrate and claim
them to be farcical because sites which have nitrate level more than the actual and previous score
which has been prescribed by Anzec. These are called an A whereas the sites which have a score
of four times the original are marked with a score of B and the ones where the ranks are as high
as 15 times, it is marked with a score of C. The Government has been very defiant in dealing
with this issue and they have not considered the facts but when the same thing comes from the
general public, the situation gets out of hand. The public at large believe in the logic and the
statistics are completely ignored by the ministry. The general people have started to believe in
the same logic which has been forwarded by the ministry.
Effluent management
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Mikes joy information on effluent was that the damage will take 15 billion dollars to
clean up the mess by the dairy farming which is more than the industry worth to the economy.
He claims that the small streams that feed into the larger streams should be fence to avoid
rubbish getting into the major rivers and lakes. He insists on concentration of the smaller streams
to deal with the root of the problem. Fonterra information was that it has sets standards for
effluent management. All suppliers are required to manage all the effluents sources to comply
with the council rules. The farms and the waterways have ben polluted over time and there has
been no proper method for cleaning. The pollutants have ruined the water bodies and the process
of cleaning will take an immense amount of time.
Dairy effluents cut down the fertilizer cost and increase pasture production if
appropriately managed. Effluent management program enacts laws that have to be followed
whenever a land needs to be done. This meets the organizational objectives by conducting an
environmental assessment on farms annually (Feldman, 2013). On the other hand, the farmers
have to approve the set programs to enhance the resolution of issues. The dairy effluents are a
good substitute to the use of fertilizer and the method of cleaning the pollutants should be
actively taken up by the Government. There are stringent legislature that look into the use of
products and therefore whenever it is seen that the pollution is getting out of hand, it is best to
impose more laws that help in the prevention of pollution.
Waterway management
Mike joy says that pollution of water has costed the society a lot. the health of the
society is at risks due the effluent and nitrogen in the waters. A management of these hazards is
to be initiated to clean up water which human depends on.
The Fonterra waterway management should have the initiative to lessen the water loss in
rivers and waterways. This is achieved by bringing about the risk farms under control to decline
the water quality in streams. On the other hand, to safeguard the rivers for the forthcoming
generation. Fonterra aims to attain 100% stock segregation. According to Fonterra waterways
being the primary water source, it is more than a meter wide and 30cm deep (Feldman, 2013).
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Ethical assessmenet of fronterra’s action
To provide farmers with minimum standards which are clear, education on environment
issues and a better information practice, Fonterra has initiated the supply Fonterra Program
which govern the waterway, nitrogen and effluent management which are detailed in 2012/2013
Suppliers Handbook that entails the rules and regulations as well as the terms and conditions of
supplying Fonterra.
x
4.0 Ethical decisions are making options.
4.1 Strategic options that Fonterra may utilize
For every organization to meet their set goals and objectives, it is bound to have sound
decisions which aim at improving both internal and external stakeholders as well as the
organization at large. The decisions made ought to be ethically based on the success of the
company and stakeholders satisfaction (Tall & Campbell, 2018). For Fonterra to achieve this,
ethical decisions making options should be highly considered which are discussed as follows;
Denis Collins systematic rational ethical decision-making framework help in the analysis of the
ethical dilemma that is faced by any planner. With the help of ethical planning, individuals are
given the right to question and analyze their decisions and also see how ethical they are. The
ethical dimension of every decision is analyzed and followed (Henson, 2016). These are essential
to ensure that there are wrong decisions taken which might harm or affect the planners
(Mendenhall et al., 2017). It is very important to undertake any decision which is not against any
principle. There is a four-way test which was created very early in the year of 1932 and the
managers were of the opinion that decisions without any ethical backing have no locus standi.
4.1.1: Business as usual
Fonterra exercises their ethical decision making in strategic alternatives such as the
projection of the quality seal which is found in all of their products. The seal which reads ‘trusted
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