UNETHICAL PRACTICES OF NESTLE

INTRODUCTION:

Nestl was one of the most successful food-based companies in the world. It is set up by Henri Nestl in 1867, in Vevey, Switzerland. Nestl grew over the decades by acquiring smaller companies to become the largest company in Switzerland by the 1960s. By the end of 2002, the company employed more than 250,000 people in 508 factories around the world. 29 of Nestl's brands have annual sales of over 1 billion Swiss francs (about $1.1 billion),including Nespresso, Nescaf, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel and Maggi. Nestl operates in 86 countries. It is one of the main shareholders of L'Oral, the world's largest cosmetics company. Nestl's product portfolio included soluble and roast coffee, other beverages like tea and health drinks, several mineral water brands, dairy products, chocolates and confectionery, ice cream, frozen food, culinary products, breakfast cereals, infant food, pet care, pharmaceutical products and cosmetics.

NESTLE IN INDIA: Nestl's relationship with India dates back to 1912, when it began trading as The Nestl Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. After India's independence in 1947, the economic policies of the Indian Government emphasized the need for local production. Nestl responded to India's aspirations by forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the Government wanted Nestl to develop the milk economy. Progress in Moga required the introduction of Nestl's Agricultural Services to educate advice and help the farmer in a variety of aspects. From increasing the milk yield of their cows through improved dairy farming methods, to irrigation, scientific crop management practices and helping with the procurement of bank loans. Nestl set up milk collection centers that would not only ensure prompt collection and pay fair prices, but also instil amongst the community, a confidence in the dairy business. Progress involved the creation of prosperity on an on-going and sustainable basis that has resulted in not just the transformation of Moga into a prosperous and vibrant milk district today, but a thriving hub of industrial activity, as well. Nestl has been a partner in India's growth for over nine decades now and has built a very special relationship of trust and commitment with the people of India. The Company's activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods. The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste,

Nutrition, Health and Wellness through its product offerings. The culture of innovation and renovation within the Company and access to the Nestl Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices. Nestl India manufactures products of truly international quality under internationally famous brand names such as NESCAF, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of daily consumption and use such as NESTL Milk, NESTL SLIM Milk, NESTL Dahi and NESTL Jeera Raita. Nestl India is a responsible organization and facilitates initiatives that help to improve the quality of life in the communities where it operates.

NESTLE UNETHICAL PRACTICES: Although it was one of the most successful companies in the world, Nestl was frequently criticized for using unethical marketing practices to promote the sales of some of its products. The company was severely condemned by health agencies around the world for its marketing of infant formula in developing countries, by conveying the message that the formula was better for babies than mothers' milk. There were also demands on the company to stop purchasing cocoa from the Ivory Coast, where bonded labor and children were used on plantations to harvest cocoa beans. Nestl also became mired in a controversy for selling genetically modified food in some Asian countries without labeling them explicitly. Pure Life, the mineral water brand the company launched in some Asian countries, was also criticized for being too high priced. Using suppliers that violate human rights (e.g purchasing milk from Mugabe, buying cocoa from suppliers that use child slaves) and destroy the environment (e.g. palm oil from rainforest) Controlling and abusing of water sources in its bottled water operations (e.g. in United States and in Brazil) Promoting unhealthy food, especially for young children Trade union busting activities and denying the rights of workers to collectively bargain

NESTLE CASE STUDY: Nestl: The Infant Formula Controversy CASE ANALYSIS: For over 20 years nestle has directly or indirectly charged with involvement in the death of Third World Infants. The charges revolve around the sale of infant feeding formula, which allegedly is the cause for mass deaths of babies in the Third World. In 1974 a British journalist published a report that suggested that powderedformula manufacturers contributed to the death of Third World infants by hardselling their products to people incapable of using them properly. This accused Nestl of unethical and immoral behavior. Because of this unethical practice there were some charges made by public or media on Nestle. To handle this problem Nestle had taken some defenses, resolutions and make some new policies. These all are defined in the case as following: CHARGES: Most of the charges against infant formulas focus on the issue of discouraged breast feeding among Third World mothers and have led to misuse of the products, thus contributing to infant malnutrition and death. In northern Peru where water come from a highly contaminated river. Throughout the Third World, many parents dilute the formula to stretch their supply. The children had never been breast fed, and since birth their diets were basically bottle feeding. In rural Mexico, the Philippines, Central America, and the whole of Africa, there has been a dramatic decrease in the incidence of breast feeding.

DEFENSE: Defense after some criticism, Nestle still said that they believe breast feeding is still the best for infant. However, for some reason, mothers cant feed their baby with their own milk so they should use nutrition milk or mixed food instead. However, in third world countries, material and water are really contaminated so it might be harmful for infants. There are some points which has been taken by nestle as an defensive statement: Nestl argues that the company has never advocated bottle feeding instead of breast feeding. All its products carry a statement that breast feeding is best. The company does believe that infant formula has a vital role in proper infant nutrition as a supplement, when the infant needs nutritionally adequate and appropriate foods in addition to breast milk, and as a substitute for breast milk when a mother cannot or chooses not to breast feed. Many poor women in the Third World bottle feed because their work schedules in fields or factories will not permit breast feeding. Scientists recently compared the microbiological contamination of a local native gruel with ordinary reconstituted milk formula prepared under primitive conditions. The real nutritional problem in the Third World is not whether to give infants breast milk or formula but how to supplement mothers milk with nutritionally adequate foods when they are needed.

RESOLUTION:

In 1974, Nestle, aware of changing social patterns in the developing world and the increased access to radio and television there, reviewed its marketing practices on a region-by-region basis.

In 1977, the Interfaith Center on Corporate Responsibility in New York compiled a case against formula feeding in developing nations, and the 3rd World Institute launched a boycott against many Nestle products. In 1981, Nestle regulate the advertising and marketing of infant formula in the 3rd world. The INFACT (The Infant Formula Action Coalition) lobbied the WHO to draft a code to regulate the advertising and marketing of infant formula in the 3rd world. In 1982, Nestle formed the Nestle Infant Formula Audit Commission (NIFAC) .NIFAC recommended several clarification for the instructions of the code. In October 1982, Nestle accepted those recommendations. Other issues within the code, such as the question of a warning statement, were still open to debate.

NESTLE POLICIES: Nestle have adopted some policies as given below: No advertising to the general public. No sampling to mothers. No mother craft workers. No use of commission/bonus for sales. No use of infant pictures on labels. No point-of-sale advertising. No financial or material inducements to promote products. No samples to physicians except in three specific situations: new product, a new product formulation, or a new graduate physician. Limitation of supplies to those requested in writing and fulfilling genuine needs for breast milk substitutes. A statement of the superiority of breast feeding on all labels/materials. Labels and educational materials clearly stating the hazards involved in incorrect usage of infant formula, developed in consultation with WHO/UNICEF. Besides all of these things, Nestle case had new twist in it. In 2001, it was believed that some 3.8 million children around the world had contracted the human immunodeficiency virus (HIV) at their mothers breasts. In affluent countries mothers can be told to bottle feed their children. Moreover, in 2004, the demand for infant formula in South Africa outstripped Supply as HIV-infected mothers made the switch to formula. Demand grew 20 percent in that year, and the government investigated the shortages as Nestl scrambled to catch up with demand.

Suggestions: ETHICAL AND SOCIALLY RESPONSIBLE DECISIONS Create Policies and Practices: Organizations must research, develop, and document policies and processes around defining, identifying, and reporting ethics violations. These policies should be articulated in the employee handbook and protections should be put in place for those who raise ethical issues. However, having a policy is not enough. You must practice what you preach. Then it will be fruitful for the organization. Hire Right: Nestle should select quality people who can make a huge difference in the ethics in the organization. Develop People's Understanding: Nestle should develop a process for reporting ethics violations and building staff understanding about ethics expectations from the stakeholders. Incent the Right Thing: Before introducing a new measure in organization, Nestls leaders must consider if it encourages the type of actions that are valued by the organization. If there is a risk of impropriety, it is important to have a conversation around what checks and balances will be put in place to make sure unwanted behaviors. Put Controls in Place: Nestle should concern with some risk management professionals who help in making all the proper policies and processes in place. It is also wise to perform regular audits to help reduce opportunities to act unethically, incent individuals who

may act unethically to reconsider, help catch issues that have occurred by accident, and mitigate risk all around. Build a Culture of Transparency, Openness, and

Communication: To ensure true success when it comes to organization ethics, people must see and hear what is going on as well as feel comfortable to stand up and speak out if they see something occur that is not right. So, Nestle should work upon the organizational culture that helps in making the goodwill of the organization because if culture is good, employees will behave well that will result in good image of company in the eyes of the people. Leadership Must Walk the Talk: Leaders can talk about the importance of policies and processes, incentives, communication, and openness all day, but if they turn around and act unethically, it can be like throwing a large stone into the pond of ethics tranquility. So, these are some suggestions recommended for nestle company to prevent the unethical behavior in the organization.