The below paper will investigate the ethical issues in regards to the use of child labour, with in the supply chain of Nestle, the international consumer goods manufacturing company.Thes report will look into what ethics in international business is , how this is defined and how it applies to the case of Nestle’s Supply chain , it will also explore the ethical dilemmas faced by Nestle SA. Secondly it will try to identify what are the root causes of these ethical dilemmas, how the company is currently facing them and what are the drivers of this kind of behavior.
This paper will also look at what Nestle is currently doing in regard to addressing any ethical concerns in its supply chain and analyzing what its current effectiveness will be. Lastly, it will look at ways in which Nestle can address any ethical issues within its supply chain and find solutions to the ethical dilemmas identified, that it may want to implement to combat any negative consequences that may arise from such unethical practices.
This paper seeks to investigate and critique the notion that “The sole purpose of a firm is to make money for its shareholders” it will look at the firm itself and how it is set up, what drives the decisions of the firm and what external factors will influence the future and current actions of the ferm in how it runs its operations as well as how ethics plays its part in the profitable operation of the business. In this essay more focus will be given to the ethical questions of the firm and how this impacts the business and how it interacts with its diverse stakeholders, including actions in communities in which it operates as well as looking into what impact these ethical or unethical actions will have on the profitability of the firm if any.
In the second part of this essay an analysis of the actions of a multinational corporation such as Nestle will be investigated (Specificly in its Cocoa Supply Chain, where issues of Child Labor have been Raised by the media) to determine how companies are currently handling this issue of ethics in international business and identify any current issues of ethics that may be faced by the company. Lastly this paper will look at possible recommendations as to how a company such a Nestle will be able to manage its ethical responsibilities and take actions if needed to mitigate and minimize the company’s risk of being exposed to unethical behavior. By doing this it will be possible to confirm or renounce the above statement and provide more insight as to the current state of ethical behavior in multinational companies in the current global economy.
Description of ethics in an international business context
Business Ethics, is the demand for moral and ethical behaviour in all aspects of business either national or international companies.
Business ethics is about the social responsibility, corporate compliance, employer and staff rights that every company has to take into account when running its operations. The aspect of ethics like morality, responsibility, accountability, decisions and actions of any corporate organizations has to be addressed from the lowest point to the highest level. Basically, the foundations for the business ethics are behavior, attitude, values, demands of courtesy, manners, honesty and integrity. (Universal Class, 2019) Companies and their acts were considered “responsible for the consequences of their actions in a sphere wider than that covered by their Income statement” (Wood,2015). CRS unfold among multinational companies due to the loopholes in the international regulatory framework. MNCs abused differentiation in social and environmental gauges for “commercial advantage” utilizing escape clauses to maximize their worth. (Zerk, 2006: 1). CSR provided the chance to companies to demonstrate their sincere goals.
An ethical dilemma is a situation in the decision-making process regarding two possible choices, neither of which is absolutely correct from an ethical viewpoint. Although we face many ethical and moral issues in our daily life, most of them come with relatively simple solutions. In a perfect world ,we would – it can be said that there would be no conflict and that all people involved in activities with each other would be treated fairly and justly and that there would be no corruption and peace among all.
And that corporations doing business in communities would consider all stakeholders and their needs into account when making business decisions that affect all involved. There may be various challenges in the world of business depending upon the nature, size and type of organisation. It is important that business organisation maintain a certain benchmark of ethics in order to regulate dilemmas that are obvious to businesses.
Some of the ethical dilemmas in business are human resources issues, safety issues of the employee, conflicts of interest and maintenance of customer confidentiality. As well as conflicts between differing cultural views.
Drivers for unethical behaviour
Nestle, after its major economic breakdown and due to World War, it faced prominent dropped in profit from $20 million to $6 million. Due to this, the company established factories in developing countries as the labour cost is minimum in those countries.
Unrealistic Performance Expectations
In MNC’s there is excessive pressure from the parent company to meet unrealistic performance goals which can be met only by cutting corners or acting in an unethical manner. In order to meet those goals Nestle have forced children to work up to 14 hours per day, six days per week. There are around 14,986 child labour cases on the cocoa farms only in Cote d’Ivoire and Ghana since 2012. (Douglas Yu,2018)
Decision Making Process
In a world of business there comes a situation where meeting a business target and achieving organisational goal seems above than realizing whether the behaviour are unethical simply because they fail to ask,” Is this decision or action ethical?” Instead they focus on straightforward business calculus to what they perceive to call a business decision forgetting that the decision may have an inevitable ethical dimension. The fault lies in the processes that do not incorporate ethical considerations into business decision making.
The climate in some business does not encourage people to think via ethical consequences of business decisions resulting to bring unethical behaviour in an organization. Child labour seems to be unethical to many developed countries but for the under developed and undeveloped countries child labour might be the only option to feed their family, to fulfill their daily necessity. And for MNC this might seem to be an acceptable way of doing business in order to meet its target.
Socio economic factors
Socio Economic factor may have an impact on the propensity of people, and organisation to behave in an unethical manner. The existence of child labour in Nestle supply chain for its chocolate products due to consumer not willing to support such labour with their purchasing power define the root cause for companies toward unethical behaviour. (Oliver Nieburg, 2018)
Some people seem overly driven to make money and succeed at any cost. In this pursuit, ethics often take second place to the pursuit of profit (Schwartz 1986). In collectivistic societies, many people aspire to some form of socio-economic egalitarianism where income and benefits are roughly evenly divided; no one is either too rich or too poor, and harmony prevails as an ultimate goal (Gelfand et al. 2004; Hall and Hall 1987) In Individualistic societies, many people aspire to self-determination and independence and personal success with financial and material as a measure of that success.
Nestle in Sub-Saharan Africa
The root causes that lead to child right exploitation in Sub Saharan Africa and South Asian countries is poverty. It is an assumption that due to the poverty the children must work by necessity. It is estimated that as of year 2013-20144 around 2 million children(1.15 million in Cote d’ Ivoire and 880,000 in Ghana) were working in the cocoa sector in Sub saharan Africa as per the report published by “International Law and Policy Institute,2015”
Nestlé SA, a multinational manufacturer of food products that has been doing business since 1866 with its head office in Vevey, Switzerland, it operates factories in more than 80 nations. Nestlé’s chief offerings are condensed and powdered milk, baby foods, chocolate products, candies, instant coffees and teas, soups, seasonings and condiments, frozen foods, ice cream, and bottled water as well as pharmaceuticals. (Britannica)
Nestle being such a large and diversified MultiNational corporation faces many of the above ethical dilemmas in its day to day operation around the globe. One of which that has sparked a lot of intrest by the media and communities around the world has been the ethical dilema in regards to the use of child labour in the Cocoa Supply Chan of Nestle
Nestle being one of the biggest manufacturers of Chocolate in the world uses a significant amount of cocoa in its chocolate production , as cocoa is a key ingredient in the manufacturing process of making chocolate.
Nestle currently procures most of its cocoa supply from the international cocoa market , but due to the nature of the cocoa plant that produces the cocoa bean that only grows in certain climatic conditions around the world this supply has been concentrated in countries such as Ghana , Ivory Coast, Indonisia , Papua New Guinea and Central ammerican countries .
The 2 main supplying nations of cocoa beans to Nestle being Ghana and Ivory Coast
However, there is a dark side to chocolate produced from the above beans , thousands of children in West Africa are forced to work in the cultivation of cocoa beans, the primary ingredient of chocolate. Ivory Coast, the leading supplier of cocoa, accounts for more than 40% of global supply (Salaam-Blyther, Hanrahan & Cook 2005).
Due to the increased demand for cocoa beans by the world market and the naturaly limited supply of beans as well as the geografic limitations of growing areas , countries such as Ghana and Ivery Cost have leading roles in the supply of the important bean to the market , but due to facters inharnat to the two countries such as scatterd suppliers and small produsers ,high poverty levals , low economic development and littel or no regulation by govermants that can be seen to be corrupt , the production of cocoa beans has fell victum to ethical abuses and explotations , one of which takes the form of child labour in the farming of the much needed cocoa bean where children are used by small scale cocoa farments in the growing of beans to do tascs such as harvesting , cleaning, carring, and genaral taking cear of the cocoa trees.
Resulting is children being exploited by this need for cheap labour in the cocoa industry, due to may consumers now taking intrest in the responsabil production and sustainability of the products they buy many larg corporations have started to see more intrest in how there supply chains are effected by such ethical dilemas as the use of child labour , as this delema is now impaciting the corparations brand in bouth a ethical as well as economic asprect .
Facing this threat companies have now been placing more focus on managing such ethical dilemmas.
In 2001, the cocoa industry (including major multi national companies such as Hershey, Nestle and M&M/Mars) made a voluntary promise to implement the Harkin Engel Protocol (commonly known as the Cocoa Protocol), to certify their cocoa as a “child labour free” product (Salaam-Blyther, Hanrahan & Cook 2005; Chocolate Manufacturers Association 1989).
In 2012, Nestle was the first company in the industry to approach a comprehensive supply chain: the Child Labour Monitoring and Remediation System (CLMRS) which identifies issues of child labour within Nestle supply chain and provides targeted solutions to prevent similar situations going forwards. Since the adoption of Child labour Monitoring Remediation System Nestle has succeed to reduce incidents of child labour by 51% . Probably 100% never will be quite possible but still Nestle is in its continuous journey.
To do this companies are using audit and certification services from third party companies such as Fair Trade Certified, Rainforest Alliance (RA) and UTZ
Child labour in cocoa industry is a biggest challenge. Understanding the scale and complexity of the problem is the first step towards finding the right solutions. Nestle continuous effort to minimize child labour from it’s supply chain has remained in it’s paper work rather than implementation. In spite of having child labour, Nestle can focus on professional body of farmers for better farming practices. Moreover, it can focus on community awareness support programs as an appropriate and well-targeted educational initiative can change the attitude of the entire community.
Nestle has been claiming that forced child labour is unacceptable and has no space in their supply chain and there is no tolerance for the use of forced labour or child labour in their operations. However, nestle has not been following what it is saying. There are various policies and system established by Nestle like Fair Labour Association which led to Child Labour Monitoring Remediation System (CLMRS). There is an implementation gap between what it has been saying and what it is doing. Nestle need to increase its transparency and credibility to enhance its effort. Nestle should be accountable to their degree of responsibility to respect and protect human rights. Further, it is recommended to pursue government statute and regulation to bring sustainable transformation to the overall cocoa industry.
The most common ethical issues in global business so far involved human rights, employment practices, environmental issues and the moral obligation of multinational companies. Ethical issues and dilemmas in international business are rooted in the various forms of political systems, law, economic development and culture & tradition depending upon nation to nation. This paper has discussed the child labour issues in Nestle supply chain. The extent and nature of child labour is influenced by poverty, weak enforcement of laws and policies designed to overcome child labour. Despite initiation of various guidelines, protocol (Harkin-Engel), polices and collective efforts of NGO and INGO, we can still question ‘Has there actually had any effect in reducing child labour?’, the effort to reduce child labour is indeed the step to eradicate the child labour or it is just a vested interest of certain parties to have positive aspects of their concern organisation.