Nestle's Social Irresponsibility in Developing Nations
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Case Code : BECG032
Case Length : 12 Pages
Period : 1998 - 2003
Pub. Date : 2003
Teaching Note : Available
Organization : Nestle
Industry : Confectionaries
Countries : South Africa
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Nestlé's Socially Irresponsible Practices
Most of the controversies that Nestlé was embroiled in involved developing countries. Analysts felt that this was probably because the laws and procedures in developing countries were considerably lax than those in developed countries, where corporate crimes are detected early and the compensations to be paid can be painfully heavy. In developing countries, the public was either unaware or more tolerant towards deviations from established standards.
It was ironical that the biggest controversy in Nestlé's history involved the product on which the company was built. Critics said that Nestlé had promoted the use of infant milk formula (which many experts believed, was harmful to the health of the mother as well as the child), in developing countries, in an unethical manner. The company was criticized particularly for its promotions which implied that women in westernized countries routinely used the formula as a substitute for mother's milk. It was also alleged that Nestlé subtly developed the belief that using the formula was more beneficial to the mother as well as the child. This type of promotion was in violation of the 'International Code of Marketing Breast-Milk Substitutes' of the WHO /UNICEF...
Corporate social responsibility became an important issue in the late 20th century and the early 2000s, as a result of increasing public awareness and a scrutiny of the activities of public companies.
However, there were still several large companies which shrugged off their responsibilities towards the society, indulging in ethically questionable practices. If large companies behave unethically, it soon comes to the notice of the public and the company's image is tainted. Companies are often worse off for having behaved unethically in the interest of short term gains, as the bad publicity generated by unethical practices leads to far greater losses in the long run. Many companies have well laid out charters to govern their social responsibility and behavior, (Refer Exhibit-III for Nestlé's Corporate Business Principles), but more often than not, these are only on paper. Companies like Nestlé made a public show of their support to social causes, in order to divert attention from their irresponsible behavior elsewhere...
Exhibit I: Annual Financials
Exhibit II: Nestlé's Infant Formula Charter (May 1996)
Exhibit III: Nestlé's Corporate Business Principles (First Published in 1998)