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A 

Study 

Report On

Business Ethics

(Nestle)

Date-19/04/2016

 

2014-16

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Submitte b!- Submitte t"-

#$ish %ain(244) P&"' Smitha M"han

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ARTICLE

Nestle is a Swiss multinational food and beverage company. Their products include baby

food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice

cream, frozen food, pet foods, and snacks. Twenty-nine of their brands have sales of over $

billion a year, and have over !,""" brands. They have ## factories across %# countries,and employ around &&&,""" people. They truly are what you would call a giant. They're also

considered to be one of the best employers in (urope with si) *((+ certifications and

sponsor numerous activities and sustainable proects. *ooking at only these stats, it would

seem that Nestle is one of the good guys/ but then why are they so hated0 *et's take it

step by step.

1hild labour, unethical promotion, manipulating uneducated mothers, pollution, price fi)ing

and mislabelling 2 those are not words you want to see associated with your company.

Nestle is the world's largest foodstuff company, and it has a history that would make even

hardcore industrialists shiver. 3e're going to look at why Nestle has such a bad reputation

and whether or not it deserves it.

Baby Formula and Boycott

http://archive.fortune.com/magazines/fortune/fortune_archive/1994/09/19/79744/index.htmhttp://archive.fortune.com/magazines/fortune/fortune_archive/1994/09/19/79744/index.htmhttp://archive.fortune.com/magazines/fortune/fortune_archive/1994/09/19/79744/index.htmhttp://en.wikipedia.org/wiki/Leadership_in_Energy_and_Environmental_Designhttp://en.wikipedia.org/wiki/Nestl%C3%A9#Corporate_social_responsibilityhttp://en.wikipedia.org/wiki/Leadership_in_Energy_and_Environmental_Designhttp://en.wikipedia.org/wiki/Nestl%C3%A9#Corporate_social_responsibilityhttp://archive.fortune.com/magazines/fortune/fortune_archive/1994/09/19/79744/index.htm

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3e're in the '%"s, and this is a sad story about poverty, breastfeeding, and greed. Nestle

aggressively pushed their breastfeeding formula in less economically developed countries

4*(+1s5, specifically targeting the poor. They made it seem that their infant formula was

almost as good as a mother's milk, which is highly unethical for several reasons.

The first problem was the need for water sanitation. 6ost of the groups they were targeting 2

especially in 7frica 2 didn't have access to clean water 4many don't to this day5, so it was

necessary for them to boil the water. 8ut due to low literacy rates, many mothers were not

aware of this, so they mi)ed the formula with polluted water which put the children at great

risks. Nestle seems to have knowingly ignored this, and encouraged mothers to use the

formula even when they knew the risks. 8reastfeeding, one of the most important aspects for 

an infant, especially in unsanitized areas, was cast aside. 8aby formula was the nearest

thing in the world, and this splendid triumph of care and science is so like mother's milk

that the tiny stomach won't notice the difference. 8ut the tiny stomach did notice the

difference.

6any mothers were able to read in their native language but were still unable to read the

language in which sterilization directions were written. (ven if mothers understood the need

to boil the water, they might not have had the facilities to do so. 9N:1(; estimates that a

formula-fed child living in disease-ridden and unhygienic conditions is between < and =>

times more likely to die of diarrhea and four times more likely to die of pneumonia than a

breastfed child. 7nother problem was that mothers tended to use less formula than needed 2

to make the ar last longer, resulting in many infants receiving inade?uate amounts.

8ut even if the water was boiled, and even if the formula was administered in the rightproportion and in the right ?uantity, it is lacking in many of the nutrients and antibodies that

breast milk provides. 8reast milk contains the re?uired amount of the nutrients essential for

neuronal 4brain and nerve5 development, and to some e)tent, protects the baby from many

diseases and potential infections. 7ccording to the :nternational 8aby ;ood 7ction Network

4:8;7N5, Nestle used unethical methods to promote their infant formula to poor mothers in

developing countries. 8ut it gets even worse.

Today, several countries and organizations are still boycotting Nestle, despite their claims to

be in compliance with 3@A regulations. There's even a committee, the International Nestlé

Boycott Committee that monitors their practices. Several universities and student

organizations have also oined the boycott, especially in the 9B.

There is no clear, public number of lives that were lost due to this aggressive marketing

campaign, and of course, Nestle is not directly responsible for their tragedies. 8ut it was

easy for them, as it was easy for everybody to see the risks and the negative effects their

formula was having. :t was easy for them to save many lives, but they chose the money

instead.

Nestle and Water

http://www.unicef.org/nutrition/index_breastfeeding.htmlhttp://www.unicef.org/nutrition/index_breastfeeding.htmlhttp://www.unicef.org/nutrition/index_breastfeeding.html

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Brown admitted that Nestlé currently wastes about 30% of the 700m gallons of water a year

it draws from the ground in California.

;ew people know it, but Nestle is actually the world's largest producer of bottled water. :n

fact, they're so keen on their water business 4which also involves many of their other

products5, that they believe water isn't a universal right. 1hairman Ceter 8rabeck-*etmathe

saidD

 7t the second 3orld 3ater ;orum in =""", Nestle pushed for making access to drinking

water from a right to a need, a defining change. 6eanwhile, Nestle drains the a?uifers it

controls as much as possible, without any regards to sustainable usage or environmental

concerns. 7 recent case is the1alifornia drought 2 an issue without precedent in the past

,="" years. 8ut Nestle doesn't care. (ven as Starbucks recently announced they would

transfer their  (thos water bottling facility from 1alifornia to Cennsylvania, Nestle 1(A Tim

8rown saidD 7bsolutely not. :n fact, if : could increase Ewater bottling operationsF, : would.

Ges, if he could, he'd increase water bottling operations, even though Nestle has been

working without a permit since %!!. :nhabitat reports that the company has been sourcing

its water from the San 8ernardino National ;orest without a permit and they've been recently

been bumped to the front of the ?ueue for permit renewal 4which will take around !

months5, and they can keep working in the meantime as long as they pay a laughable $>=#

annual fee. 7lso, 1alifornia doesn't know how much water Nestle uses, because they have

http://www.zmescience.com/ecology/environmental-issues/california-drought-tree-ring-05122014/http://inhabitat.com/starbucks-to-move-ethos-bottled-water-operations-out-of-drought-stricken-california/http://inhabitat.com/starbucks-to-move-ethos-bottled-water-operations-out-of-drought-stricken-california/http://www.scpr.org/programs/airtalk/2015/05/13/42830/nestl-waters-ceo-isnt-stopping-bottling-in-califor/http://www.scpr.org/programs/airtalk/2015/05/13/42830/nestl-waters-ceo-isnt-stopping-bottling-in-califor/http://inhabitat.com/how-nestle-is-pillaging-californias-water-in-the-4th-year-of-the-states-worst-drought/http://rt.com/usa/249321-nestle-california-forest-water/http://rt.com/usa/249321-nestle-california-forest-water/http://www.zmescience.com/ecology/environmental-issues/california-drought-tree-ring-05122014/http://inhabitat.com/starbucks-to-move-ethos-bottled-water-operations-out-of-drought-stricken-california/http://www.scpr.org/programs/airtalk/2015/05/13/42830/nestl-waters-ceo-isnt-stopping-bottling-in-califor/http://inhabitat.com/how-nestle-is-pillaging-californias-water-in-the-4th-year-of-the-states-worst-drought/http://rt.com/usa/249321-nestle-california-forest-water/

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no legal grounds for making the company divulge this information, and Nestle hasn't

published any reports. 7n independent analysis puts all their water usage at billion gallons

a year.

:ndeed, unsustainable usage of a?uifer water can lead to a significant decrease in water 

levels, and can even e)haust the a?uifer. That's right, underground water isn't the

ine)haustible source many people believe it to be. :n the case of 8hati +ilwan, people are

getting sick because if the community had fresh water piped in, it would deprive Nestle of its

money source 2 bottled water under the Cure *ife brand. Hreedily using natural resources

for profits0 1heck.

8ut when Nestle isn't trying to privatize water or use it without regards to the environment,

it's simply bottling/ tap water. 7 1hicago-based business has sued the company 4again5,

claiming that the five gallon ugs of :ce 6ountain 3ater  they bought were nothing else than

tap water. :t may come as a shock to you, but nearly half of the bottled water in C(T plastic

bottles is actually from a tap 2 though Nestle never advertised this. They know what's likely

going to happen though, as this is almost a dress rehearsal of a previous

scandal. Twelve years ago Nestle 3aters was sued over allegation of false labeling, and

ultimately settled for $" million in charitable contributions and discounts.

ANALYSIS

http://www.desertsun.com/story/news/environment/2014/07/12/nestle-arrowhead-tapping-water/12589267/http://www.desertsun.com/story/news/environment/2014/07/12/nestle-arrowhead-tapping-water/12589267/http://www.icemountainwater.com/#/homehttp://www.desertsun.com/story/news/environment/2014/07/12/nestle-arrowhead-tapping-water/12589267/http://www.icemountainwater.com/#/home

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Baby Formula and Boycott:-

Individualism- :ndividualism states that everyone has the right to purse their own interests

and should do so, but no one has a right to make other people's choices about their pursuits

for them 4Salazar5. :t also states that the main obective of companies should be to profit as

much as possible as long as it is within the realm of ethical responsibility. Nestle is guilty ofthis on an absolutely absurd level regarding all of the lies, fabrications, and manipulative

intentions of its marketing control of mothers in developing countries. :t is pretty apparent

that if the mothers were enlightened with the facts of how they are spending their hard

earned money on a product that may cause their infant to die in the long run because of lack

of vitamins and nutrients, they would seriously reconsider the continuous purchasing of it.

Nestle knows this all too well, so they simply lied in their marketing effort, which of course is

e)tremely unethical. :ts advertisements to this day undermine breastfeeding, and claim that

its formula helps protect babies 4The Nestle 8oycott5. 3hile in reality the mothers have the

ability to feed their babies milk for free should they choose to do so, the choice is skewed by

this form of advertisement and strips away the free choice they should and do have, makingit seem like the only way their baby will survive and flourish is to buy them Nestle milk.

Nestle's aggressive tactics in which it leads those who do not know better to assume there

are no alternatives that provide the same value have been duly noted by others around the

world who see the company for who they really are, resulting in Nestle becoming one of the

most boycotted companies in the entire world 4The Nestle 8oycott5. The best way for Nestle

to retain at least most of its profits while also complying with the ethical theory of

individualism would be to market how tasty and delicious its product is, while not implying it

is e)tremely healthy and necessary for survival in developing countries.

Utilitarianism-9tilitarianism states that happiness and pleasure are the only things of

intrinsic value 4Salazar5. :t also states that we should bring about happiness and pleasure to

all beings capable of feeling it 4Salazar5. Nestle certainly knows how to make itself happy,

but the same cannot be said about making those around it happy. Nestle makes itself and its

employees happy because as was previously mentioned, it is one of the most profitable

companies in the world 4Hleckman5. @owever, the company has become so profitable

because the vast amounts of people it has taken advantage of over the years. : can only

imagine how crestfallen the poor mothers of the past and present would be if they learned

their children who tragically passed away potentially could have been saved by simply

breastfeeding their children instead. : can say with certainty they would be anything but

happy. They would be angry, sick to their stomachs, and would want to do whatever is within

their power to shut down Nestle's continuing trickery and deceit that is costing children theirlives with every passing year. The only thing that would appease the protestors and naIve

mothers would be transparency. Nestle has a right to sell its product, but it doesn't have the

right to trick people into believing they need it to survive in developing countries. : would

imagine that happiness comes with free choice and survival in developing countries, and

Nestle milk can potentially strip families away from both of those things. :n the long run, it is

obvious what will be best for Nestle milk's international e)ploited stakeholdersD a decreased

reliance on the product. This will accomplish two e)tremely positive thingsD save them

precious money to spend on other things with their limited budget, and also increase the

health of any young children they may have by switching to natural breastfeeding, giving the

children the natural nutrients they were previously lacking. ;or Nestle e)ecutives, they reallyhave to look at themselves deeply in the mirror. The main benefit of conducting business in

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the way that they do is to ma)imize profits, but in the process they are ruining the lives of

countless families. Surely, sacrificing some profit for saving lives within those families

wouldn't be too disastrous for their profitability0 :n the long term, this would help change

Nestle's tarnished image of a soulless and evil company.

antianism- Bantianism states that one should always act rationally, help others to makerational and informed decisions, respect people and their autonomy, and do what is right

because it is morally right rather than for the result it yields 4Salazar5. Nestle is certainly a

company that acts rationally when thinking of themselves, because their whole business and

marketing scheme is designed to bring in the most money for themselves. @owever, the

company intentionally goes out of its way to make sure that its customers are not making

rational and informed decisions. 7s mentioned previously, the company tricks its poorer

customers into thinking they need the milk, when in reality they would be much better off

without it. :'m sure Bant is throwing up in his grave as : am typing this, Nestle could not have

abided to his principles any less than it currently is. 1onsumers of a product, especially

those who may not have the resources to conduct thorough research, need to be accuratelyinformed about what it actually is they are buying and what effects that product might have

on them and their families. :nstead, Nestle continues systematic violations in those

countries which have not yet brought in independently monitored and enforced legislation

implementing the marketing re?uirements, according to 8aby 6ilk 7ction. (ssentially, the

company gets away with spreading lies and false information in some countries because

they do not have laws in place outlawing certain harmful forms of advertising and marketing.

To comply with BantJs principles, the company needs to stop doing this and market its

product in an honest, truthful way. 7dditionally, the ;ormula of @umanity states that you

should treat humanity well as an end and never simply as a means 4Salazar5. (ssentially,

that means you should do the right thing because you want to, not because it could lead to a

desirable outcome. 1learly, the company has no desire to do the right and moral thing in its

current form, and : believe that unless new leadership rises within the company, that will

always be the case. To comply with the formula, the company needs to implement at least a

minimum amount of ethical standards, because it currently doesn't really seem to have any.

Kecuperating most of its impressive profits while not causing the death of countless infants

by tricking their mothers would be a pretty great start.

!irtu" T#"ory- Lirtues are the characteristics that allow things to function properly, and

depend on the thing's function and circumstances 4Salazar5. The four main virtues are

courage, honesty, self-control, and fairness 4Salazar5. 1ourage is actually most prevalent

within this controversy by the reactions of organizations who speak out against and boycott

the immoral actions of Nestle. The actions of these organizations have led to some minor

positive changes in Nestle's policies, including its claim that its milk formula was the new

golden standard in infant nutrition 4The Nestle 8oycott5. Nestle shows no courage, as the

numbers it kills are nothing but a number to it. :f its employees actually travelled to the

countries it targets the most and witnessed the suffering it regularly causes, they would

hopefully have a much more difficult time carrying on doing what they do. 7s touched upon

previously, the actions of Nestle are anything but honest. The deceit in its marketing

involving falsehoods about Nestle milks nutritional value and the lie that all the 3estern

mothers were using its formula helped boost its sales significantly in developing countries,including giving out free samples to get the mothers and their children hooked. 7dditionally,

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the company refuses to put a warning label that mi)ing its formula with potentially unclean

water can be disastrous, and many have suffered health-wise as a conse?uence 4Brasny 7s

if that weren't enough, Nestle distributes free products to hospitals in e)change for the

promise that the doctors there will recommend its milk and other products to patients. These

actions are dishonest and immoral, and the company needs to stop and become much moretransparent to become honest. The e)ecutives of Nestle do not show self-control, because if

they had it then they would make sure they were being ethical in addition to making huge

profits. 9nfortunately, ethics seems to take a backseat to monetary greed, demonstrating

their lack of self-control. The decision makers would need to realize the harm they are doing

to entire countries, and work to limit them as best they could. *astly, its actions are not fair to

those it takes advantage of. The mothers in developing countries do not know any better,

and trust the company to make sure they meet their needs as it advertises. Since Nestle's

advertising is actually based on mainly lies and trickery, the end result is the customers

getting ripped off because of Nestle's lies, and that is unfair. 7s has been the theme

throughout, the company needs to stop doing this to become honest, credible, and ethical.

N"stl" and $at"r:-Individualism

:ndividualism e?uates to (goism 4selfishness5 plus rights-

based constraints. Nestle is acting selfishly by not putting the needs of the community

before their own in a moment of crisis. They have made sure that the shareholders will

continue to make a profit 4as long as bad publicity doesnJt hurt sales5 and they have made

sure that the owner of Nestle Caul 8ulcke continues to make a profit from this section of their 

company. The residents may suffer but according to the :ndividualism, the residents of

1alifornia are beyond the scope of NestleJs responsibility. Therefore someone who thinks

like an individualist would see what Nestle is doing as ethical and okay.

Utilitarianism

9tilitarianismJs primary values believe that the happiness of all conscious beings

is e)tremely importantM this is understood as pleasure and absence of pain. The happiness

they seek for all conscious beings is also seen as satisfaction of desires. This ideology cares

about all stakeholders, from the owner to the worker to the customer. This theory would look

at Nestle as unethical, because in the long run they are slowly but surely hurting the natural

water supply of 1alifornia as it is in its delicate state. The residents of the area are not happy

about this. This is an emergency situation and instead of Nestle helping they are only

focused on continuing to make a profit. Caul 8ulcke the 1(A of Nestle even wants to make

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bottled water more e)pensive. Someone with the 9tilitarian mindset would tell them that they

should be treating this situation seriously and they should move their water plants out of

1alifornia as ?uickly as possible.

antianism

BantianismsJ primary values put an emphasis on the company making rational decisions,allowing all individuals to the right or condition of self-government, honesty and freedom.They believe that rational and informed consent from all parties involved is a must in alldecisions and actions. BantianJsJ would look at Nestle as unethicalM while the company istrying to do the best for themselves they are forcing the residents of 1alifornia to be moredependent on water bottles that hold their natural resource. This is not Kational, a rationalcompany would understand that water is needed for survival and therefore should not betempered with while the state is in a drought. They would also understand that it is theresidents of the state that have a right to this water and to the safety of their environment.

!irtu" T#"ory

The Lirtue TheoryJs primary values states that the business should have character traits that

promote wellness or thriving of individuals within the society 4case 6anual, Salazar 5.

The Lirtue Theory would see Nestle 3aters as being unethicalM because they hurting the

well-being of the residents. The Lirtue Theory says that you should not be dishonest and

Nestle has been dishonest with clients in the past about the risks that come with them

putting in their water plants. Kisks such as pollution, possible drain of most of their water

flow and the overwhelming traffic that would come from the plants placement. Nestle is

overall not acting as a Lirtuous company to be virtuous they would need to show high moralstandards. They have only shown that they care more about the profit then the well being of

the environment and itJs residents.