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A

Study
Report On

Business Ethics
(Nestle)
Date-19/04/2016

2014-16
PGP-GBM

Submitted byAvish Jain(244)


PGP-GBM

Submitted toProf. Smitha Mohan

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 $1
billion a year, and have over 8,000 brands. They have 447 factories across 194 countries,
and employ around 333,000 people. They truly are what you would call a giant. Theyre also
considered to be one of the best employers in Europe with six LEED certifications and
sponsor numerous activities and sustainable projects. Looking at only these stats, it would
seem that Nestle is one of the good guys but then why are they so hated? Lets take it
step by step.
Child labour, unethical promotion, manipulating uneducated mothers, pollution, price fixing
and mislabelling those are not words you want to see associated with your company.
Nestle is the worlds largest foodstuff company, and it has a history that would make even
hardcore industrialists shiver. Were going to look at why Nestle has such a bad reputation
and whether or not it deserves it.

Baby Formula and Boycott

Were in the 90s, and this is a sad story about poverty, breastfeeding, and greed. Nestle
aggressively pushed their breastfeeding formula in less economically developed countries
(LEDCs), specifically targeting the poor. They made it seem that their infant formula was
almost as good as a mothers milk, which is highly unethical for several reasons.
The first problem was the need for water sanitation. Most of the groups they were targeting
especially in Africa didnt have access to clean water (many dont to this day), so it was
necessary for them to boil the water. But due to low literacy rates, many mothers were not
aware of this, so they mixed 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. Breastfeeding, one of the most important aspects for
an infant, especially in unsanitized areas, was cast aside. Baby formula was the nearest
thing in the world, and this splendid triumph of care and science is so like mothers milk
that the tiny stomach wont notice the difference. But the tiny stomach did notice the
difference.
Many mothers were able to read in their native language but were still unable to read the
language in which sterilization directions were written. Even if mothers understood the need
to boil the water, they might not have had the facilities to do so. UNICEF estimates that a
formula-fed child living in disease-ridden and unhygienic conditions is between 6 and 25
times more likely to die of diarrhea and four times more likely to die of pneumonia than a
breastfed child. Another problem was that mothers tended to use less formula than needed
to make the jar last longer, resulting in many infants receiving inadequate amounts.
But even if the water was boiled, and even if the formula was administered in the right
proportion and in the right quantity, it is lacking in many of the nutrients and antibodies that
breast milk provides. Breast milk contains the required amount of the nutrients essential for
neuronal (brain and nerve) development, and to some extent, protects the baby from many
diseases and potential infections. According to the International Baby Food Action Network
(IBFAN), Nestle used unethical methods to promote their infant formula to poor mothers in
developing countries. But it gets even worse.
Today, several countries and organizations are still boycotting Nestle, despite their claims to
be in compliance with WHO regulations. Theres even a committee, the International Nestl
Boycott Committee that monitors their practices. Several universities and student
organizations have also joined the boycott, especially in the UK.
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. But it was
easy for them, as it was easy for everybody to see the risks and the negative effects their
formula was having. It was easy for them to save many lives, but they chose the money
instead.

Nestle and Water

Brown admitted that Nestl currently wastes about 30% of the 700m gallons of water a year
it draws from the ground in California.
Few people know it, but Nestle is actually the worlds largest producer of bottled water. In
fact, theyre so keen on their water business (which also involves many of their other
products), that they believe water isnt a universal right. Chairman Peter Brabeck-Letmathe
said:
At the second World Water Forum in 2000, Nestle pushed for making access to drinking
water from a right to a need, a defining change. Meanwhile, Nestle drains the aquifers it
controls as much as possible, without any regards to sustainable usage or environmental
concerns. A recent case is theCalifornia drought an issue without precedent in the past
1,200 years. But Nestle doesnt care. Even as Starbucks recently announced they would
transfer their Ethos water bottling facility from California to Pennsylvania, Nestle CEO Tim
Brown said: Absolutely not. In fact, if I could increase [water bottling operations], I would.
Yes, if he could, hed increase water bottling operations, even though Nestle has been
working without a permit since 1988. Inhabitat reports that the company has been sourcing
its water from the San Bernardino National Forest without a permit and theyve been recently
been bumped to the front of the queue for permit renewal (which will take around 18
months), and they can keep working in the meantime as long as they pay a laughable $524
annual fee. Also, California doesnt know how much water Nestle uses, because they have

no legal grounds for making the company divulge this information, and Nestle hasnt
published any reports. An independent analysis puts all their water usage at 1 billion gallons
a year.
Indeed, unsustainable usage of aquifer water can lead to a significant decrease in water
levels, and can even exhaust the aquifer. Thats right, underground water isnt the
inexhaustible source many people believe it to be. In the case of Bhati Dilwan, people are
getting sick because if the community had fresh water piped in, it would deprive Nestle of its
money source bottled water under the Pure Life brand. Greedily using natural resources
for profits? Check.
But when Nestle isnt trying to privatize water or use it without regards to the environment,
its simply bottling tap water. A Chicago-based business has sued the company (again),
claiming that the five gallon jugs of Ice Mountain Water they bought were nothing else than
tap water. It may come as a shock to you, but nearly half of the bottled water in PET plastic
bottles is actually from a tap though Nestle never advertised this. They know whats likely
going to happen though, as this is almost a dress rehearsal of a previous
scandal. Twelve years ago Nestle Waters was sued over allegation of false labeling, and
ultimately settled for $10 million in charitable contributions and discounts.

ANALYSIS

Baby Formula and Boycott:Individualism- Individualism states that everyone has the right to purse their own interests
and should do so, but no one has a right to make other peoples choices about their pursuits
for them (Salazar). It also states that the main objective of companies should be to profit as
much as possible as long as it is within the realm of ethical responsibility. Nestle is guilty of
this on an absolutely absurd level regarding all of the lies, fabrications, and manipulative
intentions of its marketing control of mothers in developing countries. It 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
extremely unethical. Its advertisements to this day undermine breastfeeding, and claim that
its formula helps protect babies (The Nestle Boycott). While 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, making
it seem like the only way their baby will survive and flourish is to buy them Nestle milk.
Nestles 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 (The Nestle Boycott). 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 extremely healthy and necessary for survival in developing countries.
Utilitarianism-Utilitarianism states that happiness and pleasure are the only things of
intrinsic value (Salazar). It also states that we should bring about happiness and pleasure to
all beings capable of feeling it (Salazar). 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 (Gleckman). However, the company has become so profitable
because the vast amounts of people it has taken advantage of over the years. I 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. I 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 Nestles continuing trickery and deceit that is costing children their
lives with every passing year. The only thing that would appease the protestors and nave
mothers would be transparency. Nestle has a right to sell its product, but it doesnt have the
right to trick people into believing they need it to survive in developing countries. I 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. In the long run, it is
obvious what will be best for Nestle milks international exploited stakeholders: a decreased
reliance on the product. This will accomplish two extremely positive things: 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. For Nestle executives, they really
have to look at themselves deeply in the mirror. The main benefit of conducting business in

the way that they do is to maximize profits, but in the process they are ruining the lives of
countless families. Surely, sacrificing some profit for saving lives within those families
wouldnt be too disastrous for their profitability? In the long term, this would help change
Nestles tarnished image of a soulless and evil company.
Kantianism- Kantianism states that one should always act rationally, help others to make
rational 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 (Salazar). 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. However, the
company intentionally goes out of its way to make sure that its customers are not making
rational and informed decisions. As 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. Im sure Kant is throwing up in his grave as I am typing this, Nestle could not have
abided to his principles any less than it currently is. Consumers of a product, especially
those who may not have the resources to conduct thorough research, need to be accurately
informed about what it actually is they are buying and what effects that product might have
on them and their families. Instead, Nestle continues systematic violations in those
countries which have not yet brought in independently monitored and enforced legislation
implementing the marketing requirements, according to Baby Milk Action. Essentially, 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 Kant's principles, the company needs to stop doing this and market its
product in an honest, truthful way. Additionally, the Formula of Humanity states that you
should treat humanity well as an end and never simply as a means (Salazar). Essentially,
that means you should do the right thing because you want to, not because it could lead to a
desirable outcome. Clearly, the company has no desire to do the right and moral thing in its
current form, and I 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 doesnt really seem to have any.
Recuperating most of its impressive profits while not causing the death of countless infants
by tricking their mothers would be a pretty great start.
Virtue Theory- Virtues are the characteristics that allow things to function properly, and
depend on the things function and circumstances (Salazar). The four main virtues are
courage, honesty, self-control, and fairness (Salazar). Courage 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 Nestles policies, including its claim that its milk formula was the new
golden standard in infant nutrition (The Nestle Boycott). Nestle shows no courage, as the
numbers it kills are nothing but a number to it. If 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. As 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 Western
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. Additionally,

the company refuses to put a warning label that mixing its formula with potentially unclean
water can be disastrous, and many have suffered health-wise as a consequence (Krasny As
if that werent enough, Nestle distributes free products to hospitals in exchange 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 more
transparent to become honest. The executives 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. Unfortunately, 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. Lastly, 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 Nestles
advertising is actually based on mainly lies and trickery, the end result is the customers
getting ripped off because of Nestles lies, and that is unfair. As has been the theme
throughout, the company needs to stop doing this to become honest, credible, and ethical.

Nestle and Water:Individualism

Individualism equates to Egoism (selfishness) plus rightsbased 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 (as long as bad publicity doesn't hurt sales) and they have made
sure that the owner of Nestle Paul Bulcke continues to make a profit from this section of their
company. The residents may suffer but according to the Individualism, the residents of
California are beyond the scope of Nestle's responsibility. Therefore someone who thinks
like an individualist would see what Nestle is doing as ethical and okay.
Utilitarianism
Utilitarianism's primary values believe that the happiness of all conscious beings
is extremely important; 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 California 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. Paul Bulcke the CEO of Nestle even wants to make

bottled water more expensive. Someone with the Utilitarian mindset would tell them that they
should be treating this situation seriously and they should move their water plants out of
California as quickly as possible.
Kantianism
Kantianisms' 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 all
decisions and actions. Kantian's' would look at Nestle as unethical; while the company is
trying to do the best for themselves they are forcing the residents of California to be more
dependent on water bottles that hold their natural resource. This is not Rational, a rational
company would understand that water is needed for survival and therefore should not be
tempered with while the state is in a drought. They would also understand that it is the
residents of the state that have a right to this water and to the safety of their environment.
Virtue Theory
The Virtue Theory's primary values states that the business should have character traits that
"promote wellness or thriving of individuals within the society (case Manual, Salazar 17)".
The Virtue Theory would see Nestle Waters as being unethical; because they hurting the
well-being of the residents. The Virtue 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. Risks 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 Virtuous company to be virtuous they would need to show high moral
standards. They have only shown that they care more about the profit then the well being of
the environment and it's residents.