Corporate Social Responsibility: Multinational Corporations Essay

Question:

Discuss about the Corporate Social Responsibility for Multinational Corporations.

Answer:

Introduction:

Earlier the company used to emphasis on the quality and the price of their products to gain competitive advantage in the market. The global market today has changed a lot and the company as well as its stakeholders, not only rely on these things to gain competitive advantage. Today the corporate social responsibility plays an important part or role because it helps in gaining corporate reputation (Baumann-Pauly, Wickert, Spence & Scherer, 2013). Therefore, along with the Annual report the company or the organizations have to provide the Corporate Social Responsibility report at the same time.

The Swiss company Nestle, too, emphasis more on the Corporate Social Responsibility factor, apart from emphasizing on the quality and the price of the product. Nestle is a company that was founded in the year 1866 and this particular company operates in almost 195 countries. The company has 468 factories, around the world and at the same time, the company has almost 33,000 employees working for this company. Moreover, the particular company has 2000 brands, both globally as well as nationally. The Swiss company not only believes in the Corporate Social Responsibility but at the same time, the people believe in the Corporate Shared Values as well. The three important Corporate Social Responsibility factors that have influenced Nestle are the following:

Ethical

Among the ethical activities, one of the most important ethical activities is having the Fairtrade certification. Nestle received the Fairtrade certification for one of its product, known as the Kit-Kat (The Nestl? Sustainability Review, 2016). The particular product has received the Fairtrade certification in the year 2010 (The Nestl? concept of corporate social responsibility as implemented in Latin America, 2016). The Fairtrade Kit-Kat bar is the part of the initiative that has been taken by the Nestle Company and the name of this particular initiative is “The Cocoa Plan” initiative.

Another important initiative that has been taken by the Nestle Company is providing nutritious food, to the consumers of the product (Kruschwitz, 2013). The foods or the products that are being provided to the customers should be health beneficial to the customers. The products that are being provided to the customers are not affordable but at the same time, it is accessible as well.

Economical

The Corporate Social Responsibility includes the economic factors, where, the support provided to the farmers in the rural areas, for their development is the most important thing. In developing countries like Latin America, Nestle is having almost 72 factories that are providing to the people living in the country. The values and the skills that the people in Nestle have are passed on to the people living and working in the factories of Latin America (The Nestl? concept of corporate social responsibility as implemented in Latin America, 2016). The factories not only help the employees to gain the skilled and the values but also help them and their families with a stable income (Crane, Palazzo, Spence & Matten, 2014). The company also helps and supports the farmers, so that they become productive and supply good quality raw materials, which include the milk and the coffee to the company. One of the instances of the farmers receiving support from the company can be traced back to 1930, when in Brazil many farmers are saved from bankruptcy, because Nestle came up with their new product Nescafe.

Discretionary

The discretionary factors at first include the sustainable factors that are being used by the company for the protection of the ecology or the environment. Therefore, for the production of the products the company has reduced the usage of water. The company has reduced 70% of their usage of water in the agricultural field. The company is also efficient enough in safeguarding the raw materials in an efficient way, and at the same time it help in protecting the raw material for the environmental reason as well (Payaud, 2014). The particular company use almost 3% of their expenditure, which is around 45 million pound for the environment protection. The company has taken initiative to provide convenient and safe water supply to the people. Therefore, they have set up or rather they have organized water initiative programs in many different and various communities. The efficient use of the water helps the supply chain of the company in more than one way. Therefore, this particular Swiss Company has taken initiative to protect the scarce water that is there. Nestle has also encouraged efficient use of the water for both the manufacturing process and at the same time for the distribution process as well.

Aims and Objective

Nestle is one of the most important global food manufacturer in the world and it is one of the leading manufacturer in the world. Nestle has the objective of providing the best nutrition and ensures proper health and well-being to the people living in the world. It can be put in this way, that Nestle has the objective of being the leader in nutrition, as well as in Health and Wellness. Therefore, Nestle is such a company that is trusted by all the stakeholders and compare to its macro competitors, Unilever and DANONE, the company enjoys quite a high market sale. The company has the major aim or the goal of fulfilling their 39 commitments, by the year 2020, and if possible even before this particular time. The company has the goal of being there in every household that is there around the world and at the same time, it helps in promoting the quality life of the people living around the world (Chou, 2014). The company also had the goal of providing both tasty as well as the healthy foods to their consumers.

(Figure 1: Nestle and the Story of the Company

Source: Nestle, 2013)

Strategy

Nestle is aligned to the United Nation Millennium Development Goals, and thus the strategy that has been adopted by the company is the Creating Shared Value Strategy (Miah, Griffiths, McNeill, Poonaji, Martin, Morse & Sadhukhan, 2015). The particular strategy provides respect to not only to the people and culture but at the same time to the nature as well. Creating Shared Value or the CSV actually helps in creating commitment that helps in building compliance and sustainability. The particular strategy helps in mitigating the operational risk that the company may faces and at the same time, it helps in protecting the reputation that has been earned by the company. Creating Shared Value therefore helps in ensuring competitiveness as well as the long-term success of the company in the market (Creating Shared Value and meeting our commitments 2012, 2016). The CSV helps in creating a value for both the shareholders and the society.

CSV is a theory that has been propounded by Michael E. Porter and Mark Kramer. CSV is unlike the Corporate Social Responsibility or the CSR, it is something more than gaining competitive advantage and it is more about philanthropy as well. The particular strategy helps in aligning with the overall corporate strategy of the organization. The CSV helps in fulfilling the commitment that the company tries to achieve by the year 2020. The CSV also align with the principles of the company that are there (Porter & Kramer, 2016).

Creating Shared Value has a particular structure and Nestle follows that structure in order to achieve the goal and the objectives that it has set for itself. The framework of the CSV includes the following things at a simplified level:

Agriculture and the Sourcing

The particular factor helps in reducing the risk related to the contaminants that are there in the raw material sourcing. The particular factor ensures that the company’s long-term agricultural requirement is protected and at the same times it ensures quality and at the same time competitive prices for the users (Holzinger, Wartzek, Schiffer, Leichtfuss & Nestle, 2016). The research activities that are being carried out by Nestle, helps in meeting the quality and the brand requirement. The direct farm assistance that is being provided by the company helps in meeting the quality and the brand requirement. For instance in Filipinos the consumers of Nestle rely mainly on the coffee products that are being provided by the company. Therefore, in Filipinos, the Company has come up with such an agronomy program that had helped the farmers to yield the product of their farm, both in terms of quality and quantity (Mithil & Islam, 2014). The Nestl? Experimental and Demonstration Farm, or the NEDF is such an organization had helped Nestle in this particular program. The centre of this organization is located in the Tagum City. Nestle also aims at improving the working conditions of the labor working in the factory. Nestle through this particular stage aims at achieving better environmental management, from the raw material supply chain.

Knowledge transfer and at the same time farm assistance again are those things that are the part of this particular framework. For example, Nestle has provided farm assistance to the Ivorian farmers, who are equipped in producing 1.3 million tons of coffee. The Ivorian farms although, faced a problem because of this increase in production of the coffee. Moreover, the coffee plants that were there in the country also became old and sick and thus caused a problem for the farmers. Nestle therefore, had an agreement with the Ivorian government, and under the “Cocoa Plan Initiative”, the company, provided assistance, so that there is the renewal of the cocoa plants. The example of the knowledge transfer can be found in the assistance provided to the farmers of Filipinos. Knowledge and training is provided to the farmers through three days seminar or through three-week advance course. If the farmers want to improve, their farming skills then there are being provided with the on-site training as well.

Manufacturing and Distribution

The next or the second factor that is included within this particular framework includes the Manufacturing and the Distribution factor. The particular factor includes providing food safety through the improved operations that are there in the organization. Nestle tries to food security to the people by ensuring the prices of the products are low and by ensuring that the products that are available in the market is accessible to the people. The company tries to meet the standards that are there in the organization by complying with the regulation that are there. The food security is being provided to the people by following the business principles and the code of conduct. Nestle has set safety requirements for each of their products and especially the products that are there for the infants have to follow the stringent regulation. The particular factor also includes the risk management issues that are related to the food safety. Nestle have their own external laboratories where the task is being carried out. In case any risk is being identified the peers of Nestle is being informed about it.

Products and Consumers

The Creative Shared Values include the products and the customers as the third most important factors. The Company aims at providing nutritional food to their consumers and they emphasize on the health and the wellness of the consumers. The nutritional food, which the company would provide requires local level research. The company carries out local level research, which would help in providing tasty and the healthy foods to the consumers. For example, the company has come up with D’Fit ice cream that contains fewer calories, because almost 40% of less sugar is there in the ice cream.

Advantages

The particular CSV strategy that has been adopted by the company is beneficial for the company in more than one way. The CSV strategy that has been adopted by this particular company is not only an important strategy of the company but also this particular strategy has helped the company to gain competitive advantage at the same time. The strategy that has been adopted by Nestle allows them to set up their factories in the developing countries, but that does not mean they have compromised with the profit that is being earned by them. The particular strategy has helped the company to earn profit even by operating through the factories based in the developing countries. In fact, the company has almost 45% of their factory located in the developing countries. The company tries to attract the investor and the same time, the potential investors through the CSV strategy that is there. The CSV strategy that has been taken by the company has helped the company to increase its share prices at the same time.

(Figure 2: The Rise in the Stock Price of Nestle from the year 2010

Source: Content, Scully, Content, Smith, Insider, & Rosoff, et al. (2015)

The particular strategy has helped the company to create direct employment and at the same time, it has increased the food production at the same time. Apart from creating the employment opportunities for the people, the particular strategy has helped the company to sustain in the market for the period of around 150 years (The Nestl? Sustainability Review. 2016). The particular strategy had helped Nestle to integrate with all the culture and thus promote the brand to the people of each culture. Therefore, the company had made connection with the people of all the cultures; and had made research in the local level as well, and created foods whose flavor is related to the flavor at the local level. Thus this particular strategy has turned out be advantageous and the beneficial for the company in many ways.

Difficulties and the Strategies to Overcome the Difficulties

Creating Shared Value is good but there are certain difficulties related to it and among those entire difficulties one that is most important is that there are no Key Performance indicator. The Key Performance Indicator will help in sharing the knowledge with the farmers regularly, or at least periodically. The KPIs or the Key Performance Indicator will help in enhancing not only the quality of the product but at the same time, it helps in enhancing the food security procedures at the same time. The CSV strategy does not have any measurable method and this lack of measuring the productivity gain through strategy requires an improvement because it could give rise to many difficulties as well.

The company should target to make an investment in the model farms. The model farms investment will help in the cultivation of the 4Cs that are there in the market. The 4Cs include not only the Customer Want, Cost, Convenience, as well as the Communication at the same time. The 4Cs are the internal requirement of a company and proper care should be taken to fulfill this particular requirement.

Education is one of the most important things that have been given importance in the Nestle action plan. According to this particular action plan, the company should provide proper education to the people not only through the printed medium but also at the same time through visual method at the same time (Creating Shared Value and meeting our commitments 2013, 2016). The company also aims at providing education to the customers through different social media also, which include social media like Facebook and YouTube.

(Figure 4: The Action Plan of Nestle

Source: Content et al., 2015)

The internal capabilities of Nestle will help the company to achieve the goal that it has set for itself; but then there are certain internal limitations of this company as well. Therefore, to combat the internal limitations of this company it is important to come up with an effective strategy that will help the company to gain competitive advantage. The strategy should be such that it will help the company to sustain in the competitive market.

References

Baumann-Pauly, D., Wickert, C., Spence, L. J., & Scherer, A. G. (2013). Organizing corporate social responsibility in small and large firms: Size matters. Journal of Business Ethics, 115(4), 693-705.

Chou, A. (2014). How and Why Multinational Corporations Pursue CSR Strategies: The Case of Nestle in China. Available at SSRN 2420273.

Content, P., Scully, S., Content, P., Smith, A., Insider, B., & Rosoff, M. et al. (2015). Business Insider - Business news, trends and insights. Business Insider. Retrieved 14 June 2016, from

Crane, A., Palazzo, G., Spence, L. J., & Matten, D. (2014). Contesting the value of “creating shared value”. California management review, 56(2), 130-153.

Creating Shared Value and meeting our commitments 2012. (2016) (1st ed.).

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Holzinger, F., Wartzek, F., Schiffer, H. P., Leichtfuss, S., & Nestle, M. (2016). Self-Excited Blade Vibration Experimentally Investigated in Transonic Compressors: Acoustic Resonance. Journal of Turbomachinery, 138(4), 041001.

Kruschwitz, N. (2013). Creating shared value at Nestle. MIT Sloan Management Review, 55(1), 1.

Miah, J. H., Griffiths, A., McNeill, R., Poonaji, I., Martin, R., Morse, S., ... & Sadhukhan, J. (2015). Creating an environmentally sustainable food factory: a case study of the Lighthouse project at Nestl?. Procedia CIRP, 26, 229-234.

Mithil, M., & Islam, R. (2014). How to create a self-sustaining business model for promoting NESCAFE.

Nestle, M. (2013). Food politics: How the food industry influences nutrition and health (Vol. 3). Univ of California Press.

Payaud, M. A. (2014). Marketing strategies at the bottom of the pyramid: Examples from Nestl?, danone, and procter & gamble. Global Business and Organizational Excellence, 33(2), 51-63.

Porter, M. & Kramer, M. (2016). Creating Shared Value (1st ed.).

The Nestl? concept of corporate social responsibility as implemented in Latin America. (2016) (1st ed.).

The Nestl? Sustainability Review. (2016) (1st ed.).

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