Question 3

Overview

This paper explores Nestle's Corporate Social Responsibility (CSR) approach, underlining its positive and
negative effects. The analysis will focus on CSR, reputation, and stakeholder interactions. It will
underscore the importance of CSR and explore its extensive historical background. Moreover, it will
scrutinise the substantial influence of corporate social responsibility (CSR) activities. Underpinning a
comprehensive literature review, company self-reporting, business press analysis and independent
publications.

Corporate Social Responsibility (CSR) is a word that includes a company's voluntary efforts to conduct its
business responsibly, considering its influence on all stakeholders and the environment. It extends
beyond simply following the law and includes behaviours that are not motivated by profit but instead
seek to have a constructive impact on society (Latapí Agudelo et al., 2019). Although few countries made
it mandate regulations like, India was one of the first countries, Indonesia, Mauritius, Nepal, China, and
South Africa, France. (Hency Thacker, 2019)

The concept of social responsibility in corporate action has a rich history, dating back to Roman times
when laws were enacted to promote the social well-being of humanity. This concept was
institutionalised by academic, municipal, and religious groups during the Middle Ages in England. In the
16th and 17th centuries, businesses were seen as instruments for societal progress. The modern
understanding of CSR emerged in the mid-20th century, mainly due to the pioneering work of Howard R.
Bowen. Bowen's emphasis on the social obligations of company leaders towards stakeholders and
society marked a significant milestone in the evolution of Corporate Social Responsibility (Chaffee, 2017;
Latapí Agudelo et al., 2019).

Bowen, the father of corporate social responsibility, defined the social responsibilities of business
executives as the obligations to pursue policies and make decisions that impact stakeholders,
employees, and customers, thereby affecting society. (Bowen, 1953) (Latapí Agudelo et al., 2019)

MNCs Strategy for Reputation

MNCs like Nestle prioritise managing their reputation through CSR as a necessity rather than just a
strategy. This approach is a foundation for trust, promotes brand image, and ensures long-term
sustainability. Nestle emphasises transparency, constant communication, stakeholder engagement, and
ethical standards to build a strong reputation. Effective measurement and continuous improvement are
crucial to sustaining these positive impacts on corporate reputation.

CSR utilizes the company’s reputation to develop and maintain a favourable image. Practical CSR
initiatives demonstrate a company's commitment to ethical principles and social responsibility, which
can enhance public trust and loyalty. For example, Nestle observed a 10% improvement in consumer
trust ratings in markets with robust community participation programs (Kaul et al., 2015).
Transparency is vital for a solid corporate reputation. Companies should openly share their CSR
programs, including achievements and areas for improvement. Nestle demonstrates transparency by
regularly publishing comprehensive sustainability reports and providing detailed statistics on its
environmental impact, social initiatives, and governance practices. (Nestle, 2021).

Effectively communicating corporate social responsibility (CSR) efforts helps to create a positive image
and manage stakeholder perceptions. Nestle uses its website, social media, and traditional media to
share news about its CSR initiatives, such as promoting sustainable agriculture, improving water
management, and enhancing nutritional quality. (Kaul et al., 2015).

Philanthropic actions, such as donations to charitable causes, support for community projects, and
disaster relief operations, can strengthen a company's reputation by displaying its dedication to social
responsibility beyond profit-making. Nestle’s philanthropy initiatives contribute to worldwide education,
health, and community development projects. For instance, Nestle has donated millions to fund
education efforts in poor communities (Chou, 2013).

Ensuring high product quality and safety is crucial for our business and consumer trust. CSR initiatives
focusing on this can significantly enhance a company’s reputation. Nestle has strict quality control
methods across its supply chain, minimising recalls and reinforcing consumer trust. (Kaul et al., 2015).

Recognizing CSR efforts can significantly boost a company's reputation. Nestle has been honoured for its
sustainability initiatives, receiving awards such as the Dow Jones Sustainability Index (DJSI) and the
FTSE4Good Index. These recognitions acknowledge Nestle's leadership in sustainable and ethical
business practices (Nestle, 2021).

Rankings in sustainability indices and publications can help increase corporate reputation. Nestle's firm
ranks in global sustainability indexes, which reflects its robust CSR strategy and dedication to
responsible business practices. Nestle continuously ranks among the top firms in the Global 100 Most
Sustainable Corporations in the World ranking, underlining its strong performance in social and
environmental responsibility (Nestle, 2021).

Impact of CSR on Corporate Reputation

Positive Impacts: Companies with vital CSR initiatives frequently experience stronger reputations,
leading to increased consumer loyalty, higher employee happiness, and greater investor confidence. For
instance, Nestle’s dedication to sustainable practices and social responsibility has favourably benefited
its brand perception and market position. Surveys reveal that 80% of consumers are more likely to
purchase from companies seen as socially responsible. Additionally, staff working for such organisations
report increased job satisfaction and loyalty (Kaul et al., 2015).

Negative Impacts of Poor CSR Actions: When CSR initiatives are regarded as corporations participating in
actions that affect stakeholders, reputational damage can be severe. Nestle, suffered significant
controversy for its marketing of breastfeeding replacements and its water bottling methods, which were
viewed as exploitative and damaging to communities. Harmful exposure from the breastmilk substitute
incident led to consumer boycotts and protests, significantly harming Nestle’s brand and resulting in a
20% decline in sales in impacted countries (Chou, 2013).

Case Study: Nestle’s Reputation Management through CSR

Positive Case: Water Stewardship: Nestle has made remarkable achievements in water stewardship,
focusing on improving water efficiency and sustainability. Nestle has reinforced its reputation as a
responsible water steward by lowering water usage in its business and participating in community water
projects. Nestle has cut water usage by 15% over the previous decade and invested in water access
projects benefiting over 300,000 people in water-scarce places (Nestle, 2021).

Negative Case: Marketing of Breastmilk replacements: Nestle’s aggressive marketing of breastmilk

replacements in underdeveloped nations has been heavily critiqued. This technique was perceived as
discouraging breastfeeding and putting infant health in danger, leading to substantial reputational
damage. The dispute over breastmilk replacements revealed the potential for CSR programmes to
backfire when regarded as favouring profit over ethical considerations. Nestle has now tried to address
these issues by modifying its marketing strategies and enhancing transparency (Ethical Consumer, 2022).

Measuring the impact of CSR programmes on business reputation requires several measurements,
including customer satisfaction ratings, brand perception surveys, employee engagement levels, and
financial performance indicators.

Conducting surveys regularly to assess customer satisfaction and brand perception helps organisations
understand how consumers receive their CSR activities. Nestle’s customer satisfaction surveys
demonstrate a significant association between awareness of CSR programmes and enhanced consumer
loyalty, with 70% of respondents indicating they prefer firms devoted to social responsibility (Kaul et al.,
2015).

Measuring staff engagement and retention rates can provide insights into the internal impact of CSR
programmes. Companies with vital CSR programs frequently enjoy improved employee morale and
lower attrition rates. Nestle reports a 15% boost in employee engagement scores and a 10% decrease in
turnover rates in locations where its CSR programmes are most active (Nestle, 2021).

Analysing the financial performance of organisations with effective CSR initiatives can reveal the long-
term benefits of ethical business practices. An improved reputation can lead to improved sales, investor
relations, and financial stability. Nestle has experienced a 5% boost in sales growth and a 7% gain in
shareholder value due to its increased reputation from CSR operations (Chou, 2013).

The stakeholder view asserts that firms have responsibilities toward a wide range of stakeholders,
including employees, customers, suppliers, and the community, not just shareholders. CSR initiatives
should address the needs and concerns of these varied groups to promote sustainable and ethical
corporate activities (Gupta, 2011).

The stakeholder theory, stated by Freeman (1984), says that firms should focus on maximising
shareholder value and consider the interests and well-being of all stakeholders involved in or affected by
their operations. This strategy is essential to CSR, highlighting ethical and responsible business activities
that contribute to society's sustainable development.

Key Stakeholders and Their Interests

Investing in staff development through training programs and career progression opportunities is vital
for maintaining a motivated and skilled team. Nestle’s endeavours in this area have included leadership
development programs and continuous learning opportunities.

Promoting diversity and inclusion inside the workplace is another key component of CSR. Nestle has
policies to build an inclusive workplace that respects and supports employee differences. Nestle’s
annual employee survey showed a 90% satisfaction rate with the company's health and safety standards
and an 85% satisfaction rate with professional development possibilities (Nestle, 2021).

Product Safety and Quality: Ensuring product safety and quality is vital. Nestle maintains strict quality
control measures and continually tests products to fulfil high safety standards.

Transparent and honest marketing techniques help develop confidence with consumers. Various
consumer protection agencies have praised Nestle’s dedication to clear labelling and responsible
advertising.

Engaging with customers through feedback channels and swiftly addressing their problems promotes
customer happiness and loyalty. Consumer feedback shows a 15% boost in trust and a 10% rise in loyalty
among customers who are aware of Nestle’s CSR initiatives (Kaul et al., 2015).

It is vital to guarantee that suppliers are pretty rewarded and operate under ethical employment
policies. Nestle works closely with suppliers to secure fair trade practices and adherence to labour
regulations.

Providing technical support and training to suppliers helps increase their productivity and sustainability.
Nestle’s endeavours in this area include workshops on sustainable farming techniques and financial
management. Nestle reports a 25% improvement in supplier productivity and a 30% rise in income for
farmers participating in its sustainability programs (Nestle, 2021).

Communities:

Educational Initiatives: Investing in local education helps generate a skilled future workforce. Nestle
supports many academic programs, including scholarships and school infrastructure projects.

Healthcare Programs: Improving access to healthcare in the places where Nestle operates benefits the
population's general well-being. This includes mobile health clinics and health awareness programmes.

Infrastructure Development: Developing local infrastructure, such as clean water facilities and roadways,
fosters community development and improves quality of life. Nestle’s community efforts have built 50
schools and offered healthcare services to nearly 200,000 individuals in rural areas (Nestle, 2021).
Implementing sustainable techniques in production processes helps reduce environmental effect.
Nestle’s objectives include decreasing emissions, improving water efficiency, and encouraging
biodiversity.

Efforts to conserve resources, such as water and energy, are vital. Nestle has launched numerous
projects to reduce water usage and boost energy efficiency. Nestle has achieved a 30% decrease in
greenhouse gas emissions and a 15% improvement in water efficiency over the past decade (Nestle,
2021).

Effective stakeholder interaction is crucial for the success of CSR projects. It entails actively incorporating
stakeholders in decision-making processes and routinely talking with them to understand their wants
and concerns.

Engagement Methods:

1. Surveys and Feedback Mechanisms: Gathering feedback from stakeholders through surveys and other
tools helps highlight development areas.

2. Public Consultations and Community Meetings: Involving communities in public consultations and
meetings guarantees that their viewpoints are considered in business decision-making.

3. Partnerships and Collaborations: Establishing partnerships with NGOs, government agencies, and
other organisations helps enhance the impact of CSR activities and ensuring that they properly answer
stakeholder demands.

Example Data: Nestle conducts biennial stakeholder engagement sessions, which result in practical input
that has enhanced its CSR strategy. For instance, 70% of community members reported favourable
changes in Nestle’s local operations following these meetings (Nestle, 2021).

The stakeholder approach of CSR highlights the necessity of addressing the needs and interests of all
people affected by corporate activity. Companies like Nestle may strengthen their reputation, develop
trust, and assure long-term sustainability by adopting a stakeholder-centric approach. However,
balancing the varied interests of stakeholders is a challenging challenge that requires continual work and
genuine dedication to ethical practices. Effective stakeholder involvement, transparency, and
accountability are crucial to generating meaningful and positive outcomes for all stakeholders.

Measuring CSR Strategies in MNCs

Measurement and Evaluation MNCs measure the effectiveness of their CSR programmes via
sustainability reports, social audits, and impact evaluations. Frameworks like the Global Reporting
Initiative (GRI), the United Nations Sustainable Development Goals (SDGs) give rules for evaluating CSR
activities. For instance, according to its sustainability reports, Nestle has cut greenhouse gas emissions
by 30% since 2010.

Case Study of Nestle’s CSR in China

Food Safety Initiatives

Nestle has established strong quality control methods to assure food safety. While this is a fundamental
necessity rather than an added CSR effort, the company's transparency about its supplier chain has
generated consumer trust, exhibiting a blend of fundamental corporate responsibility and reputational
management. Specifically, Nestle states that its food safety actions have resulted to a 15% drop in
foodborne disease cases in its Chinese operations (Chou, 2013).

Controversial Practices

Marketing of Breastmilk replacements: Nestle's promotion of breastmilk replacements has been

extensively attacked for discouraging breastfeeding, which is vital for infant health. This practice
indicates a profit-driven marketing strategy rather than a CSR endeavour, showing a mismatch between
commercial interests and social responsibility. Reports suggest that Nestle's market share for breastmilk
substitutes climbed by 25% in emerging nations, particularly China, creating ethical issues (Ethical
Consumer, 2022).

Water Bottling activities: Nestle's water-bottling activities have been scrutinized for depleting local
water resources and significantly harming local populations. This technique is generally considered an
exploitation of natural resources rather than a CSR effort. It is alleged that in one region, Nestle’s water
extraction resulted in a 20% fall in local water tables, harming agriculture and home water supply
(Ethical Consumer, 2022).

Analysis of Nestle’s CSR Reports and Business Press

Self-Reporting by Nestle

Sustainability Efforts: According to Nestle’s "Creating Shared Value and Sustainability Report 2021," the
business has achieved a 30% decrease in greenhouse gas emissions across its activities since 2010.
Additionally, Nestle has committed to attaining net-zero emissions by 2050. The report also shows that
Nestle has increased water efficiency by 15% over the past decade and expects to get 100% of its
electricity from sustainable sources by 2025.

Community Investments: Nestle claims to have invested over CHF 400 million in community
development programmes globally, focusing on improving local education systems, enhancing
agricultural methods, and promoting rural development. In China, Nestle's activities include cooperating
with local farmers to promote sustainable farming practices, purportedly benefiting over 300,000
farmers.

Supply Chain Transparency: Nestle has created a thorough supply chain transparency program with tight
quality controls and regular audits. This effort has led to a 15% reduction in foodborne disease incidents
in Chinese operations (Nestle, 2021).

Independent Analyses
The Bloomberg Business Press Perspectives article evaluates Nestle’s CSR initiatives and shows the
company's large expenditure in sustainability marketing. While Nestle's self-reported data shows growth
in certain areas, Bloomberg points out potential gaps between the company's statements and impact.
For instance, there are differences between Nestle’s reported reduced water usage and accounts from
local populations experiencing water shortages due to Nestle's bottling plants.

The Financial Times has investigated Nestle’s corporate social responsibility (CSR) practices,
concentrating on its environmental impact. The publication highlighted Nestle’s massive use of plastic
packaging, which has caused severe environmental concerns. Despite Nestle’s pledge to making all its
packaging recyclable or reusable by 2025, the article points out that the current recycling infrastructure
in many areas, notably China, is insufficient to manage the volume of plastic trash generated.

Conclusion

Nestle’s CSR activities in China provide a sophisticated case study of the complications involved in
corporate social responsibility. On the bright side, Nestle has made substantial gains in enhancing food
safety, promoting environmental sustainability, and supporting local communities through numerous
projects. The company’s self-reported data demonstrates tremendous progress in decreasing
greenhouse gas emissions, improving water efficiency, and enhancing supply chain transparency.

However, the critical research finds that certain of Nestle’s behaviours, especially the marketing of
breastfeeding substitutes and water bottling operations, clash with the criteria of real CSR. These
activities focus primarily on profit rather than social responsibility, negatively hurting local communities
and generating ethical concerns.

Significance of properly examining CSR efforts to discern between real activities and clever marketing.
For CSR to be effective, firms must prioritise ethical standards and transparent reporting, ensuring that
their actions correspond with their social and environmental responsibility promise.

Bibliography

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