Nestlé Company CSR and Sustainability Perspectives

Introduction

1. Nestlé Company faces political risk emanating from policies passed by foreign governments. The amendments to the company act passed by the Indian government affected the company’s approach to corporate social responsibility (Rana & Majmudar, 2018, p. 1). Notably, if the firm conforms to the amendment to implement CSR of projects that have no direct correlations with its operations, it is likely to abolish incomplete project and, hence affecting its image. Accordingly, completion of old projects and implementation of new CSR projects as per regulation carry significant financial risks and could lead to losses.

Stakeholders are people who interact with a business to gain either directly or indirectly from its operations. Nestlé stakeholders are consumers and communities where it operates and its partners, such as suppliers (Rana & Majmudar, 2018, p. 8). According to the companies act, Nestlé should spend 2 percent on CSR projects that are over and above its primary business objectives programs (Rana & Majmudar, 2018, p. 1). It is significant that Nestlé analyses the severity of the risks to implement strategies that translates to profit to the stakeholders.

Organizations implement CSR strategies to gain competitive advantage. Su, Peng, Tan, and Cheung (2016) describe CSR as voluntary steps beyond legal and financial expectations of firms (p. 479). Businesses can employ the CSR models to enhance competitive advantage reputation and image, financial performance, brand visibility, and customer relationship (Yin & Jamali, 2016, p. 3). Companies can position themselves in emerging markets when they adopt CSR since such practices are positive signals to investors (Su et al., 2016, p. 480). Applying CSR models can improve financial performance of companies and enhance environmental focus, which delivers value and quality (Su et al., 2016, p. 480). Saeidi, Sofian, Saeidi, Saeidi, & Saaeidi (2015) add that CSR links three interrelated parameters, including customer satisfaction, reputations, and sustainable comparative advantages, which benefit the implementing firms (p. 342). Therefore, companies can engage CSR as a business strategy to advantage its operations, stakeholders, and the overall environment for purposes of sustainability.

The concept of creating shared values (CSV) interconnects a company activities and societal preferences. Nestlé Company implements CSV focused on environmental sustainability, nutrition, and rural development (Rana & Majmudar, 2018, p. 2). The model integrates the community interest and development needs as key aspects of Nestles company success. To meet this initiative, the company enhances its products and operations, reinforces the attainment of healthy economies, improves business performance, and rural development. The three-tier approach ensures that the company operations address environmental concerns, health of consumers, and lead to enhanced livelihoods of suppliers through economic empowerment programs (Rana & Majmudar, 2018, p. 2). Therefore, CSV model provides an integrated approach to support the business and its direct and indirect stakeholders.

Operating business guided by ethical principles is important in the modern world. Sustainability is a significant approach in managing the depleting resources, such as environments degradation (Barbier & Burgess, 2017, p. 1). Sustainability in business refers to the management of commercial entities using models that benefit the environment on which every global transaction relies (Dyllick & Muff, 2016, p. 2). Organizations that implement sustainability programs in the market reduce their operational costs and minimize risks. Such companies achieve brand reputations, enjoy competitiveness in the industry, and attract professionals employees as a source of competitive advantage (Dyllick & Muff, 2016, p. 2). Schaltegger, Hansen, and Lüdeke-Freund (2016) define sustainable approaches as developments that meet people’s needs without straining the needs of future generations. Therefore, sustainability builds the logic for ethical business management practices in response to environmental expectations and interests of future generations.

CRS and sustainability have correlations in business. According to ISO 2O11, “The essential characteristic of social responsibility is the willingness of an organization to incorporate social and environmental considerations in its decision-making and be accountable for the impacts of its decisions and activities on society and the environment” (as cited in Dyllick & Muff, 2016, p. 5). Additionally, compliance to applicable laws and the consistency with international standards to manage stakeholder interest should be a significant attempt of a CSR program (Dyllick & Muff, 2016, p. 5). According to El Baz, Laguir, Marais, and Staglianò (2016), CSR is dependent upon a corporate strategy employed by an organization (p. 4). Hence, either the approaches are based on financial performance, which mainstreams models of profit maximization and brings societal strain, or centered on value for stakeholders (El Baz et al., p. 4; Yin & Jamali, 2016, p. 3). Accordingly, the notable difference between CSR and sustainability is based on the model of CSR applied, which can either be achieved or not.

2. Forecasting CSR activities helps an organization to manage it activities better. Nestlé should plan its CSR activities through programs that will minimize its exposure to risks. According to Garriga and Mele (2004), CSR is a critical aspect to the attainment of a firm’s economic goals and wealth generation (as cited in Saeidi, Sofian, Saeidi, Saeidi, & Saaeidi, 2015, p. 342) Given that the government’s approach to CSR requires a predefined setup, it is significant for a firm to comply. Risks such as government sanctions for failure to observe regulations and industry specific policies can lead to fines, products confiscation, and company closure.

The current activities of Nestlé provide an opportunity for business. The CVS programs are divided in three broader objectives of water and environmental sustainability, rural development, and nutrition (Rana & Majmudar, 2018, p. 2). Nestlé should not stop its CVS projects to implement the new regulatory requirement in CSR. In its place, the company should define the scope of the three CVR frameworks to ascertain whether they fall over and above its primary business objectives (Rana & Majmudar, 2018, p. 6). Such redefinition enable the company to discuss with the regulator and provide proof that certain CVS program, such as eradicating hunger, malnutrition, poverty, and making safe drinking water available for citizens among others, may not fall direct into Nestlé’s core business goals and thus should be applied under new CSR categorization.

CSR and CSV programs will provide comparative advantage for Nestlé Company. It will help the company to maintain quality within its programs (Rana & Majmudar, 2018, p. 6). For example, by implementing CSV, the firm is certain of high quality supply of coffee, milk, and agricultural products relevant for its production (Rana & Majmudar, 2018, p. 6). Thus, discontinuing CSV activities would mean a direct onslaught on quality and value, which would lead to a possible drop in sales. Accordingly, the company should undertake both CSR and CSV activities since they directly affect people’s livelihood and deliver overall sustainability to all sectors of the Indian economy.

3. The amendment to the company act relating to CSR provides clear instructions to entities. The amendments require new CSR perspectives delinked from having a direct correlation with the core business activities of an organization. According to Rana and Majmudar (2018), “under the new rules, CSR expenditure companies need to clearly distinguish activities that are undertaken specifically in the normal course of business and those that are done incrementally as part of CSR initiatives” (p. 11). Due to this requirement, Nestlé Company should make representation to the government to restate the extent of its CSV activities and advice on how they escalate beyond the firm’s primary objective. For instance, the health and sanitation program that supports female student in school through the provision of health facilities is a core area that directly supports societal needs (Rana & Majmudar, 2018, p. 4). However, although the organization has supported 45 sanitation projects and reaching out to over 58000 women through capacity building interventions, the activities are not directly associated to the company’s primary objectives (Rana & Majmudar, 2018, p. 4). Thus, making a presentation to the government will enhance their partnership through understanding of CSR activities the observation of the law.

Nestlé can make a presentation to the government. The strength of such arrangement will enable the company and the government to agree on the integration of CSV activities as part of the company CSR initiative. Accordingly, the presentation would also act as disclosure forums. Effective CSR activities will enhance the company image in the market, improve customer trust, and increase sales prospects (Yin & Jamali, 2016, p. 3). Therefore, to ensure the government understands what the company does, the company will enjoy good will, which leads to positive publicity that is necessary for business.

4. An effective corporate strategy illustrates the strength on an organization to manage its activities abroad. The model assists an organization to respond to the needs of local stakeholders as it advance its business interests. The long-term CSR strategy will be anchored on the three principles of nutrition, water, and rural developed (Mohajan, 2015, 7). The three major areas of CSV will illustrate the perspective of the new CSR activities.

Nutrition

Given that, the company provides nutritional support to children in order to manage health risks such as malnutrition. The CSR will develop nutritional education programs for children and support child educations programs in various schools (Mohajan, 2015, p. 7). Companies advocate for safe and healthy practices that reduce the susceptibility to lifestyle challenges, such as poor social behaviors and feeding systems through CSR programs (Lee, O’Donnell, & Hust, 2018, p. 1). To implement nutritional wellness strategy, the company will develop CSR teams for effective operations and package relevant content that suits its target populations in the society.

Water and Environment

The CSV focus of water and environment will ensure the organization concentrates on supporting disadvantaged population to access water. Accordingly, it will incorporate environmental conservation measures to support nature for sustainability (Dyllick & Muff, 2016, p. 2). Mohajan (2015) states that construction of water tanks in schools and support for education can lead to healthy and sustainable livelihoods (p. 7). Therefore, the model is critical for supporting the society and protecting the environment.

Rural Development

Rural development will support stakeholders to manage dignified lives. The economic empowerment programs will encourage people to focus on poverty alleviation (Mohajan, 2015, p. 7). In addition, the company will construct community toilets and support development project in the society (Mohajan, 2015, p. 8). Hence, this will boost the overall rating of the company in the market and lead to competitive advantage.

References

Barbier, E., & Burgess, J. (2017). Natural resource economics, planetary boundaries and strong sustainability. Sustainability, 9(10), 1-12. doi:10.3390/su9101858

Dyllick, T., & Muff, K. (2016). Clarifying the meaning of sustainable business: Introducing a typology from business-as-usual to true business sustainability. Organization & Environment, 29(2), 1-19. doi: 10.1177/1086026615575176

El Baz, J., Laguir, I., Marais, M., & Staglianò, R. (2016). Influence of national institutions on the corporate social responsibility practices of small-and medium-sized enterprises in the food-processing industry: Differences between France and Morocco. Journal of Business Ethics, 134(1), 1-51, doi: 10.1007/s10551-014-2417-z#

Lee, Y. J., O’Donnell, N. H., & Hust, S. J. (2018). Interaction effects of system-generated information and consumer skepticism: An evaluation of issue support behavior in CSR twitter campaigns. Journal of Interactive Advertising, 1-14. doi: 10.1080/15252019.2018.1507853

Mohajan, H. (2015). Present and future of Nestlé Bangladesh limited. American Journal of Food and Nutrition, 3(2), 1-15. Retrieved from https://mpra.ub.uni-muenchen.de/82850/1/MPRA_paper_82850.pdf

Rana, N., & Majmudar, U. (2018). Nestlé India: Creating a new CSR strategy.  Ivey Business School Foundation.

Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, A. S. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction, Journal of Business Research, 68(2):341-350.

Schaltegger, S., Hansen, E. G., & Lüdeke-Freund, F. (2016). Business models for sustainability: Origins, present research, and future avenues, 1-DOI: 10.1177/1086026615599806

Su, W., Peng, M. W., Tan, W., & Cheung, Y. L. (2016). The signaling effect of corporate social responsibility in emerging economies. Journal of business Ethics, 134(3), 479-491, doi 10.1007/s10551-014-2404-4

Yin, J., & Jamali, D. (2016). Strategic corporate social responsibility of multinational companies subsidiaries in emerging markets: Evidence from China. Long Range Planning, 49(5), 1-18, doi.org/10.1016/j.lrp.2015.12.024

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