Nestlé Approach to Corporate Social Responsibility in Sri Lanka

Corporate social responsibility has become an essential duty of businesses today in meeting their duty of care to the stakeholders where they operate. Many businesses realize that they do not operate in a vacuum and require to involve local communities, local governments, civil society organizations, suppliers and non-governmental organizations in their operations (Leventhal 2018).

There has been heated debate simmering on the role of businesses in corporate social responsibility and sustainability strategies. Opponents infer that businesses exist for one reason, to maximize shareholder wealth and that all activities negating from that aspect are mere window dressing affairs (Paun 2018; Sethi 2012). Visser (2010), for instance, posits that though many companies claim involvement in CSR and sustainability, social problems have grown not reduced and that climatic vagaries have gone a notch higher. He proposes CSR 2 or in short corporate sustainability and responsibility where companies align their business strategies to community problems hence benefitting both parties.

Other experts such as Porter and Kramer (2011) share the same thoughts. They propose a model called Creating Shared Value, which has been executed very successfully at Nestlé. The model aligns business interests to those of local communities thereby ensuring not only sustainable livelihoods for local communities but also successful business performance.

That said, businesses are increasingly becoming role models in the society by shunning unfair practices in the quest to maximize their profits (Sandel 2012). Many companies have taken an ethical stand in the social dimension and environmental sustainability by educating students, embracing fair labour practices, coming up with life-changing innovation in water utilization, green technologies, and alternative energy. These address societal needs, the environment and at the same time increase business performance. Companies such as Tesla, Nestlé, and Unilever are leading in that front and other companies have started to pay attention (Sternberg 2018).

This report focuses on Nestlé Sri Lanka operations in corporate social responsibility and environmental sustainability. It explores the strategies Nestlé is pursuing to empower local communities in farming, milk production, supply chain management, and education in its social responsibility strategy. Further, the report explores the environmental sustainability strategies the company is pursuing in Sri Lanka to ensure efficient use of energy, water utilization, sustainable resource use, and carbon emission reduction. More to the point, the report inquires into the creating shared value mantra that has seen Nestlé expand the horizons of traditional corporate social responsibility.

1.1 Nestlé Approach to Corporate Social Responsibility in Sri Lanka

The Community

Nestlé primarily deals with food products, a variety of beverages such as coffee, Milo and chocolates as well as nutritional products. Though the company was established in the early 1860s, it commenced its operations in Sri Lanka in 1906 and began trading shares in 1983. It has a variety of brands in Sri Lanka such as Nespray, Milo, and Maggi among others. It sources its raw materials such as cereals, fruits and milk from the local farmers thereby empowering them financially (Nestlé 2018).

Nestlé has an elaborate corporate social responsibility strategy in Sri Lanka. The company realizes that its success is tied to the success of the local communities in terms of provision of raw materials, supply chain management and eventually as customers to its finished products. Therefore, it has taken mechanisms to address all the stakeholders across the value chain. The company’s social responsibility incorporates the community, farmers, schools, hospitals, supply chain agents and its employees (Nestlé 2018).

1.2 The community

The first port of call for the company when it began its commercial operations in 1984 was to assist in the rehabilitation of war-ravaged communities in the North and Eastern areas of Sri Lanka. Nestlé played a big role in setting up the first milk collection centres where the community would deliver milk (Fukukawa 2009).

The company trained the community members on dairy farming and provided a steady and ready market for their produce. To ensure that everyone was involved in the process, Nestlé made sure that milk collection targeted all the people especially the ones who were physically disabled as a result of the civil strife. The company collected even the least amount of milk the physically disabled could contribute. In the process, the community members were empowered and regained the losses they made during the war (Nestlé 2018).

Currently, Nestlé provides technical support, extension services, and quality assurance to ensure that farmers produce high-quality milk thus accruing maximum benefits from their efforts. The company actions have directly impacted the living conditions of over 24,000 farmers. Indirectly, the company has impacted over a hundred thousand people in transportation, logistics, and retail business (Mia et al. 2015).

1.3 Education and training

The company has helped community members to acquire technical skills in modern agriculture. This has been achieved through the provision of agricultural extension workers who train local farmers on superior farming technology (Porter & Kramer 2011).

On education, Nestlé has helped to rehabilitate schools in Pannala and Makandura among other areas. This has impacted directly on the education of over 7000 students. Nestlé understands that by empowering the children, the community is uplifted and this forms a stable bedrock for its future customers (Nestlé 2018).

Education and Training

1.4 Sanitation and Healthcare

The company recognizes that over a billion people in South-Asia lack proper sanitation facilities. This has the potential to affect the health of millions through waterborne communicable diseases. The company’s contribution to solving the problem was through investment in modern sanitation facilities in local community schools and hospitals. This has helped Sri Lanka’s bid to achieve millennium development goal 4 on the reduction of infant mortality. The company has set up over 20 sanitation facilities that directly impact over 5000 students and community members (Nestlé 2018).

1.5 Employees and Labor Practices

The company recognizes the value of its employees in achieving its strategic objectives. The employees enjoy numerous benefits extended by the company including employee reward schemes, career growth and development, ample maternity and paternity leave and upward mobility schemes (Bloom 2016).

Nestlé has adopted labour practices recommended by the International Labour Organization which among other issues, restrict child-labour, shuns gender and sexual discrimination, and advocates for equal employment opportunity for all (Fransen 2018).

1.6 Stakeholder involvement

Any company that seeks to excel has to involve stakeholders in its operations (Mele 2009). Nestlé recognizes this aspect and collaborates with its agents to ensure that farmers interests are well addressed. Moreover, the company provides chilling plants to farmers to stem the loss of milk. It also incorporates farmers in its efforts to ensure top quality raw materials such as coconut by providing them with superior seedlings (Nestlé 2018).

1.7 Company Reporting

Nestlé is very truthful in its financial, social and environmental reports. This has helped to instill top-notch ethical standards in its operations. It has received recognition from the Dow Jones Sustainability index for exemplary performance in social and environmental spheres (Miah et al. 2015).

2.0 Environmental Sustainability

Ever since the silent spring exposé by Rachael Carson which detailed the damage that manufacturing firms – particularly those producing chemicals – had on the environment, many companies have begun to scrutinize the impact of their operations on the present and future generations. This was amplified by the Brundtland report in 1987 dabbed “Our Common Future” which emphasized the importance of sustainable utilization of environmental resources. The report appealed to the present generation to meet their needs without jeopardizing the ability of future generations to meet theirs (Jameson 2013).

Many companies are waking up to the fact that the business paradigm in so far as the environment is concerned has shifted. The millennial generation, for instance, is very concerned with how the companies they purchase from treats the environment. Even without the benefit of business ethics, companies that disregard the environment are on one hand meeting with increased resistance from the customers and regulatory authorities (Crane & Matten 2016). On the other hand, companies that are innovating green solutions are meeting with unprecedented growth (Norton, 2012).

Sanitation and Healthcare

Nestlé understands that its raw resources come from the environment and is, therefore, duty-bound to ensure sustainable utilization of those resources (Nestlé 2018). The company has numerous sustainability approaches including waste reduction, green energy solutions, afforestation programs among others discussed in detail.

2.1 Reduction of greenhouse gas emission

The company is alert to the fact that greenhouse gases like carbon dioxide, sulfur dioxide, and CFCs are the leading cause of ozone depletion which has led to global warming. To this end, Nestlé has instituted mechanisms such as increased utilization of solar energy instead of petroleum products. The company is also adopting wind energy in all its branches worldwide having made great achievements on this front in Brazil (Miah et al. 2015).

In the financial year 2012-2013, Nestlé achieved the highest score in the carbon disclosure index. Furthermore, it was listed among the top companies in the climate disclosure leadership index. This saw it listed among the top companies in the Dow Jones Sustainability Index (Nestlé 2018).

2.2 Afforestation program

In Sri Lanka, Nestlé has provided 20,000 coconut seedlings to 3000 farmers for transplantation in Sri Lanka. This is in addition to communal tree planting exercise that the company participates in during World Environment Day (Nestlé 2018).

2.3 Water conservation

The company has elaborate water conservation mechanisms in all its strategic business units in Sri Lanka. To begin with, Nestlé sensitizes its staff on reducing water utilization and minimizing wastage. It educates children on water conservation upon drilling boreholes for them. The children become ambassadors of sustainable water use and spread the message to the wider community. Moreover, the Kurunegala factory which manufactures the bulk of Nestlé products in Sri Lanka is very efficient with no water discharge at all (Nestlé 2018).

2.4 Raw materials

The company only acquires raw materials from the farmers near their factories whom they assist in meeting environmental sustainability standards set by the company. This reduces the use of fuel for transportation and prevents the use of dangerous chemicals that harm the environment (Porter & Kramer 2011).

2.5 Packaging and distribution

Nestlé uses eco-design materials for its packaging. This material is easy to recycle once the products have been utilized. To cut on energy utilization during transportation and distribution, the company maximizes its networks and fully utilizes its vehicles to prevent suboptimal or empty journeys. The company has an efficient green distribution facility in Sri Lanka which only utilizes green energy. Cost savings from the facility reached 40 million Rupees while emissions reduced by 47 tonnes in the year 2017(Nestlé 2018).

Employees and Labor Practices

Recommendation

It is recommended that Nestlé encourages innovation from its employees and suppliers. Many companies are coming up with innovative ways to conduct CSR and environmental sustainability when they encourage their employees to participate more in the conception of CSR and sustainability programs. Nestlé can for instance venture into immune boosting food supplements to improve the health of the local communities.

It is also recommended that Nestlé comes up with an employee reward program for coming up with innovative ideas. This will motivate employees to come up with better mechanisms to address social concerns.

To encourage environmental sustainability, it is recommended that Nestlé encourages its employees to use green solutions to achieve the company objectives. For instance, certain employees can work from home to cut on transportation and fuel utilization. Additional the company can encourage its employees to cycle to work.

The company impact on the local community is very minimal affecting only a few thousand people compared to Sri Lanka population. It is therefore recommended that the company should engage the local communities more particularly on the issue of healthcare and hygiene.

Conclusion

This report has explored the Corporate Social Responsibility and sustainability approaches used by Nestlé in Sri Lanka. The report reveals that Nestlé creates shared value with its suppliers, farmers, and agents whereby they provide the company with goods and services in exchange for a reliable market, education, training, provision of farming resources and quality checks. Nestlé also provides infrastructure development, health, and sanitation facilities as well as education to the local community. In terms of sustainability, the company has reduced its emissions in Sri Lanka by 47 tonnes, utilizes optimal transportation for its goods and uses environmentally friendly packaging for its products. The company has featured on the Dow Jones Sustainability index list since 2012.

References

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