Introduction
The modern slave trade is common in many business institutions with long, complex supply chains and those that operate in areas without strict laws. This crime is prevalent because perpetrator companies cannot be directly linked to it. However, many organizations directly or indirectly contribute to forced labor. Nestlé, a leading food and beverage business with headquarters in Switzerland, is a good example. The firm was sued in 2015 by consumers in California for ignoring human rights crimes performed by its cocoa suppliers. The corporation defended itself, arguing it took all the necessary actions to prevent child labor in its procurement. A Californian judge dismissed the lawsuit because the crimes had not been committed in the US. It was not the first time the business formed in 1867 had been involved in such matters. This paper will analyze the case study of eliminating modern slavery from supply chains, look at the critical dilemma in the case, seek the various options available to Nestlé, and offer recommendations.
Key Dilemma
Nestlé management is faced with an ethical dilemma on whether or not to continue with its supply chain strategy or change its strategy. The approach it uses to procure is known to tap child labor, but changing it will increase procurement costs. Opting for the continuation of its supply strategy could have substantial adverse effects on the chocolate producer as it could pose ethical and reputational risks. On the other hand, changing its strategy in the supply chain overnight could lead to massive costs, including risking outages and thus reducing profits. The management needs to consider all factors concerning this ethical dilemma as it could influence its position as a global leader in cocoa production. A strength, weakness, opportunities, and threat (SWOT) analysis would help the firm choose the best decision. This SWOT analysis has internal and external considerations, according to Benzaghta et al. (2021). Thus, the analysis can be used as an effective means of evaluation.
The management of Nestlé has to consider its previous actions concerning corporate social responsibility. The Swiss conglomerate has a horrible history of its morality and ethical matters. In 2015 it admitted that the fish it procured was obtained from a manipulated workforce. It further accepted the finding of Verité that some workers died while doing fishing for the company to procure. The management of Nestlé also accepted allegations filed against it that it was importing fish supplied by people who procured forced labor. They, however, added that nothing could be done to ensure safer procurement in Thailand.
The company was sued in 2010 for misleading the promotion of bottled water. The Chinese government also blocked it due to various unethical practices. Taking it back, Nestle was involved in unethical marketing allegations in 1970 by promoting a baby formula to undeveloped countries. With this in mind, the company’s management has to consider if they can afford another scandal to damage its good reputation or not. These alternatives, which are both precisely opposite, will negatively affect the reputation of managers and that of the company. If the firm chooses to continue its supply chain strategy, it may negatively affect its public record, and public members may be forced to boycott the products resulting in huge losses. On the other hand, if the organization decides to change its supply chain strategy and purchase its cocoa beans from 100% certified suppliers, then the cost of the beans may go up, leading to a reduction in profits.
The reasonably foreseeable consequence of continuing with the procurement strategy are many. First, the company may face legal action for child and forced labor. Second, the clients may boycott the products leading to losses. Third, customers will be deprived of consuming genuine products. Then management may lose its reputation and jobs for unethical practices. Not taking steps to curb child labor in Africa may make the critics not believe in the company’s moral actions. Then conglomerate may also be forced to rebrand an expensive action. On the flip side, the foreseeable consequences of changing the procurement strategy include increased costs of procurement which may lead to a reduction of profits. If the management seeks to maintain the profit margin, it will have to increase the price of its products and hence reduce sales. Change in the supply chain strategy may also lead to temporally shortages of cocoa berries. The company may also change, hoping it will improve its image only for people to question its previous actions, as was the case with the scandal in Thailand.
Options to Address the Issue
There are various options that Nestlé could take on this matter. However, before deciding on any action, it would be imperative for the management to consider its duties to various parties. The company would also need to consider the duties it owes to various parties. In this case, the entity has to consider its employees, competitors, partners, shareholders, customers, and, more importantly, cocoa seed harvesters. Nestlé should ensure that it respects other people’s autonomy, including its workers, to make a safe work environment for them. Before taking any action, the company should first consider the distributive justice theory. Transformational leadership is likely to positively impact distributive justice (Nandedkar & Brown, 2018). Thus, the leaders should follow the principle of distributive justice while considering their options. The worst-off parties in the case could be the children who are subdued to face forced labor. It could also be the parents and relatives of the affected children. Other affected parties include the workers who operate in hazardous environments. The customers of Nestlé would be said to know they are consuming chocolate produced through child slavery.
The management would have to decide if to place the good for the unit before good for all people. It would also need to decide on the best route, either short or long term. Then it would have to decide if to go for profits or loyalty. Outsourcing is an effective device to create incentive collusion, which reduces opportunism, externalizes monitoring costs, and facilitates a competitive organization of supply chains (Ndubisi & Nygaard, 2018). Despite these apparent advantages of outsourcing, the management may need to see if they out way the negative implications child labor in Ivory Coast and Ghana may bring to the conglomerate.
Recommendations
As per the Utilitarianism, Kantianism, rights, and distributive justice, the best recommendation to offer Nestlé going forwards would vary on whether the advice is long or short term. Going by the Utilitarianism approach, which seeks to foster happiness and pleasure instead of pain, the conglomerate would seek to end forced labor fast. Going by the Kantianism theory, which seeks first to fulfill a particular duty, the approach would be to maintain the status quo first. In the short term, the best recommendation after considering all the factors would be for them not to alter their supply chain strategy. Despite ethics being an essential issue in corporate social strategy, it would bring disaster to decide to change the systems on short notice. Changing the systems without good planning would result in a less efficient system. It would also lead to the reduction of the suppliers who are used to the traditional way. Reasonable policies and procedures would be good, but not enough (Osuji et al., 2020). The motivation of suppliers and key employees would also be lowered.
Since the supply chain management systems in the case study are rigid and complex to change, a slow transformation would be necessary. First, all laws and regulations would have to be considered and reviewed, and the change should ensure it complies with the relevant acts. Then a policy procurement procedure that ensures that the company does not procure products likely to have been made available by fraudulent, unfair, and forced labor should be set. In the long term, Nestlé should ensure that its supply chain structure is well monitored and that child labor is not tolerated in areas where the company is involved. These kinds of decisions do not make a company profit but ensure the prevention of losses due to unethical behavior.
Conclusion
Nestlé has been criticized for using forced labor, among other unethical issues, to maximize its profits. The conglomerate should seek to build trust with various parties it has to serve going forward. Ethical dilemmas like the one in our case are nightmares for most managers and should be handled with due diligence. Many managers have a hard time because both options usually result in losses. There are cases where opposing dilemmas fit in different time frames like in this case study. After considering the ethical factors and the options available, this case study is one of the few where one option, which is continuing with the distribution and procurement strategy, fits in the short term, and change of strategy would be helpful in the long term.
References
Benzaghta, M. A., Elwalda, A., Mousa, M., Erkan, I., & Rahman, M. (2021). SWOT analysis applications: An integrative literature review. Journal of Global Business Insights, 6(1), 55–73. Web.
Nandedkar, A., & Brown, R. S. (2018). Transformational leadership and positive work outcomes. International Journal of Organization Theory & Behavior, 21(4), 315–327. Web.
Ndubisi, N. O., & Nygaard, A. (2018). The ethics of outsourcing: When companies fail at responsibility. Journal of Business Strategy, 39(5), 7–13. Web.
Osuji, O., Jamali, D., & Ngwu, F. N. (2020). Corporate Social Responsibility in developing and emerging markets: Institutions, actors and sustainable development. Cambridge University Press.
Perkiss, S., Bernardi, C., Dumay, J., & Haslam, J. (2017). A sticky chocolate problem: Impression Management and counter accounts in shaping the corporate image. Critical Perspectives on Accounting, 81. Web.