Child Labour in Nestle - Essay Example

Nestle Child Labour Name: Lecturer: Course: Date: Introduction Child labour is a longstanding phenomenon that is still a critical concern in the contemporary world. An important rationale is protection of child’s human rights. Despite this, current rate of globalisation, which has intensified market competition and economic crises, has made human rights concerns, such as child labour, very unequivocal (Baland & Robinson 2000). Some companies such as Nestle have been criticized for taking advantage of relaxed labour regulations in developing countries to exploit children, who work as child labourers. While some companies have agreed that maximising profits is a central aspect of their business objective, others have argued that such an approach could affect their ethical values. Hence, the question, is it justifiable to use child labour? This essay argues that Nestle should not use child labour to lower production cost, and that it should have a duty of care towards preventing child labour among its suppliers. Situation A report by the Fair Labour Association (FLA) exposed cases of violation of labour code by Nestlé’s cocoa supply chain in Ivory Coast. The report indicated that cases of child labour were prevalent despite the efforts to discourage employment of children in the industry. FLA investigations traced the trend to Nestlé’s major suppliers, which represented around 80 percent of the company’s cocoa supply in Ivory Coast (Giblin 2012). Further revelations indicated that attempts to enforce fair labour practices had been greatly challenged at numerous stages of the company’s supply chain, since few parties at the end of the chain are knowledgeable about labour code. As the biggest food company globally, sourcing some 10 percent of the cocoa from the country, the company is well-positioned to have significant impact on the lives of workers harvesting cocoa in Ivory Coast by ensuring contiguous remediation and methodical improvement in the long-term (Giblin 2012). Critical Discussion on related Management Processes, Ethics The International Labour Organisation (ILO) defines child labour as the employment or hiring of individuals below the age of 15, or the national minimum working age. Nestle was involved in multiple serious violations of labour laws (child labour), which persisted since there were no local laws set up to guarantee fair and safe working conditions. Estimates by the US State Department indicates that some 10,000 children in the country are victims of human trafficking and slavery, while those subjected to child labour are over 109,000 (Giblin 2012). The cocoa contributes to child labour due to the high demand for reasonably priced chocolate products in the developed nations. This has triggered competitive market between cocoa farmers. On the other hand, the low cost of child labour and slavery has triggered increased demand for cheap child labour (Giblin 2012). The rationale for perpetuating or prohibiting child labour can be explained by a number of theories. The decision by parents in Ivory Coast to perpetuate child labour can be explained by the theory of multiple equilibria. According to the model, parents’ decision to withdraw children from labour is based on their level of income. Child labour is a mass phenomenon that happens due to parental poverty or concern for household survival (Basu 1999). Although this assumption has the potential to make an underlying rational to ban child labour to lose its force, the assumption on parental decision-making in addition to that of substitutability in production between adult and child labour can cause multiple equilibrium in labour market: one where the wages of adults is high and children do not work and the other where children work because adult wage is low (Brown, Deardorff & Stern 2002; Edmonds 2005). This presents ethical dilemma in justifying child labour. However, ethical theory of right negates such rationale. The ethics of right theory states that if an individual has a right, then it would be unjustified to interfere with the right even if several people are bound to benefit from the interference. Nestlé’s decision or reluctance to stop child labour in its supply chain can be explained by Milton Friedman theory of business, which postulates that a business’s social responsibility is to acquire profits. Based on this revelation, the 4Ps of marketing mix model – product, place, price and promotion—can be used to communicate what motivated Nestle to uphold child labour in its profit-seeking endeavour. In regards to the product, Nestle was concerned with helping their customers to achieve enough supply of chocolates to the product’s consumers. Concerning the price, the company was concerned with selling the chocolates cheaply. In respect to place, the company sold the product cheaply in markets from Ivory Coast, such as the United States. The element of promotion included selling the product at cheap price in the strategic locations (Giblin 2012). In business management, professional ethics is concerned with managing the relations at each link of the chain, which is a crucial aspect in supply chain management (SCM). Hence, companies should use supply chains to reduce costs and add value to the product as well as nurture a long-term value-added relationships (Barauna 2005). While Nestlé’s cocoa suppliers used child labour to reduce cost, they failed in the other two aspects of adding value to the product and establishing value-added relationships. In SCM, the network of distributors, suppliers, warehousing and harvesting participate in the production of a product. Put differently, SCM enables organizations to acquire the rights commodities from the point of collection to point where they are needed at the right time, quantity and cost (Barauna 2005). Efficient management of the SCM entails managing the relationship with customers and suppliers as well as getting constant feedback on events happening at each link of the chain. The FLA report on child labour in Ivory Coast shows that Nestlé’s supply chain management was deficient, as it maintained a poor relationship with its suppliers in Ivory Coast (Giblin 2012). Additionally, it received no constant feedback on conditions of labourers and regulations happening in its cocoa harvesting chain (Bharadwaj & Lakdawala 2013). Like Nestle, a number of other companies’ suppliers have also been involved in cutting costs by outsourcing suppliers who use child labour. Companies such as Microsoft, Nike, Apple, and Hershey have been criticised for taking advantage of inefficient or lack of labour laws in developing countries that regulate cheap labour from child labourers (Giblin 2012). Just like Nestle, Hershey, which is also a chocolate manufacturer had its suppliers in Ivory Coast exploit child labour. Nike has faced similar criticism in its Indonesian shoemaking plant. Despite this, it doesn’t mean that Nestle, Nike and Hershey have no responsibility for their supply chain. Based on the Three-I model, several approaches can be applied to explain child labour. The first one is ignorance, where many companies are unaware of the human rights implication of using child labour (Nestle 2014). The second is indifference, where some companies are knowledgeable about human rights violations and have chosen not to act. Nestle fell under this category, when child labour was identified in its supply chain. Third is involvement, where some companies are aware of the human rights issues and have taken steps to identify and monitor the issues. In this regards, there are three monitoring types Nestle can use (Nestle 2014). These include external, internal and independent. Internal means the company trains its own staff on requirements for labour policy. External means the company hires auditors to inspect and track workplace conditions and practices and independently means the monitoring is carried out by interest groups (IFC 2002). Nestle uses Mission and vision objectives as well as strategies for objectives. The company has initiated the Corporate Business Principles and Nestle Supplier Code that prohibit child labour in addition to promoting business integrity, upholding labour standards and ensuring health and safety. The company commits to tackling child labour in a holistic manner, where safety practices and labour and health practices are monitored (Nestle 2014). Roots of Ethics Based on ethical theory of consequentiality, as organisations become increasingly global, they face difficulty in ensuring ethical integrity in their supply chain and enforcing an ethical approach to management of workforce. In regards to Nestle, this is particularly in situations where local governments have weak labour laws that permit child labour. Under this scenario, growth of supply chain gives rise to a number of challenges for certain aspects of CSR (Piedade & Thomas 2006). Both Nestle and BAT were faced with a similar problem. With regard to BAT, the tobacco industry faced great challenges in managing its supply chain in developing nations, such as Uganda and Tanzania, where child labour is rampant due to poverty and cultures that permit it. Lack of government involvement in regulating child labour in the industry also perpetuated the trend. The same scenarios affected Nestle in Ivory Coast. The ethics of right theory states that if an individual has a right, then it would be unjustified to interfere with the right even if several people are bound to benefit from the interference. Essentially, the society shows concern for ethics in supply chain management due to the environmental effect and health and safety (Brown, Deardorff & Stern 2002). Child labour is a critical issue in business management. It deprives the children of their basic right to quality and meaningful education, which negates the natural virtues of corporate social responsibility (CSR) (Fredborg 2009). Within the same breath, having a supply chain that is free of child labour ensures a company would have a capable and educated workforce in the long run (Ravallion & Wodon 1998). Additionally, since ethical performance of businesses are under intense scrutiny by stakeholders, the media and consumers, indications of child labour within a company’s supply chain can cost a company’s reputation, leading to revenue loss. The pressure originates from various sources. Investor interests in the integrity of the supply chain have however contributed to efforts for stricter regulations (Bharadwaj & Lakdawala 2013). A range of stakeholders are concerned about the ethical, social and environmental performance of a company’s supply Chain. For instance, while the general public has increased expectations of the company’s social responsibilities in regards to promoting social health, investors and other rating agencies see management of supply chain as an indicator of how effectively a company is run (Giblin 2012). Nestlé’s involvement in cases of child labour indicates the company showed little efforts to show commitment to enforcing ethical standards. Other stakeholder such as the media is also interested in highlighting malpractices to harness public opinion. In this respect, consumers become more discerned while it shows how governments of the affected developing countries undermine progress in establishing ethical labour and trade practices. Conclusion Supply chains are usually complex and signified by interrelationships between varied companies. Hence, issue of managing responsibility is two-way. This involves the responsibility of the party requesting for supply and the party providing the supplies. In both scenarios however, companies would be affected by the actions of their suppliers, whether directly or indirectly. Nestle was affected by the actions of cocoa farmers, who supplied cocoa to the company, to employ children. References Baland, J & Robinson, J 2000,“Is child labor inefficient?, Journal of Political Economy 108: 663-679. Barauna, F 2005, Managing and Addressing Child Labour in Supply Chains, viewed 22 March 2014, http://edissertations.nottingham.ac.uk/58/1/05MBAlixfbdm.pdf Basu, K 1999, ‘Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards’, Journal of Economic Literature, vol. 37, No.3, p.1083-1119 Bharadwaj, P & Lakdawala, L 2013, Perverse Consequences of Well-Intentioned Regulation: Evidence From India’s Child Labor Ban, viewed 22 March 2014, http://econ.msu.edu/seminars/docs/ChildLaborBan.pdf Brown, D, Deardorff, A & Stern, R 2002, The Determinants of Child Labor: Theory and Evidence, School of Public Policy The University of Michigan Ann Arbor, Michigan 48109 -1220 Discussion Paper No. 486 Edmonds, E 2005, “Does child labor decline with improving economic status?”, The Journal of Human Resources, Vol. 40 p.77-99 FLA 2012, FLA Highlights Underlying Challenges of Child Labor After Extensive Investigation of Nestlé Cocoa Supply Chain, Fair Labour Association, viewed 22 March 2014, http://www.fairlabor.org/blog/entry/fla-highlights-underlying-challenges-child-labor-after-extensive-investigation-nestl%C3%A9 Fredborg, I 2009, Corporate Approaches to Child Labour– A Northern European Perspective, viewed 22 March 2014, http://www.diva-portal.org/smash/get/diva2:227810/FULLTEXT01.pdf Giblin, C 2012, Eliminating child labour from the supply chain, The Guardian, viewed 22 March, 2014, http://www.theguardian.com/sustainable-business/eliminating-child-labour-supply-chain IFC 2002, Good Practice Note in the Workplace and Supply Chain Addressing Child Labor, Good Practice Note, No. 2, p.1-19 Nestle 2014, Child Labour, viewed 22 March 2014, http://www.nestle.com/csv/human-rights-compliance/human-rights/child-labour Piedade, L & Thomas, A 2006, "The Case for Corporate Responsibility: Arguments from The Literature," SA Journal of Human Resource Management, Vol. 4 No. 2, p.57-64 Ravallion, M & Wodon, Q 1998, Does Child Labor Displace Schooling? Evidence on Behavioral Responses to an Enrollment Subsidy, viewed 22 March 2014, http://www.cid.harvard.edu/archive/events/cidneudc/papers/neudc_qw.pdf Read More