Saturday, April 7, 2018

Nestle's Deforestation of Ghana and the Ivory Coast (2017)

Company Overview 
Nestlé, today, is the largest food and beverage company in the world, but the company had not always been on the worldwide stage. The number of products that Nestlé offers to consumers today are also several times larger than when the company began in 1867. In Vevey, Switzerland, Henri Nestlé developed the first product for his soon to be company. This product happened to be cow’s-milk food, for babies who couldn’t be breastfed. While the demand for Nestlé’s product skyrocketed, the funding for his company to fulfill all its orders was coming up short. Henri Nestlé had high energy and optimism regarding the health benefits of his product and he would preach these benefits to doctors and mothers alike, but this positivity could not create enough financial resources for the company to continue. By the time Nestlé hit 61 years of age, his drive to continue the business had come to its end. In 1874, Jules Monnerat, who had been longing for the opportunity to take over Farine Lactée Henri Nestlé (The name of the company at the time), offered Nestlé CHF 1 million for ownership of the company. This offer would be accepted and Monnerat would become the new chair of Farine Lactée Henri Nestlé.
            The Anglo-Swiss Condensed Milk Company would become one of Nestlé’s first major competitors in 1877, when they decided to begin producing products for babies. Nestlé was quick to respond to the new competitor in the baby food industry and created a condensed milk product of their own. The battle between the two companies urged the Anglo-Swiss Condensed Milk Company to open a factory in the U.S. in 1881. Splitting their focus between the United States and Europe allowed Nestlé to jump to the top of the industry, in Europe. Nestlé would later open their first factory in the United States in 1900, two years after venturing outside of Switzerland for the first time. Being that the company was based in the center of the Swiss chocolate industry (Vevey), Nestlé began their expansion into the chocolate industry in the late 1900’s. They became partners with the Swiss General Chocolate Company, who founded the Peter and Kohler brands. As a result of this agreement, the first milk chocolate bar was produced under Nestlé’s name.
Henri Nestle, around 1867, pictured alongside his initial infant food product.

Chocolate has become a popular product and major source of income for Nestlé today. Keeping up with their reputation is the reason they were under controversy in 2017. Much like when Farine Lactée Henri Nestlé and The Anglo-Swiss Condensed Milk Company were competing for the top spot in the late 1800’s, Nestlé Food Company Inc. is competing with companies in the chocolate industry, such as Hershey, Mars, Heinz, and Fererro, today. Each of these companies is willing to do whatever it can to be more profitable and successful than the other companies in the industry. The CEO of Nestlé, Peter Brabeck-Letmathe, has lost sight of correct ethical behavior in his drive to be the best. The recent actions of Nestlé Food Company Inc. have not resembled the value system that Henri Nestlé established when the company first started. Mr. Nestlé would not be happy to hear that his company, which was founded to help infants who couldn’t be breastfed, is now rapidly destroying the rainforests in West Africa, solely to increase profitability. He faced struggles of his own when he was low on financial resources but overcame these obstacles without harming others. Nestlé Food Company needs to look back to their roots and find an alternative way to increase cocoa bean production without destroying the forests in Ghana and along the Ivory Coast. These two locations make up 60% of cocoa bean production in the world, which is why they are such attractive locations to chocolate producing companies like Nestlé, Ferrero, Hershey, etc. The problem with this is that cocoa bean extraction is a destructive process for rain forests to undergo. In fact, from 2000-2014 the Ivory Coast has lost more than 14% of its total rain forest while Ghana has lost 12%. If these companies continue to abuse these major cocoa bean producers, the rain forests will continue to disappear and so will the cocoa beans.
The first Nestle milk chocolate bar produced, 1875. A bar that set the standard for chocolate bars,
 as all prior cocoa bars had been immensely bitter and were unable to be sweetened with milk.

            Stakeholders in any given situation, are the people or parties who are affected by the actions/business activities of others. In this case, the decisions of the Nestlé Food Company to extract cocoa beans from Ghana and the Ivory Coast, contributing to deforestation in these areas, has effects on many stakeholders. Some of the key stakeholders present include: the cocoa sector, millions of shareholders depending on Nestlé in the stock market, the Nestlé Food Company itself, cocoa bean traders, Ghana, and the Ivory Coast. Each stakeholder is affected by this case in a unique way. Such as the entire cocoa sector being negatively impacted by the deforestation of the largest cocoa bean producing areas in the world; or the Nestlé Food Company creating a negative reputation for itself in the eyes of ethical consumers. Nonetheless, various groups of people were affected, mostly negatively, from the business actions of the Nestlé Food Company.

Individualism, an ethical theory created by Milton Friedman, refers to an action as ethical if, within the confines of the law, it maximizes profits for the business owners. The managers who make the decision for Nestlé to extract cocoa from Ghana and the Ivory Coast, are correct in that this action will maximize profits in the short-term. Yet, the action of deforestation in these areas are illegal. Specifically in the Ivory Coast, a protected area where production of cocoa beans is against the law. Since Nestle’s actions of trading with these cocoa bean traders are not considered illegal, Individualists would find their decision to attain cocoa from these areas to be ethical. Had Nestle been directly involved with the actions of cocoa bean producers, then Nestle would be breaking the law and their actions would be considered unethical by Individualists. The association with farmers who are continually destroying the environment will not boast a positive outlook for the company, but under the Theory of Individualism, the morality or ethics of the situation is not in question.
Deforestation in Africa; the leading country in loss due to deforestation
according to a Food and Agriculture Organization (FAO) report.

The Utilitarian approach to ethics involves maximizing the overall good of those affected. As stated earlier, the many stakeholders impacted in this case are almost all negatively affected by the actions of Nestlé. Thus, an overall good would not be applicable to this case. Also, the benefits of extracting more cocoa beans do not outweigh the costs associated with the action. Since the result of extraction is a destroyed rain forest, not only does it harm the ecosystem, but also ruins the producers of these cocoa beans, which will be detrimental to the long-term production of cocoa. These are just two reasons why a Utilitarian would find this business action to be unethical.

Immanuel Kant developed the ethical theory known as Kantianism, which states that businesses acting ethically are those who respect and honor individuals and their choices. In other words, companies must present themselves rationally and allow society to make rational decisions, to be considered ethical by a Kantian. People’s interests must be respected in the execution of a business action for it to satisfy the Formula of Humanity, a formula pertaining to the Law of Rationality established by Kant. Is causing deforestation of protected areas for the means of attaining raw materials for production, an act that respects the people of Ghana and the Ivory Coast? Nestlé’s actions are certainly irrational and disrespectful to the people of Ghana and the Ivory Coast. The company is also using their rain forests solely for what they can get from them, this being cocoa. In other words, they are valuing the rain forests simply as a means and not as an end, which disagrees with the Formula of Humanity. In conclusion, this case would be considered unethical in the eyes of a Kantian.

Virtue Theory
As opposed to the approach that Kantianism takes to ethics, the virtue theory emphasizes the means of an action and not the ends. Ancient Greek philosopher, Aristotle, founded the virtue theory “to know whether a person is fulfilling his/her purpose and potential” (Salazar, 2014). Four characteristics of people that the theory focuses on are courage, honesty, temperance, and justice. If the business decision of a company satisfies all four qualities, then the action is considered ethical. Acting according to the courage characteristic involves a company taking a chance and standing up for what they believe is right in society. The honesty component pertains to the truthfulness that companies must convey to its employees, customers, and competitors in business. Temperance refers to a company providing reasonable expectations, while the justice virtue embodies hard work and fair practice. By extracting cocoa beans from protected areas, Nestlé did not act courageously, nor did they act honestly by executing this action. This is because Nestlé had claimed to be, “opposed to the deforestation of rain forests and peatlands around the world” yet engaged in an action that contributed to the deforestation of rain forests in Ghana and along the Ivory Coast. The company also failed to act with temperance. Acting with temperance would have consisted of acknowledging the destructive effects of deforestation and finding an alternative way or location to obtain their cocoa beans. Along the lines of the justice virtue, Nestlé was unsatisfactory as well since they were not committed to fair practice by unlawfully extracting cocoa beans from protected areas. Obviously, by not satisfying all four virtues, let alone one virtue, the actions of the Nestlé Food Company would be considered unethical by means of the virtue theory.

It is easy to see that the actions of Nestlé have been unethical. This claim is further solidified when applying each ethical theory to this case and having all but one come back with the same answer. This one theory was Individualism which focuses on the business aspect of Nestle's decision. 


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