Impact of Nestls Approach to CSR on Their Business - Case Study Example

Introduction: Nestle is a 140 year old global leader in the FMCG sector with a rich tradition of contributing to the community and a high level of awareness and activities entered on philanthropy, environmental sustainability and promotion of healthy living among its consumers as well as the society at large. The company has diligently strived toward the well being of its stakeholders as well as the general community, and managed to balance it with increased profitability, year after year. Nestle has shown high level of commitment to various causes which is apparent from the numerous awards won by it both locally as well as overseas. Recently it won the Best Supplier Engagement Award at the Ethical Corporations 5th Annual Responsible Award ceremony held in Londons Mayfair on 29th September 2014 (Nestle, 2014). It also won the Most Inclusive Employer of the Year award at the European Diversity Awards held in London (European Diversity Awards, 2014), and the Ministerial award for its significant environmental achievements and initiatives awarded by the government of Vietnam (Vietnam Investment Review, 2014). The achievements of the company in diverse field are indicative of the company’s commitment towards its stakeholders and for global causes. This essay aims to discuss various aspects related to corporate social responsibility and creating shared value and other similar initiatives undertaken by Nestle over the years. 1. Impact of Nestlé’s approach to CSR on their business: The term corporate social responsibility has been widely discussed and debated across various academic and non-academic fields alike. It is defined as "a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment by integrating social and environmental concerns in their business operations and in their interaction with their stakeholders" (European Commmission, 2001, p. 6). The UK government describes the term as "the responsibility of an organisation for the impacts of its decisions on society and the environment above and beyond its legal obligations, through transparent and ethical behaviour" (gov.uk, 2014). Nestlé embraced the concept of CSR and actively endorsed the principles laid down by the term. This is apparent from the corporate strategies of the firm which are built around customers needs and expectations. The company recognises and acknowledges the need of the consumers with regard to having access to information about the products they consume. Nestlé’s approach of catering to this need of the consumers helped significantly in developing and establishing its corporate responsibility strategies, whereby the key focus was on fulfilling all the basic needs and requirements of the consumers. In accordance with its newly developed CSR policy, Nestle heavily promoted healthy eating whereby the consumers were now offered a greater insight into the products consumed by them. This entailed providing vital information statistics such as the Guideline Daily Amounts (GDA) developed by the IGD (Institute of Grocery Distribution). All products manufactured and marketed by Nestle were in accordance with the GDA requirements as recommended by nutritionists and scientists, thus ensuring greater awareness about healthy eating and health and well being of the consumers. Nestlé’s corporate responsibility through food labelling ensured it’s keen interest in the well being of its consumers and displayed its commitment for contributing to the greater good of the community at large. Figure 1: Carol’s (1991) Pyramid of CSR Source: (Caroll, 1998) Nestlé’s approach toward CSR entailed fulfilment of the ‘expected’ behaviour / attitude / response of the consumers from the organisation. By ensuring provision of vital nutrient information the company displayed ethical behaviour by making its consumers aware of the dietary requirements being followed. Furthermore the company incorporated ethical business practices as a part of its business principles and responsibility toward its stakeholders. Such attitude from the organisation conveyed its honest intentions about holding the stakeholders best interests above profit motive, and helped in conveying the sincere and legitimate interests of the company. Nestle was able to effectively communicate its visions and values though its ethical behaviour and actions which helped in generating trust among the consumers with regard to the brand. Furthermore the company embraces the concept of shared value and has effectively incorporated the same as part of its CSR strategy. This is reflected in the various commitments of the company with regard to environmental sustainability, ethical and legal compliance, conservation of valuable resources, and providing nutritious products to the consumers (Nestle, 2014). The inclusion of such CSR strategies within the company policy ensured improved response from the stakeholders. Studies suggest that there is a positive relationship between the CSR activities of a company and the attitudes of the consumers toward the products /services endorsed by that company (Brown & Dacin, 1997; Ellen, Webb, & Mohr, 2006). In a study carried out to ascertain and evaluate the impact of CSR strategies of a company on consumer buying behaviour it was observed that the consumers’ purchase decisions were significantly influenced based on the CSR approaches of the organisation in question (Mohr, Webb, & Harris, 2001; Sen & Bhattacharya, 2001). The observations made in this study has been further supported a survey /poll carried out by Pomering & Dolnicar ( (2008)) which indicated that consumers expect organisations to share and offer vital product /service related information. It also revealed that the consumers tend to display a favourable attitude toward companies that openly share all crucial information related to their product, which is likely to influence the consumer decision. CSR strategies aimed at fulfilling the needs of the consumers are also known to greatly influence their purchase decisions and help in developing positive attitudes toward the company as well as the brand (Mohr, Webb & Harris, 2001). Also it has been well established that although the diverse stakeholder groups such as consumers, shareholders, investors or employees, have different interests the impact of CSR on all the above listed groups have been found to be the same regardless of the difference in their interests (Sen & Bhattacharya, 2001). Nestle continues to contribute toward the greater good of the society at large, thus attracting improved outcomes in terms of greater employee commitment and customer loyalty in the process. Nestle UK recently became the first major manufacturer to be the Principal Partner of the Living Wage Foundation, that aims to provide Living Wage to all its employees as well the employees hired by its sister foundations. It currently covers approximately 8000 employees and is likely to include more employees by the end of December 2017 (Nestle UK, 2014). In an effort to contribute toward the sustainability initiative, Nestle UK joined hands with the industry-wide campaign under its brand new initiative "Working on Waste" which aims to bring together the food and grocery companies and influence them to help their employees in reducing household food waste. Over 650,000 employees industry-wide, are known to have participated in the initiative, thus ensuring the benefit of the communities at large (Nestle UK, 2014). Thus Nestlé’s CSR approach proved to be good for their business since it not only enabled the consumers’ an insight into the ingredients used but also other vital information related to the product including nutrition count, expert advise with regard to daily nutrient requirement, shared values, ethical standards and policies etc. This is reflected in its business performance report, which indicates an overall increase in market share in UK & Ireland by 1.7 per cent in 2013 and a 32 per cent growth in sales in the same year (Nestlé UK, 2014). Thus on the basis of the above discussion it can be safely stated that Nestlé’s approach to effective CSR played a key role in improving and enhancing the manner in which the company is perceived by the consumers which in turn proved to be good for its overall business. 2. How was the focus on GDA labelling good for Nestlé in terms of satisfying their consumers’ needs? Nestlé was the first food company ever to introduce the concept of food labelling whereby it made vital information about the nutritional contents about the said food product, available to the consumers (Nestle, 2014) Under the Nestlé Nutritional Compass initiative launched by the company in 2005, Nestlé ensured that the nutritional contents of the products manufactured and marketed by the brand be made available to all its consumers (Nestle, 2014). The program proved to be highly satisfying because for the first time ever, the consumers were provided crucial information about the products consumed by them such as calories, sugars, fat, salt and other content. It offered them an opportunity to judge for themselves, based on the calorie count provided, whether the product is healthy for consumption or not. Also, the GDA (Guideline Daily Amounts) for each product manufactured and marketed under the brand, was produced and published in association with the guidance and inputs shared by nutritionists and scientists. It also published government recommendations along with the GDA provided by the nutritionists and scientists. Such detailed information was never before, accessed by the consumers and hence this new initiative by Nestle helped them in understanding the concept of GDA and make healthy choices for themselves. The basic motivation behind Nestlés food labelling strategy was to ensure provision of healthier food options to its consumers, especially young children and prevent overeating and encourage healthier lifestyle choices. Such information was hence perceived in a good light by the consumers who were greatly influenced and impressed by the companys commitment to social causes and in serving its consumers. Market research carried out by Nestle as well as other researchers had indicated that consumers are keen on consuming healthy food and were conscious of their diets. A sharp rise in portion sizes in away-from-home food products were observed across several studies carried out over the years and some companies were even seen encouraging the trend through promotional marketing campaigns using word such as "super-sizing" and value-for-money or offers such as two for the price of one, all aimed at encouraging the consumers to buy more than required. Such a trend had convinced the consumers that products that were smaller in size carried no value, thus promoting unhealthy eating habits solely encouraged for their own profits. Moreover studies have also indicated that packaged food contained higher calories and sparse nutrients thus affecting public health. According to the UK Guideline Daily Amounts the recommended dietary allowance for an average adult is 2000 calories and 1800 calories for children (Food & Drink Federation, 2014). Consumers are frequently observed ignoring these guidelines either due to lack of awareness or lack of information made available to them by the organisations offering such food products thus making it all the more difficult for consumers to make healthier choices (Backstrand, Wootan, Young, & Hurley, 1997; Bates, Burton, Howlett, & Huggins, 2009; Chandon & Wansink, 2007). The company promptly responded to the consumers needs by making such vital information, related to food content and calorie count, available to the consumers by directly printing it on all its products. Such a move by the company was not only ethical but also displayed their commitment toward their stakeholders in providing good quality products. Nestle is highly committed to displaying nutritional content across all its products in a bid to encourage its consumers to make a healthy living choice and the same has been reflected positively on the companys overall brand image. Consumers are now seen believing in the values and ethics endorsed by the brand and are seen to react positively toward the initiative. Furthermore such stringent CSR initiatives on the part of the company has not only managed to influence its target audience - the consumers but has also managed to generate a positive response from its employees as well who are now highly motivated in response to their companys keen interest and genuine commitment efforts to ensure well being of all its stakeholders as well as their families. 3. Explain the concept of creating shared value, and how did it allow Nestlé to connect more positively with its consumers. The concept of shared value was introduced and popularised by Porter & Kramer (2011: p.66) and is defined as: "policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates". Companies can achieve the objectives described above through introduction of business principles that aim to serve for the greater good of the community at large. The concept of shared value, hence, is not restricted to achieving the profit objectives alone but also entails extending the concept of value to include the benefits available to the consumers and other stakeholders alike. The concept of value hence is shared and includes values received by the company in terms of financial returns and profitability and by the stakeholders in terms of good quality products and improved social commitments that ensure their overall well being (Porter & Kramer, 2011). Companies today are increasingly participating in activities that create shared values since it is perceived as one of the most effective means of engaging its consumers, creating a positive brand value and image, and contributing to the society which ultimately translates into positive financial gains for the company. The concept of shared value hence is not only limited to corporate philanthropy, social responsibility or sustainability but is a complex term, which includes an amalgamation of various socio-economic objectives of the organisation. The publication of Nestlé’s shared values report indicates the companys commitment to the community and its keen desire toward adopting, implementing and encouraging sustainable business practices that are beneficial for both - the company as well as the consumers at the same time. The concept of creating shared value or CSV is perceived as highly crucial for organisations today since creating value for stakeholders ultimately translates into creating value for the shareholders thus implying that it benefits both of them in the long run (Freeman, Wicks, & Parmar, 2004). One of the key traits of the concept of CSV is the fact that value must be created in a way that it is beneficial for both the company as well as the society at large. It must include factors that ensure reduces internal costs for the organisations as well as benefit the community. Organisations can create value by various means, which includes restructuring their business principles, reconnecting their existing product line, or redefining their corporate strategies (Taback & Ramanan, 2014). Nestle decided to pursue all three and more. The company’s shared values entail ensuring environmental sustainability, which includes water conservation, climate change - reducing its energy use and emissions, protecting its natural capital, ensuring sustainable packaging of its products, and reduce waste. It also seeks to ensure and promote nutrition, health and wellness for all its consumers. Under this objective the company seeks to provide healthy and nutritious food to its consumers and promote healthy eating and lifestyle; and provide funding for accessing nutrition training to 500 catering students among other objectives (Nestle UK, 2014). Nestlé’s CSV approach has CSV has proved to be highly beneficial for the company by enabling the consumers and the community at large to react positively towards its products because the CSV efforts of the company are directed towards the greater good of the society at large. It entails and ensures the betterment of the people as well as the planet, which is perceived positively by individuals and environmentalists alike. It creates a positive image of the company and influences consumer attitudes towards it. Nestlé’s CSV Report (2013) states the key objective of the company as achieving long-term sustainable growth by creating value for its stakeholders. The report emphasises on creating more value to its shareholders and this is apparent from the various social awareness and commitment campaigns spearheaded by the company. The companys commitment to social causes is commendable as is reflected in its various campaigns and actions over the years. Recently the company launched a nation-wide campaign to help young unemployed youth gain employment opportunities. This campaign was launched by the company in response to the UK governments report that indicated high unemployment rate among the UK youth. Nestle plans to bridge the skills and unemployment gap by creating over 1900 employment opportunities in the UK and Ireland by offering positions to prospective job seekers across all levels from operators on the factory floor to field assistants and business management (Nestle UK, 2014). The company also works closely with local agencies in a bid to encourage sustainable practices that strive to contribute to the environmental conservation causes. The ‘Get Better with Nature’ campaign launched by Nestle empowers communities to make a difference by offering the grants to help them achieve their desired goals and spread awareness regarding environmental causes (Nestle UK, 2014). The concept of shared value is perceived as highly positive by the consumers and encourages greater participation in the activities and campaigns led by the company. This helps in generating greater awareness about not only the initiatives undertaken by the company but also about the company and its brands. It helps the company in achieving its key goal of long-term profitability along with creation of increased value for the company. The range of efforts and activities undertaken by Nestle, bears testimony to the fact that organisations today are not all about profitability but are perfectly capable of balancing its profit motives with the greater good of the community. Such continuous efforts on the part of the company to engage and involve the community in its shared value policies ensure greater interest and participation of the consumers in the company’s activities, thus allowing them to connect positively with the company. Furthermore the concept of CSV ensures improved community development, resolves various public policy issues such as high rates of unemployment and /or public health issues such as obesity, by promoting healthy eating and provides a better platform for improving the infrastructure. Nestlé’s campaign that ensures provision of employment and education to its employees helps in improving the purchasing power of the consumers in the long run and ensures overall development of the company, the society and the economy as well. 4. What kinds of marketing research approaches do you feel would be most appropriate in evaluating Nestlé’s communications campaign? Nestle launched a full-fledged communication campaign aimed at promoting its latest GDA labelling policy with a view to generate awareness among the public / consumers with regard to its new labelling system. Since monitoring the manner in which the consumers react to a given product is of utmost significance for organisations, it is imperative to choose a highly effective and appropriate marketing research approach to evaluate the success or status of the campaign. In order to ensure effective evaluation of Nestlé’s communications campaign the following marketing research approaches are suggested / recommended: Client-based marketing research approach Large scale survey and /or experiments (since it would help in generating vital quantitative data) Exploratory research (since it would help in observing key trends, enable easier access to secondary data, and generation of effective information, greater insight and understanding of the data collected) and Client-based marketing research approach: The key aim of client based marketing research is to provide constructive analysis of the data collected and enable its effective interpretation and analysis regarding both - the organisation as well as its external environment. Client based research helps organisations by providing valuable data regarding the marketing strategies used by the organisations and its response (acceptance / rejection) by the consumers /target audience. This approach is most suitable for Nestle because it is solution oriented and aims at not only providing key data but also providing effective solutions to the problems sought to be resolved by the company (Kent, 2007). Figure: Client-based marketing process Source: (Kent, 2007, p. 5) Another key benefit of client-based research is the fact that it is entirely client-led, which eliminates researcher bias and lends more objectivity to the results generated therefrom. Since a third party mostly carries out this type of research, there is little to no interference of the organisation conducting such research, thus the client alone is the sole arbiter of the research. However since the research is initiated by the organisation, it does have some say in the key purpose of the research and the expected outcomes. This type of research is likely to generate positive and effective outcomes since the researcher is in-charge of diagnosing a problem and collecting information that would help its client (the organisation) to initiate a valid and befitting response to the same (Kent, 2007). Large scale survey and /or experiments: Such research approach would be most beneficial for effectively evaluating the companys recent campaign due to the following reasons: Quantitative campaigns ensure effective communication of the consumer response to GDA labels: Quantitative studies focused on generating consumer response may include questionnaire surveys conducted via online polls or any such similar method. Such questionnaires comprising of questions that seek to test the level of awareness of the respondents with regard to questions such as: awareness about the concept of GDA; whether they have used GDA labels to purchase a given product; questions seeking participant response with regard to the difficulty, if any, in reading and understanding the labels; the key purpose of the participant behind using or relying on the GDA label etc. Furthermore the use of large scale survey approach enables the company to take necessary actions based on the responses of the participants and improvise on its marketing campaign if it is found to be ineffective or lacking in response (Kent, 2007). Exploratory Research: The key aim of an exploratory research is to generate novel ideas based on observations made and offer insights with regard to the trends observed during the course of the study. This method of research could prove to be highly beneficial to the company since it would enable Nestle to ascertain the success or failure of its campaign, evaluate the effectiveness of each element of its promotional mix i.e., partnership, online marketing, word-of-mouth, sponsorship schemes etc., and suggest the tool that is most preferred by the target audience. This type of research approach is mostly qualitative in nature and relies on observation of the target audience. Hypotheses are then drawn based on expert opinions along with market observations, and data collected during the study and insights are presented based on the interpretation of the collected data. The participant data can be collected in the form of online polls or public surveys. This type of marketing research is most beneficial and highly recommended for Nestle because it helps in observing and studying the behaviour of the consumers and in evaluating and assessing their attitudes toward a given variable (in this case the marketing campaign of the company). Conclusion: This case study helped me in understanding various key theoretical issues including the concept of CSR, CSV (Creating Shared Value); and customer satisfaction theories, mainly the person-situation-fit theory whereby the company analysed and studied the aspects desired in a product and matched the product attributes (by way of GDA labelling) to fit the customers’ needs. I observed that ‘capitalism with a conscience’ is indeed an achievable goal as displayed aptly by Nestle through its various philanthropic, social, environmental and charitable efforts at the same time balancing its key objective of ‘profit maximisation’. I also learned the increasing significance of new concepts such as CSV and its impact and significance in gaining long-term benefits in terms of customer loyalty, improved brand image and value, and an improved workforce environment. It serves a wide range of goals including providing satisfaction to its employees, leads to employee motivation and trust in the management, improves consumer trust in the company and the product and improves the company image in the society as a whole. Works Cited gov.uk. (2014, 04 03). corporate responsibility: call for views. Retrieved 12 18, 2014, from gov.uk: https://www.gov.uk/government/consultations/corporate-responsibility-call-for-views European Commmission. (2001). Promoting a European framework for corporate social responsibility . (p. 6). Brussels: COM. Nestle. (2014). Creating shared value: Our approach. Retrieved 12 18, 2014, from nestle.co.uk: http://www.nestle.co.uk/csv2013/aboutcreatingsharedvalue/ourapproach Nestle UK. (2014). 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