Child labor, bribery, a disregard for the environment and unhealthy products. One of those issues would be enough to erode consumer and shareholder confidence in a major transnational company. Nestle, the world’s largest food and beverage company with more than 8,000 brands, has faced continuing criticism over the years for all four.
MBA students from Auburn University’s Harbert College of Business and other leading business schools were asked to assess the validity of the ethical problems faced by Nestle and offer specific recommendations for how the company should act during the National MBA Case Competition in Ethical Leadership hosted in November by Baylor University’s Hankamer School of Business.
Auburn’s four-member team placed second and earned a $1,200 award. Baylor won the competition, while Iowa State University placed third. Other competing schools included Brigham Young University, Case Western Reserve University, Pepperdine University, Texas A&M, Texas Christian University, the University of Illinois, Miami, Pittsburgh and Minnesota.
Auburn’s team of Peyton Alsobrook, Scott Dukes, Ian Mercer and Chantel Tremitiere took a methodical approach in evaluating the claims against Nestle. Peter Stanwick, associate professor in the Department of Management, served as the team’s advisor. Teams received the case at 10 a.m. on a Thursday and presented 24 hours later.
“We approached the case with a blank slate,” said Dukes, who earned an individual award for best Q&A. “We didn’t make any assumptions about Nestle and whether or not it was acting ethically. We spent our first two hours researching each of the four claims and found that three of them were not valid.”
The Swiss-based company has received criticism for sourcing cocoa from Ivory Coast farms that have utilized child labor, bottling water in California in the midst of a record drought, offering bribes to Chinese medical professionals to promote its baby formula to new mothers, and creating health problems through some products (candy) that it remedies through others (health foods).
The Harbert College team determined that Nestle has attempted to combat child slavery in its supply chain. Nestle was the first company to join the Fair Labor Association in 2012. By the end of 2016, all of its cocoa farms will be FLA-certified. Dukes said concerns about Nestle’s bottled water operations in California were also unfounded. The team determined that the company’s operations in the state used less water annually than two golf courses.
Dukes said they determined that Nestle’s most problematic ethical concern involved its tactics in marketing and selling Nestle-brand baby formula in China. “Even though most competitors were also offering bribes to Chinese doctors, the fact was a clear violation of Chinese law and misinformed millions of young Chinese mothers,” he said. “Our advice to Nestle was blunt: Stop! Instead, we recommended Nestle move to selling baby formula online, direct to consumers.”
The team’s research found that online retail sales (including the sale of baby formula) were booming in China and that, by 2019, 40 percent of the country’s retail transactions would take place with the help of a phone, tablet or computer. “Our recommendation allowed Nestle to simultaneously avoid unethical business practices and stay ahead of shifting consumer demographics and trends,” Dukes said. “In the long run, this move would encourage ethical business practices and generate more revenues for the company.”
The team also recommended Nestle appoint a corporate-level ethics officer and offer ethics training to each of its 340,000 employees. “Finally, we pointed out that Nestle continues to do great philanthropic work around the world,” Dukes said. “If the company would market its brand better, it could change the undue negative perceptions from many consumers.”
The second place finish at Baylor marked another strong showing from a Harbert College of Business team in a national case competition. In September, the team of Alsobrook, Tremitiere, Akira Powell and Beatrice Onadeko earned second place and $15,000 at the National Black MBA Association Graduate Case Competition in Orlando.
“Our high finishes are a great testament to our selection process of MBAs, and the MBA program,” Stanwick said. “Our success in these types of competitions just reinforces my belief that we have great MBA students and a great MBA program.”