MANAGING CORPORATE REPUTATION

MEMBERSHIP NUMBER: 38450233

WORD COUNT
TASK 1- 2700
TASK 2- 1637
TOTAL- 4337

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Contents
TASK 1 ....................................................................................................................................................... 4
Executive Summary................................................................................................................................... 5
1.1 Issue management: Before it turns to a crisis .................................................................................... 6
1.1.1 What is issue Management? ........................................................................................................ 6
1.1.2 Issue management impact on corporate reputation ................................................................... 7
1.1.3 Development of an issue ............................................................................................................. 8
1.1.4 Changing landscape of issue management .................................................................................. 8
1.2 Assessment of Issue management at Nestle ...................................................................................... 9
1.2.1 Key issue areas and target stakeholders...................................................................................... 9
1.2.2 Issue management teams .......................................................................................................... 10
1.2.3 Steps taken to protect reputation of Nestle .............................................................................. 10
1.2.4 Audit findings ............................................................................................................................. 11
1.3 Potential Issues for Nestle and its impact on relevant stakeholders................................................ 13
1.3.1 Risks and potential issues .......................................................................................................... 13
1.3.2 Stakeholder prioritization and mapping .................................................................................... 14
1.3.3 Issues affecting stakeholder groups........................................................................................... 14
1.4 Issue Management Strategy ............................................................................................................. 15
1.4.1 Nestle current Issue management strategy ............................................................................... 15
1.4.2 Areas for improvement in current issue management strategy ............................................... 15
1.4.3 Recommendation for an issue management strategy............................................................... 15
1.4.4 Early Warning systems ............................................................................................................... 15
1.4.5 Social media listening and its importance ................................................................................. 16
1.4.6 Restructuring Nestle issue management strategy ..................................................................... 16
1.4.7 How Nestle can control an issue using social media ................................................................. 17
1.4.8 Political and financial consequences of implementing the recommended issue management
strategy ............................................................................................................................................... 17
1.5 Conclusion ......................................................................................................................................... 17
References for Task 1 .............................................................................................................................. 18
TASK 2 ..................................................................................................................................................... 20
Executive Summary................................................................................................................................. 21
2.1 CSR Theoretical Framework .............................................................................................................. 22

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 2.1.1 Evaluation of the concept of corporate Social Responsibility (CSR) .......................................... 22
2.2 Nestle current CSR strategy and its impact on stakeholders ............................................................ 23
2.2.1 Extent to which CSR is embedded in the identity of Nestle ...................................................... 23
2.3 Recommendation of CSR strategy .................................................................................................... 24
2.3.1 Environmental dimension .......................................................................................................... 24
2.3.2 Voluntariness Dimension ........................................................................................................... 24
2.3.4 Factors to consider when developing a CSR Strategy ................................................................ 25
2.4 Financial and Political Implications ................................................................................................... 25
2.4.1 Financial Implications................................................................................................................. 25
2.4.2 Political Implications .................................................................................................................. 26
2.5 Conclusion ......................................................................................................................................... 26
References for Task 2 .............................................................................................................................. 27
Appendixes.............................................................................................................................................. 29
Appendix 1: Company Background ......................................................................................................... 30
Appendix 2 : Reputation Audit ................................................................................................................ 32
Appendix 3: Stakeholder Audit (Based on Nestle Annual Report, 2015)................................................ 33
Appendix 4: Risk Audit ............................................................................................................................ 35
Appendix 5: CSR Audit ............................................................................................................................ 36

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 TASK 1
Issue Management to build reputation
Insurance

Word Count: 2700

To: CEO, Nestle

From: Marketing Consultant, Nestle
Date: 15.05.2016
Subject: Issue Management

4
Executive Summary

Reputation is an organization's most valuable asset, said Lynnda Nelson, President of the International
Consortium for Organizational Resilience (the ICOR). Damage to reputation can literally destroy an
organization.

Organizations globally are becoming increasingly aware of the way in which they are perceived by others
and how people feel about them. According to Reputation Consultancy Reputation Matters certain
organizations place reputation on a higher pedestal of importance than the goods and services sold.

The following report investigates the current status of Nestles reputation and identifies issues which
may affect it.

The first part of the report focuses on the conceptual framework of Issue management. Different
academics and industry professionals thoughts and opinions on Issue management will be
evaluated to comprehend the concept of crisis communications. An audit will be drawn out with real
life examples to understand the extent to which Issue management is important for managing corporate
reputation of all organizations.

The next part of the report will access the current issue management practices of Nestle, through a
reputation audit (RepTrak framework) stakeholder audit (Mendelows matrix) and a risk audit. The scores
given to Nestle in the audits are done by comparing Nestle to the set benchmark of the tool used in the
audit.

Based on all the findings via the audits a recommendation will be provided for an issue management
strategy for Nestle to strengthen and protect its reputation. Financial and political implications of the
recommended strategy will also be drawn out.

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 1.1 Issue management: Before it turns to a crisis
1.1.1 What is issue Management?
Most organizations today are geared to manage a crisis with a range of contingency plans in place.
However, it is more effective to manage issues with the potential to grow into a crisis, thereby
preventing crises before occurrence, which is issue management.

Issue management is, The strategic use of issue analysis and strategic responses to help organizations
make adaptations needed to achieve harmony and foster mutual interests within the communities in
which they operate (Heath, 1997).

Heath (2002) adds onto this theory stating that proper issue management should help build, maintain
and repair relationships with stakeholders by ensuring that external threats do not affect the
organizations mission and goals.

However, neither theory analyzes the root cause creating an issue. Crable et al (1985) discuss the
concept of an issue by analyzing its root cause and state that in order for an issue to take place, a
situation needs to be first labeled an issue and then developed through claims (via the manipulation of
symbols via sources such as the media). For example, tobacco manufacture was not an issue until the
1990s when teenagers became a target audience and the public attached importance to this situation.
Only then did it become an issue (Botan et al 2004).

According to different authors, issue management consists of the below-mentioned factors. This process
will result in the early detection of an issue, action taken to sort it, and steps taken to prevent further
issues from emerging.

Issue identification Strategic decison

Evaluation
and analysis making and action

Figure 1: stages in issue management

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1.1.2 Issue management impact on corporate reputation
Warren Buffet says, It takes twenty years to build a reputation and five minutes to ruin it (Sullivan,
2015). In most organizations, reputation is taken for granted until threatened. The objective of
reputation management should be to enhance a positive reputation and incorporate it into the
marketing strategy.

Van Riel & Frombrun (2007) add that failing to maintain a positive reputation would lead to damages to
the existing share value, drops in share price, negative media coverage, inability to form new customer
relations, and legal pressure (shown below.)

Frombrun (1998) delves deeper into the effect of reputation stating that it consists of corporate
personality, identity, and image. These three factors result in either a positive or negative reputation. In
turn, the organizations reputation affects the organizations credibility, trustworthiness, reliability, and
responsibility in its stakeholders eyes.

Based on the above theories it can be seen that Issue management is critical to an organizations
reputation. Failure to manage an issue would result in shareholders having a negative image of the
organizations credibility, trustworthiness, reliability and responsibility, which in turn would result in
damage to existing share value, fall in share price, negative media coverage, inability to form new
customer relations and legal pressure thereby affecting profitability.

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1.1.3 Development of an issue

The Hainsworth & Meng (1998)

theory shows five stages that
would help an organization to
understand where their issues
currently stand and where they
could reach, giving organizations
time to develop strategies to
curtail them. At the potential
stage, stakeholders become aware
of the issue. According to
Hainsworth & Meng, it is at this
stage that it is best to curtail the
Source: Meng,2009
issue before it reaches a crisis
stage.

Next, the theory explains a dormant stage where the issue reaches a high level of intensity and then
becomes a norm amongst all stakeholders. This stage is risky as it can leave a scar on the organizations
reputation. As an organization, it is best to analyze issues and plot them in their respective lifecycle
stage.

1.1.4 Changing landscape of issue

management
Accordingly, it can be said that in order to
prevent an issue from arising, one must practice
effective stakeholder management. It must be
understood that with social media availability,
stakeholders are able to receive and respond to
information much faster than before.

According to a study carried out by the PEW

Research Center (2014), all social media sites
have experienced a steady growth (as shown in
the diagram above), further emphasizing the
need for effective stakeholder management.

In todays social media-driven world, issue

management becomes even more challenging due to the speed at which information can be
transferred. For example, August 2015 saw Unilever managing a major issue-turned-crisis after Indian
rapper Sofia Ashraf released Kodaikanal wont, a YouTube video that highlighted mercury poisoning by
Unilever in the province of Kodaikanal. The video had over 3-million views and over 60,000 tweets
resulting in the closure of the factory.

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1.2 Assessment of Issue management at Nestle
Nestle has come under fire in the past for carrying out a range of activities that crossed ethical
boundaries causing damage to the community and environment it operated in. These issues were not
nipped in the bud, resulting in a full-blown crisis (Corp Research, 2016). Nestle has not still fully
recovered from their impact on its reputation.) The crises are as follows:

Infant formula controversy: Nestle was accused of aggressively marketing infant formula
resulting in malnourished babies in Africa as mothers mixed formula powder with unclean
water. (Corp Research, 2016)
Water scandal: Nestle was accused of large-scale pumping of water from springs resulting in a
lack of water for local communities (Corp Research, 2016)
Child labor: It was accused of ignoring the use of child labor in cocoa plantations in Africa. These
plantations supplied directly to Nestle. (Corp Research, 2016)

1.2.1 Key issue areas and target stakeholders

In order to prevent further crises from occurring, Nestle outlined key areas of potential issues. The
following table describes the areas that Nestle chooses to concentrate on due to the likelihood of issues
arising from them and the targeted stakeholders. The information was obtained via Nestle yearly CSR
report (2016).

Factor Description Target Stakeholder

Nutrition Promoting a healthy NGO
diet Government
Abstaining from using Public
ingredients that are Consumers
unhealthy for
consumers
Addressing over and
under nutrition
Addressing pressing
issues such as obesity

Rural Development Improving the Local communities

livelihoods of farmers Government
Responsible sourcing Public
NGO

Water Proper water Government

treatment before Local communities
discharging from Public
factory NGO
Promote Water
Conservation

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Environmental sustainability Promotion of the Government
Environmentally NGO
friendly methods of Public
operation Local Community
Human rights & Compliance Eliminate Child labor Managers
Ethical practices in Employees
business as well as in Government
the workplace NGO

Nestle, with the help of independent organizations, carries out extensive research into key issue areas to
identify such issues. After extensive consultations, they plot environmental, social, and governance
issues of concern. The findings are used to determine associated risks and opportunities for Nestls
reputation, operations and finances. These are then placed onto a materiality index displaying their
position relative to the degree of stakeholder concern and potential business impact as shown in the
diagram above. Together, the results represent the material issues facing Nestle.

1.2.2 Issue management teams

Nestle has in place In Society Board, a team put in place to manage key issue areas. This board falls
under the direct control of the CEO. A diagrammatic view of the power structure present in the Board is
given below. It consists of special teams and task forces with specialist knowledge in the areas of
nutrition, rural development, human rights, and compliance.

1.2.3 Steps taken to protect reputation of Nestle

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Source: Nestle (2016)

An audit was carried out using Frombruns RepTrak framework (Appendix 2) to analyze the extent to
which Nestles issue management strategies have affected their reputation. This takes into account the
emotional bond that people have with the company and connects that bond to their rational behaviors.

According to the model, reputation is an emotional bond that results in

People buying your products and services

People recommending your company
Investors support
Policy-makers and regulators give you the benefit of the doubt
Employees aligned and delivering on your strategy

It tracks perceptions of ones organization based on seven facets: leadership, performance, products,
innovation, workplace, governance and citizenship.

These facets in turn affect stakeholders in terms of esteem, admiration, feelings, and trust, thereby
creating either a positive or a negative reputation (reputation pulse).

1.2.4 Audit findings

Nestle was audited on the RepTrak framework and given a score of 1 (lowest) to 10 (highest) on each
dimension. The results were as follows:

Score Dimension Reason

9 Product & Service Nestle focusses on
maintaining a high standard of
quality in their entire portfolio
which includes food and
beverages as well as systems
and service (Nestle,2016)
8 Innovation Largest R&D Network in the
FMCG industry with over 34
R&D facilities employing over
5000 people. (Nestle,2016)
8 Citizenship Nestle believes in creating
shared value by being
environmentally friendly as
well as supporting the
agricultural community in the
disadvantaged countries they
operate in (Nestle, 2016)

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8 Performance Nestl is the biggest food
company in the world, with a
market capitalization of
roughly 231 billion Swiss
francs, which is more than
US$ 247 billion as of May
2015. In 2014, consolidated
sales were CHF 91.61 billion
and net profit was CHF 14.46
billion. (Nestle, 2016)
6 Workplace Physical safety of employees
taken very seriously.
Documentation as well as
training is given to the
workforce in order to create a
safety culture (Nestle, 2016)

6 Governance Nestle ensures that its

counterparts the world over
adhere to the legal and
socially acceptable practices
of the country. However they
have had situations where
they have been accused of
exploitation (Nestle, 2016)

6 Leadership Nestle has a hierarchical

structure with the chairman
and the CEO being at the top
of the decision making
process (Nestle,2016)

Nestle, by RepTrak standards, has a considerably high standard for reputation, attributed to Nestle
being advanced in Research and Development, which results in being able to cater to stakeholders
changing needs and taking into consideration the safety and welfare of employees and of the
community they operate in. This eliminates any chances of negative perceptions being created in the
stakeholders minds.

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 1.3 Potential Issues for Nestle and its impact on relevant stakeholders
1.3.1 Risks and potential issues
A risk audit was carried out to identify potential risks that could metamorphose into an issue (Appendix
4). The audit took into account Nestls strategic, financial and operational risks. Based on the findings
potential issues which may arise from the risks were analyzed. The findings are shown in the table
below

Risk Description of Risk Potential issue

Strategic Risk Nestle still faces backlash
from the NGO, Global Action
for Improved Nutrition, and
the WHO for the sale of baby
milk in developing countries.
It is accused of making babies
dependent on Nestle baby
milk, thereby creating a case
of malnourishment (Muller,
2014).
Concerned NGOs may decide to run
campaigns persuading customers to
boycott Nestle. With the use of social
media and consumers increasing
demands for social responsibility, the
possibility remains high.
The host country could threaten to
take legal action if Nestle fails to take
action.

Financial Risk According to Wenzlau (2013), A loss in profit margins, which will have an
the general cost of raw adverse effect on the organization and
materials in all sectors shareholders expecting a higher return on
investment
including the food and
beverage industry is
increasing. This could affect
Nestls cost of production.

Operational Risk Political instability can result Government action curtailing Nestls
in regulation changes that involvement in the country will result in
could affect FDI (Roe et al production shortages losses
2013).

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1.3.2 Stakeholder prioritization and mapping
To prevent issues from occurring, it is important to implement effective stakeholder communications.
An audit was conducted (refer appendix 3) to examine the types of stakeholders, extent of
communication Nestle should implement, and stakeholders effect on reputation. In order to gauge the
importance of the stakeholder, the power interest matrix (Johnson and Scholes, 1999) was used to plot
interest levels. Finally, a rating of 1- 5 was given, with 5 being the highest.

1.3.3 Issues affecting stakeholder groups

Based on the audits findings, potential issues affecting each stakeholder are as follows:

Issues outlined to stakeholder based on risk and stakeholder audit

Stakeholder Issue
Group
Public Dissatisfaction on the impact Nestle is having on society resulting in negative
publicity on social media

Government Tough regulations on products believed to have negative impact on the health of the
people.
Consumers Boycotting Nestle due to being unhappy of the level of social responsibility of the
organization especially in cases regarding exploitation of developing countries

NGO Launching social media campaigns and obtaining support from regulatory bodies to
take action against Nestle on the grounds of social irresponsibility.
Employees Inability to communicate effectively during times of an issue due to lack of training.

Shareholder Not willing to invest in future if required and feeling extremely insecure on promised
returns

Local Protesting against Nestle for affecting their environment and livelihood.
communities

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1.4 Issue Management Strategy
1.4.1 Nestle current Issue management strategy
Nestle currently follows a strategy focusing on the following:

Identifying issues in nutrition, rural development, water, environmental stability, HR and

compliance
Identified issues are researched upon in depth and key issues that could damage reputation are
deemed issues to focus upon.
An issue management team with individuals with specialist knowledge to work closely with
external bodies (e.g.: WHO), preventing any issues from arising and developing into a crisis.

1.4.2 Areas for improvement in current issue management strategy

Nestls focus areas cover all past issues and the strategy will prevent similar reoccurrences. However,
with a volatile internal and external environment, it is imperative to enhance the present strategy to
locate and react to a wider range of issues.

1.4.3 Recommendation for an issue management strategy

In order to be more vigilant to changes in both the internal and external environment, an issue
management strategy is needed to ensure commercial success by reducing any possibility of damage to
reputation. Thus, effective early warning systems are needed.

1.4.4 Early Warning systems

According to Harrison (2013), an effective early warning strategy should consist of;

Social media listening: Monitoring anything said about the organization in social media.
Market research: Regular surveys sent to stakeholders to obtain up-to-date information on their
emerging feelings towards the organization and the product.
Competitors: Stakeholder feedback in the public arena about ones competitors can act as a very
powerful early warning tool for what to expect in the future from ones own stakeholders.
Regulatory bodies: Maintain close communications with regulatory bodies directly affecting
ones organization.
Nestle current issue management team is effective managing its stakeholders and obtaining information
regarding their emerging feelings towards Nestle, however there is no social media listening team
involved in issue planning, which poses a threat as most stakeholders in todays world are extremely
active on social media. Therefore, the issue management team should be restructured to include a social
media listening team that would scan social media to do the following, which would result in the ability
to identify and control a wider range of issues.

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1.4.5 Social media listening and its importance
According to Henan (2012), social media listening involves activities related to monitoring statements
about ones organization on social media platforms (Facebook, Twitter, YouTube, etc.).

An Air France (2014) study on 34,000 individuals categorized as customers and non-customers showed
that most individuals (especially non-customers) perceptions on the organizations reputation are
based on social media updates.

1.4.6 Restructuring Nestle issue management strategy

SOCIAL MEDIA MANAGER

SOCIAL MEDIA TEAM

Nestle in society Board

The social media manager (SMM) and his/her team (SMT) will be listening and responding to any
relevant statements. A monthly progress report would be submitted to the in society Board. If social
media replies cannot manage a potential issue, the SMM would immediately inform the Board, for
action together with the existing issue management team.

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1.4.7 How Nestle can control an issue using social media
Social media Platform How they can be used if an Benefit to Nestle
issue arises
Facebook (8.3 million Explain Nestles side of the Improve transparency with
followers) story via pictures and posts. customers

Twitter (153K followers) Communicate to customers Improved communication with

about the organizations side of all stakeholders
the issue

Youtube (5016 Subscribers) Posting videos of Nestles CSR Improve relations with
activities Stakeholders

1.4.8 Political and financial consequences of implementing the recommended issue

management strategy
Financial: A significant amount of the issue management budget should be spent on implementing the
new strategy as this would involve recruiting new staff and expansion of existing work stations.
However, being able to locate and handle issues in the long run would result in fewer expenses on
satisfying disgruntled stakeholders.

Political: The creation of a new team within the overall issue management department could result in a
certain level of resistance from the existing staff. Cultural clashes could result as it takes time for new
staff to adjust to Nestle culture.

1.5 Conclusion
The report covers the importance of issue management followed by its changing landscape especially
with the use of social media. It provided insight into existing strategies used to manage issues, and
loopholes and ways these could be overcome.

Finally, it provides an overall strategy to improve issue management. Therefore, this report would aid
Nestle gain an in-depth insight into changes in issue management and how to further strengthen their
issue management strategy, thereby being ideally positioned to defend their reputation and reduce
unnecessary costs related to satisfying disgruntled stakeholders.

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References for Task 1

Books
Davies, G. et al (2003) Corporate Reputation and Competitiveness. London, Routledge.

Heath, R. L. (1997). Strategic issues management: Organizations and public policy challenges. Thousand
Oaks, CA: Sage.

Heman et al. (2013). Digital Marketing Analytics. USA: Que Publishing.

Van Riel, C. and Fombrun, C. (2007) Essentials of Corporate Communications. London, Routledge.

Journals
Botan, C.H.et al (2004). Public relations: State of the field. Journal of
Communication, 54(4), 645-661.

Crabble. et al (1985). Managing issues and influencing public policy.

Public Relations Review, 11, 3-16.

Hainsworth, et al (1988). How corporations define issues management. Public Relations Review, 14(4),
18-30.

Heath, R.L. (2002). Issues management: Its past, present and future. Journal of Public Affairs,2(2), 209-
214.

Roe et al. (2011). Political instability: Effects on financial development, roots in the severity of economic
inequality. Journal of Comparative Economics. 39 (3), 279309.

Websites
Duggan et al. (2015). Social Media Update 2014. Available:
http://www.pewinternet.org/2015/01/09/social-media-update-2014/. Last accessed 13/05/2016.

Mattera. (2015). Nestl: Corporate Rap Sheet. Available: http://www.corp-research.org/nestle. Last

accessed 13/05/2016.

Muller. (2013). Nestl baby milk scandal has grown up but not gone away . Available:
http://www.theguardian.com/sustainable-business/nestle-baby-milk-scandal-food-industry-standards.
Last accessed 13/05/2016.

http://www.nestle.com

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http://www.nestle.com/csv

Rahman. (2015). Indian rapper 'overwhelmed' by success of protest song against Unilever . Available:
https://www.theguardian.com/world/2015/aug/07/indian-rapper-sofia-ashraf-success-protest-song-
unilever. Last accessed 13/05/2016.

Sullivan. (2015). It takes 20 years to build a reputation and five minutes to ruin it. Available:
http://www.thejournal.ie/readme/crisis-management-for-business-2347381-Sep2015/. Last accessed
13/05/2016.

Wenzlau. (2013). Global Food Prices Continue to Rise. Available: http://www.worldwatch.org/global-

food-prices-continue-rise-0. Last accessed 13/05/2016.

Annual Reports
Nestle CSV Report (2016)

Nestle Annual Report (2015)

Bibliography
Bowen, S.A., & Heath, R.L. (2005). Issues management, systems, and rhetoric:
Exploring the distinction between ethical and legal guidelines at Enron. Journal of Public
Affairs, 5(2), 84-98.

Wartick, S. L., & Mahon, J. F. (1994). Toward a substantive definition of the corporate issue construct.
Business & Society, 33(3), 293-311.

Tucker, K., Broom, G. & Caywood, C. (1993). Managing issues acts as bridge to strategic planning. Public
Relations Journal, 49(11), 38-40.

Renfro, W.L. (1993). Issues management in strategic planning. Westport, CT: Quorum.

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 TASK 2

The Responsible Organization

Word Count: 1637

To: CEO, Nestle

From: Marketing Consultant, Nestle
Date: 15.05.2016
Subject: Corporate Social Responsibility

20
Executive Summary

According to 2013 RepTrak study results, 59% of customers will go out of their way to communicate
something positive about a company with an excellent CSR reputation. Many multinational
organizations are promoting a more responsible approach to do businesses today. Thus Corporate Social
Responsibility becomes a critical area of concern for Nestle.

The first part of the report focusses on the theoretical framework of Corporate Social Responsibility. The
argument will be based on relevant theories and models to evaluate different concept of corporate
social responsibility.

The report will further discuss CSR from Nestles point of view. Nestle current Corporate Social
Responsibility practices will be audited through a comprehensive CSR audit and an identity audit. The
CSR audit will illustrate the pros and cons of Burger Kings CSR activities and its impact on company
reputation.

Based on the findings of the CSR audit, recommendations will be provided to introduce a strategy to
enhance Nestle CSR activities. The recommendations will only focus on the key areas of weaknesses.
Organizational implications of implementing the recommended CSR strategy will be assessed. Since a
robust CSR program can positively influence the company during challenging situations, the report will
also illustrate the impact of the new CSR strategy on the recommended crisis communications strategy
of Nestle.

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2.1 CSR Theoretical Framework
2.1.1 Evaluation of the concept of corporate Social Responsibility (CSR)
In order to understand the concept of CSR it is necessary to take into account different definitions of
CSR in order to get a basic understanding of the concept of CSR.

According to Kotler (2007) Corporate Social Responsibility is defined as a commitment to improve

community well-being through discretionary business practices and corporate resources. Kotler goes on
to state that Corporate Social Responsibility is a commitment to improve community well-being through
discretionary business practices and corporate resources.

The WBCSD (World Business Council for Sustainable Development) agrees with Kotler, mentioning that
organizations should operate in a way which either meets or exceeds the ethical, legal, commercial and
public expectations that the society has of the organization. The organization is expected to operate in a
manner which contributes towards sustainable economic development whilst improving the quality of
life of the workforce, their families and that of the local community and society.

Carroll (1991) broke CSR into four segments. Stating that in order for CSR to be carried out effectively all
four stages mentioned below should be met. The stages are as follows.

Johnson and Scholes (2004) differ in their point of view in comparison to Kotler (2007), Caroll (1991) or
the WBCSD. Johnson and Scholes (2004) state that Corporate Social Responsibility is concerned with the
way in which an organization exceeds the minimum obligations to stakeholders specified through
regulations and corporate governance.

In conclusion it could be said that there are two methods by which CSR could be approached. The first
being the approach of Kotler (2007) and the WBCSD which link corporate resources with the community
thereby takes an overall view to CSR whereas Caroll (1991) goes deep into the aspect of community by
dissecting it into four segments. This approach would prove useful when dealing with socially conscious
consumers as their needs would be linked to the needs of the community.

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2.2 Nestle current CSR strategy and its impact on stakeholders
Appendix 5 (CSR scorecard for Nestle) assess the extent to which Nestle manages its CSR practices and
the impact it has on stakeholders.

The appendix is based on the triple bottom line principals based on the companys contribution to each
factor (people, planet and profit) is rated and accessed. The key points are discussed as follows.

People- Nestle contributes to the welfare of local communities as well as involvement in research on
improving the global standard of nutrition. The contributions done have elevated the lives of the local
communities (Nestle CSV, 2015)

Planet- Nestle is concerned towards the environmental and ecofriendly practices resulting in positive
relations with concerned stakeholders such as local government bodies, local communities and pressure
groups.

Profit- By carrying out the above mentioned CSR activities. Nestle is creating shared value by creating a
long term value for society in the long run. As todays consumers are socially conscious acts such as
these would result in building brand loyalty.

2.2.1 Extent to which CSR is embedded in the identity of Nestle

In order to understand the extent to which CSR is an integral part of Nestle identity, Balmer et al (2003)
5 types of identity was taken into account.

2.2.2 Nestle identity analysis

Identity type Extent to which CSR is embedded Score
(H/M/L)
Actual Identity Nestle carries out regular training sessions for staff members H
involved in activities that could damage the environment. The
programs are present to evaluate and update the employees on
green methods (Nestle, 2015)

Communicated Nestle mission statement Good food, good life communicates M

identity the organization as being aiming to provide consumers with the
best tasting, most nutritious choices. (Nestle,2015)

Conceived identity KPMG named Nestl one of the worlds top ten companies H
reporting on Corporate Social Responsibility (KPMG,2013)
th
Nestle was placed 18 in the REPTRACK 100 companies for CSR

Ideal identity Nestle Benchmarks its CSR activities on the Asset 4 model which is M
a the leading provider of objective, comparable and auditable
extra-financial information (CSRWire,2009)
Desired identity According to Nestle (2015), Nestle wishes to be the leading socially H
responsible organization by 2020

23
Based on this information it can be seen that Nestle inculcates CSR both internally as well as externally.
This has resulted in Nestle being recognized as being highly socially responsible by organizations such as
KPMG and REPTRACK which have ranked Nestle amongst to top CSR organizations.

2.2.3 Weaknesses
As highlighted in Appendix 5, Nestle has faced a range of crisis in the past. Nestle has been accused of
overlooking child labor, exhausting of resources with no concern for the local community, damaging the
environment , repressing employees in developing countries and causing malnutrition in Africa.

It is taking this crisis into account that Nestle carries out its CSR in the areas of people and planet.
However socially irresponsible behavior can still occur on the part of the suppliers who are much harder
to control as they do not fall directly under the management of Nestle.

2.3 Recommendation of CSR strategy

The CSR framework of Dahlsrud (2006) can be used to develop an effective CSR strategy for Nestle. The
recommendations are based on the key weaknesses which were highlighted in appendix 5.

2.3.1 Environmental dimension

Nestle current CSR activities are mainly target at its internal and connected stakeholders. Therefore
Nestle should collaborate with pressure groups such as Greenpeace and introduce a robust
environmental program benefiting all stakeholders. This will help to attract more eco-friendly
stakeholders.

2.3.2 Voluntariness Dimension

Nestles adaption of CSR policies and practices are directly trigged by external forces such as campaign
group pressure and there is little trace of intrinsically motivated CSR. Nestle should therefore change
this approach and should engage in volunteer activities to position itself as a responsible entity.

A successful CSR strategy has to be context specific for each individual business. ( Marrewijk, 2003)
Being in the food and beverage manufacture industry, the key challenge Nestle faces is control of its
suppliers who are located in developing nations with little control over matters pertaining to pressing
issues such as exploitation and abuse.

Nestle should therefore focus more on educating and monitoring its suppliers on ethical practices. At
the moment Nestle does carry out training and awareness programs for these suppliers however
monitoring them on a regular basis is absent. Nestle should therefore focus on doing so.

24
2.3.4 Factors to consider when developing a CSR Strategy

2.3.5 Measuring effectiveness of the CSR activities

Measuring should be carried out with proper monitoring schemes for evaluation. This would enhance
productivity of the activities by reducing waste and aid in being focused. Nestle should make clear to the
public via their annual CSR report public regarding internal tools of monitoring, verifying or assessing its
policies or commitments. There should be an explicitly defined corporate policy to ensure compliance
throughout the value chain with the companys Code of Business Ethics.

Nestle should also give employees access to a blog through which new ideas for being more CSR
oriented can be shared.

McDonalds has a corporate responsibility blog in which CSR team members of the company discuss
their work and their vision on the performance of their company regarding social and environmental
issues. McDonalds, (2014).

2.3.6 Transforming Organizational Culture

Even with well-established training and internal records, Nestle cannot guarantee that employees
interpret company principles correctly. The aim is to build a community within the company where
employees are trusted to do the right thing and behave in a socially responsible manner. Internally
initiated CSR by the firm can simultaneously provide the most suitable benefits for the firm itself.
(Gyves, OHiggins, 2008) Hence employees should be made understood that acting responsibly is an
integral part of their performance and they should be encouraged to play their part. If they do not act
accordingly, firm measures should be taken by the company.

2.4 Financial and Political Implications

2.4.1 Financial Implications
The Corporate Sustainability Team and the environmental team of Nestle should be provided adequate
training to help them understand areas to focus on. Conducting research to understand stakeholders
perception towards Nestle CSR practices have financial implications due to costs associated with
improving the standard of company literature related to CSR. The recommended voluntary activities will
also require a substantial investment.

Through an effective CSR program Nestle will be able to attract more customers as todays customers
desire to do their bit to the society, through the purchase of Nestle products. Since CSR also involves
benefiting employees, it will increase staff productivity, which directly impacts on customer satisfaction
level, leading to revenue growth.

25
Since Nestle already engages in CSR practices, the company would not face many political
consequences. Yet the financial implications associated with the new strategy would be of concern.
Employees may believe that the existing CSR practices are at a satisfactory level and the new CSR
strategy would be a waste of company resources. Thus conflicts of interest are likely to take place.

2.4.2 Political Implications

Since Nestle already engages in CSR practices, the company would not face many political
consequences. Yet the financial implications associated with the new strategy would be of concern.
Employees may believe that the existing CSR practices are at a satisfactory level and the new CSR
strategy would be a waste of company resources. Thus conflicts of interest are likely to take place.

2.5 Conclusion
A robust CSR program can differentiate a company from another thereby creating a competitive
advantage. Stakeholders too desire to interact with a company which is a responsible corporate entity.
This makes corporate social responsibility one of the key concerns for Nestle, to communicate to
stakeholders that the company is following ethical practices. Based on the weaknesses of Nestles
current CSR programs, a new CSR strategy is introduced which will enable the company to reach its CSR
objectives and to maintain goodwill.

26
References for Task 2

Books
Asongu, J. (2007) Strategic Corporate Social Responsibility in Practice. Lawrenceville, Greenview
Publishing Company

Kotler, P and Lee, N. (2005) Corporate Social Responsibility. Doing the most good for your company and
your cause. New Jersey, John Wiley & Sons.

Zu, L. (2009) Corporate Social Responsibility, Corporate Restructuring and Firms Performance. Berlin,
Springer.

Journals
Anselmsson et al (2007) Corporate social responsibility and the positioning of grocery brands.
International Journal of Retail and Distribution Management. August, pp 835-856

Balmer et al, (2003), Corporate Brands: What are they? What of them?
European Journal of Marketing, 37/7-8, pp. 972-997.

Dahlsrud, A (2006) How Corporate Social Responsibility is defined. Wiley InterScience, November, pp 5-
11
Marrewijk, M (2003). Concepts and Definitions of CSR and Corporate Sustainability: Between Agency
and Communion. Journal of Business Ethics. 44 (2), 95-105.

Rahman, S. (2011) Evaluation of definitions: Ten Dimensions of Corporate Social Responsibility, World
Review of Business Research. March, pp 166-176

Websites
Kelly,A. (2016). Nestl admits slavery in Thailand while fighting child labour lawsuit in Ivory Coast.
Available: http://www.theguardian.com/sustainable-business/2016/feb/01/nestle-slavery-thailand-
fighting-child-labour-lawsuit-ivory-coast. Last accessed 26/06/2016.

New York Times. (2015). The Rising Cost of Manufacturing. Available:

http://www.nytimes.com/interactive/2015/07/31/business/international/rising-cost-of-
manufacturing.html?_r=0. Last accessed 13/05/2016.

Smith. (2015). 5 shocking scandals that prove it's time to boycott Nestl . Available:
http://www.dailydot.com/opinion/nestle-california-bottled-water/. Last accessed 26/06/2016.

27
Annual Reports
Nestle CSV Report (2016)

Nestle Annual Report (2015)

Bibliography
Porter, M and Kramer, M. (2006) Strategy and Society. Link between competitive advantage and
corporate social responsibility. Harvard Business Review, December, pp 1-16

Rahman, S (2011) Evaluation of definitions: Ten dimensions of corporate social responsibility. World
Review of Business Research. March, pp 166-176

Sprinkle, G and Maines, L. (2010) The benefits and costs of corporate social responsibility. Harvard
Business Review, March, pp 445-453

28
 Appendixes

Appendix 1: Company Background

Appendix 2: Reputation Audit
Appendix 3: Stakeholder Audit
Appendix 4: Risk Audit
Appendix 5: CSR Audit

29
Appendix 1: Company Background

Nestle is a Swiss transnational food and beverage company with its

headquarters in Switzerland. The organization has a history dating
back to 1905.
According to Fortune magazine (2015) Nestle remains as the
largest food and beverage conglomerate in the world measured by
revenues ($92 Billion), and is ranked 43 in the Forbes Most
Valuable Brand index.
Nestl has 447 factories, operates in 194 countries, and employs
around 339,000 people.
Nestle as of February 2014 owns 23.29% of LOral shares making
it one of the largest shareholders of one of the biggest brands in
the cosmetic industry
Vision
To be a leading, competitive, Nutrition,
Health and Wellness Company delivering
improved shareholder value by being a
preferred corporate citizen, preferred
employer, preferred supplier selling
preferred products
Mission
Good Food, Good Life" aiming to provide
consumers with the best tasting, most
nutritious choices in a wide range of food
and beverage categories and eating
occasions, from morning to night.
Source: Nestle official website( 2016)

Products and brands Nestle Global sales (CHF), 2015

Nestle covers a diverse range of 25
products and brands that cover 20
almost every food category
15
present.Given below is the global
10
sales for Nestle product range.
5
Source: Nestle Annual Report, 2015 Global sales (CHF)
0

Source: Nestle Annual Report,2015

30
Key competitors

Unilever - A Dutch company

that produces packaged foods
and products for the home and
personal care markets.
Kraft Foods - A U.S. company
that produces packaged foods
products. Kraft is one of
Nestls largest U.S. based
competitors. In early 2010, Kraft Source:FoodEngineering (2016)
bought Cadbury Schweppes
(CSG), creating the largest candy company in the world and strengthening Kraft's international
presence.
Kelloggs- A US multinational food manufacturing company. Kellogg's produces cereal and
convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored
snacks, frozen waffles, and vegetarian foods. Brands include Froot Loops, Corn Flakes, Frosted
Flakes, Rice Krispies, Special K, Cocoa Krispies, Keebler, Pringles, Pop-Tarts, Kashi, Cheez-It, Eggo,
Nutri-Grain, Morningstar Farms, and many more.
GROUPE DANONE - A French Company that produces packaged foods and beverages. Groupe
Danone competes with Nestle internationally and in the U.S.

Earnings per share

Earnings per share were highest in

2010 at 10.12 % this dropped to
2.96% in 2011 and a rise to 3.32%,
a drop 3.13% and then a gradual
increase to 4.52% in 2014. A slight
drop to 4.51% was seen in 2015%.

Source: Morningstar,2016

31
 Appendix 2: Reputation Audit
RepTrak Framework

Reputation Dimensions Nestle Dimension Reputation Pulse Scores (1-10) Remark

Esteem Admire Trust Feeling
H/M/L H/M/L H/M/L H/M/L
Product & Services Nestle focusses on maintaining a high standard of quality by M M H M 9 High in quality value and service
having regular audits of its quality levels by external bodies
(Nestle, 2015)

Innovation H M M H 8 Scores high on both innovation

and adaptiveness
Largest R&D Network in the FMCG industry with over 34 R&D
facilities employing over 5000 people. (Nestle,2016)

Workplace Physical safety of employees taken very seriously. M M H M 6 Information regarding

Documentation as well as training is given to the workforce in physiological safety is absent
order to create a safety culture (Nestle,2016)
Governance Nestle ensures that its counterparts the world over adhere to H M M M 6 Fairly Sustainable approach
the legal and socially acceptable practices of the country. towards operating as a ethical
However they have had situations where they have been organization
accused of exploitation (Nestle,2016)
Citizenship Nestle believes in creating shared value by being H H M H 8 A global plan to creating shared
enviromentally friendly as well as supporting the agricultural value
community in the disadvantaged countries they operate in
(Nestle, 2016)
Leadership Nestle has a heirachical structure with the chairman and the M M M M 6 Visionary managers
CEO being at the top of the decision making process
(Nestle,2016)
Performance Nestl is the biggest food company in the world, with a H H H H 8 Steady financial progress with
market capitalisation of roughly 231 billion Swiss francs, range expansion
which is more than US$ 247 billion as of May 2015. In 2014,
consolidated sales were CHF 91.61 billion and net profit was
CHF 14.46 billion. (Nestle,2016)

Sources:

Nestle CSV Report (2016)

Nestle Annual Report (2015) 32
Appendix 3: Stakeholder Audit (Based on Nestle Annual Report, 2015)

Stakeholder Power Interest Communication need Extent to which they Effect on Reputation Rating
are met (1-5 with
5 being
highest)
Shareholders High- Direct High- stable share Future financial Nestle clarifies any Effective 5/5
influence on price and higher implications and doubts shareholders communication with
management returns direct influence on may have during the shareholders
decisions key processes and meetings as well as makes them feel that
management through the use of their investment is safe
decisions email and phone calls thereby building trust
Employees High- Nestle High- Employees should be Nestle communicates Ethical treatment of 5/5
sustainability lies Proper pay made aware of crisis that all employees are employees creates an
in the hands of Quality work and taught how to to be treated fairly overall positive
its employees environment respond to external and no discrimination perception of the
Rewards and sources if questioned in any form can be organization
recognition about the issue practiced
Consumers High- Ability to High- Quality Consumers should be Yearly report
Nestle portray their 3/5
make or break products made aware of the summarizing Nestle
brand as a family brand
Nestle reputation CSR activities done environmental which takes the
Ethical background friendliness, ethics
wellbeing of its
of the organization Make consumer and Health
consumers as well as
aware of Nestle consciousness the environment
Health concerns stance on nutrition around them very
Advertising showing seriously
Nestle as a family
brand
NGO High- Gather High- If Nestle is Ensure NGOs are NGOs are invited to Effective 4/5
support to operating in an aware of Nestle CSR covenings to ensure communication with
boycott an ethical an activities and ethical they are satisfied with NGOs would result in
organization environmentally stance the way Nestle lesser chances of issues
found to be friendly manner operate turning to crisis
unethical

33
Government High- Medium- Information regarding Nestle has a issue Govt can take prompt 4/5
Government has Compliance to code impact of Nestle management team to legal action against
the power to of conduct activities on maintain close Nestle thereby
impose certain Health and safety in communities communication with negatively impacting
regulations and food the govt in case an reputation
restrictions on the issue turns up
operations

Local Medium- Ability High- Impact of Information regarding Nestle works closely Local communities can 3/5
communities to take legal Nestle on how Nestle plans to with the communities gather the support of
action against community carry out activities it operates in to NGOs and govt if
Nestle benefiting local prevent any issues needed
community occurring.
Public Medium- Ability High- Expects Communicate via Nestle actively Negative publicity via 2/5
to spread Nestle to operate media and social monitors and social media can result
information via ethically and media on the positive managers in an issue leading to a
social media socially responsibly aspects Nestle does to communication via crisis
the community social media

34
 Appendix 4: Risk Audit
Risk Risk Description Impact on Nestle Score
Categorization
Strategic Risk Nestle Baby milk NGO, Global Action for Improved Negative publicity 4/5
Scandal continues Nutrition states that the Global food can discourage
to grow as industry including Nestle has customers from
pressure groups damaged the health of whole purchasing the
and the WHO Nations. The NGO also requests product
continue to WHO to join forces to fight these
investigate organizations (Muller,2013)
(Muller, 2013)
Operational Risk Political instability
Rapid changes in government can Cause production 5/5
in operation in result in changes in regulations and shortages and cause
developing relations with MNCs this could affect Nestle to incur high
countries Nestle as most raw materials are losses
sourced from developing countries
Financial Risk Increase in costs Manufacturing costs have seen a Any increase in costs 4/5
especially raw dramatic rise from 2004 to 2015. of raw materials
material costs (BCG,2015). These include items that adversely affects
are made from countries usually Nestles operating
known for cheap labor such as China, results
Taiwan and Russia.

Sources:

Muller. (2013). Nestl baby milk scandal has grown up but not gone away . Available:
http://www.theguardian.com/sustainable-business/nestle-baby-milk-scandal-food-industry-standards. Last
accessed 13/05/2016.

New York Times. (2015). The Rising Cost of Manufacturing. Available:

http://www.nytimes.com/interactive/2015/07/31/business/international/rising-cost-of-manufacturing.html?_r=0.
Last accessed 13/05/2016.

35
Appendix 5: CSR Audit

Triple bottom line Activity Target Stakeholders Score

factor
People Nestle is involved in research projects based on improving Public 5/5
nutrition levels especially those of children globally. Nestle Media
works closely with local experts in doing so. (Nestle,2015) Local government
agencies
Nestle carries out yearly programs with the farming Suppliers 4/5
communities that supply raw materials. The idea being for Local community
the development of the community (Nestle, 2015) Media
Regular staff training to ensure Nestle values on social Employees 5/5
responsibility are understood and executed
effectively.(Nestle, 2015)

Nestle closely monitors the cocoa plantations in countries NGO 5/5

that have been accused of child labor. Schools were built Pressure groups
for children as well as programs to educate the communities Regulatory bodies
on the damage done due to child labor (Neslte, 2015) Media
Public
Local government

Nestle was charges with a lawsuit in 2010 for the alleged use Legal bodies 0/5
of child labor in the Ivory Coast, (Guardian, 2016). NGO
Pressure groups
Media
Nestle has been accused of curtailing trade union activity as Legal bodies 0/5
well as strategically setting up factories in countries with NGO
relaxed labor laws (Smith, 2002) Pressure groups
Media

36
 Since 1974 Nestle has been known for the unethical practice Legal bodies 0/5
of marketing of infant formula resulting in malnourished NGO
babies in Africa due to mothers mixing da powder with Pressure groups
unclean water. (Smith,2015) Media
Planet Nestle carries out projects and programs to conserve water Local government 4/5
as well as ensuring that all its factories purify the waste Media
water before discharging it into main waterways. Local communities
(Nestle,2015) NGO
Pressure groups

Nestle has processes in place to ensure that all its processes Local government 4/5
in the production of its goods are done with minimal impact Media
to the environment (Nestle,2015) Local communities
NGO
Pressure groups

Improving the environmental effect of Nestle packaging Local government 4/5

(Nestle,2015) Media
Local communities
NGO
Pressure groups

Programs to educate local communities on the need for Local government 4/5
conservation (Nestle,2015) Media
Local communities
NGO
Pressure groups

Greenpeace accuses Nestle for the Use of Palm oil in its Local government 0/5
production. Greenpeace accuses Nestle of promoting the Media
deforestation of land to set up Palm tree farms by suppliers. Local communities
(Smith,2015) NGO
Pressure groups

37
 In California, Nestl bottles water in desert regions that are Local government 0/5
already struggling with water shortages, and it refuses to Media
disclose how much it processes at its facilities. In Wisconsin, Local communities
the firm became involved in a protracted dispute over NGO
pristine water sources, while Nestl has also made itself Pressure groups
extremely unpopular in Oregon. (Smith,2015)
Profit Nestle believes in the cocept of shared value and in the Suppliers 4/5
empowerment of the farmers and the communities Shareholders
through which they obtain their raw materials. The Local communities
concept behind shared value is to help create value for the
organization which in the long run results in larger profit
margins. (Nestle,2015)

Sources:

Kelly,A. (2016). Nestl admits slavery in Thailand while fighting child labour lawsuit in Ivory Coast. Available:
http://www.theguardian.com/sustainable-business/2016/feb/01/nestle-slavery-thailand-fighting-child-labour-
lawsuit-ivory-coast. Last accessed 26/06/2016.

Nestle CSV Report (2016)

Nestle Annual Report (2015)

Smith. (2015). 5 shocking scandals that prove it's time to boycott Nestl . Available:
http://www.dailydot.com/opinion/nestle-california-bottled-water/. Last accessed 26/06/2016.

38