nestle’s corporate social responsibility and the farmers’ perception thereof a preliminary study...
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Nestle’s Corporate Social Responsibility and the Farmers’ Perception Thereof
A Preliminary Study byJ. Sedfrey S. SantiagoDavid Edward G. JimenezJohn Carlos B. ClerigoJohn Gokongwei School of ManagementAteneo de Manila University
OutlineCoffee Industry BackgroundProblem StatementMethodResults and AnalysisPreliminary Conclusion
Coffee Industry BackgroundPhilippines’ Coffee Situation
◦Coffee output is less than 1% of global production (95 TMT, P5.5 Billion)
◦Continually declining from 2008-10◦More than half of total supply of
coffee beans are imported◦From 2010 to 11, coffee
farm area dropped from 131 to 122 thousand hectares (6% drop)
Source: Gain Report, USDA-FAS, 2011
Coffee Industry BackgroundNestle’s hold of the market (more
than 80%)◦75% of local coffee supply is Robusta◦Nestle buys about 80% of this◦Thus, 60% of the local coffee
production is bought by Nestle◦Nestle has the power to develop the coffee industry
BackgroundCSR Programs
◦Buying Station
BackgroundTraining Program
ProblemIs Nestle’s CSR Program deemed
fair by the coffee farmers?Did Nestle’s CSR Program
improve the standard of living of the coffee farmers?
Are the farmers satisfied and what are their suggestions?
MethodsInterviews with key players in the
coffee industry (Philippine Coffee Board, Philippine Coffee Alliance, Nestle, Government and Coffee Farmers)
Survey and Interviews
MethodsSurvey of Coffee Farmers (based
on the objectives)◦Purposive sampling method
(gathered through contacts gained from interviews)
◦45 each island group (Luzon, Visayas and Mindanao)
◦Currently, we have 33 coffee farmer respondents
MethodsSurvey DesignWFTO’s Fairtrade Principles
◦ Creating Opportunities for Economically Disadvantaged Producers
◦ Transparency and Accountability◦ Capacity Building◦ Payment of a Fair Price◦ Non-Discrimination, Gender Equity and Freedom of
Association◦ Working Conditions◦ Environment◦ Trading Practices◦ Child Labor and Forced Labor
Alternative fairness standard◦ 4C – Common Code for the Coffee Community
Results: Most coffee farmers are middle-aged
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Age
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Results: Majority of farmers are male
Male70%
Female30%
Gender Distribution
Results: Small farm sizes
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Farm Size (in hectares)
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Results: Classification of Respondents
Buying Station
61%Train-
ing Pro-
gram15%
Both24%
Number of Farmers percent
Buying Station only 20 60.6
Training Program only 5 15.2
Both 8 24.2
Total 33 100.0
Results: Is the Buying Station Program fair?
Yes39%
No54%
Not Sure7%
Fairness: Buying Station ProgramTop 5 Fairness Indicators:
Top 5Fairtrade Principle
Frequency of Yes Responses
We are able to use our earnings from the buying station for the education of our children and medicine.
Creating Opportunities 100%
I receive full payment for my beans on time.
Payment of a Fair Price 89%
All or substantially all of my beans are bought by Nestle. Capacity Building 79%Nestle explains how they compute for the price of my coffee beans.
Payment of a Fair Price 64%
I have more income from coffee farming (that I can use to buy more land, equipment and materials).
Creating Opportunities 64%
Fairness: Buying Station ProgramBottom 5 Fairness Indicators:
Bottom 5Fairtrade Principle
Frequency of Yes Responses
Nestle informs me how they determine the price of Nescafe instant coffee.
Transparency and Accountability 29%
I can say that my coffee beans have better quality because of the suggestions of the employees in the buying station. Capacity Building 25%
Nestle provides a written contract regarding the sale of my coffee beans.
Transparency and Accountability 25%
Nestlé buying station employees inform us of the principles of fair trade. Trading Practices 11%
Nestle consults farmers when they plan to change policies in the buying station program.
Transparency and Accountability 4%
Results: Is the Training Program fair?
Yes62%
No8%
Not Sure31%
Fairness: Training ProgramTop 5 Fairness Indicators:
Top 5 Fairtrade Principle
Frequency of Yes Responses
Nestle informed me of the processes and objectives of the training program.
Transparency and Accountability 92%
I learned from Nestlé how to add more value to my coffee beans (like processing). Capacity Building 92%I can say that my coffee beans have better quality because of my Nestlé training. Capacity Building 92%I have better support system in farming because of Nestlé (because I know people from the training program who can give me assistance). Capacity Building 92%I can plant other kinds of crops aside from coffee.
Non-discrimination 92%
Fairness: Training ProgramBottom 5 Fairness Indicators
Bottom 5
Fairtrade Principle
Frequency of Yes Responses
Nestle consults farmers when they plan to change policies in the training program.
Transparency and Accountability 23%
Nestlé teaches us to allow our children to go to school and play even if they are used for our farming.
Child Labor and Forced Labor 31%
Nestlé tells us not to use forced labor. Child Labor and Forced Labor 31%
Nestlé employees regularly visit my farm to check on the status of/update on my farming. Trading Practices 38%Nestlé has sent employees to my farm in order to inquire about how satisfied I am with their program. Trading Practices 38%
Results: Did the programs of Nestle improve the farmers’ standard of living?
Improved79%
No Change15%
Worsened3%
Missing Values3%
Results: Are the Farmers satisfied with the CSR programs of Nestle?
Yes76%
No21%
Missing Values3%
Results: Comments/Suggestions of FarmersOn Pricing:
◦ Increase price or make prices stable◦ Questions on the coffee grading system◦ Why are Arabica and Robusta priced the same?
On Payment:◦ Direct payment instead of thru the bank
On the Training:◦ Increase participants◦ Organic farming◦ Field Visits
Other Comments:◦ Location of Buying Station
ConclusionCoffee farmers are generally satisfied.The beneficiaries perceive that the
programs gave a positive effect to their standard of living.
But, there are some issues regarding fairness.◦Buying Station Program◦Transparency and Accountability
In order to be a true CSR program, Nestle must improve on its fairness.
Reserve Slides
Related WorkThe basic responsibility of a company toward its
suppliers like coffee farmers is to be fair in its dealings (Jamali, 2008 citing Papasolomou, 2005 at 218).
Thus, following the stakeholder approach, which asserts that “organizations are not only accountable to its shareholders but should also balance a multiplicity of stakeholders interests that can affect or are affected by the achievement of an organization’s objectives” (van Marrewijk, 2003 at 96 citing Freeman), it is important to determine whether Nestlé’s CSR programs address said inequities, or if they perpetuate the inequities despite the programs’ good intentions.
Methods10 Fair Trade Principles
◦Creating Opportunities for Economically Disadvantaged Producers
◦Transparency and Accountability◦Capacity Building◦Payment of a Fair Price◦Non-Discrimination, Gender Equity and
Freedom of Association◦Working Conditions◦Environment◦Trading Practices◦Child Labor and Forced Labor
Fairness: Buying Station ProgramTop 5 Fairness Indicators:
Top 5Fairtrade Principle Yes No
Not Sure
Missing data Total
We are able to use our earnings from the buying station for the education of our children and medicine.
Creating Opportunities 100% 0% 0% 0%
100%
I receive full payment for my beans on time.
Payment of a Fair Price 89% 4% 0% 7%
100%
All or substantially all of my beans are bought by Nestle. Capacity Building 79% 18% 0% 4%
100%
Nestle explains how they compute for the price of my coffee beans.
Payment of a Fair Price 64% 32% 0% 4%
100%
I have more income from coffee farming (that I can use to buy more land, equipment and materials).
Creating Opportunities 64% 32% 4% 0%
100%
Fairness: Buying Station ProgramBottom 5 Fairness Indicators:
Bottom 5Fairtrade Principle Yes No
Not Sure Total
Nestle informs me how they determine the price of Nescafe instant coffee.
Transparency and Accountability 29%71% 0%100%
I can say that my coffee beans have better quality because of the suggestions of the employees in the buying station.
Capacity Building 25%68% 7%100%
Nestle provides a written contract regarding the sale of my coffee beans.
Transparency and Accountability 25%75% 0%100%
Nestlé buying station employees inform us of the principles of fair trade.
Trading Practices 11%71%18%100%
Nestle consults farmers when they plan to change policies in the buying station program.
Transparency and Accountability 4%89% 7%100%
Fairness: Training ProgramTop 5 Fairness Indicators:
Top 5 Fairtrade Principle Yes No
Not Sure
Missing ValuesTotal
Nestle informed me of the processes and objectives of the training program.
Transparency and Accountability 92% 8% 0% 0% 100%
I learned from Nestlé how to add more value to my coffee beans (like processing).
Capacity Building 92% 8% 0% 0% 100%
I can say that my coffee beans have better quality because of my Nestlé training.
Capacity Building 92% 8% 0% 0% 100%
I have better support system in farming because of Nestlé (because I know people from the training program who can give me assistance).
Capacity Building 92% 8% 0% 0% 100%
I can plant other kinds of crops aside from coffee.
Non-discrimination 92% 0% 0% 8% 100%
Fairness: Training ProgramBottom 5 Fairness Indicators
Perception of Training Fairtrade Principle Yes No
Not Sure
Missing Values
Total
Nestle consults farmers when they plan to change policies in the training program.
Transparency and Accountability 23%31%46% 0%
100%
Nestlé teaches us to allow our children to go to school and play even if they are used for our farming.
Child Labor and Forced Labor 31%69% 0% 0%
100%
Nestlé tells us not to use forced labor.
Child Labor and Forced Labor 31%62% 0% 8%
100%
Nestlé employees regularly visit my farm to check on the status of/update on my farming. Trading Practices 38%62% 0% 0%
100%
Nestlé has sent employees to my farm in order to inquire about how satisfied I am with their program. Trading Practices 38%62% 0% 0%
100%
Because of the training program, I have more income from coffee farming (that I can use to buy more land, equipment and materials).
Creating Opportunities 38%54% 8% 0%
100%