OBU essay sample

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OXFORD BROOKES UNIVERSITY RAP

OXFORD BROOKES UNIVERSITY BSC IN APPLIED ACCOUNTING Research and analysis project (RAP) TOPIC. 20 AN ORGANIZATION’S CORPORATE SOCIAL RESPONSIBILTY POLICIES, INCLUDING BUSINESS ETHICS AND THEIR IMPACT ON BUSINESS PRACTICE AND KEY STAKEHOLDERS.

“NESTLE PAKISTAN” RAP WORD COUNT; 6475 PRESENTED BY; NOOR UL AIN NASEEM ACCA REGISTRATION NO; 1582293

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I DEDICATE THIS HUMBLE EFFORT TO MY CHILDHOOD FRIENDS WHO HAVE STOOD BY ME THROUGH THICK AND THIN.

“But if the while I think on thee, dear friend, All losses are restored and sorrows end.” (William Shakespeare)

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TABLE OF CONTENTS

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PART I (PROJECT OBJECTIVES AND APPROACH) 1. PROJECT TOPIC 1.1 Topic Selection My RAP to oxford Brookes university is based on topic 20.’ an organization’s corporate social responsibility policies, including business ethics, and their impact on business practice and key stakeholders’. The reason for choosing this topic for my project is the recent outrage of ethical and social concerns for corporates globally and its impact on an organization’s repute, its operations, and philosophy, and to ascertain as to what extent a corporate would invest in society and how practical it is in actual long term. Moreover, the thorough study and extensive research needed for this project would help me understand and develop knowledge about business ethics and CSR, and targeting a certain company I will be able to witness the more practical side of these terms. As a student of ACCA paper P1 and P3, I feel it will help me with my exam results as well. 1.2 Organization Selection I have chosen Nestle Pakistan for research project purpose. Nestlé is Pakistan's largest consumer goods company with sales of around CHF 500 million in 2006.1 Nestlé has been serving Pakistani consumers since 1988, when its parent company, the Switzerland-based Nestlé SA, first acquired a share in Milkpak Ltd. In 1990 its Shiekupura factory started production of NIDO milk powder and cereals they also acquired a milk plant in Kabirwala Punjab. Nestlé Pakistan opened the largest milk plant of Asia and also the largest milk reception among Nestlé World at Kabirwala on March 16, 2007. There brands available in Pakistan consist of dairy, milk, beverages, baby food, bottled water, breakfast cereals, chocolates and confectionary. Products are manufactured in five facilities scattered around the country, from Islamabad in the north, to Karachi in the south.2 1.3 Reason for Selection Nestle Pakistan was chosen as the particular organization for several reasons. Due to global presence of nestle SA it is one of the forerunners to comply with ethical and social concerns as a corporate in Pakistan , moreover its target consumer is common man , due to which society at large is where it finds itself accountable ultimately. Being listed at the Karachi stock exchange, and matchless presence in market its operations and business is debatable in diverse 1 2

www.nestle.com www.nestle.pk NESTLE PAKISTAN

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forums within country. The issue of CSR has been addressed promptly at their official website and seems like one of the main concern of the organization and its unprecedented presence in Pakistani market indicates the success of this social investment. Another reason on my behalf was my personal keen interest in analyzing how a global corporate like nestle would implement its CSR and business ethics policy to Pakistan. 2.0 RESEARCH OBJECTIVES “Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet, and Profit.” 3  To understand term CSR and business ethics in practical terms, while targeting nestle Pakistan, applying all relevant knowledge and information to analyze company’s approach and achievement of relevant results.  Reviewing company’s corporate social responsibility policies, and several areas of CSR covered by it.  Identified areas covered by company while addressing CSR related issues, their communication to relevant stakeholders.  While opting a stance on CSR what particular issues relating business ethics are covered by company and how it relates to key stakeholders. “CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality Of life of the workforce and their families as well as of the local community and society at large”4  How far the company has gone creating shared value for its stakeholders and what aspects of CSR it explores in doing so.  Evaluating how the company has adopted environment friendly and sustainable business practice. “The shared value model is based on the idea that corporate success and social welfare are interdependent Taking responsibility for its impact on society means in the first instance that a company accounts for its actions.”5

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www.wikipedia.com Making good business sense, issued by world business council for sustainable development in Jan 2000, from phill watts and Richard holme . page . available at http://www.wbcsd.org/web/publications/csr2000.pdf 5 www.wikipedia.com 4

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3.0 RESEARCH QUESTIONS To approach the RAP effectively, I have designed the following research questions, to identify the main areas of concern relating the topic. And also by appropriately answering each one of them I will be able to cover enough ground, for my RAP to accomplish its objectives.  How does the company identify with corporate philanthropy?  What is the effect of environmental stewardship and sustainability policy on nestle Pakistan’s business operations and processes?  What is nestle Pakistan’s stance on ethical business conduct, and what key stakeholders it identifies while addressing the issue?  What conclusions the research on above questions has formed? 4.0 RESEARCH APPROACH In order to cover the topic chosen for the RAP especially in context of nestle Pakistan, I had to form an approach allowing me to reach my project objectives, while answering individual research questions. My research was based on gathered information about the terms CSR and business ethics, from academic and business sources. Company data in the form of reports, brochures, press releases, and figures issued in this regard were gathered, at nestle Pakistan and also at group level. This mass of quantitative and qualitative data, from secondary sources had to be filtered to get the most reliable and relevant out of it. Review and analysis done , on this data as presented while answering the research question in terms of firm’s philanthropic and environmental efforts and its commitment towards ethical business practices was the base of any conclusions reached. Also any of the company’s projected and communicated stance on this issue were analyzed to be supported by facts like awards and acknowledgements, the magnitude of thus captured market and goodwill of company. Its reports on shared value and performance indicators were also focused. 5.0 INFORMATION GATHERING The information used and referenced while preparing this RAP came from several sources.  The website of nestle Pakistan ‘www.nestle.pk’, and nestle SA www.nestle.com.  To understand the terms business ethics and CSR, key stakeholders I have consulted Wikipedia as a source of general knowledge on these terms.  A working paper issued by world council for sustainable business development ‘making good business sense’ was also helpful.  A shared value report issued by nestle.  Several internally generated documents ; Nestle corporate business principles NESTLE PAKISTAN

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 







 5.1

Nestle business conduct code Nestle policy on environmental sustainability. Consolidated nestle environmental indicators. News sites of financial times, daily times, and business reporter were also searched for related articles and columns. Academic journals of financial times. ‘Strategic management journal’ and ‘journal of business ethics’ were consulted. Business journal of Mckinsey and co. ‘Mckinsey quarterly’ was also a source. Material from books written on the topic and excerpts taken from them, columns, discussions on web, debates, conferences attended by nestle and press releases from the company in such regards were also studied. Policies adopted and supported by nestle Pakistan. Like UNO global compact, international labor organization conventions, OECD guidelines for multi national enterprises, and ICC business charter of sustainable development. Reports issued by nestle on particular issues such as; water management, industrial refrigeration, water sustainability, environment progress were also studied and consulted. ACCA paper P1, and P3 BPP books were also a source of information on CSR and business ethics. Limitations of information gathering

The information required for this RAP came from several sources, but almost all of it was searched for on the internet, which due to frequent electricity breakdowns in Pakistan, turned out to be nuisance. Moreover, material on the internet from general sources like blogs and discussions was mostly unreferenced and thus unreliable. While working with information in electronic form issues like loss of data and requirement of IT skills to work with information and present it aptly were also initially problematic. To cover the topic from various angles I tried to get maximum material issued in form of reports by nestle, although many reports were available on internet, some brochures ordered by post , still haven’t found there way to me .

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PART II (ANALYSIS AND REVIEW) PART II A 6.0 HOW DOES PHILANTHROPY?

THE

COMPANY

IDENTIFY

WITH

CORPORATE

“Philanthropy is the effort or inclination to increase the well-being of humankind, as by charitable aid or donations”.6 The concept of philanthropic contributions by a company can be derived from two principles;  Charity principle; aiding the society voluntarily, more fortunate or able members of society helping the less fortunate or disable people of the society.  Stewardship principle; business and wealthy people to see themselves as caretakers or stewards .should consider the interest of all affected by them.7 Nestle Pakistan recognizing itself a corporate citizen explores various aspects of CSR, corporate philanthropy being one of them. A few of many barriers in implementing a CSR policy have been identified as lack of leadership involvement and vision that reaches much less then long term goals , while focusing too much on short term gains. Moreover the inability of management to recognize CSR issues as opportunities, and developing a strong case in favor of social investments. “Discretionary social responsibility includes corporate philanthropy and involvement in efforts that benefit society. A company's social responsiveness is expected to reflect top management's philosophy.8” Even this dimension of CSR, philanthropy can be a tool for business to build trust and mutuality among its stakeholders. This contribution to the society can fairly be seen as long term investment in society from where the business derives its resource in all forms.

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www.wikipedia.com http://www.scribd.com/doc/6895666/ethics-csr 8 The Moderating Effect of Environmental Munificence and Dynamism on the Relationship between Discretionary Social Responsibility and Firm Performance Author(s): Irene Goll and Abdul A. Rasheed. Journal of Business Ethics, Vol. 49, No. 1 (Jan., 2004), page 43. 7

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6.1

Nestle Pakistan Philanthropic Efforts

Nestle Pakistan has invested through various channels is Pakistani society and corporate philanthropy principle is apparently explored a little further then traditional concept of the term, by the company. “Good corporate philanthropy incorporates both business interest and societal needs”9 6.1.1

Providing Earthquake Relief

In October 2005, a devastating earthquake hit Pakistan. The magnitude of calamity was overwhelming and is till date the biggest natural disaster the country has seen. Nestle Pakistan made contributions in form of food and beverage items. The issue is addresses further; “Within two days, we had established a crisis committee under the supervision of our Managing Director. The same day, the management team left to visit the affected areas, and by 11 October, the first six Nestlé trucks left our factories, bearing bottled water, powdered and UHT milk and ready-to-cook MAGGI noodles. Instead of burdening the government and relief agencies, we aggressively reactivated our own shattered distribution channels to bring supplies to the people who needed them most and established six camps to distribute relief goods.”10 According to nestle Pakistan; due to their shared efforts with air force and volunteering with other agencies and company’s swift response, 80 trucks of goods worth Rs. 20 million. Two 10-ton trucks of drinking water were dispatched to Muzaffarabad Hospitals. “Every company needs to shape its philanthropic vision, mission and values. Every corporate philanthropist needs to craft annual objectives that serve the firm and the public interest. Appropriate variations of these articulated needs find there ways to grant guidelines.”11 The company also took part in rehabilitation of the area;  Contributions from employees and other nestle markets, worth rupees 20 million was used to adopt and reconstruct a model village in Azad Kashmir.  Compensation to employees, distributors whose homes were destroyed amounted to Rs. 4.1 million. 9

a candid account of corporate philanthropy ‘give and take’ by reynold levy. Harvard business school press. Introduction Page 20. 10 www.nestle.pk 11 a candid account of corporate philanthropy ‘give and take’by reynold levy. Harvard business press.

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 Nestle SA contributed additional Rs 16 million for reconstruction and rehabilitation purpose.  Nestle employee donations from their own salaries amounted Rs 3.3 million.  Working with students of King Edward medical college Lahore medicines worth Rs. 175000 were collected.12

CONTRIBUTIONS MADE

20 18 16 14 12 Million Rs. 10 8 6 4 2 0

6.1.2

For Model Village For Rehabilitation For Employees Destroyed Homes For Medicines

Development of the Rural Population of Pakistan

Nestle Pakistan has undertaken tube well and hand pump installation schemes in selected areas. Their first project was completed in 2002 in a village of 3000 inhabitants in Tehsil Dunyapur, Khanewal. So was commissioned in 2005 near Chishtian. Since then 300 hand pumps have been installed in desert area of Thar and Cholistan. The residents of villages which host milk reception for nestle can make use of water pumps.13 “According to carol, these are (philanthropic efforts) desired rather than being required of companies. They include charitable donations, contributions to local communities and providing employees with the chances to improve their own lives.”14 12

www.nestle.pk www.nestle.pk 14 ACCA paper P 1, professional accountant .BPP.page 57. 13

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Nestle Pakistan is also encouraging capacity building for women in rural areas working with UNDP. 800 people are impacted by this joint initiative. The goal of project is to enhance income and employment generation of rural women through livestock skills development, improved livelihoods and food security at the household and community level. Trainees are given a month long, hands-on training in basic animal healthcare.15 6.1.3

Contributing in Education Sector of Pakistan

In an effort to improve education in rural areas of Pakistan, nestle has undertaken the rehabilitation of several primary and middle schools, focusing on schools for girls. “In 2004, in partnership with an NGO, we adopted a school in Pindi Dhallon, Sheikhupura, and achieved such an improvement of educational facilities, including teaching aids and teacher training, that school attendance doubled.”16 Donations in form of computers were also given to rehabilitated schools of poor and rural communities in 2004-5. The business journal of Mckinsey and Company ‘Mckinsey Quarterly’ conducted a survey on corporate philanthropy; “The vast majority of companies, according to the results of a recent McKinsey survey believe that economic growth in developing markets is important to the success of their business strategies. And more than two-thirds of those companies are engaged in various programs to encourage that growth, whether through education or private-sector development or technological advancement”17. Nestle Pakistan in the same mind set states “in the 21st century, no country can hope to progress without a strong commitment to scientific training and research.”18 While putting this in Practicality Company has invested in Pakistan’s long term future, by committing to help set up a school of science and engineering at the Lahore University of Management Sciences (LUMS).

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www.nestle.com www.nestle.pk 17 www.mckinseyquarterly.com 18 www.nestle.pk 16

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6.1.4

Nestle Pakistan Acknowledged Through Philanthropy Award

While working on CSR, world business council for sustainable development, issued paper ‘making good business sense’ a dialogue on community involvement by companies was held. “Philanthropy and charity were mentioned frequently, but many participants emphasized their preference for collaborative projects and placed greater stress on mutuality than on simply giving. Companies may feel as if they are part of the community but until the rest of the community accepts them, there is much work to be done19.” In acknowledgement of the companies continuous efforts nestle Pakistan has been awarded a corporate philanthropy award. “Karachi: Nestlé Pakistan has been awarded the Corporate Philanthropy Award by the Pakistan Centre for Philanthropy (PCP) at a dignified ceremony in Karachi, in recognition of its Corporate Social Responsibility Programs for the community. The Awards applaud and recognize the contributions made by corporate sector of the country for social development programs. Nestlé Pakistan has been very active in social development programs in the country through various integrated multi dimensional community development programs and accords. Staff report”20

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Making good business sense, issued by world business council for sustainable development in Jan 2000, from Phill watts and Richard Holme. page 7.available at http://www.wbcsd.org/web/publications/csr2000.pdf 20 www.dailytimes.com.pk

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PART II B 7.0 WHAT IS THE EFFECT OF ENVIROMENATL STEWARDSHIP AND SUSTAINABILTY POLICY ON NESTLE PAKISTAN’S BUSINESS OPERATIONS AND PROCESSES? “Stewardship is an ethic that embodies cooperative planning and management of environmental resources with organizations, communities and others to actively engage in the prevention of loss of habitat and facilitate its recovery in the interest of long-term sustainability”21 7.1

Environmental Stewardship Recognized as Policy

The policy adopted by nestle Pakistan in terms of environmental issues has been addressed in ‘nestle corporate business principles’ an internally generated document issued by nestle to provide a guideline for nestle management worldwide. Within the above mentioned document Nestlé’s policy is covered by a principle namely; “Protection of environment: Since its early days Nestlé has been committed to environmentally sound business practices throughout the world and continues to make substantial environmental investments.22” While covering the issue nestle pledges to integrate such policies that will let designing and operating of its activities in efficient and sustainable way. This is leading to minimization of adverse environmental impact, and waste generation. Also it maintains a policy of ensuring continuous improvement of environmental performance throughout its supply chain. “For organizations, sustainability involves developing strategies so that the organization only uses resources at a rate that allows them to be replenished. At the same time emission of waste are confined to levels that do not exceed the capacity of environment to absorb them”23.

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www.wikipedia.com Nestle corporate business principles. Page 16. 23 ACCA paper P1 Professional Accountant. BPP. Page 301. 22

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7.2

Nestle Pakistan Adherence to Global Principles

In order to form a business policy, reaffirming an environmental stand in terms of operations carried out by the business, several aspects need to be considered. In case of manufacturing this might even start from raw material stage, the seed and pesticide used although nestle doesn’t involve in agricultural production it addresses ecological aspects of farming by its suppliers in its policy. Operations and processes designing are also of prime importance as they directly affect material consumption, pollution emission, waste generation and sustainability of any resource thus consumed. In order to form a policy that covers multi dimensions of environmental concerns for the firm, nestle has adhered and advocated policies adopted globally by firms. Nestle adheres to United Nations global compact’s “three guiding principles on environment”, Principles; 7, 8 and 9 of the compact;  “Supports a precautionary approach to environmental challenges  Undertakes initiatives to promote greater environmental responsibility  Encourages the development and diffusion of environmentally friendly technologies”24 Nestle also adheres to international chamber of commerce business charter for sustainable development. Three and eight of all sixteen principles state respectively Principle; 3 Process of improvement To continue to improve corporate policies, programs and environmental performance taking into account technical developments, scientific understanding, consumer needs and community expectations, with legal regulations as a starting point, and to apply the same environmental criteria internationally. Principle; 8 Facilities and operations To develop, design and operate facilities and conduct activities taking into consideration the efficient use of energy and materials, the sustainable use of renewable resources, the minimization of adverse environmental impacts of waste generation, and the safe and responsible disposal of residual wastes.25 Nestle Pakistan implementing this strategy complies with environmental act (1997) and states;

24

The UN Global Compact's ten principles. Available at http://www.unglobalcompact.org/aboutthegc/thetenprinciples/index.html 25 ICC business charter for sustainable business development; available at http://www.bsdglobal.com/tools/principles_icc.asp NESTLE PAKISTAN

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“We try to ensure that every stage of our operations, the environment impact is minimal, at the raw material stage, we support sustainable agriculture and dairy farming practices, including environmental protection.”26 Nestle Pakistan has three main factories operating in Pakistan, located in Shiekhupura, Kabirwala and Islamabad .To keep its operations environmental friendly nestle Pakistan addresses issues like ‘maximizing co efficiency ,minimization of resource consumption, waste and air emissions . Quitting of heavy fuel oil usage to eliminate air pollution and has brought its emissions way below legal limits’. 27 Air Acidification Potential

25.00 20.00 1K Tonnes 15.00 SOx Equivalents 10.00 5.00 0.00 2007

2008

2009

Years 28

The above chart shows consolidated data from nestle environmental indicators issued at group level. Covering nestle business worldwide. Above mentioned document also states greenhouse gasses emission lowered in 2008-09 by 15.8% and ozone depleting substances by 90.0%per tone of product. 7.3 The Nestle Policy on Water as Resource Water happens to be one of the essential elements forming human body that comprises about 60% of body weight. 97.5% of the world’s water is in the form of salt water in our seas and oceans. 70% of the remaining 2.5% of fresh water is frozen in polar icebergs and glaciers. Fresh water that is available for both human and environmental needs represents barely 1% of the earth’s total water mass. Water apart from Nestlé’s bottled water, is one of the main raw materials used in manufacturing of all products.29 Nestlé recognizes that responsible management of world-wide water resources is an absolute necessity. The ‘nestle water policy’ covers several key areas of 26

www.nestle.pk www.nestle.pk 28 2009 Consolidated Nestlé Environmental Performance Indicators .available at http://www.nestle.com 29 nestle and water. Sustainability , protection, stewardship. Available at http://www.nestle.com 27

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performance in water usage, waste generation, water reservoirs, water withdrawal etc. Following are included in policy.  “Protection of springs and their surroundings is of primary importance in this Endeavour.  innovation and renovation of its products and processes, including manufacturing methods that minimize water consumption and waste water generation;  Fresh water use is reduced as much as possible and, wherever feasible, water is reused and recycled used water is treated and returned to the environment according to local legislation; where none exists, internal Nestlé standards are applied”. 30 Total Water Withdraw l

3.9 3.8 3.7 Meter Cube Per 3.6 Tonne 3.5 Product 3.4 3.3 3.2 2007

2008

2009

Years 31

The above mentioned graph is based on consolidated environmental indicators issued by nestle SA. According to this document % decrease in water discharge in 2008-09 was 64.5% meter cube per ton of product. Implementing this nestle Pakistan addresses: “Our Shiekhupura and Kabirwala factories have elaborate water treatment systems to prevent wastewater from polluting the environment; we are continually reducing our consumption of raw water per ton of production”32

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Nestle and water. sustainability, protection, stewardship. Page 13.available at http://www.nestle.com 2009 Consolidated Nestlé Environmental Performance Indicators; http://www.nestle.com 32 www.nestle.pk 31

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7.4

Nestlé Exploring Environmental Sustainability

Nestle further addresses environment, while identified as priority area; “During the manufacturing and distribution of our products, we use efficient technologies and apply best practices to;  Recycle or recover energy from by-products. The packaging of our products is critical to guarantee our high quality standards, to prevent food waste and to inform consumers. We strive to:  lead the development and use of materials from sustainably-managed renewable resources;  Support initiatives to recycle or recover energy from used packaging; use recycled materials.”33 By Products For Recovery

1.4 1.2 1 Million 0.8 tonnes 0.6 0.4 0.2 0 2007

2008

2009

Years 34

Above graph is indicating figures in consolidated environmental indicators issued by parent company. Also waste for disposal is decreased in 2008-09 by 54% per ton of product. Nestle in its corporate business principles covers; “The efficient and sustainable use of renewable resources, the minimization of adverse environmental impact and waste generation, and the safe and responsible disposal of residual wastes”35 Nestle Pakistan implements the policy by working on packaging and recycling, by working on packaging solutions that use minimum weight and volume and can be recycled. It has a collection system for used packaging. Solid waste is collected for either recycling or environment friendly disposal.36 7.5 Nestle implementing an Environmental Management System 33

The nestle policy on environmental sustainability. Page 2 available at http://www.nestle.com 2009 Consolidated Nestlé Environmental Performance Indicators 35 Nestle corporate business principles pg 16. 36 www.nestle.pk 34

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While adopting a policy on environmental sustainability it is of utmost importance that it is implanted from the planning stage, not only to incorporate the stance in operations but also to shun from any adverse situation that might result in loss of goodwill or even cancellation of license. “In 1996 the Nestlé Environmental Management System (NEMS) was created to pull together all in-company environmental activities and measures. NEMS has since been implemented throughout the company”.37 The Nestle environmental management system designed and illustrated in the ‘Nestle policy on environmental sustainability’, addresses issues such as environmental policy, management review, and planning with environmental aspects in mind. Communication and documentation of operations, awareness and training, dealing with emergency and responsiveness are parts of this system. Careful monitoring and evaluation is also part of the process. The system is addressed in Nestle policy on environmental sustainability. Through this environmental concerns are addressed at the planning stage, and are kept in relevance through out operational stage with constant checking and management review. Nestle Pakistan states; “Our factories have environment committees to manage routine environment issues and review performance. Environmental impact assessment is done in advance for every new project and measures are adopted to minimize adverse impacts on the environment.”38 It seems as if nestle has environmental issues sorted out, as one of the most sought after CSR issues addressed by it. It has clearly been committed not only in implementing Nestlé’s policies in such regards but also communicate the issue to stakeholders. 7.6

Recognition of Nestle Pakistan’s Environmental Efforts

Nestle Pakistan in 2007 was also awarded “annual environment excellence award”, in acknowledgment of its efforts. “Mr. A. Hassan, HSE Manager at Nestlé Pakistan Ltd, pictured far right, was presented the award by Dr S. Ahmed, Minister of the Environment on July 4, 2007 at a ceremony held in Karachi, Pakistan. The panel of judges voted unanimously to award Nestlé Pakistan Ltd for their environmental policy and vision, local activities for the protection of the environment and their contributions to community welfare. NFEH is affiliated with the United Nations Environmental 37 38

Nestle sustainability review available at http://www.nestle.com www.nestle.pk NESTLE PAKISTAN

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Program (UNEP) and is supported by the Ministry of Environment of the Government of Pakistan. The Annual Environment Excellence Awards are designed to recognize and promote the organizations which make an outstanding contribution to sustainable development”.39

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www.nestle.com . NESTLE PAKISTAN

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PART II C 8.0 WHAT IS NESTLE PAKISTAN’S STANCE ON ETHICAL BUSINESS CONDUCT, AND WHAT KEY STAKEHOLDERS IT IDENTIFIES WHILE ADRESSING THE ISSUE? “Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Businesses can often attain short-term gains by acting in an unethical fashion; however, such behaviors tend to undermine the economy over time.”40 While taking an ethical stance on business conduct, a company operating globally can shield itself from various angles exposing it to risks like bad publicity, loss of goodwill, government sanctions etc. It might though win through proper communication of its stance prolong customer loyalty and brand image that in today’s competitive market requires more than product marketing. “It is often said by those who practice good business ethics that they do not violate their moral duties or obligations. Unlike many who engage in deceit, corruption and ruthless regards of others rights in their business dealings, those who practice business ethics have a respect for moral duty and live their lives accordingly” 41 Nestle through its ‘corporate business principles’ and ‘code of business conduct’, addresses several related issues concerning ethics in business covering different stakeholders. These documents serve as Nestlé’s ethical conduct guidelines, for nestle management worldwide. While operating globally the company is open to several risks and threats depending upon cultural, ethnic, religious and social diversity it faces. A code of conduct by any means can mitigate the exposure -without negating the fact that it is not possible without management commitment and proper communication- for the very purpose nestle maintains legal and compliance function. Moreover, it is yet another challenge to incorporate a common code to national and local markets that nestle operates in. “Ethical codes aim to reduce the occurrence of incidents, to improve the extent to which stakeholder expectations are realized, to boost stakeholder confidence in the company and to encourage the authorities to relax regulations and control. In addition to articulating stakeholder interests, a code can also communicate and elaborate on the principles the company upholds. Stakeholder principles are 40

www.wikipedia.com business ethics , critical perspectives on business and management ,edited by Alan Malachowski , published by Routledge Pg 233 41

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General requirements for company and employee conduct: they govern the relationship between company and stakeholders”.42 In its document ‘leadership and management principles’ nestle takes the stand of respecting cultures and traditions of its various spread markets and pursues the goal of integrating itself as much as possible in those cultures . It also identifies the long term benefit of company to lie in benefiting community. “A corporate stakeholder is a party that can affect or be affected by the actions of the business as a whole. The word "stakeholder" has become more commonly used to mean a person or organization that has a legitimate interest in a project or entity”.43 Keeping in mind the relevant stakeholder preferences, the consequences of actions with a rather long term approach in mind can compel any management to take ethical decisions as this is the only realistic way of not only sustaining the business practice but hold a ground for business to grow. 8.1 Stakeholders Identified and Ethical Concerns Addressed by Nestle “Ethics are a good business investment, essentially because they entail positive externalities. They are a prerequisite-site for building trust with various inside and outside stakeholders. Such trust, in turn, is a prerequisite for loyal and innovative long-term cooperation. Synergies are only possible through cooperation, and in areas where actions of others are difficult to supervise, trust built on long-term ethical behavior becomes the only practical way to capture such synergies”44 While addressing various issues relating to business ethics, nestle satisfies a variety of stakeholder concerns. “Key stakeholders are a subset of stakeholders who have power to prevent the project from achieving its full set of objectives and potentially may cause the project to fail”45.

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Business Codes of Multinational Firms: What Do They Say? Author(s): Muel Kaptein Source: Journal of Business Ethics, Vol. 50, No. 1 (Mar., 2004), pp. 13-31 Published by: Springer; pages 14 ,21. 43 www.wikipedia.com 44 A Note on Ethics and Strategy: Do Good Ethics Always Make for Good Business?Author(s): Bernhard Schwab Source: Strategic Management Journal, Vol. 17, No. 6 (Jun., 1996), pp. 499-500 Published by: John Wiley & Sons, Pg 499 45 www.stakeholder-management.com NESTLE PAKISTAN

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8.1.1

Managers and Employees; (possible ethical concerns identified) Compliance Fair with Law Dealing and Regulations.

Managers and Employee

Adherence to Conflict of local laws interest addresse Respect of d cultural norms Nestle reputation UNO and defense. OECD guidelines.

Awareness and Human Communication Rights

Liberation to join trade unions Encouraging trust and respect in org culture

Sound workplace environmen t Abolition of child labour Eliminate all forms of compulsory labour

Equal Opportunity

Fair employment Career opportunities Racial, linguistic and ethnic bias discouraged

In its corporate business policy and business conduct code. Nestle identifies workforce rights and manager and personnel obligations towards ethical business conduct, complying with local laws and regulations, and respecting local norms. It is outlined in nestle management and leadership principles that respect of local culture and tradition is management’s commitment and benefiting locality is in turn beneficial to nestle. Addressing conflict of interest and outside activities in business conduct code proper disclosure and uncompromised nestle interest are addressed as priorities. “Corporations are increasingly paying attention to ethics in the conduct of employees at all levels of the organization. The corporate ethics movement addresses the need to guide individual decision making and to develop an ethical workplace environment”46. Organizational culture indicates a firm’s commitment and building values in individuals that are after all what formulate the company and influence its Practices. HR issues of equal opportunities, indiscriminate environment, health and safety are also addressed.

46

Social Responsibility and Ethics: Clarifying the Concepts Author(s): Josie Fisher Source: Journal of Business Ethics, Vol. 52, No. 4 (Jul., 2004), pp. 391-400 Published by: Springer page 393. NESTLE PAKISTAN

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Employees Receiving Formal Classroom Training In Developing Countries

94000 92000 90000 88000 Num ber Of 86000 Eployees 84000 82000 80000 78000 2008

2009 Years 47

Above graph is from key performance indicators issued by nestle group in terms of CSR. Joining trade unions at free will to encourage dialogue, continuous improvement in employee training and skills are also addressed. Nestlé favors fair remuneration structures and attractive compensation package.48 Abolition of child and all form of compulsory labour is also covered by nestle. “The average salary of a factory worker is more than double the average wage of the milk processing industry, and four times that of the informal sector.”49 “A structure which assures operational speed and personal responsibility, with strong focus on results, reducing bureaucracy as much as possible”50 Is defined as desired by nestle.

47

Creating Shared Value Summary Report 2009 Available at www.nestle.com Nestle human resource policy. Available at www.nestle.com 49 http://www.nestle.com/CSV/CSVinAction/AllCaseStudies/DairySectorPakistan.htm 50 The Nestlé Management and Leadership Principles, page 12. available at www.nestle.com 48

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8.1.2

Consumer; (ethical business and communication)

“Ethical behavior only obtains value when it is visible to others, and any 'ethical' action should be milked for all it is worth through wide publicity. Essentially, ethics becomes an exercise in public relations.” 51

Consumers

Quality Assurance

Health and Awareness

Sound Advertising

Compliance with relevant laws

Developing sound dietary Habits

Encouraging energetic pursuits, discouraging violence or exploiting behavior Respect cultural, social religious matters of concerned groups.

Quality management system

Creating awareness on health and balanced diet issues

While addressing consumer issues, in policy nestle focuses on consumer need for nutrition, enjoyment and quality. Building consumer trust through communication and sound products nestle discourages heavy snacking or over eating and keeping a balanced diet. For the purpose nestle Pakistan its website addresses dietary concerns for infants, elderly, women and youngsters. The site covers balanced diet recipes, body weight, and exercising. “By sourcing its milk directly, testing the quality of the milk, and using cooling stations and collection points, Nestlé has helped to prevent adulteration and unhygienic milk handling.”52 Following graph shows renovation in product range, for nutritious diet.

51

A Note on Ethics and Strategy: Do Good Ethics Always Make for Good Business? Author(s): Bernhard Schwab Source: Strategic Management Journal, Vol. 17, No. 6 (Jun., 1996), pp. 499-500 Published by: John Wiley & Sons, page 500. 52 http://www.nestle.com/CSV/CSVinAction/AllCaseStudies/DairySectorPakistan.htm NESTLE PAKISTAN

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Nutritions 8000 7000 6000 5000 Num ber of 4000 Products 3000 2000 1000 0

2009 renovated for nutrition and health

2008 inc in essential nutrients

Years

reduction of sodium , sugars ,fats

53

“The content of consumer communications must reflect good taste and social responsibility in accordance with each country’s laws and regulations and voluntary codes and standards .Although standards will vary from country to country”.54 Offending any ethnic or religious group is prohibited. Advertisements must abide by ethical limits like, not misleading users into potential benefits of products, overstating them. Authority of parents must not be shown undermined, advertisements mustn’t depict violence, or anxiety are included in nestle communication to consumer policy in 2007. “Beyond ethical considerations, consumer criticism of perceived CSR deficiencies can be extremely detrimental to corporate profitability and market share.”55 Nestle Pakistan was also awarded for year 2005 the coveted excellence award in marketing for its sound marketing techniques. “We're proud to be among the only companies in Pakistan to venture outside the commercial mode of communication, offering programs catering to better child nutrition and good parenting.”56 53

Creating Shared Value Summary Report 2009 ; Creating Shared Value Key Performance Indicators. (nutrition )Available at www.nestle.com 54 Nestle communication principles. Page .1 available at www.nestle.com 55 Corporate Social Responsibility in the Supply Chain: An Application in the Food Industry Author(s):Michael J. Maloni and Michael E. Brown Source: Journal of Business Ethics, Vol. 68, No. 1 (Sep., 2006), pp. 35-52 Published by: Springer .introduction, page 35. 56 www.nestle.pk NESTLE PAKISTAN

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8.1.3

Supplier (ethical transactions and business dealings)

Nestle Pakistan at Kabirwala has Asia’s largest milk reception. In Punjab it has developed a milk district. Hundreds of thousands of small farmers live over an area of 100,000 square kilometers in central Punjab. More than 900,000 farmers and their dependants have been directly affected by our milk purchases.57 “The premise of fair trade is that food retailers should support prices to the suppliers that allow these suppliers to not only avoid poverty but also sustain business longevity.”58 Regulations

Suppliers

Condemning of bribery and corruption

Fair Dealing

Quality Assurance

Gifts and meals

Supplier audit

Fair price

Quality tests

Confidential info Nestle directs its employees in improper financial or other advantage, with public or private third party. This could otherwise result in criminal charges or disciplinary procedures. Nestle adheres to OECD’s recommendations of fighting corruption. On the issue of dealing with confidential information of suppliers nestle code states it to be treated as if it was Nestlé’s confidential information. “Nestlé insists on honesty, integrity and fairness in all aspects of its business and expects the same in its relationships with all suppliers of materials, goods and services”.59 .It also endorses international chamber of commerce revised rules of extortion and bribery in international transactions. Endorsement to ICC charter by nestle leads to several issues raised by ICC. In principle 11 of ICC business charter for sustainable development supplier issues are thus addressed. Principle # 11 - Contractors and suppliers: To promote the adoption of these principles by contractors acting on behalf of the enterprise, encouraging and, where appropriate, requiring improvements in their practices to make them consistent with those of the enterprise; and to encourage the wider adoption of these principles by suppliers.60 57

www.nestle.pk Corporate Social Responsibility in the Supply Chain: An Application in the Food Industry Author(s): Michael J. Maloni and Michael E. Brown Source: Journal of Business Ethics, Vol. 68, No. 1 (Sep., 2006), pp. 35-52 Published by: Springer, Page 41. 59 Nestlé’s principles of purchasing, pg 15 60 ICC business charter of sustainable development. Principle 11. 58

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Nestle maintains a ‘supplier code’ along with ‘guiding principles on procurement’. “Food companies may feel that they cannot afford to devote additional financial and employee resources to seemingly indirect issues such as supply chain CSR. Such low margins offer little financial insulation, however, for these companies to endure any serious public campaigns or protests. Thus, ignoring supply chain CSR issues may present a greater risk.”61 Any sort of favors received to influence employees must not be taken. In case of doubt guidance is to be taken form line manager or legal and compliance function. Suppliers dealing in terms of pricing and negotiations should also be unbiased, under free trading principles. “A complex network of collection centers ensures that no farmer has to go far to deliver his daily produce. His payment is prompt and transparent”.62 Auditing of supplier for safe and sound raw and packaging material is also addressed in Nestlé’s ‘principles of purchasing’. Suppliers Audited for Food Saftey, Quality And Processing

3900 3800 3700 3600 3500 3400 3300 3200 3100 2008

2009 63

Nestle Pakistan integrates check and proper storage at all levels, where nestle has installed 100 milk tanks to assure proper storage according to quality and health standards. Nestle also stresses on selection of skilful and trained personnel for procurement purpose in ‘nestle principles of purchasing’. 8.1.4

Competitors (following competition laws and fair play)

Competition against other players for all resource, publicity, or market share is natural. But in order to regulate this competition to avoid any dirty business 61

Corporate Social Responsibility in the Supply Chain: An Application in the Food Industry. Author(s): Michael J. Maloni and Michael E. Brown. Page 45. 62 www.nestle.pk 63 Creating Shared Value Summary Report 2009 ; Creating Shared Value Key Performance Indicators. (suppliers)Available at www.nestle.com NESTLE PAKISTAN

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practices and exploitation of consumer or new entrants certain regulations must be in place. Competition commission of Pakistan regulates the competition in Pakistani market (established on 2nd October; 2007 under the Competition Ordinance, 2007). Major aim of this Ordinance is to provide for a legal framework to create a business environment based on healthy competition towards improving economic efficiency, developing competitiveness and protecting consumers from anti-competitive practices. Nestle supports free enterprise and other company’s equal rights .And supports development of competition laws. Pricing

Competitor

Fair competition Marketing

Collusion with Mergers and Targeting competitor acquisitions competitor condemned product Abiding Allocation of competition laws customers and products

Nestle in its corporate principles states that nestle have its commercial policy set independently and do not fix prices in agreement or collusion with competitor. Allocation of customer and territories, markets in agreement with competitor is also prohibited .And deals with supplier and customer in relevance to competitor laws. Mergers and acquisitions will be used as a means to improve business rather than restrict competition. “Advertising should not name competitors directly, portray competitive products inaccurately, nor denigrate them”64.

64

Nestle consumer communication principles. Page 1, available at ww.nestle.com. NESTLE PAKISTAN

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8.1.5

Business partners (collaboration and combined efforts)

“Business partner is a term used to denote a commercial entity with which another commercial entity has some form of alliance. This relationship may be a highly contractual, exclusive bond in which both entities commit not to ally with third parties. Alternatively, it may be a very loose arrangement designed largely to impress customers and competitors with the size of the network the business partners belong to”65. Nestle in its corporate business principles, identify several possible business partners.

Business partner

Authorities

Supporting Ethical dialogue Concerns Promotion and implementation of legislation

Academic and Professional Bodies

Financial Local Community Communities

Communication and cooperation

Information sharing

Personal involvement

No insider trading

Develop long term relations

Updating knowledge for mutual benefit

“Bronn and Bronn (2003: 291) suggest that "Organizations are undergoing dramatic changes as stakeholder groups exert an ever-increasing influence on the place and responsibilities of organizations in society.”66 “The net effect of Nestlé Pakistan’s activities in the dairy sector amounts to more than 80 000 jobs, equivalent to 35 indirect jobs for each Nestlé employee.”67 In its corporate business principles nestle pledges to support ongoing dialogue between all industry sectors. Working with governmental laws and regulatory authorities, and protecting rights of consumer. Business relations are to be based on fairness and mutual trust in context of free market. Encouraging improvement of group products, policies and services it fosters a constructive update of knowledge and mutual benefit with academic and professional bodies, leading to open and direct communication of information to general public and financial community. Being listed at Karachi stock exchange it also has to abide by 65

www.wikipedia.com The Role of Strategic Conversations with Stakeholders in the Formation of Corporate SocialResponsibility Strategy, Author(s): Morgan P. Miles, Linda S. Munilla, Jenny Darroch Source: Journal of Business Ethics, Vol. 69, No. 2 (Dec., 2006), pp. 195-205 Published by: Springer ,page 201. 67 www.netsle.com 66

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corporate governance code. Disclosure and transparency are listed as principles followed by the company. Nestle also prohibits purchase and sale of nestle securities and shares on basis of information not yet public and abides by insider trading rules. While working with the local communities it operates in nestle Pakistan focuses on building long term relations through building partnerships, creating jobs, benifiting surrounding community. “The environmental production conditions within the milk districts are superior to non-milk districts, and school enrolment among the daughters of smallholders within the milk district has increased.”68 “Nestlé is also convinced that it is the people who form the strength of the Company and that nothing can be achieved without their commitment and their energy, which makes people its most important asset”69

68 69

www.nestle.com Nestle management and leadership principles. NESTLE PAKISTAN

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PART III 9 CONCLUSION In light of research done, and the review and analysis undertaken several areas of successfully pursued CSR policy, by nestle Pakistan are identified by me. Not only are the firm’s practices in line with nestle group’s policy , but also the firm’s adaptation to local markets of Pakistan and its recognition of cultural and economic environment are reflected in translation of CSR principles. Following can be concluded thus;  CSR activities of firm stretch from education, earthquake relief, and rural population development showing commitment towards social welfare.  In its environmental stewardship efforts, the efficient use off resource, minimization of environmental footprint, enhancement and improvement of environmental friendly operation and policies are reflected.  Through people commitment Nestle Pakistan has achieved positive image, and work quality while promptly reporting relevant issues to stakeholders.  Incorporation of ethics, in business conduct has been reflected in multiple aspects of business. Has the biggest market share in its industry, working with government and international organizations (UNO) towards CSR. Has an ethical code to abide by, shows that the company has been successful in exhibiting ethics in its operations, dealings and impact on society at large.  The idea of shared value creation by group has been followed by Nestle Pakistan. Creation of mil district, working with UNDP, helping farmers and suppliers, consumer health are examples of value creation created by company for Pakistani society.

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SKILLS AND LEARNING STATEMENT QUESTION #1: what did you learn from the meetings with your project mentor, including the presentation that you gave to your project mentor? ANSWER: before the first meeting with my project mentor, Mr. Ikram-ul-Haque Syed I was quite blank and undetermined. The fact that I am also taking my ACCA paper P3 from him made me feel convenient to put everything on the table. He briefed me on OBU criteria and I learned about requirements like ethics module, project deadline and topic selection while focusing on single organization. He advised me to select topic not only on personal interest but also current study relation .the organization selection according to presence, topic relation, information availability etc was also stressed by him. I left with a realistic view on getting what I want to be the topic and organization. “Most important principle I have learned in the field of interpersonal, it would be this: Seek First to Understand, Then to Be Understood. This principle is the key to effective interpersonal communication”70 The general information helped me to gather the required energy and plan the work. After taking my time and finally selecting topic 20 and Nestle Pakistan as the organization. I got down to collect information as I guessed the focus of the next meeting to be on discussing research question designing , and research approach for RAP. During the second meeting I decided to;  Present gathered data on topic and company.  Discuss my understanding of drafting the RAP made by reading RAP preparation guide.  Show the initial stages of RAP like topic selection and research objectives prepared by me.  I felt relieved that he was pleased with gathered information. A discussion on research work and information used, helped me to understand usage of relevant and reliable information in RAP. Using already published work of others with proper referencing was also stressed by him, giving them the credit and also being ethical in research work. While discussing apt RAP preparation, mentor cleared several issues like planning the work within time limit, Scheduling meetings around drafting of work to get feedback in time, Draft SLS along with the RAP to properly reflect experience and learning process while overcoming thresholds during research. Student accountant article on SLS preparation turned to be helpful and I understood the importance of using secondary information in research work. A review of my work done braced me with the knowledge of using 70

The seven habits of highly effective people, by Stephen R. covey pg 120 . NESTLE PAKISTAN

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information in RAP, referencing it, differentiating between primary and secondary data, and importance of relating qualitative and quantitative data. Also working with constraints like time limit, loss of direction and communication gaps was discussed. Through this encounter I was made aware of work remained. Reassurance about quality required and present progress were also given .this assessment helped me in drafting SLS having several self assessment questions and I was able to reflect myself better. I now felt more confident in fulfilling OBU criteria, designing research questions covering my topic, giving an in depth view of research work done, Possible ways of addressing them. Improvements in my proposed research approach were also made. The third meeting was focused around presentation on power point slides, and finalizing completed project. I was concerned about the layout and discussed it with peers and mentor. The presentation prepared by me was followed by question and answer session, I was a bit confused from the start but tried to hold my ground, it was now that I realized I am being able to handle Questions and left feeling rather satisfied about my efforts on RAP. QUESTION# 2: how well do you think you have answered your research questions? ANSWER: while formulating research questions I kept in mind my RAP objectives and the topic, I wanted both to cover the issue of CSR including business ethics from various angles and also not to get carried away with my research and loose my way while actually trying to connect the issue with stakeholders and impact on business practice. This was intriguing, as issue like environmental friendly business policies and corporate philanthropy in application have various related goals and consequences, then what we read in a book once. Gathering data most of which due the nature of topic came in qualitative form, was one thing interrelating it, connecting it with quantitative data and making an analysis that would reflect the extent of research done and reflect the direction and reason of research was yet another. Referencing of information that came from both academic and business sources was also challenging. This although was thoroughly provoking, but gave me an opportunity to apply gained knowledge .One issue while working on CSR and business ethics was the still evolving and relevant nature and application of these terms. In practical context, differentiating them from mere advertisement, implications of social investments in long term and interrelation of society and business, I found to be very debatable topics. The deep cultural and societal impacts, religious and economic conditions and legal environment of business strongly compliment CSR policies. My idea of effectively answering the questions was designing them so that they might cover various dimensions like economic, ethical, philanthropic and social issues relating CSR and while answering these relate the facts and company information. With shedding light on stakeholders covered by policies and affected by business operations. Reports and figures released by the company and

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pursued policies were extremely helpful while analyzing company’s performance towards CSR in relation to group’s with a global presence. While learning about CSR and business ethics the academic material like books and journals, I was left with no proper sense of direction, coming back to company information and facts , and form an approach that would not end me up in getting lost in translation, took some time. I kept a simple approach of drafting my RAP even if it seemed scattered and presented without sequence, and later redraft it as this will take less time than to linger it altogether. While addressing each question I would collect information, and cut it short in most relevant, related, and authentic ,while the company’s clear and communicated stance on the topic , required thorough study for the purpose of review and application of knowledge to analyze the consequences and effects of business policy in terms of CSR ,referencing from books , journals, news ,global compacts etc, to support any conclusions or results reached was also stressed in order to form a solid base for my RAP to reach its objectives. Use of tables and quantitative data to increase understanding and support conclusions reached was also stressed. QUESTION#3: How have you demonstrated your interpersonal and communication skills during this project work? ANSWER: Undertaking this RAP was my own decision; my first task was to convince my family on the importance of this for me in my future study and career. I knew that I might come across several barriers but, did it with an intent to learn and explore. The fact that I have no practical experience relating my ACCA studies till date lacking certain communication skills is quite natural for me. From initial briefing about RAP by the mentor, I felt I had several general knowledge questions, some of them were answered by my mentor and some were addressed by the RAP preparation guide on ACCA global. While gathering information for my project I felt that there was no obvious need for primary data due to the overwhelming information I found about nestle. Once I started designing research questions there were certain issues raised in my mind like proper presentation of work, covering my topic from several angles and also review company policies I found it difficult to explain this all to my mentor. Scheduling with the mentor, due to his busy schedule at times also was an issue. During the meetings the presence of unnecessary noise from surrounding people and interruption was also distracting. I however learned that I must not let any of this affect my concentration, taking notes and timing the meetings was helpful. While answering research questions I found that I have several issues resolved while trying to answer them in the best possible way and in this way I was being able to cover the RAP, show my mentor practically what I have done, and also my limitations in research and proper drafting can be communicated properly, increasing the visibility of both my strengths and weaknesses. Discussing research work projects, with my friends in universities learned that confusion, delay, and most off all communication gaps are pretty much a part of the game.

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“When you communicate synergistically, you are simply opening your mind and heart and expressions to new possibilities, new alternatives, and new options”71 Sometimes while raising queries and briefing my mentor on my work I felt I am not being able to explain myself and my mentor did complain about this to me. I on the other hand felt that at several occasions while discussing options for RAP to turn out at its best, I and my mentor were not speaking the same language. Through this I gained confidence to present my work and the composure to face criticism, prioritizing effective questioning and communication over my natural shy nature. Thus I gained useful information and experience to work and interact with people. QUESTION# 4: how has undertaking the RAP helped you in your accountancy studies and current employment role? ANSWER: the topic selection for RAP was done carefully by me not only reflecting my personal interest but also expanding my current knowledge base on CSR and business ethics, both of whom will be examinable in ACCA paper P1. Undertaking the RAP was a distinct experience, through which I learned while researching and drafting the project, how to find and collect relevant information on the internet: the importance of thorough reading for strong knowledge base, to support ongoing research work. I also learned how to present and sequence information making it presentable in a meaningful way. Connecting issues and most of all, finding a direction through a rather haphazard path of research work. Tolerating delay, meeting deadlines, and working with constraints like lack of information availability, electricity breakdowns. Developing certain IT skills working with Power Point and Excel sheets also was a new experience to me. Handling frustration, due to the burden of being individual in undertaking the task and consequences. Although I am not currently employed, but all of the above mentioned experiences must come in handy and I hopefully will feel less amateur in work environment and pressures. “The experiences you have as you carry out your decisions take on quality and meaning in the context of your life as a whole.”72 Moreover while working on a company whose group has global presence, business ethics relating employees, operations, decisions, management, supplier, consumer etc have been viewed with increased visibility and better understanding .and I feel that there is a lot that can be applied during my work experience as ethical concerns being a professional have to be one of my 71 72

The seven habits of highly effective people by stephen R.covey pg134. The seven habits of highly effective people by Stephen R. covey . pg 63. NESTLE PAKISTAN

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primary concerns. Overcoming communication barriers as mentioned in above question, and working with others is also a learning experience. The ACCA exam papers of professional level expect a certain level of practicality reflected while answering the exam questions, as I learn from past papers I feel that while working on nestle Pakistan I not only gained valuable knowledge on CSR in firm perspective and also the academic and business material gone through other then issued by the firm I feel much more enlightened about CSR and business ethics in application. Connecting management philosophy and strategy, its integrity and commitment within business practices .the importance of stakeholder interests addressed , use of proper communication , and the idea of creating a shared value for business and stakeholders as claimed by nestle , aligning both party interests will certainly become handy while sitting for P3 exam ‘business analysis’.

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LIST OF REFRENCES AND BIBLIOGRAPHY

1. Phill watts Richard Holme, (Jan 2000) Making good business sense, issued by world business council for sustainable development. 2. Irene Goll and Abdul A. Rasheed (Jan., 2004), ‘The Moderating Effect of Environmental Munificence and Dynamism on the Relationship between Discretionary Social Responsibility and Firm Performance’ Journal of Business Ethics, Vol. 49, No. 1 3. Reynold levy. (n.d.), a candid account of corporate philanthropy ‘give and take’, Harvard business school press. 4. Stephen R. covey; The seven habits of highly effective people 5. ACCA paper P 1, professional accountant .BPP. 6. Alan Malachowski (editor),(n.d.) business ethics , critical perspectives on business and management , published by Routledge. 7. Muel Kaptein, (Mar., 2004), ‘Business Codes of Multinational Firms: What Do They Say?’ Journal of Business Ethics, Vol. 50, No. 1 pp. 13-31 published by Springer. 8. Bernhard Schwab (Jun., 1996), ‘A Note on Ethics and Strategy: Do Good Ethics Always Make for Good Business ‘Strategic Management Journal, Vol. 17, No. 6 pp. 499-500 Published by: John Wiley & Sons, 9. Josie Fisher (Jul., 2004),’Social Responsibility and Ethics: Clarifying the Concepts’ Journal of Business Ethics, Vol. 52, No. 4, pp. 391-400 Published by: Springer 10. Michael J. Maloni and Michael E. Brown (Sep., 2006), ‘Corporate Social Responsibility in the Supply Chain: An Application in the Food Industry’ Journal of Business Ethics, Vol. 68, No. 1 pp. 35-52 Published by: Sprin 11. Morgan P. Miles, et al ‘(Dec., 2006), The Role of Strategic Conversations with Stakeholders in the Formation of Corporate SocialResponsibility Strategy’, Journal of Business Ethics, Vol. 69, No. 2 pp. 195-205 Published by: Springer. 12. the UN global compact available at ; http://www.unglobalcompact.org/aboutthegc/thetenprinciples/index.html 13. ICC business charter for sustainable business development; available at http://www.bsdglobal.com/tools/principles_icc.asp 14. www.nestle.pk 15. www.wikipedia.com 16. www.mckinseyquarterly.com 17. www.dailytimes.com.pk 18. www.stakeholder-management.com http://www.stakeholdermanagement.com/blog/?p=16

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19. http://www.scribd.com/doc/6895666/ethics-csr 20. www.nestle.com; 21. http://www.nestle.com/InvestorRelations/Reports 22. http://www.nestle.com/InvestorRelations/Reports/OtherReports/Environment .htm 23. http://www.nestle.com/InvestorRelations/Reports/OtherReports/People.htm 24. http://www.nestle.com/InvestorRelations/Reports/OtherReports/OtherTopics .htm 25. Nestlé Report on principles of purchasing. 26. Nestle report on communication principles. 27. Nestle (2009) Creating Shared Value Summary Report; Creating Shared Value Key Performance Indicators. 28. Nestlé port on Management and Leadership Principles http://www.nestle.com/AllAbout/Governance/BusinessPrinciples/BusinessPri nciples.htm 29. Nestle human resource policy. 30. Nestle sustainability review. 31. Nestle corporate business principles. 32. Nestle code of business conduct. 33. Nestle policy on environmental sustainability. 34. Nestlé (2009) Consolidated Environmental Performance Indicators; 35. Nestle report on Nestle and water. Sustainability, protection, stewardship.

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APPENDIX ( A ) NESTLE ENVIROMENTAL PERFORMANCE The following figures and chart is excerpt from “2009 Consolidated Nestlé Environmental Performance Indicators”

2009 Consolidated Nestlé Environmental Performance Indicators

Indicator Total water withdrawal

Total water discharge

Units 106 M3 per year

2000 % Change GRI Reference 2008- 2005- 2000- ReferYear 2005 2006 2007 2008 2009 09 09 09 ence 213

155

157

147

143

-3.2% -10.2% -33.0% EN8

M3 per tonne 8.42 product

4.37 4.05 3.82 3.59 3.47 -3.5% -20.7% -58.8%

Outputs 106 M3 per year

123

158

M3 per tonne 6.24 product

Water discharge quality

159

118

101

96

91

*

-5.0% -25.6% -42.2% EN21

3.38 3.09 2.46 2.34 2.22 -5.3% -34.3% -64.5%

*

103 tonnes COD per year N/A

N/A

N/A

N/A

9.17 8.29 -9.6% -

-

Average mg COD / l

N/A

N/A

N/A

95

-

*

N/A

N/A

N/A

96% 97% 1.0%

-

*

N/A

% of COD removed N/A 6 Greenhouse 10 tonnes CO2 gases emission per year 4.72 (direct), scope 1 kg CO2 per tonne product 186 Greenhouse 106 tonnes CO2 gases emission per year N/A (indirect), scope 2 kg CO2 per tonne product N/A

90.78 -4.4% -

-

EN21

4.31 4.05 4.13 4.10 3.98 -3.1% -7.6% -15.8% EN16

118

106

101

100

97

-3.4% -18.4% -48.2%

N/A

N/A

3.1

3.0

3.0

-0.1% -

-

N/A

N/A

75

73

73

-0.4% -

-

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* EN16

*

37


2009 Consolidated Nestlé Environmental Performance Indicators

Indicator

2000 % Change GRI Reference 2008- 2005- 2000- ReferYear 2005 2006 2007 2008 2009 09 09 09 ence

Units 103 tonnes SOx equiv. per Air acidification year 28.2 potential kg SOx equiv. per tonne product 1.11 tonnes R-11 Emissions of equivalents ozone-depleting per year 29.69 substances GR-11 equiv. per tonne 1.17 product

18.4 19.0 21.4 18.11 16.64 -8.1% -9.7% -41.0% EN20

0.51 0.50 0.52 0.44 0.40 -8.4% -20.3% -63.7%

*

10.19 8.93 8.82 5.02 4.85 -3.2% -52.4% -83.7% EN19

0.28 0.23 0.21 0.12 0.12 -3.5% -58.0% -90.0% *

By-products (for recovery)

Waste (for disposal)

106 tonnes per year 1.28 kg per tonne product 50.57 106 tonnes per year 0.48

1.48 1.20 1.07 1.11 1.35 22.0% -8.7% 5.5%

EN22

40.7 31.4 26.0 26.95 32.79 21.7% -19.4% -35.2%

*

0.44 0.40 0.37 0.41 0.36 -12.4% -17.8% -25.2% EN22

kg per tonne product 18.96 12.0 10.5 9.1 * Nestlé specific indicators that are not required by GRI.

9.98 8.72 -12.7% -27.4% -54.0%

Total water withdrawal (EN8) The sum of water used by Nestlé factories from all sources, including purchases from suppliers as well as surface, ground and rain water sources. This includes water that may be treated through industrial services (such as softening and demineralising), non-contact cooling water, water used for cleaning and water used by itself as a raw material (e.g. for bottled waters) but does not include

NESTLE PAKISTAN

*

38


water contained in raw materials (e.g. from milk). Over the last ten years, both absolute total water withdrawal and water withdrawal rate per tonne of product decreased. This decrease is the result of extensive efforts by Nestlé engineers and environmental professionals to improve water efficiency in our operations. It is also influenced by changes in the relative tonnage of each product category (volume change) and acquisitions and divestitures. The following chart shows the contribution of these three components. Total water discharge (EN21) The sum of all water effluents discharged from Nestlé factories. Water effluents are generated in manufacturing from processing, cleaning and some cooling processes. Over the last ten years absolute total water discharge decreased by 42.2% as well as the total water discharge per tonne of product, which decreased over this time period by 64.5%. Water discharge quality (EN21) The water quality is expressed by the Chemical Oxygen Demand (COD), commonly used to measure the amount of organic compounds in water. A decrease in COD represents improvement of water quality. Greenhouse gas emission (direct) (EN16) The sum of all on-site greenhouse gas emissions at Nestlé factories which arise from combustion processes used to manufacture products as well as the CO2 equivalents from refrigerants. These greenhouse gas emissions can result from burning of fuels in boilers, roasters, dryers, electric generators and from refrigerants losses (CO2 eq). Not included are greenhouse gases arising from transportation and business travel. This indicator corresponds to Scope 1 of the WRI/WBCSD GHG Protocol. Over the last ten years absolute greenhouse gas emission (direct) decreased by 15.8%.The greenhouse gas emission (direct) rate per tonne of product also decreased by 48.2%.These reductions have been achieved through energy savings and fuel-switching projects where fuels such as coal and heavy fuel oil were replaced by cleaner-burning fuels such as natural gas. Greenhouse gas emission (indirect) (EN16) These are greenhouse gas emissions arising from the generation of electricity, hot water and steam which is purchased by Nestlé or otherwise brought into our organizational boundary. The emissions physically occur at the facility where the electricity is generated. Typically publicly available country-specific default factors are used to calculate this from the purchased energy qualities. This

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indicator corresponds to Scope 2 of the WRI/WBCSD GHG Protocol.

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Air acidification potential (EN20) The sum of all SOx and NOx gas emissions at Nestlé factories resulting from the total on site energy consumption, converted into SOx equivalents. Over the last ten years absolute air acidification potential decreased as well as the air acidification potential rate per tonne of product, also decreased over this time period. These reductions have been achieved through energy savings and fuel-switching projects where fuels such as coal and heavy fuel oil were replaced by cleaner-burning fuels such as natural gas. Emissions of ozone-depleting substances (EN19) The sum of substances emitted from Nestlé factories which have been shown to contribute to the depletion of the ozone layer, that is, having an ozone depletion potential. The common unit of measurement is R-11 equivalents. R-11 is one type of refrigerant, which has been assigned an ozone depleting potential of one, with all other ozone depleting substances being assigned relative values. The ozone depletion potential of each substance is determined using conversion factors commonly agreed by relevant authorities. These substances are primarily refrigerants in equipment used to cool or freeze products. Both absolute ozone depletion potential and ozone depletion potential rate per tonne of product decreased over the last ten years. By-product (for recovery) (EN22) Any materials that are generated during the manufacture of a product that leave the factory and is destined for reuse or recovery, including recycling, composting and incineration with heat recovery. They are not limited just to the product manufactured; they include all materials used to support the manufacture. In 2009, the by-products figure increased due partly to the newly acquired Nestlé Nutrition factory which generated approximately 5% of the total Nestlé byproducts. Waste (for disposal) (EN22) Waste is any material, which arises during the manufacture or distribution stage of a product at a factory site that is destined for final disposal to off site landfill or to incineration without heat recovery. Not included are extraordinary wastes generated on a non-routine basis, such as construction and demolition waste, contaminated soils, etc. Over the last ten years absolute waste quantity decreased by 25.2%.The waste rate per tonne of product also decreased over this time period by 54%.

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APPENDIX ( B )

NESTLE KEY PERFORMANCE INDICATORS FOR YEAR 2009 The following figures and chart is excerpt from “Creating Shared Value Summary Report 2009”

Creating Shared Value Key Performance Indicators

GRI

2008

2009

109908

107618

18039

10428

10375

9963

67

71

Renovated products for nutrition or health considerations(b)

6254

7252

Products with increase in nutritious ingredients or essential nutrients (b)

3068

3878

Products with reduction of sodium, sugars, TFAs, total fat or artificial colourings(b)

3186

3374

Products analysed and improved or confirmed via 60/40+ programme (sales volume, CHF billion)

13.6

16.8

Products containing Branded Active Benefits (sales volume, CHF million)

5072

5045

Economic Total Group sales (CHF million) • Net profit (CHF million) •

Nutrition Nestlé Nutrition business (sales volume, CHF million) Products meeting or exceeding Nutritional Foundation profiling criteria (% of total sales)(a)

Products featuring Nestlé Nutritional Compass labelling (% of sales worldwide)(c)

•

98

98

Nestlé television advertising to children under six in compliance with policies on responsible marketing (%)

•

n/a

99.9

n/a

100

Infant formula marketing staff in developing countries trained in the WHO Code (% of staff)

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Creating Shared Value Key Performance Indicators

GRI

2008

2009

455

807

4.00

4.17

n/a

58995

20.0

21.8

3417 165000 120000

3864 165497 165497

282887

278165

970

1319

Lost time injuries among employees and contractors (per million hours worked)

2.8

2.0

Total injury rate among employees and contractors (per million hours worked)

6.1

5.1

13

4

83928

93146

25

27

42

42

Safety, health and environment governance ISO 14001/OHSAS 18001-certified sites (number of certificates)

Packaging Total packaging materials (million tonnes)

•

Packaging weight reduction (tonnes) Reduction of packaging weight (per l of product) – Nestlé Waters, over 5 years (%)

Suppliers Suppliers audited for food safety, quality and processing Suppliers who received Nestlé Supplier Code Suppliers who acknowledged Nestlé Supplier Code

Our people Total workforce (number of employees) Key Business Positions

•

• Fatalities of employees and contractors

• Employees receiving formal classroom training in developing countries

• Leadership positions held by women (%)

• Local Management Committee members native to country in developing countries (%) • •

•

KPI corresponds in full to a GRI G3 indicator. KPI corresponds in part to a GRI G3 indicator.

(a) 2009 assessment scope: 66% total food and beverages sales volume. (b) based on reports of approximately 75% of worldwide product development teams. (c) Excludes petcare and Dreyer’s. (d)Excludes plain coffee, tea and water, products for Nestlé Professional, gifting chocolate, petcare, and Nestlé Nutrition. (e) Based on internal and external audits.

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APPENDIX ( C ) GLOSSARY OF TERMS ACCA: association of certified chartered accountants CHF: Swiss frank (ISO currency code.) RAP: research and analysis project CSR: corporate social responsibility NESTLE SA: Switzerland based nestle. Parent company of nestle Pakistan UNO: United Nations organization OECD: organization for economic cooperation and development ICC: the international chamber of commerce UHT: ultra high temperature processing RS: Pakistani rupees. NGO: non governmental organization UNDP: United nations development programme

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