Nestle’s Corporate Social Responsibility and the Farmers’ Perception Thereof A Preliminary Study by J. Sedfrey S. Santiago David Edward G. Jimenez John Carlos B. Clerigo John Gokongwei School of Management Ateneo de Manila University

Outline Coffee Industry Background Problem Statement Method Results and Analysis Preliminary Conclusion More informative.

Coffee Industry Background Philippines’ 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) Show three-year decline. Source: Gain Report, USDA-FAS, 2011

Coffee Industry Background Nestle’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 60% of total local coffee production bought by Nestle. Who is 2nd to Nestle?

Background CSR Programs Buying Station Change picture.

Background Training Program

Problem Is 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?

Methods Interviews with key players in the coffee industry (Philippine Coffee Board, Philippine Coffee Alliance, Nestle, Government and Coffee Farmers) Adjust sample size. Don’t abbreviate.

Survey and Interviews

Methods Survey 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 Adjust sample size. Don’t abbreviate.

Methods Survey Design WFTO’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 More descriptive titles.

Results: Majority of farmers are male

Results: Small farm sizes

Results: Classification of Respondents   Number of Farmers percent Buying Station only 20 60.6 Training Program only 5 15.2 Both 8 24.2 Total 33 100.0 Add total.

Results: Is the Buying Station Program fair?

Fairness: Buying Station Program Top 5 Fairness Indicators: Top 5 Fairtrade 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. 64% I have more income from coffee farming (that I can use to buy more land, equipment and materials). Check third statement. Pareto chart.

Fairness: Buying Station Program Bottom 5 Fairness Indicators: Bottom 5 Fairtrade 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. 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. 4%

Results: Is the Training Program fair? Explain the question for this graph.

Fairness: Training Program Top 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 I can say that my coffee beans have better quality because of my Nestlé training. I have better support system in farming because of Nestlé (because I know people from the training program who can give me assistance). I can plant other kinds of crops aside from coffee. Non-discrimination

Fairness: Training Program Bottom 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. 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.

Results: Did the programs of Nestle improve the farmers’ standard of living? State the question.

Results: Are the Farmers satisfied with the CSR programs of Nestle?

Results: Comments/Suggestions of Farmers On 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

Conclusion Coffee 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 Work The 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.

Methods 10 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 Program Top 5 Fairness Indicators: Top 5 Fairtrade 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% I receive full payment for my beans on time. Payment of a Fair Price 89% 4% 7% All or substantially all of my beans are bought by Nestle. Capacity Building 79% 18% Nestle explains how they compute for the price of my coffee beans. 64% 32% I have more income from coffee farming (that I can use to buy more land, equipment and materials). Check third statement. Pareto chart.

Fairness: Buying Station Program Bottom 5 Fairness Indicators: Bottom 5 Fairtrade 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% Nestle provides a written contract regarding the sale of my coffee beans. 75% Nestlé buying station employees inform us of the principles of fair trade. Trading Practices 11% 18% Nestle consults farmers when they plan to change policies in the buying station program. 4% 89%

Fairness: Training Program Top 5 Fairness Indicators: Top 5 Fairtrade Principle Yes No Not Sure  Missing Values Total Nestle informed me of the processes and objectives of the training program. Transparency and Accountability 92% 8% 0% 100% I learned from Nestlé how to add more value to my coffee beans (like processing). Capacity Building I can say that my coffee beans have better quality because of my Nestlé training. I have better support system in farming because of Nestlé (because I know people from the training program who can give me assistance). I can plant other kinds of crops aside from coffee. Non-discrimination

Fairness: Training Program Bottom 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 69% Nestlé tells us not to use forced labor. 62% 8% 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. 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 54%