Contemporary Issues in Society and Business

Question: Students analyse corporate scandal or controversy, examining its causes, its social and / or environmental impact, and the nurture and adequacy of response to it on the part of the wider industry or sector? Answer: Introduction As opined by Philip Kotler in his work Principles of Marketing as consumerism and environmentalism movements mature worldwide it has become essential for marketers to ensure that they are aware of the impact their actions have on society and environment (Grnewlder, 2008). Corporate Social Responsibility determines how organisations integrate corporate self-regulation into their business models (Coombs Holladay, 2011). CSR policies serve as a self-regulatory mechanism which help organisations monitor and control the activities in a way that they adhere to ethical standards, spirit of law and international norms. This report analyses the social responsibility issues associated with the Hershey Company sourcing its cocoa from West Africa which is accused for extensive child labor, forced labor and human trafficking. It identifies the root cause behind Hershey Companys failure to perform its responsibilities towards society and environment. The report also discussed the natures and adeq uacy of responses to such issues presented by the industry. Founded in year 1894, by Milton S. Hershey, The Hershey Company headquartered in Hershey, PA, is North Americas largest chocolate manufacturer (The Hershey Company, 2015). The company has wide international presence with facilities in more than 90 countries across the globe. The company considers is people as its most precious assets and thus employs 13,000 employees across the globe and put in their best to deliver high quality, delicious products to most valued customers. The company has recorded annual revenue of $ 7.1 billion and has more than 80 brands across the globe. In-spite being recognised as a global brand Hershey Company has been accused for sourcing its cocoa from West Africa where the cocoa farmers are known to use forced and child labor. Hershey Companys failure to meet its corporate social responsibility and its unethical sourcing of raw materials is showing adverse affects on its brand image across the globe. Analysis of Issues involved Hershey Company has failed to take the responsibility of its cocoa supply chain and has been accused to source most of its cocoa from West Africa which is plagued by abusive child labor. Apart from child labor there are number of social responsibilities issues associated with Hershey sourcing its cocoa from West Africa. Cocoa farmers in West African region are recognised as the major supplier of cocoa in world still they live in poverty while the chocolate corporations earn huge profits. These suppliers are not even paid enough to hire adult workers at cocoa plantation farmers. Statistics reveal that just 6.6% of the value of $1 Chocolate bar actually researches the farmers, 35.2% is received by chocolate manufacturers and 44.2% is received by retail and taxes (Nieburg, 2015). Sustainability efforts made by chocolate producing companies like Hershey are actually failing to address the actual problem of poverty faced by cocoa suppliers. Hershey company do not source cocoa that has been certified by independent organisations thus cannot ensure that their raw materials meet various social, labor and environmental standards. Hershey lacks well defined policies and procedures that help ensuring that the cocoa it has purchased is grown without the use of any form of labor exploitation. Hershey is not involved in ethical sourcing and fail to source Fair Trade Certified cocoa Causes behind the Issues The primary reasons behind the social responsibility issues identified above are; Unethical Sourcing: Hershey sources its cocoa from West Africa a region that is accused for abusive child labor, human trafficking and forced labor. It been more than 10 years since the worlds leading chocolate companies promised to tackle child labour still there are more than 80,000 children working for the cocoa industry in Ivory Coast, the worlds largest producer of cocoa (BBC News, 2011). These children are forced to work for long hours at the farms and are almost paid nothing. They are forced to indulge in dangerous jobs which result in lifelong injuries and even deaths (BBC News, 2011). Most of the families in West Africa are involved in cocoa production on small farmers and are not even able to earn a living income. They are paid really less for the beans thus they do not have enough money to employ adult workers and pay them fair wages. Hersey has been well aware of this fact since year 2001still its lacks control over its supply chain and continue to source from West Africa without ensuring that cocoa it purchases is free from labor rights abuses of any form. Hershey enjoys a market share of 42.5% in United States chocolate industry still it fails to ensure that its products do not use cocoa that is produced under most harmful conditions of abusive child labour Lack of Transparency: As stated by the 2010 Trafficking in Persons report there is no effective way to monitor a supply chain until it is traced all the way down to the raw materials. According to the report businesses are responsible for all the labor involved in their supply chain starting from the production of raw materials and in order to ensure compliance they must get all the actions verified by an independent third party. Hershey lacks well defined programs that can help them trace their cocoa supply chain and ensure that the farms from which they source their cocoa is not using abusive child labour in any form. Hershey Trust has clearly rejected investors proposal to institute supply chain transparency programs for the cocoa its sources in year 2006. The same happened in year 2008 which clearly reveals the companys unwillingness to increase transparency and accountability in their supply chain across the globe (Mills, 2014). These rejections on Hersheys part to provide trans parency into its supply chain are completely unacceptable especially when it is associated with serious issues of abusive child labour and human trafficking. According to Richard Lenny CEO of Hershey Company providing such confidential information and revealing weaknesses in companys supply chain to shareholders will adversely affect companys market position and competitive standing. This lack of transparency in Hershey Companys supply chain further encourage farmers involved in cocoa production to use child labor on their plantations. Greenwashing: Hershey has no policies and procedures in place that can help them ensure that the cocoa they purchase and use in their products is not produced using child labor. As an example of its social responsibility Hershey points out to various charitable donations it has made for children welfare in US and West Africa (Dragiewicz, 2014). Greenwashing is a term that defines the false actions of a company or an organisation wherein they indulge in extensive advertising and marketing spending huge time and money to claim they are green rather than actually implementing business practices that will benefit the environment (Blythe, 2013). Hershey Company presents a perfect example of greenwashing by pointing out its charitable activities in its corporate social responsibility reports but at the other end they avoid policies that can help tracking their global supply chain (Baird, et al., 2012). They pay less to cocoa farmers who are in turn forced to use child labor on their farms which is the only means of living for them. In the United States, Hershey Company makes significant efforts to support underserved children however fails to take adequate measures to ensure that rights of children are protected in the process of production of its main ingredients (Gustafson, 2014). Heshey points of a number of initiatives its has taken to improve the life of children in West Africa however no specific information is available on how these investment actually prevents use of child and forced labor on cocoa plantation farmers from where it purchases its cocoa. Lack of Certification: Consumer today form the heart of all business and marketing strategies(Ferrell Hartline, 2012). With a rapid increase in health education across the globe consumers today have changed their ways of buying eatables. Apart from the nutritional benefits associated with the product they are also keen to have complete knowledge about the source of ingredients used in its production (Belch Belch, 2011). They want to have complete information about the conditions under which the products are manufactured(Saxena, 2010). Consumers today expect companies to ensure that they are accountable for any labor and environmental issues in their supply chain. They expect companies to have strong policies to protect workers right(Sahaf, 2008). They want companies to ensure that commitments made by them on paper are actually implemented in an effective manner and are monitored and audited by independent third parties. In order to create a sustainable supply chain for cocoa it is essential that certification schemes are implemented by chocolate companies. These certification schemes help ensuring that cocoa is produced according to specified social and environmental standards. Fair Trade, UTZ certified, Rainforest Alliance and Organic certification are some of the certification programs that are used by cocoa sector of West Africa (Bhagwati, 2007). Very few of Hersheys chocolate products are Fair Trade certified making the company lag behind competitors in development of a sustainable cocoa supply chain. Social and Environmental Impact of Issues Unethical sourcing of cocoa from West African region has serious adverse affects on the local communities and environment of the area. West Africa is the worlds largest producer and supplier of cocoa (Bloxham, 2012). Around 70% of worlds cocoa supply comes from the Ivory Coast. Reports reveal that Hershey sources its cocoa from suppliers who use abusive child labor. As the farmers are paid very less they are forced to employ cheap labor in order to keep production cost low (Baines, et al., 2013). They are even not paid enough to employ adult labor thus indulge in appointing child labor and human trafficking. Statistics reveal that children working at cocoa plantations are between 12-15 years of age and some are even as small as 5 years old (Baird, et al., 2012). It is estimated that child labor is being employed by about two-third of African farms. The International Labor Organisation in year 2007 conducted a research which reveals that around 284,000 children worked for cocoa farms in Ivory Coast under hazardous conditions which included activities like working with sharp objects, safety equipments, and pesticides and in an environment full of harmful animals, inspects and snakes (Baird, et al., 2012). A survey conducted by the Tulane University and the Government of Ivory Coast the cocoa business use around 819,921 as underpaid labors. With a rise in demand of cocoa beans globally the cases of labor exploitation has witnessed a tremendous increase. Child labor is serious offense which not only spoils the life of children involved but also affects the growth of the society as a whole. It is the primary reason behind the growth of illiteracy rate and poverty of the region (Taylor, 2006). Child labor has serious consequences like malnutrition, life threaten injuries, conical diseases and even deaths. It is hampering the economical development of the region and its culture. Nature and Adequacy of Response to Issues A rise in the serious issue of child labor in West African region has considerably drawn attention of organisations and corporations that are sourcing their raw materials from the region. A number of laws, initiatives and measure have been implemented by them in order to reduce child labor in the region for cocoa plantation business (Boone Kurtz, 2015). In Africa a law prohibits children under the age of 14 years from getting involved into business sector except on family farms. A number of worlds leading organisation has come together in support of ethical sourcing of cocoa by implementing policies and relying on third-part certifications that help them ensuring that the cocoa they purchase is not produced using child labor or other forms of labor exploitations (Halbert Ingulli, 2014). A number of organisations work globally to minimise the child labor issues present in the cocoa business. Some of these organisations are; World cocoa Foundation (WCF), Sustainable Tree Crops Progra m (STCP), Harkin-Engel Protocol, International Cocoa Initiative (ICI) and International Labor Organisation (ILO) (Baird, et al., 2012). There are a number of third-part certifications that help ensuring that cocoa is produced ethically. Some of these certifications recognised worldwide are; Fair Trade, UTZ Certified, Rainforest Alliance and Organic (Mills, 2014). All these help chocolate producing companies ensure they have built a sustainable supply chain. Commentary In order to gather evidence and data for the assignment the articles mentioned in the appendices section are used. These are all articles from renowned online websites that have a long history of publishing trustworthy data. They all focus on the social responsibility issue of child labour associated with Hershey Companys unethical sourcing of cocoa from West African region which accused for using abusive child labor, forced labor and human trafficking on their cocoa plantation farms. All these five articles bring out the dark side of worlds largest manufacturer of chocolate and other confectionaries. They show how Hershey Company presents a perfect example of greenwashing wherein they are investing huge money in advertisements and marketing techniques to show that they are performing their responsibilities towards the society and environment and are involved in charitable activities to ensure well being of underserved children but on the other side they are sourcing their cocoa from West Africa which is plagued by child labour. These articles speak about how the farmers in West Africa are merely able to earn their living while the companies that purchase the cocoa produced by them are actually earning exceptionally high profits. In-spite being the worlds largest producer of cocoa West Africa is poverty struck and owing to this fact they rely on child labor which helps them in keeping the production cost low. The video presented by the BBC make the audience feel miserable for the children who are forced to work in cocoa farms and even indulge in dangerous activities. The video actually makes the audience feel the pain felt by small children when they get injured working with hazardous substances. The other articles present in details the statistical figures that reveal the number of children and their average age who are being used at cocoa plantations. They also inform the readers how these children are kept far away from their families and are treated as animals. They are not even paid minimum wages and at times even denied meals. The articles focus on the increase in demand of consumers to know about the exact source of production of products. Consumers today want organisations to take complete responsibility of sourcing their products from suppliers that are not involved in unethical activities. It is important that business ensure that perform their duties towards their society and e nvironment. The articles inform the readers about Hershey Companys rejection to shareholders request to increase transparency in the supply chain and their lack of policies that help ensuring cocoa used in their products is not produced using child labor. The articles suggest ways by which Hershey can increase the sustainability of its supply chain and ensure children rights are protected in West African cocoa farms. All the articles conclude by informing Harshey Company that its high time they should take the responsibility of their cocoa supply chain. Appendices https://www.confectionerynews.com/Commodities/Poverty-in-cocoa-ignored-in-sustainablity-drive-Cocoa-Barometer-2015 https://www.bbc.com/news/world-africa-15686731 https://danielsethics.mgt.unm.edu/pdf/Hershey%20Case.pdf www.bloomberg.com/news/articles/2014-03-18/hershey-judge-says-shareholders-can-seek-child-labor-files-1- https://www.confectionerynews.com/Manufacturers/Court-refuses-to-dismiss-Hershey-child-labor-case References Baines, P., Fill, C. Page, K., (2013) Essentials of Marketing. Oxford: Oxford University Press. Baird, H., Guevara, N. Karpechenko, A., (2012) The Hershey Company and West African Cocoa Communities. [Online] Available at: https://danielsethics.mgt.unm.edu/pdf/Hershey%20Case.pdf [Accessed 2015]. BBC News, (2011) Cocoa farms in Ivory Coast still using child labour. [Online] Available at: https://www.bbc.com/news/world-africa-15686731 [Accessed 2015]. Belch, G. Belch, M., (2011) Advertising and Promotion: An Integrated Marketing Communications Perspective. Chicago: McGraw-Hill Education. Bhagwati, J., (2007) In Defense of Globalization: With a New Afterword. Oxford: Oxford University Press. Bloxham, E., (2012) Chocolate and child labor: A hurdle for Hershey. [Online] Available at: https://fortune.com/2012/11/16/chocolate-and-child-labor-a-hurdle-for-hershey/ [Accessed 2015]. Blythe, J., (2013) Principles and Practice of Marketing. London: Sage. Boone, L. Kurtz, D., (2015) Contemporary Marketing. New York: Cengage Learning. Coombs, W. T. Holladay, S. J., (2011) Managing Corporate Social Responsibility: A Communication Approach. New Jersey: John Wiley Sons. Dragiewicz, M., (2014) Global Human Trafficking: Critical Issues and Contexts. New Jersey: Routledge. Ferrell, O. C. Hartline, M., (2012) Marketing strategy. New York: Cengage Learning. Grnewlder, A., (2008) Corporate social responsibility: Implementation in German companies. Norderstedt: GRIN Verlag. Gustafson, E., (2014) We the Eaters: If We Change Dinner, We Can Change the World. London: Rodale. Halbert, T. Ingulli, E., (2014) Law and Ethics in the Business Environment. New York: Cengage Learning. Mills, A., (2014) Child Labour and Slavery in the Chocolate Industry. [Online] Available at: https://www.foodispower.org/slavery-chocolate/ [Accessed 2015]. Nieburg, O., (2015) Extreme poverty ignored in sustainable cocoa drive, say NGOs. [Online] Available at: https://www.confectionerynews.com/Commodities/Poverty-in-cocoa-ignored-in-sustainablity-drive-Cocoa-Barometer-2015 [Accessed 2015]. Sahaf, M. A., (2008) STRATEGIC MARKETING: Making Decisions for Strategic Advantage. New Delhi: PHI Learning Pvt. Ltd. Saxena, R., (2010) Marketing Management 4E. New Delhi: Tata McGraw-Hill Education. Taylor, A. J. W., (2006) Justice as a Basic Human Need. New York: Nova Publishers. The Hershey Company, (2015) Company Profile. [Online] Available at: https://www.thehersheycompany.com/investors/company-profile.aspx [Accessed 2015].