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

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)
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
Background

CSR Programs
◦ Buying Station
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)
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
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
40
35
30
Percent
25
20
15
10
5
0
Age
Results: Majority of farmers are
male
Gender Distribution
Female
30%
Male
70%
Results: Small farm sizes
50
45
40
Percent
35
30
25
20
15
10
5
0
Farm Size (in hectares)
Results: Classification of
Respondents
Both
24%
Training
Program
15%
Buying
Station
61%
Number of
Farmers
percent
Buying
Station only
20
60.6
Training
Program only
Both
Total
5
8
33
15.2
24.2
100.0
Results: Is the Buying Station
Program fair?
Not
Sure
7%
Yes
39%
No
54%
Fairness: Buying Station Program

Top 5 Fairness Indicators:
Top 5
Fairtrade Principle
We are able to use our earnings from
the buying station for the education of
our children and medicine.
Creating Opportunities
Frequency
of Yes
Responses
100%
I receive full payment for my beans on
time.
Payment of a Fair Price
89%
All or substantially all of my beans are
bought by Nestle.
Capacity Building
79%
Nestle explains how they compute for
the price of my coffee beans.
Payment of a Fair Price
64%
I have more income from coffee farming
(that I can use to buy more land,
equipment and materials).
Creating Opportunities
64%
Fairness: Buying Station Program

Bottom 5 Fairness Indicators:
Bottom 5
Fairtrade Principle
Frequency
of Yes
Responses
Nestle informs me how they determine the price Transparency and
of Nescafe instant coffee.
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 Transparency and
sale of my coffee beans.
Accountability
Nestlé buying station employees inform us of the
principles of fair trade.
Trading Practices
Nestle consults farmers when they plan to
change policies in the buying station program.
Transparency and
Accountability
25%
11%
4%
Results: Is the Training Program fair?
Not Sure
31%
No
8%
Yes
61%
Fairness: Training Program

Top 5 Fairness Indicators:
Top 5
Frequency
of Yes
Fairtrade Principle Responses
Nestle informed me of the processes and
objectives of the training program.
Transparency and
Accountability
92%
Capacity Building
92%
Capacity Building
92%
I have better support system in farming because of
Nestlé (because I know people from the training
program who can give me assistance).
Capacity Building
92%
I learned from Nestlé how to add more value to
my coffee beans (like processing).
I can say that my coffee beans have better quality
because of my Nestlé training.
I can plant other kinds of crops aside from coffee.
Non-discrimination
92%
Fairness: Training Program

Bottom 5 Fairness Indicators
Bottom 5
Fairtrade Principle
Transparency and
Accountability
Nestle consults farmers when they plan to
change policies in the training program.
Nestlé teaches us to allow our children to go to
school and play even if they are used for our
Child Labor and Forced
farming.
Labor
Child Labor and Forced
Nestlé tells us not to use forced labor.
Labor
Nestlé employees regularly visit my farm to
check on the status of/update on my farming.
Trading Practices
Nestlé has sent employees to my farm in order
to inquire about how satisfied I am with their
program.
Trading Practices
Frequency
of Yes
Responses
23%
31%
31%
38%
38%
Results: Did the programs of
Nestle improve the farmers’
standard of living?
Worsened Missing Values
3%
3%
No Change
15%
Improved
79%
Results: Are the Farmers satisfied
with the CSR programs of Nestle?
Missing Values
3%
No
21%
Yes
76%
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
We are able to use our earnings from
the buying station for the education of Creating
our children and medicine.
Opportunities
Miss
Not ing
Sure data Total
No
100%
0%
0% 0% 100%
I receive full payment for my beans on Payment of a Fair
time.
Price
89%
4%
0% 7% 100%
All or substantially all of my beans are
bought by Nestle.
Capacity Building
79% 18%
0% 4% 100%
Nestle explains how they compute for Payment of a Fair
the price of my coffee beans.
Price
64% 32%
0% 4% 100%
I have more income from coffee
farming (that I can use to buy more
land, equipment and materials).
64% 32%
4% 0% 100%
Creating
Opportunities
Fairness: Buying Station Program

Bottom 5 Fairness Indicators:
Bottom 5
Fairtrade
Not
Principle
Yes No Sure Total
Transparency
and
Accountability 29% 71% 0% 100%
Nestle informs me how they determine
the price of Nescafe instant coffee.
I can say that my coffee beans have better
quality because of the suggestions of the Capacity
employees in the buying station.
Building
25% 68% 7% 100%
Transparency
Nestle provides a written contract
and
regarding the sale of my coffee beans.
Accountability 25% 75% 0% 100%
Nestlé buying station employees inform us Trading
of the principles of fair trade.
Practices
11% 71% 18% 100%
Nestle consults farmers when they plan to Transparency
change policies in the buying station
and
program.
Accountability 4% 89% 7% 100%
Fairness: Training Program

Top 5
Top 5 Fairness Indicators:
Fairtrade
Principle
Nestle informed me of the processes Transparency and
and objectives of the training program. Accountability
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.
Capacity Building
I have better support system in farming
because of Nestlé (because I know
people from the training program who
can give me assistance).
Capacity Building
I can plant other kinds of crops aside
from coffee.
Non-discrimination
Yes
Not Missing
No Sure Values Total
92%
8%
0%
0%
100%
92%
8%
0%
0%
100%
92%
8%
0%
0%
100%
92%
8%
0%
0%
100%
92%
0%
0%
8%
100%
Fairness: Training Program

Bottom 5 Fairness Indicators
Perception of Training
Fairtrade Principle Yes
Nestle consults farmers when they plan
to change policies in the training
Transparency and
program.
Accountability
Nestlé teaches us to allow our children
to go to school and play even if they Child Labor and
are used for our farming.
Forced Labor
Nestlé tells us not to use forced labor. Child Labor and
Forced Labor
Nestlé employees regularly visit my
farm to check on the status of/update
on my farming.
Trading Practices
Nestlé has sent employees to my farm
in order to inquire about how satisfied
I am with their program.
Trading Practices
Because of the training program, I have
more income from coffee farming (that
I can use to buy more land, equipment Creating
and materials).
Opportunities
Not Missing
No Sure Values Total
23% 31% 46%
0% 100%
31% 69%
0%
0% 100%
31% 62%
0%
8% 100%
38% 62%
0%
0% 100%
38% 62%
0%
0% 100%
38% 54%
8%
0% 100%