Currently browsing posts about: CSR(Corporate Social Responsibility)

In the latest issue of the American Journal of Public Health, Derek Yach and his colleagues at PepsiCo in Purchase, NY, say yes, it can, in answer to the question they pose in their article, “Can the food industry help tackle the growing global burden of undernutrition?”

If we are to successfully combat global undernutrition, efforts must be sustained by multiple stakeholders from various sectors. We believe that trust is built through industry’s demonstration of practical actions that improve health, and recognition of these actions by governments and nongovernmental organizations. Only through new and innovative public–private sector partnerships can we truly make a difference.

Three international public health leaders counter with no, it can’t, in an article entitled “The snack attack.”  They point to irreconcilable differences between the the goals of private industry and public health:

The problem lies with food, drink, and associated companies whose profits depend on products that damage public health and that also have damaging social, economic, and environmental impacts. These most of all include transnational companies, of which PepsiCo is one. To succeed, big business must sustain and increase annual turnover, profit, and share price…We suggest that public health professionals see papers such as those of Yach et al. as part of the marketing strategies of transnational food and drink companies…The privatization of public health does not work.

This argument reminds me of the editorial that David Ludwig and I wrote for JAMA late in 2008: “Can the food industry play a constructive role in the obesity epidemic?”  We concluded:

With respect to obesity, the food industry has acted at times constructively, at times outrageously. But inferences from any one action miss a fundamental point: in a market-driven economy, industry tends to act opportunistically in the interests of maximizing profit. Problems arise when society fails to perceive this situation accurately.

While visionary CEOs and enlightened food company cultures may exist, society cannot depend on them to address obesity voluntarily, any more than it can base national strategies to reduce highway fatalities and global warming solely on the goodwill of the automobile industry. Rather, appropriate checks and balances are needed to align the financial interests of the food industry with the goals of public health.

PepsiCo owns Pepsi Cola, of course, but also Gatorade, Frito-Lay snacks, and Aquafina water, among many other brands.  According to Advertising Age (June 22, 2009), PepsiCo earned $43 billion in worldwide sales in 2008. Its product-specific advertising expenditures in 2008, just for “measured media” (meaning run through advertising agencies) were, for example:

• $162 million for Gatorade
• $145 million for Pepsi Cola
• $27 million for Tostitos
• $14 million for Doritos
• $11 million for Fritos.

These figures, staggering as they may be, do not include the amounts Pepsi spends on lobbying, supporting the American Beverage Association’s efforts to fight soda taxes, funding medical research at Yale, or marketing to children and adults in India and other developing countries, as previously discussed on this site.

Is corporate “social responsibility” really responsible?  Or is it just marketing?  And what should be the checks and balances?  You decide.

Added April 17: This comes from a former employee of PepsiCo who asks that I post this anonymously:

I think you probably know that the “marketing dollars,” the share (ads/direct marketing), of companies like Pepsico are only a fraction of what are their actually marketing/promotions budgets.  Many years ago, PepsiCo made a conscious effort to redefine/shift budgets to what is called promotional spending from traditional marketing spending.  In doing so though, they keep the control and allocation of the funds in the hands of the marketing teams.

For Pepsi I know that the $145 million you mention is probably only 25% of what Pepsi “internally” considers consumer marketing spending.  For example, direct to retails “incentive” bonus funds are given for moving volume — those funds are almost entirely funneled into the retails increasing consumer marketing to their direct customers.  There are even examples where they can hide 10’s of millions of dollars at a time by linking event sponsorships (stadiums, etc.) to retailer agreements, thus moving those dollars to long-term “capital expenditures.”  I would guess that for Pepsi alone that that $145 million could be as much as a billion a year for direct and indirect consumer marketing spending.

It is not just obscene how much gets spent to increase volume… since, for companies like PepsiCo, Coke, etc.  Volume is the only way they generate higher profit to their shareholders.  As you say, to expect a corporation to do things for the good of the consumer just shows a misunderstanding of their primary function when they are a for-profit entity.

Food corporations are pushing corporate social responsibility (CSR) as hard as they can.  This seems like an oxymoron to me, but here’s what they say:

CSR #1: Nestlé (no relation) says it is creating shared value by “optimizing water use and productivity, Italy.”

In the Piacenza and Parma region of Italy, in recent years, water has become scarcer, especially during the summer. Nestlé Italia decided to engage more closely with its tomato suppliers, to secure its supply of tomatoes and significantly reduce the amount of fresh water used for irrigation.

The three-year project with Consorzio Interregionale Ortofrutticoli, a cooperative of tomato farmers, aims to maximise tomato production and optimise irrigation in 10 pilot farms with differing soil conditions, by using solar-powered CropSense Soil Moisture Monitoring technology. Data at root level is collected daily and used to provide the exact amount of water needed to optimise crop revenue and water use.

Data collection will continue into 2011, and additional farmers are already keen to join the project based on the initial results: yields have nearly doubled, the tomato quality (sugar content) increased by 15% and the water used to produce one tonne of tomatoes fell by 45%.

Watch Nestlé’s film: Optimising water use and productivity, Italy

Read more in Nestlé’s report, Creating Shared Value

Anti-CSR: For an antidote, try Corporate Accountability International’s campaign called “Think Outside the Bottle,” and watch the video of Annie Leonard’s Story of Bottled Water.

CSR #2: FoodNavigator has a new collection of commentaries on CSR:

I’ve just gotten an announcement of Nestlé’s (no relation) latest corporate social responsibility activities.  It has released the 2009 version of its annual report: “Creating Shared Value.” By this, the company means that its activities that benefit society as well as its shareholders in three areas: water, nutrition, and rural development.

According to the report, Nestlé has achieved:

• A 59% reduction of water withdrawal per ton of product since 2000.
• More than 160,000 individual farmers and suppliers trained through capacity-building programs.
• Significant improvements in greenhouse gas emissions, water use and creation of waste and by-products.
• More than 7,200 products renovated for health considerations; over 3,300 now have reduced sugar, sodium, fats or artificial colors.

But wait.  Isn’t this the company that sold $102 billion worth of bottled water as well as chocolate candy, and ice cream last year?

Is Creating Shared Value a win-win?  Or is it an oxymoron?

I greatly admire the work of Jared Diamond.  His book, Guns, Germs, and Steel: The Fate of Human Societies, is as clear an explanation as you will ever get of how the inequitable distribution of favorable geography, climate, and natural resources affects the development and maintenance of human societies.

But here he is, incredibly, in the Sunday New York Times writing a fan letter to corporate social responsibility for protecting those favorable environments.  He writes:

There is a widespread view, particularly among environmentalists and liberals, that big businesses are environmentally destructive, greedy, evil and driven by short-term profits. I know — because I used to share that view.  But today I have more nuanced feelings…I’ve discovered that while some businesses are indeed as destructive as many suspect, others are among the world’s strongest positive forces for environmental sustainability.

And which corporations does he include as “strongest positive forces?”  Chevron, Walmart, and Coca-Cola.   I’ll leave discussion of Chevron and Walmart to others, but Coca-Cola?

Coca-Cola, Diamond says, is protecting the world’s water supplies.  The company needs clean water in the 200 countries in which it operates.  This, says Diamond:

compels it to be deeply concerned with problems of water scarcity, energy, climate change and agriculture. One company goal is to make its plants water-neutral, returning to the environment water in quantities equal to the amount used in beverages and their production. Another goal is to work on the conservation of seven of the world’s river basins, including the Rio Grande, Yangtze, Mekong and Danube — all of them sites of major environmental concerns besides supplying water for Coca-Cola. These long-term goals are in addition to Coca-Cola’s short-term cost-saving environmental practices, like recycling plastic bottles, replacing petroleum-based plastic in bottles with organic material, reducing energy consumption and increasing sales volume while decreasing water use.

Please note the future tense.  These are things Coke says it plans to do.  As for what the company is doing now, Diamond does not say.  His piece does not mention Coke’s negotiating with officials in developing countries to buy water at rates significantly below those charged to local communities, a topic under much discussion when I was in India last year.  It does not mention campaigns in India to hold Coke accountable for its abuse of local water rights or any of the similar campaigns in other countries.

Diamond’s piece does not talk about the efforts Coke puts into selling bottled water at the expense of local water supplies.  As described by Elizabeth Royte in her book, Bottlemania, companies like Coke exhibit every one of of the characteristics formerly deplored by Diamond in attempting to secure plentiful and reliable sources of cheap local water: in his words, “environmentally destructive, greedy, evil and driven by short-term profits.”

Diamond says he sits along side and has gotten to know and appreciate the motives of many corporate executives.  Me too.  Personally, many of them mean well and wish that they could do more to be socially responsible.  But they work for businesses that are required, by law, to make short-term profit their reason for existence.  This means that corporate social responsibility is necessarily limited to actions that bring visible – and immediate – returns on investment.

We need some critical thinking here.  If Diamond gave any thought at all to what Coca-Cola produces – bottled water and sodas – he would surely have to agree that less of both would be good for our own health and that of the planet.

I love corporate social responsibility reports .  I collect them.  Someone from Nestlé was kind enough to send me its shiny new report – Nutritional Needs and Quality Diets: Creating Shared Value, 2008.  Nestlé is a very big food company.  For starters, it employs 283,000 people in 84 countries.  It sold $96.5 billion in products last year for a not-too-shabby profit of $16 billion (dollar figures are converted from Swiss francs and rounded off).   Bottled water accounted for $8 billion in sales (down 1.6% from the previous year), pet food for $11 billion, and ice cream for $18 billion.  I looked for – but could not find – the sales figures for Nestlé’s infant formula, the source of much controversy about this company.

As for social responsibility, the company says its education programs have reached 9 million people.  And by changing the recipes of its foods, it has eliminated 75,000 tons of trans fat from its products, along with 15,000 tons of salt and 638,000 tons of sugars.  Nestlé is also the largest fortifier of foods with vitamins and minerals.

Will these kinds of approaches help people eat healthier diets?  As David Ludwig and I discussed in a JAMA article last October, we are skeptical.  But read and decide for yourself!

March 19 update: and thanks to Jaybird for sending today’s example of Nestlé’s corporate responsibility in India.

March 21 update: thanks to Margo Wootan for forwarding the corporate responsibility report from Disney.

Nestle (No relation. I just can’t figure out how to enter the accent mark) has released its first report on corporate social and environmental responsibility. The report, Shared Value, available online in four languages, takes an interesting approach.  It couples each of its social goals with the benefits to its business. Two examples: Reducing the environmental footprint and reducing our operating costs,” and “Helping farmers improve earnings and assuring our supply of raw materials.” What to make of this? This question is very much on my mind these days because I’ve been asked to write something addressing the question, “Is there anything the food industry can do to play a constructive role in doing something about childhood obesity?” Is there? I’m collecting opinions.