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Essay: Nestle – impact in San Bernardino area in California

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  • Subject area(s): Environmental studies essays
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  • Published: 15 October 2019*
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“Is water a basic human right?” or “Should it be given a market value and privatized to make profit?” Without a valid basis of right, Nestlé has been excessively extracting water in several areas around the world especially in the United States, leaving those areas to suffer from severe droughts. Most recently, it happened to San Bernardino area in California. This case is morally important as it affects the ecosystem of the whole society and it serves as a representative case of a bigger problem of a selfish company and government corrupting and taking advantages of its community. If this case is not treated right, there will continue to be more cases just like this which will ultimately lead to the deterioration of the society.

Key Facts

Originally a Swiss-based chocolate brand, Nestlé has developed over 15 types of products, grown to govern over 8,500 brands in over 80 countries, and served people in 197 countries (Nestlé, 2017). Nestlé is the biggest supplier of the world’s bottled water, owning 67 water brands worldwide, of which are 7 brands in the United States alone (Nestlé, 2017). Some of the brands that it owns are Perrier, S. Pellegrino, Nestlé pure life, Vittel, Poland Spring, Dear Park, Arrowhead, and Acqua Panna (Thirst, 2017). Some of us do not even realize that some of the brands are under “Nestlé”. Thus, we clearly do not know the extent of impact that this powerful global conglomerate has on our society.

This case analysis is based on Desert Sun’s news forum, part of USA Today network which is an internationally distributed American daily newspaper, “Nestlé appears to be taking too much water from California forest” written by Ian James which was published on December 21, 2017.

Since 2015, people started noticing that Nestlé extracts millions of gallons of water in California’s San Bernardino National Forest more than it has the legal right to and sell under its “Arrowhead” brand (James, 2017). Numerous complaints were sent to the State Water Resources Control Board (SWRCB) regarding this unlawful act. After two years of investigation, the SWRCB revealed that the company’s permit to withdraw water from San Bernardino park technically expired in 1988 and that a significant portion of the water Nestlé currently extracts is being extracted without a “valid basis of right”. The board found that although Nestlé has the right to extract only eight and a half million gallons of water annually out of San Bernardino National Forest in California, the company has, on average, from 1947 to 2015, been collecting an average of over 60 million gallons of water a year. Essentially,  for almost 70 years, the company has been stealing over 50 million gallons of water each year from California. This has left California in its fourth straight year of being in severe drought while the company keeps on pumping water in excess (James, 2017).

This is not the first time Nestlé is doing this. It has been doing this in many regions including other states like Michigan, Pennsylvania, and Oregon (James, 2017). Nestlé pays $500 annually to pipe water from San Bernardino but it is able to repackage and sell it back to the locals at a much higher price (Erickson, 2017). The question is “Why is there no one to stop it?” After 68 years of stealing water, no one is held accountable or is arrested. In 2015, Desert Sun investigated and uncovered that the U.S. Forest Service has been allowing Nestlé to continue withdrawing water from San Bernardino using an expired permit. Consequently, groups of environmentalists sued the U.S. Forest Service. However, the court ruled that Nestlé could continue to divert water while applying for a permit renewal (Chappell, 2017).

It is interesting how an individual could get arrested if he steals a toothpaste in a convenient store, but an international mega corporation can get away with stealing billions gallons of water from public lands. A serious action must be taken to prevent the same thing being done over and over again which will ultimately leave the nation and human race to suffer from irreversible consequences.

Ethical Analysis

The main moral issue in this case is that Nestlé and the involved entities care more about short-term profits rather than the lives of people in the area, the environment, and long-term sustainability. Human rights, social responsibilities, and shared values are at stake. The lives and well-being of the people in the community, wildlife and the entire human race are in danger. Justice and fairness need to be granted as soon as possible to prevent other companies from doing the similar thing, taking advantage of the community.

In 2005, Nestlé’s CEO Peter Brabeck claimed that “human beings don’t have a right to water” (The Ring of Fire, 2017). By this, does he mean that it would be fine that Nestlé just takes all the water? The issue at hand is “How can Nestlé manage this ethical challenge?”, “How can Nestlé maintain profits without sacrificing humanity and environment?”, “Would the companies be willing to turn itself back to ‘doing business with humanity in mind’?”, and “Would it be able regain consumers’ trust after going through this controversy?” However, a bigger question for us, consumers, is ‘when a big worldwide conglomerate claims itself as people’s company, should we believe it right away?’ This case illustrates the fact that companies are willing to do things above and beyond to get its intended profit.

This act of Nestlé not only indirectly harmed people in the community but also the environment and its surrounding wildlife. With enormous power in the area, Nestlé affected the government and regulators in a way that it is willing to overlook this issue due to a huge amount of money it has brought along, allowing Nestlé to continue making profits out of this reckless act (Syrmopoulos, 2017). For these reasons, the key moral actors in this case are Nestlé’s management team, the government and regulators, and the people of California.

First, the company’s management team has the authority to decide which direction the company will be heading whether it would confess in the wrongdoing or staying quiet and continuing the immoral act. Nestlé is considered the most important moral actor because its action will determine the future of both the company and the whole society. If the company decides to back down and take the punishment it deserves, then the problem is solved. But if not, we need other involving entities to help push a stop button to this careless act.

Next is the government and the policy makers as they are the ones to uphold the law and what it is made to serve which is “justice”. In this case, the government also plays a crucial role because while California law does not prohibit companies like Nestlé from piping the state’s water, the policy makers should be aware of the harm this could cause. The government and regulators should be fair regardless of how big and powerful the company is. They should set an example to prevent other similar companies from doing the same thing. If this is allowed, its competitors may think that if it is okay for Nestlé to steal water from natural sources, then it must be fine for them to do the same. This will lead to a collapsed community. But would a lawsuit against the company solve this problem? The answer is probably ‘no’ and basically due to corruption (Syrmopoulos, 2017). This is when the people come in.

People in and outside the area are another significant actor, for if the company and government deny to do what they are supposed to, people need to stand up for themselves. They need to fight maybe not for winning but for raising awareness of people in their community and in other areas of the nation and world. Although this may not immediately stop the selfish act, it puts the company and the government in a spotlight which, hopefully, would make them less comfortable to cooperate and corrupt.

Apparently, what Nestlé is doing does not only conflict with societal values but also with its own vision of “creating shared value”. With its promise to do a right thing and to be transparent (Nestlé, 2016), Nestlé failed to do what they alleged. Also even though Nestlé’s spokesperson claimed that “we will continue to operate lawfully and comply fully with the California law”, it has not cutback on its water withdrawal (Ring of Fire, 2017). How can a company that is irresponsible and negligent grow on a collapsed community and environment? The way to solve this is that Nestlé admits its wrongful act and make a commitment to change and make things right. The foundational moral values involved here are honesty, fairness, care, and responsibility which if the company is brave enough to admit, it would be able to reinstate its corporate integrity and values and start gaining back its consumers’ trust.

Associating itself with both Corporate Social Responsibility and Creating Shared Value, Nestlé governs an active role of not only giving back to community (CSR) but also in remaining sustainable by comply to the rules, regulations, and benefits of the society as a whole. It should recognize the fact that it will thrive better if the community where it operates is better because CSV is the fundamental way of doing business as it is built upon a strong foundation of compliance and sustainability.

In this case, the conflict has been evolved from being a right/wrong decision into a right/right dilemma. First, clearly, it is right for Nestlé to come out and admit its wrongdoing as there are sufficient evidence. Also, it is wrong for the company to be irresponsible towards the community it resides in, putting profits over people. The company should recognize the fact that although it may lose some profit and long-built reputation at first, but as the issue is prolonged, the impact on its profit and sustainability will be even worse in the long-run. However, Nestlé has further claims that it builds plants in weak areas to create jobs and help economy. By arguing this, Nestlé puts itself in a positive light, transforming a right/wrong conflict into a right/right one, making the issue more complicated. Nevertheless, even though it is true that the company partly creates jobs for local people in the areas which contributes to a prosperous overall economy, we have to consider further whether the jobs it is providing is worth the damage it is doing to the community as a whole and which one actually outweighs the other.

With the quote “Every day, we touch the lives of billions of people: from the farmers … to the communities where we live and work; and the natural environment upon which we all depend.”, Nestlé’s vision is to enhance people’s quality of life and contribute to a healthier future. However, Nestlé did just the opposite. The jobs Nestlé brought to the community cannot offset the harm that withdrawing extra water, especially in the critical phase of water scarcity, has posed to the enclosing nature and lives of people.

There are moral issues from Nestlé’s action, its means of an action and the intent of its action. First, the action itself is proved to be immoral as it negatively affects the well-being of the community. The means of the action is also unethical as the company conveniently keeps extracting the water in the hopes that no one would notice how much it has piped out to gain an additional profit. Lastly, its intention is clearly solely profit-driven. The company values its short-term profit over the long-term sustainability without considering how much the act could seriously lead to the decline of the nature and society.

In evaluating this moral challenge, we have to take into account how many lives will be affected and suffered from the scarcity of water and the impact it will pose on future generations. What will they do if there is no more clean water? Every human has a duty to protect our human race from harm. To do that, we must think not only how our today’s action will result in this period of time but also in the decades to come. The outcome of Nestlé would provide them with only profits, but the community would be severely impaired from the consequences. If this is continued, it would be hard to bring back the healthy stage of nature and would seriously affect the circumambient environment and wildlife.

The codes of my wisdom tradition namely “Karma”, “Five Moral Precepts”, and “The Three Characteristics of Existence” can be used to described how Nestlé’s act is immoral. First, in the concept of “Karma”, we believe that what goes around comes around, meaning that whatever we do, the consequence would come back to us. If we do good deeds, we get good things in return while if bad deeds are done, bad things will happen. Clearly, here that Nestlé has let the dark side of capitalism to take over thus intended to gain profit. Although it might succeed at first, in the longer run the company’s name may be associated with the actions of selfishness and life destruction. Also if continues, the nature itself will start to decay, thus there will be no place for it to gain further profit and the company will struggle to remain sustainable. Next, the company violates three of the “Five Moral Precepts” namely harm other lives, steal, and lie. By failing to stay intact with these moral codes, stakeholders will start losing faith in the company, which will eventually leads to the breakdown of company’s own reputation. Lastly, according to “The Three Characteristics of Existence”, Nestlé does not realize the fact that everything is always changing and that nothing will stay the same forever. The money and reputation it has right now will go away with the passage of time. By not trying to remain sustainable through protecting the environment, wildlife, and people, and keeping the ecosystem undisrupted, the company will have a hard time surviving in the future. For these reasons, the moral challenge is conflicted with the core values I believe is important for everyone to be happy to create a peaceful and sustainable society.

Stakeholder Analysis

The stakeholders in this case range from the company, its consumers, employees, the government, the policy makers, business partners, competitors, to the entire industry, people in the area, the environment, and the surrounding wildlife, essentially the whole society. Of all the stakeholders, the company and the people in San Bernardino area are by far the most morally significant.

The company is critical in determining how the situation will unfold. Nestlé denies its misconduct based on three grounds. First, it claims that it is creating jobs and improving economy. Second, it claims that it pays for the water it diverts from San Bernardino National Forest. Last, it has the permit from a century ago which it claims to enable the company to divert water from that source. However, their claims are not compelling because the company may not have considered the fact that the jobs it created does not come close to compensating for what it has done to the environment. Also the fact that it can also create jobs and contribute to the society in many other positive and beneficial ways. Next, Nestlé pays almost nothing ($524) compared to the amount of water it took but it pumps up excessive amount which it does not have the right to (Thirst, 2017). Last, the permit it uses is already proved to be expired (James, 2017). For these reasons, their claims are weak and invalid.

Next is the people of California. Their claim is that the company deserves a punishment before moving on to the stages of updating its permits, submitting a compliance plan, outlining plans for monitoring and review, and proving that it will face an enforcement action (Thirst, 2017). The moral claims of this group is predominant as it is more compelling and urgent. They are the ones being affected most by the Nestlé’s wrongdoing which could cause them their lives and future. Facing their fourth straight year of being in a severe drought, these people are longed for justice. Unfortunately, due to power inequality, they do not have enough capability to fight with a company like Nestlé. The feeling of being neglected by the company and the government leaves them with the only option which is to hope for someone to come and try to make a difference. However, at the end of the day, no one person would be able to make this happen because only when the whole society unite and continue to fight together that the light at the end of the tunnel will be seen. We need to make sure that the people not only in California but also everywhere else Nestlé is stealing water from including Michigan, British Columbia, and Ontario cooperate to gather resources needed to defeat a giant corporation like Nestlé.

According to the “Stakeholder theory”, all of the stakeholders, big or small entities, within and beyond a business all have a role in contributing to Nestlé’s success and failure. If the company continues to ignore the value of lives over the value of profit, stakeholders may not continue to believe and invest in the company.

Taking away water is almost like taking away the air people are breathing in as it is one of the four essentials of life. If the company continue working on sucking public resources and profits, it could further destroy more lives.

Option Analysis

There are two options for Nestlé and another two options for state regulators to do. For Nestlé, first it could stop extracting water in excess and start to comply with the society’s benefit as a whole. Second, it could remain stubborn and not stop until it loses in court. In this case, it is very easy to decide. As for me, it is clear that the first option is more superior because although the company may be harshly condemned at first but it would not get much worse than at this moment. Also, I believe that new reputation can be rebuilt as long as the company is willing to change. In this way, people are also willing to forgive. As a leader of the bottled water industry, Nestlé has a role of maintaining its corporate integrity because good leaders are the ones who concerns about the encompassing lives and how its actions would lead to others’ well-beings. However, if the second option is chosen. The longer this continues, the more hatred it would receive from the community and situation will only get worse. Thus the first option is deemed to be most suitable.

If Nestlé decides to choose the second option, the next moral action should be done by the government and regulators, which they also have two options. First, they could choose to pay no attention due to the amount of money Nestlé has and the potential effect Nestlé could have caused because of its power. The second option is for them to step in and take serious actions to stop this unethical act which is preferred because government is the entity that could possibly regulate the industry by proposing new rules and regulations to prevent companies doing this. They could also give Nestlé a heavy punishment for its past action as a lesson and as an example for other companies in the industries to see what would happen when they aim to attain profit with the expense of the community.

The most feasible, thus the best, option is that Nestlé itself take the punishment and renew its goal that rather than focusing solely on profit, they should take into consideration the lives of people in the community and the social condition. Above that the government should also introduce rules and the consequences of any unscrupulous acts to shelter lives from harm created by the greediness of other humans.

Decision

The most ethical option is where the company admit its wrongdoing and is willing to take the punishment and change its goal from collecting profits to providing lives. This mindset can be implemented using top down influence strategy, starting from the board of directors through management team down to employees working in factories. By doing this, the company can continue to build factories in rural areas and create more jobs but it needs to be aware and be honest to how much water it may take. This action will work to reinforce and reinstate its social responsible, fairness, honesty, and corporate integrity.

Summary Argument

Nestlé must take a serious action or punishment must be done before more lives are threatened due to the environmental impact of a large-scale water diversion.

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