Harvard Case - Championing EDI and ESG While Using Child Labour: The Hershey Paradox
"Championing EDI and ESG While Using Child Labour: The Hershey Paradox" Harvard business case study is written by Bertrand Guillotin. It deals with the challenges in the field of General Management. The case study is 18 page(s) long and it was first published on : Feb 11, 2024
At Fern Fort University, we recommend that Hershey implement a comprehensive and multi-faceted strategy to address the child labor issue in its supply chain, while simultaneously upholding its commitment to EDI and ESG principles. This strategy should prioritize transparency, accountability, and collaboration with stakeholders, including suppliers, NGOs, and governments, to ensure ethical sourcing practices and sustainable business practices.
2. Background
The case study highlights the complex dilemma faced by Hershey, a global confectionery giant, as it navigates the challenges of ethical sourcing and sustainable business practices. Despite its commitment to diversity and inclusion (EDI) and Environmental, Social, and Governance (ESG) principles, Hershey has been criticized for sourcing cocoa from regions where child labor is prevalent. This paradox underscores the intricate nature of global supply chains and the difficulties in ensuring ethical practices across complex networks.
The main protagonists in this case are:
- Hershey: A multinational corporation with a long history of producing chocolate products, facing pressure to address child labor in its supply chain.
- NGOs and Activists: Groups advocating for the protection of children and raising awareness about the issue of child labor in the cocoa industry.
- Cocoa Farmers: The individuals directly involved in cocoa production, often operating in challenging conditions and facing economic pressures.
- Consumers: Individuals who purchase and consume Hershey products, increasingly concerned about ethical sourcing and sustainability.
3. Analysis of the Case Study
This case study can be analyzed using a framework that combines Corporate Social Responsibility (CSR), Supply Chain Management, and Stakeholder Engagement.
- CSR Framework: Hershey's commitment to EDI and ESG principles is commendable, but it falls short in its supply chain practices. The company needs to strengthen its CSR framework by incorporating robust ethical sourcing policies and implementing effective monitoring mechanisms to ensure compliance.
- Supply Chain Management: Hershey's supply chain is highly complex, involving multiple layers of suppliers and intermediaries. This complexity makes it challenging to track and manage ethical practices throughout the entire chain. The company needs to implement a robust supply chain management system with strong traceability and transparency measures.
- Stakeholder Engagement: Hershey needs to engage actively with all stakeholders, including NGOs, cocoa farmers, and consumers, to address the issue of child labor. This engagement should involve open communication, collaboration, and a commitment to finding solutions that benefit all parties involved.
4. Recommendations
Hershey should implement the following recommendations to address the child labor issue and uphold its commitment to EDI and ESG principles:
1. Transparency and Traceability:
- Implement a comprehensive traceability system: Hershey should invest in technology and systems to track cocoa beans from farm to factory, ensuring transparency and accountability throughout the supply chain.
- Publish a detailed supply chain map: This map should identify all suppliers and intermediaries involved in cocoa sourcing, allowing for better oversight and monitoring of ethical practices.
- Develop a robust reporting mechanism: Hershey should provide regular reports on its progress in addressing child labor, including metrics on the number of farms audited, interventions implemented, and results achieved.
2. Collaboration and Partnership:
- Engage with NGOs and advocacy groups: Hershey should collaborate with NGOs and activists to develop and implement effective interventions to address child labor. This collaboration should involve sharing information, resources, and expertise.
- Support cocoa farmer cooperatives: Hershey should invest in programs that empower cocoa farmers, providing them with training, resources, and fair prices for their cocoa beans. This will help reduce the economic pressures that drive child labor.
- Work with governments and international organizations: Hershey should engage with governments and international organizations to advocate for policies that promote ethical sourcing and child labor prevention.
3. Monitoring and Enforcement:
- Conduct regular audits of suppliers: Hershey should implement a rigorous auditing process to ensure that its suppliers are complying with ethical sourcing standards.
- Develop a system for reporting and addressing violations: Hershey should establish a clear process for reporting and addressing violations of its ethical sourcing policies. This process should include sanctions for suppliers who fail to comply.
- Invest in technology and analytics: Hershey should leverage technology and analytics to monitor its supply chain, identify potential risks, and develop targeted interventions to address child labor.
4. Education and Awareness:
- Educate consumers about ethical sourcing: Hershey should launch campaigns to educate consumers about the importance of ethical sourcing and child labor prevention.
- Promote responsible consumption: Hershey should encourage consumers to make informed choices about the products they purchase, supporting companies that prioritize ethical sourcing and sustainability.
- Engage with employees: Hershey should educate its employees about the company's commitment to ethical sourcing and encourage them to be ambassadors for responsible practices.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Hershey's mission statement emphasizes its commitment to social responsibility and ethical business practices. These recommendations align with this mission by addressing the child labor issue and promoting sustainable sourcing.
- External customers and internal clients: Consumers are increasingly demanding ethical and sustainable products. These recommendations address this demand by ensuring transparency, accountability, and responsible sourcing practices.
- Competitors: Other confectionery companies are facing similar challenges with child labor in their supply chains. By implementing these recommendations, Hershey can differentiate itself as a leader in ethical sourcing and gain a competitive advantage.
- Attractiveness ' quantitative measures: While quantifying the impact of these recommendations is challenging, the potential benefits include improved brand reputation, increased consumer trust, and reduced risk of reputational damage.
6. Conclusion
Hershey faces a significant challenge in balancing its commitment to EDI and ESG principles with the realities of its complex supply chain. By implementing the recommendations outlined above, Hershey can address the child labor issue, uphold its ethical commitments, and build a more sustainable and responsible business model.
7. Discussion
Other alternatives not selected include:
- Ignoring the issue: This option is unacceptable as it would damage Hershey's reputation and alienate consumers.
- Simply sourcing from other regions: This option may not be feasible as child labor is a global issue, and simply shifting sourcing to different regions may not solve the problem.
- Using only certified cocoa: While this option is a step in the right direction, it is not a complete solution as certification programs can be costly and difficult to implement.
Key assumptions of these recommendations include:
- Willingness of stakeholders to collaborate: Successful implementation requires a commitment from all stakeholders, including suppliers, NGOs, and governments.
- Availability of resources: Hershey needs to invest significant resources in implementing these recommendations.
- Effectiveness of interventions: The effectiveness of the interventions will depend on various factors, including the commitment of all stakeholders and the effectiveness of monitoring and enforcement mechanisms.
8. Next Steps
Hershey should implement these recommendations in a phased approach, starting with a pilot program in a specific region. This pilot program should be carefully monitored and evaluated to identify best practices and refine the approach.
Timeline:
- Year 1: Develop a comprehensive traceability system, engage with NGOs and cocoa farmer cooperatives, and conduct pilot audits of suppliers.
- Year 2: Expand the traceability system, implement a robust reporting mechanism, and launch a consumer education campaign.
- Year 3: Fully implement the recommendations, including comprehensive monitoring and enforcement mechanisms, and continue to engage with stakeholders.
By taking these steps, Hershey can demonstrate its commitment to ethical sourcing and sustainability, build a more responsible business model, and contribute to a more just and equitable cocoa industry.
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Case Description
As she prepared for the Hershey Company Investor Day, CEO Michele Buck knew the importance of equity, diversity and inclusion (EDI); the importance of environmental, social, and governance (ESG) practices; and that EDI within corporate social responsibility (CSR) was key to Hershey's valuable brand image, engaged employees, and effective business relationships. "Children's wellbeing is at the heart of who we are as a company. This goes back to our founder, Milton S. Hershey, who cared deeply about children." However, the company depended on cocoa beans from West Africa and had not yet honoured a 2001 industry-wide pledge to uproot child labour in global supply chains. Hershey was committed to improved practices but had not yet reached its goals. What if Hershey's largest customer in its largest market decided to drop Hershey products? What if socially conscious institutional investors decided to sell their shares? How could the CEO avoid these disastrous scenarios and reassure both customers and investors?
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