Harvard Case - The Hershey Company: Broken Pledge to Stop Using Child Labour
"The Hershey Company: Broken Pledge to Stop Using Child Labour" Harvard business case study is written by Bertrand Guillotin. It deals with the challenges in the field of International Business. The case study is 15 page(s) long and it was first published on : Dec 20, 2021
At Fern Fort University, we recommend a multi-pronged approach for The Hershey Company to regain consumer trust and ensure ethical sourcing practices within its supply chain. This strategy involves a combination of immediate actions to address the current crisis, long-term initiatives to strengthen its commitment to ethical sourcing, and a comprehensive communication plan to rebuild public trust.
2. Background
The Hershey Company, a global leader in the confectionery industry, faced a significant ethical crisis when it was revealed that its cocoa supply chain continued to involve child labor despite a previous pledge to eliminate it. This revelation led to widespread public criticism, boycotts, and damage to the company's reputation. The case study highlights the complexities of managing a global supply chain, particularly in emerging markets where child labor is prevalent.The main protagonists in this case are:
- The Hershey Company: A multinational corporation facing a crisis of trust due to its failure to uphold its commitment to ethical sourcing.
- Consumers: Concerned about the ethical implications of child labor and demanding transparency and accountability from companies.
- NGOs: Organizations like Fairtrade and the International Labor Organization (ILO) advocating for ethical sourcing and worker rights.
- Cocoa farmers: Many are struggling with poverty and lack of resources, making them vulnerable to exploitative practices.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several frameworks:1. Stakeholder Theory: The Hershey Company's failure to address the issue of child labor in its supply chain demonstrates a lack of consideration for all stakeholders, including consumers, NGOs, and cocoa farmers. This neglect resulted in a loss of trust and a significant reputational crisis.
2. Supply Chain Management: The case highlights the challenges of managing a complex global supply chain, particularly in emerging markets. The Hershey Company's reliance on third-party suppliers and lack of effective monitoring systems contributed to the issue of child labor.
3. Corporate Social Responsibility (CSR): The Hershey Company's initial pledge to eliminate child labor was a positive step towards ethical sourcing. However, the company's failure to follow through on this commitment demonstrates a lack of commitment to its CSR principles.
4. Crisis Management: The Hershey Company's response to the crisis was inadequate. It lacked transparency, failed to take swift action, and was slow to address the concerns of stakeholders. This resulted in further damage to its reputation and exacerbated the crisis.
4. Recommendations
Immediate Actions:
- Independent Audit: Immediately commission an independent audit of the entire cocoa supply chain to identify and address all instances of child labor. This audit should be conducted by a reputable and transparent organization.
- Transparency and Disclosure: Publicly disclose the findings of the audit and outline a detailed plan of action to address the identified issues. This plan should include timelines, specific measures, and clear accountability mechanisms.
- Compensation and Support: Provide financial and logistical support to cocoa farmers to help them improve their livelihoods and eliminate the need for child labor. This could include training, access to microfinance, and improved farming techniques.
- Collaboration with NGOs: Partner with NGOs like Fairtrade and the ILO to develop and implement effective monitoring systems and ensure compliance with ethical sourcing standards.
Long-Term Initiatives:
- Strengthened Supply Chain Management: Implement a robust and transparent supply chain management system with enhanced monitoring and traceability capabilities. This system should include rigorous due diligence processes, regular audits, and effective risk assessment.
- Investment in Sustainable Cocoa Farming: Invest in programs that promote sustainable cocoa farming practices, improve farmer livelihoods, and reduce the reliance on child labor. This could include initiatives focused on agronomy, climate resilience, and community development.
- Consumer Education and Engagement: Educate consumers about the company's commitment to ethical sourcing and the challenges of eradicating child labor. This could involve transparent labeling, social media campaigns, and partnerships with consumer advocacy groups.
- Internal Culture Change: Promote a culture of ethical sourcing and social responsibility within the company. This could involve training programs, ethical guidelines, and a strong commitment from leadership.
Communication Plan:
- Open and Honest Communication: Communicate openly and honestly with stakeholders about the company's commitment to ethical sourcing and the steps it is taking to address the issue of child labor.
- Regular Updates: Provide regular updates on progress made towards eliminating child labor in the supply chain.
- Engaging with Stakeholders: Actively engage with consumers, NGOs, and other stakeholders to address their concerns and build trust.
- Social Media Engagement: Utilize social media platforms to communicate with stakeholders, share information, and address concerns in a timely and transparent manner.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Mission: The Hershey Company's core competency lies in its expertise in chocolate manufacturing and distribution. This strategy aligns with the company's mission of providing consumers with high-quality chocolate products while upholding ethical sourcing practices.
- External Customers and Internal Clients: These recommendations address the concerns of external customers who demand ethical sourcing practices and internal clients who need to understand and implement the company's new ethical sourcing policies.
- Competitors: The Hershey Company's competitors are also facing similar challenges regarding ethical sourcing. By taking a proactive approach to addressing these issues, the company can gain a competitive advantage and demonstrate its commitment to ethical business practices.
- Attractiveness: The financial implications of these recommendations are significant but necessary to restore consumer trust and avoid further reputational damage. The long-term benefits of ethical sourcing practices outweigh the short-term costs.
6. Conclusion
The Hershey Company's failure to uphold its commitment to ethical sourcing practices has resulted in a significant crisis of trust. By implementing the recommended actions, the company can regain consumer trust, demonstrate its commitment to ethical sourcing, and ensure a sustainable future for its business.
7. Discussion
Other alternatives not selected include:
- Ignoring the issue: This would be a disastrous decision, leading to further reputational damage and potential legal action.
- Minimizing the issue: This would be perceived as dishonest and would further erode consumer trust.
- Shifting blame to suppliers: This would not address the root cause of the problem and would damage relationships with suppliers.
Risks:
- Implementation challenges: Implementing these recommendations will require significant effort and resources.
- Resistance from suppliers: Some suppliers may resist changes to their practices.
- Lack of transparency: Failure to be transparent about the company's efforts could lead to further damage to its reputation.
Key Assumptions:
- Consumer demand for ethical sourcing: Consumers will continue to demand ethical sourcing practices from companies.
- Government regulations: Governments will continue to introduce regulations to address child labor in supply chains.
- Commitment from leadership: The Hershey Company's leadership will be fully committed to implementing these recommendations.
8. Next Steps
Timeline:
- Month 1: Commission independent audit, announce plan of action, and begin engaging with stakeholders.
- Month 3: Publicly disclose audit findings and implement initial corrective measures.
- Month 6: Develop and implement long-term initiatives for sustainable cocoa farming and supply chain management.
- Year 1: Establish a comprehensive monitoring and evaluation system to track progress and ensure accountability.
Key Milestones:
- Completion of independent audit: This will provide a clear picture of the extent of the problem and inform the company's plan of action.
- Implementation of corrective measures: This will demonstrate the company's commitment to addressing the issue of child labor.
- Development of long-term initiatives: This will ensure the sustainability of the company's ethical sourcing practices.
- Establishment of a monitoring and evaluation system: This will ensure accountability and transparency in the company's efforts to eliminate child labor.
By taking a proactive and comprehensive approach, The Hershey Company can emerge from this crisis stronger and more committed to ethical sourcing practices. This will not only rebuild consumer trust but also create a more sustainable and equitable future for the cocoa industry.
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Case Description
Michele Buck became the first woman president and chief executive officer of the Hershey Company (Hershey) in 2017 and was elected as chair of the board in 2019. Now, in 2021, she was leading a company that was facing supply chain and legal challenges. Although Hershey was dedicated to bringing "goodness to the world," the company was accused of having broken its 2001 pledge to uproot child labour from its cocoa supply chain. Global pressure for greater supply chain transparency and compliance with human rights increased throughout 2020, and in 2021, Hershey became a defendant in a US federal class-action lawsuit alleging harms caused by child labour. With an annual shareholders' meeting pending on May 17, 2021, Buck had to decide how to mitigate the risks and deal with potential fines of up to US$500 million.
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