Starting with a short literature study on the impact of multinational companies in their host countries, this essay gradually narrows the problematic down to the introduction of the case of Nestlé’s ‘Pure Life’ in Lahore, Pakistan. After illustrating the problem of Nestlè's impact on the local community in Lahore, the stakeholder typology of Mitchell, Agle & Wood (1997) will be used as an example to evaluate under which premises stakeholder theory becomes an ethical theory, before applying the ethically modified typology on the case.
Table of Contents
1. Introduction
2. Multinational companies and their impact on local communities in host countries – An academic literature study
3. Nestlé and its impact on local communities in the host country – The case of ‘Pure Life’ in Lahore, Pakistan
4. Stakeholder Theory – An ethical theory?
5. The case of ‘Pure Life’ in Lahore, Pakistan in the light of an ethical stakeholder theory
6. Conclusion
Objectives and Research Focus
This essay explores the ethical implications of multinational corporations' (MNCs) activities within host countries, specifically focusing on the case of Nestlé’s ‘Pure Life’ water brand in Lahore, Pakistan. By employing an ethically modified version of the Mitchell, Agle & Wood (1997) stakeholder typology, the paper investigates how applying ethical principles can shift corporate attention from mere power dynamics to legitimate stakeholder claims.
- The impact of multinational companies on local communities in developing countries.
- Evaluation of stakeholder theory as an ethical management framework.
- Critique of Nestlé’s groundwater extraction practices in Pakistan.
- Modification of the Mitchell, Agle & Wood (1997) typology to incorporate ethical legitimacy.
- Analysis of the 'separation thesis' regarding the relationship between business and ethics.
Excerpt from the Book
3. Nestlé and its impact on local communities in the host country – The case of ‘Pure Life’ in Lahore, Pakistan
The availability of water has drastically decreased in past decades in Pakistan and is now at 1000m³ per capita per annum (Shahid, Iqbal & Hasnain, 2014). If this tendency continues, Pakistan will become a water shortage country (Hashmi, Farooq & Qaiser, 2009). Although exact figures vary, it can be assumed that a significant part of the available water does not fit for human intake (Shahid, Iqbal and Hasnain, 2014). This also accounts for the “[m]ajority of the people of Pakistan [who] get drinking water from groundwater source[s]” (Shahid, Iqbal and Hasnain, 2014, p.7525).
In 1997, Nestlé launched the concept for their water brand ‘Pure Life’. “The concept was to extract groundwater, and after purification and addition of minerals, to sell it as an affordable product for daily use.” (Rosemann, 2005, p.22). The affordability in Nestlé’s concept is questionable, as calculations of Rosemann (2005) suggest that the coverage of a family’s monthly demand of drinking water with Nestlé’s ‘Pure Life’ would consume a median Pakistani household income. While Nestlé’s activities only account for little over 1% of Pakistan’s groundwater extraction, their share is likely to rise, as water tables decline by approximately 1.4m per annum, causing public wells to dry out (Rosemann, 2005). Those circumstances draw a picture of a country with drastic demand for free and safe drinking water. The immoral behaviour Nestlé is accused for, is, to take advantage of the absence of regulations regarding groundwater extraction, to sell the drinking water to people, who urgently need it, but can hardly afford it (Rosemann, 2005). There is also the fact that traditionally, drinking water was a public good in Pakistan, rather than a commodity (Rosemann, 2005).
Summary of Chapters
1. Introduction: This chapter outlines the scope of the essay, introducing the problematic impact of Nestlé in Pakistan and the plan to apply stakeholder theory to evaluate these activities ethically.
2. Multinational companies and their impact on local communities in host countries – An academic literature study: This section reviews literature regarding the positive and negative impacts of MNCs on local economies, highlighting the tension between home-grown corporate ethics and local regulatory environments.
3. Nestlé and its impact on local communities in the host country – The case of ‘Pure Life’ in Lahore, Pakistan: This chapter examines the specific water crisis in Pakistan and the ethical criticisms directed at Nestlé regarding their groundwater extraction practices for the ‘Pure Life’ brand.
4. Stakeholder Theory – An ethical theory?: This section discusses the evolution of stakeholder theory and the 'separation thesis', arguing for the inseparability of business and ethics through a Kantian lens.
5. The case of ‘Pure Life’ in Lahore, Pakistan in the light of an ethical stakeholder theory: This chapter applies a modified stakeholder model to identify the Lahore community as a 'dependent stakeholder' and argues for the necessity of acknowledging their legitimate ethical claims.
6. Conclusion: The final chapter synthesizes findings to argue that while stakeholder theory has evolved toward more ethical perspectives, global business practices often fail to integrate these considerations.
Keywords
Nestlé, Pure Life, Pakistan, Stakeholder Theory, Business Ethics, Multinational Companies, Groundwater Extraction, Corporate Social Responsibility, Separation Thesis, Ethical Management, Local Community, Sustainability, Mitchell Agle Wood, Water Scarcity, Fiduciary Duties.
Frequently Asked Questions
What is the core focus of this research?
The research examines the ethical implications of Nestlé's water extraction activities in Lahore, Pakistan, by applying and adapting established stakeholder theory models.
What are the primary themes discussed in this paper?
The paper covers multinational corporate responsibility, the tension between business and local ethics, water resource management in developing countries, and the evolution of stakeholder theory.
What is the main research goal?
The goal is to determine whether Nestlé’s activities in Pakistan align with ethical stakeholder theory and to propose a modified typology that emphasizes the legitimacy of stakeholder claims over raw power.
Which methodology is employed to analyze the case?
The author uses a qualitative literature-based approach, modifying the Mitchell, Agle & Wood (1997) stakeholder typology to incorporate a more ethical, Kantian perspective for case analysis.
What topics are explored in the main body of the work?
The main body treats the economic impact of MNCs, the specific water crisis in Pakistan, the separation thesis in business ethics, and the re-evaluation of the local community as a dependent stakeholder.
Which keywords best describe this study?
Key terms include Nestlé, Stakeholder Theory, Business Ethics, Pakistan, Water Scarcity, and Corporate Social Responsibility.
How does the author define the 'separation thesis' in this context?
The author references the separation thesis as the historical debate over whether business and ethics should be considered separate domains, ultimately arguing for their inseparability.
What conclusion does the author reach regarding Nestlé's management?
The author concludes that Nestlé has largely failed to acknowledge the legitimacy of the local community's claims, leading to a long-standing ethical conflict.
Why is the Lahore community identified as a 'dependent stakeholder'?
They are identified as dependent because they have a legitimate ethical claim to water as a fundamental human need, yet they lack the power to enforce their interests against the multinational corporation.
- Quote paper
- Malte Eilbracht (Author), 2016, Nestlé and its impact on the local community of a host country in the light of an ethical stakeholder theory, Munich, GRIN Verlag, https://www.grin.com/document/342226
