Case Study – Lancaster Caramel Company

Introduction

Hershey’s is one of the largest chocolate manufacturers that aims to continue expanding worldwide. The beginning of Hershey’s company was when Milton S. Hershey found Lancaster Caramel Company in the 19th century in Pennsylvania. He made his wealth by producing caramel pieces as the first product before turning into chocolate production. The idea of making chocolate came after he started covering the caramel pieces with chocolate, many people were impressed and attracted to the taste of the chocolate coat.

After that, he found his business in the chocolate industry.

Hershey’s offers many charitable, social and cultural programs. However, it faces many ethical issues, especially regarding labor issues, specifically child labor. Hershey’s uses children to make cocoa in Africa. It has also received many criticisms that it’s not doing enough to combat labor exploitation and not helping communities in West Africa. Therefore, it has been ranked as the lowest among its competitors and since then, the ethical cases against Hershey’s increased.In 2015 and 2018, two lawsuits were filed against the company in California courts, which claimed that the company is violating the consumer protection laws of West Africa countries by not disclosing that their cocoa suppliers in Ivory Coast, rely on the worst forms of child labor.

Most cocoa companies are facing several ethical issues related to the safe environment and fair treatment of workers, and it attracts the attention of many institutions especially when it relates to child labor. Hershey’s Company faced many ethical and legal issues like the board of directors’ case, child labor, and the cocoa beans source.

The main issue was that the cocoa farming is found in lands with a high amount of vegetation where the weather is rainy, hot and tropical and these farms were found in poor nations, around 70% of the cocoa comes from Africa especially from Ivory Coast which is the major global cocoa supplier. And this resulted in a continuous and non-stopping demand of farms workers, and that led to engage children, slaves and trafficked human in this tough environment to meet the increasing demand for workers. To reduce the costs of farming many farmers use members of their families. Besides, many cocoa farms don’t own the land, so they are required to pay a percentage of each year’s crop to the land’s owners.

Children who worked in cocoa plantations were between 12 and 14 years, but some of them were only 5 years old, and they worked under dangerous and hazardous conditions. Hazardous conditions comprise using chemicals, such as pesticides, and sharp tools, such as knives, working in places that full of snakes and other dangerous animals, all of that was in the governments and corporation’s awareness.

Number of estimates indicate that two-thirds of African farms use child labor and shows that the children were forced to work without rights and without humanity. This ethical issue isn’t only related to children, it’s related to non-family workers who may be enslaved to work in abusive conditions. Often, the workers are threatened with physical punishment or death if they try to leave the farm. Although the company generates income and the prices of chocolate have increased, many farmers did not see any increase in additional compensation or standard of living.

Thus, those ethical issues have drawn the attention of many organizations and companies that produce the same products. In order to reduce the use of children for cocoa farming, these organizations have implemented many different initiatives, laws, and other precautionary measures. African law prevents children under the age of 14 from working in the business sector, excluding family farms, which is considered as a weak side of the law because it doesn’t consider the number of family cocoa farms that are using their family members in cocoa production and the ease of hiding for non-family laborers.

Organization and companies who purchase products from West Africa are interested in the cases of children labor, human trafficking and forced labor in West Africa, they have implemented a lot of initiatives and laws in order to reduce the use of children for cocoa farming. Critics are arguing that Hershey’s doesn't do enough in order to improve communities in West Africa of labor exploitation. Although some competitors adopted fair trade certification and disclosed information about their source of cocoa beans like Nestlé, Hershey’s still didn’t respond to the requests from the public about disclosure and name of its cocoa suppliers. However, it is well known that Hershey’s acquires most of its cocoa from West Africa, but the specific sources are so difficult to identify.

Another ethical issue of Hershey’s was raised when the attorney general’s office was worried about Hershey’s board members, who were overpaid, received compensation for redundant travel expenses and exceed the limit of 10 years in their positions. So, they became in a questionable situation in terms of whether they are acting in the interest of Milton Hershey’s school or not.

Regarding whether Hershey’s is responsible for the child labor conditions or not, Hershey’s can’t be marked as the main cause or that it's responsible for the child labor condition because there is no clear evidence that says so. However, Hershey’s values might be a cause of such ethical issues. Their belief in openness to possibilities enabled the diversity in employment which led to employ children below the legal age for work.

In addition, the company still didn’t reveal its suppliers' which made them in a questionable situation. For Hershey’s, In order to balance its ethical culture and concern for labor conditions in West Africa, it has to focus on many key issues, especially those related to workers' employment in West Africa. This means that the company must make more effort in terms of its CSR in the workplace to improve the life of the workers' environment, such as increasing the workers' income, providing compensation, benefits, and rewards. They must also adopt a strategy of full transparency and full disclosure of everything related to labor in West Africa, to avoid the vague picture about their cocoa suppliers who may use child labor

The company can apply the concept of the Golden Rule which is based on Do unto others as you would have them do unto you. By making the HR and the other departments realize that they should prevent such activities because they wouldn’t allow it to be practiced by their children. Also, The company’s owners should have their own virtue ethics about the faultiness of child labor. So, they must establish deterrent laws that prevent farmers from employing under-age workers and compel farmers to apply them and set fines for violators.

By applying the utilitarianism concepts, Hershey’s must carry out ongoing awareness campaigns in West Africa for families and the community and raise awareness of the child by enriching his mind with the knowledge and events that occur around him. Knowing and understanding this, the child may be protected from exploitation. Finally applying the universal ethics concept between Hershey’s and other cocoa companies, they should actively seek and work to fight the use of child labor and to punishing farmers who use children through boycotts.

Nestlé has begun in the 1860s in Switzerland when its founder Henri Nestlé created a miracle which is a baby formula for mothers who can't feed their children. It consists of a mixture of cow’s milk, flour, and sugar, and this was Nestlé’s first product. Nestlé and its biggest competitor merged in 1905. Year after, Nestlé added chocolate to its line of production, and they got many factories around the world. Nestlé is the biggest food and beverage company in the world. They employs almost a quarter of a million from different nations, and they have factories around the world, they're operating in every part of the world.

With Nestlé continuous chain of success, a case has been brought against Nestlé that relates to the child labor issue. The Fair Labor Association (FLA) issued a new report authorized by Nestlé that researchers had visited 260 of Nestlé's farms in Ivory Coast in 2014 and they found that there are 56 workers under 18 years, and 27 of them are under 15. Also in Divo district, they found evidence that proved the existence of forced labor with young labors who didn't receive any salary for a year of work.

Though Nestlé has created a code of conduct which prohibits the use of child labor and tried to inform farmers about the code, the researchers of FLA found that farmers’ awareness about Nestlé’s code was low and they couldn't attend the training courses from Nestlé due to the lack of interest or time. They also found that there are 24 children work on farms as a ""family workers"", they were unable to go to school because they were forced to work with their parents.

The phenomenon of child labor is widespread in societies, especially those of developing countries. Child labor isn’t only against the law but a phenomenon that deprives children of their childhood and destroys their future. Children may be at risk due to their insecure work environment. As Hershey's case, children work on dangerous tasks such as working with sharp objects like knives and machetes and transporting heavy loads.

Nestlé said that the child labor issue in farms and cocoa sectors is a result of the lack of education, poverty and the lack of the community's awareness about the dangers of this work. It's working with the local communities to address the issue of child labor to ensure that these poor communities will be financially and socially sustainable.

In 2012, Nestle had created a Child Labor Monitoring and Remediation System (CLMRS) in Ivory Coast. This system works to raise the awareness of the community about child labor and identify children who may face risk. This system was the first system that is established by a cocoa company.

In 2016, Nestle started to applicate the Child Labor Monitoring and Remediation System (CLMRS) in Ghana, and in 2017, it has published a report showing the big progress they've made in tackling child labor. Nestle’s also tackling this problem by helping children in the cocoa plantation communities to go to schools. In addition, they've built and renovated 42 schools to help over 11,000 children.

Individuals try to live their lives according to a stander of right or wrong behavior, this field of study known as Ethics. Organizations are required to develop their own code of ethics. Hershey’s defined its ethical business behavior to its stakeholders through its code of ethics. And it’s clear that Hershey’s business ethics is consistent with the ethical standards in terms of dealing with conflict of interest and sustainable supply chain management. Hershey’s also outlined its organizational culture by setting four core values to its business. It gave the CSR great attention by setting a strategy that focuses on keeping the development of CSR performance and collaborated with its stakeholders. Hershey’s has fulfilled its social contract approach, which is the obligation toward the society over and above the expectation of the company’s stakeholders, by dividing its CSR into four groups which are marketplace, environment, workplace, and community.

According to Altruistic CSR, in which the organizations underwrite specific initiatives to give back to the company’s local community or to designated national or international programs, Hershey’s designed the ‘Dollars for Doers’ program to encourage employees to participate in 50 hours of community services to get a reward of 250$. In addition, Hershey’s start to implement different strategies like sustainable paper and recyclable packaging to reduce its impact on the environment as a part of its rule toward the CSR. Hershey’s has developed a compensation committee to solve out the Board of directors’ issue. They developed a legal document that covers the terms of choosing the boards and compensation.

Hershey’s ethical issues involved challenges by its functions, due to their ethics in the human resources department which involves hiring employees with different ages, gender, and qualities to comply with company’s values which talks about open to possibilities value that means embracing the diversity.

The global efforts for improving the labor condition prevent the children under the 14 age from working in business sector, which reflect the ethical Relativism concept that implies some degree of flexibility by allowing teenagers to work in business sector to meet the increasing demand for the labor, as well as, avoiding children’s involvement in these tough environments.

Although Hershey’s works to improve the labor condition through many commitments, it refuses to name its suppliers, which in turn, put the company in a questionable situation, is it really commit to the global effort for reducing the labor issues through fighting child labor and improve labor condition or not?

One of the possible reasons why Hershey’s isn’t responding to the continuous claims to disclose its suppliers is that they follow one of Saul Gellerman rationalizations, which is the belief that company’s activities are safe because it will never be found due to the difficulties to identify their specific sources of cocoa. 

Hershey’s company has many advantages in the market. It has been ranked as one of the world’s largest producers of chocolate and candy products. In addition, there are many CSR activities that the company adopt such as sponsoring several consumer health initiatives and programs, including Moderation Nation, a national consumer education initiative that promotes balanced lifestyles. Also, the company was willing to follow its competitors' vision to reduce child labor and improve the cocoa farming community, including the Hershey Learn to Grow (LTG) farm program, in Ghana and its partnership with three certification organizations: UTZ, Fairtrade USA, and Rainforest Alliance in order to produce cocoa that is certified as sustainable after receiving many ethical cases. Despite all the strong features that Hershey’s has, its act of hiding its cocoa supply source might affect its reputation and reduce its customers’ trust in it. Also, its value ‘open to possibilities’ led to child labor. However, Hershey’s large income can help it to invest and participate in many projects to improve lives in West Africa and fight child labor.

To conclude, Hershey’s main threat is the competitor companies like Nestle, Mars Mondelez, and Ghirardelli who addressed sustainability, poverty, and child labor before Hershey’s started so they are praised and supported by the community and institutions.

Conclusion

To sum up, due to the poverty in West Africa, the labor issues in the chocolate industry are very complicated. The exploitation of cocoa communities is related to the lack of education and opportunity, governmental corruption, and other conditions in West Africa. Improving the well-being of West Africa is an important thing of humanity and to fight the problems associated with labor cocoa plantations. Despite Hershey’s recognizable financial contributions, it follows its competitors on efforts to address sustainability, poverty, and child labor.

The issues faced by cocoa-making companies with regard to child labor are difficult to solve. There are many obstacles that can’t be overlooked or in these cases, which makes solving them almost impossible. Such problems require a great collaboration between companies that address the chocolate industry, however, a small change in West Africa’ life quality can improve the lives of many workers eventually.

To solve the issue of child labor, Hershey’s should adopt the Universal Ethics Concept by cooperating with other cocoa companies to guarantee a financially and socially stable life for the community in Africa by hiring labor inspectors who will play an important role to reduce the labor child, also they should create education opportunities for the child by establishing schools and following up the education and develop it. They also must work with suppliers to prevent the child labor phenomenon and set fines for violators.

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