Muhammad Asim

Baig
Business Ethics

Nestle Michigan-Water case Study

As the company expanded, so did their money-hungry stomachs. Nestlé invested $100 million to build a
new 410,000-square-foot bottling plant in Mecosta County, Michigan. According to the National Public
Radio, Nestlé has been pumping out 200 gallons of freshwater out of Michigan-water that the people of
Flint desperately need. The Flint Michigan crisis has killed 12 people and hospitalized 87. Children are
losing their hair, developing skin lesions, and going blind just from bathing. The community has no access
to fresh water because Governor Rick Snyder switched the city’s water supply from one of Michigan’s
most pristine water sources to the noxious and harmful Flint River in an attempt to save money. While
the citizens of Flint live in a constant state of disarray, worrying about how to survive, Nestlé has been
making a profit. Not only does Nestlé take water from a city in a full-blown water crisis, but they also sell
it to third world countries who don’t have access to clean drinking water, for astronomical prices.
According to Nestlé Pure life, they sell their water for 2 dollars a bottle. To Americans that may seem like
no big deal, but in a third world country where people only make a few cents a day, it’s everything. Nestlé
persuaded the World’s Water Council to change drinking water to a need rather than a right. If water were
a right, then it would have to be supplied freely, but since it’s a need, water companies can sell it for as
much as they want and make an enormous profit.

Many people get sick in the areas in which the Nestlé Company was present. The village requested Nestlé
to provide them clean water piped in but it refused their request because in that way the company could
not get any kind of profit. As the point of view of stakeholders, Nestlé did wrong and used unethical
measures such as the people who got sick due to dirty water and for them purchasing Nestlé was the
matter of their life and death. The bottled water of Nestlé also lies under the category of unethical
consideration as it impacted negatively by the concept of individualism

Effects:
●The effects of pumping water has lowered the local water levels and affected the spawning of the local
pike.

●Controversy of diminishing water resources and breaking ground-water has affected legislation on
bottled water companies and other businesses.

●Nestlé’s use of this natural resource has created conflict and controversy locally, nationally and globally.

Cost-Benefit Analysis
A cost-benefit analysis is a systematic process that businesses use to analyze which decisions to make and
which to forgo. The cost benefit analyst sums the potential rewards expected from a situation or action
and then subtracts the total costs associated with taking that action. Some consultants or analysts also
build models to assign a dollar value on intangible items, such as the benefits and costs associated with
living in a certain town.

Cost-Benefit Analysis: An Ethical Critique

1. In areas of environmental, safety, and health regulation, there may be many instances where a
certain decision might be right even though its benefits do not outweigh its costs and certain
decision might be wrong even though its benefits outweigh its cost.
2. Cost-Benefit analysis put dollar values on non-marketed benefits and costs.

Discussion:
In this case the, the government of Michigan’s has authority to allow Nestle for pumping gallons of water
from Michigan state, his CBA analysis based on the financial situation of local community, he consider
shortage of water as a cost and jobs for local community as a profit. According to his projections, if Nestle
build their bottling plant in Michigan, jobs will be provided to local people of and the community, their
financial situation will improve, and economy of the state will also improve. But he neglects the ultimate
effects of shortage of water which may cause health issues and death of many people, and this happened
in the end as a result of water shortage, 12 people lost their lives, these lives cannot be consider as a
comparison to the money (Dollars) which makes the economy better.

On the other hand Nestlé invested $100 million as a cost of this project, Nestlé did this is for keeping their
business cost low to increase their profit margins. Inexpensive water was just one of the reasons Nestlé
chose to have a plant in Evart MI (A tiny Michigan town) Due to a combination of a cheap water supply
and significant tax breaks from the state of Michigan, Nestlé had the perfect opportunity to keep cost low
while increasing its water withdrawal. With the approval of the proposal, Nestlé can increase its
production. By increasing production, Nestlé can then bottle and ship more water at a faster pace. In the
long term, doing this will allow Nestlé to capture more of the market share, which has the potential to
raise its stock price, or increase its dividends, thus benefiting its stockholders. Nestle analysis that this
project would not only increase revenues, but also would keep current stockholder’s profits high and
creates a sound investment opportunity for potential new stockholders who are looking to invest. Nestle
not only unable to analyses the impact of this project on local community and environment but also did
not consider the impact on its image by its community when making a drastic proposal such as this one.

In critiques point of view, even if all the technical problems of shadow pricing could be solved, there are
still good reason for not assigning a monetary value to something. Steven Kelman argues that,

“Placing a dollar value on some goods reduces their perceived value, because they are valued precisely
because they cannot be bought and sold in a market”.

In utilitarian point of view, it is the matter of maximizing good over bad. Instead of pumping water for
selling it to maximize the profit when the people of Michigan are facing water shortage, and people are
affected by drought. Providing water for people are in great need for survival would be ethical and moral
activity.