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Few company names come so often prefixed by the word 'boycott' as Nestle. The Swiss-based multinational has, since the 70s, been the subject of widespread consumer action over aggressive marketing of its baby milk products in the Third World. ±±¾©Èü³µpk10ers have argued bottle-fed babies die unnecessarily because the powder is often mixed with contaminated water, causing diarrhoea and malnutrition.

Nestle is for many consumers the ultimate mark of quality across a colossal brand portfolio that takes in coffee (Nescafe), bottled water (Perrier, Vittel), pet food, pasta, dairy products and chocolate brands such as Kit Kat and Aero. It is also the biggest food company in the world.

Now it is courting fresh controversy with plans to launch its Nan HA hypoallergenic baby milk in the UK and a £1.3m donation to the Red Cross (Marketing, June 20. The move comes on the back of Edinburgh Fringe boycotts by comedians over the festival organisers' decision to extend links with Perrier in its sponsorship of the Comedy Award.

And earlier this month writers Germaine Greer and Jim Crace pulled out of the Hay-on-Wye literature festival over Nestle's sponsorship of the event.

In its defence, Nestle has recently introduced an ombudsmen system allowing employees to blow the whistle on any unethical marketing of baby milk formula to mothers in developing countries.

But have its Third World activities irrevocably tarnished its reputation among hoards of consumers and supplied permanent fuel to the Western boycott bandwagon? Or can it somehow act to convince consumers it is a socially responsible company?

We asked Raoul Pinnell, vice-president of global brand and communication at Shell, which rode a public relations disaster in the 90s over its plans to dump the oil platform Brent Spar in the North Sea, and Giles Gibbons, partner at Good Business, whose jointly authored book sets out the case for firms to use the power of their brands to drive social change.

DIAGNOSIS

Raoul Pinnell

The general public has a heightened need for protection and trust. Recent world events demonstrate the fragility of some of the mechanisms by which its citizens can legitimately be protected.

One of the consequences is that when one is involved in marketing a potentially controversial product - as Nestle will be, one has to take extra care in responding to customer needs and expectations.

Customers are searching for organisations that they can trust. A manifestation of this is a demand for more openness and transparency. Another is a desire to be treated in a more adult way with the brand acting as a 'partner' rather than as a 'parent'.

One enabler of this is the internet, and the fundamental way it is changing the access that stakeholders have to each other. Clearly the net will also enable a global audience to share its point of view with Nestle.

How it is prepared to respond is critical. Dialogue with customers is required - listening, and learning, and asking for active participation in the solution. In what are often very complex problems, that can't be solved through the media soundbite.

Giles Gibbons

Nestle is one of the world's most socially responsible companies. It owns some of the world's most popular brands. And yet it's also one of the global corporations most frequently under fire from activists. Why?

It's because Nestle takes a worthy, but conventional approach to its social role. It keeps social responsibility separate from its brands - admittedly a common mistake. Many companies point to their social and environmental reports, community programmes and charitable giving and ask despairingly "Why don't we get any credit for the good things that we do? The reason is that such laudable activities are often divorced from mainstream operations and absent from the most powerful communications channel a company has: its brand marketing. So Nestle needs to start using its brands as agents for social change. This way it will not only make a greater social contribution; it would build up a 'bank of goodness' to deflect what is often unfair criticism.

This is the difference between social responsibility and social leadership, and it's the best way for Nestle to convincingly secure the health of its brand.

TREATMENT

Pinnell's prescription

- Listen to stakeholders' rational and emotional concerns and share with them knowledge of nutrition.

- Be wary and challenge the ad agency if it presents simple 'problem solution' advertising to address concerns.

- Establish a 'monitoring tracker' to provide disciplined data to see if the issues are being addressed.

Gibbons' guidance

- Be less defensive and apologetic when criticised: be proud of your economic and social contribution and say so.

- Devolve corporate social responsibility budgets so brand managers can create brand-led social leadership programmes.

- Find creative ways of using your brands to tackle the social issues customers care about.

VITAL SIGNS

Nestle financials     Dec 2001         Dec 2000          Dec 1999
Turnover              £34.89bn   £33.85bn    £29.03bn
Cost of goods sold    £15.56bn   £15.85bn    £13.96bn
Gross profit          £19.34bn   £17,99bn    £15.07bn
Gross profit margin   55.4%            53.2%             51.9%
Profit for the
financial year        £2.75bn    £2.40bn     £1.84bn
Net profit margin     7.9%             7.1%              6.3%

Source: Nestle