by Sunil Sinha, Emerging Markets Economics

Sunil Sinha is Director of EME (Emerging Market Economics), a firm of economic, financial and management consultants serving both the public and private sectors. EME is experienced in carrying out evaluations and provides advice to governments and aid agencies throughout the world. Its clients include the World Bank, the Asian Development Bank, the International Trade Centre and the UK Department for International Development.

We were commissioned by Nestlé S.A. to undertake a study of its Pakistani subsidiary, Nestlé Milkpak, to examine the extent of its compliance with the WHO Code of Marketing of Breast-milk Substitutes and the Nestlé Instructions that are derived from the Code.

Objectives and methodology

In line with best practice, we have not just evaluated the operations of Nestlé Milkpak to check for possible breaches of the WHO Code. We assessed whether policies, procedures and practices form a consistent framework to implement the Code. We examined the company to see whether the WHO Code is embedded in Nestlé Milkpak's culture and operations and to check for systemic pressure within the company and from the market place that may lead to breaches of the Code. In this way we could be confident not only of whether breaches of the Code are occurring today, but form a view also of whether breaches were likely to occur in the future. Our findings are based on checking the company's management information, human resource management and accounting systems, verified by an internal survey of Nestlé Milkpak staff and an external survey of health professionals. The methodology used emphasised the crosschecking of the findings from individual systems and surveys to reveal potential areas of inconsistency and possible breaches across the company's operations as a whole. There were thus three strands to the audit - the audit trail of policies and procedures that focused on the company's internal systems, internal interviews and external interviews. If the three sources were not in agreement on a particular matter, a more thorough investigation was carried out. The results are therefore comprehensive and reliable, going far beyond a mere analysis of paperwork.

Summary of the findings

We have concluded that, overall, the operations of Nestlé Milkpak are in compliance with the letter and the spirit of the WHO Code. The Code is deeply embedded in the culture and operations of the company, particularly the Infant Nutrition Department. The human resource function rewards knowledge and adherence to the Code. Of the 28 articles of the Code that apply to manufacturers of infant formula, the company was fully compliant with 25 articles. The instances of breaches that we found are relatively minor and can be easily corrected - they appear to be of the letter rather than the spirit of the Code.

The three Code violations found

These violations appear to be of the letter rather than the spirit of the Code and represent evidence of a lack of an assurance system to ensure compliance rather than a systematic attempt to breach the Code.

Framework for Code implementation

In systemic terms, we found that a basic framework exists within the company to implement the Code. However, our report recommends that Nestlé Milkpak document policies and procedures that are largely unwritten to improve the consistency of the framework for implementing the Code. We have also suggested that the company implement a formal system of quality assurance (QA) for the Code that builds in checks for compliance into all operations and delegates the authority of the CEO to a manager to ensure its implementation Nestlé Milkpak has attempted to mitigate systemic pressure to breach the Code arising from within the company and the market place by separating Medical Delegates (who are sources of information about Nestlé products, but who do not sell the product) from the sales operation of the company. The audit trail and the internal survey show that Medical Delegates are not concerned with sales performance and are not put under pressure when it is poor.

Code implementation in Pakistan

As a general observation, the absence of legislation in Pakistan means that there is no clear guidance available on how the Code should be implemented in Pakistan and therefore the possibility is there for NGOs to advance different interpretations of the Code. This can lead to confusion and we suggest that Nestlé Milkpak work with the government in order to enact appropriate legislation/regulations that would clarify these grey areas. There is also a general lack of understanding amongst health professionals and NGOs as to the scope and purpose of the WHO Code. The level of WHO Code compliance awareness is much lower in Pakistan than in developed countries such as the UK. Health professionals in Pakistan clearly need to be made more aware of the Code's Recommendations before they can realistically play their important role in implementing them. Nestlé could work with the paediatric association (PPA) to educate health professionals on what is allowed and, more importantly, what is prohibited under the WHO Code. Our report also recommends that a voluntary panel be established that would comprise experts, members of the PPA, the government, NGOs and industry. This panel would be charged with ensuring that all allegations of breaches of the Code are investigated and dealt with so that a credible process is established to redress breaches of the Code.

Sunil Sinha, July 2000