BUSI 400 Week 1 Individual Assurance of Learning Exercise 1 Example

Sweet Product, Bitter Supply Chain: Hershey's Responsibilities in Cocoa Sourcing

Why Cocoa Is a Strategic Issue

David and David (2017) describe strategic management as the process of formulating, implementing and evaluating decisions that enable an organization to achieve its objectives, and they argue that ethics and sustainability belong inside that process rather than beside it. For The Hershey Company, the clearest example is cocoa. Cocoa is the company's most important raw material, and its cost shapes the company's results. Hershey's financial statements show gross profit falling from about $5.30 billion in 2024 to about $3.92 billion in 2025, even as net sales rose to about $11.69 billion, as cocoa costs surged; net income fell from about $2.22 billion to about $0.88 billion (The Hershey Company, 2026). A supply that volatile, concentrated among smallholder farms in a few West African countries, is a strategic risk as well as an ethical responsibility.

The Ethical Issue: Child Labor

Most of the world's cocoa comes from Côte d'Ivoire and Ghana, where farms are small and family labor is common. A study funded by the U.S. Department of Labor put the number of children engaged in child labor in cocoa production in the two countries during the 2018-2019 season at about 1.56 million and found that most of them were exposed to hazardous work such as using sharp tools or agrochemicals (NORC at the University of Chicago, 2020). A chocolate bar's supply chain begins in places its buyers will never see, and that is exactly why the buyer's responsibility is greater, not smaller. Major chocolate companies, Hershey among them, committed two decades ago to reduce the worst forms of child labor, and the report found that the problem persisted.

The Stakeholders Involved

Several groups have a stake in how Hershey sources cocoa. Farmers and their families depend on cocoa income and bear the direct harm of child labor and poverty. Governments in Côte d'Ivoire and Ghana set minimum farm-gate prices and run the systems through which much cocoa is sold. Consumers increasingly ask whether the chocolate they buy was produced ethically, and retailers respond to those concerns. Investors care about both the cost of cocoa and the reputational risk of supply chain abuses. Employees, finally, want to work for a company whose practices they can defend. A strategy that serves only one of these groups, for example by squeezing cocoa costs to protect margins, may harm the others and eventually the company itself.

Evaluating Hershey's Response

Carroll (1991) pictured corporate social responsibility as a four-level pyramid, with economic duties at the bottom and legal, ethical and philanthropic duties stacked above them. The table applies that framework to Hershey's cocoa sourcing.

Hershey's economic and ethical layers are now linked. Farmers paid too little cannot afford to hire adult labor or send children to school, so low farm incomes feed both the child labor problem and the long-term risk to supply. That connection is the strategic point of chapter 10: ethical failures in a supply chain eventually become business failures.

Placing the Issue in the Strategic Management Process

Chapter 1's model gives the recommendations their structure. In strategy formulation, Hershey's leaders decide how much cocoa to source through verified programs and what they will pay for that assurance. In strategy implementation, procurement staff, suppliers and partner organizations must carry those decisions into thousands of farming communities, which requires budgets, training and monitoring systems. In strategy evaluation, the company measures whether child labor and farmer incomes are actually changing and adjusts when they are not. Treating the issue this way keeps it from becoming a one-time campaign. It also forces a trade-off into the open: paying more for verified cocoa raises costs in a year when cocoa prices already squeezed margins, but cutting those programs would increase the long-term risks to supply and reputation that the analysis identified.

Recommendations

• 1. Raise the share of cocoa bought through programs that pay farmers premiums and monitor child labor at the household level, and publish the share each year, so progress can be judged.
• 2. Tie part of executive compensation to verified reductions in child labor in the company's sourcing areas, making the ethical objective part of the strategy's evaluation stage.
• 3. Invest in farmer productivity and income diversification in partnership with governments and other buyers, since higher farm incomes address both the ethical problem and the security of supply. The chief procurement officer would own the first recommendation, the board's compensation committee the second and the sustainability team the third, with progress reported annually alongside the company's financial results.

A Reflection on Stewardship

Scripture warns employers against withholding the wages of those who mow their fields (English Standard Version Bible, 2001/2016, James 5:4). The workers who grow Hershey's cocoa are not its employees, but they are part of the chain that produces its profits. A strategy that treats them justly is both faithful and wise.

References

Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39-48. https://doi.org/10.1016/0007-6813(91)90005-G

David, F. R., & David, F. R. (2017). Strategic management: A competitive advantage approach, concepts and cases (16th ed.). Pearson.

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

NORC at the University of Chicago. (2020). NORC final report: Assessing progress in reducing child labor in cocoa producing areas of Côte d'Ivoire and Ghana. https://www.norc.org/research/projects/assessing-progress-in-reducing-child-labor-in-cocoa-growing-areas.html

The Hershey Company. (2026). Annual report on Form 10-K for the fiscal year ended December 31, 2025. U.S. Securities and Exchange Commission. https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000047111&type=10-K