LEVEL 7 • SUCCESS THROUGH BUSINESS ETHICS Group Bimbo Solution

LEVEL 7 • SUCCESS THROUGH BUSINESS ETHICS

GRUPO BIMBO

Research & Writing Pack

Supplier-linked palm-oil deforestation, ethical decision-making and leadership accountability

1 Introduction

Business ethics is the issue that relates to norms whereby organisational decisions are evaluated on the basis of commercial interests that concern stakeholders, rights as well as social well-being. It goes even more than legal compliance as actions may be legal but deceptive or exploitative or detrimental to the environment. Ethical analysis thus requires the question of what a company should do, who happens to be the victims and the presence or absence of governance to change the promise made to the people into actual action. This is especially crucial in global food supply chains where indirect sourcing can put an end to what happens when there is a gap between a buyer and the place of harm and on the other hand the supplier is still influenced by the buyer. Monitoring and mapping, in turn, are at the heart of plausible zero-deforestation commitments (Austin et al., 2021), and certification in itself cannot fix all traceability and implementation issues (Ostfeld and Reiner, 2024).

Grupo Bimbo is a multinational baking company that claimed to operate in 34 countries, 217 bakeries and manufacturing facilities, over 57,000 routes and over 149,000 partners in 2023 (Grupo Bimbo, 2024a). Its palm-oil policy in 2015 vowed responsible sourcing of palm oils on the basis of traceability, no deforestation and no exploitation (Grupo Bimbo, 2015). In 2022, the Environmental Investigation Agency (EIA, 2022) found that a mill that was linked to PT Inti Kebun Sawit Jaya, linked to the supposed clearing of approximately 700 hectares in West Papua, was present in a supply chain to Grupo Bimbo via International Flavors and Fragrance. Grupo bimbo informed EIA that it was consulting with the supplier to clear the allegation. This report does not consider that supplier relationship as evidence that Bimbo cleared forest directly. It also examines the ethical sufficiency of the due diligence and leadership of Bimbo. The thesis is that the ethic intent of the Bimbo policy and response is ethical, yet traceability of the plantations and lack of disclosure to the population demonstrates an implementation and assurance loophole.

2 Philosophy of Grupo Bimbo action.

2.1 Utilitarianism

The utilitarianism evaluates the action according to its total effects on all the people concerned. Palm oil creates positive impacts: it is prolific, multi-purpose and helps people gain jobs, cheap food, lives of producers. An immediate break with all suppliers who are questioned might automatically place the burden on workers and the smallholders and prevent deforestation as the production is moved on to less visible marketplaces. Lai et al. (2022) demonstrate that the sustainability initiatives may either facilitate or limit the involvement of smallholders based on its design. The utilitarian answer to the question should then be defensibly based on weighing targeted engagement and remediation against a suspension, not a priori that withdrawal is always good.

The possible damages are however far reaching and long term. Acobta, Ayompe and Egoh (2023) single out the adverse consequences of oil-palm plantation on carbon sequestration, climate control, quality habitats and genetic diversity. Ngan et al. (2022) relate the industry to the community, labour, land and livelihood issues as well. Such losses may be irreversible and most of the time are borne by the stakeholders who may get minimal value of the final product. As Bicknell et al. (2023) show, conservation results in oil-palm landscapes can be enhanced with ecological interventions, thus showing that avoidable damage is not an inevitable cost of production. In the light of utilitarian logic, the extent, length and spread of the potential harm is a sufficient reason to defy prior precautionary checks that are administered even before all accusations are proven beyond doubt.

In the June 2023 progress report of Grupo Bimbo, palm-oil traceability of 95.56% to mills but 67.52% to plantations was reported; palm-kernel-oil traceability was 83.27% to mills and 70.02% to plantations (Grupo Bimbo, 2023a). The numbers indicate significant improvement yet tangible gaps in information where land conversion happens. The undiscovered portion cannot be presumed to be deforested. Nonetheless, poor visibility increases the chances of detrimental damage finding its way to the supply chain without any notice. A utilitarian view on this is thus ambivalent: supplier engagement would save livelihoods, and better behaviour, though it would maximize welfare only in the figment that it is backed up by swift verification, corrective action and remedy that is sanctionable. Instead, commercial continuity is given weight in the short term and ecological and community externalities are discounted.

Figure 1. Grupo Bimbo reported substantially lower traceability at plantation level than at mill level in June 2023. 

Source: Grupo Bimbo (2023a).

2.2 Duty ethics

Duty ethics evaluates behaviour in terms of the observation and regard of obligations and people, rather than the achievement of positive consequences. This 2015 promise gave Bimbo a self-improved responsibility to develop a system of sourcing that could avoid deforestation and exploitation. These are the corresponding obligations of honesty of speech, conformity of words with deed, fair inquiry into plausible warnings and evading the enjoyment of anticipated misconduct. According to Grabs and Garrett (2023), the goal-based sustainability governance can create paradoxes in the situations when ambitious commitments do not have mechanisms that can render performance credible. Regarding the Kantian viewpoint, a business organisation could never be able to systematise a rule that would enable firms to promote and declare no-deforestation pledges and tolerate ongoing on-plantation invisibility whenever it was inconvenient to do so through the mechanism of direct sourcing.

This is not enough to show that Bimbo intentionally violated its pledge. Multi-tier supply chain limited direct control and its choice not to make the immediate unsupported accusation but refer to IFF was the sign of procedural attention. But indirect control is not synonymous with not being responsible. Empirical studies on indirect sourcing of commodities indicate that the third-party is a significant challenge towards implementing zero-deforestation promises (zu Ermgassen et al., 2022). Bimbo chose the ingredients, suppliers, claims/monitoring arrangements that it gained. This obligation of its part was therefore one of reasonable due diligence but not prevention. Chong et al. (2023) suspect sector-specific transparency in ESG with financial relevance but the ethical disclosure should not be narrowed down to the investor value: it is paid to the impacted stakeholders as they need to have the credible information to analyze the corporate behaviour. Interaction which does not result in a disclosed outcome is still procedural incomplete.

2.3 Rights and justice

Rights and justice theory deals with the rights, just process and balance of burdens. Conversion of the land could potentially impact upon the accessibility of forests to the community, livelihoods, water and cultural resources and the biodiversity and carbon impacts will be passed to the future generations. There is also a consumer interest in responsible-sourcing claims which are correct, and the rights of workers and smallholders to fair treatment in the course of corrective action. When consumers and shareholders gain the positive benefits of global sourcing and communities that are remote to the source suffer in environmental risk, the allocation is ethically unbalanced in the face of total economic benefits being positive.

The punitive supplier exclusion also becomes a challenge due to justice. Dharmawan et al. (2021) find that smallholders are hampered by structural and cultural limits to achieve sustainability standards, and Denashurya et al. (2023) demonstrate that better practice adoption can be hindered by certification impediments. The entire mapping and compliance expense should not be shifted to actors that have less capacity in a just way. Procedural justice entails having avenues of complaint, engage the impacted communities, and publication of the investigation criteria and results. Technical and financial support must also be part of what should be termed as corrective programmes where deliberate or habitual infractions should lead to suspension and remediation. The rights-based conclusion is thus more compelling than a request of additional data: Bimbo needs to employ traceability to deliver voice, protection and remedy. Those outcomes cannot be replaced by certification and supplier guarantees or percentages.

3 Ethical decisions making

The model proposed by Rest of four components provides a plausible explanation on how an ethical commitment is transformed into action: moral awareness, moral judgment, moral intention and moral behaviour (Rest, 1986). At the awareness phase, in 2015 Bimbo was already conscious of the fact that deforestation and exploitation were moral issues in its policy. The information security threat was informational. Lack of traceability of plantations, the managers will not be able to detect a certain risk at its initial stage and act upon it. Adwiyah et al. (2023) note that a lack of information integration and proper performance measurement are prevalent in a sustainable palm-oil supply chain. The infrastructure on ethics, and not only the administrative enhancements, is then trustworthy geolocation, supplier mapping, and grievance information.

The decision makers who are in judgement stage have to make tradeoffs between continuity, evidence quality and relationship with suppliers against ecological and community losses. Jones (1991) conceptualizes that in the moral-intensity model the attention that will be given by an issue is determined by the size, probability, climate and social consensus. The damage caused by forest loss can be disastrous and extremely local and long-lasting, but it is the perception of closeness which might be mitigated by the influence of a geographical distance and a multi-level supplier network. This internal congruence that deforestation is wrong is eminent in the policy that Bimbo has come up with; this should translate into the enhancement of significance in the check and not letting inefficiency block the path to be taken.

Moral intention inquires whether the desirable ethical judgment is given priority in the organisations. Grupo Bimbo publishes quarterly sustainability governance, indicators and a supplier assessment (Grupo Bimbo, 2023b). The positive nature of these mechanisms is that the responsibility is better likely to withstand commercial pressure in situations where there are obvious owners, deadlines and incentives. But the outcomes of the public reporting are not definite answers to whether procurement rewards, executive repercussions or decision to purchase was related to traceable and grievance closure at the plantation level. The impact of the team and circumstances is critical as the ethical decision-making process involves not only cognition, but also authority, targets, and available information.

Moral behaviour is an observational prevention, disclosure and amend. Providing the supplier with an opportunity to be involved was a compulsory preliminary response, but still a giving and it did not show moral solution. Respectable behaviour would identify the plantation in supply pathway, consult those affected, issue time limited correction programme, break purchases where necessary and publicise the result. The ethical-decision model thus recognises the critical point of failure that may lie between awareness and behaviour: the values of Bimbo were established, yet a certain degree of visibility and lack of certainty regarding the responsibility may not permit it to be applicable to individual sourcing decisions. 

4 Organisation response and style of leadership.

Grupo Bimbo has an identity of sustainability and purpose-driven. The long term societal needs and concerns, ecological and world government affairs assume a transformational leadership form as they aim to make the employees and associates oriented towards other values rather than profit. It is also endowed with stewardship characteristics: the leaders take ownership of resources and stakeholder’s long-term scale. AlHares (2025) notes that in an organisation where goals are met ethics leadership may lead to sustainability and performance, and Nguyen, Nguyen and Hoai (2021) find a collection of elements correlated with ethical leadership: CSR, reputation and firm performance. It does not imply that the leadership of Bimbo was ethical but it forms the basis of the importance of credible implementation of the leadership on the legitimacy and the organisational performance.

Transactional processes such as indicators, quarterly oversight and supplier reviews are also employed by the company. This hybrid can also be efficient since symbolic aspiration without control fosters minimal compliance, and ethical purpose and control. as Hsieh, Tai and Li (2023) demonstrate, the direction of the ethical-leadership research is turning towards the focus on leaders’ ability to shape the organisational situations instead of focusing on an individual moral character. Managerial reach is indicated by the self-reported overview of 16 palm-oil suppliers of 92% of its volume, a measure that does not address the gathering of volumes or the language of the policies to establish compliance at the plantation level.

Figure 2. Grupo Bimbo 2023 net sales by region. The distribution illustrates organisational reach, not the impact of the ethical controversy. 

Source: Grupo Bimbo (2024a).

Consideration of transparency and consequences of the response should then be the criterion of leadership. The decision to contact the supplier was quite prudent and possibly beneficial, in particular, since the unspoken accusation had to be confirmed. The following traceability disclosure also recognizes the flaws as opposed to asserting total disclosure. Plantation traceability, however, was significantly less than mill traceability and publicly available material failed to effectively express the resolution of the investigation, the involvement or redress of the aggrieved stakeholders. The limited assurance of the annual report offers some level of independence confidence, though limited assurance is less comprehensive and might not deal with this particular supplier pathway. Altogether, it can be concluded that Bimbo was transformational intent and managerial response, and ethical leadership was defined half-way given due to the control and disclosure system that at the time did not indicate that the contested case was controlled by the promise of 2015.

5 Recommendations

To start with, Grupo Bimbo ought to implement the mandatory geolocation and traceability of all high-risk volumes of palm-oil in the twelve-month in the verified plantations. Grumbles and satellite warnings ought to initiate a documented escalation procedure: affirm the compromise and provision a timetable, demand redress within a designated timespan and terminate new buying upon refusal of a verifier by a supplier. They should be operational KPI of 100% traceability of the high-risk volume and publication of the exceptions which were not resolved. This will lessen utilitarian harm and meet the obligation to enforce the 2015 promise.

Second, the company ought to engage in reasonable verification of its traceability and no-deforestation provisions such as sampling outside direct suppliers. As to material allegations it must publish method of investigation, status of investigation, resolution and remedy but with reasonable confidentiality. Measurements must encompass mean case-resolution time, verified closure rates on their own and percent of volumes to plantation. This enhances information rights and impartial justice instead of seeing transparency as reputation management.

Third, Bimbo should base the procurement and senior-management incentives upon the verified traceability, grievance redress and redress. Mapping, training and compliance among smallholders should be funded by a supplier-support fund in order to achieve improved standards which will not merely marginalize vulnerable producers. 

6. Conclusion

The responsible-palm-oil policy and interaction with suppliers can indicate the ethical consciousness of Grupo Bimbo, but not alone, it can create ethical adequacy. Utilitarianism, duty ethics and the rights-based justice aligns on the necessity of increased visibility of plantation, whilst disagreeing with trade-offs, obligation and remedy. The decision-making analysis reveals that a break in movement between values and action can be caused by incomplete information and incentives. The leadership of Bimbo was thus goal-oriented and partially responsible. Green plantation traceable, enhanced independent audit, open remediation and case final adjudication are required in transforming commitment into credibility of ethical performance throughout its global sourcing network.

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