2.

Coca-Cola-A Case Study

2.1. Coca-Cola’s profile

Coca-Cola started its business in 1886 as a local soda producer in Atlanta, Georgia
(US) selling about nine beverages per day. By the 1920s, the company had begun
expanding internationally, selling its products first in the Caribbean and Canadian
markets and then moving in consecutive decades to Asia, Europe, South America and the
Soviet Union. By the end of the 20th century, the company was selling its products in
almost every country in the world. In 2005 it became the largest manufacturer,
distributor and marketer of non-alcoholic beverages and syrups in the world. Coca-Cola
is a publicly-held company listed on the New York Stock Exchange (NYSE).

2.2. Coca-Cola’s CSR policies and reporting

In 2007 Coca-Cola launched its sustainability framework Live Positively embedded
in the system at all levels, from production and packaging to distribution. The company’s
CSR policy Live Positively establishes seven core areas where the company sets itself
measurable goals to improve the business’ sustainability practices. The core areas are
beverage benefits, active healthy living, the community, energy and climate, sustainable
packaging, water stewardship and the workplace.
Coca-Cola has a Code of Business Conduct which aims at providing guidelines to
its employees on – amongst other things – competition issues and anti-corruption. The
company has adopted international CSR guidelines such as Global Compact and Ruggie’s
Protect, Respect and Remedy Framework (Ruggie’s Framework), but these guidelines do
not seem to be integrated into the Code of Business. However, these CSR initiatives are
included in other activities or policies of the company. For instance, the UN Global
Compact principles are cross-referenced in the company’s annual Sustainability Reviews
and Ruggie’s Framework is partly adopted in the company’s ‘Human Right Statement’.
After the conflict in India, in 2007 Coca-Cola formed a partnership with the World Wildlife
Fund (WWF) and became a member of the CEO Water Mandate, as water is one of the
company’s main concerns.
Every year Coca-Cola publishes a directors’ report denominated ‘The Coca-Cola
Company Annual Report’; the last one was published in March 2011 and comprises the
company’s activities during 2010. In this report there is a small section dedicated to CSR
and it includes a brief description of the initiatives in community development and water
preservation that the company has developed. Since 2001, Coca-Cola also annually
publishes a separate report devoted to CSR called ‘The Coca-Cola Company Sustainability
Review’. These reviews, which are published every two years, are verified and assured
by a third party, the sustainability rating firm FIRA Sustainability Ltd. This verification
provides ‘moderate assurance’ on the reliability of the information reported by Coca-
Cola. Both reports – the annual company review and the sustainability reports – are
elaborated based on the GRI G3 guidelines, which were adopted by the company in 2001.
Due to its relevance to Coca-Cola’s business, the company also annually reports on the
progress of the water stewardship programme’s targets.
2.3. Coca-Cola’s conflicts
Several campaigns and demonstrations followed the publication of a report issued
by the Indian NGO Centre for Science and Environment (CSE) in 2003. The report
provided evidence of the presence of pesticides, to a level exceeding European standards,
in a sample of a dozen Coca-Cola and PepsiCo Beverages sold in India. With that evidence
at hand, the CSE called on the Indian government to Implement legally enforceable water
standards. The report gained ample public and media attention, resulting in almost
immediate effects on Coca-Cola revenues.
The main allegations made by the NGO against Coca-Cola were that it sold
products containing unacceptable levels of pesticides, it extracted large amounts of
groundwater and it had polluted water sources. These conflicts will be discussed under
2.3.1 and 2.3.2.

2.3.1. The presence of pesticides

Regarding the allegation about Coca-Cola beverages containing high levels of
pesticide residues, the Indian government undertook various investigations. The
government set up a Joint Committee to carry out its own tests on the beverages. The
tests also found the presence of pesticides that failed to meet European standards, but
they were still considered safe under local standards. Therefore, it was concluded that
Coca-Cola had not violated any national laws. However, the Indian government
acknowledged the need to adopt appropriate and enforceable standards for carbonated
beverages.
In 2006, after almost three years of ongoing allegations, the CSE published its
second test on Coca-Cola drinks, also resulting in a high content of pesticide residues (24
times higher than European Union standards, which were proposed by the Bureau of
Indian Standards to be implemented in India as well). CSE published this test to prove
that nothing had changed, alleging that the stricter standards for carbonated drinks and
other beverages had either been lost in committees or blocked by powerful interests in
the government. Finally, in 2008 an independent study undertaken by The Energy and
Resources Institute (TERI) ended the long-standing allegations by concluding that the
water used in Coca-Cola in India is free of pesticides. However, because the institute did
not test the final product, other ingredients could have contained pesticides.

2.3.2. Water pollution and the over-extraction of groundwater.

Coca-Cola was also accused of causing water shortages in – among other areas –
the community of Plachimada in Kerala, southern India. In addition, Coca-Cola was
accused of water pollution by discharging wastewater into fields and rivers surrounding
Coca-Cola’s plants in the same community. Groundwater and soil were polluted to an
extent that Indian public health authorities saw the need to post signs around wells and
hand pumps advising the community that the water was unfit for human consumption.
In 2000, the company established its production operations in Plachimada. Local
people claimed that they started experiencing water scarcity soon after the operations
began. The state government-initiated proceedings against Coca-Cola in 2003, and soon
after that the High Court of Kerala prohibited Coca-Cola from over-extracting
groundwater. By 2004 the company had suspended its production operations, while it
attempted to renew its licence to operate. Coca-Cola argued that patterns of decreasing
rainfall were the main cause of the draught conditions experienced in the area. After a
long judicial procedure and ongoing demonstrations, the company succeeded in
obtaining the licence renewal to resume its operations. In 2006 Coca-Cola’s successful re-
establishment of operations was reversed when the government of Kerala banned the
manufacture and sale of Coca-Cola products in Kerala on the ground that it was unsafe
due to its high content of pesticides. However, the ban did not last for long and later that
same year the High Court of India overturned Kerala’s Court decision. More recently, in
March 2010, a state government panel recommended fining Coca-Cola’s Indian
subsidiary a total of $47 million because of the damage caused to the water and soil in
Kerala. Also, a special committee in charge of looking into claims by community members
affected by the water pollution was set up.
The long legal procedures against the Indian government that Coca-Cola had to
face were not the only consequence of the conflict. The brand suffered a great loss of
consumer trust and reputational damage in India and abroad. In India there was an
overall sales drop of 40% within two weeks after the release of the 2003 CSE report. The
impact in annual sales was a decline of 15% in overall sales in 2003 – in comparison to
prior annual growth rates of 25-30%. This highly publicised conflict in India also caught
the attention of consumers in the US. After a series of demonstrations by students who
joined two activist groups in the US, ten American universities temporarily stopped
selling Coca-Cola products at their campus facilities.

2.4. Coca-Cola’s CSR policies post-conflicts

Two years before the water conflict in India in 2003, Coca-Cola adopted the GRI
Guidelines and started reporting on sustainability. By 2003, the company had already
experienced a few CSR-related conflicts in other parts of the world. However, none of
them had the grave consequence of a loss of trust in the company and its products by
consumers and the public in general.
According to Pirson and Malhotra, the main reason why this controversy ended so
badly for Coca-Cola lies in its response to the problem. Coca-Cola denied having produced
beverages containing Elevated levels of pesticides, as well as having over-exploited and
polluted water resources. By denying all claims and trying to prove its integrity, instead
of demonstrating concern towards the situation, Coca-Cola failed to regain consumers’
trust. The Indian population viewed Coca-Cola as a corporate villain who cared more
about profits than public health. In comparison, previous conflicts experienced by the
company in the US and Belgium were better handled because it included stakeholder
engagement in its strategy.
It appears that the company became aware of its mistake after the controversy
had been ongoing for a couple of years. In 2008 Jeff Seabright, Coca-Cola’s vice president
of environment and water resources, recognized that the company had not adequately
handled the controversy. He acknowledged that local communities’ perception of their
operation matters, and that for the company ‘(…) having goodwill in the community is an
important thing’.
Although Coca-Cola still denies most of the allegations, the reputational damage
experienced after the controversy in India pushed Coca-Cola to take damage-control
measures. Those measures at first consisted of statements to confirm Coca-Cola’s
integrity. For example, Coca-Cola dedicated a page in the Corporate Responsibility
Review of 2006 to address the controversy. The statement consisted mainly of providing
information supporting its good practices and water management of its operations in
India. But this statement did little to combat the declining sales and increasing losses
exceeding investments. Coca-Cola gradually changed its strategy to include damage-
control measures that addressed the Indian communities’ grievances. In 2008 the
company published its first environmental performance report on operations in India,
which covered activities from 2004 to 2007. It also created the Coca-Cola India
Foundation, Anandana, which works with local communities and NGOs to address local
water problems. But perhaps the most outstanding change of strategy by Coca-Cola
consisted of launching various community water projects in India. An example is the
rainwater harvesting project, where Coca-Cola’s operations partnered with the Central
Ground Water Authority, the State Ground Water Boards, NGOs and communities to
address water scarcity and depleting groundwater levels through rainwater harvesting
techniques across 17 states in India. These techniques consist mainly of collecting and
storing rainwater while preventing its evaporation and runoff for its efficient utilisation
and conservation. The idea behind this is to capture large quantities of good quality water
that could otherwise go to waste. By returning to the ecosystem the water used in its
operations in India through water harvesting, the company expected that this project
could eventually turn the company into a ‘net zero’ user of groundwater by 2009. In the
2012 Water Stewardship and Replenish Report, Coca-Cola stated that its operations in
India have ‘achieved full balance between groundwater used in beverage production and
that replenished to nature and communities – ahead of the global target’.
It appears that the controversy in India was a learning experience for the
company, and that it motivated the company to adopt a more proactive CSR policy on a
global scale that focuses on water management. In June 2007, Coca-Cola implemented a
water stewardship programme and committed itself to reduce its operational water
footprint and to offset the water used in the Company’s products through locally relevant
projects. To achieve those commitments Coca-Cola established three measurable
objectives:
(1) Reducing water use by improving water efficiency by 20% over 2004 levels by 2012.
The latest data available from 2010 shows a 16% improvement over the 2004 baseline.
(2) Recycling water through wastewater treatment and returning all water used in
manufacturing processes to the environment at a level that supports aquatic life and
agriculture by the end of 2010. By September 2011, the progress observed concerning
this target was 96%.
(3) Replenishing water used by offsetting the litres of water used in finished beverages
by 2020 through local projects that support communities and nature (i.e. watershed
protection and rainwater harvesting). Currently, Coca-Cola reports that it holds a global
portfolio of 386 community water partnerships or community-based replenish projects.
By 2011, about 35% of the water used in finished beverages was replenished.
It is noteworthy that Coca-Cola publishes, in addition and separate to the
sustainability reports, an annual water report. In these reports the company publishes
assessments of and the progress in its water initiatives. Some of the assessments are
made by the Global Environment & Technology Foundation, an American NGO
experienced in facilitating the creation of public-private partnerships.
Also, in 2007, Coca-Cola entered into a partnership with WWF. Its core objectives
are increasing understanding on watersheds and water cycles to improve Coca-Cola’s
water usage, working with local communities in various locations worldwide, and
developing a common framework to preserve water sources. Finally, and also in the same
year, the company became a member of the public-private initiative CEO Water Mandate,
which is a public-private initiative that assists companies in the development,
implementation and disclosure of water sustainability policies and practices.

Make an analysis for the case, about:

1. Implementation of Coca Cola’s CSR.
2. Major ethic’s problem of the case.
3. Response from Coca Cola to the conflict.
4. Conclusion.

Berikan analisa terbaik anda terkait:

1. Penerapan CSR Coca Cola.
2. Permasalahan etika yang utama dari kasus.
3. Respon Coca Cola terhadap konflik.
4. Kesimpulan.