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A study on Corporate Social Performance of Coco Cola

Shailashri V T, Dr. P. S. Aithal

Srinivas University, Pandeshwar Mangalore 575001, India
Shailashrivt@gmail.com

Abstract:

Coca-Cola India being one of the largest beverage companies in India, realized that
CSR had to be an integral part of its corporate agenda. According to the company, it was
aware of the environmental, social, and economic impact caused by a business of its scale
and therefore it had decided to implement a wide range of initiatives to improve the quality of
life of its customers, the workforce, and society at large.

However, the company came in for severe criticism from activists and environmental experts
who charged it with depleting groundwater resources in the areas in which its bottling plants
were located, thereby affecting the livelihood of poor farmers, dumping toxic and hazardous
waste materials near its bottling facilities, and discharging waste water into the agricultural
lands of farmers. Moreover, its allegedly unethical business practices in developing countries
led to its becoming one of the most boycotted companies in the world.

Notwithstanding the criticisms, the company continued to champion various initiatives such
as rainwater harvesting, restoring groundwater resources, going in for sustainable
packaging and recycling, and serving the communities where it operated. Coca-Cola planned
to become water neutral in India by 2009 as part of its global strategy of achieving water
neutrality. However, criticism against the company refused to die down. Critics felt that
Coca-Cola was spending millions of dollars to project a 'green' and 'environment-friendly'
image of itself, while failing to make any change in its operations. They said this was an
attempt at greenwashing as Coca-Cola's business practices in India had tarnished its brand
image not only in India but also globally.

This paper identifies the model Coco Cola has adopted for its corporate social responsibility.
It discusses the Carrols model of CSR with specific reference to coco-cola.

Key words: Corporate social performance, Carrolls model, Coco- Cola

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Introduction

CSR: …is seriously considering the impact of the company‘s actions on society. It is the
obligation of decision makers to take actions that protect and improve the welfare of
society as a whole, along with their own interests. It supposes that the corporation has
economic and legal obligations as well as responsibilities to society that extend beyond
these obligations.

Corporate social responsibility encompasses the:

• Economic
• Legal
• Ethical, and
• Discretionary

Expectations that society has of organizations at a given point in time.

Objectives

 To identify the nature of CSR in business organizations.

 To study the Carrolls Model of CSR
 To Match Carrolls Model of CSR with the company Coco –Cola
 Importance of CSR activities to build the brand image of Coco-Cola

The study is based on the model of CSR. It is a case based study .Secondary data has been
used to draw inferences and conclusions.

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Discussion
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).

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 even 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 RemedyFramework (Ruggie‘s Framework)[1],
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[2] ‗The Coca-Cola Company Annual Report‘; the last one was published in
March 2013 and comprises the company‘s activities during 2012.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

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ISBN No.: 978-93-5321-508-8
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.

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 are discussed below[3]

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.[4]

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

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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.[5]

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
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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 Sea bright, 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 controvers . 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.[6]
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 round
water 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 utilization 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

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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 2012 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 2014. By September 2014, 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.[7]
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.[8]

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Corporate Social Performance:
Carroll’s Model

Coco cola followed the defense and reactive methods of CSR.

The case studies evidenced changes in the company‘s CSR policies after experiencing a
conflict. Now a days, Coca-Cola implements various initiatives tailored to address the water
problems in India, which includes research, partnerships with the Indian local government
and international organizations and community projects. Moreover, the company did not stop
there. Water management is one of the core elements of Coca-Cola‘s global CSR policy and
the company is committed to meet targets concerning water management efficiency. Coca-
Cola does not admit that the conflict in India was the main motivation behind the adoption of
its ambitious water management policies. However, given the severe image damage – and the
consequent revenue losses experienced – it is very likely that the conflict in India influenced
the corporate decision to implement a CSR policy on water management efficiency in its
global operations. Also, Coca-Cola has improved its reporting activities by being up to date
with the advances in GRI guidelines. Perhaps Coca-Cola can be said to be the company that
adopted one of the most ambitious CSR A policies after experiencing the conflict in India.
Coca-Cola appears to be strongly determined to address its operational impacts on the
environment, particularly on water. Given the nature of the impacts, the company has the

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possibility of carrying out research and taking steps towards preventing and remedying
damage, with results that can be measurable.

The Present CSR initiatives of Coco-Cola to build a brand

Conclusion
Coca-Cola initiated such efforts by adopting initiatives that are tailored to remedy the water
problems it caused in India and to improve its image towards its customers. Such initiatives
include research and partnerships with the Indian local government. Subsequently, Coca-Cola
adopted water management as one of the core elements of its global CSR policy and the
company has committed itself to meet quantifiable targets concerning water management
efficiency. Coca-Cola does not admit that the conflict in India is the main motivation behind
the adoption of the water policies.
However, given the severe damage to its reputation – and the consequent revenue losses
experienced – it is very likely that the conflict in India influenced the corporate decision to
implement a CSR policy on water management efficiency in its global operations.

Reference
[1 ]Amber, T. & Wilson, A. (1995), "Problems of a Stakeholder Theory", Business Ethics,
4(1): 30-35.

[2 ]Anshen, M. (1980), Corporate Strategies for Social Performance, New York, Macmillan.

[3] Arkin, A. (1996), "Open Business is Good for Business", People Management, 2(1).

[4 ]Arrow, Kenneth (Ed.) (1989), Ethics for Practicing Managers in Modern Corporations,
Boston, Harvard Business School.
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[5 ]Aswathappa, K. (2001), Essential of Business Environment, New Delhi, Himalaya

Publishing House.

[6 ]BAE Systems (2002), Corporate Social Responsibility Report 2002: BAE Systems,
London, BAE Systems.

[7] Chakraborty, S.K. (Ed.) (1995), Human Values in Managers, New Delhi, Wheeler
Publishing.

[8] Chakraborty, S.K. & Groholt , Per (1993), Management by Values: Towards Cultural
Congruence, USA, Oxford University Press.Development. Englewood Cliffs, NJ: Prentice-
Hall.

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