(Coca-Cola Company) Corporate Social Responsibility

Corporate Social and Environmental Issues of Coca-Cola Company

Since the millennium, businesses need to operate within a social environment and such boundaries pose a threat to businesses role of profit-making as there is a presence of a trade-off. For that reason,  social goals are often placed peripherally to profit-making (Davis 2005). The challenge in society now is to juggle between profit-making and being socially responsible (Barnett and Salomon 2006).  This is illustrated by the adherence of Corporate Social Responsibility (CSR). It is defined as the commitment of business to meet ethical, legal, commercial and public expectations (Dahlsrud 2006). In United States alone, Coca-Cola is the largest manufacturer, distributor and marketer of non-alcoholic beverages (Coca-Cola 2009). This paper examines how Coca-Cola, which offers more than 400 brands in over 200 countries and serves 1.6 billion servings each day (Coca-Cola 2009), have performed in relation to the environment. Their conduct in addressing issues like water stewardship and animal testing will reveal both strengths and weaknesses in their operations and their eventual impact on the society and stakeholders.

It is the companies’ responsibility to be transparent and accountable for their operations and their environmental consequences (Trapp 2009). Coca-Cola’s has generally been responsible in their business approach, relying on key governance structures and the essential management systems in place within the organization, such that Coca-cola was able to realize its vision[1] and goals[2] (Coca-Cola 2009). In their recent LIVE POSITIVELY campaign[3], Coca-cola focuses on key areas to their business sustainability, including Active Healthy Living and Water Stewardship (Coca-Cola 2009). It is observed that they have done reasonably well in their conduct of business in recent years; however their record had been blemished by scandals. Nevertheless, bad news is still news after all, as it can prompt Coca-Cola to embark on a public-relations campaign which can eventually aid in their business aspects.

The Case For Coca-Cola

Coca-Cola has been consistent in contributing positively to environment in recent years, for instance, collaborating with various companies and governing bodies to address water issues. Coca-Cola’s past environmental performance include replenishing the amount of water used to nature (Coca-Cola 2009). Consumers are beginning to look into the environmental performance of corporations and they recognize the negative impacts business operations can generate on the environment. In June 2007, Coca-cola formed a conservation partnership with WWF to improve the water efficiency and improving the quality of drinking (Balch 2008). Since 2009, water efficiency[4] had been improving till 9% and is gradually achieving its 20% target by 2012.  In January 2005, "Water Resources Management and Drinking Water Safety in Rural Regions of China" program was started to tackle the problem of lack of basic sanitation and clean water (Coca-Cola 2009).  Previously, in 2005, Coca-cola partnered with the Beijing Organizing Committee of the Olympic Games, the Beijing Youth League, the Beijing Young Pioneers and the First News newspaper to pioneer "Save a Barrel of Water" program to engage in watershed restoration and protection (Coca-Cola 2009). This merely shows that Coca-Cola is aware of the issue of water scarcity in China and is helping to solve key environmental issues, which is a commendable effort. Environmental damages become more prevalent, it is likely that the profitability of such activities will attract more companies. (Lesourd and Schilizzi 2001)  Although it is obvious that companies engage in Environmental Management all for the sole purpose of benefit, the benefit of the doubt should be given to Coca-Cola for assisting in environmental issues such as water scarcity as it is helping the environment.

Coca-Cola strongly believes that the strength and sustainability of their brands is directly co-related to the achieving social goals, one of which includes minimizing the environmental footprint that has been created (Coca-Cola 2009). Coca-Cola is aware of the problem of water scarcity aggravated by accelerating impacts of climate change, population growth and urbanization. As a result, Coca-cola is continually working to minimize wastage of scarce resources through the abovementioned concerted efforts of organizations. Coca-cola is obliged to assess the vulnerabilities of the quality and quantity of water sources and implement a source water protection plan by 2013 after recognizing a social responsibility (Coca-Cola 2009). Truly, it is of no obligation that Coca-Cola Company has to see into the needs for water stewardship. But, as it recognizes that the adverse effects of its production it has on the world, Coca-Cola has indeed come a long way since it was last criticized for not doing enough for the world. [5] 

Case Against Coca-Cola

As much as Coca-Cola reciprocates back to the society, its image seems to be hounded by negative news. Ethical Times reported that Coca-cola was alleged to have turned its back on violence amidst the workers, indirectly causing the death of the workers in Carepa, Colombia (Corporation 2006).  While ensuring the efficiency of the production, human rights should be observed as part of a welfare system. Regardless of the severity of the issue, by refusing to investigate the situation clearly shows that Coca-Cola is not doing enough to ensure the justification of a death of a fellow employee. This shows discrimination and should not be condoned. In addition, Coca-Cola had been guilty of testing their products on animals. Ironically, the decision against animal testing (Gala 2007) on its beverages on May 31, 2007 and the subsequent rally partner organizations to disregard animal testing in favour of People for the Ethical Treatment of Animals (PETA), goes to show that they are conscious of their actions. But one cannot deny that it have succumbed to the pressure of its rivals, Pepsi, in a bid to gain the same competitive edge over its rivals (Burrows 2010). After all, PETA’s campaign lasted a year (Gala 2007) and the move could be interpreted as getting compassionate votes of approval from the public. As a result, the social performance of Coca-Cola is not ideal for such an established company due to such controversy.

Coca-Cola’s official website[6] states that the “core of the ethics and compliance program at The Coca-Cola Company is their Code of Business Conduct”. The basis of their business conduct circles around honesty and integrity in all matters and it is imperative that all of associates of the company understand the Code and comply in its precepts in the workplace and larger community. In addition, Coca-Cola regularly audits its business to ensure adherence of rules and regulations. These auditing standards follow international standards with regards to investigation conduct issues. This is in fact, the company’s strategy in eliminating prejudice, corruption and maintaining law and order.

Even if Coca-Cola can steer clear of controversy, its Coke drink has long been the target of many critics, mainly for promoting health problems such as obesity. This is especially since many people order Coke[7] as they patronise fast food restaurants. It has integrated into the diets of commoners and whenever a change is requested, its substitute would otherwise still be a Coca-Cola franchise. This merely shows that the lack of substitute drinks and how dominant Coca-Cola has on market power. Coca-Cola products contain lots of sugar, promoting obesity, which is a negative social problem.[8]

In light of the negative news that can affect the image of Coca-Cola, the stakeholders are at risk of being affected (Boutilier 2009). The stakeholders are those entities that can affect or be affected by Coca-Cola’s decisions, politics and operations. (Boutilier 2009) They have to be accountable in 5 key areas namely the shareholders, customers, employees, bottle partners and the society. 

In recent times, many companies enhanced their image by reducing environmental effects, conducting product improvements and publishing their efforts, in a bid to become profitable and be of benefit to shareholders (Lesourd and Schilizzi 2001).  Environmental harm is of a concern in the short and long term. The lack of social and environmental ratings can be detrimental to the company’s performance and image. For instance, KLD dropped Coca-Cola from its BMS Index in July 2006 because of concerns about the company’s labour and environmental practices in the developing world. As a result, 50 million shares of Coca-Cola stocks were sold by TIAA-CREF[9] (Wilbert 2006). This will be detrimental to the shareholders as they are more concerned about the Coca-Cola’s rankings in the stock exchange. The performance of the company in the stock market is dependent on the social and environmental ratings. Poor rankings will be a financial loss to shareholders and these rankings will represent a certain image to the public.

Strategies to managing a company are sometimes based on the perception of stakeholders, government and even consumer themselves as stakeholders are decisive to the firm’s sustainability and performance (Berman 1999). An improvement would be that social and environmental agencies can help Coca-cola in making their regulations and efforts more transparent to the stakeholders so that people will understand what they are investing in and hence will have a moral identity to connect with. Through pre-emption and forecasts, Coca-cola can engage with stakeholders to understand the issues that are the most important to them and to work jointly with communities and governments, for instance, in water-stressed areas. In a bid to combat corruption, the company can implement an anti-bribery compliance program to instill confidence in establishing itself as a competent and ethical company.  These recommendations can be used so that proper business ethics can be achieved.

Government Intervention

[10]As stakeholders are not involved in the full range of firms’ activities and would rely on reports, they often will have imperfect information and hence become victims of Greenwashing (Lyon and Maxwell 2008).  While adhering to their company standards[11], another essential suggestion is for a governing body to regulate such companies in terms of their reporting. In ensuring that CSR is observed, the disclosure of social and environmental data has to be comprehensive and reliable (Lydenberg 2005). There is no doubt that Coca-Cola has been accountable to his stakeholders with regards to its achievements and CSR reporting.  There is a possibility that such disclosures are not included in the report and essential information relevant to its stakeholders is not published in their official website.

Conclusion

It may seem that Coca-Cola’s commitment to CSR is merely rhetorical in natural, but there is little doubt that given Coca-Cola’s reputation, its movements are often closely monitored and at times criticized. But recent efforts (Reynolds 2007) in the previous few years seem to indicate that Coca-Cola is a step in the right direction to convince its shareholders, consumers and critics alike that it runs an ethical business! In fact, special mention has to go to Coca-Cola as unlike several years ago when it had no awareness of the adverse impacts of their products; now Coca-Cola is rather keen in improving their environmental footprint, as well as proving critics wrong by claiming social responsibility more than ever.

REFERENCES

Balch, O. (2008) Water Efficiency: Swimming In Dwindling Waters. 

           

Barnett, M. L. and R. M. Salomon (2006). "Beyond Dichotomy: The Curvilinear Relationship Between Social Responsibility And Financial Performance." Strategic Management 27(11): 1101-1122.

           

Berman, S. L. (1999). "Does Stakeholder Orientation Matter? The Relationship Between Stakeholder Management Models And Firm Financial Performance." The Academy of Management Journal 42(5): 488- 506.

           

Boutilier, R. (2009). Stakeholder Politics: Social Capital, Sustainable Development And The Corporation. California, Stanford University Press.

           

Burrows, D. (2010) Pepsi Pips Coca-Cola To On-trade Top Spot. 

           

Coca-Cola (2009). Live Positively: 2008/2009 Sustainability Review: 51.

           

Corporation, E. (2006). Is Coke The New Nike?: 18-20.

           

Dahlsrud, A. (2006). "How Corporate Social Responsibility Is Defined: An Analysis Of 37 Definitions." Corporate Social Responsibility and Environmental Management 15(1): 13.

           

Davis, I. (2005). The Biggest Contract? Economist. London, The Economist Newspaper Limited.

           

Gala, S. (2007) PETA Praises Beverage Giant After It Ends Fatal Experiments

           

Lesourd, J.-B. and S. G. M. Schilizzi (2001). The Environment In Corporate Management: New Directions And Economic Insights. Cheltenham, Edward Elgar Publishing Limited.

           

Lydenberg, S. (2005). Coporations And The Public Interest. San Francisco, Berrett-Koehler Publishers, Inc.

           

Lyon, T. P. and J. W. Maxwell (2008). "Greenwash: Corporate Environmental Disclosure Under Threat of Audit."

           

Reynolds, J. (2007) Coke's CSR Focus: Better Late Than Never. 

           

Trapp, R. (2009) Corporate Social Responsibility Is Vital For Business Survival. 

           

Wilbert, C. (2006). "Social Responsibility Of Coca-Cola Questioned: Giant Retirement Fund Decides To Sell Shares." Atlanta Journal-Constitution.

           

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[1] Coca-Cola’s first goal: Lasting and positive difference to the world

[1] Coca-Cola’s second goal: Constantly innovating to keep products affordable and making business more environmentally and economically beneficial to the communities served.

[1] Coca-Cola’s last goal: Investing in economic, social and environmental development of communities to make business grow.

[2] See Annex A for Coca-Cola’s Goals

[3] See Annex A for Coca-Cola’s LIVE POSITIVELY Campaign

[4] See Annex B: Performance Highlights

[5]  See “Coke's CSR focus: better late than never” article.

[6] Coca-Cola Official Website: www.coca-cola.com

[7] The most commonly known MacDonalds meal is the McChicken Burger Meal. It includes a McChicken Burger, French fries and a Coke Drink. In essence, the default complementary drink that comes with all fast food is Coke.

[8] See Annex E: Amount of sugar content for commonly known Coca-Cola products. Adapted from http://www.energyfiend.com/sugar-in-drinks.

[9] TIAA-CREF, the largest U,S retirement fund.

[10] See TIAA-CREF Shareholders Meeting Dominated by Concerns of Social Responsible Investing: Coke Was the Most Dominant Issue Raised article.

[11] Coca-Cola is led by their established standards of corporate governance and ethics and often reviews its systems using international best practices in terms of transparency and accountability.