Coca Cola in India: A Corporate Social Responsibility Case Involving Marginalised Stakeholders

Coca Cola in India: A corporate social responsibility case involving marginalised stakeholders

Group 8

Contents

Executive Summary

1. Introduction
2. The Problem
3. CSR Strategies

3.1. Outcomes

1. Recommendations

1. Conclusion

Executive Summary:

Production by Coca-Cola began in Plachimada, Kerala, in 2000, creating a range of social and environmental issues for the local communities due to over-extraction of groundwater, pollution and high levels of pesticides. This led to a long legal battle and protests by activist groups, creating a highly publicised conflict which adversely affected the company’s reputation when these allegations were denied, and resulted in a loss of sales and consumer trust. As a result of this, Coca-Cola adopted more proactive CSR strategies which emphasised sustainability and stakeholder engagement. On a local scale, this involves projects such as rainwater harvesting and watershed protection, with the water stewardship programme setting goals on a global scale. These strategies mean that the company can avoid such conflicts in the future and uphold or improve its reputation, with a focus on responding quickly and proactively to the concerns of all stakeholders. This is in line with stakeholder theory (Freeman, 1984) whereby CSR involving a range of stakeholders leads to greater advantages for the company, thus it is recommended that Coca-Cola continues its CSR strategies as a form of investment. There is doubt, however, as to whether the company is now operating ethically or if these strategies are simply ‘greenwashing’ to improve Coca-Cola’s image (Faheem, 2009).

1.0 Introduction

Corporate Social Responsibility (CSR) involves the commitments of organisations to act ethically and contribute to improving the socio-economic status of their workforce, local community and society in general. Marginalised groups are those which have been assigned less importance, often minorities, whose needs are ignored (Dhavaleshwar & Swadi, 2016). Engaging with CSR strengthens relationships with a firm’s stakeholders which can be particularly important for marginalised groups, with companies often taking this step as a response to social or environmental conflicts (van Tulder & van der Zwart, 2006). This was the case for Coca-Cola, who began production operations in Kerala, India in 2000. Production here led to issues for the local indigenous people as a result of over-extraction of groundwater, polluted water sources and high levels of pesticides in their drinks. For many years, Coca-Cola denied all allegations which negatively impacted the company’s reputation, both locally and internationally, resulting in a loss of sales and consumer trust. As a result of this, Coca-Cola developed a CSR strategy which would deal with these issues, although there is debate as to how successful this has been (Torres et al., 2012). This report intends to analyse the problem and the CSR strategies put in place and make recommendations on future stakeholder engagement.

2.0 The Problem

Shortly after operations by Coca-Cola began in Plachimada, Kerala, negative reports started to emerge of local water shortages, which local people claimed to be caused by the corporate giant. Additionally, Coca Cola’s discharge of wastewater in to surrounding fields and rivers led to accusations of groundwater and soil pollution within the same area (Torres et al., 2012). In 2003, a report by Indian NGO ‘Centre for Science and Environment’ (CSE) provided evidence of the presence of pesticides in Coca-Cola drinks in India, which exceeded the European standards. Further studies found similar results, although it was ruled that Coca-Cola had not failed to meet Indian standards, causing the Indian government to acknowledge more enforceable standards for carbonated beverages needed to be adopted. The public and media paid significant attention on this, which lead to many negative consequences on the performance of Coca-Cola, such as a 15% decline in annual sales in 2003 and significant reputational damage (Torres et al, 2012).

Operations adversely affected the indigenous people known as the Adivasis, who were primarily socio-economically disadvantaged agricultural workers - the marginalised stakeholders in this case. As stakeholders, the local people were expected to gain some benefits from Coca Cola’s operations in Kerala, including increased employment. However, this employment was mostly temporary, poorly paid and did not involve many of the poorest indigenous tribes (Jeeja, 2016). Additionally, the environmental impacts caused by Coca-Cola in the local area, such as soil pollution, devastated the farming industry and jobs, by affecting their capabilities to grow rice and coconuts (Kumar, 2016). Groundwater pollution became so severe that local health authorities advised water at local wells and pumps should not be consumed, for fears of significant impacts to human health. According to Kumar (2016), the Kanniamm who live in Kerala thought that the water had been poisoned as when they used it, their eyes and skin had a burning sensation.

Over many years, production by Coca-Cola was repeatedly suspended and resumed, through a long legal battle and protests by a local activist group. This conflict was highly publicised and resulted in the perception of Coca-Cola as a corporate villain, leading to declining sales in India and abroad. Although this was not the first time Coca-Cola had created conflicts, previous issues in the US and Belgium had been dealt with effectively through stakeholder engagement. Therefore, in 2008, the company acknowledged the importance of community and published its first environmental performance report on operations in India (Torres et al., 2012).

3.0 CSR strategies

Coca-Cola has since developed various projects as part of its CSR strategy which involve engagement with local communities. For example, the Coca-Cola India Foundation, Anandana, was created to ensure inclusive growth and sustainable development by working with local communities and NGOs (Anandana, 2013). The company also partnered with various organisations and communities to address water scarcity through rainwater harvesting throughout 17 Indian states, meaning that by 2012, it was reported that there was a balance between the amount of water extracted and replenished through its operations. In 2011, Coca-cola provided a water recycling policy through returning all cleaning industrial waste-water for reducing water pollution (Torres et al., 2012). This was also achieved through watershed protection. Working with local communities can also benefit the company as indigenous people have experience and knowledge which can aid sustainable resource management (Jeeja, 2016). Coca-Cola also developed a more proactive CSR strategy on a global scale by implementing their Water Stewardship Programme, aiming to improve water efficiency and recycle and replenish used water (Torres et al., 2012). Every year, Coca-Cola releases a Sustainability Report which includes a section focussing on stakeholder engagement involving four key principles - transparency, inclusiveness, consistency and accountability (Coca-Cola Sustainability Report, 2017). Furthermore, Coca-Cola also publishes ‘The Coca-Cola Company Sustainability Review’ every two years. Because of the importance of sustainability for its business, the company also annually reports on the progress of the water stewardship programme targets. Several years ago, Coca-Cola also published the sustainability theme ‘Live Positively’, which was used in all processes of operation, such as manufacturing, transportation and marketing. The company’s CSR policy illustrates many measurable targets for its sustainable operation. The policy includes many directions, such as benefit, health of the public, the community, environmental issues and the workplace.

However, these strategies have been criticised as ‘greenwashing’, with claims that Coca-Cola continues to engage in unethical practices despite putting across an environmentally and socially responsible image (Faheem, 2009).

3.1 Outcomes

By analysing the CSR issues of the Coca-Cola Company and the effects on marginalised stakeholders, the true meaning of the company's subsequent strategy can be seen, which is beneficial to both internal and external stakeholders. In detail, the company's implementation of the CSR strategy ensures its reputation is maintained which is beneficial to the company's long-term development because it increases the company's profits and reduces the additional cost. If the company had previously implemented a CSR strategy to avoid the problems discussed above, the reparation costs could have been avoided.

In addition, the strategies put in place ensure the interests of marginal stakeholders are protected, leading to more positive results for everyone involved. As marginalised stakeholders, the results produced by the local community with regards to shutting down production were unexpected due to their limited resources and power, indicating that marginalised stakeholders may need to be more highly regarded in the future (Shivaran et al., 2015). At the national level, this case forced the Indian government to recognize the need to adopt appropriate and enforceable standards for carbonated beverages, highlighting the wide-ranging impacts of a company on its stakeholders, and stimulating the development of a more proactive CSR policy by Coca-Cola to prevent further pollution of their beverages.