Sample Critical Appraisal of Coca Cola Company’s CSR Practices

A Critical Appraisal of Coca Cola Company’s CSR Practices

Introduction

Given that the term corporate social responsibility (CSR) has varied definitions depending on the dimension a person takes in defining it, this report will define the term as the obligations that companies have in pursuing policies and goals that are in stakeholders’ interests. The stakeholders in this report will be the customers who purchase products from organizations. One critical issue in CSR practices is that for a company to be socially responsible, it must conduct its businesses ethically. Otherwise, the company will not be socially responsible and it might counter resistance from its various stakeholders. According to Milovanovic, Barac and Andjelkovic (2009, p. 89), CSR concept enables companies to strengthen their images, enhance their brand names, and increase their market shares. Accordingly, at this age, companies should not downplay the critical roles that CSR practices play in their business ventures. In this regard, they should be concerned about them (Brennan et al. 2007, p. 369).

Company’s Background

This report will focus its attention on Coca Cola Company. The company was established in 1886 in Atlanta, Georgia (Freitag & Stokes 2009, p. 69). Since its establishment, the company has been producing soft drinks and it has been able to spread its business practices to about two hundred countries worldwide. The company has consequently become a leader in soft drink business. The company has faced constant criticisms from its customers as well as health activists over the years for violating some ethical business practices (Brennan et al. 2007, p. 370). In order to counter these criticisms, the company has developed various CSR policies that are implemented annually. Some of these measures include active healthy living, energy and climate, water stewardship, and sustainable packaging (Torres et al. 2012, p. 53). With respect to these measures among others, Maignan and Ferrell claim that the Coca Cola Company is among the companies that profile themselves as socially responsible (2004, p. 3). However, as this report is concerned, the matter will depend on the way customers who are part of stakeholders of the company according to stakeholders’ theory perceive the company.

In this report, I will take the role of a consultant who has been hired by Coca Cola Company’s management team to investigate the company’s CSR policies. The management team is worried that customers have not been convinced that the company is implementing its CSR policies in the right manner. In relation to this fact, the company’s management team wishes to establish whether customers have been taking the company’s CSR policies as a green-wash or they appreciate them. The first part of the report will highlight what the company has been doing in implementing its CSR policies while the second part will highlight what the customers feel about those policies. The report concludes that customers have been viewing the company’s CSR practices as a green-wash.

Theory

Theoretically, the stakeholder theory is one of the critical theories that can be applied in this case to help evaluate what customers feel about Coca Cola Company’s CSR practices. This theory defines stakeholders as the groups of people that affect or are affected by firms as they strive towards achieving their objectives. According to this theory, different actors referred to as stakeholders influence organizational activities (Maignan & Ferrell 2004, p. 5). Some of these people that include managers and employees coordinate the way organizations run. Other people that include investors as well as strategic partners indirectly influence the way organizations run (Carroll & Buchholtz 2014, p. 98). Other people, such as customers, local communities, regulators, and activist groups, influence organizations at different levels. Customers, in particular, influence organizations by purchasing products. Therefore, they have great influence on profit making businesses. The theory claims that there is a need of approaching stakeholders from integrated approaches because these people are instrumental in firms’ profitability (Boeger, Murray & Villiers 2008, p. 107). In this respect, the theory highlights the need of incorporating different stakeholders in creating long-term values for organizations that engage in business (Morsing & Schultz 2006, p. 324). For Coca Cola Company, customers are part of stakeholders that are critical in its success; thus, the company cannot underrate them or ignore them in its business practices. This means that as Coca Cola Company strives to make profit, it must do this with customers in mind. Failure to do this is likely to affect the company as it has been witnessed in various parts of the world.

The Company’s CSR Policies

The company has a CSR policy under the live positively banner. This policy was established in 2007 after the company became the largest beverage company worldwide (Kaur & Aggarwal 2012, p. 268). The policy covers seven core areas, namely active healthy living, energy and climate, community, water stewardship, workplace, sustainable packaging, and beverage benefits. Each of these seven areas covers a specific item that is critical in CSR policies and in the company’s success (Bara 2010, p. 18). The active healthy living addresses the products the company produces with an aim of ensuring that the company’s products do not affect customers’ health. The water stewardship area addresses the water issues that are critical in the company’s daily practices. The energy and climate area addresses the environmental issues. Other core areas cover other issues that directly or indirectly affect the company.

Under sustainable business practices, the company is committed to implementing its CSR policies the best way possible. In this respect, the company has designed CSR policies that permeate every business aspect. At the same time, the company has designed community-based policies to address all aspects that affect communities within its surroundings. Apart from this, each year, the company gives money to charity organizations as well as engages in volunteer services to promote its CSR policies (Brennan et al. 2007, p. 370).

Furthermore, at the end of every year, the company publishes a report under the title “Coca Cola Company annual report.” In this report, the company among other things highlights the critical CSR issues it addresses  over the year as well as what the company achieves over the year in promoting those CSR practices. This part of the report under the sub-title CSR policies indicates what the company does in preserving water and developing communities (Brennan et al. 2007, p. 370). Alongside this, the company publishes another report known as sustainability review after every two years. To confirm the authenticity of this report, the company usually submits this report to a third party company. By so doing, the Coca Cola Company is usually assured that it is doing the right thing in addressing CSR issues within its business ventures.

Critical Areas the Company Addresses

As a beverage company that engages in manufacturing water related products, Coca Cola Company is vulnerable to attacks from community activists and environmentalists for depleting water supplies. In addition, the company is vulnerable to waste related attacks from these groups of people. In order to counter these challenges, the company has responded by initiating projects aimed at replenishing and saving water. One such project is known as Replenish water program that runs under 3 R’s. The three R’s stand for reduce, recycle, and replenish. Under this project, the company commits to returning the amount of water it uses in its production exercise back to the members of the communities. With the help of the first R that stands for reduce, the company commits to reducing the amount of water it uses in producing its products. A key exercise in this practice has been reducing the amount of water used in producing each liter of soda. For the second R that stands for recycle, the company ensures that all its wastewater is treated before disposing it. Finally, for the third R that stands for replenish, the company works with local stakeholders, such as NGOs, communities, and local governments in preserving water. Some of the company’s projects aimed at replenishing water include awareness programs, watershed protection, enhancing water use in agriculture, and expanding drinking water for the members of communities. The replenish project has not been implemented in all 200 countries the company has subsidiaries, but at least seventy of these countries are currently enjoying some of these projects (Brennan et al. 2007, p. 370).

Critical Appraisal of Their Customers

In the midst of what the company has been doing in implementing its CSR policies, customers have been reacting to these practices in two different ways. On one hand, some customers feel that the company does not do something tangible that can warrant the company goodwill in implementing its CSR policies. On the other hand, some customers feel that the company does something tangible that warrants it goodwill in implementing its CSR policies. As a way of evaluating what the customers have been feeling towards Coca Cola Company’s CSR policies, this part of the report will highlight some incidences that will help establish what customers feel about Coca Cola Company’s CSR practices.

The first incidence that will be highlighted in this case took place in India back in 2003. In this incidence, the company was accused of draining in excess million liters of water from Kerala region and in so doing reduced local water supplies in the region. The NGO that accused Coca Cola Company of doing this claimed that the company had led to high unemployment rate in the region because vegetables and coconut trees had dried up. The region in question is a semi-desert region with small villages that are characterized by semi-arid conditions, and in relation to this, people living in this region rely heavily on ground water to cultivate their crops and do other things. It was alleged that since the company established its bottling plant in that region, the water table had dropped dramatically (Milovanovic, Barac & Andjelkovic 2009, p. 95). As a result, the community that was living in that region was experiencing water shortage and was at the risk of losing even drinking water.

According to Milovanovic, Barac and Andjelkovic (2009, p. 95), Coca Cola Company was ill advised by locating its plant in such a region with water problems. The government, on the other hand, made a terrible mistake by allowing the company to locate its plant in that region. The moment Coca Cola Company was accused of depleting water in the region, it denied the accusation. The company claimed that it was harvesting rainwater for the local people. The local people, on the other hand, claimed that the project was not operational because the company did not maintain it. This led to a conflict between the company and the local people that were the company’s customers. Given that rainfall in the region was so low, the local people claimed that the company had the responsibility of replenishing water in the region, but the company was doing very little or simply doing nothing about it. In fact, it was wrong for the company to extract water from the region even during summer season when there was water shortage even in the absence of the company in the region. The impact on the local people that were the company’s customers was huge because women had to walk long distances looking for water (Kaur & Aggarwal 2012, p. 268).

The neighboring regions were also affected by the company’s practices and in some instances; the local people had even gone to an extent of protesting against the company. The matter exacerbated when the village local council declined to renew the company’s license claiming that the company had over-used and even contaminated water resources in the region. An Indian high court had even ordered the company to seek for alternative sources of water. In contrast to what the company reported in its annual report that it was preserving the environment, the company was producing a sludge-like by-product that was given to local people as fertilizer. The said by-product was evaluated and found to be containing toxic chemicals (Kaur & Aggarwal 2012, p. 268). This contamination spread to water supplies. The matter did not end there because the company’s products were contaminated as well following the high level of pollution from the company.

The second incidence relates to university students in USA and other parts of the world. In this incidence, over one hundred university campuses in the U.S, Canada, and UK have accused the company of ignoring its social problems. The University of Michigan was one of the universities that boycotted the company for violating some CSR practices back in 2006. This was the tenth university in the U.S to ban the sale of coke products in its premises (Milovanovic, Barac & Andjelkovic 2009, p. 94). Other universities such as Rutgers University and New York University had done the same before. To a great extent, Coca Cola Company has built its success on its brand name that has been in the existence for over a century now. However, according to Milovanovic, Barac and Andjelkovic, the company’s reputation has been edging down following series of attacks on its reputation (2009, p. 94). These authors liken Coca Cola Company’s case to McDonald’s and Nike’s cases.

Another major concern that customers have against the company relates to the role that sugary fizzy drinks have in obesity epidemic. This concern is widespread in developed countries than in developing countries. Accordingly, the concern has been more in developed countries that in developing countries. This notwithstanding, the concern has affected the company’s reputation because customers are concerned whether the company cares about them as it strives towards making profit. In the U.S, companies that produce soft drinks have voluntarily agreed to refrain from selling their products in schools (Milovanovic, Barac & Andjelkovic 2009, p. 94). This move has resulted from the pressure that has been coming from health activists, parents and government. However, in spite of implementing this strategy, Coca Cola Company has been countering this move with intense advertisement. The latest intense advertisement that was aimed at countering the university boycott was under the banner of “welcome to the coke side of life”. Analysts claim that this slogan aims at generating a positive feeling about the company’s image.

In Europe, the company’s reputation was affected by the launch of Dasani water in the UK as well as the contamination of a bottling company in Belgium. The UK Dasani water case was linked to what the company was doing in recycling tap water that contained excessive dangerous ingredients. With regard to this incidence, UK customers felt that the company was not doing enough to protect them (Milovanovic, Barac & Andjelkovic 2009, p. 95). However, the company responded in a positive manner by stopping shortly to manufacture Dasani water.

In 2009, the Venezuelan government also attacked the company for marketing its coke products without specifying the health risks these products had on consumers. In this case, the government was concerned about the health of its people thereby launched an investigation on the effects the company’s products had on Venezuelan people. Unlike in the Indian incidence where the company refuted the claims leveled against it, the company voluntarily removed its coke products from supermarkets as it waited for the government to complete its investigation. The move by the Venezuelan government was advised by the campaign that was initiated on April 2009 under the slogan “stop killer coke” (Milovanovic, Barac & Andjelkovic 2009, p. 95). This protest highlighted the abuses the company had on customers as well as on environment, and in particular, it highlighted the most recent abuses the company had on customers.

How to deal with the green-wash issue

In order to deal with CSR issues arising from customers, Coca Cola Company needs to do the following. First, any time CSR issues arise; the company should be concerned about those issues rather than denying ever violating CSR practices. In this case, the company should learn from what happened in India in 2003 after the company was alleged to have polluted and over-exploited water resources in Kerala region. In the said case, the company denied all CSR issues that were raised by customers and by so doing, the company found itself in a conflict with customers. This was not the best way to approach the issue because the company failed to regain customers’ confidence in its CSR practices (Holzendorff 2013, p. 2).

Second, the company should implement its CSR policies to the letter rather than simply purporting to be doing something about them whereas it does not implement them fully (Freitag & Stokes 2009, p. 69).

Summary and Conclusion

From the Indian case, the customers did not appreciate what the company was doing in harvesting rainwater in the sense that they accused the company of failing to maintain the project. The company, on the other hand, felt that it had done enough by simply initiating the project and then forgetting about it. In relation to the company’s CSR practices, water stewardship is part of what the company does in implementing its CSR policies. Although this is a good CSR practices for a company that uses a lot of water in its manufacturing processes, some customers do not feel the company is doing enough as it is supposed to do. This is in relation to what the company did in India. On the other hand, the U.S university issue also depicts that some customers do not feel that the company does enough in implementing its CSR policies. Other case studies such as UK Dasani case and Belgium plant issue depict that majority of customers do not feel Coca Cola Company does enough in implementing its CSR practices. Accordingly, from the customer’s perspective, Coca Cola Company’s CSR practices are simply green-wash.

 

 

 

 

 

 

 

References

Bara, C., 2010. Corporate social responsibility & international development. Herstellung: Diplo.de.

Boeger, N., Murray, R. & Villiers, C., 2008. Perspectives on corporate social responsibility. Cheltenham, UK, Edward Elgar.

Brennan, R. et al. 2007. Contemporary strategic marketing. New York: Palgrave Macmillan.

Carroll, A. & Buchholtz, A., 2014. Business and society: ethics, sustainability, and stakeholder management. Stamford: Cengage learning.

Freitag, A. & Stokes, A., 2009. Global public relations: spanning borders, spanning cultures. New York: Routledge.

Holzendorff, D., 2013. Living on the coke side of thirst: the Coca Cola Company and responsibility for water shortage in India. European management & public affairs studies, 1(1), 1-4.

Kaur, H. & Aggarwal, G., 2012. A paradox on corporate social responsibility – case study on coca cola. International journal of physical and social science, 2(9), pp. 264-274.

Maignan, I. & Ferrell, O., 2004. Corporate social responsibility and marketing: an integrative framework. Journal of the academy of marketing science, 32(1), pp. 3-9.

Milovanovic, G., Barac, N. & Andjelkovic, A., 2009. Corporate social responsibility in the globalization era. Economics and organization, 6(2), pp. 89-104.

Morsing, M. & Schultz, M., 2006. Corporate social responsibility communication: stakeholder information, response and involvement strategies. Business ethics: a European review, 15(4), pp. 323-338.

Torres, C., et al. 2012. Four case studies on corporate social responsibility: do conflicts affect a company’s corporate social responsibility policy? Utrecht law review, 8(3), pp. 51-73.