A Case study on corporate social responsibility and analysis of coca-cola's policies and operations in India
Corporate social responsibility is a multi-dimensional concept that encompasses all of a company‟s economic, legal, ethical and philanthropic responsibilities (Carroll, 1989, pp 30- 33). CSR policies and their adherence determine the ethics and values of a company, and go hand-in-hand with its sustainability, thereby becoming an unavoidable part of a company‟s core philosophy. They are aimed at ensuring better social, economic and environmental atmosphere resulting in retaining customers, avoiding overall business risks, support from community and local bodies and ultimately earning higher profits for the business with an enhanced brand image. Though these are the benefits, the main aim of CSR should be - societal welfare through creating a moral and ethical value system which benefits everyone.
In this report, I will be analysing the case of Coca-Cola in India with regards to the Corporate Social Responsibility policies adopted. For the same, I will start by throwing light on relevant literature of Corporate Social Responsibility. Drawing on the research, I will discuss on the implications of Coca-Cola‟s business operations in the Indian sub-continent and further reflect on the resulting issues of Environmental pollution and negative effects on the social health and general well-being. This will be followed by a critical analysis with reference to the principles and theories of CSR, ie the Pyramid of CSR, the Theory of Social Responsibility and Utilitarianism. Based on this analysis, I will make recommendations to improve on Coca-Cola India‟s CSR policies and overcome its sustainability issues in India.
Corporate Social Responsibility refers to the voluntary inclusion of communal and ecological welfare in a company‟s operations, corporate decisions and its involvement with the stakeholders (Babalola, 2012). The long-term sustenance of a business and its ability to perform financially well has been proved based on research to be largely dependent on the kind of CSR policies implemented (Margolis and Walsh, 2003). The need for CSR emerged on a wide spectrum with the advent of globalisation and the reducing involvement of Governments in the core areas of a society‟s functioning (Kercher, K., 2007). The motivation for developing CSR policies can be dependent on an ethical argument, a logical framework or on economic benefits for a business house and in most cases a combination of all of these (Kotler & Lee, 2005). As per Archie Carroll (1991) and his Pyramid of CSR, the economic and legal responsibilities were the mandatory ones whereas ethical and philanthropic were discretionary. But in today‟s society, they have become equally important for a business to succeed amidst growing consumer rights and competitive markets (Werther & Chandler, 2006). CSR has grown to be a corporate identity and shows the culture, values, personality and principles of the organisation, on the basis of which it is evaluated (Paine, 1994).
Accountability for CSR activities is one grey area of business given the fact that though it is mandatory for a corporation to declare and follow Social responsibilities, there are no rules and regulations that it needs to compulsorily abide by; therefore making it necessary to have stringent assessment due to the various factors that affect dissemination of good CSR practices (Garvy & Newell, 2005). The factors that influence the effectiveness of corporate accountability include false promises to stakeholders, different communal backgrounds of corporate operations and the difference in intention and actual ethical behaviour of the business leaders and management ( Frynas 2005). An organisational CSR framework with ethical leadership that can lead a company towards sustainable social success will involve transparency, reliability, compassion and integrity (Waldman, Siegel, & Javidan, 2006). Lack of corporate governance and voluntary undertaking of CSR has become a huge challenge when organisations involve in illegitimate activities detrimental to the social and environmental welfare (Palazzo and Scherer 2006). The Global Reporting Initiative summoned in 1997 proposed to develop globally acceptable Corporate Social Responsibility and Sustainability reporting guidelines. Even though many companies worldwide are part of this initiative, the failure to implement a system of legal accountability on CSR has been a boon to many organisations for misuse of corporate resources (Soheli Ghose, 2012).
Coca-cola is the world‟s largest beverage company founded in the year 1886 at Atlanta, USA. Today it has operations in every single country in the globe with over 500 brands for production and distribution in the consumer markets. The company has been catering to the Indian market customers since 1956 and since its re-entry in 1993, the sales volumes and profits has been on the rise year after year until 2013 since when the graph shows slow decline. Coca-cola rules the soft drinks market in India through the wholly owned subsidiary company Coca-Cola India Pvt. Ltd (Jonathan Hills and Richard Welford, 2005). The company has been subject to continuous criticism globally including its major Asian market India and the Corporate Social Responsibility of this global giant is subject to continuous scan by the Government, social groups and consumers (Burnett, M., & Welford, R., 2007) due to unethical value system reflected in business practises followed, health effects of the product, employee issues and environmental issues of water, air and land pollution resulting from its plant operations.
Coca-Cola has formulated a set of Corporate Social Responsibility and Sustainability policies and confirmed to be following the same in its operations in the India market as per the rules issued by the Ministry of Corporate Affairs, Government of India under Section 135 of the Companies Act, 2013. The company has undertaken to positively impact the social, economic and environmental progress in India with focus on three major areas: Water, Agriculture and Recycling. Its CSR objectives cover a wide range of activities and programmes that can ensure sustainable development in the market. As mentioned in Cocacola India‟s website in its Sustainability section, following are the purpose of its Corporate Social Responsibility projects:
Though the CSR policies as mentioned above focus on the social, economic and environmental benefits of the society, the implications of the company‟s operations in the country point to a different direction. The prime allegations against Coca-Cola India have been of acting detrimental to environmental safety and consumer health resulting in resentment and distrust in the minds of the general public, consumers and the Government (Henrik Berglund & Sofia Helander, 2015).
One of the major concerns that pointed out the unethical practices followed by the multi-national giant Coca-Cola in India has been the issue of depletion of groundwater resources near its bottling plants. In 2002, environmental activists and experts raised their voice against excessive extraction of water near its plant in Plachimada, Kerala which led to drought and thereby drastically reducing the agricultural production in the nearby places (Henrik Berglund & Sofia Helander, 2015). After this was confirmed by the country‟s Central Ground Water Board, there were widespread protests and strikes. Since India is majorly dependent on agriculture, the importance that was attached to this issue was huge. Another such issue is the pollution caused by dumping lethal waste and discharging hazardous components based waste water in to the agricultural farms near its bottling plants. The company‟s plants were also using lofty amounts of energy and the Green House Gases (GHS‟s) that were released as a result of the refrigerating and vending techniques used for production were creating high levels of air pollution. This led to pollution of land, water and air thereby creating long-term effects on the public. There was also an allegation of distribution of toxic waste as fertilisers to farmers near Coca-Cola‟s bottling plants (Vedwan, N, 2007). Coca-Cola initiated water conservation projects like Rainwater harvesting and Watershed Protection throughout the country to address the issue and reverse the damage caused by groundwater depletion. Fertiliser distribution was stopped, Solid Waste Management system was implemented that helped in recycling any solid waste that was given out during production and eKOfreshment Coolers were installed to successfully get rid of hydro fluorocarbons that caused air pollution. In spite of these, the issues have not been completely resolved. In a recent order from the State Industries Promotion Corporation of Tamil Nadu (SIPCOT) in April 2015, following the public outrage and considering the water and pollution concerns, the plan for a new bottling plant in Perundurai, Tamil Nadu has been cancelled. This shows lack of public and government trust in the company‟s objectives, philosophy and procedures.
Coca-Cola‟s products have been viewed very critically for the hazards they pose to consumer health. Centre for Science and Environment (CSE), an Indian NGO raised an allegation against the company in 2003 that there were traces of pesticide residue in the company‟s soft drinks and bottled water. Tests conducted on samples found that they contained pesticide residue surpassing 30-36 times the global standards that could cause deadly health concerns like cancer, birth defects, damage to the nervous and reproductive systems and severe disruption of the immune system (Iype, 2003). This issue caused many retailers, schools, colleges and clubs banned the use of CocaCola‟s products causing a loss is sales and revenue during 2003. To resolve the issue, CocaCola India implemented a technique of “Carbon Filtration” in its manufacturing and bottling units to get rid of any solvents or pesticide traces off its products. The company claims that its Quality Systems are compliant with the requirements of the Food Safety and Standards Authority of India (FSSAI). But many private laboratories and groups are still coming up with reports stating the dangers of using Coca-Cola‟s products (Atlanta IMC, 2003). After having provided an overview of the issues faced by Coca Cola India, we will further provide a theoretical analysis of these issues.
The concepts and theories of CSR developed as a result of the recognition that a corporate cannot survive as an entity different from its civil society (Philip, K., & Lee, N., 2005). The major factors that gave rise to this phenomenon, that are also the benefits that an organisation can reap by adhering to ethical principles are shown through a diagrammatic representation below: