Historically, many companies and corporations have received recognition for their growth and success over time. However, although praised, discoveries of controversial issues lead consumers to question various companies’ ethics and operations. Coca-Cola, or simple coke, has existed for over a century, originating in Atlanta, Georgia in 1892, and eventually expanding and providing drinks internationally. Today, the company produces concentrate, which then sells to Coke licensed bottlers internationally; and ultimately ending up sold to retail stores and vending machines for consumers to purchase.
Along with the regular “coke”, the company has also been able to produce other cola branded drinks including water, energy drinks and coffee. The most common of all, Diet Coke; others include Caffeine-Free Cola, Diet Coke Caffeine-Free, Coke Cherry, Coke Zero and Coke Vanilla. All of which could be found in over 200 countries within the year 2013, with consumers drinking at the least 1.8 million servings each day, according to the book, Citizen Coke: An Environmental and Political History of the Coke Company (Elmore p.
However, while extremely popular and high in demand, the Coke Company has faced much controversial issues from the public in India throughout its years of growth. Out of every country that Coke operates in, India has the fastest growing market (KillerCoke). From the start of production in 1999 to present day, Coke has spent $2 billion and will continue to spend an addition $5 billion in India. According to the article Coke rejigs bottling arm management, Coke has a plan to pursue expansion for the following few years (until 2020) in India with the plan to double their revenues to $200 billion (TOI). India is among the top seven markets globally for Coke, the CEO of Hindustan Coke stated “we have made significant investments in the marketplace and as we get ready to further accelerate growth, it is very important to develop a high quality talent pipelines. This team will work closely with Coke India to achieve our 2020 vision.” Part of their expansion was focused on a plant in Mehdiganj, India.
The emerging markets with Coke like India and China will result in about 60% of the incremental sales volume growth (TOI). According to the book Business and its Environment, 80 percent of the world’s population lives in emerging markets countries, and 90 percent of the world’s population growth will be in these countries over the next 30 years (Baron p.477) The start of production for a few of their bottlers in India has raised issues because of Coke’s use of the water supply of nearby villages. Amit Srivastaba, of the India Resource Center, a center that works to support movements against corporate globalization in India said, “Three communities in India — Plachimada in Kerala, Wada in Maharashtra and Mehdiganj in Uttar Pradesh — are experiencing severe water shortages as a result of Coke’s mining of the majority of the common groundwater resources around its facilities (KillerCoke).”
One of their issues comes from its production in Mehdiganj, near Varanasi, India, that has been in operation since 1999, and has been the center of attention in many surrounding villages since 2003 and especially after Coke announced that they are planning to expand by $25 million. In August of 2012, according to the article Coke Abandons Expansion Plans in India Because of Water, the company halted their plans to expand in Mehdiganj because of a delay in a no-objection certificate and locals becoming concerned about environmental dangers (The Wire). Organizations such as the India Resource Center and others who organize protests increase the awareness of issues, and therefore private regulation have been made an alternative to government regulations. As a result, the strategy Coke had all along failed to see through when the locals did not approve of their actions.
If Coke does not have an affective nonmarket strategy in place for their activities in other countries, major opportunities can close when issues of any kind arise. A nonmarket strategy is important to avoid government regulations and to keeping the company’s opportunities open. Aside from the government, the company’s opportunities can also be controlled by private politics such as protests, public criticism, interest groups as well as public sentiment towards the company. (Baron p.31). The other factor that can affect opportunities is moral concerns, which Coke seems to be going through this issue right now. Coke should formulate a policy that oversees the use of water in India, which is the major concern of groups in private politics. Interest groups that are in play from the surrounding villages in India include: anti-coke nongovernmental activist groups, Varanasi-based activist, environmentalist, politicians, farmers and the villagers that have created lives in surrounding areas.
Leading from within these interest groups is The Uttar Pradesh Pollution Control Board; a statutory organization entrusted to implement Environmental Laws and rules within the jurisdiction of the state of Uttar Pradesh, India (UPPCB). The Control Board had found that Coke violated a number of conditions of its license that had to do with the use of water. The company had not yet obtained clearance for the extraction of groundwater from the Central Ground Water Authority (CGWA), a government agency that monitors and regulates the process in water-stressed areas (The economic Times). But Coke had some objections to these accusations. According to Coke, a Central Ground Water Authority report from 2012 stated that the reduction of groundwater in the area was not due to their company.
According to the article UP pollution board shuts down Coke’s Varanasi unit, the maker of sprite said in a statement that the plant in Mehdiganj has complied with regulatory approvals and applicable laws in India (The Economic Times). Despite these statements, according to the Central Ground Water Authority, the groundwater in Mehdiganj has gone from “safe” back in 1999 when Coke got back into operating in India to “critical” in 2009. The closure order by the Central Ground Water Authority stated that Coke increased its production capacity from 20,000 cases to 36,000 cases a day without the board’s permission. Similar to this problem was one in 2004, when one of the 68 Coke plant in Plachimada, Kerala was shut down over accusations that the operation led to the reduction of groundwater (see Exhibit #1).
The company faces legislation holding it liable for $47 million in damages (The Economic Times). Initially, Coke had looked beneficial for the local economy, but then the regulations and protesters hit the company as a result from the critically low levels of water. Although this may have halted the company’s expansion plan of $25 million into Varanasi, Coke is seeking permission from the Uttar Pradesh Pollution Control Board to expand into Mehdiganj. With authorization, they will increase productivity by opening a second bottling line. However, the struggle continues as the recent closure has already inspired other protest to start, starting problems down the company’s future operations in their bottling factories.
Over 10 years ago, a protest by farmers and anti-globalization activist successfully launched a “Quit India” campaign in order to stop Coke’s expansion into Varanasi. Many villages are saying big companies like Coke are coming into India and using their drinking water, even when levels are critically low for basic living consumption (see Exhibit #2). According to the article Coke has a bottler of a headache in India; the level of water for the villagers became even lower as Coke proceeds to operate in India. Amar Signh Rathor, a farmer in the village Mehdiganj, has noticed the continuous decline of water levels by simply observing his own well. Within three years, the water level below his water table has fallen by over 18 meters. Most of the population of Mehdiganj (approximately 10,000 people) blamed Coke for the shocking decrease in their water supply (Sydney Morning Herald P.13).
The plant that is to blame is at the edge of the village. A villager named Shakuntala Devi said, “If the Coke plant isn’t closed it will be impossible to live here (Sydney Morning Herald P.13).” Coke violates human rights for the people of India by taking their water and in the process they damage the environment. According to the article Coke’s Crimes in India, they are draining a vast majority of groundwater from farms and turning farming communities into virtual desserts. These farmers livelihood that have been destroyed have resulted in a increase of suicide, and everyday for many years now, there are protests of some sort, big or small, against Coke’s abuse in India (KillerCoke).
On November 24, 2004, a protest outside of the Mehdiganj plant broke out and quickly turned violent. Multiple villagers had attempted to break the barrier of the police in order to reach Coke property, resulting in a defensive attack in return from the police. Organizers stated that there were approximately 2,000 people – mainly woman and youth – who took part in the protest, although Coke reported a much smaller number. This was the first of many protests to start, even though they were at a smaller scale. In this protest alone, two hundred villagers were reportedly arrested during the brawl (Sydney Morning Herald P.13).
According to the article Indian villagers want Coke plant shut amid water fears, later in June of 2007, four hundred people marched and rallied at the Varanasi district magistrate’s (DM) office, demanding that the Coke bottling plant in Mehdiganj be shut down effective immediately. Within the four hundred, included people from twenty different villages, all of who submitted a letter to the district magistrate, Vina Kumari Meena, drawing attention to the water shortage and pollution of groundwater and land caused by Coke’s operation. The letter demanded that the operation be shut down (Monitoring South Asia).
Due to the severity of the situation, the director of The District Rural Development Agency (DRDA) declared the water issues in India as “dark zoned”. A “dark zone” category infers that ground water resources are over-exploited, and more than 85 percent of the total recharging of ground water resources is being extracted, which resulted in all new underground installations being approved by the government (BBC Monitoring South Asia). Accusations of unethical acts against the environment can lead to nongovernmental organizations forming, which affect the organization in question by mobilizing people to work for causes.
“These groups have been instrumental in advancing the causes of environmental protection, health and safety protection for consumers, and civil and human rights (Baron p.75).” The lead of the campaign Lok Semiti (People’s Committee), a nongovernmental organization that is against Coke, Nandlal Master, said “When people themselves do not have enough water to meet their basic water needs, why should Coke be allowed to siphon hundreds of thousands of liters of water every day (BBC Monitoring South Asia)?” But the issues with Coke go beyond the use of water and its reduction impacting a majority of the villages.
Coke provides waste product from their operation to farmers as fertilizers for their crops. A BBC study found that the fertilizer contains toxic chemicals, stating, “Dangerous levels of the known carcinogen cadmium have been found in the sludge produced from the plant in the southern state of Kerala (BBC news).” Face the Facts, an investigative journalism for BBC, sent presenter, John Waite, to further investigate the allegations. Part of the investigation consisted of sending a sludge sample to the University of Exeter in the UK, and the results were very alarming. The test revealed that the sludge was a useless fertilizer that contained the toxic metals cadmium and lead.
David Santillo, a senior scientist at the university’s lab, affirmed that the levels of cadmium and lead have not only contaminated that sludge provided to the farmers, but the entire water supply as well. The levels are way above those approved by the World Health Organization. Britain’s leading poison expert, professor John Henry, said, “The results have devastating consequences for those living near the areas where this waste has been dumped and for the thousands who depend on crops produced in these fields (BBC News).”
The professor is correct to assume these consequences because cadmium is a poison that can accumulate in the kidneys and with repeat exposure it can cause kidney failure. Lead is also dangerous, and more to children than to anyone else. Even at low levels, lead can cause mental retardation and even anemia, a blood deficiency (BBC News). The professor also explains that with the levels of chemicals in the water, pregnant women in the villages in India consuming from the farm’s goods can fall vulnerable to miscarriages, stillbirths and premature births. After these alarming results, more test where conducted on the soft drinks.
In the year 2003, the Centre of Science and Environment (CSE), a non-for-profit and nongovernmental organization based in New Delhi, India, tested 12 cold soft drinks (Pepsi, Mountain Dew, Diet Pepsi, Mirinda Orang, Mirinda Lemon, Blue Pepsi, 7-Up, Fanta, Limca, Sprite, Thumbs Up and of course Coke). The article, Pepsi, Coke contain pesticides: CSE, based in India was the one to write about the cold drinks, which included 2 big companies, Pepsi and Coke. Both companies failed health standards when both drinks tested positive for pesticides. The tests from three samples of each of these Pepsi and Coke brand drinks that was conducted by the Pollution Monitoring Laboratory (PML) of the Centre of Science and Environment showed that the samples contained residues of four very toxic pesticides and insecticides: lindane, DDT, malathion and chlorpyrifos. These four pesticides are known to cause cancer, damage the nervous and reproductive system, and severely damage the immune system (Rediff).
These tests were conducted in the year 2003 from April to August with samples from across the city. The samples from Coke were found to contain pesticides that exceeded global standards by 30 times the limit at 0.0150 mg/l, with the EEC limit of total pesticides being at 0.0005 mg/l. Coke defended its position by saying their plants use a multiple barrier system to remove potential contaminants and unwanted natural substances including iron, sulfur, heavy metals as well as pesticides, “Our products in India are safe and are tested regularly to ensure that they meet the same rigorous standards we maintain across the world (Rediff).” But despite these statements the citizens of India seem to believe the Centre of Science and Environment, as sales have been impacted in the so-called safe and high-quality drink and investors from the company in India have lost confidence (Coke India).
Looking at the nonmarket issue cycle, Coke is way past the issue identification, interest group formation, legislation, and has now reached the Administration phase in India (see Exhibit #3). The issues were identified soon after they got back into India in 1999. Villagers, farmers and environmentalist noticed the problem, starting many groups interested in the closure of these factories, sparking the many protests stated above. Legislations already started within the Indian Parliament banning Coke drinks from its cafeterias. Amit Srivastaba, of the India Resource Center, stated that the ban came as a result of tests by the Indian government and private laboratories, which found high concentrations of pesticides and insecticides in the cola drinks (Indian Resource Center).
If Coke wants to prevent their company from becoming the next Enron in the ethical sense, they need to take the right action now before they sink too low in unethical actions and laws of the government that are way out of their control start to enforce legislations. Enron was a energy company that was found out to be engaging in unethical marketing malpractices including; misrepresentation of reports regarding the financial position of the organization in order to continue from benefiting from the investments provided by the stakeholders, a false energy crisis to gain more money from investors and finally, executives of the company embezzled money from unsuspecting investors which led to the bankruptcy of the company. Coke’s name is a global brand that can definitely work its way out of the unethical characteristics in the communities of the countries it operates in by simply providing the same quality of goods around the world.
So far, Coke’s way of handling the issues in India has been very questionable. Their strategy thus far is to globalize their company no matter the cost, ethically and environmentally. Protesters from many interest groups have eliminated many opportunities for Coke and have been attacking the company for over exploitation and pollution of water that is already dangerously low. Interestingly, Coke responds with public relations scams, deceptive statements and points out awards of how they are corporate socially responsible (KillerCoke).
The article Coke’s crimes in India further expands by saying that Coke stated, “For four consecutive years, Coke plants in India have won the prestigious Golden Peacock Environment Management Award for environmental practices from the Institute of Directors, which grants the award in association with the World Environment Foundation.” Similar remarks were made in late 2005 when the company claimed to be recognized for being a ‘Water Efficient Unit’ by the Confederation of Indian Industry (CII) (KillerCoke).
Coke continued on with their misleading information in 2007 at two Canadian college campuses about their activities in India and Colombia. Coke bragged that The Energy and Resource Institute (TERI), described as “an Indian-based nonprofit research organization,” had “begun an assessment of our company’s water resource management practices in India (KillerCoke).” TERI is a respected Dehli-based nongovernmental organization with deep experience in sustainability issues, and Coke falsely stated they were working closely with them on their water management. However, Coke already began to make social responsibility a top priority by investing in new innovations and plant processes to help make more improvement moving forward. The Coke webpage of the UK indicates that outside of their plants they attempt to replenish more than 100 percent of the water that they use by creating rainwater harvesting structures, restoring ponds, and leading interventions that focus on improving water efficiency, among other things. And by 2012 they met their goal and exceeded it to 110 percent of water replenished throughout India (Coke UK).
From the article Villagers to Coke: ‘Go away’; In India, foes claim company is depleting water supply, a Coke spokesman stated the shortage of monsoons in India from June to October is to blame for water depletion affecting India’s agriculture. Harry Ott, the director of Coke’s Global Center for Water Excellence said, “If the monsoons are good, these problems don’t come up.” Today in mehdiganj “the land around Coke’s plant looks lush. Fields brim with mustard plants, potatoes, peppers, wheat and rice (The Atlanta Journal-Constitution).” But the struggle continues as people focus more on the bad rather than the good. Coke like many other businesses focuses on the profitable side of their operation, without realizing the environmental damages it can cause to surrounding communities.
When Coke is looking into the future of the company, it is looking to double their revenues more than working on a nonmarket strategy that will prevent interest groups from the communities they operate in to question the company’s morals. Doubling their revenues further proves that Coke, being the number one beverage company in the world, has some money to play with. In Kala Dera, protests are starting because of the lack in Coke’s corporate social responsibility, leading back to the use of water and the damage being done to the communities around it. In 2010, shareholders at a meeting taking place in Duluth, Georgia, were told by Amit Srivastaba of the India Resource center, “It is only a matter of time before the Coke company will be held financially and criminally liable for their operations in water-stressed areas in India.” He continued by stating “The company management is being seriously derelict in its duties by not acknowledging the real extent of the liabilities Coke has incurred and continues to incur in India (KillerCoke).”
By investing a few million dollars a year of the billions of earnings they have reached ever since the late nineteenth century when the company first got started, they will be showing the shareholders that Coke is doing something to get on the right track. Coke could start with compensation of the crops that farmers lost when they initially started to operate in India, and also assure the farmers that Coke is investing in new innovations to solve the water issue so it will not be a problem in the long-run. Also, Coke could invest into the education in India by opening new schools; increase awareness of diseases through nongovernmental programs, as well as investing in the communities in which their bottling factories reside. With the issues out for the public to read about, it should be an incentive for the company to not continue down this horrific path in developing countries.
Other things Coke should considering doing for the sake of their image is stepping up in community service, donations focused to help clean up the streets that their distributors travel in, donations to nongovernment organization, show the public that they are actually working to stop the shortage and contamination of water without spreading lies of what they are actually doing. One way to do is by continuing their activities so far to stop the shortage of water and further help the environment by planting trees. The article Trees Reduce Air Pollution mentions that trees can help with the gas pollutants from the factories by absorbing them through the pours in the leaf surface (DNR). Furthermore, the company can look to work with the nongovernmental organization TERI in efforts to better sustainability of water resources, instead of just talking about doing it because in the end actions speak louder than words.
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