Coca-Cola Goes Green
Coke has been selling its iconic carbonated soda for 130 years – climate change threatens to disrupt its business, and the company is adapting its practices in response.
Coca-Cola (“Coke” or the “Company”) is the world’s largest beverage company. The Company owns or licenses more than 500 beverage brands, primarily sparkling beverages but also a variety of still beverages such as waters, juices, ready-to-drink teas and coffees, and sports drinks. Coke products, sold in the United States since 1886, are today sold in more than 200 countries. Water is the main ingredient in all of these products and as a result, continued access to sufficient water resources is critically important to the success of the Company. Climate change threatens to impact both the quality and consistent supply of water. Rising temperatures can lead to droughts and accelerate the melting of glaciers, an important source of freshwater worldwide. In addition, changing weather patterns may decrease global agricultural productivity, limiting the supply of key commodities such as sugarcane, corn, citrus, coffee and tea, which are important inputs for Coke products. Coke recognizes that climate change is a major threat to commerce and has adopted comprehensive business practices to minimize the negative effects.
Steps to Address Effects of Climate Change
Coke has a robust water stewardship program and continues to work on improving water usage efficiency, treating wastewater and achieving the goal of full replenishment of the water it uses in production and bottling. In order to mitigate water supply dislocation, the Company regularly assesses water-related risks and has a formal water risk management program. In 2015, Coke conducted a global plant-level assessment and implemented Source Water Protection Plans (SWPP) detailing specific risk-mitigation actions to address water supply issues at each facility. Coke also uses its leverage to require its bottling partners to implement similar source water protection plans. In addition to focusing on water efficiency, the Company has taken extensive measures to treat the wastewater it produces. All of Coke’s plants are in compliance with, and in many cases exceed, local wastewater treatment regulatory standards. Recognizing that the most meaningful impact often happens at the public policy level, Coke routinely collaborates with other companies, governments and NGOs to advocate for policy reforms aimed at improving water availability and quality.
In addition to the critical need for reliable water, it is imperative for Coke to maintain a secure, sustainable supply of agricultural ingredients. To that end, Coke has developed Sustainable Agriculture Guiding Principles (SAGP) which set expectations of suppliers and aim to address sustainability challenges specific to agriculture by encouraging better growing practices. The SAGP establishes principles at the individual farm level for human rights, environmental sustainability and farm management. This includes requiring suppliers to protect the access and land rights of local communities with respect to natural resources. The principles are designed to provide a mutually beneficial foundation for the Company and its agricultural suppliers that encourages transparency and accountability across the supply chain. Coke has also partnered with organizations such as WWF, TechnoServe, and Cargill, to help members of the supply chain test and refine new growing techniques. Together they are overseeing initiatives to improve crop yields for farmers.
Looking to the Future
Coke has a long-term goal to be a zero-waste company. A significant area to address in achieving this goal is improving the sustainability of product packaging. Coke has taken many actions already to reduce the environmental impact of its packaging, such as trimming the weight of plastic bottles and aluminum cans. The Company has also launched efforts to introduce a higher content of sustainable materials in its packaging, such as the PlantBottle packaging, the first fully-recyclable polyethylene terephthalate (PET) bottle. However, PET bottles require significant natural resources to make and so the need to use recycled or renewable materials is paramount. Coke must continue to invest in initiatives to recover and recycle bottles it introduces to the market – it currently recovers only 37%. The Company has had success partnering with non-profit and government organizations in the past to tackle important sustainability challenges, and such collaboration will be critical to improving the wide and complex system of recycling programs.
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- The New York Times – Industry Awakens to Threat of Climate Change.
- The Coca-Cola Company 2015 SEC Form 10-K Report. https://www.sec.gov/Archives/edgar/data/21344/000002134416000050/a2015123110-k.htm
- The Coca-Cola Company 2014/2015 Sustainability Report.
- The Coca-Cola Company Water Stewardship & Replenishment Report.
- The Coca-Cola Company Sustainable Agriculture Guiding Principles.
- McKinsey – How companies can adapt to climate change.
Student comments on Coca-Cola Goes Green
As a Coke lover myself, I find the company to be much more committed than many other food and beverage institutions to eliminating its environmental impact. I agree with you that while Coke can still do more, some of the efforts, such as developing SAGP, are pretty revolutionary for a Fortune 50 company to develop. When reading your article, I began thinking about other ways besides water conservation Coke could decrease its environmental footprint. I recalled when Coke was experimenting with “square cans.” It was a recyclable innovative design where Coke cans would be rectangular instead of circular. The thought process was that in packaging, the square cans could be stacked and fit more efficiently inside boxes for distribution purposes. Thus, more inventory could be shipped using less gas-guzzling 18-wheeler trucks or ships. Unfortunately, the company felt that the circular shape of the soda can was too iconic to change, and the project did not move forward. Here’s hoping things may change in the future!
Great post. Given that water is proving to be an ever-scarcer commodity, how much room do you think there is for a ‘water tax’ similar to the much muted sugar-tax in the UK? Should the consumer be paying for scarce resources or for the negative externalities posed on society by his or her consumption?
Well done – the water initiatives seem interesting. Do you believe that the company is headed towards ‘sustainability’? I cant help but think back to our IKEA discussion here. Anything on transportation/logistics management to reduce the carbon footprint. For a company of this size I think you point to some good steps towards reducing waste and pushing towards sustainability.. in your opinion could (or should?) they be more aggressive with the timeline for their initiatives? Would love to discuss your research more at some point
I would echo you that Coke has established a robust water stewardship program to reduce overall water consumption in the plants. My company provides water reduction service and technology to Coke and Coke has a very consistent strategy globally. Even in developing countries, Coke would still spend significant money to reduce water consumption. As an industry leader, I would challenge Coke to further lead industry and consumer behavior changes. For example, Coke introduced new ways to turn empty bottles into useful objects (http://www.adweek.com/adfreak/coca-cola-invents-16-crazy-caps-turn-empty-bottles-useful-objects-158136). I feel strongly that Coke can do some right marketing campaigns to increase consumer awareness in the sustainability area.
Very insightful – loved the post. Considering the clout Coca Cola (or “Coke” or “the Company”) would have with everyone involved in its supply chain, would be interesting to see if they would try to implement sustainability across their supply chain. This brings me back to the question we discussed in the IKEA case on control vs. impact. One of the key metrics to gauge the seriousness of their intent and efforts would be to see how much they are willing to control their supply chain to push the sustainability agenda. As a second best alternative, how much are they willing to invest in programs that their supply chain partners can comply to and what they would do to enforce this? What would especially be interesting is to see the efficacy of their efforts internationally given the scale they operate in.
Great article! I was just reading something on water sustainability (http://www.economist.com/news/leaders/21709541-water-scarce-because-it-badly-managed-dry-facts) outlining how half of the world’s population will be water stressed by the middle of the century. I think the moves Coke is making as such a large consumer of water will be good steps to encourage other large consumers of water to adopt similar programs. Also, in the context of Coke’s business I’m not sure how they could ever become truly “zero waste” but after reading this I’ll definitely be following the company’s plan.