Coca-Cola: Sustainability Visionary or Villain?
Coke's Water Stewardship Program has helped the company secure a sustainable and socially responsible water source. But is the program truly helping the people living in water-stressed areas or making the situation worse?
By 2030, it is estimated that water demand will outpace supply by up to 40% [1]. Water is the life source of Coca-Cola (“Coke”), the largest beverage company in the world. From 2003, when Coke first acknowledged that water was a “limited resource facing unprecedented challenges from over-exploitation, increasing pollution and poor management” to 2016, when Coke announced it was the “first Fortune 500 Company to replenish all the water it uses globally”, the company took great strides to create a sustainable water supply source [2][3]. Despite emphasizing corporate responsibility, debate rages over the ethical practices of the company.
Water Stewardship Program
In 2007, Coke began its Water Stewardship Program with a goal of creating a “water-sustainable” business. The company’s current program is organized around four targets: water-use efficiency, managing wastewater, replenishment, and mitigating risk [4].
Water-Use Efficiency: Since 2004, when Coke was using 2.7 liters of water per liter of product, the company has increased its water-use efficiency by 27% to 1.96 liters. By 2020, the company plans to increase its current efficiency by 13% to reach a goal of 1.7 liters. Water-use efficiency is not limited by the company’s 2020 goal. The company currently operates facilities in North America, Europe and South Pacific bottling at or below the 2020 goal with the company aiming to continuously increase efficiencies across all facilities [4].
Managing Wastewater: Treating waste-water used in manufacturing Coke products has become a standard operating requirement. In 2015, the company transitioned wastewater management into a performance-based model to accelerate quality and efficiency improvements [5]. Today, 795 out the company’s 804 facilities have a wastewater treatment plant, with five out of the nine non-conforming sites in the planning/construction phase of such treatment facilities [6].
Replenishment: In 2009, Coke began taking steps to replenish the water it used in its products [7]. The company met is 2020 goal of 100% replenishment five years early in 2015. Coke partners with governments, civil societies and the private sector to run proximately 250 community projects in 71 countries. These projects focus on improving access to safe water and sanitation, conserving/restoring water quantity or quality of watersheds, and providing water for productive use through rainwater harvesting or water reuse for irrigation. In 2016, the company surpassed its 100% replenish rate, returning 115% of the water used in Coke’s products in 2015 [8]. Coke plans to meet or exceed its 100% replenishment goal through sustaining its current community projects and investing in additional projects as the company’s business grows [9].
Mitigating Risk: In 2015, Coke conducted a plant-by-plant assessment, in conjunction with local communities and governments, to determine the risks of the water supply for both the company’s facilities and the communities they operated in. Each facility developed a protection plan to mitigate the identified risks. The action steps identified in the various protections plans have led to over 3,700 mitigation actions and have served as the bases for many community projects under the Replenishment initiative. The Company plans to reevaluate existing plants every five years [10].
Sustainability Example or Corporate Exploitation
Coke’s emphasis on creating a sustainable and socially responsible water supply source should serve an example for corporations, however, in recent years Coke has faced backlash over water exploitation. In 2004, Coke was forced to shut down its operations in Rajasthan, India after local citizens and NGOs accused the company of excessive water withdraws and water pollution [11]. Although the company was found to be acting within the law, this facility, along with many others, is located in water-stressed regions in India [12].
The incident in Rajasthan is not unique. In 2014, Coke was forced to close another Indian facility due to water exploitation and abandon a new facility after a public campaign against the company. Shortly thereafter, Coke withdrew permits for two additional facilities [13]. Just this year, local Indian merchants refused to sell coke products over water exploitation issues [12].
Coke has implemented various initiatives to secure its water supply and increase efficiencies. However, its questionable tactics have resulted in a backlash and reputational damage in one of its fastest growing regions. In addition, Coke’s 100% replenishment rate has come under scrutiny as the program does not always benefit the communities the company operates in [9]. To maintain its place as the leading beverage manufacturer, Coke must commit itself to 100% ethical behavior or face expulsion from many regions and permeant reputational damage.
As Coke looks ahead, it must decide what to do with the many facilities it currently operates in water-stressed areas. Having a responsibility to its shareholders, does the company maintain operations in these areas while it looks for alternatives to alleviate the situation or does it close its many operations to preserve the water rights of the local community?
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[1] Boccaletti, Giulio, Maitra, Sudeep, and Stuchtey, Martin. “Transforming Water Economies”, McKinsey & Company. [https://www.mckinsey.com/~/media/McKinsey/dotcom/client…/SRP_09_Water.ashx].
https://www.mckinsey.com/~/media/McKinsey/dotcom/client_service/Sustainability/PDFs/McK%20on%20SRP/SRP_09 _Water.ashx, accessed September 2014. Accessed November 2017
[2] “2003 Annual Report on Form 10-K”, the Coca-Cola Company, Apr 21, 2004. [https://www.sec.gov/Archives/edgar/data/21344/000104746904005840/a2126594z10-k.htm]
[3] “Coca-Cola is the First Fortune 500 Company to Replenish All the Water it Uses Globally”, the Coca-Cola Company, Aug 25, 2016. [http://www.coca-colacompany.com/press-center/press-releases/coca-cola-is-the-first-fortune-500-company-to-replenish-all-the-water-it-uses-globally]
[4] “Improving Our Water Efficiency”, The Coca-Cola Company, Aug 16, 2017. [http://www.coca-colacompany.com/stories/setting-a-new-goal-for-water-efficiency]
[5] “2015/2016 Sustainability Report”, The Coca-Cola Company. [http://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2016/2015-2016-Sustainability-Update.pdf]. Accessed November 2017
[6] “Wastewater: Safely Returning the Water We Use to Make Our Beverages”, The Coca-Cola Company. [http://www.coca-colacompany.com/stories/treating-and-recycling-wastewater]. Accessed November 2017
[7] “2013/2014 Sustainability Report”, The Coca-Cola Company. [http://assets.coca-colacompany.com/1a/f6/89303ab746bcbf67f9fdc25fd93b/2013-2014-coca-cola-sustainability-report-pdf.pdf]. Accessed November 2017
[8] “2016 Sustainability Report”, The Coca-Cola Company. [http://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2017/2016-sustainability-update/2016-Sustainability-Report-The-Coca-Cola-Company.pdf]. Accessed November 2017
[9] “Collaborating to Replenish the Water We Use”, The Coca-Cola Company, Aug 16, 2017. [http://www.coca-colacompany.com/stories/collaborating-to-replenish-the-water-we-use]
[10] “Mitigating Water Risk For Communities And For Our System”, The Coca-Cola Company. [http://www.coca-colacompany.com/stories/mitigating-water-risk-for-communities-and-for-our-system]. Accessed November 2017
[11] Stecklow, Steve. “How a Global Web of Activists Gives Coke Problems in India”, Wall Street Journal, June 7, 2005. [https://www.wsj.com/articles/SB111809496051452182]
[12] Sanjai, P R, and Archana Chaudhary. “PepsiCo, Coca-Cola Fight Patriotism in Parched Indian State”, Bloomberg, Mar 15, 2017. [www.bloomberg.com/news/articles/2017-03-16/pepsico-coca-cola-fight-patriotism-in-drought-hit-indian-state]
[13] Srivastava, Amit. “Never Mind the Greenwash – Coca Cola Can Never Be ‘Water Neutral’”, Ecologist, Aug 25, 2015. [www.theecologist.org/blogs_and_comments/commentators/2985093/never_mind_the_greenwash_coca_cola_can_never_be_water_neutral.html]
Coke is known for their local production and sourcing of products. They bottle and manufacture much of their products close to where they are sold, this is a huge benefit to many developing economies in terms of job creation and local industry development. As with the incident mentioned in this article in Rajasthan producing locally does pose challenges, especially in water stressed regions. Coke must consider in conjunction with local governments and communities whether the benefits of manufacturing locally and reducing transportation costs, creating jobs etc is worth the use of scare water resources. Alternatively, Coke could use these locations as an opportunity to test new ways to be even more efficient with their water before rolling out to other locations. They could seek to subsidize this with tax breaks etc.
I agree that Coke’s water replenishment goals and measurement systems are flawed. A recent article by Martha Pskowski in Truthout discusses Coca-Cola’s links to water shortage issues in Mexico. with the support of other sources, the article claims that Coke-affiliated bottling plants are to at least partly to blame for public-use wells that are drying up across southern Mexico. Climate change is only making matters worse as the areas rainy season is growing more inconsistent over time. In addition, the earthquake on September 7 disrupted water infrastructure, making the scare resource more difficult to access.
Coca-Cola’s water harvesting and reforestation projects elsewhere in Mexico and Central America have not addressed the shortage issues in the southern Mexican state of Chiapas. It appears that Coke has not come to the aid of community residents by assisting in the construction of new/deeper wells. Does Coke stand to sell more product in this community against the backdrop of the increasing cost of water? I have no evidence of this type of exploitation but one does wonder.
I think that this essay exemplifies another example of a big corporation trying to be “sustainable” because they’re supposed to rather than because they truly believe in a more sustainable world.
If Coca-Cola wants to have a positive (or at least neutral) impact in the world for the generations to come, it should define a clear sustainability strategy and align each company action all over the world to this strategy. In those regions were government regulations fall short compared to the company’s sustainability strategy, Coca-Cola should enforce its own regulation and partner with governments and local suppliers to help them improve their natural resources management.
Consumers are more conscious than before of companies that claim to be sustainable but they actually aren’t and social media is a perfect platforms to share company’s behaviors all over the world. Coca-Cola should stop talking the talk and start walking the walk. Otherwise, consumers will find out the misalignment, which could have disastrous reputation impacts for the brand.
Reading through this made me reflect on Coca-Cola’s various concerns and motivations. While their motivations seem to be primarily driven by the need to maintain a resource for its supply chain inputs (e.g., to maintain commercial sustainability), I do believe that the outcomes of their actions are resulting in a greater good for the world. Although the efforts seem to still be under development, with figuring out a way to create socially responsible water in a method that is good for the community as well, in the long run, this is an issue that human kind will need to solve, and it is refreshing to see corporate capital being put towards it.
In the meantime, however, I do think that it has an obligation to close its operations to preserve the water rights of the local community. This creates a time pressure for them to find a solution, creating a stronger motivation than there might be otherwise. I hope to see Coca-Cola succeed in finding a win-win solution that is good for both the company as well as the community, as this could have a huge impact on the world.
Roger and Isabelle have questioned Coca Cola’s intentions and motivations around its water sustainability initiative. Does it matter? Regardless of Coke’s intentions – out of obligation, because they genuinely care, or because it saves them money (probably all three) – the result in the majority of the plants where they implemented these initiatives is the same: Less water wasted from a more sustainable use of water in production. I fail to see why their intentions matter.
Great piece on Coke and vibrant comments about The Company’s motivations! Thanks for sharing. This question around intention reminds me of similar discussions our section has had during cases about companies/protagonists that take on a social impact initiative (Shakti, Patrimonio Hoy, Dove, Kurt Summers, etc). What strikes me is the vigor with which we question social impact intentions and motivations in contrast to the relative lack of scrutiny we employ when looking at companies that seek value maximization, market share maximization, profit maximization (Longchamp, Aqualisa, Dollar General, etc, etc). A hyperbolic example of this phenomenon might be: If we thought a company like Coke wanted to “really make a difference” wouldn’t they stop making Coke all together since it’s terrible for you and wastes water and instead start solving for cheap, accessible desalination technology, then give the technology away for free to the world?
I don’t know why we do this or what the right answer is, but it has me thinking.
I appreciate that when mitigating risk Coke has been working with the local governments to create contingency plans for their factories. We’ve seen one-to-many cases wherein the company says they do have some “audit committee”, but due to conflicting interests of the intermediaries or asymmetrical power dynamics issues slip through the cracks. Having the governments who should represent the goodwill of their citizens and their lands that has a strong authority in Coke’s ongoing operation is a good party to include in future conversations.
While I do question Coke’s past and their motives, it is undeniable that this work they are committing themselves to replenish and reduce water wastage is a overall positive impact. But now I’m wondering, if they reduced the liter amount per bottle from 2.7 to 1.96, what exactly it is it that I’ve been drinking?? Perhaps ignorance is bliss, but ideally they have not sacrificed on product quality and these new replacement substances do not have any long-term side-effects.
While I feel that Coca Cola’s social projects focused on water sustainability are admirable, I feel like they are reactionary solutions to a much larger problem. As an iconic historical American brand, I think Coke is perfectly position to take a note from the Cynthia Carroll playbook and change the beverage industry to be socially motivated. Their position as a global, well regarded, trusted, profitable brand empowers them to be an example and that requires exemplary behavior. Regardless of their efficiency, Coke has to use billions of gallons of water each year and for that I believe they should work more closely with issues of water and drought all over the world. I would push Coke to think about the underlying reasons why India is without water and focus on fixing that. For example they could be financing environmental studies, building dams, monitoring the impacts of climate change on these regions and addressing water sanitation not by cleaning the water, but fixing infrastructure that allows the water source to be dirtied in the first place.
This is a fantastic article and an excellent example of a company launching a sustainability initiative that looks great on paper but actually has many unintended consequences for local populations. Since Coke’s model is largely predicated on local production, it will be very difficult to shut down local operations at this point. They must also weight the negative consequences of their water sustainability program with the negative economic consequences of shutting down local production, which may be far greater. As a result, they should not shut down local production, but rather focus on reducing negative consequences, especially now that they have been identified.
Great article. I agree with TOM that Coke must address both sustainability and employment/economic implications in considering whether or not to shut down local production – Coke’s factories have multi-faceted implications and sustainability must not be considered in a vacuum. As I think about our TOM takeaways, my mind goes to utilization. Coke is not utilizing their raw materials efficiently. I have no problem with their sustainability campaign, but I find fault with their lack of self awareness and self improvement. The campaign allows them to clean up after the fact, rather than solve the root cause of their inefficiencies. Can they achieve a 0% waste, 1:1 ratio of water to product? If not, can they be completely transparent about why the ratio cannot be 1:1?
Very interesting article on how the environment-focused strategy roll-out of a “socially responsible corporate” could potentially be resulting in a net negative impact for the communities around it. To your question on what Coke should do regarding operational facilities in water-stressed areas, I believe there are two core issues that coke needs to think about:
1) In every water-stressed area, look into what the core sources of water usage are and potentially what are they going to be replacing, when they decide to open a plant – is it agriculture, other industries, or simply the water for basic use of the community? That may govern the level of damage they cause.
2) For the water that they use, Coke needs to ensure that there is no contamination that occurs due to the wasteful materials that are released into the water-streams. This was one of the major reasons for the issues they faced in India.
An estimation of value creation should not just be measured in terms of the profits and employment created in a country by a corporation but they need to employ more progressive approaches such as “True Value” generation, which also takes into account the externalities that are caused by corporations on the environment and local communities.
Great read! This is an ethical dilemma facing many corporates today. How do you think about the trade-off between business sustainability and social responsibility? Climate change has exacerbated this tension further. I believe the role of regulators become more eminent in such cases. It important to have a government or independent body which can hold multinational companies accountable for their sustainability claims. It is equally important for Coke to manage any reputational risk arising from their operations in water stressed communities.