Coca Cola thirst for thriving!!
Promoting sustainability throughout the supply chain begins with going straight to the source to assess environmental and social impacts. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates companies like Coca Cola will be more and more affected by the problem.
The scientific consensus on climate is unequivocal, climate change is real and is mainly fueled by human activity, especially through man-made greenhouse gas emissions. The implications of climate change for businesses and companies are huge and diverse, with strong impacts on supplier viability, natural resources shortages, government regulation and other important factors. Among all of them, the impact on natural resources is the most dangerous one and, among all of them, the most relevant to human life is water. Since the 1970´s droughts have become larger and more extreme worldwide and they are expected to keep getting more severe. Global warming affects evapotranspiration which then leads to increased drought in dry areas and an expansion of dry areas. As reference, scientists expect the amount of land affected by drought to grow by mid-century and water resources in affected areas to decline as much as 30%. [1]
Water is a limited resource in many parts of the world. As the demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates businesses will be more and more affected by this problem. The World Wildlife Fund has identified that agriculture uses over two thirds of the world`s fresh water. Among the company`s most affected by this issue, Coca Cola Company stands out as a big one. Global droughts have increasingly dried up the water needed to produce its soda in the last decade with lasting implications in the company`s balance sheet. In addition, according to Jeffrey Seabright, Coke’s vice president for environment and water resources, increased droughts, more unpredictable variability and increased floods have also disrupted the company`s supply of sugar cane, sugar beets and citrus for its products. [2]
Coca Cola`s largest product component is water. Sugar, sweeteners and juice concentrates depend very much on water availability and quality. As a reference, approximately half of what Coca Cola spend on inputs for its products and packaging is in agricultural spending. Sufficient amount of good quality fresh water is also required across the entire supply chain. Around half of the water Coca Cola uses goes to its beverages but the other half is used in its manufacturing process (some in cleaning and some in other processes). In total, eighty percent of Coca Cola`s value chain water footprint is associated with the farming, processing and production of sugar. [3] Hence, access to high quality water from sustainable sources is core to the long term viability of the product and the company. Insufficiency in the amount of water used could indirectly negatively affect not only the product but also the business as a whole as it impacts profit negatively through higher costs, a broken supply chain and financial instability. In summary, water is simply critical to Coca Cola Company and its shortage or lower quality have negatively impacted its operations in recent years.
In response to this issue Coca Cola has acknowledged the problem and implemented policies to mitigate the effects on its operations, mainly through water conservation measures. [4] The company is doing this as part of a bigger effort and integrated approach to sustainability, The Climate Protection Strategy, in which climate change protection plays a key role in the whole strategy of the business. Coca Cola`s water strategy consists on 4 big guidelines or objectives, i) replenishing the water they use, ii) improving water efficiency, iii) mitigating water risk and iv) treating and recycling water. [5] Coca Cola is continually working to ensure the best possible practices for water extraction and has made strong commitments to reduce, reuse, recycle and replenish the water it uses. In addition, the company is working a) towards the goal of making sure 100% of its wastewater is treated, b) to protect the local watersheds in which it operates and c) to promote awareness of water issues in the communities in which it participates. Such communities include its suppliers, Coca Cola´s most important partners. Coca Cola sets minimum standards which suppliers must meet in order to gain authorization. The company also expects its suppliers to gain special certifications and comply with the company´s requirements. [6]
Promoting sustainability throughout the supply chain begins with going straight to the source to assess environmental and social impacts. Coca Cola has successfully identified the source of its water problems and is addressing its effects through an integrated sustainable approach. Going forward, the company can also work on identifying additional potential steps it could take to solve some of these issues, such as addressing new regulations.
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[1] Karl, T.R., J.M. Melillo, and T.C. Peterson, eds. 2009. Global climate change impacts in the United States. Cambridge University Press.
[2] Coral Davenport. The New York Times. January 23, 2014. http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html?_r=3
[3] Climate Change 2015 Information Report. The Coca Cola Company. http://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2016/2015-CDP-Final.pdf
[4] Water Footprint Network. http://waterfootprint.org/en/about-us/news/news/coke-nike-call-climate-change-commercial-threat/
[5] Coca Cola`s Climate Protection and Sustainability Report. http://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2015/09/2014-2015-sustainability-report.pdf
[6] Coca Cola Sustainable Agriculture. http://www.coca-colacompany.com/stories/sustainable-agriculture
Interesting read! I think it’s great that coca cola is actively implementing policies to reduce water waste and reuse, recycle and replenish the water it uses. Do you think they can play a larger role in consumer education and advocacy? One of the biggest issues in the developed world is that consumers haven’t yet experienced water shortages (other than California in recent years). Even if consumers have to pay for water, the cost is relatively low which naturally leads to water being wasted. As a large organization, coca cola has the ability to impact consumer perceptions and I think an educational advertising program would really help increase awareness of this issue. Why not create an advertising campaign on Water Conservation that highlights the many ways people can contribute to the solution?
Very interesting article!
Great post! I agree that Coca Cola is doing a good job getting ahead of the issues to come and partnering with the right groups to mitigate potential operational issues. I think there is a branding opportunity here for Coca Cola that I would like to seem them undertake: with consumer trends focusing on the detriments of sugar which is creating a lot of negative press for Coca Cola, there is an opportunity to make Coca Cola stand for a positive message again by promoting its investment in mitigating climate change. This would also help increase awareness of the issues at hand!