Coca-Cola’s Path to Sustainability
“Increased droughts, more unpredictable variability, 100-year floods every two years…When we look at our most essential ingredients, we see those events as threats.” [1]
Jeffrey Seabright, Vice President for Environment and Water Resources, The Coca-Cola Company
With an iconic brand and impressive portfolio of over 500 beverage brands, The Coca-Cola Company is the largest beverage company in the world. Aside from its flagship product, Coca-Cola, the Company also houses common household beverage brand names such as Sprite, Fanta, vitaminwater, Honest Tea and Simply Orange. More than 1.9 billion servings of Coca-Cola beverages are enjoyed by consumers in more than 200 countries around the world each day [2].
Climate change poses several risks to Coca-Cola’s manufacturing process and operating model. These include:
- The increasing scarcity of water, the main ingredient in substantially all of Coca-Cola’s products
- Disruptions in the supply of key agricultural commodities integral to the production process (e.g. corn, sugarcane, sugar) caused by shifting weather patterns and decreased land productivity
- Carbon footprint and other environmental impact of Coca-Cola’s manufacturing and transportation operations
- Impact of climate change on the resilience in communities where water availability and food security are critical to the prosperity of Coca-Cola’s customers [3].
These risks present long-term implications that may impact the Company’s manufacturing processes, disrupt their supply chain, alter end-consumer demand, and adversely affect Coca-Cola’s bottom line.
An Enthused Response in Water and Energy Efficiency
Over the years, Coca-Cola has undertaken several efforts to address the increasing threat of climate change, primarily in the areas of water conservation and energy efficiency.
Through a series of robust water stewardship and management programs to-date, Coca-Cola has invested $2 billion to reduce water use and improve water quality in the communities in which it operates [4]. Earlier this year, the Company announced that through close collaboration with local and global partners, they have met their goal of replenishing the equivalent amount of water used in their global sales volume back to nature and communities, equating to 191.9 billion liters of water through 248 community water projects in 71 countries [5].
These efforts in water management were supplemented by efforts to increase energy efficiency in three principal activities of the Coca-Cola business system: manufacturing plants, distribution fleet, and cold drink equipment. In its manufacturing plants, the Company is systematically evaluating the type of energy consumed in its manufacturing processes, and investing in efficient lighting, compressor optimization, heat recovery and renewable energy. While the total amount of energy consumed by manufacturing sites has grown, the Company’s energy efficiency ratio (the amount of megajoules used per liter of product) has improved over time. This improvement resulted in over $600 million cumulative savings in energy costs since 2004. The Company has made similar investments in its fleet composition (shifting to a fleet of hybrid delivery trucks that are significant more energy efficient than traditional trucks) and innovations in refrigeration technology (phasing out HFC use in refrigeration and insulation) as well [6].
Looking Forward
In September 2016, the Company announced that it has reduced water use by 2.1 billion liters in the past two years and reduced its carbon footprint by 1.07 million metric tons. It simultaneously announced a commitment to using 40% clean energy and recovering for recycling 40% of its packaging introduced to markets by 2020. Other environmental targets include: sourcing 20% of the total plastic PET it uses from recycled or renewable PET, reducing packing by 25% per liter of product produced, and certifying over 95% of its key agricultural ingredients against its Sustainable Agricultural Guiding Principles [7].
Despite these advancements, much work is left to be done. Coca-Cola remains at risk to the agricultural impact of climate change. While we know that scientists at Coca-Cola are hard at work searching for a substitute for sugar in their concentrate formulas, the Company at this current point in time is far from insulated from agricultural risks. Much is left to be done, but Coca-Cola is well on its way to a more sustainable future.
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[1] The New York Times. Industry Awakens to Threat of Climate Change. [ONLINE] Available at: http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html?_r=0. [Accessed 04 November 2016].
[2] The Coca-Cola Company. 2016. Coca-Cola At A Glance: Video and Infographic: The Coca-Cola Company. [ONLINE] Available at: http://www.coca-colacompany.com/our-company/infographic-coca-cola-at-a-glance. [Accessed 04 November 2016].
[3] The Coca-Cola Company. December 31, 2015 Form 10-K (filed February 25, 2016). [Accessed 04 November 2016].
[4] Harvard Business Review. 2016. The Comprehensive Business Case for Sustainability. [ONLINE] Available at: https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability. [Accessed 04 November 2016].
[5] Washington Post. 2016. Coca-Cola just achieved a major environmental goal for its water use – The Washington Post. [ONLINE] Available at: https://www.washingtonpost.com/news/energy-environment/wp/2016/08/30/coca-cola-just-achieved-a-major-environmental-goal-for-its-water-use/. [Accessed 04 November 2016].
[6] The Coca-Cola Company. 2016. Position Statement on Climate Protection: The Coca-Cola Company. [ONLINE] Available at: http://www.coca-colacompany.com/stories/position-statement-on-climate-protection. [Accessed 04 November 2016].
[7] Environmental Leader. Coca-Cola HBC Targets 40% Packaging Recovery, 40% Clean Energy by 2020. 2016. [ONLINE] Available at: http://www.environmentalleader.com/2016/09/30/coca-cola-hbc-targets-40-packaging-recovery-40-clean-energy-by-2020/#ixzz4P1DcQrct. [Accessed 04 November 2016].
Thanks for this post – very interesting! It’s helpful and effective to see the many ways in which climate change affects Coca-Cola’s operating model. I’m eager to see the distribution of the company’s efforts across geographies. Are they doing better in some locations over others? Is that intentional? Are they prioritizing in the best way? Based on your post, as well as Sayan’s specifically on India (https://d3.harvard.edu/platform-rctom/submission/coca-cola-in-india/), it seems like Coca-Cola could be focusing on India and other developing countries. Prioritizing countries most prone to the impacts of climate change seems to be a win-win for both the company and for the people who live there.
Thank Joy! This was very insightful for me, for two main reasons:
First, it never crossed my mind that Coca Cola (or any other soft drink manufacturer), is in danger due to climate changes.
Second, I think this is one of the best examples to the irony of today’s modern world: luxury vs. sustainability – Coca Cola is the symbol of western life, and it is trying to minimize the damage it causes in order to survive.
The efforts Coca Cola does seem very substantial – decreasing water use by 2 billion liters within two years and commitment of 40% clean energy is not granted. However, I wonder how further can Coca Cola go? Water is their main ingredient and highly maintained factories are in the essence of their production process. Coca Cola needs to be very very creative in order to isolate itself from agriculture risks, giving the fact it is a root cause of some of them.
Joy – thanks for the fun post about Coca Cola. I find it pretty amazing that Coca Cola was able to return back more water than it used in 2015. I find it pretty ironic that companies hadn’t considered doing this earlier, since it obviously seems like a possible feat if carefully implemented. I’m assuming that this is something they are carrying out company-wide and globally, but I’d be interested to know if they are focusing more on some regions than others? Are there regions that are having trouble implementing the sustainability measures?
Thank you for this interesting article. I had no idea Coca Cola had introduced these initiatives and it sounds like they have had substantial wins thus far. I would be interested to know how the Company is handling the fluctuations in pricing and supply of its commodity ingredients. Echoing our discussion of IKEA, are there ways that the Company can control more of the raw material procurement process to minimize some of the risks?