Case study Coca-Cola & Pepsi Harm India's Ecology

Abstract: The case discusses the controversy surrounding the Indian subsidiaries of multinational cola majors Coca-Cola and Pepsi in 2002-03. The two companies had caused severe ecological damage in the state of Himachal Pradesh by painting their advertisements on rocks. The case describes the ecological importance of these rocks and the nature and extent of environmental damage caused by the companies. Besides giving a detailed account of the legal proceedings initiated against them, the case also discusses the efforts taken by the companies to repair the damage. The case also gives information on the various other controversial activities of Coca-Cola and Pepsi in India. Issues: » Rationale behind seasoned companies exploiting natural resources for commercial gains from the business ethics perspective "What Coke and Pepsi need to realize is that passing the buck is not the solution. The fact remains that their dealers and franchisees have defaced the mountains and caused irreparable damage to the ecosystem." - "Make Coke and Pepsi Pay for this," www.indianexpress.com, August 14, 2002. "The fine imposed by the Supreme Court on Coke, Pepsi and others is a warning for other violators who think that in India you can completely disregard the principles of corporate governance and get away with it." - "Coke, Pepsi Fined for Defacing Himalayan Rocks," www.newsindia-times.com, October 04, 2002 A Novel Controversy! On August 10, 2002, Coca-Cola India (Coke) and Pepsi Foods Limited (Pepsi), the Indian subsidiaries of multinational cola majors Coca-Cola and PepsiCo, found themselves under attack. In an article published by leading Indian newspaper, Indian Express (titled 'Rape of the Rock'), the two companies were accused of destroying the ecological balance of the Himalayan state of Himachal Pradesh (HP).

Kripal pointed out the incident while hearing a public interest litigation regarding the conservation of forests in the country." Worldwide. The Supreme Court (SC) expressed concern over such acts by companies and said that they .N. said.' One such protestor. refused to acknowledge responsibility for the damage done. Coke and Pepsi had shown a gross negligence of their duties as socially responsible corporate citizens. K. geologically valuable rocks this way cannot be allowed. Professor Ashok Sahni (Sahni) of Punjab University said. they tried to pass the buck to their local partners (distributors. Manohar. however. advertisers etc. Many environmentalists referred to this act as 'commercial vandalism. Instead. in reality it was virtually impossible. While many other companies were also found to have damaged the rocks in this way." Environmentalists argued that the damage done by the companies to the fragile ecosystem was irreparable. companies following good corporate governance policies do not exploit natural formations for commercial purposes. While Pepsi stated that it had little operational control over the affected Manali-Rohtang region.Coke and Pepsi had allegedly defaced rocks that were over 45 million years old along the Manali-Rohtang road in the state.). "This is not a free-for-all. As media coverage of this issue intensified. Both the companies. thus harming the ecosystem and disfiguring the beauty of the mountainous region (Refer Exhibit I for pictures of the painted rocks). Coke and Pepsi began fearing the damage the controversy could cause to their image and popularity. These companies had painted their advertisements on the rocks. and painting old. P. Commenting on this. Damaging the Environment The matter attracted the attention of the judiciary when a three judge bench headed by the Chief Justice of India B. "It becomes a very expensive proposition trying to wash off the paint with gallons and gallons of thinner and then too completely cleaning it and restoring the original surface is impossible. Analysts said that by harming the ecology of the Manali-Rohtang road area. Coke and Pepsi were the most high profile organizations involved in this activity as a result they attracted the maximum criticism. This news report (and many other related reports that followed) generated wide-spread outrage against the companies and their illegal use of governmentland for advertising products. They pointed out that though the damage might seem to be repairable on paper. Coke argued that it was an 'extremely environment conscious' company and that the incident was a local mistake. a Supreme Court (SC) advocate and member of the Legal Action for Wildlife and Environment (LAWE).

Three days after the first news report was published. Salve filed a case against the companies for commercial vandalism. the court issued notices to the cola companies. advertisements have been plastered on the entire mountainside. .. Therefore.. charging them of violating the Forest Conservation Act 1980. Salve. to whom the land belonged.they only had to invest in the paint and labor. it asked the companies to explain why they painted the rocks. The Legal Tangle .ft. upon the court's direction.ft.. with many smaller ones (painted by other companies) in clusters along the road and the river bed. A detailed report on the damage done by the companies (submitted by Salve) stated that "from the village Kothi to Rallah waterfalls to Beas Kund. Disturbed over the damage done to rocks in forests.Proceedings & Arguments Over the decades. many people suddenly found that they had something to say about the issue.. The advertisements ranged in size from 10 square feet (sq. approached the National Environment Engineering Research Institute (NEERI) to inspect the entire Rohtang-Manali road for advertisements painted on the rocks. each. The SC stated that the painting of the rocks was a non-forest activity and could not be carried out without the prior permission of the concerned authorities. Most of the Coke and Pepsi advertisements were between 10 to 20 sq.should be "made to pay" for the damage they did to the ecology in order to promote their business.) to about 100 sq. After this.ft. Once the controversy erupted." Environmentalists pointed out that these mountainous facades were home to huge ecosystems that had developed over millions of years. Since they did not seek permission from the government. A person named Harish Salve was appointed amicus curiae (friend of the court) by the SC to investigate the matter and take the necessary legal action. Justice Kripal said that it would be proper to take up the matter in court. Analysts felt that companies opted for this mode of advertisement since it was very cost-effective . many companies in India had painted their advertisements on rocks but nobody seemed to have been bothered by this practice till the Indian Express reported the damage to the ecosystem. a stretch of about 56 kilometers. they did not have to make any payment in this regard.

Jawaharlal Nehru University. This case was regarded by many corporates.. for it really sets the rigor India needs in dealing with environmental issues. Applauding the court's decision. and perhaps ought to have been taken long back.. In supporting the protection of nature in its original form. I have seen this across the country. New Delhi. Such defacing of rocks is not something restricted to the Himalayas in India. Professor C K Varshney. said. .Implications for the Companies Analysts felt that the court's ruling sent a clear and firm message to corporates who had been abusing natural creations for commercial purposes. the courts have set a great precedent". in whatever way possible. "This is really a decision in the right direction.the court took a little more than a month to convict those who were found guilty and order restoration work (Refer Exhibit IV for a timeline of the case). lawyers and environmentalists as one of the fastest to be resolved . School of Environmental Sciences.

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