PGDM – 2012-14

Ethical dilemma faced by

Submitted to: Prof. J Mohanty

Submitted by:

Udit Mittal-2012344
The Coca-Cola Company is one of the most well known companies in the world. and quite
possible the world since its origination in the late 1800’s. Coca-Cola’s rapid expansion and
innovation have provided ample evidence that the company is here to stay. However, after
the death of the companies CEO, Robert Goizueta, the company has faced multiple ethical
dilemmas. These problems have had a direct negative impact on Coca-Cola’s financial
expansion, corporate culture, business relations, as well as their shareholder. Through
thorough examination of past ethical dilemmas, grievance resolution, and utilizing third
party consulting, Coca-Cola is on route to regain trust from consumer and business
partners.

Ethical issues concerning Coca-Cola in India

Situation Analysis:
In 2003, the community near the Coca-Cola bottling plant in Kerala, India protested against
the water scarcity and polluted water that resulted from its bottling operations. The
allegations caused the closure of the bottling plant. Coca-Cola was banned in the state for
these unethical business practices. Soon after the incident, the Center for Science and
Environment (CSE), a Delhi-based environmental NGO, released a report indicating the
presence of pesticides, greatly exceeding European standards, in a dozen popular
beverages sold under the brand names of the Coca-Cola Company and PepsiCo. This report
raised serious protests all over India on the soft drink industries, especially Coca-Cola and
PepsiCo. Together, the companies have 90% of the India's soft drink market.
In response to the allegations, Coca-Cola denies them by saying their products are safe and
questions the lab reports presented by CSE. The University of Michigan placed the Coca-
Cola Company on probation in 2006, and asked for an independent assessment of its
operations in India. The soft drinks were examined by an independent lab, The Energy and
Resources Institute (TERI). According to the reports the soft drinks were declared safe and
pesticide free. However, the CSE claimed that only the water was tested and not the other
ingredients; ingredients such as artificial flavors and sugar. After the reports from TERI

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were published the government declared soft drinks as safe. However, the problems with
some bottling plants still remain, due to the depleting levels of ground water, day by day.

Critical Issues/Problems:
Solid waste and water issue: The communities near the bottling plant in India complained
about the passage of sludge as fertilizer, causing health and environmental damage. The
most important issue concerning these communities is the depletion of water levels caused
by the Coca-Cola bottling operations which have drastically reduced availability of water
for irrigation purposes.
Pesticides in soft drinks: The other issue concerning human health caused by Coca-Cola is
that their bottled water and soft drinks contain pesticides which were tested by the
reputed NGO, CSE.
Dual product standards: Coca-Cola is accused of having dual standards in terms of their
products and safety measures concerning human health with respect to USA, Europe and
India.
Community issue: These allegations affected Coca-Cola largely with its sales and also caused
the closure of one of their bottling plants in Kerala, India. Additionally, Coca-Cola’s
products are banned in the state of Kerala, India.

Action Taken:
Coca-Cola Company, India thought seriously about its corporate responsibility and
witnessing huge sales losses. In order to gain trust among the local communities near the
bottling plant, they improved their business practices and reduced the water usage by
34%. Through the practice of rainwater harvesting, Coca-Cola returned substantial water
to the aquifers. They have stopped distributing sludge as Biosolids(fertilizers) to farmers
for agriculture use, and have taken initiatives with the Indian government to encourage the
development of additional solid waste disposal sites. The water used for making soft drinks
is treated with activated carbon filtration and run through a purification process to ensure
that the water is free of pesticide residue. The ingredients are also closely monitored and
undergo various quality checks. According to the company’s factsheet, they strictly follow
the product standards which are the same all over the world.
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Coca-Cola has also partnered with the NGO’s and the government to provide medical access
to poor people through regular health camps. In addition to their outreach efforts, the
company committed itself to environment responsibility through its business operations.
For example by following the practices of conserving energy and by adhering to the ban on
purchasing CFCs, Coca-Cola exhibited greater corporate responsibility.
The allegations in other ways helped Coca-Cola Company, India to show their corporate
social responsibility and to maintain good product quality standards. The initiatives all
over India helped them reach villages for a good cause and also indirectly marketed their
products with establishing a trust among the public. After all these allegations, the CSE is
still not convinced of the quality of the product. Therefore, Coca-Cola must prove that they
have upgraded their lab with sophisticated instrument which is capable of measuring
pesticide residue in soft drinks. As per the recent reports by CSE, they claim that the
pesticide residue has gone up 27 times higher than expected level by the Bureau of Indian
Standards (BIS) (in 2006).

It is said that :

“Those who don't learn from the mistakes of the past are destined to repeat them.”

Kala Dera - Thirsting from Coca-Cola

Kala Dera is a large village outside the city of Jaipur where agriculture is the primary
source of livelihood. Coca-Cola started its bottling operations in Kala Dera in 2000, and
within a year, the community started to notice a rapid decline in groundwater levels.

For farmers, loss of groundwater translated directly into loss of income. For women, it
meant having to walk an additional 5 to 6 kilometers just to fetch water to meet the basic
daily needs of the family. For many children in Kala Dera, it meant leaving schools to
provide a much needed helping hand doing household chores since the women had
additional burdens.

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The community in Kala Dera organized itself to challenge the Coca-Cola Company for the
worsening water conditions - through extraction and pollution - and demanded the closure
of the Coca-Cola bottling plant.

The company, in usual fashion, denied any wrongdoing, blaming "outsiders" for the
increasing local community opposition.

Forced Assessment Validates Community Concerns

The community of Kala Dera, as well as the villages of Plachimada and Mehdiganj in India
that are opposing Coca-Cola bottling plants, have enjoyed significant international support.
And most notable in lending support have been college and university students across the
globe, and in particular, the US, UK and Canada - some of Coca-Cola's larger markets.

The Energy and Resources Institute (TERI) only looked at six bottling plants in India and
was released in January 2008.

Validating the concerns of the communities campaigning against Coca-Cola, the assessment
noted that Coca-Cola approached its operations in India from a "business continuity"
perspective that ignored the impacts on the community.

Stop Using Groundwater in Kala Dera

Some of the most disturbing findings in the assessment concerned Coca-Cola's bottling
plant in Kala Dera.

Confirming that Coca-Cola's bottling plant in Kala Dera operated in an "overexploited"

groundwater area and the Coca-Cola's bottling plant had "significant impacts", the
assessment noted that "the plant's operations in this area would continue to be one of the
contributors to a worsening water situation and a source of stress to the communities
around."

According to me these are four recommendations with regard to the Coca-Cola bottling
plant in Kala Dera, making it clear that Coca-Cola could no longer utilize the overexploited
groundwater resource in Kala Dera:
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 1. Transport water from the nearest aquifer that may not be stressed
2. Store water from low-stress seasons
3. Relocate the plant to a water-surplus area
4. Shut down this facility

Unfortunately, they still wait for Coca-Cola to make good on the recommendations made by
the assessment that Coca-Cola itself paid for.

Coca-Cola's Response - Unethical and Dishonest

Coca-Cola has had seven months to respond to the findings on Kala Dera. We have not seen
much action on the part of Coca-Cola that address the concerns raised in the assessment. In
fact, what we have seen much of, is an unethical and dishonest campaign by the Coca-Cola
company in an attempt to misrepresent the issues.

Continued Misery in the Face of Certainty

Kala Dera lies in an overexploited groundwater area and access to water has been difficult.
Summers are particularly intense in the area, and summers are when water shortages are
most acute.

Ironically, summer months are also when Coca-Cola reaches its peak production, and it is in
the summer months that the Coca-Cola bottling plant in Kala Dera extracts the most water,
making already existing water shortages even worse.

At the very least, the Coca-Cola company could have stopped extraction of water this
summer, knowing very well the conclusions of the assessment.

With facts in hand, the Coca-Cola company has chosen to continue its operations,
knowingly contributing to the misery of thousands of people.

On the one hand, Coca-Cola talks a good talk about being a good corporate citizen.

Yet, it continues to deplete groundwater causing undue hardships to the community even
after it has been told to stop doing so, that too by a study funded by the company itself.

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