Business Ethics, Governance & Social Responsibility

CASE STUDY ANAYSIS-3

THE CRISIS OF WATER

Submitted by: -

GROUP – 06: Section ‘A’

Simin Niaz M - 21050
Sinchana M - 21051
Sumanth H S - 21052
Supreetha - 21053
Sushma C - 21055
T Jeyashri – 21056
Varsha Patil – 21057
Varsha U S – 21058
Vijeta Kerwani – 21059
Vivek Vittal – 21060

Date of Submission: 25-11-2021

Submitted to: -
Dr. Nilanjan Sengupta
Professor – Human Resources, SDMIMD
Q1. Who are the main stakeholders of beverage companies such as Coco-Cola and Nestle in
this case? How could one prioritise their stakes and how legitimate are the different stakes?

This case discusses about how ‘Water’ now an increasingly scarce and contested resource has
become an ethical issue for business. Considering the concepts of demand and supply, the
business is deeply involved either as a supplier of safe drinking water and sanitation or as a
major user of the same as a raw material or as a product to sell. Here the Coco-Cola and
Nestle companies are in the demand side of the water business. It mainly emphasises how the
beverage companies use the water available per individual across the globe and scarcity of
water.

What is Beverage Industry?

The beverage industry (also known as the drink industry) manufactures drinks and ready to
drink products. Examples are bottled water, soft drinks, energy drinks, milk products, coffee
and tea-based products, nutritional drinks, and alcohol products.

The beverage industry is traditionally a market with specific high demands with regards to
hygiene and its related technologies. In these Industry we mainly encounter with 2 major
categories they are,

 Alcoholic Beverage Industry

 Non-Alcoholic Beverage Industry

Coca-Cola: Coca-Cola partners with hundreds of stakeholders across the country, at both a
local and global level, and across many different functions. Company stakeholders include
bottling partners, suppliers, consumers, customers, industry partners, governments and
NGOs.

Nestle: The global stakeholder network consists of the people who operations impact and
those who influence our activities. We identify the following groups as fundamental to our
continuing business success Academia, Communities, Consumers and the general public,
Civil Society Organizations (CSO), Customers, Employees and their representatives,
Governments, Industry and trade associations, Intergovernmental organizations, Non-
governmental organizations (NGOs), Reporting agencies, Shareholders and the financial
community and Suppliers (including farmers and smallholders).
In order to understand the stakeholder management approach, we need to first understand
what we mean by stakeholders and who the stakeholders are.

The major stakeholders for the above-mentioned companies are:

 Customers
 Suppliers
 Employees
 Investors
 Government
 NGO’s

Beverage firms have well-defined stakeholders without whom they would not exist. Their
major stakeholders are their customers, to whom they sell their products, their suppliers, from
whom they obtain raw materials and services, their staff, who work to put the final products
together, and the investors and bottlers who put in resources. The poor are the most impacted
stakeholders because they cannot afford to buy expensive clean bottled water and are
compelled to seek alternative water sources, such as the Lake in India, which triggered a
disease outbreak that killed 300 people.

Their partners, the government, non-governmental organisations, and civil society are also
stakeholders. While all stakeholder interests are vital and genuine, some may be prioritized. It
is, nevertheless, critical to grasp that the stakes of all stakeholders and they should not be
overlooked.

After analyzing the case and the stakeholders involved, we can classify the stakeholders
based on their potential threat or potential cooperation to the organizations as given below:
 Stakeholder’s potential for threat to organization

High Low

Type 4: Mixed Blessing Type 1: Supportive

High Strategy: Collaborate Strategy: Involve

Stakeholder's
potential for Government Employees
cooperation with
organization Tpye3: Non-supportive Type 2: Marginal

Strategy: Defend Strategy: Monitor

Low

Customers, local
Suppliers
community, and NGO’s

 Type 1: Supportive
These stakeholders have low potential threat to the organization and have high
potential cooperation with the organization. In the above case, the employees of
Coco-Cola and Nestle comes under this category. The strategy to deal with this type
of stakeholders is to involve them.

 Type 2: Marginal
These stakeholders have low potential threat to the organization and also have low
potential cooperation with the organization. Here the suppliers come under this
category. The strategy to deal with these stakeholders are to enter into good faith
negotiations for contentious and difficult problems.

Type 3: Non-Supportive
These stakeholders have high potential threat to the organization and low potential
cooperation with the organization. The stakeholders in the category involves
 customers, community and NGO’s. These stakeholders are one of the major threats to
the beverage companies. As we see in the case, the NGO’s and the community made a
billion dollar company ‘Coco-Cola’ to shut its operations in Kerala because the
company was utilizing more ground water resulting in depletion of ground water level
in the surrounding areas and also severely affecting the agricultural output. The main
strategy that can be adopted is to defend.

 Type 4: Mixed Blessing

These stakeholders have high potential threat to the organization and high potential
cooperation with the organization. Here the government comes under this category.
Even these stakeholders are a major threat as we seen the case where many municipal
cooperation’s of Canada limited the sale of bottled water which severely affected
Nestle Company. They can also be cooperative as we see many instances in the case
where the government have given support and permission for privatization of water
supply. Hence they are a mixed blessing.

Conclusion:

From this case analysis we understand that:

Relationship-building can help to prioritize the society's interests: Trust, mutual regard, and
understanding are intangibles that build and change through time as a result of individual and
communal experiences and interactions. As a result, we must begin engaging with
stakeholders as soon as feasible.

Information Exchange: Continue to provide facts to stakeholders in the decision-making

process in a meaningful and accessible manner.

Consultation with Stakeholders: Make a plan for each consultation process with
stakeholders.

Partnerships and Negotiation: Enter into good faith negotiations for contentious and
difficult problems.

Question 2: Discuss the potential and the limits of what corporations can achieve in business
of water.
Answer:

Water is one of the most valuable resource and that as we know will always remain the same.
As a known fact only 1% of world water is available to drink, hence it is really important that
is available is put to use in a smart and sustainable way. Today, 844 million people lack
immediate access to safe drinking water. Almost 2.3 billion people do not have access to
decent sanitation. By 2025, it is anticipated that 1.8 billion people would live in areas of acute
water shortage, and two-thirds of the world's population will have critically stressed water
supplies unless we change how we use water. In a situation that we are living in now, how
corporations utilize and sustain with respect to water management is important. Controlling
water loss and contamination is a major ethical challenge.

It is necessary to recall the three foundations of Healing Earth’s environmental ethic:

 The natural world has intrinsic value.

 The natural world has instrumental value.
 The value of sustainability balances nature’s intrinsic and instrumental values.

In the above case of both coco-cola and nestle, it is evident that companies were not
completely aware of the situation and the problem that they caused. As a responsible
company it is important that the company knows its operations as well as the after effects of
the same. Any company, no matter how good they are in what they do, will only be able to
sustain in the market for a long time of they have a positive presence in the environment they
are dealing with, deals with water, air, soil and the entire society as a whole.

Ethical rooting of the company: The companies only cared about its profits and personal
motives and had low drive towards environment care and development that resulted in
environment degradation knowingly or unknowingly by the companies.
Coco-cola:

Coca-Cola was accused of draining the underground water table and of releasing improperly
treated industrial effluents in less developed countries. The company was hit hardest in India.
The focal point of the environmental accusations in India was the Coca-Cola plant located in
the southern state of Kerala.

Coca-Cola the reputational damage experienced by the company after the controversy in
India pushed Coca-Cola to take damage-control measures. Since the company was facing
several issues related to its environmental sustainability in India, it launched several
rainwater harvesting projects in India.

For example, Coca-Cola dedicated a page in the Corporate Responsibility Review of 2006
to address the controversy.

In 2007, Coca-Cola initiated a global water project that focused on reducing, recycling, and
replenishing water used in the company's beverage production

An example is the rainwater harvesting project, where CocaCola’s operations partnered with
the Central Ground Water Authority, the State Ground Water Boards, NGOs and
communities to address water scarcity and depleting groundwater levels through rainwater
harvesting techniques across 17 states in India. By returning to the ecosystem the water used
in its operations in India through water harvesting, the company expected that this project
could eventually turn the company into a ‘net zero’ user of groundwater by 2009.
In 2002, Coca-Cola initiated its water sustainability initiatives to provide local communities
residing in the areas near its bottling plants with access to potable water. In the 2012 Water
Stewardship and Replenish Report, Coca-Cola stated that its operations in India have
‘achieved full balance between groundwater used in beverage production and that replenished
to nature and communities – ahead of the global target’.

The company received support from several non-governmental organizations (NGOs), central
groundwater authorities, state groundwater boards, and welfare associations. The statement
consisted mainly of providing information supporting its good practices and water
management of its operations in India. It also created the Coca-Cola India Foundation,
Anandana, which works with local communities and NGOs to address local water problems.

Nestle:

 Nestle has increased its efforts in recent years to reduce the quantity of water required
in their operations, since water scarcity has become a serious worry in many regions
of the world. Despite a large rise in the number of items manufactured, the overall
volume of water used by Nestlé companies decreased from 218 billion liters in 1998
to 155 billion liters in 2006. Water conservation is especially crucial in water-stressed
locations, such as our Nescafé factory near Bangkok. Nestle is, employing the most
up-to-date technologies, every effort was made to reduce water use and maximize
water stream recycling.
 Nestlé has been developing lighter packaging materials and optimizing surface-to-
content ratios for years. Between 2002 and 2006, the quantity of packaging per Nestlé
Waters product was lowered by 26%, saving 354 thousand tonnes of packaging
material in 2006 when compared to the proportional amount used in 2002. These
initiatives resulted in energy and other cost savings in manufacturing and
transportation, as well as lower solid waste volumes. Nestlé Waters works with other
firms and local governments to ensure that bottles are collected and recycled after use
whenever possible, and it keeps an eye on promising innovations in new packaging
options like recycled PET (RPET).
 SWITZERLAND – Nestlé Waters Collaboration: Nestlé Waters' ECO- Broye
initiative has established local collaborations to help preserve natural resources and
safeguard farmer income in this region of Switzerland since acquiring the Henniez
 brand in 2007. Farmers will create "ecological corridors" across 1500 hectares of
farmland to preserve and stimulate local biodiversity; organic filtration in a tributary
of the River Broye to improve surface water quality; and a biogas digester, which will
be controlled by Nestlé Waters, to turn organic farm waste into clean energy.
 Increasing operational effectiveness: As part of their commitment to increase
operational efficiency, nestle started focusing on minimizing water extraction and
increasing reuse, as well as utilizing alternative water sources such as rainwater
collection and continuously improving the water efficiency of their goods. Nestle
wants to help the environment by returning clean water to it.
 Determining water management action plans Assessing the water-related risks facing
our factories is crucial to identifying where to prioritize their water management
efforts. The risk of reduced water quantity or quality – “physical risk” – is often
linked to local competition among domestic, industrial and agricultural users.
 Projects to conserve water: Nestle factories' wastewater was decreased by 38 percent
[KPI] between 2001 and 2011 by recovering water from industrial processes and
recycling it for other purposes such as cooling and landscape irrigation. They recycled
7.8 million m3 of water in 2011 as part of their effort to limit water outflow

Initiative’s suggestions:

 Community projects will be the most effective way to gain back the trust of people in
the area the company is dealing with and will also allows the company a way to pay
back to the society they are working in.
 Making sure that the company is doing all that it can in order to reduce pollution and
raising industry standards, work on internal technology in order to rectify the solution
is the most genuine way the company can work on.
 The companies have to keep in mind that raise in pollution will add indirect cost to
the general public living in the region, in order to take the burden that they themselves
created in the first place the companies can build “Drink well” in and around the area
which can be used free of cost for the people.
 The company needs to makes sure that they give back all that they take from the
environment and try even making the situation better than what it was before. This
 will not only build the image of the company but also will help in long term
sustainability of the company in the same area they are operating in.
 The companies need to make sure that they don’t over use the resources and all the
resources that are used are put at optimal utilization.
 The companies need to collaborate with numerous local, global and international
bodies to work on all the issues that exist.
 Water shed development programs can be done by the companies pro-actively.
 Improve current water consumption and reduce leakages and wastage.
 Work on in house rain water harvesting.
 Encourage and educate people towards rain water harvesting and smart homes.