Ethical issues faced by the Coca-Cola

Company and the Apple Inc.

BM7704
Global corporate responsibility and business ethics

Prepared by:
Nuaman A Khan
S4113919
Introduction
The need to handle the issues of Business Ethics and dilemmas associated with
Business Ethics has increased in recent years. The news of losing trust in the
company has increased, which resulted in protests from the public since the
companies have been accused of several misconducts relating to the well-being of
their employees and the way the business has been operating. This has increased
the demand for companies to operate ethically and implement a bigger corporate
responsibility and relevant laws to support the employees of these companies
(Ferrell, Odies C, & Fraedrich, J. 2021).

For centuries people in business have chosen to focus on profit over morals, some
of them may have obtained both. However, focusing mainly on profit leads to ethical
issues. These issues, for example, the clarity, justice, or the feeling of right and
wrong can all be resolved by implementing ethical standards. In other words, ethics
is defined as the process of handling the issues in accordance with morals, values,
and principles. Hence, implementing ethical standards in a business is usually set by
the management of such a business (Ferrell, Odies C, & Fraedrich, J. 2021).

Corporate Social Responsibility, or in other words also known as CSR, is one of the
youngest concepts in the field of modern business but this concept has been in place
since the start of the Industrial Revolution. However, it has developed over the years
and has been the subject of debate for companies. Moreover, it has also been one of
the concepts which are related to government organisations, Non-Government
Organisations (NGOs), and even organisations that deal with different governments
all over the world like the United Nations, World Bank, and International Labour
Organisation. Hence, the concept of CSR is related to almost all the types of
organisations in the world (Crane, A., Matten, D., & Spence, L. (Eds.)., 2013).

Corporate Social Responsibility is the commitment of a company toward the well-

being of society and acknowledging that they are responsible for social and
environmental performance (Blowfield, M., & Murray, A., 2014). Since the start of
the Industrial Revolution, companies have been providing healthcare, housing, and
other perks to ensure a better working condition for their employees without being
told to publish or boasting about this in public (Crane, A., Matten, D., & Spence, L.
(Eds.)., 2013).

In this assignment, a study will be conducted on two business examples and their
various business unethical issues and their Corporate Social Responsibility, and how
they affect the society and the employees of the company. It will also focus on the
corporate responsibility of these companies. The study is based on their
controversial issues which are being highlighted in the current news and why it is
important to guide the companies through corporate responsibility towards a policy
that will be beneficial to the society and is aligned with the values of the society.
Whereas the business ethics implemented by such companies will be studied to
understand how the company will be more sustainable and create profit based on
ethical sourcing.

Discussion
Business ethics is one of the important aspects of any company while giving
importance to the marketing, managing, financing, and accounting of the
organisation. However, business ethics can be implemented without much effort and
can also be understood in depth. (Ferrell, Odies C, & Fraedrich, J. 2021).

Here, the Coca-Cola company, Apple Inc. and LinkedIn have been chosen for their
several unethical issues and how they have been implementing steps to overcome
such issues. Both the companies are globally recognized for their products and
services and how they have come so far in terms of profit-making.
Business Examples

Coca-Cola

The Coca-Cola Company was first introduced in the year 1886 by Dr. John Stith
Pemberton, a local pharmacist in Atlanta, Georgia (GA), USA (Coca-Cola, n.d.). It
was first put on shelves of the market with the name “excellent” as a soda fountain
drink (Coca-Cola, n.d.). It is one of the valuable and known brands worldwide that
has expanded successfully over the years. Today, the Coca-Cola company is one of
the top three largest beverage companies in the world having a global market share
of 48%. The Coca-Cola company produces about 160 different types of beverages
and is functioning in 200 countries around the world (Gao, Q., Geng, S., Shi, Y., &
Zhao, S. (2022).

However, the company has been constantly in debate due to its various ethical
issues. And eventually, many of its investors have also criticised and lost faith in the
Coca-Cola Company. Big investors like Warren Buffet who was one of the board
members till 2006, resigned from the company due to the lack of company’s failures
in overcoming the ethical issues and its challenges. The Coca-Cola Company has
been in the news for its several unethical activities in a variety of sectors, including,
racism, union worker intimidation, pollution, natural resource depletion, and more.

Ethical Issues

Contamination

Since 1999, contamination issues have raised severe ethical questions that have
negatively impacted the company’s reputation in the market worldwide. In June
1999, many people in Belgium claimed that they were poisoned by the drinks
manufactured by Coca-Cola, resulting in a barrage of negative press for the
company. People who consumed tainted items complained of stomach pain,
headaches, shaking, and nausea; the majority of those affected were kids who were
in school (outbreak of Coca-Cola-related illness in Belgium: a true association,
1999). This contamination problem was spread not only in Belgium but to other
nations too where comparable incidents were recorded, for example, France.
However, the company did not respond in a timely manner which further damaged its
reputation. The toxin was ultimately discovered, and it was the result of an incorrectly
handled batch of carbon dioxide. Contamination was a major setback for the
corporation since impacted nations like Belgium had imposed product bans ( Nemery,
B., Fischler, B., Boogaerts, M., Lison, D., & Willems, J. (2002).
Racism

Coca-Cola was in the headlines when some of the employees, mostly African-
American and Latino, sued the business behemoth for racial discrimination.
According to the lawsuit, the employees had alleged that the company is a “cesspool
of racial discrimination” (Greenwald, J., 2012). The allegations were related to
discrimination in the working environment, as well as disparities in promotion
progress, harsh and vengeful acts against the minorities, and uneven distributions of
overtime hours (Greenwald, J., 2012).

The Apple inc.

Founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1977, the Apple Inc.
has headquarters in Cupertino, California, USA. It is now known as the first US
company to cross the $1trillion in market capitalization in 2018 (Investopedia.com,
2022) (Apple, n.d.). the Apple Inc. is one of the most famous companies in the world
for its cutting-edge technology manufacturing in computers, tablets, mobile phones,
etc. These products are well known in the market as iPhone, iPod, MacBook, etc.
also, it also provides various software, services, and accessories for their products. It
is one of the second largest companies in terms of revenue. The company has been
following an aggressive pricing strategy to form a loyal customer base (reuters.com,
2022). The company's major revenue is obtained from its wide range of iPhones and
iPad which is around $192 billion from the sales of iPhone units (Investopedia.com,
2022) (Apple, n.d.).

Ethical issues

The Apple inc., being a multinational company, has faced multiple challenges in
terms of doing business ethically. Many different humanitarian bodies have accused
the Apple Inc. of implementing policies that exploit the well-being of its labourers and
its consumers. The Apple Inc. has implemented such policies to increase its
profitability and compete with its rivals.

The Apple Inc. was accused of workplace exploitation by its main supplier Foxconn.
Foxconn employs approximately 1.6 million people in China. Though Foxconn is one
of the leading suppliers for the Apple Inc., it is also a contractor for other OEM
companies (Hille and Jacob, 2012). The workers were subjected to harsh working
environments and were given orders to work 15h a day (Klowden, 2006). The
employees were paid $50 a month for working 15h a day. However, other employees
around the world were given $100 a month excluding the other perks (Clarke,
Thomas & Boersma, Martijn. (2017)).
During the year 2009, one of the Apple Inc.’s suppliers in east China, Wintek was
also accused of using a chemical called N-Hexane (Branigan, 2010). This chemical
was used to clean the LCD displays of Apple’s products. Due to its characteristics as
a better option than alcohol which cleans the screens faster and Wintek used it for
production whenever they received a large order. However, N-Hexane evaporates
faster which has an adverse effect on the nervous system of those who used to work
with that chemical (Barboza, 2011). The employees had started to complain about
headaches and other adverse side effects of using the chemical, while some of the
employees had to be hospitalised (Myers, C., & Fellow, K 2013).
Recommendation

Due to the lack of immediate action by Coca-Cola in the matter of contamination, the
company faced a major backlash. To avert such situations, a crisis management
plan should have been implemented by the company (Elliott, D., Swartz Ethné, &
Herbane, B. 2002). Furthermore, professionals with knowledge in different and vast
fields shall be assigned to a ‘Task Force’ to immediately respond to the situation as
various situations may require a different set of skills and various situations
necessitate different types of knowledge as the “Law of situation” states (Wolf, 1988
-1989). This notion remains applicable in today’s economic world (Johnson, V., &
Peppas S.C. 2003).

Equality Diversity and Inclusion:

In response to the racial discrimination lawsuit against the company, Coca-Cola had
decided to pay $192 billion as a settlement, which was also one of the largest ever
settlements by a company in a case relating to racial discrimination. Also, Coca-Cola
had formed a diversity council to address the issue. As per the lawsuit, racial
discrimination was present in the company for 4 years, but the company turned a
blind eye to this and had to pay the largest amount for settlement. It was also stated
in the lawsuit that the top management had conspired toward this which led to a
public uproar against this case. Such cases can be avoided by applying the following
methods (Farell, J., n.d.)

● The staff and the leaders of an organisation should be educated to tackle

racial discrimination in the organization.
● Gather the data to understand the problem, accordingly a process should be
implemented to change the system shall be put in place.
● The organisation should investigate complaints by any staff member in an
unbiased and timely manner.
● After implementing the process for change, it should be checked and rectified
at the earliest

Coca-Cola has taken steps toward corporate governance guidelines by

implementing several reforms in the governance of their company (Coca-Cola
policies, 2017).

● Directors are responsible for exercising their business judgment to act in what
they reasonably believe to be in the company's and its investors' best
interests.
 ● At least one annual executive session of the non-management Directors will
address the Board’s leadership structure and whether the Chief Executive
Officer should hold the position of Chairman of the Board or if the role should
be separated.
● Shareholders or the Board may nominate directors in accordance with the
bylaws. In accordance with its charter, the Committee on Directors and
Corporate Governance will review all nominees for the Board, including
shareowners' nominations.
● Board Committees include Audit, Compensation, Directors and Corporate
Governance, Executive, Finance, Management Development, and Public
Issues and Diversity Review.

Responsibility of the Coca-Cola company towards the stakeholders

As per Coca-Cola's corporate policy, the company is liable for the health of its
consumer and for the environment (Coca-Cola, n.d.). In view of their policy, the
company should collaborate with its partners and their subsidiaries to solve the
problems faced by the company. Also, the company is responsible to consult their
consumers and their critics to tackle the emerging problems and create better
solutions in social and environmental aspects. However, the company has only
focused on making its business more profitable.

The Apple Inc. responsibility toward CSR

As stated by Tim Cook, CEO, the Apple Inc. “at Apple, we are constantly innovating
in the technology we make and in how we make it - with respect for people’s rights
and for the planet we share” (Apple Inc. (2022). However, in 2006, Apple’s main
supplier, Foxconn, was accused of a poor working environment in the factory. This
created a problem for the Apple Inc. To prevent themselves from any such future
accusations, the Apple Inc. had formulated a mechanism to audit the suppliers of
their company. This audit was conducted by third parties every year and a report of
Apple’s supplier responsibility is made to show what kind of initiatives have been
taken in CSR. But such reports only boast about the company and create a better
image for the consumers, instead of being concerned for the well-being of the
society and environment (Ukrami, 2012)

The Apple Inc. has repaid almost US$30 Million to approximately 35000 employees
since 2008 to assist them in escaping the harsh working conditions they had faced in
their supplier factories. (Apple Inc., 2022). Further, looking at the way the Apple Inc.
has implemented the CSR initiatives, this shows that, regulating the CSR initiatives
by the Governments of the respective country where the company is operating is
helping the government to compel the organisations to implement better CSR
initiatives for the well-being of the society and the environment (Hargrave, T.J.,
2015).
For instance, the State Government of Karnataka, India had implemented a “Clean
Bengaluru'' drive in Bengaluru, this initiative led to the Apple Inc. adopting a policy to
create waste-free landfills in Bengaluru, India.

Even though the Apple Inc. was one of the first companies to start complying with
the Fair Labor Association (FLA) guidelines, it was noticed that it was just to create a
brand image in the view of the customers (Myers, C., & Fellow, K 2013). Hence, it
can also be seen that all these multinational companies that implement CSR
initiatives are doing it only when they have been forced to do so by the law of land
where they operate. Therefore, other countries should implement laws for such
multinational companies like it was done in Indian city of Bengaluru. Since many
companies are not compelled to do so on their own. These companies like the Apple
Inc. should be compelled to implement CSR initiatives by the stakeholders and the
government of that host country. This will make the company work towards the
sustainability of the environment and the well-being of the people. The Apple Inc. is
making sure they follow the directions of the government by outsourcing it to third
parties auditors and various NGOs (Wolf, R. (Ed.), 2014).

Progress of company towards responsibility

This study has also analysed the Environmental, Social, and Governance report
(ESG) of the Coca-Cola company and the Apple Inc. the researcher has collected
the ESG report of 2022 from Refinitiv. As per the ESG report, it is found that the
Combined ESG score of the Coca-Cola Company was changed every year i.e., in
the year 2019 the score was B while in the year 2020 the score is C+. However, the
ESG score of the Coca-Cola company was increased from A- in the year 2020 to
2019 to B. further the weightage of the ESG score is 100%. Further, the ESG report
of Apple inc. shows that the combined SEG score is C which is constantly the same
from the year 2016 to 2020. While ESG scores increased from 2019 to 2020, B+
from A-. other measures show that the companies are working on their responsibility
towards governance, society, and the environment. For instance, the Environmental,
Social Pillar Scores of Apple inc. also increased from the year 2019 to 2020. On the
contrary, the governance pillar scores of Apple Inc. are constantly the same from the
past year 2019 to 2020. The Environment, social and governance pillar score of the
Coca-Cola company is constantly increased from the year 2019 to 2020. The table
of both ESG reports of the Coca-Cola company and Apple inc. is as follows:
The Coca-Cola Company

The Apple inc.

Conclusion
To conclude in case of the Apple Inc. has implemented several CSR initiatives for a
sustainable environment and the well-being of the people. But these initiatives
should be regularly scrutinized by the members of the stakeholders and the
employees of the company to check if they have been properly implemented. The
stakeholders and the government should work together to bring stricter laws in the
host country/state to compel these companies to implement CSR initiatives since
organisations do not implement CSR on their own. Since it can be seen from the
study that the organization usually does not consider the implementation of CSR
initiatives when it is about the stakeholder’s well-being (Wolf, R. (Ed.), 2014).

Further, it can be seen that all these organisations do not consider the well-being of
all the stakeholders who are affected by these organisations since it is not beneficial
for the company to some extent. It was evident in the case of the Apple’s supplier
Foxconn that even after implementing CSR initiatives for the employees, they were
accused of various kinds of unethical issues at their company. Hence, it is crucial for
the government of all the nations to implement laws around CSR initiatives for such
multi-national companies (Wolf, R. (Ed.), 2014). However, implementing laws around
CSR initiatives is a matter of debate between nations. Whereas India’s stance
towards CSR initiative is very firm and has already implemented such laws which are
mandatory for every company to follow and adhere to.

Complying with business ethics is very important for global organisations such as
Apple Inc. and the Coca-Cola Company, as it will help them survive in long term as
well as it will help them in bringing success. All kinds of stakeholders, shareholders,
employees, consumers, and suppliers have a significant impact on good business
ethics and a clear corporate responsibility of a company. Hence, they should
concentrate more on such aspects of the company. These aspects should also be
implemented in the various functions of a company.
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