Tuesday, August 18, 2009

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 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.
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).

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