Coca-Cola Company’s Corporate Social Responsibility in India

Introduction

The concept of corporate social responsibility (CSR) is now common in multinational, regional, and local companies. To others, CSR is corporate citizenship or efforts toward sustainability developments and benefiting the community. The Coca-Cola Company (Coke) is one such multinational company with corporate social responsibility agenda in the countries in which it operates. In India, for instance, Coke is one of the biggest soft drinks manufacturers in the country.

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Consequently, it has made CSR an integral part of its global business strategies. For instance, with regard to water consumption, Coca-Cola notes, “a key business strategy is based on reducing the amount of water we consume and minimizing our other environmental impacts while succeeding in sustainable production processes and water reclamation” (Coca-Cola, 2011). The company had serious environmental concerns with regard to water consumption, depletion of groundwater resources, and related environmental pollution. As a result, there were massive environmental, economic, and social impacts due to the business activities of Coke. Coke, however, had CRS initiatives in place but failed to implement them to enhance the quality of the environment, affected communities, and employees.

The issue of water consumption, depletion, and pollution in India has resulted in severe criticism of Coke by environmentalists, the affected community, and activists (India Resource Center, 2014). The problem is widespread, specifically in areas with bottling plants. These are mainly rural, agrarian villages consisting of poor farmers. They have complained of toxic substances, dumping, and other hazardous waste materials from the company. This could be regarded as an unethical business practice and a tragedy of the common person, which goes against the idea of CSR.

The purpose of this research is to explore the corporate social responsibility of Coca-Cola Company with regard to the water issue in India.

Research Question and Topic Statement

  • What is the Coca-Cola CSR strategy adopted specifically with water consumption in India?
  • What challenges does Coca-Cola face in attempts to implement CSR initiatives in India?
  • Understand why Coca-Cola closed its bottling plants and growing criticism in India
  • How can Coca-Cola address water issues in India’s bottling plants?
  • Is the company leadership committed to its CSR initiatives in India?

Literature Review

Corporate social responsibility (CSR) is a part of strategic development for many multinational corporations (MNCs) irrespective of their origins or locations of operations. MNCs have the moral responsibility to advance CSR practices. They are responsible for most of the industrial activities globally. MNCs are business and profit-oriented companies, and therefore, their major goal is not to assist communities in escaping poverty, conserving environments, or engaging in other activities with the public good.

In fact, Ivar Kolstad noted that Nobel Prize laureate Milton Friedman is credited with the statement, “The social responsibility of business is to increase its profits” (Kolstad, 2007). This statement, however, is no longer sustainable in an environmentally conscious world in which consumers increasingly look for companies that are more responsible in their practices and relations with communities.

The concept of CSR reflects organizational practices that involve taking part in activities that have direct benefits to society. Today, CSR has gained considerable recognition, is more mainstream. Thus, focused organizations have included sustainability initiatives into their core business practices to promote shared value for all stakeholders, including society.

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CSR is no longer relevant for society and the environment. Instead, it is now a critical part of organizational success. There is a business in doing social good. Globally, communities face myriads of challenges, including persistent poverty, climate change, wars, and famine, among others. On this note, the business case for taking part in CSR activities remains simple and straightforward. The business will lose much more if responsible organizations fail to act.

Various forms of CSR activities exist. Organizations have created a wide range of practices to meet their unique CSR practices. These may involve giving donations from profits, offering services or products to deserving recipients. First, some MNCs focus on environmental affairs to meet their CSR obligations. It is recognized that organizations, irrespective of their sizes, have a carbon footprint or interact with the environment in a given manner.

Any activities that they can pursue to curtail environmental degradation are considered good for the business and communities. Second, businesses also engage in philanthropic acts to meet their CSR obligations. They can donate proceeds to any charity organization to support their noble course. Time, financial support, and other resources can benefit most not-for-profit organizations. Finally, ethical labor practices are also recognized as part of corporate social responsibility. Some organizations strive to act according to ethical and moral standards when dealing with employees. In this respect, labor laws are the center of focus in CSR, and MNCs are usually monitored for any exploitative labor practices along their supply chains.

For companies engaged in promoting their international presence in several countries, one major critical factor they must consider is how they will transform the quality of life of communities in the host countries in which they conduct their businesses. In these host countries and communities, many local people tend to believe that such companies will transform their lives and improve standards of living.

In other instances, MNCs may meet hostility because they are viewed as exploiters that want to plunder natural resources and cheap labor. Their business operations are mainly geared toward profit maximization and less on the welfare of communities or employees. Consequently, the race to globalization has raised concerns that MNCs are purely focused on profits at the expense of impacts on the environment and vulnerable local communities, including the workforce (Edwards, Marginson, Edwards, Ferner, & Tregaskis, 2007). In response to such issues, MNCs have also enhanced their focus on social issues other than the pursuit of profits.

CSR remains the most prominent agenda among MNCs to improve social responsibilities in areas where they operate. It is a voluntary approach to account for the externalities associated with business activities in host countries. CSR helps MNCs to control employees and market behaviors and therefore reflect the overall image that they want to portray globally. Further, CSR is seen as a means of assisting MNCs to attain legitimacy to some extent, particularly in the area where they are not held in high regard (Edwards et al., 2007). CSR establishes consistency in practices and ensures that local communities and resources are exploited in sustainable ways. Thus, MNCs gain greater recognition internally and in external business environments.

As competition escalates, MNCs find CSR to be highly valuable, particularly when it is well defined as a part of strategic business objectives.

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Corporate Social Responsibility Issues

Despite the growing awareness and widespread adoption of CSR, it continues to present several sources of concern to organizations, shareholders, and society. It has many unanswered questions (Christensen, Mackey, & Whetten, 2014). For several years, researchers in CSR have significantly concentrated on the link between CSR and the financial performance of a company. On this note, it is argued that without a strong ‘business case’ (financial performance linked with CSR), important questions remain to be explored regarding these initiatives. Hence, it could not be easy to understand why organizations continue to undertake CSR initiatives without financial benefits.

Christensen et al. (2014) relate CSR outcomes to the quality of leadership in an organization. For instance, they argue that individual differences could affect CSR outcomes. This observation is made under trait theories of leadership. In this regard, CSR initiatives start with the comprehension of leadership traits of senior-level managers, values, personal traits, and idiosyncratic characteristics. Within this argument is the idea that leaders shape strategic objectives of their firms and that leaders’ personality, traits, and values are reflected in their choices of activities. Hence, a leadership role from this theoretical perspective is imperative for CSR outcomes.

A lack of business results from CSR could be a critical challenge in many organizations. In fact, several firms have the notion that CSR should be treated as a business discipline, and different initiatives associated with it should lead to business results (Rangan, Chase, & Karim, 2015). This could be demanding too much from CSR and fail to understand the overall objective of CSR initiatives, which is to align organizational social and environmental responsibilities with the strategic objectives and values of an organization.

If by engaging in such acts, CSR initiatives reduce risks, improve organizational reputation and directly contribute to business performance, then that is positive for an organization. However, for several CSR initiatives, these are not their core goals but rather spillovers and not the major reasons for their existence (Rangan et al., 2015). Hence, one can argue that there are issues associated with CSR in organizations due to poor alignment of CSR activities with strategic business goals. This implies that there is a general lack of systematic ways to enhance coherence and involvement in CSR strategies.

It is imperative to comprehend how organizations devise and implement their CSR initiatives. In this case, managers, directors, and senior executives are the best employees to lead organizations in driving CSR agendas. They are either directly or indirectly involved in the CSR strategy development of their organizations.

Rangan et al. (2015) show leadership is vital for CSR initiatives. The ideal of shared value is the maxim that drives CSR in organizations. That is, creating economic value for an organization in a manner that also creates value for the community. However, research shows that shared value does not exist and is not the norm in many organizational practices (Rangan et al., 2015). Instead, many organizations tend to focus on a multifaceted form of CSR that runs “the gamut from pure philanthropy to environmental sustainability to the active pursuit of shared value” (Rangan et al., 2015, p. 42).

In addition, well-managed firms are not keen on integrating CSR with their business strategies and objectives totally, but rather focus on developing forceful and convincing CSR initiatives that tend to reflect organizational values and purpose. This is a wide approach of CSR common in many companies. Still, it faces “poor coordination and a lack of logic to connect various programs” (Rangan et al., 2015, p. 43).

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Currently, studies have shown that CEOs and other senior managers are increasingly taking part in CSR initiatives. However, CSR activities are normally started, managed, and run by internal managers in poorly coordinated manners and, in most cases, without the involvement of senior executives.

It is therefore important for organizations to devise and execute CSR initiatives that are coherent and well-coordinated in areas in which they conduct their business operations. In fact, senior-level executives and other managers should make CSR initiatives a critical part of their roles. On this note, companies are required to conduct, develop inventories, and audit current CSR initiatives.

They can focus on the above-mentioned areas of CSR initiatives to drive their agenda. By determining the best CSR initiative to adopt for a given area, organizations create strong foundations for their activities. However, some researchers have shown that CSR activities in companies are limited and depend on “size, level of diversification, research and development, advertising, government sales, consumer income, labor market conditions, and stage in the industry life cycle” (McWilliams & Siegel, 2001, p. 117). From these observations, McWilliams and Siegel (2001) argue that a company can find an “ideal” level of CSR, which it can identify through cost-benefit analysis, and they should determine the neutral relationship between CSR and the financial performance of their companies (p. 117).

Generally, it is observed that several companies have disparate and poorly coordinated CSR activities. In most cases, however, senior executives are not aware of these initiatives because they are devised and executed by managers. Consequently, such organizations fail to impact communities positively through CSR initiatives (Rangan et al., 2015).

The case of Coca-Cola in India is unique because the company had CSR initiatives, but it was forced to shut down its bottling plants twice because of groundwater depletion and pollution (India Resource Center, 2014). Although Coke continued to experience criticisms from various stakeholders, the company proceeded to execute different initiatives related to water conservation such as rainwater harvesting, restoring groundwater resources to acceptable levels, water recycling, and supporting local Indians in rural areas in which it operated bottling plants.

Methodology

The methodology provided the methods used to collect data for the research question. It was designed to inform research purpose and data analysis. The research methodology was applied to study Coke’s CSR initiatives with regard to the water issue in its India bottling plant. The case study ensured an in-depth exploration of available data regarding CSR initiatives, leadership and CSR, strategies, challenges, solutions, and criticism, and closure of bottling plants. For the case study, secondary data were collected from different sources.

The qualitative data analysis method

The researcher adopted a qualitative method for analysis of thematic data collected for the study (Johnson & Onwuegbuzie, 2004, pp. 14–26). Qualitative data were collected on critical areas of the study to understand the issue of water in detail.

Data collection

No primary data were collected for the study. Therefore, no sampling was done. Instead, secondary data from other relevant sources were collected and used to answer research questions. Secondary data offered the following advantages. First, they were cheap and easy to obtain since it was difficult to collect primary data from India. Second, this method of data collection saved time. Third, they helped to reveal more insights about the water issue. Finally, the researchers could evaluate data and compare them for credibility.

To ensure the credibility of the collected data, the evaluation was conducted to ensure that the data used satisfied the following criteria. First, data for the study were available. Second, data collected for the study were relevant, current, and based on the same concept. Third, data were evaluated for accuracy. In this stage, data sources were reviewed for credibility and bias. Finally, data sufficiency was checked to ensure that adequate data would be found for the study.

Data Analysis

A content analysis was conducted for qualitative data. Codes were assigned to textual data by identifying common themes study on water issues, CSR strategies, leadership, growing criticism, and the plant closure.

Results

CSR initiatives and strategies

Coca-Cola claims that it is focused on water conservation, environmental control, and providing benefits to the community. Since 2003, the company has adopted various strategies to address water issues in India. It also aimed to rebuild its image in the country. Some of these CSR initiatives, which were environmental-related, included the Eko management through which Coke strived to protect groundwater resources.

The strategies included rainwater harvesting, water conservation, and replenishing groundwater. The local people considered these strategies as public relations exercise because they were ambitious and unsustainable. Nevertheless, Coke aimed to conserve water and control pollution with these CSR strategies.

The rainwater harvesting initiatives had failed, could not replenish groundwater or offset its usage.

Challenges with CSR initiatives implementation

The project was ambitious, and many local residents, activists, and environmentalists argued that CSR initiatives were public relations exercise. The company’s approach was ambitious, broad, and unsustainable. It was not aligned with strategic business objectives because Coke only embarked on assessing its CSR activities in 2008. Overall, these CSR strategies did not work.

Plant closure and growing criticism

Given the rapid depletion of groundwater resources and CSR initiatives to conserve water, the water issue in India persisted. Communities, activists, and environmentalists continued to pressure the company to close its bottling plant due to water depletion and pollution. In 2014, Coca-Cola shut down its operations in Mehdiganj, India. Apparently, this was not the first plant to be shut down because of water issues. More than a decade ago, Coca-Cola was forced to shut down a plant in Kerala for the same reasons of environmental pollution through the dumping of toxic wastes and groundwater depletion.

Coca-Cola leadership Commitment to CSR initiatives

Events leading to the closure of the two factories depict failures of the leadership to engage in constructive CSR initiatives to conserve groundwater and stop the dumping of toxic effluent. The company recognizes that water is critical for its business and the local community. However, Coca-Cola failed to show coherent strategies, facts or explain its position on environmental conservation and shared values in the sustainability of groundwater resources and dumping of toxic materials.

Interventions about the water issue in India

The company should review the current CSR initiatives for groundwater conservation, sustainability efforts, and environmental pollution. Any new interventions should be defined in the company’s strategic objectives.

Discussion

The aim of this case study was to investigate CSR initiatives by Coca-Cola on groundwater depletion and environmental pollution. The overall result showed that the company’s CSR initiatives were not successful. Coca-Cola had to shut down its bottling plant amidst growing criticism and protests.

As globalization increased, MNCs such as Coca-Cola look for new locations to expand their operations. They must, however, account for social and environmental issues in host countries. Some of their business goals may not support social and environmental issues in host countries, and this is the case of Coca-Cola and the water depletion and environmental pollution in India (India Resource Center, 2014). Although the company claims that it had CSR initiatives to address the challenges (Coca-Cola, 2011), they were not adequate or lack effective leadership and implementation strategies. Many studies have highlighted the role of leadership in promoting CSR practices in companies (Rangan et al., 2015; Christensen et al., 2014).

Coca-Cola continued with its CRS initiatives despite widespread criticism and growing protests. Its rainwater harvesting strategies, replenishing groundwater resources, recycling water, and minimizing consumption were regarded as ambitious public relations efforts (India Resource Center, 2014). Critics believed that the company was spending millions of dollars on rebuilding its tarnished image rather than focus on critical changes in its operations. Consequently, one can conclude that Coca-Cola lacked the commitment to ensure CSR success.

It is believed that the water conservation efforts were ambitious, not aligned with the company’s objectives, and lacked coordination, and as a result, the project ran into a dilapidated state. Researchers have shown that it is imperative to align and coordinate CSR activities with the overall business strategic objectives (Rangan et al., 2015; Christensen et al., 2014; Edwards et al., 2007). Years of protest against poor environmental practices finally led to the closure of the bottling plant.

Overall, several factors were responsible for the failure of CSR initiatives in India, including lack of leadership, poorly formulated and coordinated CSR activities, a lack of commitment, and failure to account for social and environmental factors in the process. Therefore, Coca-Cola failed to ensure shared value in the affected village.

Recommendations

  • Coca-Cola should review current CSR initiatives on groundwater conservation and environmental pollution to align them with the overall business strategic objectives. The failed initiatives were ambitious and appeared to be public relations exercise.
  • Coordinate CSR activities and borrow the best practices and adapt them to other locations
  • Coca-Cola needs strong leadership to support the implementation of CSR initiatives.
  • Develop new metrics to gauge CSR initiatives performance
  • The initiatives should address environmental issues as well as social challenges in the community.

Conclusion

MNCs use CSR to ensure sustainable developments and benefit communities. It reflects corporate citizenship. In this case study, Coca-Cola was used to demonstrate how CSR initiatives were used in India amidst claims of groundwater depletion and environmental pollution. This study shows that Coca-Cola CSR initiatives in India were not successful in the affected location because the company was finally forced to shut down its bottling plant.

Although Coca-Cola had claimed that its key business strategy was based on water conservation, reducing the amount of water consumption, and minimizing its environmental impacts to promote sustainability agenda, the CSR initiatives were generally unsuccessful.

The study findings show that CSR initiatives were ambitious, not evaluated, coordinated, and were never aligned with strategic business objectives and mere public relations exercise. Consequently, they faced implementation challenges. Lack of supportive leadership could have played a critical role in the overall failure of the initiatives. The plant closure indicated that the company’s CSR initiatives had failed, and the company itself was not committed to CSR activities. In addition, criticisms have continued from different sections, including activists, environmentalists, and community members.

The failed CSR initiatives show that Coca-Cola must strive to change its CSR practices and focus on both social and environmental challenges rather than adopt ambitious uncoordinated activities.

It is believed that the recommendations provided would be adequate to address any future CSR challenges that the company might have.

References

Christensen, L. J., Mackey, A., & Whetten, D. (2014). Taking Responsibility for Corporate Social Responsibility: the Role of Leaders in Creating, Implementing, Sustaining, or Avoiding Socially Responsible Firm Behaviors. The Academy of Management Perspectives, 28(2), 164–178. Web.

Coca-Cola. (2011). Corporate Social Responsibility Report 2011. Web.

Edwards, T., Marginson, P., Edwards, P., Ferner, A., & Tregaskis, O. (2007). Corporate Social Responsibility in Multinational Companies: Management Initiatives or Negotiated Agreements? Web.

India Resource Center. (2014). Mehdiganj – The Issues. Web.

Johnson, R. B., & Onwuegbuzie, A. J. (2004). Mixed Methods Research: A Research Paradigm Whose Time Has Come. Educational Researcher, 33(7), 14–26.

Kolstad, I. (2007). Corporate Social Responsibility of Multinational Corporations. CMI Brief, 6(2), 1-4.

McWilliams, A., & Siegel, D. (2001). Corporate Social Responsibility: A Theory of the Firm Perspective. Academy of Management Review, 26(1), 117.

Rangan, K., Chase, L., & Karim, S. (2015). The Truth About CSR. Harvard Business Review, 93(1/2), 40-49.

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