Case Study

Coca-Cola in India: A Responsible Corporate Citizen?

R Harish* and Bharathi S Gopal** The Coca-Cola Company is the largest non-alcoholic beverage company in the world, selling over a billion bottles/cans per day in more than 200 countries across the world. It is one of the worlds most loved and most valued brands. At the same time, it has its share of controversies, both regarding the health-related aspects pertaining to its products and also its business practices. In this case study, we look at Coca-Colas operations in India, and how the company is trying to keep up a clean image in the face of several difficulties. While pesticide residues in the colas marred the image of the company some years ago, it was soon followed by a series of allegations about excessive water extraction, and water and soil pollution at several of its bottling units. While refuting and defending itself against these allegations, the company has taken up several environmental and community-based corporate social investment projects across the country, particularly those related to water conservation, rainwater harvesting, etc. However, critics argue that all these initiatives of the company are just a greenwash to cover-up its wrongdoings and project a good image of itself.

Introduction
Coca-Cola Indias website proudly proclaims that it has won the prestigious Golden Peacock Environmental Management Award (GPEMA) during the years 2002 to 2005 for the company-owned bottling plants at Baddi, Ameenpur, Dasna, and Kaladera (near Jaipur) respectively. These awards are given by the World Environment Foundation, a not-for-profit organization registered in India and the UK. Some of the criteria on which this award is given are: energy and water use, wastewater discharge, compliance with government regulations, and positive impact on the local community. Detractors, however, point to the fact that Coca-Cola is one of the major sponsors of the World Environment Foundation and an award from the Foundation is just an attempt to build a responsible image.1 Students of several universities and colleges in the US, Canada and the UK have from time to time taken up campaigns against the Coca-Cola Company in view of its business practices in India, and also voted to keep out Coca-Cola from their campuses. Following student protests,
* Faculty Member, The Icfai Business School, Bangalore, India. E-mail: harish@[Link] * * Team Leader and Faculty Member, The Icfai Research Center, Bangalore, India. E-mail: bharathig@[Link]
1

Indian Campaign Forces Coca-Cola to Announce Ambitious Water Conservation Project, [Link] July 30, 2007.

2008 The Icfai University Press. AllThe Icfai University Journal of Corporate Governance, Vol. VII, No. 4, 2008 Rights Reserved. 42

the University of Michigan, suspended its business relationship with Coca-Cola in January 2006. The condition for resumption of the business was that its operations in India be assessed by an independent, third party. Once again, in a travesty of justice, University of Michigan accepted Coca-Colas suggestion to appoint the Energy and Resources Institute of India (TERI) as the independent agency. Coca-Cola resumed its sales in the University of Michigan in April 2006. However, Coca-Cola is reportedly one of the sponsors of TERI. In 2001, TERI had named Coca-Cola as one of the most responsible companies in India. In 2003, it had organized the Earth Day with the support of Coca-Cola. Indian groups campaigning against Coca-Cola rejected TERI as the independent agency. Thereafter, one more organizationThe Meridian Institute, was invited to join the investigation, but TERI continues to be the lead evaluator.2 At the annual shareholders meeting of the Coca-Cola Company, held in April 2007, William C Wardlaw III, grandson of one of the earliest investors in Coca-Cola and a major individual shareowner, had introduced a resolution asking for a report on the potential environmental and public health damage from Coca-Colas plants in India. Wardlaw is reported to have said, My family and I are still hoping Coca-Cola will become much more responsive to environmental and human rights issues. All of us would be the beneficiaries, including of course Coca-Cola shareholders. At this moment of utmost crisis, it is time for all of us to make a supreme effort to figure out how to truly do the right thing and then to commit to following through.3 Coca-Cola has faced several criticisms and controversies in different parts of the world from time to time, for a variety of reasons. However, India has been the nerve center for protests against several bottling plants of Coca-Cola on the subject of water and land pollution. Part of the reason, perhaps, is that India is a densely populated agrarian country, where a sizeable percentage of the population depends on land and water for its livelihood, both of which are scarce commodities. Coca-Colas refreshing image had been considerably dented in India because of the campaigns against it, and as observed by the Wall Street Journal, cost it millions of dollars in lost sales and legal fees in India, and growing damage to its reputation elsewhere.4

The Coca-Cola Company

Coca-Cola5 originated in 1886, when John S Pemberton, a Pharmacist in Atlanta formulated and started selling it as a patent medicine for several mental and physical disorders. Later, Asa Griggs Candler bought out Coca-Cola and was instrumental in repositioning it as a drink for refreshment and enjoyment, thereby making it one of the greatest marketing successes. During 2006, The Coca-Cola Company, which is the parent company for all operations across the globe, reported a turnover in excess of $24 bn and a net income of $5 bn (Table 1). The Company sold 21.4 billion cases of beverages in 2006 as against 20.6 billion cases
2

Coca-Cola Funded Group Investigates Coca-Cola in India, [Link] 2007/[Link], April 16, 2007. Coca-Cola Rapped at Shareholders Meeting for Not Disclosing Liabilities in India, [Link] news/2007/[Link], April 18, 2007. Coca-Cola Funded Group Investigates Coca-Cola in India, [Link] 2007/[Link], April 16, 2007. Originally, coca leaves from South America, which are also used to make cocaine, were used as the stimulant. Kola nuts were used as the source of caffeine. Hence, the name Coca-Cola. To this day, Coca-Cola uses a non-narcotic coca leaf extract manufactured at a dedicated plant in New Jersey, USA. 43

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Table 1: The Coca-Cola Company Operating Revenues and Net Income (2002 to 2006) (in US$ mn) Year Ended December 31 Net operating revenues Net income after taxes 2006 24,088 5,080 2005 23,104 4,872 2004 21,742 4,847 2003 20,857 4,347 2002 19,394 3,050

Source: Item 6; Selected Financial Data, [Link]

in 2005.6 More than a billion bottles/cans of Coca-Colas beverages were being sold each day in more than 200 countries across the world. According to the 2007 figures, Coca-Cola was the largest manufacturer and marketer of nonalcoholic beverage concentrates and syrups in the world. While the company manufactures and sells concentrates, most of the bottling is done by licensed franchisees. Interbrand, a world-renowned brand valuation and consultancy firm, releases annual valuations of global brands, based on their earning potential and allied parameters. Coca-Cola has been at the top of this list for several years in a row. Interbrand valued the Coca-Cola brand at over $70 bn for the year 2006. A high brand valuation indirectly reinforces the fact that the brand is also extremely popular. In effect, one could perhaps conclude that Coca-Cola is the worlds most loved brand. Besides being a popular brand, Coca-Cola also has a vision to achieve sustainable growth through various goals, one of which is Being a responsible global citizen that makes a difference.7

Coca-Colas Commitment to CSR

Coca-Colas goal to be a responsible citizen has manifested into corporate responsibility initiatives under four major headsworkplace, marketplace, environment, and community. Community-based activities are channelized through the Coca-Cola Foundation. Coca-Cola partners with renowned organizations such as the United Nations Development Program (UNDP), US Agency for International Development (USAID), Global Water Challenge, CARE and PlayPumps International, in numerous water supply, sanitation, health and hygiene, watershed management and education-related programs in various nooks and corners of the world. It also engages itself in community-based recycling projects for consumer product packaging. It has also lent support in providing disaster relief during the Indian Ocean Tsunami (2004), Hurricane Katrina (2005), the earthquake in Pakistan (2005), etc. Coca-Cola is also engaged in developing commercially viable hydro-fluorocarbon (HFC)-free refrigerant technology, which would go a long way in reducing global warming. The Chairman and CEO of Coca-Cola, Neville Isdell E summed up the CSR activities of the company, As we create value for our shareowners and other stakeholders by running a successful business, we must also be a force for positive global changeone community at a time. We must help create economic and social value, protect the environment and contribute to the long-term sustainability of every community we serve.8
6

7 8

The Coca-Cola Company 2006 Corporate Responsibility Review, [Link] ourcompany/pdf/corporate_responsibility_review2006.pdf, p. 12. Mission, Vision & Values, [Link] Mission, Vision & Values, [Link]. The Icfai University Journal of Corporate Governance, Vol. VII, No. 4, 2008

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Excerpts from the companys Corporate Responsibility Review 2006, are presented in Exhibit 1, covering the environment and community dimensions. Some of the important highlights are:
Exhibit 1: The Coca-Cola Company Corporate Responsibility Review Detailed Performance on Environment and Community Dimensions Environment Performance Metric Water Use Ratio (Efficiency) Progress Significant What Are We Doing? Around 2.52 liters per liter of product (Coca-Cola or other coke brand soft drink) in 2006; 3% improve-ment since 2005. Around 19% improvement in water use ratio since 2002, when we first reported ratio externally. Nearly 288 billion liters used overall in 2006; 6% decrease since 2002. Pledged to replace the water we use in our beverages and their production. Around 83% compliance in 2006 with our own strict internal standards, which meet and often exceed applicable laws; increase of 2% since 2005. Approximately 97% of our global unit case volume in 2006 was delivered in refillable, recyclable or bulk primary packaging systems. Redesigned packaging to use fewer raw materials, including our contour glass bottle, with which we saved 89,000 metric tons of glass in 2006. Solid Waste Recycling Solid Waste Ratio Moderate Around 1.20 million metric tons of solid waste generated in 2006; 1% increase since 2005. 10.47 grams/liter of product in 2006. (Contd...)
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Committed to establish water use efficiency goals for global operations by 2008.

Total Water Use

Significant

Changes in our product mix may result in more waterintensive (though not less efficient) operations.

Wastewater Treatment Compliance

Moderate

Target to return 100% wastewater used in more than 800 plants in the Coca-Cola system to the environment at a level that supports aquatic life by the end of 2010. Invested in a PET bottle-tobottle recycling plant which opened in Austria in 2007. Launched global packaging data management system to better assess environmental performance.

Sustainable Packaging

Moderate

Recycled or reused 79% of solid waste; 1% improvement since 2005.

Moderate

Exhibit 1: The Coca-Cola Company Corporate Responsibility Review Detailed Performance on Environment and Community Dimensions Environment Performance Metric Corporate Social Investment (CSI) Progress Moderate What Are We Doing? Around $70 mn in global CSI in 2006. Around $4 mn in Company matching gifts (included in $70 mn total).

(...contd)

Around 7% improvement in solid waste ratio since 2005. Distribution of $70 mn in CSI: community and economic development, $25 mn; higher education, $20 mn; culture and arts; $13 mn, other, $7 mn; health and social services, $3 mn; environment, $2 mn. Nearly $1.4 bn in local capital expenditure in 2006 versus $0.9 bn in 2005. $8.2 bn in goods purchased in 2006no change since 2005.

Economic Impact

Moderate

Around $3.4 bn in global salaries and benefits in 2006 versus $3.0 bn in 2005. Around $2.9 bn in shareowner dividends in 2006 versus $2.7 bn in 2005.

Source: The Coca-Cola Company 2006, Corporate Responsibility Review, [Link] p. 15.

The water usage ratio improved by 19% since 2002 and the company has pledged to replace the entire amount of water that it uses; Around 83% of wastewater was treated in 2006 as per the companys strict internal standards which is more stringent than the applicable legal standards. By the end of 2010, the company targets to return 100% of the water used by its 800 plus plants under the Coca-Cola system, after treating the water to a level that can support aquatic life; Around 79% of the solid waste generated is either recycled or reused; and During the year 2006, the company spent $70 mn on Corporate Social Investment (CSI). The distribution being: Community and economic development, $25 mn; higher education, $20 mn; culture and arts, $13 mn; health and social services, $3 mn; environment, $2 mn; and others, $7 mn. The Coca-Cola Company finds a place on the FTSE4Good Index9, which recognizes companies that meet globally accepted corporate responsibility standards. It has also been included in the Dow Jones Sustainability North America Index, which ranks companies based on corporate governance, supply chain management, environmental management, labor practices,
9

The FTSE4Good Index Series has been designed to measure the performance of companies that meet globally recognised corporate responsibility standards, and to facilitate investment in those companies. Transparent management and criteria alongside the FTSE brand make FTSE4Good the index of choice for the creation of Socially Responsible Investment products. The Icfai University Journal of Corporate Governance, Vol. VII, No. 4, 2008

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and corporate citizenship.10 As the company grew, it expanded to other markets. It not only transported its brand overseas, but also its philosophy of being a socially responsible citizen.

Coca-Cola in India
In the 1970s, the Indian soft drinks market was comparatively quite small and Coca-Cola was the market leader. The arrival of the Foreign Exchange Regulation Act of 1973 required foreign companies in India to dilute their shareholdings to 40% in their Indian subsidiaries. While many other companies obliged, Coca-Cola was one of the few major MNCs that decided to pull out of India. Coca-Cola left India in 1977, because diluting the shareholding could also have meant divulging the secret formula for its soft drink concentrate. The liberalization process initiated by the Indian Government in 1991 made it possible for foreign companies to operate in India, without the compulsion of local equity participation. Coca-Cola re-entered India in 1993, by establishing a 100% subsidiary called Hindustan Coca-Cola Beverages Private Limited (referred to in simple terms as Coca-Cola India). It also acquired the soft drink brands (Thums Up, Gold Spot, Limca, Maaza and Citra) and bottling network of the leading local soft drinks company at that timeParle Beverages, thereby consolidating its position. Pepsi Cola had come into India five years earlier in 1988, through a joint venture route.11 But Coca-Cola gradually closed-in on Pepsis first mover advantage. Coca-Cola has invested more than $1 bn into its business in India. The Indian operations comprise around 25 company-owned bottling plants, complemented by a network of franchisee-owned bottling units and also contract packers who manufacture several products for the company. As of June 2005, there were 78 manufacturing locations, spread across 24 states in India. Coca-Colas business system provides direct employment to around 6,000 persons. In addition, about 125,000 people are engaged in a variety of supporting activities in the companys procurement, supply, and distribution networks.12 However, according to the terms under which Coca-Cola came back to India, it was required to reduce its stake to 51% in favor of resident shareholders by June 2002. However, the company sought an extension of five more years under the premise that the Indian operations had substantial accumulated losses (Rs. 21,780 mn at that time13) and that the stock market too was not buoyant. However, critics argue that the real reason why Coca-Cola dodged the Initial Public Offering (IPO) was that it did not want the details of its operations (and its wrongdoings) from becoming public. There is nothing in the Indian law which prevents a loss-making firm from offering shares to investors and the Indian stock market has seen several rounds of bullish upsurges over the past decade. The Indian governments stand on foreign investments has since become more liberal and Coca-Cola India continues to be a wholly-owned subsidiary of the parent company.
10 11 12 13

Mission, Vision & Values, [Link]. Pepsi Foods LimitedJoint Venture of PepsiCo, Punjab Agro Industries Corporation and Voltas Limited. Introduction, [Link] Coca-Cola Bends Rules in India, [Link] May 13, 2002. 47

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Coca-Cola Indias Corporate Citizenship

Little drops of joy, that is the latest tagline of Coca-Cola India. The Planet section of the companys website [Link] describes its role as a caring company under four categoriesEnvironment and Society, Corporate Citizenship, Health and Wellness and Water Management. The Citizenship section of the companys website proclaims: The Coca-Cola Company exists to benefit and refresh everyone it touches. It then goes on to list the companys four guiding principles of citizenship: Through our actions as local citizens, we strive every day to:

Refresh the marketplace Enrich the workplace Preserve the environment; and Strengthen our communities14

Regarding Refresh the marketplace, it states: We will adhere to the highest ethical standards, knowing that the quality of our products, the integrity of our brands and the dedication of our people build trust and strengthen relationships.15 It is explained further that the Coca-Cola eKO System translates the third principle (i.e., preserve the environment) into action, so that business is conducted in ways that protect, preserve and enhance the environment. Under strengthen our communities, the website goes on to add: We will seek to improve the quality of life through locally-relevant initiatives wherever we do business.16

Coca-Colas eKO System: Water and Solid Waste Management Initiatives in India
Coca-Cola prides itself as being an eco-friendly company. Its motto proclaimsWhen we heal the earth, we heal ourselves. The company claims to follow the eKO system in all its plants in 202 countries across the globe. The Coca-Cola eKO system has two facets: (1) Environment, and (2) Safety and Loss Prevention (SLP). The eKO system is guided by five major policies: commitment to lead, compliance and beyond, accountability, minimizing impact-maximizing opportunity, and citizenship. Like its parent company, the Indian subsidiary too adopts the eKO system, some initiatives of which are described briefly hereunder.

Water Resource Management

On wastewater management in particular, the company website states: The company operations are designed to minimize wastewater generation through implementation of
14 15 16

Citizenship Our Promise, [Link] Citizenship Charter, [Link] Ibid.

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Reduce, Reuse and Recycling policy. The wastewater generated at each manufacturing location is treated as per local State Pollution Control Board (SPCB) requirement and company standards. The wastewater treatment plants are designed to comply with the company standards as well as the local SPCB standards. As per company policy, wastewater treatment operations are required to be equipped with fish pond to demonstrate support of aquatic life in companys treated wastewater.17 The company reported that water used per liter of beverage produced is reported to have gone down by 24% over a period of four years (from 5.12 liters in 2000 to 3.9 liters in 2004).18 Besides, Coca-Cola India has supported drinking water projects in Maharashtra and Gujarat under the Indira Awaas Yojana.19 It has launched a check dam project and desilting program at Bidadi, near Bangalore.20 The company has also restored the historic Lehartara pond in Varanasi, and the Panna Meena Ka Kund and Sarai Bawri (both heritage wells/water sources) near Jaipur.

Elixir of Life: Drinking Water Project in Schools

In Tamil Nadu, Coca-Cola has partnered with the Rotary Centenary Charitable Trust to provide clean drinking water to 100 panchayat21 primary schools, which would benefit more than 30,000 children. Based on this experience, Coca-Cola has initiated similar projects in other parts of the country and aims to provide drinking water facility to 1,000 schools across India by 2010.22

Rainwater Harvesting
Coca-Cola India began Rainwater Harvesting (RWH) at its company-owned bottling plants in 2002. By 2004, the company reported having created rainwater harvesting potential of 1.42 Million Cubic Meters (MCM)including both inside and outside the plants, which was roughly 72% of the groundwater used by the Company-owned Bottling Operations (CBO). As of November 2007, the website of the company further stated: The company plans to become a Water Positive (with reference to groundwater used by CBOs) organization by providing RWH structures inside the plants as well as outside the plants.23 Coca-Cola India has been supporting the community RWH projects in a major way, by partnering with the government, local NGOs and residents welfare associations. A number of RWH projects have been taken up across the country in places such as Delhi, Gurgaon, Kolkata, Bhubaneswar, Mumbai, and Jamshedpur.
17 18

19 20

21 22

23

eKO: Compliance & Beyond, [Link] Minimizing Impact Maximizing Opportunities Water Resource Management, [Link] Government of Indias housing scheme for the poor named after former Prime Minister Indira Gandhi. Coca-Cola to Use Less Water in Drink Production, [Link] June 5, 2007. Local village governing council. R Rangaraj (2007), Rotary Drinking Water Project in Schools, available at: [Link] News/Aug2007/[Link], August 30. Minimizing Impact Maximizing Opportunities Rain Water Harvesting, [Link] eko/rain_water_harvesting.asp 49

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Solid Waste Management and Other Initiatives

The various solid wastes generated by Coca-Colas operations are reported to be cardboard boxes, gunny bags, poly bags, plastic, wooden and metal scrap, etc. These are segregated and stored for easy handling and recycling. Solid waste was recycled to the extent of 86% in 2004.24 Coca-Cola India won the Delhi Governments Bhagidari Award four times in a row from 2004 to 2007, for its water conservation (rainwater harvesting) and other community development (including recycling of PET bottles) programs. Bhagidari is a public-private partnership initiative launched by the Government of Delhi. The company was also awarded the Corporate Social Responsibility Award for the year 2004-05 by the J. M. Institute of Speech and Hearing at Patna for its support in the upliftment of physically challenged children. The company also organized and supported several environment awareness programs, quizzes and painting competitions for children, polio immunization programs, clean village campaigns and tree plantation programs.

The Contrarian View

Coca-Cola is not new to controversies. While it is among the top rated brands in the world, there have been many instances of the company being hauled up for a variety of issues across the worldpertaining to its business practices and also relating to the adverse health effects of its flagship product. Even in India, Coca-Cola has faced controversies and there is a contrarian view that the companys community and environmental initiatives are only a greenwash to cover-up its wrongdoings. It is alleged that the company adopts double standards, and that developing countries like India end up getting the wrong end of the stick. The company has received much adverse publicity in recent years, particularly on the issues of (1) Pesticide residues in its soft drinks and mineral water; and (2) Water depletion, and water and soil contamination by its bottling plants.

Coca-Cola: A Cocktail of Pesticide Residues?

In August 2003, the Center for Science and Environment (CSE), a non-government organization based in Delhi that focused on industrialization and environmental issues, released a press statement claiming that major soft drink brands sold in and around Delhi contained excessive amounts of pesticide residues. Tests conducted by the CSEs Pollution Monitoring Laboratory (PML) found that samples of Pepsi and Coca-Cola brands sold across the city contained pesticides 30 to 36 times more than the limits set by the European Economic Commission (EEC) standards. The pesticide residues included lindane, DDT, malathion and chlorpyriphos, which are known to cause cancer, damage the nervous and reproductive systems, cause birth defects and disrupt the immune system. The Coca-Cola brands had average pesticide residue of 0.015 mg per liter. In the absence of clear standards applicable for soft drinks in India, CSE used the available EEC standards. CSE also tested samples of soft drinks sold in the US and found that they met
24

Minimizing Impact Maximizing Opportunities Solid Waste Management, [Link] eko/solid_waste_management.asp The Icfai University Journal of Corporate Governance, Vol. VII, No. 4, 2008

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with the standards, unlike their Indian counterparts. CSE also observed that the soft drink companies cannot be taken to court because there is no way to pin them down based on Indian laws. The pesticides report created quite a stir in India. In response, the Government of India banned Coke and Pepsi products in the Parliament and several state governments took up their own investigations. Both Pepsi and Coca-Cola refuted the allegations as baseless and blamed the testing method that was used. CSE pointed out that it had followed standard procedures prescribed by the US Environmental Protection Agency, including gas chromatography and mass spectrometry. Coca-Cola came out with a detailed response which was given wide publicity through the press, the company website and other forums. The most substantial elements of the response were as follows:

As in the rest of the world, Coca-Colas Indian plants too use a multiple barrier system
to remove all potential contaminants including pesticides, mineral/heavy metal residues, etc.;

The products in India are tested to the same standards as adopted in the rest of the
world, and they are absolutely safe. They are also subjected to stringent tests at world-class, independent and accredited laboratories, both locally and abroad;

There are no standards for soft drinksneither in the US, the EU nor in India.
There are standards for water, and the water used by Coca-Cola in India conforms to both BIS25 and EU standards for drinking water;

The groundwater used is tested with very sophisticated and expensive equipment
which can identify pesticide residues in parts per billion; and

There should be a national sampling and testing protocol for soft drinks to avoid
sensationalizing reports based on unsubstantiated allegations. This would be to the good of the consumers and also of the soft drink companies. Some sections of the press even reported incidences of farmers spraying Coca-Cola and other soft drinks as pesticides on their crops. The company responded that these were baseless allegations with no scientific basis and that the soft drinks would not prove effective as pesticides. While six states imposed restrictions on the sale of soft drinks, the Kerala Government imposed a complete ban on the sale of soft drinks from Coca-Cola and Pepsi Cola across the state. This government order was, however, squashed by the Kerala High Court on the ground that the state government had no powers under the Prevention of Food Adulteration Act, to ban food products.26
25 26

Bureau of Indian Standards. Issue Far from Over, State Challenging High Court Order, [Link] [Link], September 22, 2006. 51

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Earlier, in February 2003, CSE had released a test report on packaged drinking water brands. Coca-Colas Kinley mineral water was reported to have 15 times more pesticides than the permissible upper limit according to EEC standards, while the pesticide residue levels in some competing local brands were very much higher. Coca-Cola chose to remain largely silent, and the issue was gradually forgotten.

The Ever-Thirsty Water Guzzler

Another accusation against Coca-Cola has been of causing severe water shortages in several parts across India. A number of its bottling plants are located in drought-prone areas. A bottling plant typically extracts a million liters of water per day, resulting in serious depletion of groundwater. This leads to thousands of residents in the surrounding areas facing severe water shortage even for drinking, cooking and bathing. Further, sludge and effluents from the bottling units contain excessive amounts of heavy metals such as lead, cadmium and chromium, thereby polluting nearby streams and other water sources and even contaminating the land used for agriculture. In October 2003, the Indian governments Central Pollution Control Board (CPCB) had found the sludge at eight Coca-Cola bottling plants in India to contain very high levels of lead, cadmium or chromium, and had advised the company to consider its sludge as industrial hazardous waste and take remedial action accordingly.

The Controversy at Plachimada

Hindustan Coca-Cola Beverages bottling plant at Plachimada in Kerala (south India), one of the largest in India, has been closed since March 2004, in the light of opposition from the local community. The local people had accused the company of polluting the water and soil, and causing severe water shortage.27 This incident received worldwide attention. The bottling unit in Plachimada consumed 1.5 million liters of water per day, of which it drew 800,000 liters from borewells. As this was insufficient, it also drew water from other sources nearby, thus leaving no water for the farmers coconut groves and vegetable farms. Even the well water was contaminated and rendered unpotable. The company, however, responded that there was no evidence that it was overusing groundwater and that villagers were suffering due to its actions. Nonetheless, the Kerala High Court ordered the bottling unit to stop extracting groundwater (thus leading to its closure). The court observed that the plant was using up groundwater on a magnitude which was way beyond what could be considered reasonable, thereby breaking the natural water cycle.28 Earlier, the CPCB had confirmed that the plants sludge, which the company was distributing to farmers as fertilizer, contained high levels of heavy metals. Further, tests by an independent
27

28

Krishna Iyer V R (2005), Plachimadas Right, available at: [Link] [Link], Vol. 22, Issue 16, July 30-August 12. Coca-Cola India Ordered to Stop Extracting Water in Kerala, [Link] ContentID=1500, January 2, 2004. The Icfai University Journal of Corporate Governance, Vol. VII, No. 4, 2008

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agency conducted on behalf of the British Broadcasting Corporation (BBC) had confirmed that the sludge contained high levels of lead and cadmium, which, in turn, contaminated the groundwater. Coca-Cola India, however, maintained that the fertilizer was absolutely safe.29 The plant at Plachimada remains closed to this day (November 2007) because it has not been possible to obtain the consent to operate permit from the regulatory bodythe Kerala State Pollution Control Board (KSPCB). On August 19, 2005, KSPCB had ordered closure of the plant as the company was yet to explain the large amount of cadmium in its sludge, which was contaminating the local groundwater, making it unfit for human consumption.30 This was causing allergic symptoms and perpetual headache among the local population. In October 2007, the KSPCB served a notice to the company asking why criminal charges should not be filed against it for causing pollution. The company responded that it was a zero discharge plant and that all studies carried out over the past four years had found no traces of pollution; which was completely contrary to the findings of various studies conducted by both government and private agencies.31

Depletion of Groundwater at Mehdiganj

In recent years, Coca-Cola has taken up rainwater harvesting in the areas near its bottling plants as a public relations exercise. Coca-Cola Indias website claims that a substantial amount of the groundwater we use in our operations is returned to groundwater systems, thereby helping to replenish groundwater resources. However, India Resource Center (IRC), a campaign organization, dismisses the companys claims by citing the example of Mehdiganj. In the context of protests at the bottling plant at Mehdiganj in Uttar Pradesh (in north India), when asked how much rainwater was harvested at this plant, Coca-Cola Indias Senior Manager for Public Affairs and Communication had announced that 7 million liters of water had been harvested at Mehdiganj during 2005. IRC observes that even at a conservative 250,000 liters of water consumption per day, the quantum of rainwater harvested works out to just 8% of the total consumption, which can hardly be called substantial. Incidentally, data from the Central Groundwater Board of India had found that the groundwater level in eight villages within a 3-km radius of the Mehdiganj bottling unit had dropped substantially since the plant began operating there in 1999. While pre-monsoon groundwater levels had dropped from 6.64 m in 1999 to 8.34 m in 2005, the post-monsoon groundwater level had declined quite alarmingly from 3 m to 9 m during the same period. The area around the bottling plant has also been declared a dark zone, which means that groundwater has been overexploited. The company, however, refuted the governments observation. The groundwater table has generally been going down in many parts of India due to limited rainfall coupled with increasing demand on the available water.32
29

30

31 32

India: Coca-Cola Attacked for Toxic Fertiliser Gifts to Farmers, [Link] [Link]?Story_ID=1011 Criminal Charges Against Coca-Cola Likely in India, [Link] October 15, 2007. Ibid. Abhay Jain (2006), Patkar Leads Protests Against Cola Giants in Gurgaon, available at: http:// [Link]/2006/20061005/[Link]#5, October 5. 53

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The Mehdiganj plant was also found to be polluting the water and soil with hazardous waste. The Central Pollution Control Board (CPCB) had tested the sludge generated by the plant in 2003 and had asked the company to treat its sludge, as it contained excessive amounts of lead, chromium and cadmium. The bottling plant had been supplying this waste to farmers as fertilizer. A subsequent study in October 2006 by the Peoples Science Institute and the Hazards Center found that both water and soil in the neighborhood had been contaminated with heavy metals. As a fallout, over 1,000 villagers from Mehdiganj demonstrated before Coca-Colas northern regional headquarters at Gurgaon and also before the Parliament House in Delhi demanding that the company either clean up its act or leave the country. Subsequently, there were also protests in front of the District Magistrates office in Varanasi in June 2007, demanding that the bottling unit at Mehdiganj be closed.

Protests at Sinhachawar
Another round of protests came in October 2007, when hundreds of people rallied against the Coca-Cola bottling plant at Sinhachawar in the Ballia district of Uttar Pradesh. This plant was operated by Brindavan Bottlers Limited, one of Indias largest bottlers of Coca-Cola. The demonstrators were demanding that the plant be closed permanently.33 Incidentally, Hindustan Coca-Cola Beverages (i.e., Coca-Cola India) was contemplating buying out this bottling unit from the franchisee. The reason for the protest was that the bottling plant was dumping hazardous waste both inside and outside the factory premises (in some of the surrounding fields), had illegally occupied a part of the common land belonging to the village community and that it had also blocked the usage of a public road that passed through the bottling units premises. Further, water wells and hand water pumps had dried up since the plant began operations. The locals had formed a Coca-Cola Bhagao, Krishi Bachao Sangharsh Samiti (Get Rid of Coke, Save Farming Struggle Committee) to spearhead their movement against the plant.34 The main concern was that the plant was contaminating the land and water, thereby jeopardizing the health and livelihood of the local community. Earlier, in June 2007, a team from the Indian Resource Center (IRC) had reported that the bottling plant at Sinhachawar was dumping industrial waste indiscriminately. It was also reported that its effluent treatment plant was not working and the effluents were being released into surrounding agricultural fields and into a canal that fed into the River Ganga (Ganges). The report also noted that the plant was not disclosing the amount of hazardous waste consumed and generated, as required by a Supreme Court ruling that was applicable to all industries that handled hazardous materials.35
33

34

35

Community Files Police Report Accusing Coca-Cola of Water Theft and Pollution, [Link] news/2007/[Link], October 25, 2007. Community Demands Immediate Shut Down and Investigation, [Link] [Link], June 4, 2007. Ibid. The Icfai University Journal of Corporate Governance, Vol. VII, No. 4, 2008

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A Champion in Converting Freshwater to Wastewater?

As already noted above, the Coca-Cola Company used 288 billion liters of fresh water in 2006, which is enough to meet the worlds drinking water needs for 10 days! The company converted much of this into wastewater, and used it for cleaning in its production process. Such wasteful use of water seems quite ironical, particularly as it comes from a company which calls itself a hydration company and boasts of grand proposals for water conservation in its annual corporate responsibility reports.36 While issues about Coca-Colas water usage were being raised, Coca-Cola in July 2007, announced a $20 mn global project for water conservation, in partnership with the World Wildlife Fund. The project, which aims at conserving river basins, is to be implemented over a period of three years. However, the project does not cover India, where, its critics claim, it has done the most harm, by way of polluting the waters. Sceptics questioned whether a company which has a global annual advertising budget of $2.4 bn and a market capitalization of $100 bn, could be considered serious in its role as a socially responsible company by sponsoring a $20 mn project spread over three years. IRC37 dismisses the water conservation project as just a greenwash.38

The Way Ahead

With increasing criticism in India and elsewhere, several corporate watchdogs are insisting that the government bodies implement stringent norms to curb the detrimental practices of companies like Coca-Cola. Recently, the Government of Indias Ministry of Health assigned the Indian Council of Medical Research (ICMR) to carry out a controlled study to assess the effect of consumption of carbonated beverages on health. This study has been initiated based on the recommendations of a national level expert group. This expert group was constituted for providing technical advice to the pesticides residue subcommittee formed in November 2004 in the context of the Cola controversy.39 In a bid to project a more humane and community-focused image of the organization, Coca-Cola India launched a major corporate campaign supported by a big budget in October 2007 named, Drops of Joy. This was part of a global campaign to project Coca-Cola as a total beverage solutions company and not just a cola or carbonated soft drink maker. The campaign not only showcased the company as a socially responsible organization, but also highlighted various relatively healthier options (to Cola) offered by the company such as fruit juices,
36

37 38

39

Indian Campaign Forces Coca-Cola to Announce Ambitious Water Conservation Project, [Link] July 30, 2007. Indian Campaign Forces Coca-Cola to Announce Ambitious Water Conservation Project, [Link]. Greenwash refers to disinformation disseminated by an organization so as to present an environmentally responsible public image. Hard Times Likely for Soft Drinks, The Economic Times, March 17, 2008. 55

Case Study

vitamin-enriched water, energy drinks, etc. Coca-Cola India had recently launched Minute-Maid pulpy orange juice and Cadbury Schweppes water, and soon planned to launch another bottled water brandBonaqua.40 With carbonated beverages increasingly being viewed as junk food, this shift of focus seemed quite akin to ITC (Indias leading cigarette maker) diversifying into a variety of food and personal care products. The company also launched a 45-minute film on environment protection and enhancing partnership with NGOs, which was planned to be shown in more than 5,000 schools all over India.41 While the company is taking several initiatives, doubts persist among the industry observers, NGOs, and the public whether these CSR initiatives are really genuine. J

Reference # 04J-2008-10-04-02

40

41

Kala Vijayraghavan and Shailesh Dobhal, Coke to Uncork Humane Face via Drops of Joy, [Link] August 3, 2007. Coca-Cola to Use Less Water in Drink Production, [Link]. The Icfai University Journal of Corporate Governance, Vol. VII, No. 4, 2008

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