Reference no: EM131213904

Discussion Case: Coca-Cola's Water Neutrality Initiative

From approximately 2005 to the early 2010s, Coca-Cola faced an emerging issue: its cor- porate impact on water quality, availability, and access around the world.

The Coca-Cola Company (TCCC) was the world's largest beverage company. The com- pany operated in more than 200 countries, providing 1.7 billion servings a day of carbon- ated beverages, juices and juice drinks, bottled water, and ready-to-drink coffees and teas. The company also partnered with more than 300 bottlers, independent companies that manufactured various Coca-Cola products under franchise. Seventy percent of the company's revenue came from outside the United States.

Water was essential to Coca-Cola's business. The company and its bottlers used around 82 billion gallons of water worldwide every year. Of this, about two-fifths went into finished beverages, and the rest was used in the manufacturing process-for example, to wash bottles, clean equipment, and provide sanitation for employees. Water supplies were also essential to the production of many ingredients in its products, such as sugar, corn, citrus fruit, tea, and coffee. Coca-Cola's chairman and CEO put it bluntly when he commented that unless the communities where the company operated had access to water, "we haven't got a business."

In 2003, Coca-Cola was abruptly reminded of the impact of its water use on local com- munities when the Center for Science and the Environment, a think tank in India, charged that Coca-Cola products there contained dangerous levels of pesticide residues. Other activists in India charged that the company's bottling plants used too much water, depriv- ing local villagers of supplies for drinking and irrigation. Local officials shut down a Coca- Cola bottling plant in the state of Kerala, saying it was depleting groundwater, and an Indian court issued an order requiring soft-drink makers to list pesticide residues on their labels. In the United States, the India Resource Center took up the cause, organizing a grassroots campaign to convince schools and colleges to boycott Coca-Cola products.

Water was also emerging as a major concern to the world's leaders. In the early 21st century, more than 1 billion people worldwide lacked access to safe drinking water. Water consumption was doubling every 20 years, an unsustainable rate of growth. By 2025, one- third of the world's population was expected to face acute water shortages. The secretary general of the United Nations highlighted water stress as a major cause of disease, rising food prices, and regional conflicts, and called on national governments and corporations to take steps to address the issue.

Part One

Business in Society

Discussion Questions

Coca-Cola undertook a comprehensive study, surveying its global operations to assess its water management practices and impacts. It also reached out to other stakeholders, includ- ing the World Wildlife Fund, the Nature Conservancy, the humanitarian organization CARE, and various academic experts, to seek their advice. As the leader of TCCC's water steward- ship initiative explained, the company also "sat down with each of our top bottlers, all of our operating groups, and really walked through all aspects of water and really understood where they were coming from and reached consensus though a very deliberate process."

In 2007, TCCC announced an aspirational goal of water neutrality, "to safely return to nature and to communities an amount of water equal to what we use in all our beverages and their production, by the year 2020." This goal would be accomplished in three ways: reduce, recycle, and replenish. The company said it would reduce its own use of water by running its operations more efficiently. It would discharge water used in manufacturing only if it were clean enough to support aquatic life-treating its wastewater itself where local authorities were unable to do so. Finally, the company would replenish the balance of the water it used (for example, as an ingredient in bottled beverages) by participating in various water conservation projects globally, such as river conservation, rainwater collection, and efficient irrigation.

As the water neutrality initiative proceeded, Coca-Cola moved to measure and publicly share its results. In 2011, the company reported that it had reduced its "water ratio" (the number of gallons of water used per gallon of product produced) by 13 percent from base- line levels. It estimated that 39 percent of its facilities were using recycled water, and 23 percent of the water used in finished products had been replenished through community water projects. The company also sought to measure the benefits of more than 300 partner- ships with governments and nonprofit organizations around the world, ranging from build- ing water treatment facilities in Colombia, to restoring watersheds in Thailand, to improving sugarcane irrigation in Australia. Coca-Cola estimated in 2011 that these con- servation projects had replenished the equivalent of 31 percent of the water used in its finished beverages, although it acknowledged that its methodologies for accurately quanti- fying water benefits were still evolving.

Sources: The Coca-Cola Company, The Water Stewardship and Replenish Report, 2011, at www.thecoca-colacompany .com/citizenship/pdf/replenish_2011.pdf, and 2010/2011 Sustainability Report, at www.thecoca-colacompany.com /sustainabilityreport; Business for Social Responsibility, "Drinking It In: The Evolution of a Global Water Stewardship Program at The Coca-Cola Company," March 2008; and "Coca-Cola in India," in Michael Yaziji and Jonathan Doh, NGOs and Corporations (Cambridge, UK: Cambridge University Press, 2009), pp. 115-19.

1. What was the public issue facing The Coca-Cola Company in this case? Describe the "performance-expectations gap" found in the case-what were the stakeholders' concerns, and how did their expectations differ from the company's performance?

2. If you applied the strategic radar screens model to this case, which of the eight environ- ments would be most significant, and why?

3. Apply the issue management life cycle process model to this case. Which stages of the process can you identify in this case?

4. How did TCCC use stakeholder engagement and dialogue to improve its response to this issue, and what were the benefits of engagement to the company?

5. In your opinion, did TCCC respond appropriately to this issue? Why or why not?