Cocal_Cola

CASE 5-1 COCA-COLA IN INDIA 1. What should Coca-Cola do to appease the Indian government and ensure its survival in the market' 2. What effect will this case have on Coca-Cola’s operations in India' 3. What lesson does this case have for other multinationals that want to enter the Indian market' Coca-Cola is in Kerala, India. Kerala, a naturally well watered region, was hailed as a success story for India. However, in 1992 Coca-Cola set-up a bottling plant in the state, which locals claim led to disastrous environmental impacts and water shortages. Coca-Cola began to draw 1.5 million liters a day from the local groundwater and within six months changes were noticed in the quality and quantity of well water. Water from a well in Plachimada supplying 100 families was unfit for any purpose turning brackish and white. The water was classified as ‘very hard’ and also contained very high levels of calcium and magnesium making it unable to be used for washing and drinking. It is claimed that this has been caused by over-exploitation of ground-water by Coca-Cola. Coca-Cola’s operations in Kerala have had huge impacts on local water resources with the lands of 2000 people within 1.2 miles of the factory drying up and over 100 people reporting severe stomach aches which they claim are caused by drinking unsafe water. The lack of water has also affected agriculture with yields declining. This has wider social, economic and cultural effects with farmers having to borrow money to dig bore holes and women having to walk for miles to fetch clean water (Jayaraman, 2002, [www]).   Coca-Cola has caused stress on local water resources in other Indian states too such as Andhra Pradesh where wells providing 25,000 people with water have dried up due to the company drawing 225,000 litres of water a day. Also north of Chennai Coca-Cola is releasing highly saline effluent into local water systems, which could turn the water brackish. There are other examples of contamination and water shortages in Mehdiganj, Rajasthan and Maharashtra (India Resource [www]). It is worrying that the company doesn’t seem to be concerned about how it affects local systems, for example it functioned without the prescribed effluent treatment systems in Goa for over 40 days (Jayaraman, 2002, [www]).   However, Coca-Cola does seem to be improving its relationship with water. A water stewardship strategy was implemented in 2007 focusing on four areas; plant performance, watershed protection, community water initiatives and global awareness and action. Coca-Cola also promised to replace every drop of water it uses in production by improving water use efficiency, recycling and replenishing water (Coca-Cola Company [www]).  To improve plant performance Coca-Cola has implemented an interactive water resource management toolkit. This allows managers of bottling plants to recognize how much water they use and reports show that Coca-Cola’s water use efficiency has improved 19% since 2002. Coca-Cola’s attitude towards wastewater has also improved with new standards requiring wastewater to be properly treated and by 2006, 83% of the company’s systems met these standards (Coca-Cola Company [www]).   Coca-Cola’s watershed protection will focus on ideas to improve water sustainability and involves a partnership with WWF (World Water Foundation). The company pledged $20 million to help conserve seven of the world’s important river basins, with many in less developed countries (CokeFacts [www]) including the Mekong of Southeast Asia (Coca-Cola Company [www]). These are strong attempts at conserving and protecting watersheds that will help conserve water resources in less developed countries and worldwide.  The final idea connected to Coca-Cola’s water stewardship concerns global awareness and action, with Coca-Cola helping to start up the Global Water Challenge (GWC) in 2006. The GWC is an organisation that;   “Works to consolidate efforts and mobilize the international community to meet the world’s water challenges.” (Coca-Cola Company, 2007, [www]).   The GWC aims to meet the world’s needs for safe water and sanitation through investment and awareness. Coca-Cola was also one of the first companies to support The CEO Water Mandate in 2007. This means Coca-Cola must improve in areas such as; supply chain and watershed management, public policy and community engagement (Coca-Cola Company, [www]). Signing the CEO Water Mandate, meaning that Coca-Cola must meet certain targets, is quite a statement. Many of the initiatives will help those in less developed countries, giving the impression that the company has changed its attitude towards water resources.   Finally, Coca-Cola will focus on three ideas to achieve its pledge to replace every drop of water used. Firstly the company will focus on reducing water use by setting specific water efficiency targets and aiming to be the most efficient user of water by 2008 (within peer companies). This appears to have worked with water use decreasing by 5.6% in the last five years and water efficiency improving 18.6% (CokeFacts, [www]).  Secondly, Coca-Cola intends to recycle its water and aims to have returned all the water used in manufacturing back to the environment by 2010. It will make sure the water is safe by setting stringent wastewater treatment standards. At the moment, 85% of the operations within Coca-Cola comply with these standards (CokeFacts, [www]).   Finally the company aims to replenish the water systems it uses through initiatives including community water access, rainwater harvesting and agricultural water use efficiency. A number of projects have already been set up, for example there are community programs in 40 countries focusing on awareness, management and sanitation and 300 rainwater harvesting systems in place (CokeFacts, [www]).  It must also be noted that water scarcities are caused by other factors. An absence of laws in less developed countries to regulate groundwater abstraction means that entire aquifers can be privatised by people who own just a small piece of land. Also the lack of effective legislation means companies pay hardly anything for the water they extract. Therefore there is no incentive to be sustainable in their use of water (Jayaraman, 2002, [www]). Calder (1999) also points out that the largest volumes of groundwater are abstracted for use in irrigation. This is causing irreversible damage and again there are no legal controls to regulate use. 70% of water supplies are consumed by irrigation and some believe that increasing the efficiency of irrigation systems could provide most of our future water needs (Seckler et. al, 1999).   Coca-Cola does appear to have made a large effort to improve its water use through water stewardship and trying to replace all of the water it uses. It must also be noted that other industries in less developed countries are more wasteful than Coca-Cola, with the beverage industry using less than 1% of India’s water.  There also appears to be a problem with irrigation, which is currently not sustainable. Privatization needs to be addressed and some sort of legal or political control is needed to help conserve water supplies. Therefore, Coca-Cola cannot be entirely blamed for exacerbating or causing stress in less developed countries. However, it does seem like Coca-Cola has had some adverse effects on water supplies through over-exploiting resources and contaminating some supplies, especially in India. Although there is no legislation to stop the company it isn’t very responsible and peoples lives shouldn’t be put at risk for the sake of a fizzy drink. Only time will tell if Coca-Cola does carry on with a more sustainable approach to water, or if the stewardship was just a clever marketing campaign.