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This article is written by Nikita Hora,  a final year student of Jindal Global Law School.

INTRODUCTION

Coke Cola is considered to be the world’s best brand for 11th year in a row by Interbrand.[1] In  2013 Integrated Report ranked it amongst the top three beverage companies and was under top 10 companies with the best reputation amongst US customers[2]. In 2014 Coke has first position in 100 top Corebrand power ranking and top 10 most respected Corporate brands. It ranks sixth in the world’s most admired campany by Fortune and third in official Top Consumer super brands by The Centre for Brand Analysis. [3]  The question is does Corporate Social responsibility play a significant role in improving their goodwill. In this article I want to reflect taking the example of Coke Cola that CSR is a smart and nimble-witted way to bring a social impact and on the same hand to increase company’s profitability or its only Political – Anthropological Concerns. The discourse of CSR that companies adopt and engage with ethics and social and environmental sustainability in addition to making  profit was largely constructed by the multilaterals, partly in an effort  to fend off political ideological attacks and partly to work around the crisis of legitimation that form a part of the larger derailment of ethics in the public sphere. Even it also reflects the fact that construction of CSR is the interventions that were due to the outcomes of the restructuring of global accumulation.

WHAT IS CORPORATE SOCIAL RESPONSIBILITY ALL ABOUT?

Early thoughts of CSR on an academic level can be followed back to the 1960s. In 1991 Carroll’s multi-layered idea of four interrelated viewpoints consisted of: ethical, philanthropic responsibilities, legal and economic.

Carroll proposed a pyramid that examines the measurement of CSR.

It begins with economic responsibilities; He explains that Business organization’s main goal is to make profits by providing goods and services. This is the base whereupon the other three obligations rest.

The second layer comprises of the legal responsibility of an organization. The moral responsibilities are practices that have not been classified into the law. Societal partners anticipate that an organization will do the right thing and in a reasonable manner.

Ultimately, at the highest point of the pyramid organizations have philanthropic responsibilities. Business associations are required to be great corporate nationals, which focus on enhancing the quality of life.

Around year 2000, distinctive sections of society gradually started to investigate multinationals and their operations. Thus CSR developed into a complex idea and currently became a key part of the corporate decision making of various multinationals.

Notwithstanding, this development accompanied a cost that different enterprises needed to pay. Campaigns, scandals and environmental issues etc. brought undesirable media attention, which raises the issues that whether reputation damage is a fundamental inspiration behind adoption of CSR strategies by multinationals.[4]

COCA-COLA’S CONFLICTS

An Indian NGO Centre for Centre for Science and Environment (NSE) in 2003 came up with the report in which it published several campaigns and demonstration. In the report through dozen of samples which were sold in India they proved the evidence of the pesticides present in the product to a level exceeding European standard.[5] With the help of these evidence CSE asked the government to legally enforce water standards.[6] The report gained so much of media and public attention that it caused the immediate effect on the company’s revenues.

There were three allegation which the NGO came up with against the Coca Cola company that were first the product contained unacceptable levels of pesticides second the company extract large amount of groundwater and third that it has polluted the sources.

Few years back in March 2010 the Kerala state government panel had recommended to fine the company’s subsidiary about a total of $ 47 million because it has damaged and degraded the water and soil of Kerala very badly.[7] After this recommendation a special committee was appointed by the committee members to look into the matter of the community members getting affected by the water pollution happened by the company.

The consequences that Coca Cola had to go through the long legal procedures were lost in consumer trust and reputation damage both in India and abroad. After the release of the CSE report in 2003 the overall sales dropped in India was 40%. The impact in annual sales was a decline of 15% in overall sales in 2003 in comparison to prior annual growth rates of 25-30%[8].

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Coca Cola was considered as a corporate villain in India that only cared of profits instead of public health. The conflict which the company was undergoing with India got highly published that it caught the attention if the US consumers. The students joined the two activist groups in the US after the series of demonstration which resulted in the temporarily stoppage on the Coca Cola product in 10 American universities at their campus facilities.[9]

After the environmental impact report Coca Cola realized that it could have both positive and negative impact on business. After the Indian NGO has released the report that stated that Coca Cola beverages has pesticides the company’s stock dropped by 30-40% and the ending what was a 75% growth trajectory over the prior five years.[10]

REASONS FOR INVESTING IN COCA COLA

Coca- Cola corporate as an example that demonstrates the first theatre of CSR’s priority is generating environmental and social value it is not definitely something which would create an economic return for the corporation.

The company always come up with strategic philanthropy through which they get intangible benefits in the form improved social capital and brand awareness which ultimately translate into business profits but this is not CSR goals. In fact philanthropic CSR is typically considered to be cost that necessarily the company needs to spend so that corporate would prove charity as their priority. Additionally, philanthropic CSR initiatives in the first theatre typically reside under the purview of corporate and community affairs is that the managers are hardly tied with the business operations. Example in philanthropic CSR the role that business expenditure is not expected to generate a tangible financial value. It may, in a sense, be considered the “purest” form of corporate social responsibility.

The illustration of the philanthropic CSR is only the side of the story where corporation come up with the voluntarily CSR with the good intentions. However in other cases the company might engage in charitable or CSR activities due to societal pressures instead of their choice. Most of the time the journalists, activist and civil social organization cast aspersions on business to work on improving the environmental or social consequences.

The company may or may not to culpable they launch philanthropy campaign so that they could fend off their potential reputation damages. There are a lot of time company launch philanthropic campaigns so that they could repair their reputation and after they are being penalized or sanctioned for their regulatory infractions or unethical practices. Regardless of being it reactive or pro active the company is motivated of undertake CSR initiatives as its first step because it is very loosely connected to the business strategy. In the proactive approach the reason of the CSR ties more directly to the purpose and value of the people in the business while in reactive instances the primary motivation is to annul the protesting voices. [11]

INCENTIVES IN SPENDING IN CSR ACTIVITES

The first step taken by the Coke Cola after the lawsuit and loosing consumers and stakeholders trust was Aqueduct Alliance[12]. Coca-Cola’s involvement in the Aqueduct Alliance was a showcasing move that was undertaken to strengthen the corporation’s reputation, while at the same time evading personal liability and furnishing the enterprise against future claims concerning groundwater.

Coca-Cola’s cooperation in the Aqueduct Alliance was a showcasing move that was undertaken to strengthen the company’s reputation in regards to

  1. i) General society and shareholders
  2. ii) Evading any type of personal liability,

iii) Arming the organization against future claims concerning groundwater consumption.

Thus increment in ecological transparency and combining shareholder values into the organization’s environmental decision-making process would be a profound solution in these regards.

Coca-Cola’s involvement in the Aqueduct Alliance reflects upon the rising corporate movement, which focuses upon addressing ecological concerns as a component of taking decisions which are directly related to marketing practices and resonating with the stakeholders.

Earlier there was an assumption among the corporations that effects of their activities is a method for complying with legal actions but later on there was a shift among corporates, diverting there focus towards using environmental alertness as a strategy for booming profits.

 According to Coke Cola Company the world is interconnected the work of America’s business and humanitarian organization helps children and families in the developing world improve their lives it is not only the right thing to do but the smart thing as it helps to increase company’s profit as well as strengthen national security and economic prosperity. The company believes that it is very important to do strategic investment in development and diplomatic programmes as it provide tremendous returns not only for national interest but also brings values to the company.   The American business like Coca-Cola cannot expand overseas business alone. Working to alleviate poverty, illiteracy and poor health is an essential building block for stable societies and families and the support of the from the individual donors, corporate partner like Coca Cola and its partner from U.S. foreign assistance allows Save the Children to carry out its significant work. It is considered that in a stable society there are likely to have less chance to succumb to terrorism and extremism.

To be successful Coca-Cola requires clean water, electricity and roads. It helps Coca Cola when the company employees largest employer in Africa and is the top leader providing people with opportunities overseas to earn better living, as well as benefitting in the developing countries.[13]

Recently Coca Cola has come with a new dialogue on the role of the business in the society “Combing profit and purpose”. The company strongly believes that the upcoming leaders of next generation will have different idea in the context of social purpose returns and benefits. The social purpose is viewed as a key return to the future survival. It is important for the company to build trust and reputation with the stakeholders as the current and future or up coming leaders considered return on their investment in creating social purpose. The company gives importance to the future generation for business survival and so that they could create closer relationship with the customers and this can be achieved by engaging in social purpose strategy as they cite increased innovation, increased trust and engaged employees in business as major returns.

According to this dialogue 86% of the both current and future leaders feels the company will have competitive advantage now and in future if the business have a focus on both societal, environmental and economic value.

HOW COCA COLA SEE SUSTAINABILITY? 

The company firmly believes that businesses and brands are increasingly beholden to healthy communities and constituents for their bottom line growth. The company intent on growing the business by making a difference whenever our business touches the world and the world touches there` business. The sustainability of Coke’s business depends on the health of the communities they serve. The company considers to reach 2020 Vision of doubling the business is not possible without embedding sustainability into their business to drive efficiency and effectiveness.[14]

(a) What is the “ 2020 vision of Coca Cola” ?

The company feels that world is filled with the opportunities that range from doubling their business revenue by 2020 by developing new beverages products that meet consumers evolving preference and need, by creating social value and by making positive difference in the communities throughout the world. 2020 vision provides the business goal of converting long term aspiration into reality what the company can accomplish together with the customers, global bottling partners and along with consumers sustainability is achieved with measurable growth.[15]

2020 vision it can be clear example that the strategy which companies makes for the social impact and welfare makes in such as manner that through which the company could increase their profit and goodwill in the eyes of stakeholder and consumers of the company.

The goal of 2020 vision in reference to the profit to have more than double system revenue while increasing systems margins. To maximize company and bottler long term cash flow the system priorities three key features that is first to boost system investment in sales and market execution. Secondly operate the lowest cost manufacturing and logistics in every market, while maintain the products quality standards and third to use the size and expertise to create economies of scale. Company’s matric is total shareholder return, economic profit growth and systematic cash flow.

In regard to “productivity” the goal of the company is to manage time, money and human resources for greatest effectiveness. To achieve these goals the company has designed and implemented the most effective and effective and efficient business system by prioritizing four keys things. That is first redirect resources to drive profitable growth. Second create a competitive cost advantage across the entire supply chain.third building continuous improvement and cost management culture and fourth by minimizing company’s energy use.[16]

(b) 2020 Sustainability Commitments

“Me, We, World” is the latest framework of sustainability that the company has come up through which is share the vision of working together so that they could create socail value and make positive difference for consumer, shareholder and communities they served.

“Me” stands for enhancing personal well being. The company has come up with few non- alcoholic beverages with very fewer calories under this commitment as obesity has become one of the major issues. By 2015 Coca Cola has aimed to reduce 1.5 calories from the grocery by introducing more than 100 no- and low calories product. According to the manufacturer the company has exceeded its goal by 400% that translate to 78% fewer calories per person per day in the United States.

Through this commitment company’s sells has increased along with reputation and goodwill therefore company has profited with this commitment.[17]

“We” stands for “building Stronger Communities”. The company has started 5by20 strategy under this commitment in which the company helped 5 million women to empower their women entrepreneur. In 2010 5by20 commitment was started in India, South Africa and Philippines now this initiatives is in 12 countries and since then 3,00,000 women have participated in it. The companies aims to expand 5by20 in 20 to 30 countries reaching 1.5 million women and by 2020 5 million women in 100 countries.

 The company in its strategic social investment has come up with five different stage of the value chain, identifying key success for sustainability and increase in the sale of the product for the duration of the program and beyond.

  •                 Producers

In Kenya and Uganda the company initiated Project Nurture in which it aimed to bring 50,000 smallholder mango and passion fruit framer into the value chain. This was a clear business techniques as the producers are one step removed from the Company and its bottling partner in the value chain. This initiates is consists of the procurement cost and security supply of a regional juice business with ambiguous growth target. The company is expecting to recoup several times more than its investment in next 3-5 years from Project Nurture as Minute Maid Mango is very profitable.

(2)  Distributors

In Tanzania Coca-Cola came up with Kwanza Micro Center Model in which they build the capacity of 170 independent small scale distributor which helped the company to distribute their product in the congested urban environment to the small scale outlets. In the business model of Coca Cola these Micro distributor center are the integral part to the bottler’s business model which accounts 95% of its sale volume. Through this Coca Cola’s sales growth increases as small scale retailer outlets constitutes majority of the consumers.

(3)  Retailers

In Philippines Coca Cola have initiated the STAR programme which empowers 1000 women which are into small scale retailer to grow their business through that their incomes also increases. The case study done by Coca-Cola Philippines and its bottling partner Coca-Cola FEMSA Philippines they observed through helping women grow economically the company have increased sales through development of long term relationship wit both existing and new seller of Coca Cola products.

(4) Recyclers

In Brazil Coletivo recycling is the cooperatives of 500 waste pickers Coca Cola helped to them to diversify their markets and sources of supply which help them to increase their sales and incomes with their self esteem. With the help of the member’s income increased from $250 month/ month in its initial stage of development to $1000 per month. The past experience has shown that as compare to the earliest stage development the highest- performing cooperation can generate approximately three times as per income per member. The benefits that Coca got was that it was capable of collecting and sorting larger volumes of water and selling directly to recycling plants instead of the broken for the higher cost. Coca Cola profited in the medium to long term it helped the company to reduce cost and increased security of supply of recycled PET for the production of recycled bottles.

 (5) Articans

Cola Cola in Coletive Artes helped to build self esteem of 100 cooperatives of artisans through enchasing the attractiveness of their design eventually increasing their sales and incomes. This helps Coca Cola to enhance its goodwill, reduces environmental impact and helps to generate the supply of unique Coca Cola themed products for corporate promotional uses.  The overall benefits which company is getting through strategic social investment for CSR increases sales, reduces cost of production, supply security, lessen environment impact and strengthen stakeholder relationship and reputation.[18]

CONCLUSION

Through this article I would like to conclude that companies like Coke Cola does a smart work and make good social strategies at the name of CSR so that it could increase increases its profit and reputation or goodwill in such a manner that it could bring social impact through the world. Moreover the strategic social investment that they come up is with the mindset that it could benefit the society at large and the environment also. Through this the company makes the consumers, stakeholder, employers, NGOs and government happy and contented so that no one would raise their voice against them. As the company does so much for the society and environment that it becomes difficult for any country to reject or cancel their license. All the countries where Coca Cola has its market they have increased employment and help to raise the standard of living which has help to strength national economy. In this paper I have tried to prove that Coca Cola has smart approach towards CSR in which they increase their profitability and brand image so that their shareholders are satisfied with the performance of the company and on one hand and is bringing social impact on the other hand.

 

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BIBLIOGRAPHY

[1]http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8005303/Coca-Cola-named-worlds-best-brand-for-11th-year-in-a-row.html

[2] http://www.coca-colahellenic.com/newsandmedia/News/2014/30-5-2014

[3] http://www.rankingthebrands.com/Brand-detail.aspx?brandID=5

[4] K. Ravi Raman, Community- Coco Cola Interface, Political Anthropological Concerns on Corporate Social Responsibility, 51 Soc. Analysis 103-120 (2007). Dan O’Brien, Integrating Corporate Social Responsibility with Competitive Stratege

[5] Centre for Science and Environment (CSE), ‘CSE Study on Pesticide Residues in Soft Drinks, 2003 Media Reports, vol. 1, pp. 12-14,

[6] J. Hills & R.Welford, ‘Case Study: Coca-Cola and Water in India’, 2005 Corporate Social Responsibility and Environmental Management 12, p. 168.

[7] N. Vedwan, ‘Pesticides in Coca-Cola and Pepsi: Consumerism, Brand Image, and Public Interest in a Globalizing India, 2007 Cultural Anthropology 22, no. 4,pp. 659-684.

[8] M. Pirson & D.Malhotra, Unconventional Insightsfor Managing Stakeholder Trust, 2008 Working Paper, Kennedy School of Government, pp. 9-10.

[9] Cristina A.Cedillo Torres et al., Four Case Studies: On Corporate Social Responsibility: Do Conflicts Affects a Company’s Corporate Social Responsibility Policy?, .

[10] http://rabble.ca/news/2012/01/ge-and-privatization-water

[11] Kash Rangan , Lisa A. Chase & Sohel Karim , Why Every Company Needs a CSR Strategy and How to Build It , 2012 Harvard Bus. Sch., Apr. 05, 2012 at (2012).

[12] Alyssa Carrol, Have a Coke and a Smile , 2014Global Bus. & Dev. L. J., Jan. 17, 2014 at (2014).

[13] http://www.coca-colacompany.com/stories/the-business-of-doing-good-is-good-business

[14] http://www.brandchannel.com/home/post/2012/11/09/Coca-Cola-Sustainability-Brand-Growth-110912.aspx

[15] http://www.cokecce.com/news-and-events/news/new-study-finds-the-future-of-successful-business-is-a-combination-of-profit-and-purpose

[16] http://assets.coca-colacompany.com/22/b7/ba47681f420fbe7528bc43e3a118/2020_vision.pdf

[17] http://www.coca-colacompany.com/coca-cola-unbottled/coca-cola-contributes-to-64-trillion-calorie-reduction

[18]http://www.hks.harvard.edu/mrcbg/CSRI/CSRI_BusinessFightsPoverty_5by20Report_September2013.pdf

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