The Coca-Cola Company Struggles with Ethical Crises

INTRODUCTION

As one of the most valuable brand names worldwide, Coca-Cola has generally excelled as a business over its long history. However, in recent decades the company has difficulty meeting its financial objectives and has been associated with a number of ethical crises.

 As a result, some investors have lost faith in the company.Warren Buffet (board member and strong supporter of and investor in Coca-Cola) resigned from the board in 2006 after years of frustration over Coca-Cola’s failure to overcome its challenges. Since 1990s Coca-Cola has been accused of unethical behavior in a number of areas, including product safety, anti-competitiveness,racial discrimination, channel stuffing, distributor conflicts, pollution,and health concerns. The company has dealt with a number of these issues, some are solved by private settlements and some by court battles, while others remain unresolved.

Issues Regarding Water Usage, Pollution, And Supply ChainOversight

Coca-Cola has also encountered trouble at its bottling plants in India, fielding accusations of both groundwater depletion and contamination. In 2003 the Centre for Science and Environment (CSE) tested soft drinks produced in India by Coca-Cola and other companies; findings indicated extreme levels of pesticides from using contaminated groundwater. In 2004 the first set of standards for pesticides in soft drinks was developed, supported by an Indian parliamentary committee. Although Coca-Cola denied the allegations, stating that its water is filtered and its final products are tested before being released, sales dropped. In the Indian city of Varanasi, Coca-Cola was also accused of contaminating the groundwater with wastewater. Officials at the company admitted that the plant did have a wastewater issue but insisted that a new pipeline had been built to eliminate the problem. However, during the early 2000s a number of tests were conducted regarding “sludge” produced at Coca-Cola’s Indian plants. These tests, conducted by the Central Pollution Control Board of India and the British Broadcasting Corporation, came up with toxic results. The company runs bottling plants in a handful of drought-plagued areas around India, and groups of officials blame the plants for a dramatic decline in available water. In 2004 local officials closed a Coca-Cola plant in the Indian state of Kerala; however, the closure was overturned by Kerala’s court. Although the court agreed that Coca-Cola’s presence contributed to water depletion, it stated the company was not solely to blame. Nonetheless, farmers and local residents, forced to compete with Coca-Cola for water, have protested Coca-Cola’s presence both there and throughout India.

As a result of these accusations, the University of Michigan requested that the Energy and Resources Institute in New Delhi research the issues. The university had suspended its contracts with Coca-Cola until the company hired third parties to investigate the claims. The Energy and Resources Institutes’s findings indicated that Coca-Cola’s soda did not contain higher-than-normal levels of pesticides. However, the report did indicate that the company’s bottling plants were stressing water resources and suggested that the company do a better job of considering a plant’s location based on resources.

In 2013 Oxfam International, an international federation that investigates and fightsa againstsocial injustice, poverty, and human rights violations, encouraged Coca-Cola to scrutinize its suppliers about the possibility that they engaged in “land grabs,” a practice where local farmers and residents are forced off their land commonly by large and influential institutions. Coca-Cola responded to the allegations by disclosing the names of its suppliers and agreeing to conduct independent assessments of its top sugar suppliers. The actions of Coca-Cola reflect the increased supply chain oversight expected from large, multinational corporations today.