Coca-Cola and Water Shortages in Communities across India - Case Study Example

MARKETING & SOCIETY: Coca-Cola and water shortages in communities across India: Introduction: Ever since the re-introduction of Coca-Cola to Indian consumers since the late 1990s, the company had attracted criticism from activist and advocacy groups. While the high level of pesticides contained in its products has given rise to controversies recently, the charges against Coca-Cola for usurping and depleting water resources have been a more persistent issue. In fact, Coca-Cola’s operations in India since its inception have seen many ups and downs. The lowest point of the company’s history in India was reached in 1977, when the then ruling Congress government, under the leadership of Indira Gandhi, forced out the company. This essay will detail the Achilles Heel of Coca-Cola’s operations in India, namely its competition with native inhabitants over limited water resources, and critically evaluate the company’s strategy for handling of these criticisms. Description of criticism: The competition for water between Coca-Cola manufacturing plants and local inhabitants was nowhere more blatant than in Plachimada – a rural part of the state of Kerala in South India. A subsidiary of Coca-Cola – Hindustan Coca-Cola Beverages – set up a manufacturing plant here in the year 2000. Plachimada and its surrounding areas were prone to periodic droughts. Yet, the governing authorities approved the project, apparently reasoning that the plant will stimulate the local economy and increase the speed of development in Plachimada. Coca-Cola promptly dug six bore wells for drawing water and before long the water table in the entire region dried up. This meant that the local inhabitants have to walk (or cycle) nearly seven kilometres to reach drinkable water. For example, according to the first hand report of Mark Thomas, “People I spoke to said they used to earn about 1 [pounds sterling] a day as harvesters, and they used to get about 20 days' work a month. Now they are lucky if they get five days' work a month, because the local crops have failed. They felt they had no option but to fight the company, and set up a 24-hour vigil opposite the plant. At the end of the month, they will have been there for 647 days.” (Thomas, 2004) Hence, the grievances expressed by local villagers and social activists are not confined to the issue of drinking water. The operation of the manufacturing plant gives rise to a myriad of challenges to the environment, agricultural productivity and people’s livelihoods. The Plachimada episode was only the first of many run-ins between Coca-Cola and rural communities in India. Following the tumult in Kerala, a similar situation emerged in the North Indian village of Mehdiganj, on the outskirts of Varanasi. Here, the protests are directed at Coca-Cola’s illegal occupation of village public property. A local court has already declared the company guilty of tax evasion. Moreover, the plant in Mehdiganj “enjoys heavily subsidized electricity and is accused of spewing toxics into surrounding agricultural fields as well as causing serious water shortage as a result of its operations” (Thomas, 2004). While in Kerala, the company at least tried to placate the protesters through token measures, its approach in Mehdiganj further dented its image in India. About two hundred policemen alongside gun-wielding private security personnel were deployed to intimidate the protesters. The policemen used violent methods to disperse the crowd. The other rural community that was severely affected by Coca-Cola’s environmentally unsustainable approach to profiteering is that of Kudus village in western Maharashtra state. Here, “villagers are forced to travel long distances in search of water which has dried up in their area as a result of Coca-Cola's operations. Villagers are questioning the subsidized water, land and tax breaks that Coca-Cola receives from the state, only to leave them thirsting for water. Coca-Cola has built a pipeline to transport water from a river to its plant, and an activist opposing the pipeline was detained by police authorities for a week”. (Srivastava, 2007) From studying the operations of Coca-Cola in India, an obvious pattern emerges. According to Amit Srivastava of India Resource Center, the rural communities were left with no drinking water even as Coca-Cola continued to draw water from the fast disappearing underground sources. Furthermore, its plants are constantly dumping effluents into surrounding areas causing irreparable damage to the environment. Coca-Cola’s operations in India seem to be directed from a purely commercial motive. This is no where else more obvious than in Kala Dera – located in the semi-arid desert state of Rajasthan – where the company made the audacious move of setting up a bottling plant. Kala Dera is notorious for its scarce rainfall. Of the last thirty years, ten were officially classified as drought years. On top of this notorious distinction, its groundwater resources were certified by a reliable government agency to be an overexploited. Yet, in the year 2000, Coca-Cola set up yet another of its manufacturing units there. Statistics released by the Indian government for the subsequent years reveal that the water tables in Kala Dera have shrunk more than 9 meters as a result of Coca-Cola’s operations. Moreover, the plant’s intake of water happens during peak summer period, making it impossible for villagers to access drinking water. (Hammond & Prahalad, 2004) Towards the end of 2006, the International Campaign Against Coca-Cola made a systematic evaluation of the companies performance in India. As expected, the results exposed Coca-Cola’s unethical practices since 1998. The report went on to make concrete recommendations for setting right the record. These include: 1. Extract water only from aquifers which are not in the drought-prone zone. 2. Keep enough water in storage for use in summer. 3. Relocate the manufacturing unit to an area with surplus water. 4. Finally, close down the facility in Kala Dera. (Srivastava, 2007) Coca-Cola’s response to criticisms: In response to the last of the aforementioned recommendations, the company’s top management said nonchalantly, "Walking away is the easiest thing we can do. That's not going to help that community build sustainability. Instead, the Coca-Cola has decided to support drip water irrigation in the area working with fifteen farmers” (Krishnan, 2007). In Kala Dera, there are more than 10,000 people who are involved in farming. This program to supply water to 15 farmers is no more than a publicity stunt. (Krishnan, 2007) In Plachimada, after intense pressure, Coca-Cola did offer drinkable water to the villagers free of cost. But considering the environmental damage that the plant had induced, this attempt at reconciliation with the villagers is no more than a token measure. In its initial reaction to adverse public reaction in Plachimada, the public relations officers of the company denied outright that the accusations against it are false and that it was the handy work of a bunch of radical activists. At the time of this controversy, Coca-Cola's official website carried the message that the "local communities have welcomed our business as a good corporate neighbour" (Thomas, 2004). But the ground realities belie this assessment. In spite of protests from every corner of the country, Coca-Cola, it seemed, was bent on using its political clout to get its own way. For example, when Coca-Cola resumed its operations in India in the late 1990s, it promised to divest 49 percent equity stake in the country within a five year period. But, as a result of Coca-Cola’s influence in Washington D.C., political pressure was applied on the Indian government to dilute the terms of agreement (Klein, 2004). This has disempowered Indian investors, who, even if they hold half the entire equity stake have no voting rights and cannot have a say in the company’s policies. The evidence for Coca Cola’s misuse of political contacts comes from the following statement from Robert Blackwill, the then United States ambassador to India, in his letter to the Prime Minister of India: "I would like to bring to your attention, and seek your help in resolving, a potentially serious investment problem of some significance to both our countries. The case involves Coca-Cola, one of the largest single foreign investors in India." (Vanhamme & Grobben, 2008) Evaluation of the Coca Cola’s strategy to deal with the issues: The emergence of “local, grassroots struggles against the cola giant's operation in India should also serve as a reminder to Coca-Cola's bosses in Atlanta that this is not a public relations problem that one can just "spin" and wish away. Rather, the heart of the issue is a serious concern about control over natural resources and the right of communities to determine how business is done in their communities” (Srivastava, 2007). Srivastava further asserts that “for Coca-Cola to claim, after being made aware of the community protests all over India, that ‘local communities have welcomed our business as a good corporate neighbour’, is nothing short of arrogance”. Nevertheless, the cola giant’s arrogant attitude does not surprise its critics, who are accustomed to the unethical activities of the company. (Srivastava, 2007) An analysis of Coca-Cola’s law suits in India suggests that their strategy is more centred on cover-up public relations exercises as opposed to making substantial changes to their plan of operation. To elaborate, “Parallel suits have been brought against Coke over the past five years. Coke has twenty-seven bottling facilities across India and another seventeen franchisee-owned operations. Coke has invested over $1 billion in India, employs around 6000 Indians, and asserts that its business contributes to an additional 125,000 jobs in the country. Environmental and indigenous rights activists argue, however, that Coke's bottling plants have displaced thousands of local villagers. They claim that Coke has misused and hoarded scarce water resources, leaving communities barren. Critics contend that Coke has contaminated local environments with pollutants and that the company's product itself is of lesser quality than what is sold in the West“. (Krishnan, 2007) In order to make decisive judgments on Coca-Cola’s operations in India, one would have to wait for the verdicts of these lawsuits. But, going by circumstantial evidence, it is more likely that the company’s critics are right after all. For example, Coca-Cola’s lawyers had used “different procedural delaying tactics for their clients' benefit”, which strongly support the view that the accusations against the company are indeed valid (Paust, 2002). Deducing Coca-Cola’s ethical standards in this way is prone to error, but since all the lawsuits are sub-judicial, this is the most plausible logical evaluation one could arrive at. Given the protracted time period that judicial proceedings take in India, Coca-Cola and other giant multi-national enterprises, as well as their prosecutors, must wait for long before hearing final pronouncements on the petitions filed in court. This delay serves as a deterrent for activists to press further law suits. Nowhere else is the adage ‘Justice delayed is Justice denied’ more apt than in the case of Coca-Cola’s operations in India. Unfortunately, this may also encourage more such MNCs to follow this exploitative path to profits. This should be a source of worry for any democratically government eager for more foreign investment. (Krishnan, 2007) Conclusion: In sum, Coca Cola’s operations in India over the course of the last ten years have been a highly controversial one. Alongside allegations of high levels of pesticides in its products, its ruthless exploitation of limited water resources stands against the principles of corporate social responsibility. Since stringent legislative measures to hold companies like Coca Cola accountable are bound to contain loopholes, voluntary adoption of a set Code of Ethics – one which reflects its approach to business – is the best way forward. The Code of Ethics for the company should define the values and standards by which it conducts its business operations. It should also provide all stakeholders (including rural communities discussed above) with a clear description of the procedures and processes at various levels of the organization. In other words it acts as the road map or set of guidelines to help Coca Cola in acting and conducting itself in a socially and commercially acceptable manner. More importantly, a sincere attempt to draft a Code of Ethics document will inspire confidence in all business associates – like suppliers, clients, employees as well as members of local communities. Bibliography: Bailey, A.A. (2004). Thiscompanysucks.com: The Use of the Internet in Negative Consumer-to-Consumer Articulations. Journal of Marketing Communications, 10, pp.169-182 Bhagwati, J. (1998). Poverty and Reforms: Friends or Foes?. Journal of International Affairs, 52(1), 33. 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