Corporate Social Responsibility (CSR)

Answer

Introduction

            Corporate Social Responsibility (CSR) / Ethics refers to activities that a company performs to generate good will from its stakeholders to ensure it achieves long term business sustainability. There is no company in the world that can achieve its objectives and survive in the long term if it is antagonistic towards its stakeholders. A company’s stakeholders include shareholders, managers, employees, the government, suppliers and the general public in general among others (MISHRA and MOHANTY 2013, pp.30). Each company tries in one or the other to be a good corporate citizen to survive. A company and its external environment/ stakeholders are directly dependent on each other. Each company depends on its stakeholders / external environment to provide inputs such as labor and raw materials and a market for its products and services. On the other hand stakeholders depend on a company to provide goods and services that meet its needs (MAITLAND 2004).

 It is therefore very important for a company to ensure it operates in a manner that can be considered by stakeholders as ethical and undertakes acceptable CSR activities that are acceptable to be viewed as a good corporate citizen by its stakeholders to maximize shareholder wealth and attain long term business sustainability (MISHRA and MOHANTY 2013, pp.30).  Corporate Social Responsibility (CSR) activities are intended to champion the common good of stakeholders of a company. The Coca-Cola Company being a multinational corporation is forced to address CSR / Ethical issues in multiple countries. This paper examines the commitment of The Coca-Cola Company to meet public expectations in terms of ethical, legal and commercial expectations in its areas of operations around the globe (MISHRA and MOHANTY 2013, pp.30).

An overview of The Coca-Cola Company

            The Coca-Cola Company is a beverage multinational corporation that is headquartered in Atlanta in Georgia State in the United States of America. The corporation manufactures, retails and markets a wide range of non-alcoholic beverage refreshments and various types of syrups.  Coca-Cola, invented in 1886 by John Pemberton, is the company’s flagship product and is the beverage drink that the company is associated with throughout the world (MISHRA and MOHANTY 2013, pp.30). The Coca-Cola Company was incorporated in 1892 by Asa Griggs Candler who earlier bought the Coca-Cola formula from its inventor, John Pemberton, in 1889. The Coca-Cola Company’s internationalization strategy is franchising in which the company produces syrup concentrate only and sells to bottling companies located in various countries in the world (SINGH 2016, pp.320).

Each franchised bottling company has an exclusive operating territory to avoid overlapping with other franchised bottling companies in the same geographical location. However, The Coca-Cola Company owns “Coca-Cola Refreshments” its North American- located anchor bottling operation.            The Coca-Company is listed on the New York Stock Exchange and is one of the companies that constitutes the Dow Jones Industrial Average and S&P 500 index (MISHRA and MOHANTY 2013, pp.30).  The Coca-Cola Company has one of the largest distribution networks of any beverage company in the world. This network ensures that at least one billion of its products are consumed every day. The corporation hosts some of the most valuable products in the globe.  As at 31^st December, 2016 the company employed 123, 200 employees in its establishments worldwide. The Coca-Cola Company is said to offer over 400 brands in some 200 countries in the world (SINGH 2016, pp.320).

The key issues, their possible causes and how the issues impacted the firm’s international business operations

            Ethics and Corporate Social Responsibility (CSR) activities aims at promoting business accountability to a wide range of stakeholders who go beyond its shareholders, investors and even employees at a given point in time. Protection of the ecosystem, welfare of the company’s employees and welfare of the society in which it operates both during the current and long term are the main focus of interest of CSR/ethics (MISHRA and MOHANTY 2013, pp.30).  The realization that companies are closely connected to the society in which they operate is the bedrock of CSR activities and programs in modern day corporations. The Coca-Cola Company has faced various CSR and ethical issues that have impacted on its international business operations.  Some of the CSR and ethical issues that have been alleged against the company include labor violations in dealings with its employees (SINGH 2016, pp.320).

            The company was accused of mistreating its employees in some South American countries such as Guatemala and even hiring assassins to kill union leaders in Colombia among others. In 2010, The Coca-Cola Company was sued by Guatemalan laborers for violence perpetrated against them by people who worked for the corporation and its franchised bottling companies. Employees who joined trade unions while working for bottling plants in Guatemala received death threats, were at times shot at or their family members were threatened. Labor union leaders were either murdered or some of their family members were murdered instead (MISHRA and MOHANTY 2013, pp.30).

Sexual assault was also perpetrated to employees who joined labor unions and/or their families.  One glaring example is that of Jose Chavez; a prominent union leader in Guatemala, whose son and nephew were murdered by gang members before his eyes and his 26-year old daughter gang raped allegedly because he had participated in a collective bargaining agreement on behalf of employees working for bottling companies in Guatemala City (LOVEL 2003). Violence on unionized workers was also perpetrated by the company in Colombia. In a statement from the company in 2005, the company acknowledged that together with its bottling companies it had been accused of being complicit in the suppression of union activities and intimidation of members of trade unions in Colombia and other South American countries.  This matter went for litigation in Colombia and the USA courts and the company was cleared after pressure was brought to bear on the company through product boycotts (CRAY 2001, pp.6).

A union bursting documentary film on the company’s franchised bottling plants in Guatemala, Turkey and Colombia was produced in 2009 called “The Coca-Cola Case”. The documentary which is available on internet highlights labor violations among other unethical practices perpetrated by the corporation over the years.   These perceived unethical practices perpetrated by The Coca-Cola Company and its bottling plants impacted on the company’s business operations in the international market. Global sales were slowed due to the company’s gross misconduct and questionable behaviors (CRAY 2001, pp.6).

            The next unethical conduct is that the company was accused of subjecting workers to an environment of fear and using intimidation to force workers to achieve targets that were unrealistic and unachievable. The company’s management was accused of hiring paramilitary mercenaries in some countries to kill union members or intimidate them to submission by issuing death threats. The company was sued by unions in some countries for compensation to families of employees who unions deemed the company had a hand in their deaths.   The company was also accused of overworking employees while paying low wages which was tantamount to exploitation (CRAY 2001, pp.6).

            A next ethical issue that the company has been accused of over the years is the accusation that the company’s products contribute to the problem of obesity among consumers. Many restaurants selling fast food products around the world serve their foods accompanied with the company’s beverage products. Since the company’s products contain a lot of sugar, critics of the company have constantly accused the company of contributing to the problem of obesity in many countries (MISHRA and MOHANTY 2013, pp.30). The company has also been accused of causing dental caries among regular consumers of its products due to the sucrose contained in its products.  The company criticism has also been expanded to include the claim that its products cause type 2 diabetes which eventually kills its victims. The company has on many occasions been forced to manufacture diet products and also products that are sugar free to counter this claim. This has reduced sales of the company’s products in countries where the claims have been strong (HYE-JEONG 2013, pp.110). 

            Other ethical issues include accusations on mislabeling. The company has been accused of indicating the wrong ingredients on some of its products to portray a certain favorable image.  Various environmental issues have also been associated with the company. In India for example, the company was accused for playing a role in the decline in quantity and quality of water available to farmers and local people to consume in areas where its franchisee bottling plants are located. Its packaging materials have also been associated with environmental pollution especially polythene packaging materials and pet bottles (RUSSELL, RUSSELL and HONEA 2016, pp.760).

            The causes of these various ethical and CSR issues have been varied. The main cause has been the overriding objective of every company whether private or public; to maximize shareholder wealth by reporting incremental returns on invested capital. The other cause has been poor governance within the entire operation of the business. The company has at times lacked the ability to enforce its standards and policies on bottling plants worldwide (SINGH 2016, pp.320). Many franchisees have therefore violated employee rights without the knowledge and approval of The Coca-Cola Company’s top management team.  The company’s research and development efforts have also failed to create new products that do not pose health risks to consumers. These factors have contributed to the ethical and CSR issues that The Coca-Cola Company has faced and still continue to face to a varying degree (KLEIN, COLLINGSWORTH, MITCHELL and LUTZ 2005, pp.260).

 The impact of the issues on The Coca-Cola Company’s international business operations

            These issues have impacted on the operations of the company in various ways. The company has been forced to implement a CSR programme in a bid to address the various concerns raised by stakeholders. The company’s CSR programme, whose objective is sustainability, has captured the company’s activities in all aspects of the business. The company has attempted to address health issues of its consumers, environmental issues, employee issues and all other issues that have impacted on its business operations in the international market (KAZMI 2017, pp.10).

            In addressing consumer health concerns, the company has broadened its portfolio of brands to enhance consumer choice. According to school beverage guidelines, the company has reduced the amount of calories in its products by 88 percent and introduced non-fattening products.  To address the issue of environmental concerns around packaging, the company has introduced a fully recyclable PET bottle for use by its bottlers.  The rate of recycled PET bottles has increased to 92 per cent in North America and 99 percent in Europe as a result (SMITH 2014, pp.437).  The company has improved water use efficiency by 3. 5 percent which conserves water. The company has created special programs to enhance employee development and increase employee engagement in its business operations. This has enabled the company to attract, retain and develop the skills and abilities of its employees worldwide (KARNANI 2014, pp.20).

The company has scored 100 percent on corporate equality index in its bid to address discrimination among employees.  Discrimination based on gender, nationality and race in terms of pay, promotion and terms of service has been one of the issues that has impacted the operations of the company internationally.  The company has also supported global efforts to address climate change by co-signing the Copenhagen communique which is supportive to addressing issues on climate change (COLLINGSWORTH 2006, pp.255).

            The company sets aside a substantial amount of its revenue each year to address issues surrounding ethical conduct of its business and finance CSR activities. Through court processes the company managed to clear its name from accusations leveled against it. This helped to reverse declining sales. However, these allegations gave the company’s main competitors a leeway to reduce its market share in some countries. The company’s sales were impacted negatively and slowed in some countries especially after the international lobby by trade unions in Colombia and other countries appealing for consumers to shun the company’s products (CINARLI and GAYE 2012). 

The importance of ethics and CSR for managers of multinational enterprises

             It is very important for managers to understand the value of ethics and CSR especially when they are operating in international markets. Generally, enterprises are expected to contribute to economic growth of the countries they operate in. They can only do this if they understand the impact their activities will have on the society at large so that they can minimize the negative effects while enhancing the positive impacts. Multinational corporations are supposed to create and preserve jobs in the countries they operate as a way of reducing poverty and improving the standards of living (DEBELJAK, KRKAC and IVANA 2011, pp.15).

            Companies and societies are interdependent for their survival. It therefore implies that companies should seek to maximize their benefits to society in a bid to build a good working relationship. A company cannot maximize shareholder wealth in a vacuum. The society’s goodwill is very critical in enhancing the ability of a company to achieve its long term objectives.  There is no company that can be viewed as a good corporate citizen if it continues to grossly violate human rights, its operations destroy the environment and its products harm consumers. Such a company cannot achieve business sustainability in the long run (BREZOVNJACKI, PAKOZDI and PRESELJ 2014, pp.690). 

            Multinational corporations operate across boundaries and hence must pay attention to the cultures of different nations in designing their products offering and planning marketing strategies. Companies must create a safe and healthy working environment to ensure it attracts and retains talented employees. Otherwise it would not be able to achieve its long term targets.  Companies operating in the international market must pay attention to ethical and CSR issues because the world in more enlightened now than it was a few decades ago (KNEIP 2013,pp.190) Environmental pressure groups activities are now a common feature in most countries. Human rights violations are championed by international organizations worldwide. Companies cannot engage in unethical practices such as exploitation of employees, environmental destruction, corruption and murder and not expect to get opposition from the society in which they operate in (BANUTU-GOMEZ 2012, pp.160)

Conclusion

                        The Coca-Cola Company has faced serious ethical and CSR issues that impacted on its operations worldwide at various times in its long existence. Some of the unethical practices that the company has been accused of include, labor violations, assassinations and long working hours in some of its bottling plants in some countries in South America and Europe. The company has also been accused of making products that harm consumers and environmental degradation among others. The company has implemented various CSR programmes to address these issues which are contained in its sustainability report which is posted in its official website.