Coca-Cola: Eradicating or Exacerbating Poverty
I had the opportunity to read a very interesting case on Coca-Cola© and their efforts to assist in achieving the Millennium Development Goals, one of which is to eradicate poverty and hunger. The initiative they have in place has been touted by the World Bank and the United Nations as a leading 'Inclusive Business Model'. Here’s how it works. To get their produc
ts into the far reaches of rural Africa, they created Manual Distribution Centres whereby a local community person purchases Coke products and sells them to retailers in these rural areas. Because these individuals know the terrain, culture, and access routes, they are well equipped to get the product to these once inaccessible locations. By employing these community members, Coca-Cola is contributing to the local economy, empowering locals to earn a living to pay for education, health care and food.
This initiative falls under Coca-Cola’s corporate social responsibility (CSR) strategy. Quoted below are statements from their website related to their vision and mission:
Vision: “Be a responsible citizen that makes a difference by helping build and support sustainable communities”
Mission: “…to refresh consumers and inspire moments of happiness, partner with customers to create value and make a difference and reward stakeholders while enriching the lives of local communities”
There is no doubt that multinational corporations around the world work hard to convey their CSR initiatives and are indeed doing some pretty impressive things. But examining the finer details of these initiatives and critiquing the claims they make about outcomes may uncover an important degree of hypocrisy that is typically overlooked. While it is true that Coca-Cola has created many jobs and boosted national GDP of the countries it operates in, is it wise to overlook the fact that much of what Coca-Cola does is in fact opposite to what it claims? On the surface, the presence of the company in these regions does appear to enrich the lives of local communities but once we look at some of the implications of the company’s broader operations, we begin to recognize that these former initiatives are merely drops in the bucket.
Coca-Cola procures 300 billion liters of water. A substantial chunk of that amount is water that is being taken away from communities around the world. Several powerful documentaries have spoken of this impact across the food and beverage industry (e.g. Blue Gold). It is estimated that Coca-Cola and its competitors use 2.5 liters of fresh water to produce every liter of product. So, on average, when you purchase a litre of bottled water, it took 2.5 litres to get to you. Moreover, they are putting this water in plastic bottles, of which only 23% get recycled in the US with, I’m sure, a lower number in developing regions. Most importantly, the drinks themselves come with a number of very unhealthy ingredients, one of which is high fructose corn syrup: a substance that demands an incredible amount of energy to produce, not to mention being linked to obesity and diabetes. I’ve posted the following link before: have a look at New York City’s perception of the negative implications of Coca-Cola and competitors:
Muhtar Keng, Coca-Cola’s president and CEO said, “We have seen throughout our own experience – time and again – that our business in any market is only as strong and sustainable as the communities in which we operate. For our company and our bottling partners, sustainability reflects an understanding of the role business must play in society if we are to be successful in the 21st century”.
Should we be at all concerned about the claims made by senior executives regarding their positive yet very isolated impact in developing regions when we know about the more systemic negative impact on the long-term sustainability of societies? Does the above quotation suggest that Coca-Cola is unable, or chooses not, to see the bigger picture of its operations? While they may be contributing, however minutely, to economic development (these entrepreneurs receive 3-5% margins), is the bigger issue not that their core operations systematically and inherently undermine these contributions by diffusing a completely unsustainable business model to the far reaches of the planet?
If the issue is not that they are spreading a very unhealthy product, perhaps it is their claim that they are alleviating poverty through this supposedly ‘inclusive business model’. To me, this is merely one of many marketing and distribution strategies aimed to extend product reach and thus revenues. The entrepreneurial benefits for the community and the income generated for a very small number of individuals are welcomed but are they the primary motivation or merely a convenient side benefit? Unfortunately, companies like this make claims that they are out to address poverty issues when it just so happens that, as with all low-hanging fruit, there is a natural alignment between getting more of their products out there and employing some people in the community. But once these fruits are picked, companies resist making difficult decisions that put society first.
I think it’s important to ask whether it is wrong for companies like Coca-Cola to be touting their role as a force for poverty alleviation and whether their claims should be limited to successful efforts in diversifying their markets. Is it not greenwashing when a company claims to be a force for social good when the implications of their core operations on communities around the world and the environment are as negative as pundits claim? Put in place a similar business model for more basic needs such as gaining access to finance, delivering locally procured fresh water, distributing pharmaceutical drugs, or providing housing services, and then we may start to claim real impact on poverty reduction. But should we be fooling ourselves into thinking that spreading a product claimed to be toxic both environmentally and socially in the long-term, despite its economic benefit in the short term, is good for communities?
Embedding sustainability in organizations is no easy task especially because the very notion of sustainability, in many ways, flies in the face of corporate level strategy. If companies truly want to adopt sustainability they need to consider the interconnectedness of their behaviours and actions the corresponding long-term effects of their operations across multiple dimensions. Until companies are making the difficult decisions about their core operations, it may be morally unethical to make claims that the company is committed so sustainability.