Is Coca-Cola Serious About Conserving Water?
The global-warming debate has introduced some new catchphrases into
the business lexicon. Becoming carbon neutral, for example, is now
a goal for multinationals like Dell, HSBC and Tesco. But for another
well-known international brand, becoming carbon neutral isn't enough.
Last June, Coca-Cola CEO Neville Isdell flew to Beijing and pledged
that his company would become "water neutral" — every drop of water
it uses to produce beverages would be returned to the earth or compensated
for through conservation and recycling programs. "Water is the main
ingredient in nearly every beverage that we make," Isdell said. "Without
access to safe water supply, our business simply cannot exist."
Coca-Cola sells 1.5 billion beverages a day in over 200 countries,
and it takes about 2.5 liters of water to produce just one liter of
its products at Coke's bottling plants. In 2006 Coca-Cola and its
bottlers used 80 billion gallons (290 billion liters) of water to
produce its beverages — equivalent to one-fifth of the daily water
usage of the U.S. Some 40% of that went into drinks like Coke, Sprite
and Fanta. The other 60% was consumed by the firm's supply chain and
in the production of ingredients, including the water-intensive process
of growing sugar and corn for corn syrup.
That big thirst is why it's essential that Coca-Cola addresses water
issues as part of its corporate social responsibility program, says
Jeff Seabright, the company's vice president of environment and water
resources. Population growth and climate change mean that water is
no longer available in seemingly limitless quantities — and Coke needs
to be part of the solution, not part of the problem. "It's great that
companies used to hand out checks for scholarships or to clean up
litter," says Seabright, "but increasingly the real relevance is using
the company's core competence to address issues that are of societal
concern." In its CSR initiatives, Coke last year announced it would
spend $20 million over five years to help the WWF preserve seven of
the world's major rivers. The firm is also working with partners on
conservation projects in water-stressed areas throughout the world.
Coke isn't the only company tilting its CSR program toward the environment.
Strained natural resources and growing pressure from NGOs, governments
and consumers are forcing firms to address sustainability. In the
past, "shareholder interests have dominated how the economy is run,"
says David Bevan, a sustainability expert at the University of London
Royal Holloway's School of Management. "Now, it's more about being
a community player." But Coke's water-conservation efforts go beyond
altruism. It's trying to protect its brand and ensure the availability
of a crucial ingredient. By 2025, two-thirds of the global population
will face water shortages due to climate change, urbanization and
population growth, according to a recent JP Morgan report. Marc Levinson,
lead author of the report, says businesses that don't address looming
shortages run the risk of plant closures, water rationing and sullied
reputations. "There's a major risk of being punished by customers,"
he says. "These are real business risks. This is not something far
off in the future."
Coke knows the risks well. In 2002, residents of Plachimada, a village
in India's southern state of Kerala, accused the company's bottling
plant there of depleting and polluting groundwater. Two years later,
the local government forced Coke to shut down the plant. In 2006,
when a New Delhi research group found high levels of pesticides in
Coca-Cola and PepsiCo's locally produced soft drinks, several Indian
states banned their sale. The incidents were particularly worrisome
because they hurt Coke's brand in a rapidly developing market that's
considered key to future growth.
Coke denied polluting water and sucking wells dry in India, but Seabright
admits it mishandled the controversy on the p.r. front. "If people
are perceiving that we're using water at their expense, that's not
a sustainable operation," he says. "We sell a brand. For us, having
goodwill in the community is an important thing." Last December, Coke
spent $10 million to establish the Coca-Cola India Foundation, which
has already installed 320 rainwater harvesting structures in 17 Indian
states, and plans to provide clean drinking water to 1,000 schools
The company is likewise trying to avoid incurring public wrath in
China. In the first quarter of this year, Coke's sales there rose
by 20% compared with the same period last year; sales growth in North
America was flat in the quarter. But in the future, double-digit increases
could be constrained by China's environmental problems. China is home
to roughly 20% of the world's population, but only about 7% of the
world's water. That means there are some 300 million people living
in water-scarce areas — and increasingly, citizens and officials are
becoming more militant about protecting the resource. That kind of
pressure is one of the reasons why Coke has partnered with local NGOs
to promote environmental education, rainwater harvesting and river
conservation in China — and why the company's Chinese bottling plants
are on the cutting edge of the company's conservation and recycling
efforts. Between 2004 and 2007, Coke's 37 bottling plants in China
reduced water usage by 27%.
At Coca-Cola's biggest bottling plant in China, located in Shanghai,
plastic bottles and aluminum cans zoom by on conveyer belts, weaving
in and out of massive machines that shape, clean and fill the containers.
Grimy wastewater, generated from the cleaning of water filters and
the heating and cooling of drinks, is shunted to a separate building
behind the factory where it is treated so it can be used for street-cleaning,
car-washing and other secondary uses. Leaking pipes have been fixed
to save water, and a dry lubricant is used to keep conveyer belts
running smoothly with less water. "We recognize the need to be more
vigilant in how we manage our water," says C.B. Chiu, vice president
and technical director of Coca-Cola China. "If we don't contribute
to the community, the community will see us as outsiders."
Despite these efforts, the company has yet to silence its critics
around the world. "Coke has done 'greenwashing' very well," says Richard
Girard, a researcher at the Polaris Institute, a left-leaning think
tank in Ottawa. "They shifted their image to one of a green and socially
responsible organization, but they're not changing their operations."
Specifically, he faults the firm for not setting a target date for
its water-neutrality goal, and for not establishing water-efficiency
requirements for its agricultural suppliers.
For now, Coke is focusing on reducing water in its plants and conserving
water with the help of its partner NGOs. In the meantime, there's
no prospect of demand for its products drying up. "The reality is
that people will continue to need to drink liquids," says Seabright.
"We're going to be in business." Always Coca-Cola? As long as its
taps don't run dry.
FAIR USE NOTICE. This document contains copyrighted material whose use has not been specifically authorized by the copyright owner. India Resource Center is making this article available in our efforts to advance the understanding of corporate accountability, human rights, labor rights, social and environmental justice issues. We believe that this constitutes a 'fair use' of the copyrighted material as provided for in section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner.