Coco-Cola Company’s Struggle with Ethical Crises

Name: Nandini V Rajput

Roll NO: 24WU0202159
Specialization: MBA(General)
Summary
Coca-Cola is a globally known brand, have faced many ethical challenges in past few years,
which have become a threat for corporate reputation and relationships with stakeholders. These
crises include racial discrimination, product safety, anti-competitiveness and many more. Even
though Coca-Cola is able to maintain its reputation through social responsibility initiatives and
corrective measures.
In 1999, Coca-Cola faces a racial discrimination lawsuit involving 2000 African American
employees. This includes unequal wages, promotion and performance evaluation, with African
American workers reportedly earning less compared to Caucasian counterparts. Coco-Cola have
to settled the case for 193$ million and have to start taking measures like creating a diversity
council to address internal issues
Coca-Cola also faced an accusation of financial misconduct related to channel stuffing. This
involves shipping unwanted inventory at inflated earning, misleading investors about company’s
performance. When investigation was conducted it revealed the company pressured Japanese
bottlers for accepting surplus inventory which shows misleading performance in financial
statement during 1997-1999. Later, Coca-Cola has to take measure to ensure transparency.
The relation of company with bottlers faced in 2006 when 54 US bottlers filed lawsuits against
Coca-Cola and its largest bottler, Coca-Cola Enterprise (CCE). The dispute was about a move to
supplying Powerade directly to Walmart warehouse, avoiding the direct-store delivery model that
bottlers traditionally used to follow. Though this agreement resolve the conflict, the dispute
highlighted tensions in Coca-Cola’s Supply chain partnership.
Internationally, Coco-Cola was accused of involved in unlawful violence against the union
workers in Colombia, where the members faced death threats and also killing several. The
company denied the allegation saying that happened due to the ongoing civil war in the country.
Coco-Cola was liberated from the investigation but due to this incident appeals continued which
led to global protest and scrutiny.
In India, Coca-Cola faced many allegations like depletion and contaminating groundwater in
drought-prone areas, which makes the local community protest and plant closures. Test revealed
toxic sludge at some bottling plants, further even more serious concerns. Although Coca-Cola
denied contamination claims and stated its advanced water filtration process, it started rain water
harvesting and sustainable practices to restore groundwater level.
Coca-Cola also faced criticism over the health impact because of its sugary beverages. In
Australia, the company was taken to taken to court for misleading advertising campaign that says
soda as a healthy choice for children. Similarly, their Vitamin Water brand was sued for proving
misleading information about health benefits when it contains high sugar content. These
misleading information shows the need of providing honest product information for Coca-Cola.
Even though Coca-Cola faced such challenges they took significant steps to resolve their ethical
concerns and strengthen its Corporate Social responsivity. The company invested in many
community programs, like scholarships for underprivileged students, and supported projects like
the Plant bottle which shows that the bottles were made up of 30% plant-based material. They
are also committed towards reduction in carbon footprint, by joining World life Fund to save
fresh water resources and promote environmentally friendly refrigerators technologies.
Coca-Cola’s leadership under Neville Isdell and Muhtar Kent played a very important role in
reshaping the image of Coca-Cola. They took the initiatives like hiring a government official to
handle discrimination cases, created the task force for diversity, and engaging with local
communities which heled their stakeholders to again trust the company. Also, Coca-Cola started
an recycling campaign where they turn PET bottles into reuseable products and supported HIV
and AIDS programs in Africa.
When Coca-Cola noticed a decline in their soft drink consumption beverages and fast-growing
competition, it focused on CSR and transparency plays a very important role in long term
growth. Company had many issues with some stakeholders as they want more to be done. Coco-
Cola history shows the importance of ethical decision making and responsible business practices.
Question 1
What role does corporate reputation play within organizational performance and social
responsibility? Develop a list of factors or characteristics that different stakeholders may use in
assessing corporate reputation. Are these factors consistent across stakeholders? Why or why
not?
Answer 1
Corporate image plays a very important role as it affects both organizational performance and
social responsibility. A good image in front of the society helps the company to build trust,
attracting loyal customer and helps to improve overall performance of the company. It also helps
to gain confidence and trust of investors in terms of supporting the company in times of crises.
Social responsibility, builds a social image that encourages companies to focus on ethical
practices, environmental sustainability, and positive impact on society. Companies who know
their social responsibility are more likely to maintain long term success compared to the
companies to don’t follow social responsibility.
Following are the stakeholders, who are directly or indirectly associated with the company:
 Different stakeholders assess corporate image in context of their own factors. Customers
have more value for the quality of the product, Fair pricing and company is actually
ethical and transparent to them.
 Employees focuses on work culture, Career growth, future opportunity and equal
treatment to all.
 Investors cares about their returns whether their money is been used at the right place and
are justified. They mainly focus on financial performance, company image in the society
etc.
 Communities and regulators are interested to know whether company contributes to
society, follows rules and regulations and minimize environmental destruction.
Although these factors are not consistent for all the types of stakeholders because each group
have different priorities. For example, Customer are mainly interested toward price and quality
of the product while employees are mainly focused on work culture, fair wages and future
opportunity. Similarly, investors are focused on overall financial performance of the company.
Sometimes its not possible for the company to take care of all the interest of the stakeholder.
Sometimes for proving good quality to the costumers, companies have to use high quality raw
material which may increase the time of return to investors hence investors sometimes are
satisfies.
Hence, Corporate reputation plays a very important role in terms of long-term success of
company. Company not following social responsibility, exploiting natural resources, does not
provide proper work culture to their employees and don’t treat them equally, does not provide
proper quality product to their customer have to suffer in long run.
Question 2
Assume you have just become CEO at Coca-Cola. Outline the strategic steps you would take to
remedy the concerns emanating from the company’s board of directors, consumers, employees,
and business partners; governments; and the media. What elements of social responsibility would
you draw from in responding to these stakeholder issues?
Answer 2
For Board of Directors, I would conduct a thorough review on the mistakes the company has
make in past decisions and will prepare a transparent roadmap with clear objects and strategies
defined which will lead to operational efficiency, financial viability and sustainability. This
would also include accountability of every step and measures to ensure efficiency. The focus
would be on demonstrating strong and ethical governance and leadership.
For consumer, I would try to firstly resolve their concern related to health and environmental
concerns. I will make the list of products which includes heathier options like low sugar drinks
and bottles which are made up of plant and eco friendly packaging solution. I would also try to
make an effort to regain their trusts back. While running advertisement and marketing campaign
I would make sure all the details regarding the products are showcased with full transparency.
For employees and partners, I would maintain a positive workplace culture and equal opportunity
to all the employees. I would engage employees in training, promote diversity and provide
proper growth opportunity that would enhance the trust of employees again and it would
contribute to the overall growth of business. Partners would get benefits from fair terms,
consistent payment and innovation, which will ensure long term benefit in terms of relations.
For government concerns, I would try to follow all the environmental and labor regulation in
compliance with public health such as promoting hydration and addressing obesity. Also by
involving in development programs which would aimed at supporting economical backward
people that would enhance Coca-Cola responsibility towards society and their role towards the
corporate citizen.
For media, I would try to implement a public relation strategy to show that company is putting
efforts towards sustainability, employee’s achievement and social responsibility. The transparent
information about all the product helps to build trust and maintain company’s reputation
effectively. This would help improve the reputation of the company and to regain the trust of all
the stakeholders.
Social responsibility plays a very important role which includes environmental norms, work for
community, ethical practices, health and wellness of their customer and follows government
rules and regulations. These initiatives would not only solve their position but will also ensure
their long-term success. Being the new CEO I would ensure that company tries to take care of
interest of all the stakeholders associated to the company.
Question 3
What do you think of Coca-Cola’s environmental initiatives? Are they just window dressing, or
does the company seem to be sincere in its efforts?
Answer 3
Coco-Cola’s goal is to be an environmentally friendly beverage company. The company have
started a program called “World Without Waste” in this program they collect and recycle as many
bottle as possible so that they can be reuse and can minimize the harm to the environment. They
also started using biodegradable packaging which objective is to decrease carbon-footprint in
their supply chain. Coco-Cola have replaced the usage of water and have helped the local
community in the near by area to provide them with clean drinking water.
Critics argue that with all these activities, it appears that the company is more interested in
making itself look good rather than genuinely contributing to the environment. Coca-Cola
remains the world's largest producer of plastic and continues to harm the environment with
single-use plastics.
It frequently refers to recycling efforts but has few recycled materials in its products. It makes
one wonder whether the company is seriously working on sustainability or not. The giant of
refreshment drinks, Coca-Cola, is doing well and diligently to save water. And yet, it is necessary
that the company should have changes. To gain public's trust, it needs less plastic, updates it
honestly about its progress, and cooperate with environmentalists as well. Otherwise, when that
happens, more individuals will think that they did not do enough in serving their efforts to earn
and gain the trust.