Leeds Beckett University Faculty

of Business & Law

“Ethical Analysis of Coca-Cola”
Business Ethics, Governance and Social
Responsibility
Name:Taner Bulut
Student Id: 7716528
Mathew Appleyard – Samantha Crossley

09.01.2016
Contents
1.Introduction of Ethical Issue ....................................... 2
1.1.Coca-Cola Water Pollution ın Kerala, India ........ 2
1.2. Stakeholder Analysis of Coca-Cola ..................... 3
2.Ethical Analysis of Coca-Cola...................................... 5
2.1.About Coca-Cola and Coca-Cola India................. 5
2.2 CSR Policies of Coca-Cola .................................... 5
2.3. Coca-Cola’s Ethical Practices and Current Status
in India ...................................................................... 6
2.4 Assesment of Coca-Cola...................................... 7
3.Conclusion and Recommendations ............................ 8
Bibliography ................................................................ 10

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1.Introduction of Ethical Issue

1.1.Coca-Cola Water Pollution in Kerala, India

The community protested Coca-Cola bottling facility in Kerala at 2003.The main problem was
production facility of Coca-Cola was polluting the natural water resources at this region.For this
ethical reasons production facilities of Coca-Cola was banned by Indian Supreme Court at 2004. After
this situation Center for Science and Environment(CSE), published report about the level of pesticides
exceed the European standards (CSE, 2003). This report led to a lot of protests in India against Coca-
Cola and Pepsi. Against to these protests, Coca-Cola denied the all of the charges and them insisted
their products are consumable and safe for the community. They also questioned the lab reports
published by CSE to make independent investigations of their operations in India.After this demand
soft drinks of Coca-Cola analyzed by an independent lab, The Energy and Resources
Institute(TERI).According to the reports, the soft drinks of Coca-Cola proclaimed safe and pesticide
free.Nevertheless, the CSE claimed, independent analysis tested only water segment of these
products.They didn’t check the other ingredients like artificial flavors and sugar.After this report, TERI
released the report to the government soft drinks of Coca-Cola is safe.Nevertheless, High Court of
Kerala ordered to close and canceled the license of Kerala production facility of Coca-Cola in March
2004.Until 2011 Coca-Cola tried to renew their license and re-open bottling facility.In February 2014,
the Court of State fined $48 million dollars to Coca-Cola for local people who harmed from pollution,
water depletion, crop loss and diseased from ground and surface water issues. (Mahajan, 2009)

CSE Report claims the these problems about Coca-Cola :

1. Water Shortages

2. Pollution

3. Distribution of toxic waste

4. Products contain pesticides (Hills, 2005)

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1.2. Stakeholder Analysis of Coca-Cola

(Mitchell et al. 1997)

1.2.1.Customers:
Customers are the one of important stakeholder fact for the Coca-Cola Company.Because the whole
of operations depend on and design for needs and demands of Coca-Cola customers. These clients
are the biggest retailers, cafes and restaurants to serve consumers. Coca-Cola has to create beyond
valuable and efficient selling channels to its customers because it's the main way to reach their
potential consumers.Also creating or sustainable tailored supports and services are the way building
efficient strategies for collective future.Taking the cognizance of environmental issues in world global
and largest customers and potential customers always expect the being cautious to the
environmental situation, taking environmental responsibilities and developing eco-friendly
production line and products from their suppliers. All of these needs must combine with societal
demands. When considering the case of the Coca-Cola in India understanding the societal needs and
creating effective solutions is the key ethical behaviors for Coca-Cola.

1.2.2.Consumers:
Coca-Cola had to face lots of issues in India and this situation created more complicated consumer
relations against to the public.Because of this reason Coca-Cola had to build new ways to
communicate to their potential customers.Especially they focused on environmental strategies to
reduce footprints, health activities, creating safe work environment for their strategic stakeholders
like consumers and employees.Unhealthy practices put Coca-Cola in trouble against to the

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government and society.Depending on these, Coca-Cola lost its communication between the
company and potential consumers.Building new relationships and tailoring the production stages
cost 2 Billion USD to Coca-Cola until 2011.Considering the consumer profile of the Coca-Cola is
generally depends on families who are the decision takers to buy Coca-Cola’s products and most of
the consumers are the people who between 17-35, also considering the young population in India
can cost billions to Coca-Cola.Re-creating the Brand Value and ethical practices in India became the
crucial situation to develop being ethics.

1.2.3.Suppliers:
These stakeholders are the providers of the production and selling materials for Coca-Cola company.
As a global company, Coca-Cola can set some rules about being efficient eco-friendly and legal. For
the Coca-Cola eco-friendly production methods and sustainable production methods for reducing
carbon emission, prevention for child labor and improvement on wages for suppliers will help to the
business environment.Also, energy-efficiency is the main problem for the world.Considering this
issue just building eco-friendly facilities for Coca-Cola is not the main way to be an ethical
company.Controlling and creating rules for suppliers who produce or sells stuff for Coca-Cola
production facilities must be linked with moral rules.

1.2.4.Government
Governments are the primary stakeholder for Coca-Cola because they hold the maximal legal
sanctions against to the companies.Governments have to control and investigate the legal and
ethical issues for their citizen and the environment.As a global company that has multiple operations
in lots of countries, Coca-Cola has to face different regulations and laws.Some rules and strategic
plans can change on countries but to adhere to the code of ethics is a global issue for Coca-
Cola.Because of water pollution problem in Kerala, local and Government banned production Coca-
Cola in India beverage market.After this point, Coca-Cola lost the market for seven years and brand
value.According to the case, meeting the local and national legal requirements is the central issue for
Coca-Cola.

1.2.5.Community:
A company needs to respect societies and their environmental resources.Society always thinks their
environment and vital needs.If this subject harms from someone, consequences will be harmful to
both sides. In this case, Coca-Cola was draining the natural water resources of the local area in
Kerala, and it resulted in social upheaval against Coca-Cola.Instead of obstinate with the community,
to solve this problem Coca–Cola must create sustainable relationships with community and build
events depending on volunteerism and social responsibility projects.

1.2.6.NGOs:
Non-governmental organizations are the voice of communities (Willetts, 2001). These sturdy
foundations especially considering the NGO’s in India created a public reaction to build legal
provisions against Coca-Cola.After the all of the legal conflicts between Coca-Cola and NGO’s ended
with ending of Coca-Cola production in these areas.Every right movement against unethical
behaviors start with a person, and it regroups with NGO’s.It reaches to sanction power with NGO’s.
Finally, it passed through every part of society and forced the person or corporations to change their
unethical behaviors (Papyrina, 2010).

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2.Ethical Analysis of Coca-Cola

2.1.About Coca-Cola and Coca-Cola India

“The Coca-Cola Company is a manufacturer, distributor, and marketer of non-alcoholic beverage
concentrates, syrups, and finished sparkling and still beverages. The company owns or licenses and
markets more than 500 brands, including sparkling beverages, waters, enhanced waters, juices and
juice drinks, ready-to-drink (RTD) teas and coffees, and energy and sports drinks. It operates in more
than 200 countries.The company was headquartered in Atlanta, Georgia and employed about
129,200 people as of December 31, 2014. The company recorded revenues of $45,998 million during
the financial year ended December 2014.” (Marketline, 2014, p.3)

The main purpose of Coca-Cola, sustaining and building efficient development plan for today and
future with adhering to global ethics and responsibilities.

“Coca-Cola India, is one of the country’s leading beverage companies, offering a range of healthy,
safe, high quality, refreshing beverage options to consumers. Over the last 22 years, ever since its re-
entry in 1993, the company has gone on to establish an unmatched portfolio of beverages.”(Coca-
Cola, 2015)

Appleyard, (2015) cited the research of Venn (1880)

The red shape is the ethical position of Coca-Cola according to Venn Diagram.The company focused
directly on its economic concerns firstly with creating ethical applications but after the water and
environmental issues, we are observing the Coca-Cola ignored the legal responsibilities.According to
the Coca-Cola they are in the line of business ethics and considering the ethical practices, the end
edges of shape intersects with the legal responsibilities due to this reason.

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2.2 CSR Policies of Coca-Cola
-Beverage benefits: Creating products that offer for every type of lifestyle and environment with
providing of quality for people trust.

-Active healthy living programmes: Providing health programs with product variety, nutrition
training, consumer education programs and physical activity programs.

-Building sustainable relationships with communities: Encouraging the sustainable communities

through economic development, philanthropy and the creation of economic and social opportunities.

-Energy efficiency and climate protection: Aimed to be the industry leader in energy conservation
and climate protection with not increasing carbon emission from manufacturing products.

-Sustainable packaging: Building value factor in every part of packaging cycle with purpose of reduce,
recover and reuse.

-Water stewardship: Protecting the amount of water which they are used in production facilities for
their beverages and return to nature of this amount.

-Workplace rights: Creating a healthy, safe, equal business environment for their employees with
based on international human rights. (Madhavan, 2012).

2.3.Coca-Cola’s Ethical Practices and Current Status in India

Making partnerships with farmers and government foundation, to create drip-irrigation for building
water-efficiency system in Kaladera area. Drip irrigation is an irrigation method which decreasing
level of the water using and the main purpose of this irrigation method focusing directly to the root
of seeds and it creates too efficient water management for farmers. The Coca-Cola supporting with
funding to the farmers and they also offer lots of education opportunities to teach this system.
(Chaklader & Gautam, 2014). At the end of 2011, Coca-Cola supported over the 400 project in the
area of 200 hectares.

Coca-Cola Support My School program, according to the Coca-Cola every child deserve better and
equal life in every part of the world, and this situation is too critical for social development. In these
days, many children in rural India doesn't have the primary facilities for basic needs.Also, lack of
sanitation problems still continues. Coca-Cola began the Support My School (SMS) campaign on the
24th of January, 2011. It’s nationwide program to create Awareness In the arena of water
management, Coca-Cola global goal is returning to nature of water that use in the production of all
beverages. The Support My School program is expected to affect at minimum 50,000 students in 100
schools in India. Each of 100 schools will have a chance to reach clean water and sanitation,
infrastructure for water preservation and rainwater harvesting, paysage improvement, training of
teachers, and sports activities.

Finally, Coca-Cola free-retailer program “Parivartan” run by The Coca-Cola University. This program
works with mobilized bus and its equipped with all of the required education elements like LCD’s and
chairs to feel class environment. This program focuses on money management, stock administration,
displaying and how to make trade efficiently, and control of finance. At the final of the program, each
of candidates will get “Certified Retailer” certificate.

Likewise, according to Coca-Cola they are focusing on these 4 main corporate citizenship principles:

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• Reconditioning the marketplace

• Enriching the work environment

• Protecting the nature

• Building strong relationships and refreshing the environment (Hills & Welford, 2005)

2.4 Assesment of Coca-Cola

2.4.1.Comparative Analysis of Coca-Cola’s According as Normative Ethical Theories:

The ethics that use the normative ethical theories, before to complete determination actions should
develop evaluation criteria within the framework of morality.Normative ethics uses for the creation
of a distinction between right and wrong approaches.When we are observing, the Coca-Cola case
issues in Kerala, India. According to current practices of Coca-Cola, we can say they are trying to stay
in ethical lines, but Coca-Cola’s other production facility which located in Northern India ordered to
close on 19th June 2014 (Chiltoki, 2014). Considering the all of CSR Policies of Coca-Cola in India, it
can determine as a good company that respects to natural resources, after the all of the incidents,
we are observing Coca-Cola still harming the natural resources.

According to Utilitarian Theory, it suggests consequences of ethical applications helps us finding the
meaning of ethics.In this situation, if the actions maximise the good, it produces the greatest good
for the greatest number (Mill, 1993). To sum up, determining the is the behavior morally right or
wrong, can only determined by looking at its impact on society. When we examine although good
actions of Coca-Cola, they are still exposing the charges in different areas of India about draining
natural water resources.As a result, Coca-Cola isn’t in the line of utilitarian theory.

Examining the Deontological Theory, consequences is not the point for ethical analysis, the
deontological approach focuses on duties or principles.Right actions are the main issue for this
theory. Right principles describe it for humanity.We understand deontological theory’s central
analyzing point is the intention.Considering the Coca-Cola, they made the ethical moves when they
faced with civil complaints in India.So they didn’t do anything before these issues.It’s acceptable
according to deontological theory.

Virtue Ethics identified as a virtue with the perceptual knowledge that is related morally relevant.
(McDowell, 1984 as summarized by Driver, 2014).According to McDowell, a virtuous person doesn’t
follow or adhere to rules related virtue.It shaped by our virtuous behavior and happiness is the main
purpose of this theory.According to this ethics, Coca-Cola’s social responsibility practices in India can
be well-considered but observing the same water draining issues in other parts in this country, we
can see the Coca-Cola isn’t doing what are they saying as a global company.

2.4.2.Comparative Analysis of Coca-Cola with Carroll’s Corporate Social Responsibility

Pyramid
According to Carroll’s pyramid model, the firm which regardful to the CSR, must adhere to the make
a profit, obey the law, be ethical and be a corporate citizen (Carroll, 1991).Firstly when we examine
this model according to Coca-Cola, first, and the main purpose is always being profitable for develop
their operations in the world as a global company. Because Economic Responsibilities is a most
important goal for this kind of businesses.Considering the over $3 Billion investment to develop

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long-term sustainable growth of in India, it proves they are actualizing their economic responsibilities
for corporate responsibility (Coca-Cola, 2012)

The second step at Carroll’s pyramid is Legal Responsibilities, rules, and laws are the protectors of
the link between society and companies.It depends on area and nations, but the primary role of
government is protecting their citizen with valid laws against businesses and possible threads.In this
case, Coca-Cola banned from production in Kerala, India. Societal demands listened by local and
national authorities and sanctions were applied by Indian High Court.This results experienced
because of Coca-Cola’s failure to comply with the laws.Likewise other water draining issue about
production facility for Coca-Cola in North India proves Coca-Cola still doesn’t adhere to the laws and
legal responsibilities.(Financial Times, 2014)

According to the third step of Carroll’s Pyramid, Ethical Responsibilities are the combine of economic
and legal responsibilities.To complete the corporate social responsibility legal and economic
behaviors must be in the line of ethical structure, likewise according to moral philosophy that is the
important source for ethics, ethical concerns must be for commercial purposes (Hausman and
McPherson, 1993). In this point we are observing Coca-Cola just focused their economic interests.
The second water issue shows us groundwater level in Mehdiganj in India has gone from safe level to
critical level since Coca-Cola’s first operation in 1999.The numbers of production capacity of Coca-
Cola increased from 20.000 cases to 36.000 cases per day without board permission (The Ecologist,
2014).This case demonstrates the ethical responsibilities are forgotten by Coca-Cola.

The final point of Carroll’s Pyramid is Philanthropic Responsibilities.This stage focuses on the welfare
of society with building effective social and governmental programs to serve the community.It
includes of activities that create a link between society and company.At this situation Coca-Cola
making a lot of activities that fit in philanthropic responsibilities like Coca-Cola Support My School
Programme, drip irrigation projects and independent retailer training program (Tsukamoto &
Wagner, 2015). The main point which needs the understand, building a brand image with social
responsibility studies needs programs like these but only depending on philanthropic responsibility
isn’t the main solution for the being in CSR.

3.Conclusion and Recommendations

Ethics is the obligation and behavioral movement limit for societies, business world and public
foundations since civilization age. Until today ethics seen as an optional factor for the world but
considering our rapidly growing population and due to aggressive development strategies of global
companies consumed the natural resources of our world.The importance of ethics became more
significant at this point.Despite all of the philanthropic strategies won’t be a direct solution to be an
ethical firm and corporate citizen for Coca-Cola.Especially, in this case, Coca-Cola must re-build their
ethical approaches from beginning to ending because CSR structure is linked to each other and every
part is an essential element for each one.

The first recommendation is related about Coca-Cola and customer relationships in all segmentations
and corporate future it depends on this stakeholder part. Before every organizational step, Coca-Cola
must examine it carefully movements considering the potential behaviors of customers.Ethical
behaviors are coming first in this case because a company has unethical acts in a particular area, the
results may be too harmful to the social and physical environment.The main purpose in this part

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must be creating and restructuring the ethical understanding and objectives to show customers, the
company is staying in the line of ethics and its global rules.

Considering the financial power and 5$ billion dollar investment plan to India until 2020, changing
their ethical structure and creating the new brand image with ethical concerns will be more effective
than old ethical and strategic plans when considering the current environmental issues about Coca-
Cola.If these types of global companies confront with communities and government, consequences
will be crucial for them. In this case to minimize the harmful effects of unethical behaviors re-
analyzing and re-building the ethical understanding of Coca-Cola will be the game changer for
themselves and world.

An ethical company doesn’t control itself only. It's also trying to manage the other participants of a
company like suppliers because corporate ethics is a collective theory that needs all internal and
external participant to serve company.In example controlling and setting some valid rules against
external stakeholders of Coca-Cola is a necessary application.Controlling the bottle producers and
setting some rules that have perlocution power will be too effective for completing ethical
theory.Suppliers part can be a small step for Coca-Cola because it's required to spread all of the
external resources of the company.

Governments are the protector of society and enforcer of the law.A global company has a problem
with community governments needs to do its protective duty.In this situation, the company must
prepare the necessary applications because struggling with society and government devastates
corporate image and ethical structure in specific regions and if this unethical behavior continues the
results spread over the world and situations became a crucial problem for the company.Coca-Cola
must re-prepare the all of the required regulations for not having this problem again.

Likewise, research and develop ethical practices in this country, working with independent NGO’s
which doesn’t have close relationships with some political or private foundations, can help to Coca-
Cola build new and respectful reputation against to the complainants. Also, it can create a chance to
help examine itself for ethical mistakes of Coca-Cola objectively.To sum up being ethical and
respectful to the ethical lines won’t be enough for firms, showing this to the society will help to
create the link between society and company, if it can happen this situation will reach to the main
purpose of ethics to happiness.

Making legal actions against to the NGO’s like CSE won’t help to solve this ethical issue for Coca-
Cola.Instead, of this movement, cooperation with CSE will be more effective for solving this
argument.Making partnerships with these NGO’s with the purpose of restructuring the ethical
applications of the company will create a new image and help to recover these problems.

As a result, our world resources are decreasing dramatically and controlling this issue became the
most important factor in our world. At this point, global companies have an important role in
controlling this problem because they have a significant effect on the environment.At this point
ethics and it’s applicable theories are the most influential factors to create this understanding. As
stated previously ethics became and obligation for our world and application of ethics will increase
the understanding of moral theories in world.

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