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Ethical Problem at COCA-COLA

Ethical Problem at COCA-COLA

Discuss Ethical Problem at COCA-COLA within the Marketing Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Introduction From January 1, 2006, the University of Michigan in the US put on hold the sale of the products ...

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Kalpana Heliya
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Ethical Problem at COCA-COLA - August 19th, 2009



Introduction

From January 1, 2006, the University of Michigan in the US put on hold the sale of the products of The Coca-Cola Company (Coca-Cola) in all its campuses, thus becoming the tenth US University to do so. The ban was the outcome of a relentless campaign by student activists and trade union groups, who accused Coca-Cola of violent labor practices in Colombia and of creating environmental problems in India.

The University of Michigan issued the orders for the ban based on the recommendation of its University Dispute Board. This was following the inability of Coca-Cola to meet the deadline of December 31, 2005 that required agreeing on a protocol on the findings of the commission formed by a set of universities in the US.

The commission had offered to investigate the company's labor practices and that of its bottlers in Colombia.

Coca-Cola did not want the findings of the commission to have any legal consequences but the attorneys in an earlier lawsuit against Coca-Cola and its bottlers in Colombia insisted that the findings should be legally admissible in court of law in the US.
Other prominent US universities that had banned Coca-Cola on similar grounds were the New York University, the largest private university in the US, Rutgers University in New Jersey, and the Santa Clara University in California. The University of Michigan and The New York University were Coca-Cola's largest campus markets in the US.

Coca-Cola's annual contracts with the University of Michigan, which had over 50,000 students, were worth around US$ 1.4 million in sales in 2005. The campaign by student activists and trade union groups to ban Coca-Cola had been going on for several years in different countries. Coca-Cola was accused, along with its bottling partners, of hiring paramilitary death squads in Colombia to kidnap, intimidate, or kill its union leaders and other workers at its bottling plants. Since 1989, around eight union leaders of Coca-Cola's plants in Colombia had been murdered and many others abducted and tortured. In India, Coca-Cola had to face opposition from the local people around its factory in Plachimada, Kerala,4 who charged that the company was responsible for the draining of the underground water table.

In 2003, a BBC5 report revealed that Coca-Cola was distributing improperly treated sludge containing toxic carcinogens and heavy metals like cadmium and lead, as fertilizer to farmers in the region. Coca-Cola shut down this plant in March 2004 owing to mounting pressure. The company then decided to shift its operations to a nearby industrial zone, the Kanjikode Industrial Area.

There were also protests at Coca-Cola's Mehdiganj plant in North India over similar issues. In addition to these accusations, in 2003, the Center for Science and Environment (CSE),6 made public the findings of its study wherein it reported that the products of both Coca-Cola and PepsiCo Inc. (Pepsi) that were sold in India, had a cocktail of harmful pesticide residues in them.

In an official statement, Coca-Cola denied that it had used death squads in Colombia. The company said that two judicial investigations in the country had not found any evidence in support of such allegations. Coca-Cola also claimed that there was no evidence linking it or its bottlers with the groundwater problems at its factory locations in India.

Background Note

The Coca-Cola drink, popularly referred to as 'Coke', is a kind of cola, a sweet carbonated7 drink containing caramel8 and other flavoring agents. It was invented by Dr. John Smith Pemberton (Pemberton) on May 8, 1886, at Atlanta, Georgia in USA.

The beverage was named Coca-Cola because at that time it contained extracts of Coca leaves and Kola nuts.9 Frank M. Robinson (Robinson), Pemberton's book-keeper and partner, who came up with the name for the drink, suggested that it be spelt Coca-Cola rather than Coca-Kola because he thought the two C's would look better while advertising. Robinson designed the now world famous Coca-Cola trademark as well. Pemberton later sold the business to a group of businessmen, one of whom was Griggs Candler (Candler). By 1888, several forms of Coca-Cola were in the market competing against each other. Candler acquired these businesses from the other businessmen and established The Coca-Cola Company in 1892. He aggressively marketed the product through advertising, distribution of coupons and souvenirs, and promoted the brand name Coca-Cola.
Coca-Cola's Business PracticesCoca-Cola had always believed that it conducted its business with responsibility and ethics. The company's business practices were aimed at creating value at the marketplace, providing excellent working conditions, protecting the environment, and strengthening the communities in the places of operation.

Commitment to quality and a code of business conduct were evolved to ensure good business practices. According to Coca-Cola, its commitment to quality was reflected in every facet of its business. These included commitment to product quality, quality in business processes, and in its relationships with suppliers and retailers.

The quality system was reviewed constantly so that the performance bar for these standards was always kept high. The quality guidelines were communicated to all business units and their implementation reviewed. The company introduced the Coca-Cola Quality System (TCCQS) to achieve these quality objectives (Refer to Exhibit V for details on TCCQS).

Labor Practices in Colombia


Colombia is widely considered as one of the most dangerous countries in the world for trade union activists and union leaders. The country was in the midst of a four-decade-old civil war involving leftist guerrillas, right-wing paramilitary groups, and government forces.

The civil war claimed approximately three thousand lives a year including those of many trade union leaders and workers. It was reported that in 2000, three out of every five trade unionists killed in the world were from Colombia. In 2001, SINALTRAINAL, a Colombian labor union, charged that Coca-Cola and its bottlers Panamerican Beverages (Panamaco), Bebidas y Alimentos De Uraba, and Coca-Cola Femsa, were linked to the violence against its union members in Colombia. Around eight union leaders of Coca-Cola's plants in Colombia had been murdered since 1989, and many others had been abducted and tortured. Coca-Cola was accused of hiring paramilitary death squads to kidnap, torture, or kill union leaders and intimidate worker union activists at its bottling plants.
Trade Practices in MexicoMexico was a very important market for Coca-Cola as the country was second, after the US, in terms of per capita consumption of soft drinks in the world. The Mexican market for soft drinks was estimated at US$ 6.6 billion for the year 2004. Over the years, some of the highest profit margins for Coca-Cola in its overseas operations came from Mexico. Coca-Cola was the number one seller of soft drinks in Mexico with a 70% market share. Coca-Cola's largest bottler in Mexico was Coca-Cola Femsa (CCF) in which Coca-Cola had a 40% stake...

Environment & Product Issues in India:

In India, Coca-Cola was accused of draining the underground water table, of releasing improperly treated industrial effluents, and of selling products containing pesticide residues above standard limits. The focal point of the environmental accusations in India was the Coca-Cola plant located in Kerala. Coca-Cola, through its subsidiary in India, The Hindustan Coca-Cola Beverages Pvt. Ltd., had established a bottling plant at Plachimada locality in Palakkad district in Kerala.

The unit was established in 1998-99 in a 40-acre plot that had previously been used for irrigation of paddy and other food crops. The factory site was located in the proximity of a main irrigation canal that drew water from a nearby barrage and reservoir.


Boycott of Coca-Cola Products:

In July 2001, SINALTRAINAL, with the help of United Steelworkers of America (USWA) and the International Labor Rights Fund (ILRF), filed a lawsuit against Coca-Cola and its Colombian bottlers at a court in Miami, Florida, under the Alien Tort Claims Act (ATCA) of the American Judicial System. It accused them of being responsible for a campaign of murder and intimidation against its unionized workers and charged that it was using right wing paramilitary groups for the purpose. The US judge dismissed these charges against Coca-Cola in Colombia but approved the charges against the local bottlers in Colombia.

Coca-Cola's ResponseCoca-Cola opened an exclusive website, Facts About The Coca-Cola Company - Coke Facts, to address these allegations, especially those related to Colombia and India. In an official statement featured on the website, Coca-Cola claimed that the allegations against the business practices in Colombia were false.

Two different judicial enquiries in Colombia, one by a Colombian court and the other by the Colombia Attorney General, had found no evidence against Coca-Cola or its bottlers linking them to the murders of the union members.

Coca-Cola also quoted a judgment in the lawsuit at Miami, Florida, wherein the judge had dismissed the charges against Coca-Cola, Columbia.
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