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This letter is a testimonial to the harmony that existed between man and his environment in the past. It echoes the obligations of a society towards its surrounding. Also, it has the undertone of a caveat. Many human activities that accompany the process of rapid development have far reaching effects on the environment and the civil society. The various aspects of business ethics are presented here. The aim is to clarify how we can proceed to address questions of assessing rights and wrongs, rather than to offer resolutions of questions about the nature of perfect justice to all. The disciplines of sustainability, social justice and corporate social responsibility, which are a part of business ethics, will be discussed here based on the Coca Cola story in Kerala, India. The limitation of legal framework in protecting human rights and environment in the developing countries and the various new challenges that multi-national companies face in context of globalisation are explored. New perspectives of responsible corporate behaviour like the stakeholder theory and Triple Bottom Line are discussed to address the Coca Cola issue. However, the central part of the discussion is aimed at identifying the various ethical dimensions of the issue by analysing it based on Rawlsian Theory of Justice.
In the early years of the last decade, Plachimada, a hamlet in the southern part of India, became the focal point of many debates concerning sustainability, corporate social responsibility and social justice. This village, under the Perumatty Panchayat (local administration) in Kerala, is primarily an agricultural village which depended on ground water and the monsoon for irrigation and domestic purposes. It is inhabited by mainly Adivasis (Indigenous tribes) 80% of who depend on agriculture for livelihood. Coca Cola, a multi-national beverage company opened its bottling plant in this village in the year 2000. After a few months, the local community complained about the depleting levels of water in the wells and its deteriorating quality. Though it is a drought prone area, a 25-40 feet drop in the ground water levels, in a short period, propagated the doubt of over extraction by the company.
The agitation organised initially by a tribal woman and later supported by various NGOs and environmentalists against the MNC grew into a movement that exposed the conscienceless psyche of large corporates. Later, in 2003, the Panchayat cancelled the license of the company which led to a legal battle in the following years. It also resulted in the enactment of the Kerala Ground water (Control and Regulation) Act.
The story of Coca Cola raises many ethical issues that challenge the role of businesses and its relationships. It was argued by the Company, that there was no statutory prohibition on digging of bore-wells at the time when it started production. Therefore, legally, there was no restriction upon the company to extract groundwater from its land. But, the absence of such legal framework is a weak defence by such large corporations to justify their rights or wrongs. The ultimate standard of deciding what ought to be right or wrong is ethical, not legal (Weinstein, 2007). Business ethics largely begins where the law ends (Crane & Matten, 2010).
Business ethics can be defined as the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for a business situation (Crane & Matten, 2010). Although the primary motive of corporations is the maximisation of shareholder wealth, they have the potential to contribute to the society in terms of goods and services, employment, contribution to government through taxes etc. But such contributions tend to develop, in businesses, a myopic view of their responsibility towards the society. Businesses today are expected to develop moral and social responsibilities based on values and doctrines. They need to strike a balance between shareholder requirements and the social/ environmental expectations. Also, globalisation has dramatically reshaped the role expectations of businesses.
Globalisation is a process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes and relations (Scholte, 2005). Thus multi-national companies, in the foreign markets, face social, legal and accountability issues. Moral values that were taken for granted in the home market may get questioned as soon as the corporations enter foreign markets (Donaldson, 1996). Also economic control over transnational organisation by national governments dwindled as a result of globalisation. This reposes additional ethical responsibility on the businesses in making economic decisions. The lack of legal framework for safeguarding various stakeholders of a business demands for corporate accountability. Thus, corporations are under pressure to assimilate ethical practices in their day to day business.
The corporations are simply not managed in the interests of the shareholder alone, but it involves the legitimate interests of various groups known as the stakeholders. Evan and Freeman (1993) defines stakeholder as an individual or a group which either is harmed by, benefit from the corporation or whose right can be violated or have to be respected, by the corporation (Crane & Matten, 2010, 61). Before analysing the issue using an ethical theory framework, it is vital to identify the various relevant stakeholders involved in the issue under discussion. To facilitate clarity and avoid intricacy in further discussions, a simple stakeholder model is selected over the newer Network model. A simple stakeholder model identifies, in this matter, shareholders, government, competitors, customers, employees, suppliers, civil society (local community), environment and most importantly the future generations. The involvement of future generations is important for two reasons: one, to bring a new perspective to social responsibility and two, to compensate their absence in the present day discussions.
The legitimate stake in the corporation by the government, customers, employees, competitors and suppliers are to an extent protected by the legal frameworks universally. The dense network of laws and regulations enforced by different societies force corporations to have legal contracts with the above mentioned stakeholders. Thus the interests of these groups are far more protected than the less regulated or perhaps neglected groups such as the local community, environment and future generations. Also, in this case, it is worth noting that the Kerala Ground water (Control and Regulation) Act was introduced and enacted in the wake of the protests and concerns raised by the civil society. It is an evidence of the absence of a legal framework to protect the "neglected" stakeholders. Hence, the interactions of the company with the named stakeholders need to be scrutinised on the ethical grounds. (Referring to the paradigm that "Business ethics largely begins where the law ends").
The ethical theories regarded as most appropriate for application to business contexts are the Western modernist ethical theories. These theories are based on the philosophical thinking that developed in Europe and North America and hence christened "Western". In this context, Coca Cola being an US-based multi-national company, application of these theories/ theory is justified. It is seen that the analysis of the situation based on the Consequentialist and the Non-consequentialist ethical theories provide the same result. But, for the purpose of illustration, the non-consequentialist theory, particularly the Theory of Justice posited by John Rawls (1993), is employed.
Rawls (1993) argued that the following principles of justice will emerge in the original position with unanimous agreement: a) Each person has an equal right to a fully adequate scheme of equal basic liberties which is compatible with a similar scheme of liberties for all. b) Social and economic inequalities are to satisfy two conditions. First, they must be attached to offices and positions open to all under conditions of fair equality of opportunity; and second, they must be to the greatest benefit to the least advantaged members of society. Rawls identified that fairness is central to justice (unlike his forerunners), the 'moral powers' that people have related to their 'capacity for a sense of justice' and 'for conception of the good'. He draws attention to liberty as an overriding concern in the assessment of the justice and social arrangements. The nature of objectivity in practical reason is evident from his argument that "The first essential is that a conception of objectivity must establish a public framework of thought sufficient for the concept of judgement to apply and for conclusions to be reached on the basis of reasons and evidence after discussion of due reflection". Amartya Sen (2009) in his book The idea of justice summarises these positive lessons from the Rawlsian approach.
In analysing the issue, the two stakeholders of the company namely the local community and the future generation will be checked for conformance to the principles of the theory and the third stakeholder identified as environment will be discussed later under the topic of sustainability.
The first principle of the theory of justice prioritises the equal personal liberty of each person and requires their fulfilment before proceeding to the next principle. It says liberties that all can enjoy cannot be violated on the grounds of the furtherance of wealth or income (Amartya Sen, 2009). It implies that the basic freedoms are realised to the same degree for everyone affected by a decision. Therefore, it is essential to discuss whether the over-extraction of ground water (also agreed by the company in its argument in the court) is a violation of the liberty (right to live) of any parties involved in the issue. It is apparent that the over-extraction of ground water by the company from its premises reduced the level of the ground water in the locality. The local community, largely dependent on ground water for agriculture (primary income) and domestic needs, suffered as a result of the dwindling levels. Also, it is imperative to investigate whether the access to water is a human right or not. This demands the involvement of rational persons to judge the issue in an impartial way.
The UN Human Rights Council passed a resolution on 30th September 2010 affirming that water and sanitation are human rights (Resolution A/HRC/15/L.14). Also, the statement by the Secretary General of UN, Koffi Annan that access to clean drinking water is fundamental human need and therefore a basic human right reiterates this fact. It is also observed by the Supreme Court of India (1999) that both water and sanitation are part of the constitutional right to life (Article 21, Constitution of India). Hence it can be concluded that the over-exploitation of ground water by the company is a violation of equal right to basic liberty (essential natural resources) of the stakeholders and the cause for incompatibility with similar scheme of liberty for all.
The second principle relates to the equality of certain general opportunities and equity in the distribution of general-purpose resources. The first part of the second principle requires a just institutional structure that ensures equal opportunity to all without anyone being excluded or handicapped on the grounds of disability, ethnicity, religion etc. (Amartya Sen, 2009). In this case, the opportunity of the different parties involved need to be recognised. The claim of the company, local community and the future generations on ground water resources is primarily targeted at income generation. The ground water is used for agriculture by the local community and for manufacturing by the company. Both intended to create income. Therefore, the general opportunity here is the opportunity to use the resource. The excessive extraction of this resource using multiple bore wells by the company cripples the local community of its equal opportunity.
The second part, also called the 'Difference principle', of the second principle intends to uplift the worst-off members of the society to as well off as possible through distributive equity and overall efficiency. It is obvious, in this dispute, the local community mostly farmers and the future generations, for reasons that they are absent, are the worst-off members compared to the well-off shareholders of the company. If social and economic inequalities are to be arranged in a manner that brings greatest benefit of the least advantaged, then the over-use of a general purpose resource by the company is a breach of equity in distribution.
Sustainable development was defined in the Brundtland Report (1987) as environmentally responsible development of businesses to meet the needs of the present without compromising the ability of the future generations to meet their own needs. But such considerations ignored the right of all those in the current generation to progress. Hence economic and social factors (or impact on the society) need to be considered in tandem with environmental concerns. The aspect of business ethics that aims at reducing the impact on environment, the third stakeholder in this issue, is Sustainability. It refers to the long term maintenance of systems according to environmental, economic and social considerations (Crane & Matten, 2010; Elkington, 1999). John Elkington (1999) coined the term Triple bottom line (TBL) which discusses the idea that businesses does not have a single goal of adding economic value but that it has an extended goal set that necessitates adding environmental and social value too.
The environmental perspective of sustainability is concerned with the conservation of physical resources for the future. It is assumed that the pre-existing nature will stay intact if the human activity operates at a level that doesn't threaten the health of the systems. It is based on the fact that bio systems have only finite resources and finite capacity. The over-extraction of groundwater by the company will, in the long run, disturb the ecological balance. The economic perspective of sustainability defines the limit to businesses in using the natural resources for its economic growth. Hence, corporations like Coca Cola have the responsibility to operate their businesses that will secure the long-term economic performance. The key to social perspective of sustainability is Social Justice. Businesses, therefore, should be concerned about the impact of their activities and decisions on the indigenous communities in the developing or less developed countries and regions. In this case, the activities of the company hindered the livelihood of the local indigenous community. Its activities deepened the social inequality in the region.
From the evaluation of the issue within the frameworks of theory of justice and sustainability, it is clear that the company acted unethically towards its unprotected stakeholders. Frederick (1994) defines corporate social responsiveness as the capacity of a corporation to social pressure. The company denied any responsibility for the issues by claiming that it acted within the legal framework. This mode of social responsiveness is identified by Carroll (1979) as Reaction. It is also worth noting that Coca Cola shifted towards Pro-active social responsiveness in the later years. The company expressed its commitment to replace all ground water and return to communities an amount equivalent to what they used in all its beverages and production. It adopted water management practices like rain water harvesting, recycling and replenishment activities. 'Replenish Africa Initiative' and 'Global Water Stewardship Initiative' are testimonial to the proactive social responsiveness by Coca Cola.
Visser (2008) argues that in developing nations like India economic and philanthropic expectations are more prevalent than ethical expectations. Such expectations tend to mislead the businesses in these countries to commit to philanthropic activities and thus overlook their ethical responsibilities. According to Carroll's four-part model of corporate social responsibility (1991), ethical responsibilities are expected of the corporations while philanthropic responsibilities are merely desired by the society. Corporations need to think beyond such narrow definitions of corporate social responsibility.
It is apparent from the above discussion that the corporations face new challenges in the globalised world. Decisions need to be made on ethical grounds. Businesses need to adapt to local cultures and values. Though it is accepted that the primary motive of the businesses is profit, it cannot be an excuse for ignoring the basic norms and values. They constantly need to examine the impact of their decisions on various stakeholders. The emerging markets are aggressively targeted by corporations which have resulted in environmental deterioration, poverty and resource depletion. In the future, companies will be challenged to develop clean technologies and to implement strategies that drastically reduce the environmental burden in the developing world while simultaneously increasing its wealth and standard of living (Hart, 1997). A positive shift towards sustainable development is evident from the proactive campaigns by major corporations. The UN Global Compact is one such initiative in the direction of sustainability and corporate citizenship. It promotes a greater environmental responsibility by encouraging businesses to adopt cleaner and efficient technology. It is also evident from the discussion that social forces like NGOs and local governments are playing a pivotal role in re-writing the responsibilities of businesses.