Corporate Social Responsibility Challenges for Coca Cola

Corporate social responsibility (CSR) promotes a vision for the accountability of businesses in a wide range of stakeholders beyond shareholders and investors. The main areas of interest of CSR are the protection of the environment and welfare of workers, community and society at large, both today and tomorrow.

The concept of CSR is based on the idea that companies are no further independent, but they are closely connected to the society. The traditional views on the competitiveness, survival and profitability of businesses no longer exist.

The Coca Cola Company has fully implemented all the variables of CSR. While it is not a company that applies dishonest practices (such as Mc Donald’s), it could be said that it seeks the maximization of profit but also believes in CSR and the contribution of the business to the prosperity of society. However, there is a difference. It has gone much further and has developed a code of ethical business conduct. This business conduct is communicated to all interested parties.

Terms of reference

• Corporate Social Responsibility
• Stakeholders
• Business Ethics
• Multinational Companies

Procedure (Methodology)

The present paper is based on discussing corporate social responsibility theory and how the Coca Cola Company implements it.

The research is based on CSR literature and the Coca Cola Corporate Social Responsibility Report as well as on some informal interviews with executives of Coca Cola Hellas.

Some of the reasons that make companies adopt CSR principles are:

1. The shrinking role of government.

The decrease of government funds, coupled with the growing distrust of the state regulations has led to the implementation of voluntary and non-regulatory initiatives.

2. The existing demands for greater corporate disclosure.

There is an increasing demand for corporate disclosure on behalf of the stakeholders involved, such as customers, suppliers, employees, etc.

3. The increasing interest of customers.

There is evidence that the ethical behaviour of companies has an increasing influence on customers’ purchasing decisions.

4. Growing investor pressure.

A survey by International Environics (Frazer 2005), revealed that more than one quarter of the shares Americans own, was purchased by taking into account the ethical values of the companies.

5. The competitive labour markets.

Employees seek more than just a salary and bonus. They want employers whose philosophies and operating practices suit to their own values. To be able to recruit and keep qualified employees, companies are obliged to improve working environment.

6. Relations with suppliers.

Since interested parties are increasingly concerned about business matters, many companies take steps to ensure that their partners behave in a socially responsible manner (Alexander and Buchholz 1978).

Some of the positive results that can occur when companies adopt corporate social responsibility are the following:

Benefits for the company:

• Improved economic performance.
• Lower operational costs.
• Improved brand image and company reputation.
• Better sales performance and customer loyalty.
• Increased productivity and quality.
• Increased ability to keep qualified employees.
• Access to funds for capital purposes.
• Diversified employees/workforce.
• Safe products.

Benefits for the community and the public:

• Charitable contributions.
• Employee volunteer programs.
• Corporate involvement in community programs in education, employment and programs for the homeless.
• Product safety and quality (Arlow and Cannon 1982).

The concept of corporate social responsibility is now established in the global business agenda. However, many hindrances need to be overcome.

An important challenge for the modern enterprise is the need for more reliable progress indicators in corporate social responsibility, along with the implementation of CSR strategies. The issues of dialogue and transparency can help the business be more reliable, and at the same time to reach the standards of other firms (Dierkes 1990).

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Critics of CSR, question the relationship of CSR to the nature of the business and believe that its incentives are insincere and hypocritical. They believe that it is more efficient to impose governmental and international regulations to make sure that companies act in a manner that is socially responsible.

With regard to the relationship of CSR to the nature of the business, critics argue that the aim of the business is production and profit maximization for shareholders. Theorists such as Milton Friedman and others go a step further and argue that the goal of companies is to maximize returns to shareholders, and that only people can have the social responsibility, companies are only responsible for their shareholders and not for the society as a whole. While acknowledging that companies should respect the laws of the country in which they work, they have no further obligation to the society. Some people think that corporate social responsibility is incompatible with the nature and purpose of the business, but also that it is an obstacle to free trade. Those who argue that CSR is incompatible with capitalism and in favour of neoliberalism suggest that improvements in health, human life and infant mortality are due to the economic growth caused by the free business activities.

In the theory and criticism to the CSR, the separation of firms according to their behaviour in relation to profit / ethics is included. Under this separation, the behaviour of enterprises is defined as follows:

1. The Amorals who seek only to maximize profit and return profits to shareholders.

2. The Loyalists who believe that their only obligation is not to derogate the law.

3. The Sympathizers who recognise the need to listen to the messages of society.

4. The Suspicious, in other words, the businesses that understand the need to combine profit with morality and make corporate values.

5. Finally, the Believers who are the firms that have developed and follow a code of ethics which has been notified to all interested parties (Caroll 1991).

Most businesses (the Coca Cola company is among them) are between the two poles i.e., on the one hand, they want to achieve profits and have satisfied shareholders and on the other they want to conform to the social imperatives) and the current trend is that CSR can improve to a large extent long-term business profitability because it minimizes the risks and weaknesses and offers a range of potential benefits such as improved brand image and the involvement of employees.

Other critics of CSR argue that some companies like the British American Tobacco, etc. use CSR to distract public attention from ethical issues raised regarding their core operations. They argue that some companies start CSR programs for the commercial benefits enjoyed by raising their reputation in the public or the government. They argue that companies exist only to maximize profits, and they do not promote social interests (Frazer 2005).

Another problem is when companies promote CSR, they are also committed to sustainable development, but in reality, they engage in harmful business practices. For example, Mc Donald’s while it promotes CSR, the salaries of its employees are very low. They work in unhealthy environments, and its products are a health risk because of their high fat content.

Despite these problems and the use of CSR by certain companies to cover up bad business practices it could not be supported that all companies operate in the same way.

Findings

According to the Coca Cola Corporate Social Responsibility Report (2010) the CSR programme of the company is the following:

The main objective of the CSR programme is Sustainability. This is expressed through the actions of the company in the following areas: consumer health, packaging and recycling, water stewardship, employee development, involvement of suppliers and energy and climate.

Regarding of Consumer Health, the company wants to meet the modern life trends of consumers. For this reason, it has broadened the product portfolio with products that are not fattening, and it has reduced the amount of calories in its beverages by 88% according to school beverage guidelines. It has also supported Michelle Obama’s campaign (“Let’s Move”) with the initiative Clear on Calories.

With respect to the axis of Packaging Recycling, the company introduced PlantBottle, which is a “fully recyclable PET bottle made from a blend of petroleum – based materials and up to 30 per cent of plant-based materials “(Coca Cola CSR 2010). Coca Cola has also managed to achieve high recycling rates of its bottles (99 per cent in Europe and 92 per cent in North America).

Regarding Water Stewardship, the company strives to improve the efficiency of water use. It has improved the use of water by 3.5 per cent from 2008. It current average water use ration to make one litre of its products is 1.67 litres.

The development of employees is a further objective of the CSR of the company. The company believes that employees are the foundation for success. In its previous CSR programs, Coca Cola has created special programs to attract, retain and develop the skills and abilities of employees. These programs enable employees to properly exploit their potential while developing leadership skills and talents needed by the company in all sectors and in all countries. Its current CSR programme promotes employees equality regarding diverse cultures. According to the first Employee Engagement Survey, Coca Cola has improved the levels of its employee engagement, whereas on the Corporate Equality Index of the Human Rights Campaign it has received a 100 per cent score.

Finally, with regard to energy and climate, the company co-signed the Copenhagen Communique. It was a supportive action to the global agreement on climate change. For the second year in the row, it has reduced company carbon footprint.

Recommendations

Coca Cola was based on the 6 pillars of business ethics i.e. contribution to economic growth, creation and preservation of jobs, contribution to training, protection of the natural environment, contribution to the development of the region and finally contribution to the fight against social rejection (Lantos 2001).

To achieve these goals, Coca Cola involved all stakeholders i.e. employees, shareholders, consumers and their movements, and local governmental bodies and NGOs.

If the pillars are examined one by one the following can be seen:

For the employees, Coca Cola has created a healthy and safe working environment, it is against discrimination (in terms of gender, race, nationality), the remuneration offered to employees is satisfactory (Coca Cola supports that the wages offered are above the average level of wages, and that it implements benchmarking regarding remuneration).

Regarding consumers, Coca Cola is famous for its marketing abilities. Given its global nature, it pays special attention to the different cultures of people. Furthermore, it targets both to the moral and sustainable consumption through the production of environment-friendly (regarding the chemical composition, packaging, etc.) products. It has also set up recycling programs for their products and consumer training programs to recycle its products.

Coca Cola has followed all the basic rules of the CSR theory, and its programs are successful. Its programs are long term and include many activities. Its strategy includes environment care, dialogue with all stakeholders and is in line with both its history and activities.

Coca Cola provides job positions and is taxed. For example, Coca Cola Hellas specifically paid 100 million euros in income taxes. 1,084.1 million euros in salaries and benefits and 2,441.8 million euros to suppliers for materials required e.g. packaging and services.

Coca Cola is also interested in philanthropy. In 2007 it gave more than 10 million euros to charity programs.

The aim of all these programs is the achievement of sustainable development and where this is not achieved to the desired level, Coca Cola has established the necessary controls to achieve it by changing the rules and models.

In this context, Coca Cola uses and social accounting, which is the disclosure of data (other than financial) on the activities of the company’ in social, ethical and environmental issues. This disclosure is not required by law. Coca Cola publishes an annual Corporate Social Responsibility & Sustainability Report, which is included in the material provided to stock exchange markets for investor information.

In order for social accounting to present factual and reliable data, Coca Cola implements annual audits and inspections by external partners. At the same time, it has created management systems (including all operational functions) to achieve this aim. Communication with all stakeholders is a key element of its strategy because this is the only way it can achieve continuous improvement in every activity.

Consequently, the CSR programs of Coca Cola are considered as highly successful and worthy of emulation by other companies. Coca Cola appears to have long term CSR programs because every year it communicates its actions and its faith in it. The author suggests to continue do so because the global conditions (economic, social) impose CSR programs and on the other hand, it is a way to give value and thus achieve a sustainable competitive advantage.

The value includes all stakeholders. The suppliers feel that they cooperate with a reliable company that respects its agreements and society and is a partner who will help them grow. Employees acquire a sense of identity and identification with the company because it respects human rights and recognizes their contribution. Value for the customers because they see that the company produces products that respect human health and the environment in which they live. Value for partners (banks, etc.) who perceive that the company is trying to develop and understand the messages of the market. Value for shareholders because the company remains a leader, understands the needs of consumers, acts accordingly, and as a result it is profitable. Value to society by offering programs that governments cannot provide and aimed at improving the quality of life of people suffering.

All these lead eventually to profit maximization and the market value rises and as a result the company is not only profitable but also consumers have a positive opinion about it.

Conclusions

Coca Cola is a multinational company. As such it has to implement management practices worldwide. Therefore, it establishes standards in all its operations and exploitation of employees, and environmental destruction are out of the question. On the contrary, it implements CSR programs for environmental protection as well as charity programs.

It has also never been involved in corruption issues or in issues involving child labour.

However, it recognizes the fact that there is always place for further improvements in employee and environmental issues. Therefore, each annual Coca Cola CSR report includes additional practices in these areas.