Coca-Cola's Water Sustainability Initiatives

Abstract:

This case is about the global water sustainability initiatives undertaken by The Coca-Cola Company (Coca-Cola). It details the activities undertaken by Coca-Cola's management and employees to contribute to the benefit of the society and community in which the company operated by pledging to return all the water it used in its operations back to the environment. On June 5, 2007, Coca-Cola and the World Wildlife Fund (WWF) launched a global project that focused on water conservation.

Coca-Cola being one of the largest beverage companies in the world had water sustainability initiatives as an integral part of its corporate agenda since water was an important element for the company to run its business.

According to the company, it was aware of the environmental impact caused by a business of its scale and therefore it had decided to implement a wide range of initiatives to improve the quality of life of its customers, the workforce, and the society at large.

While Coca-Cola's water sustainability initiatives earned accolades from its collaboration partners, it came in for severe criticism from activists and environmental experts for allegedly depleting groundwater resources in India. The company was also accused of dumping toxic and hazardous waste materials near its bottling facilities, and discharging wastewater into the agricultural lands of farmers. Moreover, Coca-Cola was one of the most boycotted companies in the world for its alleged unethical business practices in developing countries.

Notwithstanding the criticisms, the company championed various water sustainability initiatives such as rainwater harvesting, restoring groundwater resources, efficient water resource management, watershed protection, community water initiatives, and global awareness and action initiatives for educating the underserved communities the significance of water. The company was also criticized for spending millions of dollars to project a 'green' and 'environment-friendly' image, while failing to take care of the basics to operate its business in an ethical manner. The critics felt that this was an attempt at green washing as Coca-Cola's business practices in India had tarnished its brand image while its sales had taken a beating. However, the company intended to become a water neutral company by 2010.

Issues:

» Understand the issues and challenges faced by Coca-Cola with regard to its global environmental responsibility initiatives.

» Understand the concept of sustainability and its relevance in today's businesses.

» Understand the need for a vision, policy, and governance structure in order to achieve the goals of sustainability management.

» Understand how environmentally and socially responsible behaviour leads to sustainable business performance.

» Develop a framework to measure sustainability initiatives.

» Determine how a company's stand on social and environmental issues can contribute to enhancing its corporate image.

» Understand the reactions of consumers, environmental experts, and critics to Coca-Cola's water sustainability initiatives.

Coca-Cola's Environmental Issues

Coca-Cola was accused of draining the underground water table and of releasing improperly treated industrial effluents in less developed countries. The company was hit hardest in India. The focal point of the environmental accusations in India was the Coca-Cola plant located in the southern state of Kerala. The Coca-Cola drink, popularly referred to as 'Coke', is a kind of cola, a sweet carbonated drink containing caramel 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. 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.

Coca-Cola's Water Stewardship Strategy

In 2007, Coca-Cola initiated a global water project that focused on reducing, recycling, and replenishing water used in the company's beverage production.

Criticisms

Some analysts felt that the initiatives adopted by Coca-Cola were the need of the hour and such private sector expertise and interests could make real contributions to sustainable development. They felt that the company had set an example for other organizations to follow.

While its water sustainability initiatives earned Coca-Cola accolades from its collaboration partners and certain quarters, it failed largely to impress its critics. Despite several efforts by the company, it continued to face criticisms from several quarters...

Coca-Cola's Response

Coca-Cola opened an exclusive website, www.cokefacts.org, which addressed the allegations related to India and other countries. Also, the company issued an official statement rebutting the charges against its bottling plant at Plachimada.

Cartoon Network - The Indian Experience

"We own the kids time band."

- Hema Govindan, Vice-President (Marketing and Public Relations), Turner Entertainment Networks (Asia), in January 2002.

Cartoon Crazy Kids (And Parents)

In March 2001, leading satellite television (TV) channel, Cartoon Network, held a cricket tournament titled 'Toon Cricket 2001,' in Mumbai, India. In the tournament, famous cricket players were to play against famous cartoon characters such as Scooby Doo, Tom, Jerry, Fred Flintstone, Dee Dee, and Johnny Bravo. The tournament was a promotional exercise, aimed at increasing the popularity of the channel and its cartoon characters. The match was scheduled to begin at 2.30p.m, but the 35,000 plus capacity stadium was almost full by 1.30 p.m. with children and their parents.

By 2.30 p.m. the stadium was overflowing and many were waiting outside trying to enter the stadium, leading to a stampede. As the organizers kept trying to manage the crowds, they had to delay the match till 4.00 p.m. When the organizers announced the start of the match, children and their parents went wild with excitement and broke the barricades to meet their favorite cartoon characters.

When pleadings and requests failed to control the crowd, the organizers had to threaten the children with the cancellation of the match to send them back to their

seats. Even then, when the match began, a ring of people stayed on the field, surrounding the pitch, obstructing the view of the people who returned to the stands

The organizers and the security people were helpless, as they did not want to physically force the children off the field. By 5 p.m. many disappointed people left the stadium saying, "We can't see anything, what's the point?" Observers remarked that judging by the number of people who were there in the first place, the stadium was still probably full, even when half the crowd had left.

The crowd eventually settled down and the second half of the match went well. The cartoon characters entertained and delighted the crowds with their antics. This overwhelming response to the tournament was beyond even Cartoon Network's expectations.

Tactics to Recover Banks Loans in India Raises Ethical Concerns

In September 2007, Prakash Sarvankar, a customer of India's second largest bank, ICICI Bank, committed suicide after being publicly humiliated by the bank's loan recovery agents. ICICI Bank was compelled to pay Rs. 1 million in the form of a fixed deposit as compensation to the victim's family. In a similar incident, another customer Yadaiah from Hyderabad died of a cardiac arrest after the recovery agents forcibly tried to recover a personal loan of Rs. 15,000 from him. ICICI Bank ended up paying a compensation of Rs. 0.3 million to the victim's family.

In November 2007, the Delhi State Consumer Dispute Redressal Commission fined ICICI Bank Rs. 5.5 million after ICICI Bank's recovery agents hired goondas to recover their loan amounts.

These were not isolated incidents. There were many other reports of customers being harassed by recovery agents of other banks and financial institutions as well. For instance, in September 2007, a manager of Housing Development Finance Corporation (HDFC) Bank and two of its recovery agents were arrested for extortion and threatening a customer for recovery of a loan.

It was alleged that the recovery agents commissioned by banks often resorted to high-handed tactics such as verbal and physical abuse, threatening phone calls, and public humiliation of customers to recover loans. There were also allegations of recovery agents seizing vehicles of loan defaulters illegally and kidnapping and torturing of defaulters.

These incidents provoked an outcry against banks, with customers, the public, and policy markers clamouring to put an end to this unethical practice.

Customers alleged that the growing competition among the banks had prompted their sales force to hard sell personal and vehicle loans and other financial products, but the very same banks adopted unethical methods when it came to recovery of loans in cases of default.

Some commentators felt that such behavior of banks amounted to deficiency in service and unfair trade practice. Use of goons to recover loans was a criminal offence, they said.

On the other hand, banks justified the use of external agents for recovery of loans. According to B Madhivanan (Madhivanan), Head, Customer Service, ICICI, "When customers give false information like a wrong address or misleading employment information and when their cheques bounce, we ask for the help of a collection agency."

According to Madhivanan, it was not easy for banks to deal with defaulting borrowers who somewhere down the line stopped repaying their loans.

"You have to listen to some of the recordings of our telephonic conversations with loan defaulters. They challenge us to do anything we want to and threaten us, saying that they are going to lodge false harassment cases against us," he added.

However, analysts felt that whatever be the provocation, banks should abide by the law of the land and not resort to uncivilized behavior to recover their loans.

The various incidents involving recovery agents also attracted the attention of the regulators. In February 2007, the Supreme Court (SC) of India expressed concern that the banks were not adhering to the rules framed by the Reserve Bank of India (RBI) and the Indian Banks Association (IBA).

RBI's guidelines stated that recovery agents could not resort to "harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the credit card holders' family members, referees and friends, making threatening and anonymous calls or making false and misleading representations."

But ICICI Bank contended that the RBI guidelines provided for the employment of agents by commercial banks for recovery of loans and seizure of vehicles in case of payment defaulting.

In response, the SC bench emphasized that recovery of loans or seizure of vehicles could be done only legally, and further that while banks "[had] the right to recover the loans but [they] cannot send goondas to recover the vehicle. Sometimes since they get commission, the agents may resort to force and threat. We will have to stop this practice."

With RBI's regulations being routinely flouted, in October 2007 the apex bank expressed concern that the unlawful tactics adopted by banks would adversely affect the reputation of the banking sector in general. Subsequently on November 30, 2007, RBI issued fresh guidelines for banks.

The guidelines provided for mechanisms to be followed by banks for loan recovery and hiring and training of recovery agents. As per the guidelines, before forwarding the cases of the defaulting party to recovery agents, banks had to provide the details of the agents including telephone numbers to borrowers, and the agents were required to call defaulters only from those telephone numbers.

Secondly, every bank had to have in place mechanisms to address complaints of borrowers about harassment by the recovery agents. Banks were required to reformulate their contracts with recovery agents in such a way that the latter did not adopt "uncivilized, unlawful and questionable behaviour or recovery process."7

Verbal or physical harassment of any person, anonymous and threatening calls, intrusion into the privacy of the defaulter and his or her family and friends were strictly prohibited by the guidelines. The guidelines required that recovery agents were adequately trained to deal with customers, especially with regard to aspects like calling hours, confidentiality of customer information, and intrusion into their private space, etc.

In addition to this, the RBI censured banks for offering high incentives or setting rigid targets for recovery agents, which encouraged agents to use physical force and indulge in questionable behavior while recovering loans.

The guidelines also made reference to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Security Interest (Enforcement) Rules, 2002, in the context of loan recovery and possession of property.

In the same month, the working group at IBA too announced its plans to set up a fast-track court based on the lines of Lok Adalat. The loan recovery forum would expedite the process of recovery of loans and vehicles in a legal manner. Approving the concept of such forum for loan recovery, RBI requested IBA to start a certificate course in affiliation with the Indian Institute of Banking and Finance (IIBF) for providing training to recovery agents and marketing agents for loan recovery.

RBI also issued a warning to the banks that in case of any incident of high-handedness reported in the future or further noncompliance of the RBI guidelines, a temporary or permanent ban would be imposed on the concerned banks.

News Article:

ICICI Bank has given a compensation of Rs.15 lakhs to the families of two borrowers who died in recent weeks after ICICI Bank's recovery agents allegedly harassed them for the recovery of personal loans taken by them.

The family of Prakash Sarvankar, resident of Andheri, Mumbai who commited suicide last week will receive Rs.10 lakhs. Prakash Sarvankar had taken a loan of Rs.50,000 which he was unable to repay. The family of Yadaiah, a resident of Hyderabadhas been paid around Rs 3 lakh. Yadaiah died following a heart attack while he was allegedly harassed by ICICI Bank's recovery agents and made to sit in a branch of the bank for recovering Rs 15,000, the personal loan he had taken from ICICI. A case was filed against ICICI for this.

Last year, in July 2006, Himanshu Dev Sharma, a fast food owner from Delhi committed suicide after alleged harassment by ICICI's recovery agents.

Meanwhile Mumbai police commissioner D N Jadhav has issued a directive that banks would have to check the credentials of recovery agents and will have to submit their biodatas to local police stations. Earlier the process of recovering loans was being handled in-house by these banks. Over the last few years, this has been outsourced. The private firms who get these contracts have been using power and humiliating customers, said Jadhav.

Prakash Sarvankar, the ICICI loan customer who committed suicide wrote in his suicide note that the humiliation caused to him by ICICI's recovery agents in the presence of his wife and daughters was driving him to kill himself. The suicide note stated that he was humiliated, abused and threatened by the recovery agents of ICICI.

Jadhav has taken a serious view of the case and has asked for all the details relating to it in his office. D N Jadhav said the case was on his priority list. Four persons have been arrested so far, including an ICICI Bank employee and Mumbai police

commissioner D N Jadhav said they will be questioned to know who asked them to use power and humiliate customers in their houses. D N Jadhav said no one has the right to harass, threaten, use power or humiliate someone to recover money and said they would deal strictly with those who take law into their own hands.

Later, at a specially arranged meeting attended by senior police officials and 84 representatives of banks, credit card companies and financial institutions, Jadhav warned them about using recovery agents who harass loan defaulters. To take a step in this direction, Jadhav asked the banks to form a committee of 8-10 representatives to frame recovery guidelines, taking into account the norms set by the Reserve Bank of India (RBI). Additional commissioner of police Sadanand Date has been appointed as a facilitator to the committee. The RBI guidelines do not permit banks to intimidate, harass, publicly humiliate or intrude on the privacy of any person while seeking to recover dues. Verbal or physical threats, or anonymous calls to customers, are also not permitted.

Joint commissioner of police Rakesh Maria, said that banks have to keep human dignity uppermost in mind during recovery of loans.” He warned the banks to stay within the law or the police would take action against them. Rakesh Maria told bank representatives that if a loan defaulter filed a police complaint that he was being pressurised and threatened to repay his debt the police would have to take action against the bank. “No one can enter the premises of any person without permission or by force. Such actions attract penal action. Banks can also no longer get away by blaming recovery agents for their acts as the ultimately liability is with the banks themselves,” Rakesh Maria said. Referring to the Prakash Sarvankar case, he said that in such cases, banks would be booked for abetting the suicide.

Rakesh Maria told the bank representatives that if banks needed to make any recoveries from anyone, they should do it legally by first sending a notice to the defaulter, followed by a reminder. If, despite this, the person remained a defaulter, then the bank should proceed to attach the property of the defaulter after taking permission from the court. "During this procedure, if banks need any help from the police they can approach us and we will help them", promised Maria.

The police commissioner also laid emphasis on checking the antecedents of recovery agents before appointing them. “If an agent is recruited by a bank despite having a criminal record, then action will be taken against the bank,” Maria warned.  Deputy chief minister and home minister RR Patil said the government had taken serious note of financial institutions engaging musclemen to recover loans from citizens. RR Patil said they would not only take stern action against agents but also against managing directors and senior officials heading such financial institution. He promised strong punishment for bankers who used forceful methods, intimidation or physical abuse.