Coca Cola Ethical Issues
Abstract
Coca-Cola Company is one of the leading beverage companies in the whole world despite the pressure presented in the market by its major competitors. The company had suffered several ethical issues that have, in turn, destroyed its reputation as an international venture. The research focuses on the ethical issues that had once stroke the company and the strategy used to overcome the problem. Examples of ethical issues found to had affected the company includes racial discrimination, health issues, channel staffing, issues dealing with unions, competitive, and contamination issues. The ethical problems led to serious consequences such as loss of customers, ban on Coke products, among other negative outcomes. However, the company established strategies to address the ethical issues and has achieved to attain most of the goals geared towards restoring the situations. Also, the company has embarked on a social responsibility initiative to show the good motives it has on the community. Addressing ethical issues may result in the restoration of the lost customers and the company’s reputation in the future.
Coca Cola Ethical Issues
Introduction
Business companies have a primary objective, which is usually geared towards maximizing profits by establishing a strong market base. Increasing a company’s market base entails a lot of things that depend on the strategies used to achieve the desired outcomes. However, the strategies used must comply with ethical standards derived from various sources such as business laws, policies provided by commissions, and international trade law. Failure by a company to conform to all ethical standards may result in ethical issues that may, in turn, destroy a company’s reputation. Coca-Cola, a leading beverage company in the whole world, has been fighting a series of allegations that resulted from a violation of ethical standards.
Company Information
Company’s Name
Coca- Cola Company
Company’s Mission and Vision Statements
Vision: inspiring each other to be the best we can be by providing a great place to work.” (The Coca-Cola Company, 2018)
Mission: To refresh the world in mind, body, and spirit. To inspire moments of optimism and happiness through our brands and actions (The Coca-Cola Company, 2018).
Company’s Statement of Ethics
The Coca-Cola Company is determined to act under all laws governing national and international trade. The company is also dedicated to performing their activities with integrity and transparency (The Coca-Cola Company, 2018). Also, honesty and accountability in every aspect of the company is a critical factor that is always considered.
Company Research
Specific Ethical Issues in the Company
Contamination Scare
Contamination issues have formed serious ethical concerns since 1999, which has adversely affected the company’s reputation in the international market. In June 1999, several victims were reported to have been poisoned by Coca-Cola products in Belgium, a scenario that led to a negative customer of the products (CEOC, n.d). The problem escalated not only in Belgium but also in other countries such as France that reported similar incidences. Unfortunately, the come was slow to respond to the issue, and this exacerbated their image that was already bad. The company later realized that the poison was because of an erroneously processed batch of carbon dioxide. The contamination issue was a big blow to the company since affected countries such as Belgium ordered a ban on the products.
Competitive Issues
In the 1990s, the Coca-Cola company was accused of several unlawful tactics for increasing its market base. The company used strategies that are against European laws and cultures in their expansion journey. The 1990s marked the period in which the Coca-Cola company made serious and aggressive moves towards acquiring new companies through mergers and ventures, something that rose suspicion among the French government. The suspicion from the company’s efforts to acquire Orangina, a French beverage company (CEOC, n.d). The French government, after realizing that the company was using unlawful methods to gain its market base, rejected its bid to purchase Orangina. It also raised issues that triggered the re-scaling of the procedures used by Coca-Cola to acquire other companies such as Cadbury Schweppes that it had purchased before.
Furthermore, Italy managed to win a case against Coca-Cola following repeated claims on the anti-competitive approaches the company was using. As a result, the European Commission of Trade started a serious investigation to find out the competitive practices used by the company (McKelvey, 2006). Lastly, the company’s chief competitor, PepsiCo, made allegations that Coca-Cola was using large discounts strategy, which is against the European laws, to gain a competitive advantage.
Racial Discrimination
The company faced serious allegations from a group of African-American employees who sued it for racial discrimination. The pledges included low wages for the Blacks in comparison to the whites in the same job positions, promotion bias, and unrealistic performance evaluation. The allegations took place in 1999, but prior claims on the same issue roots back to 1995, where the company was accused of racial discrimination (CEOC, n.d). However, the company tried to restore its image by undertaking to spend a lot of money to fix the issue bust; still, there was no observable change. The discrimination complaint affected the company’s reputation negatively.
Increased Earnings Due to Channel Staffing
Channel staffing refers to a scenario where a company forwards its inventory that is not requested for the wholesalers and retailers before the end of a quarter. The practice is illegal since it leads to the accumulation of illegitimate revenue by the company. The concept behind the illegality of the practice is because the company counts the unrequired inventory as sales even though the goods remain in their warehouses (CEOC, n.d). Coca-Cola Company was charged with a similar issue in 2004, which reflected during the period between 1997-1999 when the company channel-staffed its goods to a Japanese bottler company to escalate their profits.
Issues with Distributors
In 2006, the company faced problems related to the violation of a contract that was manifested between all major bottlers in North America (CEOC, n.d). The contract prohibited house delivery to Walmart, a condition that Coca-Cola surpassed and continued with their house delivery to Walmart. As a result, over fifty bottlers in the region filled petitions to sue the company for violating the contract. The fact that Coca-Cola breached the contract between the distributors by observing a good relation with one of the distributors and ignoring the law showed its illegitimate practices. There was no point in establishing a good reputation with one distributor, while destroying reputations with the over fifty bottlers.
International Union Problems
The company was accused of allegedly killing several workers, while taking others to detention due to union issues. The unions demanded the rights of employees by disclosing some information that seemed to be confidential to the company. The deaths and missing of many workers in Columbia were directly related to the company. However, Coca-Cola denied the allegations and linked the killing to the Colombian civil war. Also, the company reported that the number of individuals slain in the attack escalated since only an eighth of the total workers in Colombia died. Various human right organizations gathered in New York to protest inhuman practices that were believed to had been exhibited by the company.
Issues Related to Water Usage, Pollution, and Population Displacement
Every company is known to need large volume of water tat is used in the industry for various purposes. Coca-Cola products are mainly made of water, implying their large consumption of water around bottling plants. In India, the company was accused of depleting and contaminating underground waters, an allegation that they supported by content of pesticides in soft drinks from the company. The company also has several bottling plants around drought-driven areas in India, which resulted in allegations that it was responsible for the exhaustion of the limited water in these areas. Furthermore, the company had been accused of displacing settlers in areas of interest due to their financial influence and their strong need to establish bottling plants in the identified areas. However, the company has always been denying such allegations, claiming that the lands are normally obtained lawfully.
Health Issues
Coca-Cola has been battling consumers’ perception of their products as being the cause of some of the chronic diseases such as obesity and cancer. The company waged an advertisement campaign to convince consumers in Australia on the health values of the drinks, an action that received severe legal implications. Various health bodies sued the company for the misleading information since the products are not healthy and consist of much sugar. Coca-Cola products have also been linked to obesity due to the high concentration of sugars. The company was also sued for providing a false information about VitaminWater that was presented to be healthy regardless of its high sugar content.
Strategies for Addressing the Ethical Issues
Creation of a Diversity Council
In response to the allegations made on discriminatory issues within the Company, Coca-Cola came up with a diversity council and pledged billions of dollars to end the issue. The financial investment in this issue aimed at providing equal wages and salaries for same job groups regardless of race. The company also undertook to observe a cultural diversity at the workplace to avoid any sort of racial discrimination. The diversity council had a main role of managing human resource and the entire hiring process that relied on skills and abilities of an employees rather than their skin color. Also, the council had the mandate to investigate human resource cycle in the company based on promotion and pension schemes regardless of employees’ race.
Re-Formulation of the Products to Eliminate Harmful Ingredients
Coca-Cola company reacted to the allegations that most of its products contained cancer-causing ingredients that were majorly associated with the caramel coloring of the drinks. The company reformulated the coloring to eliminate the disturbing substances linked to cancer and other health implications. Also, the company have managed to introduce products with low sugar levels such as the Coca-Cola zero sugar. The zero sugar drinks aim at reducing the health effects associated with the products with high sugar concentrations. Recent research on the contents of soft drinks from major companies shows that only one out of ten Coca-Cola products have disturbing ingredients, which is not the case with the other companies such as Pepsi.
Launching of the New Campaign “Coming Together”
The company reacted to the allegations that most of its products are related to obesity-causing substances. As a result, Coca-Cola decided to launch a new company to sensitize people on the importance of collective role towards fighting obesity. The campaign aims at informing individuals the various possible causing of obesity and how they can be avoided without eliminating Coke products from the market. The campaign also aims at advising customers on the various activities such as physical exercise to help in burning the harmful calories that may result from food products. Through this campaign, the company is urging individuals to embrace a healthy lifestyle through ensuring regular workouts to help in eliminating excess sugars from the body. The advice is realistic since not only Coca-Cola products are sugary; hence, even if they are eliminated from the market, consumers would still be at a similar risk of contracting sugar diseases such as obesity.
Partnership to Establish Rainwater-Collection Across India
Following the claims that the company had led to depletion of water sources and contamination of underground water, Coca-Cola has collaborated with the Indian government and other non-governmental organizations to establish a strategy that will ensure collection of rain water in India. The strategy involves establishment of large dams and purchase of tanks to be in schools and other public institutions. The main aim of this strategic plan is to preserve water for use by Indian citizens during droughts. The action implies that even the company’s bottling plants that were reported to be consuming much water will have the opportunity to tap the rain water for their use during industrial processing of the products.
Consequences of the Ethical Issues
The ethical issues led to various negative implications on the company since they happened nearly at the same time. The issues resulted in a reduction of the company’s customer base, which led to an automatic realization of losses. Also, various bodies including consumers lost trust on the company due to the corruption and discriminatory issues presented. The allegations led to various movements against the company such as the anti-human right movements protests in the New York. Imposing a ban on Coke products in some countries such as Belgium, Colombia, and France resulted huge losses that in turn affected the company’s capital.
Recommendation for Change for the organization
Restoring customer-base by the company requires Coca-Cola to concentrate on social responsibility since it is the only sure way of showing the community the good intensions of the business. The company, being one of the leading beverage companies in the world with a large capital base, should take a social responsibility focus by funding various groups within world’s communities. Coca-Cola may take an initiative of supporting education at an international level by giving grants and scholarships to learners from all over the world. Also, the company should undertake to support learners from over thirty tribal schools within the US. The company may also introduce new policies that would ensure conservation of the environment through recyclable products. Recently, it introduced a new PlantBottle that is mostly made of plant materials. Furthermore, the company should focus on empowering women through funding various welfare programs. The empowerment program should target women all over the world regardless of the cultural and racial backgrounds.
Summary
Ultimately, the company had faced various allegations following violation of ethical standards in the business environment. however, the company, using the provided recommendations and the strategies used to solve the issues, can still manage to restore its reputation. The company is still the leading, despite a stiff competition from Pepsi. However, addressing the ethical issues would present a great opportunity to the company in future.