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Ethical Issues at Coca-Cola

3223 words (13 pages) Business Assignment

24th Nov 2020 Business Assignment Reference this

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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 hit 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 stuffing, issues dealing with unions, competitive, and contamination issues. The ethical problems led to severe consequences such as loss of customers, ban on Coke products, among other adverse 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 following 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 lot of negative reviews of the products. Consumers who drank the contaminated products reported abdominal pain, headache, trembling, and sickness; many who fell victim were school children (Outbreak of Coca-Cola-related illness in Belgium: a true association, 1999). 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 1990s marked the period in which the Coca-Cola Company made dangerous and aggressive moves towards acquiring new companies through mergers and ventures, something that rose suspicion among the French government.

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 broad 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 worked between April 1995 and June 2000; the former employees sued Coca Cola for racial discrimination, and the individuals felt they were discriminated against in pay, promotions and evaluations (Coca-Cola Agrees To Pay Black Workers $192.5 Million In Discrimination Settlement, 2000). 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 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 Stuffing

Channel stuffing 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 (Tung et.al 2008). The practice is illegal since it leads to the accumulation of illegitimate revenue by the company. Coca-Cola Company was charged with a similar issue in 2004, which reflected during the period between 1997-1999 when the company channel-stuffed its goods to a Japanese bottler company to escalate their profits. “The suit contends Coke induced its Japanese bottlers to take $233 million worth of "excess, unwanted and unneeded" concentrate in 1999; it compensated them with rebates and extra funds to cover marketing and the installation of thousands of new vending machines in underserved locations.” (Klebnikov, P., 2003)

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. “In July, the United Steelworkers of America and the International Labor Rights Fund filed suit in the U.S. court against Coca-Cola and some bottlers in Colombia on behalf of their workers, alleging that the companies hired, contracted with or otherwise directed paramilitary security forces.” (Roston, A., 2001) 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 rights organizations gathered in New York to protest the company had exhibited cruel practices.

Issues Related to Water Usage, Pollution, and Population Displacement

Every company is known to need a large volume of water that 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 the content of pesticides in soft drinks from the company (Drew, 2008). 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 regions identified. However, the company has always been denying such allegations, claiming that the lands usually are obtained lawfully.

Health Issues

Coca-Cola has been battling consumers' perception of its products. The products are viewed as the causes of 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 (Clauson, Shields, McQueen, & Persad, 2008). Various health bodies sued the company for 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 false information about Vitamin Water 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 problem. The financial investment in this issue aimed at providing equal wages and salaries for the same job groups regardless of race. The company also undertook to observe cultural diversity in the workplace to avoid any racial discrimination (Goldstein & Lundquist, 2010).The diversity council had a central role in managing human resources and the entire hiring process that relied on the skills and abilities of employees rather than their skin color. Also, the council had the mandate to investigate the 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 irritating substances linked to cancer and other health implications. Also, the company has managed to introduce products with low sugar levels, such as the Coca-Cola zero sugar (Scrinis, 2016). 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 significant companies shows that only one out of ten Coca-Cola products have disturbing ingredients, which is not the case with 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 a collective role in fighting obesity. The campaign aims at informing individuals of 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 multiple 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 by 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 excluded from the market, consumers would still be at a similar risk of contracting sugar diseases such as obesity. Millennials have also become more health conscious over the years, but the decline in soda consumption is derailing some of the international market share. The “Coming Together” campaign encourages everyone to get outside and move their body in a effort to promote a healthy lifestyle (Gertner & Rifkin, 2018).

Partnership to Establish Rainwater-Collection Across India

Following the claims that the company had led to the 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 the collection of rainwater in India. The procedure involves the establishment of large dams and the 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 (Nagpal 2010). 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 rainwater for their use during the 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 problems 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 in the company due to the corruption and discriminatory issues presented. The allegations led to multiple movements against the company, such as the anti-human right movements protests in New York. Imposing a ban on Coke products in some countries such as Belgium, Colombia, and France resulted in 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 intentions 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 the 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 help learners from over thirty tribal schools within the US. The company may also introduce new policies that would ensure the conservation of the environment through recyclable products (The Coca-Cola Company. (6AD, March 2015). Recently, it added 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 cultural and racial backgrounds.

Summary

Ultimately, the company had faced various allegations following a 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 leading, despite stiff competition from Pepsi. However, addressing ethical issues would present an excellent opportunity for the company in the future. 

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