Business Ethics

Case Study

Coca-Cola's Business Practices: Facing the Heat in a Few Countries

From January 1, 2006, the University of Michigan in the US put on hold the sale of the products of The Coca-Cola Company (Coca-Cola) in all its campuses, thus becoming the tenth US University to do so. The ban was the outcome of a relentless campaign by student activists and trade union groups, who accused Coca-Cola of violent labor practices in Colombia and of creating environmental problems in India. The University of Michigan issued the orders for the ban based on the recommendation of its University Dispute Board. This was following the inability of Coca-Cola to meet the deadline of December 31, 2005 that required agreeing on a protocol on the findings of the commission formed by a set of universities in the US. The commission had offered to investigate the company's labor practices and that of its bottlers in Colombia. Coca-Cola did not want the findings of the commission to have any legal consequences but the attorneys in an earlier lawsuit against Coca-Cola and its bottlers in Colombia insisted that the findings should be legally admissible in court of law in the US. Other prominent US universities that had banned Coca-Cola on similar grounds were the New York University, the largest private university in the US, Rutgers University in New Jersey, and the Santa Clara University in California. The University of Michigan and The New York University were Coca-Cola's largest campus markets in the US. Coca-Cola's annual contracts with the University of Michigan, which had over 50,000 students, were worth around US$ 1.4 million in sales in 2005. The campaign by student activists and trade union groups to ban Coca-Cola had been going on for several years in different countries. CocaCola was accused, along with its bottling partners, of hiring paramilitary death squads in Colombia to kidnap, intimidate, or kill its union leaders and other workers at its bottling plants. Since 1989, around eight union leaders of Coca-Cola's plants in Colombia had been murdered and many others abducted and tortured. In India, Coca-Cola had to face opposition from the local people around its factory in Plachimada, Kerala,4 who charged that the company was responsible for the draining of the underground water table. In 2003, a BBC5 report revealed that Coca-Cola was distributing improperly treated sludge containing toxic carcinogens and heavy metals like cadmium and lead, as fertilizer to farmers in the region. Coca-Cola shut down this plant in March 2004 owing to mounting pressure. The company then decided to shift its operations to a nearby industrial zone, the Kanjikode Industrial Area.

There were also protests at Coca-Cola's Mehdiganj plant in North India over similar issues. In addition to these accusations, in 2003, the Center for Science and Environment (CSE),6 made public the findings of its study wherein it reported that the products of both Coca-Cola and PepsiCo Inc. (Pepsi) that were sold in India, had a cocktail of harmful pesticide residues in them. In an official statement, Coca-Cola denied that it had used death squads in Colombia. The company said that two judicial investigations in the country had not found any evidence in support of such allegations. Coca-Cola also claimed that there was no evidence linking it or its bottlers with the groundwater problems at its factory locations in India.