Coca cola responses to threat of climate change

Coca-Cola realizes that climate change has profound impact on its business performance and starts to take integrated initiatives to address the issue.

Awaken to threat of climate change

Similar to most of listed companies that are responsible for return of their shareholders, Coca-Cola used to be more focused on its financial performance than on climate change. Unexpectedly, climate change started to bring increasing pressure on its supply chain. For example, very recently in March 2016, the company decided to suspend operations of three bottling plants in different states in India because of serious water shortage[1]. The company has also been pushed to look for substitutes to traditional sugar as sugar plantation is not immune to climate change[2]. Extreme climate conditions have disrupted the company’s supply of water, sugar cane, sugar beets and citrus, which are used for fruit juice products. The company finally recognized that climate change has real direct and in-direct implications for its supply chain and financial statements. Coca-Cola becomes a strong promotor and an active global leader in reducing greenhouse gases[3].

Integrate climate change into business strategy

In order to tackle climate change issue, Coca-Cola took integrated approaches:

  • Coca-Cola incentivizes low-carbon decisions for sourcing ingredients and manufacturing products. The company provides an internal-developed Excel-based tracking tool – the Carbon Scenario Planner – to help each of its Business Unit better forecast carbon reduction scenarios and form business planning to meet emission targets[4].
  • To ensure emission cutting targets could be successfully achieved rather than some fancy numbers on business plan, Coca-Cola has aligned targets with monetary rewards for top executives. Performance of top management team (e.g., Chief Sustainability Officer and Chief Technical Officer) is linked with global climate protection performance progress.
  • In addition, Coca-Cola keeps innovating production technologies to minimize potential climate change impacts to its raw material costs. For example, traditionally, Coca-Cola produces PET plastic bottles from petrochemicals, whose price is likely to fluctuate along with climate change. The company has decided to implement PlantBottle technology, which produces one of two inputs for making PET plastic resin from renewable, plant-based feedstock rather than petrochemicals, so that the resulting plastic bottle is made up to 30% plant-based material[5].
  • Beyond improving its own production and distribution, Coca-Cola also focuses on other beverage industry sectors that may also contribute tons of greenhouse gases such as cold drink refrigerator business. Though safe and eco-friendly HFC-free (hydrofluorocarbon, a major kind of greenhouse gases) equipment has existed for years, most of commercial refrigeration equipment on the market today still uses HFC. To change the situation, Coca-Cola is the active member, or even founding member of many trade associations, research institutions and public organizations (e.g., Consumer Goods Forum, Refrigerants Naturally, U.S. Chamber of Commerce, etc.) that support usage of HFC-free refrigerants[6].
  • Besides, the company also conducts experiments on refrigeration technologies globally to shake cold drink equipment industry. For example, in India, the company partnered with Mumbai-based Western Refrigeration to introduce solar-powered “eKOCool” coolers for Indian rural areas[7]. This project not only increases people’s awareness of climate change, but also provides thousands of job opportunities to local women entrepreneurs.

My recommendation:

Every year, Coca-Cola spends billions of dollars on sales and marketing internationally, but most of its marketing campaigns are only focused on driving higher product sales. As a company with over 80 billion brand value and global customer recognition[8], I do believe that Coca-Cola should take larger responsibility in terms of raising public awareness of changing environment and educating people about how climate change could impact everyone’s life. Coca-Cola could initiate some controversial campaigns to engage customers into climate discussion or tell stories about all interesting initiatives the company is taking globally to encounter the issue. Some of its brands such as Minute Maid and Ice Dew could be easily associated with ideas of saving water and protecting fragile agriculture, so that these marketing campaigns would look very natural.

To mitigate fluctuation of raw material supply volume and pricing, the company should also continue to explore innovative manufacturing method. I believe that procurement risks could be systematically reduced if the company could successfully utilize resources (e.g., water, sugar, electricity, etc.) more efficiently or diversify raw material inputs (e.g., traditional sugar vs. artificial sweetener) in manufacturing process.

(Word count: 680 words)

 

[1] “Coca-Cola shuts down three bottling plants in India amid severe water shortage”, Free Speech Radio News, March 11 2016: https://fsrn.org/2016/03/coca-cola-shuts-down-three-bottling-plants-in-india-amid-severe-water-shortages/

[2] Justin O’Brien and Stephanos Anastasiadis, “Coke Life lands a blow against sugar, but its worthy credentials could still be trouble”, The Conversation, September 19 2014, http://theconversation.com/coke-life-lands-a-blow-against-sugar-but-its-worthy-credentials-could-still-be-trouble-31208

[3] Coral Davenport, “Industry awakens to threat of climate change”, The New York Times, Jan 23 2014: http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html?_r=0

[4] “An Ambitious Goal: Reducing Carbon in Our Value Chain”, Coca-Cola Climate Protection Report, Sep 20 2016: http://www.coca-colacompany.com/stories/an-ambitious-goal-reducing-carbon-in-our-value-chain

[5] Coca-Cola 2015 Climate Change Information Request: https://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2016/2015-CDP-Final.pdf

[6] “Coca-Cola installs 1 millionth HFC-Free cooler”: http://www.refrigerantsnaturally.com/meldung/coca-cola-installs-1-millionth-hfc-free-cooler/

[7] Jay Moye, “Coca-Cola India Develops Solar-Powered Coolers for Rural Areas”, Coca-Cola Journey, Apr 22 2013: http://www.coca-colacompany.com/stories/coca-cola-india-develops-solar-powered-coolers-for-rural-areas

[8] Coke Uses Innovation to Boost Brand Value, Retains No. 3 Spot on Interbrand Ranking, by Unbottled Staff, Oct 2014: http://www.coca-colacompany.com/coca-cola-unbottled/coke-uses-innovation-to-boost-brand-value-retains-no-3-spot-on-interbrand-ranking

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4 thoughts on “Coca cola responses to threat of climate change

  1. This was a great summary of Coca-Cola’s strategy toward and policies about climate change. I definitely agree with your assessment about using responsible marketing/advertising in the future. The case we read for this assignment noted that climate change was especially resonant with the younger/millennial generation, which I think presents Coca-Cola with a huge opportunity for both increased sales and leadership of climate change education. I wonder if there is a way to use any of Coca-Cola’s typical advertising campaigns, such as the polar bears you used in your post image, to educate the public? Polar bears are, of course, highly threatened by the effects of climate change (due to melting arctic ice), so I feel that they could be used for this type of campaign as well.

  2. Great post on how Coca-Cola has been at the forefront of climate change. Historically Coca-Cola has been under public scrutiny as a result of producing high-sugar unhealthy beverages which ultimately translate into adolescent obesity. I’d be curious to understand how the company balances their initiatives of fighting climate change with these controversies. How do they balance health concerns with climate concerns? How does using sugar substitutions for real cane sugar impacting the health of consumers?

  3. Very thought provoking! It seems that Coca Cola is taking a proactive and innovative approach to climate change. I found particularly interesting their initiative of using solar-powered “eKOCool” coolers for Indian rural areas, and I see how that could be applied in Peru, because over 70% of consumer packaged goods sales is still done through the “traditional market” (small independent businesses or “mom and pop”), where business owners are not convinced to spend on electricity to turn on coolers. I am skeptical about Coca Cola’s intentions with this initiative though. Are they just looking for a way for smaller businesses to be able to sell cold Coke because otherwise they would not have electricity to turn on the cooler? Or are they genuinely looking for ways to save energy? Still, innovation is certainly a way to go!

  4. Great article! I especially liked the idea of utilizing marketing to arise more social awareness of climate change. Coca-cola is one of the most influential companies in the world and therefore definitely should take on bigger responsibilities in terms of fighting climate change. I am curious to see how PepsiCo is doing on this end. Since they are close competitors, I am suspecting that PepsiCo probably engage in many of such environmental responsible activities as well. It is interesting to see how competition can play a positive roles to keep both company responsible for the climate impact that they contribute.

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