Coca-Cola Watches over Troubled Waters

As a non-diversified, beverage business, water has always been critical to Coke’s business: in their products, in manufacturing, and for their mostly agricultural ingredient supply base.

When Greg Koch, Director, Global Water Stewardship, Environment & Water Resources, of the Coca-Cola Company, joined Coca Cola 1996, the company had already developed a strong focus on water efficiency within manufacturing and had launched wastewater management programs.  Over time, as Coke and the world began to see various water challenges increase, the company began an escalating attention to the company’s understanding and actions on water.  His team set global strategic direction on water, established policy and requirements, formed and managed key partnerships (such
as those with WWF and USAID), and also played a governance role throughout the
company.

While water is the basis of life and is a resource that is infinitely renewable, Coke had become much more aware of the challenges it faced preserving the resource. Along with its bottling partners, Coca Cola operated with about 1,000 production facilities in more than 200 countries. The enormity of the business brought environmental and
logistical challenges.

  • Pollution
  • Improper Management
  • Over-allocation in Areas
  • Uneven Distribution
  • Non-universal access to a clean, safe water supply

In 2003, the company was among the first corporations to disclose to shareowners that water quality and quantity were a material risk to its business; a risk perhaps like no other
business given its size, well-recognized brands, geographic scope, non-diversification, and, perhaps most critically, its local business model.

Coke distributed its products within close proximity of its plants in almost all its manufacturing locations.  Coke was not an export business such as making products in one location and shipping it vast distances or even across borders.  Therefore, not only was the company interested in sufficient water quality and quantity for its business, but also for the health and sustainability of the ecosystems and people that constituted their markets, employee base, customers, and consumers.  Koch understood that the sustainability of Coke’s business hinged on the sustainability of the communities where it existed.

Coca Cola conducted a qualitative, and then quantitative, risk assessment of its global business that led to the formation of Greg’s role.  The report led to the creation of a global water stewardship strategy, which included plant-level performance objectives, watershed protection, community engagement, and a drive to increase global awareness of the need for action and collaboration on water resource sustainability.   Greg commented, “The most important thing I’ve learned through my work on water at Coca-Cola is that our business requires three licenses to water, everywhere we do business: the physical
license (sustainable quantity and quality of water resources); the regulatory license; and the social license encompassing the social and political acceptance of our use of water.”

It seems that almost everyone comes to a discussion about water with visceral experiences, memories, cultural and religious ties, economic links, as well as strong opinions and
feelings.  It’s a topic quite unlike carbon and global warming because of its local nature and its direct tie to human health and development.   This personal feel makes any solution to a water challenge much more than just technical, economic or regulatory.

Coke is a franchise system operating on a global scale; so there are hundreds of colleagues across the business that interact and collaborate with Greg and his team. His role and
work has gained visibility, power and importance to the firm over the last few
years.

What do you think? What questions does the sustainabiltiy of water raise for the future of global-based businesses?

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