Review of Coca-Cola's 2015/2016 Sustainability Report
This series examines the state of sustainability of the brands that I consciously go for on a daily basis. I examine the latest annual sustainability reports of these brands and determine, according to my perceptions, how well they are doing on their journey to sustainability. I assess these reports against the generally accepted GRI standards and come up with a verdict. The verdict basically falls under three categories: ‘terrible’ (meaning they need to take major corrections), ‘doing okay’ (meaning they are making progress despite several challenges, and ‘pretty good’ (meaning they are well on track despite a few challenges).
I decided to start with Coca-Cola because I’ve been a customer of this fizzy drink for ages. Although my consumption has reduced recently, there was a time I would have some quantity of coke practically every day. Coca-Cola as a brand is also quite impressive; it is truly global and has an amazing network of partners and market routes.
First off, the company’s 2015/2016 interactive sustainability report is pretty impressive. It’s short and sweet, with several links which lets you go directly to the issues you have the most interest. You can skip to the material issues you want to concentrate on as they are placed at the top of each page, and you can find details of reported information scattered in relevant areas.
I also liked that the report started right off with their goals – the 2020 sustainability commitments, including a snapshot of their progress over three years. Their commitments are based on their material issues which they developed in 2014 and reviewed in 2015. The core issues (top three) are Water, Women and Well-being and other material issues were also reported.
As at 2015, Coca-Cola exceeded their goal of 100% water replenishment by restocking 115% of the water they use to produce their beverages globally. They report that 191.9 billion liters of water was replenished to communities and nature through 248 community water projects in 71 countries. And 145.8 billion liters of water used in manufacturing was treated and replenished back to local watersheds near their bottling plants. However, it is not explicitly clear how many of these bottling plants are franchises and how many are company-owned. Coca-Cola acknowledges that water is a key material resource for them for which they have a robust management and risk program. Their approach is detailed in their online sustainability progress portal and includes water use efficiency in production, wastewater management, risk mitigation (using their Source Water Vulnerability Assessment and Source Water Protection Plan) and replenishment. Details of their data with regards water stewardship is also available online!
Coca-Cola aims to empower up to 5 million women entrepreneurs working across their global value chain by 2020 via their 5by20 Initiative which is run in 60 countries. The initiative consists of providing women with access to business skills training, finance & assets, and networking opportunities. The percentage of women who participated in 2015 grew by 43%, bringing the total to 1.2 million empowered women (their initiative website now has this number at 1.7 million as at 2016). The company carries out this programme in collaboration with IFC, UN Women, Bill & Melinda Gates Foundation, and many others. Impact studies carried out in several locations from 2013 to 2015 show that their approach is working!
Coca-Cola reported that there has been public criticism for their work with obesity research and physical activity funding. They stated that as that approach wasn’t working, they refocused from physical activity to community well-being. I’m pleased to see that they are also focused on finding ways to diversify their beverage options to include more options with low sugar and calories. They recognize that they need to be more transparent with reporting their financing of scientific research health programmes and health professionals. An updated list of this financing can be found here. This is key as well-being is the biggest issue for which the public most distrusts Coca-Cola. Here, the company also talks about their relatively new Coca-Cola small sized cans and bottles, a larger selection of low sugar options, front-of-pack labeling, and responsible marketing to promote choice and moderate sugar intake.
Human and Workplace Rights
Coca-Cola has first focused on the human rights risks in the supply chains of five of their biggest sugar-sourcing countries by commissioning child/forced labor studies in the markets. Furthermore, as at 2015, 98% of company-owned facilities comply with their Human Rights Policy while 90% of bottling partners and 98% of direct suppliers comply with their Supplier Guiding Principles. This Human Rights Policy is widely disseminated, complete with a manager’s guide and an app. In addition, a system has been implemented to flag potential overtime so that it can be minimized, and additional staff have been hired. The company has also been involved in the discussions and advocacy worldwide about human rights. So far, Coca-Cola has achieved a perfect score on the Corporate Equality Index. In addition, their workplace incident rate has dropped from 4.1% in 2010 to 1.7% in 2017.
Coca-Cola reported a 59% recovery rate of their bottles and cans from their developed markets (on track with their goal of 75% by 2020), and a 59% recovery rate of equivalent bottles and cans globally (exceeding their goal of 50%). In 2015 alone, they distributed 8.7 billion PlantBottles, the plastic bottle made out of 30% renewable materials made from plants, in 40 countries. To date, the PlantBottle packaging has prevented 365,000 metric tonnes of CO2 emissions. PlantBottle now accounts for 8% of global packaging and 29% of North American packaging. In addition, 2015 saw the launch of a 100% PlantBottle prototype, the first 100% renewable PET bottle! The company also experiments with ‘lightweighting’ to improve on their packaging designs.
Coca-Cola outlined their involvement in global climate conversations, from the Paris Agreement to the American Business Act on Climate Pledge. They reported that they have reduced CO2 embedded in a ‘drink in your hand’ by 13% and increased manufacturing’s energy efficiency by 2%. However, total emissions increased by 1% compared to 2014, and by 16% from 2004, undoubtedly impeding their progress with their carbon footprint goal. They do make the good point that many of their activities around sustainable packaging and water have positive impacts on climate protection.
In 2015, the company procured about 95% of their globally sourced coffee and tea from sustainable sources (thus meeting the company’s sustainable sourcing guidelines) and they have contracted to source about 1 million tonnes of sustainable sugar in 2016 (which will get them to up to 20% sustainable sourcing, against their 100% 2020 goal). They are also partnering with several organizations in China and India to promote sustainable agricultural practices.
Giving Back to Communities
The Coca-Cola Foundation and Company awarded a combined $115 million (1.2% of operating income) in 2015 as grants to about 300 organizations in 70 countries. 90% of these grants were focused on projects covering the company’s core material issues of water (21%), women (4%) and well-being (65%). Disaster relief/humanitarian and in-kind took 10%. The percentage contributions have stayed relatively the same in the past three years (although women issues were not being funded in 2013 so I’m glad to see progress here despite the relatively insignificant spending on the issue).
Coca-Cola also reports in summary (details are also available on their interactive site) how their CSR and sustainability initiatives around the world are aligned with the SDGs. It is however evident that more detailed mapping needs to be done given that only 17 projects were mapped. Given the many more projects being carried out around the world, I would have liked to see a more comprehensive linking of activities to SDGs.
Also, despite my impression with the interactive PDF, I felt some data which we have to jump between links to look for, should have been included in the summary. For example, the data about total emissions under Climate issue, workplace incidents under Human Rights issue, key financing under Well-Being issue, etc.). I also got the sense that many more information was lost in terms of the regions and many other projects that were not reported. It was thus easy to feel that Coca-Cola may only be putting their best performing regions forward and completely disregarding any activities that were sub-par, and as such skewing the balance of the report.
I would also have liked to see a lot more focus and disclosures about the obesity concerns and category perceptions touched on in the report as this scored highest in the materiality assessment. Product safety and ingredients, which also scored high in their assessment, was also sorely missing. Arguably this could have been included under well-being, but disclosure on it was sub-par. This is a shame given the significant reputational risks these two issues bring to Coca-Cola.
Furthermore, the storytelling which Coca-Cola presented was compelling and easy to read, but this could also leave you unsure if you want to find cold hard data fast. The use of more tables rather than prose might make this easier.
Verdict: Coca-Cola is ‘Doing Okay’. They have had two major breakthroughs in their water replenishment and their PlantBottle packaging. But their ambiguous message about their well-being issue is a critical challenge they still need to address.