An activist who raised questions about groundwater exploitation at the annual shareholders' meet says the company is misleading investors.
Activists who raised the issues of unethical groundwater use and pollution by Coca-Cola plants in India during the soft drinks giant's annual shareholders' meeting in Atlanta this week have expressed disappointment with the response of Coca-Cola CEO Muhtar Kent, accusing him of misleading investors about the problems the company had run into with regulators.
Speaking to The Hindu, Amit Srivastava of the India Resource Centre — which campaigns for the rights of communities in the affected areas — said that he had brought up the recommendations made on March 22 by an High Power Committee (HPC) set up by the Kerala government, according to which Coca-Cola should be held liable for $48 million (Rs.216.26 crore) in “damages to the community and the environment around its bottling plant in Plachimada”.
On the discussion at the shareholders' meeting, Coca-Cola representative Lisa Manley told The Hindu that Mr. Srivastava was a lone voice speaking out on the matter. She said: “Mr. Srivastava did ask a question about the Kerala committee's report… this topic was otherwise not an issue of focus during the meeting.”
Yet, it is a fact that the Coca-Cola bottling plant in Plachimada has been shut since March 2004 on government orders. According to the HPC, the Kerala Agricultural University found that fodder, milk, meat and egg samples collected from the Plachimada area contained copper, cadmium, lead and chromium at levels considered toxic by World Health Organisation standards.
The HPC adds that the deterioration in the quality and quantity of groundwater and the consequent public health problems, displacement and migration of labour and destruction of the agricultural economy were the main problems in Plachimada identified as caused and contributed by the Coca-Cola plant.
The company has also been involved in a controversy in Kala Dera in Rajasthan, where groundwater resources had been declared as “over-exploited” by the government in 1998. Yet, Coca-Cola built a new plant there in 2000, leading to severe water shortages in at least 40 villages in the vicinity of the plant, according to reports.
However, Ms Manley said Coca-Cola did not have all these details as it had not been given a copy of the Kerala committee's report and “at this point, it is simply a recommendation from a committee. The government has not yet acted on the committee's recommendations”.
She said Coca-Cola disagreed with the recommendations, “and we will defend ourselves against any actions that may result. As always, we will continue to work with the proper authorities to resolve this matter”.
Ms Manley also said that numerous investigations by the government of Kerala had shown that the Coca-Cola system was not the cause of local watershed issues and it was Coca Cola's view that any government committee or panel reviewing claims should “first determine through an established process of law whether any damage was caused to the residents of Palakkad [the district where Plachimada is located], and second, if such damage was caused, who was responsible.”
“It is unfortunate that the committee in Kerala was appointed on the unproven assumption that damage was caused, and that it was caused by Hindustan Coca-Cola Beverages,” she added.
Mr. Srivastava, however, took exception to Mr. Kent's response to the effect that Coca-Cola “could open the Plachimada plant any time”. This was untrue, Mr. Srivastava said, adding that he challenged them to “try and reopen the plant tomorrow — we can guarantee that they cannot open the plant again”.
He emphasised that the IRC had been campaigning to get the company's shareholders to realise that “the Coca-Cola management, including board of directors, is misleading shareholders about the financial and criminal liabilities that Coca-Cola is incurring in India”.
Mr. Srivastava said Coca-Cola had passed on the issue to its public relations department, rather than seeing it as an operational issue. But this was not a PR issue, certainly not for the communities in Plachimada and Kala Dera, he said.
Ms Manley contested this point, telling The Hindu that managing water responsibly was the highest priority in Coca-Cola's approach to environmental policy and corporate social responsibility in India. She said: “Our goal in India is to be a ‘net zero' user of groundwater, which means we are working to create a potential recharge of the amount of groundwater equivalent to that used in our operations in India.”
Ms Manley added that such recharge was happening through support for rainwater harvesting, drip irrigation and other initiatives such as helping restore traditional water storage systems that local communities use. “By the end of 2009, we had achieved a recharge rate of 93 per cent of the groundwater that we use throughout India and we aim to achieve a net zero balance at the end of 2010,” she said.
However, government figures that Mr. Srivastava quoted cast doubt on this as they suggest that “in the nine years prior to Coca-Cola's bottling operations in Kala Dera, groundwater levels fell just 3 meters and in the nine years since Coca-Cola has been operating in Kala Dera, the groundwater levels have dropped 22.36 metres.”
Coca-Cola's shareholders have also been important in the debate. While the shareholder group had been more responsive in the past and had passed a few resolutions, Mr. Srivastava admitted that they did not get a very positive response this time. He said the shareholders were myopic in their views and more concerned with the company's sales, which had been on the decline in the U.S and in Europe for some time now.
Arguing that even in this regard there has been an injustice towards Indian consumers, Mr. Srivastava said the reason for declining sales in the West was that consumers “are wising up to the negative impact of these high-sugar drinks”.
However, sales in countries such as India are rising and the company itself is focusing much more on its operations outside the U.S. According to recent reports, overall sales volume rose by three per cent in the first quarter of 2010 “and was largely driven by an 11 per cent increase in its Eurasian and African arm, as well as a 29 per cent boost at its Indian business”. The sales rise came primarily from across Asia, boasting double-digit growths in India, Vietnam and the Philippines as new consumers developed a taste for the company's drinks, a report explained.
But was Coca-Cola any better for the health of Indians? Mr. Srivastava asked, noting that India had a growing proportion of diabetics and obese in its population and this “reeks of a double standard”.
In an earlier statement, Mr. Srivastava also noted: “It is difficult to fathom why Coca-Cola located some of its plants in water stressed areas in India. It was either sheer incompetence on the part of the company or sheer arrogance. Experience tells us it is a lot of both.”