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CSR does not avert “tragedy of commons”

Corporate Social Responsibility has emerged as the preferred way for corporations to give something back to the community in which they operate and whose resources they consume.

Hindustan Coca Cola Beverages, part of The Coca-Cola Company’s Bottling Investments Group and the company's largest bottling partner in India, has initiated several social responsibility programs in the Kaladera region, including assistance to schools, police stations and putting in place rain water harvesting structures and recharge wells.

According to Sunil Sharma, adviser to HCCB on its CSR activities, a total of 127 roof top rain water harvesting structures and ground shafts have been set up by Coca-Cola in and around Kaladera.

However, a research paper written by Aneel Karnani, Associate Professor of Strategy at the Stephen M. Ross School of Business, University of Michigan, finds the company's CSR initiatives lacking.

According to Prof. Karnani, Kaladera is a classic case of “tragedy of the commons”, a concept propounded by American ecologist Garrett Hardin.

“All the stakeholders are acting in their own narrow self-interest, and also are acting legally within the rules determined by society and government. Yet, collectively this results in a major problem,” says Dr. Karnani.

“Coca-Cola is acting legally when it extracts underground water and it makes a profit by doing so. But this is to the detriment of the people living around Kaladera. Coca-Cola talks much about sustainability and being “stewards of water” -- this is mostly talk and very little action, so-called 'greenwash'. It is unrealistic to expect Coca-Cola to voluntarily forgo profit opportunities for the sake of the collective good.

The farmers too are acting in their self interest...they too extract too much water. The government should try to change (their) behavior too. It could raise the price of electricity, limit the amount of water extracted, or impose a small charge...a more 'positive' way to change behavior is for the government to incentivize and help the farmers switch to drip irrigation,” he says.

In his paper titled “Corporate Social Responsibility does not avert the tragedy of the commons—case study: Coca-Cola India”, Dr. Karnani argues for a change in public policy and governmental action to manage a common resource like water. Preaching to companies (or to the farmers) to be socially responsible will not solve the problem.