The Coke Machine (20 page)

Alone among the Big Three bottled water producers, Coke held out. “The FDA’s definition of purified water does not require [revealing] the source,” argued Coke spokesman Ray Crockett. “We believe consumers know what they’re buying.” Unfortunately, his words turned out to be too true. After a decade of near double digit growth, bottled water suddenly plummeted in 2008—with sales volume dropping 2 percent over the previous year. Dasani fared even worse, with sales dropping 4 percent, despite slashing its prices by 40 percent in the previous three years.

Part of that was due to the major recession that hit that fall; as consumers tightened their belts, they cut down on luxuries such as a $1.50 bottle of water at the convenience store to fill their own bottles at the tap. But they might never have made the choice to do that had they not already been assured they’d be safe doing so. As the recession hit, CAI moved from city hall to the state house, encouraging governors to cut state bottled water contracts to save scarce state resources. By then, Coca-Cola had already planned its response, and true to form, it was more in the vein of changing its image than changing its reality. Over the last hundred-some years, Coke had gone from a health tonic to an all-American drink to a symbol of worldwide harmony. Now it would work to undergo its biggest branding change in decades to become an environmental steward.

 

 

 

Lined up
outside the bottling plant in Needham are eight tractor trailers, their polished sides gleaming red in the sun. Another, pulled around in front of several rows of foldable chairs, is hung with a big sign on the side: “Do You Know This Hybrid Electric Truck Helps Reduce Emissions in Our City?” The press conference today has been called to announce the addition of fifteen of these new hybrid trucks to the Massachusetts fleet, part of Coca-Cola Enterprises’ “Commitment 2020,” a new initiative to become an environmentally sustainable company within the next decade.

“We’ve set pretty aggressive goals,” says Fred Roselli, CCE’s press officer, standing in the parking lot before the press conference. Wearing big black sunglasses and a black suit despite the eighty-degree heat, he looks like a Mormon Bible salesman, and has the enthusiasm to match. “We’re reducing absolute numbers of carbon 15 percent from our 2007 levels,” he patters. “We’ve installed energy efficient lighting, we’re putting in water-saving technology, we’ve started a whole new company to do recycling.” The tractor trailers, he says, are part of the largest fleet of hybrid trucks in North America—some 237 by the end of 2009, each one spewing 30 percent fewer emissions into the air.

All of these environmental initiatives are “part of CRS,” says North American president for Coca-Cola Enterprises Steve Cahillane, as he takes the podium. On cue, employees circulate through the crowd, handing out pins in the shape of a green Coke bottle reading “Corporate Responsibility & Sustainability.” “CRS is all about making a difference wherever our business touches the world,” Cahillane continues. “We not only work here, we also live here, so we are doing everything we can to create sustainable communities.”

The concept of socially responsible business practices isn’t new—though usually it’s called CSR, for “corporate social responsibility” (perhaps inverting the letters is a way for Coke to claim ownership of the concept). In fact, Coke’s environmental initiatives follow a script that dates back to the 1950s. It’s then that corporations, having survived the Progressive Era and FDR’s New Deal, began to proactively affirm the power of businesses to benefit society. “Business managers can more effectively contribute to the solution of many of the complex social problems of our time,” wrote Frank Abrams, chairman of Standard Oil of New Jersey—which would become Exxon—in 1951. “There is no higher duty of professional management.” The concept emerged as a sort of noblesse oblige of corporations, who responded by spreading a set amount of their profits to social causes in their communities.

Of course, there were limits to what a corporation could do—since legally its obligations were to increase profit for its shareholders, not spread its wealth to solve the world’s problems. Henry Ford had found that out in 1916, when his Ford Motor Company was sued for using profits to give discounts to customers instead of dividends to shareholders. The judge in the case sided against him, ruling that “a business corporation is organized and carried on primarily for the profit of its stockholders.” It’s that principle that has caused Joel Bakan to argue that corporations are essentially “pathological” entities—maximizing profit at the expense of any other good—whether workers’ rights, environmental improvements, or even its own customers’ pocketbooks. “The corporation’s legally defined mandate is to pursue, relentlessly and without exception, its own self-interest regardless of the often harmful consequences it might cause to others,” he writes.

That’s not to say that corporations can’t do good, however, so long as their efforts align with their profit motive. The second wave of corporate social responsibility began in the 1970s, when, faced with challenges from consumer advocates like Ralph Nader (and CSPI’s Michael Jacobson), corporations realized that investing in social causes could serve as a kind of insurance against criticism. It was in this era that Coke’s Paul Austin pursued his “halo effect” with hydroponic shrimp farms, desalinization plants, and soybean beverages that he argued could help earn goodwill in the developing world at the same time they helped make Coke’s vision of global harmony a reality.

Surprisingly, the practice of CSR was further entrenched by the Reagan administration, which encouraged voluntary corporate giving as a way to fill the void left from cutbacks in social programs. Even while Goizueta sloughed off the do-gooding subsidiaries acquired by his predecessor Austin, Coke established the Coca-Cola Foundation in 1984 in an effort to “enhance our ability to meet the growing needs of the communities we serve, and to provide the company with an established, forward-looking program of charitable giving.” Historically, of course, Coke had long given to charity, dating back to Asa Candler’s first gifts to Emory University. But while Candler resented the obligation to give, and Robert Woodruff earned the nickname “Mr. Anonymous” for the lengths he went to avoid credit for his charitable giving in Atlanta, Goizueta ensured that the new Coca-Cola Foundation would go out of its way to gain publicity for its actions. “It’s not that we plan to be boastful now, but we plan to step out in our name and give at a level that we can be proud of,” said its first president at the time.

While the Coca-Cola Foundation was ostensibly independent from the corporation itself, it focused its efforts in areas closely aligned with the goals of the company, concentrating particularly in the area of Coke’s most important market—children. Neatly getting around Coke’s policies about advertising to children, Coke instituted a $50 million giving program to elementary and middle schools throughout the 1990s, and followed it up with a $60 million gift to Boys & Girls Clubs that came with an exclusive beverage agreement with the organization in 1997.

In fact, Goizueta was one of the pioneers of “strategic philanthropy,” the newest trend in CSR that emerged in the 1990s. Instead of spreading money around broadly to a number of causes in an effort to be seen as a good corporate citizen, corporations increasingly began tying their nonprofit foundations to the image they were trying to achieve for their brand—from Exxon investing heavily in conservation issues after the Valdez oil spill in 1994, to AT&T pouring money into kids’ art and education programs as it expanded into cable and the Internet. Some companies even competed to sign exclusive contracts for particular causes, as yogurt maker Dreyer’s discovered when it asked to support the largest breast cancer foundation, only to discover that Yoplait had already signed on.

The “social branding” was working. One survey found that, all things being equal, 84 percent of people would switch brands to a company that supported a good cause. While some financial purists such as Milton Friedman declared CSR “evil” for perverting the free market, most financial analysts saw it for what it was: “a cool appraisal of various costs,” in the words of one
Financial Times
columnist, since “companies less exposed to social, environmental, and ethical risks are more highly valued by the market.”

No one could argue, after all, that CSR was fundamentally changing the character of business—in an era when the United States saw some of the worst examples of corporate wrongdoing in history in WorldCom, Enron, Tyco, and other companies that cooked their books to shovel record profits into the pockets of executives and investors at the expense of their own customers and employees. As the real threat of global warming emerged at the turn of the twenty-first century, companies rushed to tout their environmental consciousness. The most notorious example is British Petroleum, which rebranded itself BP and vowed to move “Beyond Petroleum” to alternative energy. After years of positive publicity, however, alternative fuels have never amounted to more than 5 percent of company spending; in 2009, a new CEO announced he’d be scaling back on even that commitment in an effort to improve profitability. The following year, of course, BP was responsible for one of the worst environmental disasters in U.S. history when one of its deep-sea oil rigs exploded in the Gulf of Mexico, discharging thousands of barrels of oil a day. After the incident, it was revealed, BP had lobbied against a simple safety measure that could have prevented the accident.

Even when the environmental branding isn’t such obvious “greenwashing,” it obscures one simple fact: Most of the initiatives companies have taken to increase efficiency and drive down their carbon footprints are also just good business. That’s certainly the case with Coke, whose efforts to reduce emissions, water use, and electricity, after all, also mean reducing costs. Asked to name anything the company is doing that is actually costing it money, Roselli hesitates. “Well, the hybrid trucks cost more,” he says. “It will take three years to recoup the money we spend on those.” Asked if any of the projects will cost the company money
in the long run
, he responds, “Well, the bottom line is the bottom line,” he says. “I think big corporations want to be able to do that, but we’re trying to figure out which projects to prioritize.”

The danger of CSR initiatives is that they have become such a branding tool that they make it seem like the opposite is true—that companies are somehow investing in causes out of a motive of self-sacrifice, rather than
partnering
with causes for mutual benefit. And as branding has become the primary reason for CSR, the appearance of doing something can overshadow the benefits of doing it. That’s certainly the case with Coke’s biggest environmental advertising initiative, touting its recycling efforts at the same time that the bottled water backlash has been drawing attention to all of that wasted plastic in Dasani bottles.

 

 

 

Just as the criticism
against bottled water was going mainstream, in late 2007, Coke announced a new partnership between the Coca-Cola Company and Coca-Cola Enterprises to create Coca-Cola Recycling, with the stated goal of eventually recycling 100 percent of its PET plastic bottles. The cornerstone of the effort was a new $50 million facility in Spartanburg, South Carolina, that it announced would be the world’s largest “bottle-to-bottle” recycling plant. By 2010, the company boasted, the plant would have a capacity of 100 million pounds per year, making it the most ambitious effort ever by a company to recover and recycle all of its own packaging materials.

To celebrate its effort, the company created an “eco-fashion” line of clothing made from recycled plastic; and, of course, it launched a new ad campaign, premiering during
American Idol
in January 2009. Called “Give It Back,” it featured people tossing Coke bottles into recycling bins, only to see them pop out anew from slots of Coke machines. To drive home the message, Coke began working with parks, zoos, and sports stadiums to prominently display red recycling bins in the shape of Coke’s hourglass bottle.

Despite the happy imagery, the truth about Coke’s recycling efforts was much less impressive. An initial pledge by Coca-Cola Enterprises to use 30 percent recycled PET (rPET) in its bottles in the United States by 2010 was quietly downgraded to a more modest 10 percent “where commercially viable,” creating a loophole big enough to drive a hybrid trailer through. In fact, that goal was even less than what Coke had pledged back in the early 1990s, one in a long line of promises on recycling it had reneged on because of “sustainability issues.” Recycled PET, the company claimed, was just too expensive in the United States to use on any wide scale. In other words, the environment was worth taking into account only when it didn’t cost additional money.

Now with the creation of the Spartanburg plant, the company claimed to have solved the problem, assuring that “the demand for recovered bottles remains strong,” according to Scott Vitters, Coke’s director of sustainable packaging. The problem with PET, however, has never been one of demand, but of supply. Carpet and car part manufacturers have always competed to get their hands on PET for industrial uses. But to get the high-quality PET needed to make into bottles is much more difficult. Unlike other materials, which can be recycled many times without degrading, PET quickly degrades when melted down repeatedly, making clear, transparent PET hard to come by—to say nothing of the additional costs to clean the material to make it “food-grade.”

The only thing that could drive down those costs, then, was a greater availability of PET—especially high-quality PET needed for beverage containers. Coke’s new plant, however, does nothing to address this side of the equation, since it purchases 98 percent of its material from already existing curbside recycling programs (the other 2 percent will come from Coke’s recycling bins at NASCAR races and other events). In fact, according to industry trade sources, Coke’s plant will if anything make the situation worse by driving up the cost for recycled PET with a huge new demand for raw materials.