You would think that by now, major corporations would be in drove into sustainability because of climate change and other environmental risks that could have an impact on companies sustainability. But, that’s not the case. However, Coca Cola, walk-to-walk on sustainability. They go deep into sustainability. Sustainability is at the core of their business strategy.
“The strengths and sustainability of our brands are directly related to our social license to operate, which we must earn daily by keeping our promises to our customers, consumers, associates, investors, communities and partners.” – from 2008/2009 Sustainability Review
Vision: “a world where all people have access to safe water, where packaging has a life beyond it’s original use, and where communities are healthy and prosperous.”
Established in 1886. Operates in more than 200 countries and markets. A $56 billion brand company. In 2009 joined the rank of Dow Jones Sustainability Indexes.
Brand portfolio: 500 brands and more than 3,300 beverage products. They have four of the world’s top five nonalcoholic sparkling beverage brands: Coca Cola, Diet Coke, Sprite, and Fanta. Simply trademark became the company’s 12th brand, in addition to Coca Cola, to have annual retail sales of $1 billion.
Number of employees worldwide: 92,800.
Market capitalization: $135.36 billion.
In the company wide system, which comprises the Company and more than 300 bottling partners around the world. The bottling partners are local-based. They manufacture, package, merchandise and distribute the finished beverages to customers and vending partners, who then sell the products to consumers. That’s how Coca Cola becomes a global business that act locally.
Sustainability at its core
This is why to get the full benefit for a business, sustainability needs to be integrated into business strategy. Coca Cola and their bottling partners are committed to keep innovating to keep their products affordable and make their business more environmentally and economically beneficial to the communities they serve. They do believe “that investing in the economic, environmental and social development of communities will help our business grow.” Need not say more. And that is sustainability at its core.
Based on the information provided on their corporate sustainability and annual reports, this is how I see their success formula of sustainability:
SUSTAINABILITY = RISK MANAGEMENT > “that leads to” > INNOVATIONS
For them not embracing sustainability, exposed them to their biggest risk that they have no control over the supply, unless they do something about it to preserve and conserve.
Think about this for a moment. Water, as a resource, is ‘very’ vital to their business. They are in the business of selling water-based products. Water is also used in their manufacturing process. 70% of the world’s water is used for agriculture and yet only 3% of the earth’s fresh water is fit for human consumption via lakes, rivers and streams. The rest is locked in glaciers, snow and ice.
Furthermore, Coca Cola is one of the largest purchasers of the approximately 145 million tons of sugar produced worldwide. Because sugarcane production has the greatest impact on the environment than any single crop, unsustainable practices can have negative impact on wildlife, soil, water, and air. The other two high volume agricultural-based ingredients – corn and oranges – the production of these crops can have large impact on freshwater ecosystems.
The beverages are produced locally in partnership with local bottling companies. The water they use is source locally, therefore is shared with communities and nature. So managing risks associated with the supply of fresh water is crucial for the company. By helping local communities, they’re helping their business, too.
Forward thinking companies think differently about climate change. Coca Cola understands the risk of climate change is tied in to their energy use. By reducing environmental impact from:
- Energy use > reduce the affect of climate change
- Climate change > can affect water security
So by lowering energy use = lowering energy costs = lowering impact on climate > it’s good for the environment. If it’s good for the environment, it’s good for ecosystem that give access to supply of fresh water.
In 2008, Coca Cola invested $500 million to reinvest in innovation and their business for years to come. They assessed everything to increase productivity, minimize waste and maximize resources.
Energy management and climate protection is a focus for the entire Coca Cola system. The company focuses on advancing energy efficiency and stabilizing their emissions to help them reduce costs and minimize their environmental impact. The scale of their global operations – 900+ bottling and manufacturing facilities, 100,000+ fleet and 10 millions of vending machines and coolers – provide them with an opportunity to improve energy efficiency and cut emissions in a variety of areas.
Selected climate innovations using low tech and high tech combined, via 2008-09 sustainability review and 2009 annual report:
- Added more fuel efficiency fleet.
- Placed more than 73,000 hydrofluorocarbon-free (HFC-free) coolers and machines in markets globally.
- Developed a proprietary energy management system that delivers energy savings up to 35%. They’ve placed 1.6 million units of these units worldwide.
- In manufacturing and office facilities improvements includes low-tech like fixing leaks and insulating pipes; putting in efficient lighting to installing renewable and biodiesel energy sources.
- In 2009, company office in Belgium made significant lighting, heating and cooling efficiency upgrades and switched to 100% renewable energy, the move that reduced ecological footprint by more than 25%.
- In Uruguay, they’re using 30 compact, electric-powered trucks to efficiently deliver products to smaller retail locations in congested areas while reducing emissions.
- In Mexico, they introduced new diesel-electric to distribution fleet. The new trucks are 30% more fuel-efficient and reduce CO2 by 40%.
For water stewardship, they focused on developing the three “R’s”:
- Reduce water ratio (efficiency) while growing business,
- Recycle the water used in operations
- Replenish the water use throughout community access and watershed restoration and protection.
Their target is that through water conservation in partnership with World Wildlife Foundation, they wanted to improve water efficiency 20% by 2012 vs. 2004 baseline. Facing with these risks – population, growth and urbanization and impacts of climate change on water – they understand that they got to do something about reducing the impact and minimize their use.
In short, here is an example of a business with long-term view that goes beyond their quarter-to-quarter profits. Everything they do today would eventually bring positive impact in the future that would keep them grow their business for many years to come.
By going knee-deep into sustainability, Coca-Cola was able to stay profitable even in during the economic downturns, er.. recession.
Source: 2009 Annual Report
Since Coca Cola started disclosing sustainability reports about 4 years ago, I wanted to see how the stock stacks up against the market – Dow Jones Industrial Average and S&P 500, that represents the broader market – over a 5-year period. So here it is. The image you see below is based on yesterday’s trading. You can click here for real-time access.
By integrating sustainability into their business culture, Coca Cola has shown that sustainability brings more value and growth to the business. Their financial and performance data speaks for itself that sustainability is good for (any) business.
There’s more that Coca Cola does than I could cover over here – in one shot. For more reference, check out below where you’ll find more resources to help you dig deeper…