In an attempt to hold onto $1.3 million worth of contracts with a US university, Coca-Cola has agreed to carry out an independent audit of its business practices in India and Colombia. This could be an astute means of boosting Coca-Cola's reputation - providing the findings emerge in its favor.
The audit of Coca-Cola's business practices follows complaints submitted in 2004 by a University of Michigan student group. Among other things, the group accused Coca-Cola [KO] of draining the water table in India, causing shallow wells used by local people to dry, and consorting with paramilitary groups in Colombia to threaten union members. Following an audit of these practices, the University will require Coca-Cola to put any necessary corrective actions in place before new contracts are agreed.
Consumer awareness of ethical concerns surrounding the manufacture, marketing and distribution of food and drinks products is growing. The fact that Coca-Cola is willing to look further into these allegations suggests that the company takes such concerns seriously, and, indeed, that it may have nothing to hide concerning the outcome.
Coca-Cola has repeatedly denied allegations regarding human rights abuses in Colombia. The beverages giant has also denied allegations that it is exploiting groundwater in India, citing a lack of evidence and the theory that any decline in the water table is due to certain areas of the country suffering from below average rainfall for several years.
Consumers are now far better informed about the complex and interconnected ethical concerns which affect food and drinks along the entire value chain. Collectively, consumers can make a difference through their purchasing power, and Coca-Cola is likely to be concerned that a significant boycott of its products could ensue from the Michigan case.
If manufacturers want to target the growing number of ethical consumers, they need not only ensure that they respond to consumers' concerns by modifying practices to meet the expectations of this group, but, crucially, to ensure that they effectively communicate any ethical policy changes made.
Furthermore, the audit could bring a silver lining for Coca-Cola. The well-publicized nature of the enquiries means that, if Coca-Cola is found to be clear of all wrongdoing, the company could finally answer some of the environmental and labor allegations that have dogged its reputation for some time.