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Why Coke Aims to Slake Global Thirst for Safe Water
By Betsy McKay
The Wall Street Journal
March 15, 2007
Hoping to restore some of the goodwill that made its flagship product
a global icon, Coca-Cola Co. has gone on a clean-water kick in the
developing world.
In Kenya, where more than half of the rural population has no access
to clean water, the Atlanta beverage giant brought water-purification
systems, storage urns, and hygiene lessons to 45 schools in a poor
western province. Children learn how to use a chlorine-based solution
to kill diseases that come from contaminated, muddy pools or remote
wells -- and are taught to teach their parents.
In Mali, Coke is helping extend municipal water taps beyond the country's
capital of Bamako. In India, where the company has been accused of
draining water from poor communities for its own use, the company
is building rainwater-harvesting structures to help alleviate chronic
water shortages. Coke's bottlers are also implementing water-efficiency
measures.
More than 1.2 billion people lack access to safe drinking water, and
2.6 billion -- about 40% of the world's population -- lack proper
sanitation, resulting in waterborne diseases that infect and kill
about two million people a year, according to the United Nations.
And global population growth and rising industrial production are
increasing competition for the world's freshwater supplies.
Coke has some 70 clean-water projects in 40 countries, a service it
hopes will eventually boost local economies and broaden its consumer
base. But the efforts are also part of a broader strategy under Chairman
and Chief Executive E. Neville Isdell to build Coke's image as a local
benefactor and global diplomat. "You have to be an integral and functioning
part both in perception and reality in every community in which you
operate," he said in an interview.
The company is also hoping to cure a public-relations headache caused
by its own thirst for water, the largest ingredient in most of its
more than 400 beverage brands. Coke and its bottlers use more than
73 billion gallons of water per year, attracting fierce criticism
even though their water usage is down 9.4% since 2002, despite a 10%
volume increase.
Nowhere is the criticism of Coke more severe than in India, where,
amid a drought in 2004, government officials forced the company to
close a bottling plant after local communities alleged the facility
was draining needed groundwater. Coke denies the charges and says
an Indian government study concluded its plant wasn't using excessive
amounts of water.
The shutdown offered Coke some humbling lessons, says Mr. Isdell,
who took the helm of the company only after the crisis erupted. "It
was very clear that we had not connected with the communities in the
way we needed to," he said. But he said it was only one of a number
of reasons the company has since made "water stewardship" a strategic
priority. "Water is at the very core of our ethos and ... responsible
use of that resource is very important to us," he said.
In a recent 10-K securities filing, Coke listed a shortage of clean
water as a strategic risk. Without such, "our system may incur increasing
production costs or face capacity constraints," Coke said. So far,
Coke and its bottlers have spent $13.4 million on water-related efforts.
Another $35 million is budgeted for 2007, including community water
projects, investments in waste-water treatment, and other work.
Coke isn't the only company working on improving water supplies. PepsiCo
Inc., which is also battling criticism over water use in India, gathers
rainwater in excavated lakes and ponds and on rooftops of its bottling
plants there. The company also sponsors community water projects in
India; in China, a PepsiCo program called Mother Water Cellars helps
people in arid parts of the country to capture and store water. Safe
Water Network, a consortium of 10 corporate leaders that includes
Pepsi Chairman Steve Reinemund, is testing portable water-purification
technology.
Starbucks Corp. funds projects to bring clean drinking water to poor
communities through its Ethos Water brand. Procter & Gamble Co., which
has a powdered water-treatment product, also funds clean-water projects.
Coke's current effort in Kenya is the product of some brainstorming
between local Coke executives and public-health and water-sanitation
experts more than two years ago, says Bill Egbe, who ran Coke's operations
there at the time and now heads the company's South Africa division.
The Kenya unit had dabbled for years with ideas such as collecting
rain on school rooftops, but hadn't funded anything larger. Mr. Egbe
says Mr. Isdell's new directive setting water and environmental issues
as a priority helped him decide to commit $120,000 for the project
in schools. "It gave us the courage to say if it works, fine, if not,
I'm not going to get killed" for taking money out of the budget, he
recalls.
Working with public-health experts in the Millennium Water Alliance,
a group of nongovernmental organizations, Coke identified the schools
in the Nyanza province and, with CARE, launched water-treatment and
hygiene-education efforts in 2005. The company funded the cost of
a mold to make small packages of the chlorine-based purifying substance
the schools needed to clean the water, and new clay storage pots to
be designed with a small neck so the clean water wouldn't be recontaminated.
When it learned the government agency charged with drilling wells
had equipment but no money, it paid for the work. While the company
hopes such steps will help improve local economies enough eventually
to build a new consumer base, it isn't looking for that right now,
Mr. Egbe says. For now, he says, sales of Coke products in such areas
are "minimal to nonexistent."
Coke hasn't limited its largess to digging wells and buying clay pots.
The company also spent $2 million last year to help create the Global
Water Challenge, a coalition of corporations and organizations that
is based at the United Nations Foundation. Coke also helped to entice
the Bill and Melinda Gates Foundation to award a $9.5 million grant
to CARE and other organizations to expand on the Kenya schools project,
implementing it in as many as 1,500 more schools over the next five
years.
In India, the company is installing 270 ponds, containers and other
devices to catch monsoon-season rainwater. Jeff Seabright, who leads
Coke's environmental efforts, says 50 more water-catching devices
will be installed this year. Coke says it is also distributing a new
kit on improving water-use efficiency to its bottlers.
While Coke has won some praise from global water experts, others complain
that it could do much, much more given the company's huge size and
insatiable thirst to convert consumers in developing countries into
Coke drinkers. Coke's water efforts are "nothing more than a public-relations
exercise," scoffs Amit Srivastava, director of the India Resource
Center, one of the most vociferous critics of Coke's water use in
India.
Coke shareholders will vote next month on a proposal from one of their
number that would require Coke to commission a study on the "potential
environmental and public health damage" caused by its business dealings
in India.
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