BUSINESS ETHICS: A CASE STUDY ON VIOLATION OF BUSINESS ETHICS BY

COCA COLA COMPANY IN PLACHIMADA

SWATHI P.AJITH
Reg No- 1839311
MSc. Development Studies
Christ University, Bangalore
VIOLATION OF BUSINESS ETHICS: COCA COLA COMPANY IN PLACHIMADA

Business ethics is a form of appropriate business policies and practices regarding potentially
controversial subjects including corporate governance, insider trading, bribery,
discrimination, fraud etc. Business ethics has become very important in corporate firms
because of its growing need and importance. Ethics means the set of rules and regulations that
the organization must follow. While in business ethics refers to a code of conduct that the
corporates are expected to follow while doing business.

ABOUT COCA COLA COMPANY:

The Coca Cola Company is an American Multinational Company manufacturing non-
alcoholic beverages. This company is most famous for its flagship product, ‘coca cola’. The
company is head quartered at Atlanta, Georgia and has its branches spread out throughout the
world. Since the 2000’s the company has been in the headlines for its health related issues,
animal testing, employee issues and various other cases as well but remains to be one of the
biggest multinational companies in the world.

The Coca Cola Company started its functioning in India in the year 1950. But due to certain
issues with the government and multinational companies, the operations of the company
started on full swing from October 1993.

ETHICAL POLICY OF THE COMPANY

The company is committed to build an ethical business culture. To ensure that the company is
following its ethics, it prescribes to the anti corruption laws in every country in which it
operates. The company’s business conduct serves as the foundation to its ethics and
compliance. All the members and associates of the company are required to know the
business conduct of the company. One of the most important characteristics of the company’s
business ethics is anti-corruption. The company’s anti-corruption program ensures that the
business throughout the entire system of coco cola is done in a fair ethical and fair manner.
The company restrains from corruption of any form including bribery.
The Company’s Code of Business Conduct serves as the base of its approach to ethics and
compliance. It clearly states that the company’s expectations of accountability with regard to
ethical conduct in all areas of its business. All of the Company and majority-owned
subsidiary associates are required to read, understand and obey to the Code’s precepts.

According to its ethical policies, the company is committed to build an ethical business
culture across all its worldwide operations and its broader system, particularly focusing on
the business that it conducts in countries where there may be a higher risk of unethical
behaviours.
The Company appoints an employee in each operation to serve as Local Ethics Officer
(LEO). This role is a critical part of bringing together its ethics and compliance program to
life around the globe, ensuring global consistency and local relevance. LEOs serve as a
resource for workers to ask questions and share their concerns and are also the keeper of their
Code on a local level. It has established many communication and management routines to
keep this important network of compliance resources current on the latest trends, tools and
elements of the programs and to enable the sharing of best practices globally.

Ethical Conduct Administration

The Code of Business Conduct is administered by the company’s Ethics & Compliance
Committee. This cross-functional senior management team overlooks all the ethics and
compliance programs and decides on the Code violations and discipline. The company’s
Ethics & Compliance Office has operational responsibility for education, consultation,
monitoring and assessment related to the Code of Business Conduct and compliance issues.
Associates across the globe receive a variety of ethics and compliance training courses
monitored by the Ethics & Compliance Office.

REVIEW OF LITERATURE:

There have been many cases of violation of business ethics by companies and many reports
have been filed on such companies. One of the prominent cases of corporate ethics violation
is the Kingfisher airlines scams. The Serious Fraud Investigation Office found out that there
were serious compromise of business ethics between the kingfisher airlines and Deccan
aviation limited. The SFIO has said that “documents were backdated and fabricated to show
that there existed three business divisions/ segments.” Such cases of violation is very
common on the marketing world these days. The study focuses on finding out where the coco
cola company went short on following their business ethics and how the livelihood of a
whole village was compromised. Companies, especially food companies must make sure that
the end product is safe for the consumers to use and no poisoning or side effects will be
caused to them afterwards. After Nestlé’s Maggi came under scrutiny of the Union Consumer
Affairs Ministry for high lead and Monosodium Glutamate (MSG) content, questions on food
safety have been raised from various parts of the Nation. But the marketers of the company
comes up with huge marketing strategies to boost the sales of their products. In the case of
Maggi, it was found that lead was present in the noodles, the sales of the company went down
drastically, and people were also affected with food poisoning. This shows the severe
carelessness and their incapability in following their business ethics. When we take the
example of coco cola itself, researchers have proved that some of the items used are not fit
for consumption. Fall in ethics and thus causing harm to the consumers is a major drawback
of any corporate. Another case of such business ethics violation is of one of world’s best
sportswear brand, Nike used to produce their goods offshore to save money. It was a human
rights violation done by the company.

METHODOLOGY

Theoretical framework:

The theory that this study uses utilitarian theory. This theory comes under the family of
consequentialist ethical theories. It puts forward actions that promote overall happiness or
pleasures and rejects actions that cause unhappiness or harm. This theory supports the study
as it talks about the wellbeing and interests of the people. This theory was proposed by
Jeremy Bentham and John Stuart Mill. They argued that every positive action tends to create
something good and will create happiness and a wrong will tend to create unhappiness. This
theory is in opposition to egoism where a person should pursue his own self-interest even at
the expense of others. Where a company’s ethical standards are compromised, it creates a
great loss for the company as well as the customers. The coca cola company is bound to
follow this theory as per its business ethics, because the company according to the ethics that
it has stated has a responsibility towards the people.

Research design

The design used for this study will be the exploratory research design. Exploratory research is
a research done for a problem that has not been studied deeply, it is meant to establish
priorities, develop operational definitions and improve the final research design. Exploratory
research helps determine the best research design, data-collection method and selection of
subjects. This case study is on finding out where the coca cola company fell short while
following its ethical principles in the village of plachimada in Palakkad district.
Research Tool

Case study method is used in this study where a detailed sketch of the incident is taken into
account.

Sources of data.

Secondary data sources are available for this study. Data has been collected from various
newspaper articles and write ups.
CASE STUDY:
Coca Cola Company is a leading soft-drink brand based in the United States. The coca cola
plant came to Plachimada, Palakkad in 1999. Palakkad district was known as the rice bowl of
Kerala. Plachimada was a small village with good water facilities and the main source off
income of the place as agriculture. The company came into Plachimada offering the residents
job opportunities and life long job security. The company promised that they will bring
development in the village and increased the expectations of the residents. Believing what the
company had offered the residents allowed the company to clear almost 35 acres of land and
set up the plant there. There were almost 800 factory workers in the plant but only a mere
number of 20 workers were from the area. The rest pf the worker were from the workers that
the company had employed were from different places and those people were the permanent
workers there and not the resident workers, which was exactly opposite to what they had
promised to the residents before.

The first signs of contamination began when the people started to identify that the drinking
water was getting polluted. People who were staying near the plant have reported that the
water that they used to get from the wells and bore-wells were becoming polluted. The water
was not fit for drinking or bathing. Diseases also started to spread out. When the people
started showing mild signs of protest about the water impurity, to compensate them, the
company started giving them fertilizers for their crops, soon to find out that the fertilizers that
they have provided are not fit for crops and have poisonous content inside them.

The residents started to understand the danger that the company was bringing to their land
within the first 6 months of its operations there. In the year 2000, they went on a strike
against the company. It was a legal battle between the residents of Plachimada and the coco
cola company. According to news reports, the residents says that the company threatened
them to stop the strike and even offered them to pay money. They say that the company
thought that the people from such a small village did not stand a chance against the big
corporate. Even the trade unions and local political parties were in favour of the coco cola
company saying that the people should stop their strike as the company is the source of
livelihood to many workers and so its operations cannot be stopped. The strike and the legal
battle went for years between the general public and the big corporate chain.
The Company has set up its branches in almost all parts of the world. But over the course of
time, the company has landed in lots off acquisitions pertaining to the quality of the drink.
The leading soft drink giant has set up one of its plants in Plachimada, Palakkad district. It
has been reported that over 5000 tonnes of sludge has been found in the drink. Officials has
reported it to be to that of fertilisers that is used for plants. There also has been an ongoing
dispute between the tribal people residing in Plachimada.
 The company had an agreement with the KSPCB, that it will use 1.5 million litres from the 6
bore wells inside the factory compounds. As a result of this, slowly the water tables began
and to reduce. Plachimada is basically a tribal area, also a scarcely populated region. The
main livelihood of people there was agriculture. With the receding water level, the water
started to become contaminated. With detailed testing, it was found out that the water had a
heavy concentration of magnesium ions and calcium in it. Water samples that were collected
near the plant in Plachimada was also found unfit to drink. During the initial years, the
farmers in Plachimada were in favour of the Coco cola plant there. The reason was that the
plant was providing the farmers with fertilizers for their crops and that too for free. But it was
found out later that the fertilizers that the company provide are also not fit for the plants.

A study conducted by Greenpace on the contamination caused by coca cola has revealed that
the sludge that was found in the drink contains: 1,100 mg/kg of lead, 100 mg/kg of cadmium,
190 mg/kg of phosphorus, 1,580 mg/kg of zinc and 4000 mg/kg of aluminium. The study
founded that the Coca Cola Company has been violating the Kerala Land Utilisation act,
Kerala Pollution Control Act and Ground Water Authorities Rules and Environment
Protection act. For all the years that the company has continued its operations in Plachimada,
it was going on contaminating the water and food sources of the place. This contamination
has affected every single life in Plachimada. The farming industry was completely
devastated.

The legal battle lasted for years. It took almost 12 years for the company to stop its operations
fully in Plachimada. There were several hurdles that the people had to come across while
fighting the legal battle against the company. Finally in 2018, the company stopped all its
operations in Plachmada and the plant just remains there with 2-3 security guards. The high
court of Kerala has asked the company to pay compensation back to the people, which has
not given to the people yet. Without the compensation, people can’t go back to their normal
lives. That much is the damage that the company has done to a small village.
The Plachimada case was one of the biggest cases of violation of ethics and a case of
negligence in the history of Kerala. The company showed no sense of responsibility towards
the people and their land. On top of it, the company tried to bribe the people to be in their
favour while it was going on attacking the nature, depriving the people of their very basic
need, that is, drinking water.
Even though Coca Cola has claimed that it strictly follows its business ethics and policies and
have been following them for so long now but the actual situation is very different. With this
Plachimada incident, it is very understandable that they have not done a good job at it. It was
one of the biggest cases of corporate negligence that Kerala has ever faced. They almost fully
contaminated the whole water sources of the people. The compensation that must have been
given to the people has not yet been payed. The company refused to accept its faults in the
first place and did nothing for the contamination of water. The Plachimada plant was not a
development scheme or the people, it was a massive corporate attack against people and their
lives. According to the residents, the village has had never faced with drinking water issues
before. The company had made the condition of the water in such a state that the water
cannot be used for any basic needs. The fertilizers that the company had provided them
destroyed their crops, basically stripping people of their lives and which had also become a
threat to the society.

CONCLUSION:
Violation of ethics is something that should be discussed with deep importance these days.
May it be coco cola or any other companies, every corporate has certain responsibilities that
it has to fulfil to the society. This case in Plachimada, it was not taken with proper care,
would have gone out of hand and would have destroyed an entire village. When a company
uses the resources of the land, it is their duty to return back what they have used. But in most
cases, what we see is that the corporates keeps on using the resources which mainly includes
the encroachment of the lands, disposal of toxic waste into the water bodies, smoke and
sound pollution and a lot more. The main aim of any company should not be just profits but
also the companies should start to identify themselves as a part of the society and start
contributing towards the society.

Even though the Coca Cola company has claimed in their business ethics policy that the
company is doing the best it can towards the socio-economic upliftment of the society, it has
proved that it just remains on paper. The fact that the company has engaged in a legal war to
continue its operations in Plachimada, itself shows the profit centric attitude of the company.
The legal battle went on till 12-13 years. The residents in their statement to the media had
claimed that the then congress government did not reply to their pleas to stop the company’s
functioning. The people claim that the company was so powerful to even keep the
government towards their side. But ultimately the company had to shut down their
operations. Most companies have a section for CSR activities, but the question is how much
are they truly willing to act for it and how much are they truly doing that. In the documents,
they might be having numerous number of service activities which they might have done but
the reality is quite different. The company had promised an “economic reform” to the people
when it came to set up the plant in Plachimada.And due to Kerala’s “reform” minded
government that time, the company easily got the license from the local council. In a way the
government is also indirectly supporting the corporates, maybe just for the profit sake of it
and not thinking about the general public.

The slogan of Coca Cola in Hindi is Jo Chahe Ho Jahe, which means whatever you want, it
will happen but seeing its acts of violation of business ethics, people has rephrased it as Jo
coke chahe, Ho Jahe, which means whatever coca cola wants, it will happen. This is not the
case just for coco cola. This actually shows the capitalistic influence of corporates
worldwide. If the companies itself is a harm for the people, then it is going to cause great loss
to the whole of mankind. To ensure this, every company should adopt the business ethics
model by practicing social responsibility which is also known as corporate citizenship.
REFERENCES

https://www.thehindu.com/news/national/kerala/not-going-back-to-plachimada-coca-
cola/article

https://en.wikipedia.org/wiki/Plachimada_Coca-Cola_struggle

https://caravanmagazine.in/communities/coca-cola-plachimada

https://www.coca-colacompany.com