The Australian

Neville Isdell wants Coke to be a social responsibility leader

By Andrew Ward

22 November 2006

"I remember going back to my university and one of my professors asked me what I was doing," Mr Isdell recalls. "He was horrified to hear I was in business. I said: 'You know, I actually believe I can create more value and help more people by working for the Coca-Cola Company than I would be able to do individually as a social worker."'

To Coke's many critics, his rosy view of the company must seem absurd. For several years, it has faced a growing drumbeat of criticism over alleged mistreatment of workers in Colombia, use of water in drought-stricken parts of India and its role in the childhood obesity epidemic sweeping the developed world.

With boycotts on university campuses throughout North America and parts of Europe, Coke appears to have succeeded Nike, Nestle and McDonald's as the anti-globalisation movement's chief corporate villain.

While student boycotts have made little impact on sales, the barrage of negative headlines threatens to tarnish Coke's most valuable asset: its brand.

"Coca-Cola has always been seen as a force for good," said Tom Pirko, president of Bevmark, a beverage industry consultancy.

"The danger is the brand starts being seen as something bad."

Until recently, Coke had a reputation for obstinacy in the face of criticism.

But in the two years since Mr Isdell was appointed chief executive, Coke's approach has begun to change. Shortly after taking the helm, he gathered together the company's 150 top managers to set strategic priorities.

Out of the meeting emerged a list of five goals considered crucial to long-term growth. One was to make Coke the "recognised global leader in corporate social responsibility". To cynics, the target sounded like airy rhetoric. For Coke, it represented an important acknowledgement that the company must deal seriously with the range of social and environmental issues.

"(Social responsibility) was seen as something that was part of our history and something that was still there, but not to the degree that it needed to be," Mr Isdell said. "It needed to be a key plank - one of the five main planks - of the company."

Coke's most urgent task was to bring greater transparency to its global operations, which span more than 200 countries, so it could identify and tackle social and environmental risks before they became problems.

Most of Coke's bottling and distribution operations are outsourced to independent companies. But, just as Nike was held accountable for labour abuses in overseas sweatshops, Coke has learned that it cannot escape responsibility for far-flung business partners.

In addition to increasing transparency, Coke has sought a more constructive relationship with critics. The company opened dialogue with student groups and forged partnerships with non-governmental organisations.

"One of the ways you get a company not to be seen as an inanimate object is to talk to folks," said Ed Potter, Coke's director of labour relations. "You might not agree. You might not even talk about matters of substance. But you develop a relationship."

Jeff Seabright, a former adviser to President Bill Clinton on climate change and now head of environmental and water affairs at Coke, has won the backing of Greenpeace for an initiative to make vending machines more environmentally friendly, provided funding for freshwater conservation projects led by the World Wildlife Fund and co-founded the Global Water Challenge, an alliance of companies and NGOs committed to widening access to safe drinking water and sanitation in the developing world.

"Our brand has made us a target for critics to attract attention to their causes," Mr Seabright said. "But NGOs are starting to understand they can achieve more with us than against us because our brand and global presence makes us a powerful partner."

The issue causing arguably the greatest concern among ordinary consumers is childhood obesity.

Coke insists it is unfair to blame soft drinks for a problem with multiple causes. But here too it has softened its stance, embracing industry guidelines restricting the sale of sugary drinks in schools and supporting initiatives to encourage exercise among children.

"Taking a leadership position on the school vending machine issue is something that Coke would not have done in the past," said Robert Davies, chief executive of the International Business Leaders Forum, which promotes sustainable business and counts Coke among its donors.

"They have realised they have to respond to perceptions in the marketplace rather than to what they believe to be the facts."

But Ray Rogers, head of the Campaign Against Killer Coke, the company's fiercest foe, rejects the notion that Coke has changed.

"They still deal with these issues as a public relations problem," he said. "Anything they have done to clean up their act is in response to political and economic pressure rather than because it is the right thing to do."

Tim Smith, senior vice-president of socially responsible investing for Walden Asset Management, believes activists such as Mr Rogers play an important role in scrutinising corporate behaviour. "Without people like him, Nike and Gap might never have been forced to address the terrible working conditions in sweatshops."