4.2 CSR POLICY PRIOR TO THE SCANDAL
4.2.2 Coca-‐Cola
Coca-‐Cola is one of the most famous and valuable brands in the world (forbes.com).
In 2005, the company became the world’s largest manufacturer, distributor, and marketer of non-‐alcoholic beverages and syrup, and today Coca-‐Cola operates in more than 200 countries worldwide (Coca-‐Cola Annual Report, 2016, p. 1).
Despite having already experienced two CSR-‐related conflicts, i.e. in the US and Belgium, prior to their scandal in India in 2003, it seems that Coca-‐Cola did not learn from these experiences.
Instead of looking forward and adapting a proactive CSR strategy to handle future potential issues, the company applied a reactive CSR strategy to each conflict and only focused on the local geographic aspect. However, with production plants all over the world, selling more than 29.3 billion units globally in 2016, and with only 18 per cent sold within the US, the company would benefit from committing to their CSR initiatives on a global level (Coca-‐Cola Annual Report, 2016).
As the scandal in India started in 2000 and lasted approximately 8 years, the Coca-‐Cola case is interesting because it occurred in the transition period of the Internet from web 1.0 to web 2.0. The case is therefore an example of how a MNC, like Coca-‐Cola, had to adapt to the new reality of web 2.0. Secondly, the case revolves around the company’s production and their environmental impact, which has become one of the Coca-‐Cola’s corner stones of their current CSR.
In light of the previous conflicts, prior to the scandal in India, Coca-‐Cola published their first report on sustainability in 2001, called “The Coca-‐Cola Company Sustainability Review”.
Despite that CSR was already mentioned briefly in the company’s annual report, the company chose to devote an additional report to CSR to enlighten stakeholders of Coca-‐Cola’s initiatives towards sustainable work.
Since 2001, Coca-‐Cola has continued to show commitment to their global workforces and has therefore updated and published their sustainability report every second year since then. To make sure the work was done properly and thus stayed verified and assured, an independent third party was hired to measure Coca-‐Cola’s activities, following the guidelines made by the
Global Reporting Initiative (globalreporting.org). Furthermore, in their annual report from 2002, the company included promises to protect the environment and stated: “our Company’s commitment to environmental issues is guided by a simple principle: We will conduct our business in ways that protect and preserve the environment” (Coca-‐Cola Annual Report, 2002).
The report emphasized Coca-‐Cola’s values of integrity, quality, accountability, diversity, and relationships based on their respect for the local communities and the environment, in which the company operated. Finally, the report also stated that the company was committed to achieving their business goals while using natural resources in a responsible way. Despite the company best intentions of creating shared value between them and the local society in India, which Porter and Kramer have argued benefits a company, Coca-‐Cola was not able to move beyond Carroll’s second layer of legal responsibility, thus making the company act unethically and lacking the spirit of being a good corporate citizen.
4.1.1.3 Apple
Today, Apple is one of the world’s most famous brands while it has created a name for itself with innovative products and technology available for consumers on a global scale (Torres et al., 2012). With a wide product-‐ and service range, Apple’s most valuable products include the iPhone, iPad, and MacBook amongst others (Apple Annual Report, 2016).
Even though the company manufactures some products in the U.S. and Ireland, the majority of Apple products are still manufactured overseas by massive suppliers that primarily operate in Asia. This means that the company’s outbound logistics are predominately from Asia and from there products are sold to Apple’s retail stores, online stores, and third parties (Torres et al., 2012).
The Apple case has been chosen due to the nature of the extreme violation against workers at Foxconn in China, which resulted in 14 employees committing suicide in 2010. Given the time of when the suicides occurred, CSR was an integrated part of both Apple and other MNC’s.
Despite Apple’s CSR initiatives, such as their Supplier Code of Conduct, violations of human rights occurred geographically on the other side of the globe at Apple’s largest supplier. It is therefore interesting to see, if the development of social media contributed to a measureable impact on Apple. As the U.S represented the company’s largest geographic marketplace, with
approximately 44% of the net sales from customers inside the U.S, it would be interesting to see if the American consumers became aware of Apple’s irresponsible behaviour in China and whether it affected the consumers enough to change their behaviour towards Apple (Apple Annual Report, 2010).
With years of investment in CSR prior to Apple’s CSR scandal in China, at the Foxconn factory, the company had for years published annual reports, sustainability reports, and updated their supplier code of conduct several times. Their annual reports have included Apple’s business conduct policy: “Apple conducts business ethically, honestly and in full compliance with all laws and regulations. This applies to every business decision in every area of the company worldwide”
(Apple’s Annual Reports, 2010, 2011, 2016).
Also, in the company’s supplier responsibility report from 2010, which was first published in 2006, Apple stated: “Apple is committed to ensuring the highest standards of social responsibility throughout our supply base. The companies we do business with must provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made” (Suppler Responsibility Report, 2010, p. 3). To make sure that suppliers were working within legal and ethical responsibilities Apple outlined a supplier code of conduct, which showed the specific expectations and conditions suppliers had to commit to (Apple Annual Report, 2010).
Since Apple’s CSR scandal happened in 2010, the company had already invested years in their CSR initiatives. With statements like the ones above, it could be argued that Apple predominantly moved their production to Asia due the economic aspect of cheaper labour cost, but also to remain competitive.
By adapting to the market and competing with competitors on price, Apple could have tried to differentiate themselves by adding additional value to the company and their corporate citizenship. Furthermore, Apple’s incorporated CSR could be seen as their way to assess value creation by working on on-‐going opportunity and future activities for the company.
4.1.1.4 Volkswagen
Volkswagen was founded back in 1937 in Wolfsburg, Germany, and is today the flagship brand of the largest auto carmaker in the world, the Volkswagen Group. The Group consists of
twelve international brands and produces cars for every consumer segment in the market.
Like many average consumer carmakers, Volkswagen has aimed at producing more environmental friendly cars over the past decades, as the subject of global warming has received increasingly focus. But in 2015, Volkswagen was exposed by the EPA for cheating on emission test and admitted to having installed the ‘defeated software’ in more than 11 million diesel cars worldwide.
The case of Volkswagen is interesting for a number of reasons: firstly, it is one of the latest CSR scandals in modern history and it is, as will be shown in the analysis, a textbook example of greenwashing. Secondly, Volkswagen’s attempts to both salvage the situation and apologize have drowned in the complexity of web 2.0, but while the impact of the case may have been more intense, the time span was a lot shorter than the other cases.
Prior to the exposure in September 2015, Volkswagen Group had published both environmental reports and sustainability reports since 1995 to compliment their annual reports. The environmental reports focused on Volkswagen Group’s environmental activities in Germany, but in 2005, Volkswagen Group expanded the scope of the report and started to include their long-‐term orientation towards sustainability, values and innovation (Volkswagen Group, 2005).
In its 2012 sustainability report, Volkswagen Group acknowledged that CSR and sustainability had become an important indicator, which both analysts and investors looked for when passing their recommendations and decisions. In 2012, Volkswagen Group was one of only three automobile companies listed in Dow Jones sustainability index and they had been named as one of the top 100 most sustainable companies in the world by the Norwegian insurance company, Storebrand. Their commitment, especially to the environment, was evident through their sustainability reports from 2012 to 2014 where the word
“environment” has an average mention rate of two per page in their 160 page reports.
Specifically, the Volkswagen Group was determined to improve the environment through better production and more efficient products. Consequently, they aimed to reduce their environmental impact from its production operations as well as reduce their production-‐
related energy consumption by 25% by 2018. Furthermore, they planned to invest €600 million in renewable energy such as solar parks and hydro plants that local communities in emerging countries also would benefit from. Finally, there was a heavy focus on car design
improvements for better fuel consumption and lower CO2-‐emissions. More specifically, the aim was to lower the average CO2-‐emission on car to 95g/km by 2020 (Volkswagen, 2012, 2013, 2014). At this stage in the development of CSR, operating within the legal boundaries of the industry and the country in which you operate was considered by many to be a matter of course. Assuming this, the Volkswagen Group appeared to live up to all the responsibilities of CSR as they also considered the ethical aspects of their actions as well as contributing to local communities. Furthermore, these initiatives could also be argued to be proactive in the sense that they aim at improving both production and products and do it before legislation is introduced on these subjects.
The sustainability reports from 2012, 2013 and 2014 contain many of the claims that turned out to be the Achilles heel of Volkswagen. According these sustainability reports, the Volkswagen Group have made promises towards minimising Volkswagen’s environmental footprint through superior environmentally compatible technology (Volkswagen, 2012); aim to not only adopt eco-‐friendly practices, but strike a balance between three main factors, economy, ecology and society (Volkswagen, 2013); and make each new generation of vehicles more eco-‐friendly than its predecessor (Volkswagen, 2014). It is within statements such as these that the element of greenwashing can be traced back to in the 2015 Dieselgate.
The final nail in the coffin was Volkswagen’s 2015 ad campaign about their “clean diesel”
engines. It was launched after their engines had won several environmental awards that had provided Volkswagen with numerous tax breaks from 2009 to 2015. Finally, just a week before the EPA investigation came to the public’s attention, a press officer at Volkswagen sent an announcement to the world’s media. “The Volkswagen Group has again been listed as the most sustainable automaker in the world’s leading sustainability ranking” (Hardyment, 2015).
Looking at the various companies’ CSR prior to their respective incidents, there has evidently been a development in corporate CSR similar to the development in theory. The early CSR in the four cases presented above show how companies has over the years started to put more emphasis on CSR in both their strategy and various reports.
The Nike case shows how the company was able to focus solely on the economic aspect of business before the issue of working conditions and human rights became a public issue. But since then, the three other cases show how CSR has become a more integrated part of business. Coca-‐Cola started to focus on their stakeholders only a few years after Nike decided