ABSTRACT In March 2000, Coca Cola, under itsIndian subsidiary Hindustan Coca Cola Beverages Private Limited (HCCBPL),commenced operations at its bottling plant at Plachimada, in the southern stateof Kerala. Over the next few years, the area surrounding the plant began tofeel the plant’s hazardous effects, as groundwater was contaminated and toxicwaste released.
What followed was a long struggle by the people of Plachimada,interest groups, and NGOs, leading to the eventual shutdown of operations atthe plant. This report is a reflective writing andwill attempt to outline the events that transpired during the course of the struggleat Plachimada, which took place at two levels: the grassroots and thejudiciary. It shall then further attempt to answer questions pertaining to theethical responsibilities of the firm to the community around it and to thesociety at large.
INTRODUCTION Milton Friedman said “thereis one and only one social responsibility of business – to use its resourcesand engage in activities designed to increase its profits so long as it stayswithin the rules of the game, which is to say, engages in open and freecompetition without deception or fraud” The above-mentionedstatement, for a long time, had been the steadfast belief of the corporationsacross the world. The notion of firms as economic entities with sole objectiveof profit maximization has been prevalent for as long as one can remember. Viewed this way there areno “responsibilities” for the firm except to produce economic value for itsshareholders. Therefore, it must lead us to believe that a firm certainly hasno ethical responsibilities but only legal obligations.
His argument elaboratedon the basic idea that being mere agents of shareholders, managers have thesole duty to increase their wealth. This argument has beenattacked by many scholars on different counts. Firstly, it seeks to completelyignore any ethical obligations. In other words, so long as they stay within lawthey need not worry about any other impact their actions may have on theirstake holders other than the shareholders.
Second it is not cleatthat the shareholders have in fact given such a mandate to the management. Theymight have invested purely with a speculative motive. In fact, some surveyscarried out on shareholders in US revealed that the majority did not want puremaximization of profits by the firms to the exclusion of all otherconsiderations. Thirdly, if it isaccepted that maximizing shareholder value is the mandate, then this has to bea long-term initiative. This is achieved only by adopting sustainable proactiveand developing a long-term relationship with stakeholders and the community.The case of Plachimada vsCoca Cola showcases this belief. It further goes and examines about therepercussions of not taking into account the well being of the community inwhich it thrives.
CONTEXT Plachimada is a small hamlet in thePalakkad District of Kerala. The majority of the population consists of Adivasis (indigenouspeople) whose primary occupation is agriculture. About 80% of the villagers areengaged in agricultural labour, with 20% engaged in other labour activities. In 1998, HCCBPL acquired 34.4 acres ofland (mostly paddy fields) in order to set up a bottling plant at Plachimada.On January 25, 2000, the Perumatty Panchayat (whose constituency includesPlachimada) granted permission to build the plant and operations began in March.The Kerala State Pollution Control Board granted a permit to produce 561,000litres of beverage per day, with an average requirement of 3.8 litres of waterfor every litre of beverage.
The source of water was primarily groundwater from6 bore wells and two open ponds, and about 2 million litres of water per daywas extracted. In six months of commencement ofoperations at the plant, the villagers complained that the water was unsuitablefor drinking or cooking. In the subsequent months, several villagers complainedof unusual stomach-aches. The farmers complained of wells emptying unusuallyfast and crop yields decreasing. A public interest group by the name ofCorpwatch India, found that there were high levels of calcium and magnesium inthe water, caused by excessive extraction of water.
The bottle washing taking place at theplant involved chemicals, and the resulting sludge was taken out of the plant.Initially the sludge was sold as fertilizer to unsuspecting farmers, followingwhich it was given free, and with increasing resentment among villagers, it wasmerely dumped on the roadside. In the few months since commencement, more than1000 families in the surrounding villages had been affected. REPERCUSSIONS As per the agreement struck by the companywith the Kerala State Pollution Control Board (KSPCB), up to 1.5 million litresof water was drawn commercially from 6 bore-wells situated inside the factorycompound. The permit granted Coca-Cola the right to extract ground water tomeet its production demands of 3.
8 litres of water for every litre of Cola. As a result, the water table receded, asdid the quality of groundwater. Detailed sampling of the water collected fromthe region revealed high concentration of calcium, and magnesium ions.Moreover, the colloidal slurry that was generated as a by-product was initiallysold to villagers as fertilizer In 2003, the BBC, in its Face the Factsprogramme, declared that samples of slurry that was being deployed asfertilizer were found to contain dangerous levels of toxic metals and the knowncarcinogen, cadmium “The area’s farming industry has beendevastated and jobs, as well as the health of the local people, have been putat risk,” said John Waite, the show’s presenter, as he read out theverdict of scientists from the University of Exeter, where samples collectedfrom Plachimada were sent for analysisThe events mentioned above are of serious concernas it stands proof of how corporations would overlook community wellbeing forprofit maximization. It is apparent that Coca-Cola did not think it importantto hold meaningful dialogue with the community it was operating within.
True to the Friedman’s notion of a firm having noethical responsibility but only legal obligation, Coca-Cola perhaps thought ofwhat was within its legal rights and did not bother to take into considerationthat the community might retaliate. The events that followed shows us why it isessential for a firm to positively interact with its community. The Anti-Coke Struggle On April 22, 2002, the ‘Coca Cola VirudhaJanakeeya Samara Samithy’ (Anti-Coca Cola Peoples’ Struggle Committee -henceforth Samithy) began its protest against the plant, with over1500 people, mostly adivasis, demanding the immediate shutdown ofthe plant owing to the severe hazard it was causing to their daily lives. The Committee was responsible for aseries of protests, anti-coke rallies and other disruptions to the operationsof the Coca-Cola Plant.
Several street corner meetings and intense campaignsfollowed. On June 9, 2002, a rally and public meeting was organised by People’sUnion for Civil Liberties and National Alliance for Peoples Movements insolidarity with the Samithy. Meanwhile, beginning in April 2003,the struggle against the cola giant took a decisive legal turn.
The Battle at the Judiciary On April 7, the Perumatty Panchayatdecided not to renew the license of HCCBPL. The secretary of the Panchayatcancelled the license, stating the following reasons: excessive exploitation ofthe groundwater by the company, environmental problems due to presence ofhazardous and toxic substances in wastes emitted by the company, and a scarcityin drinking water. This was challenged by the company at the Kerala High Court,which directed the company to approach the Local Self-Government Department(LSD) who stayed the cancelation issued by the Panchayat, stating that it hadexceeded its powers. BBC Radio 4 programme ‘Face the Facts’reported the presence of carcinogens in the waste deposited by the plant. Thiswaste had been dumped in the adjoining areas on the pretext of providingfertilizer to the farmers. On August 5, 2003, the Centre for Science andEnvironment, based in Delhi, came out with a report that showed that 12 softdrinks had significant amount of pesticides in them. On August 7, 2003, KSPCBconfirmed the BBC report, and ordered Coke to stop supplying waste to theadjoining areas and to immediately recover all waste and store it in safecontainment within the premises of the plant. On March 8, 2004 the Kerala Governmentordered the cessation of the plants operations till June 15, 2004.
A number of newspapers such as TheGuardian, The Times and the Financial Times of the UK, The New York Times ofthe USA, Le Monde of France and Asahi Shimbun of Japan covered the events andhappens of Plachimada. On the whole, Coca-Cola seemed to come out in a poorlight over the episode. Not only the plant but the company too suffered a majorhit. The Plachimada plant has not reopened till date. STAKEHOLDERS THEORY Business these days are shifting frommerely being agency for shareholders.
They are being replaced by a stakeholdermodel which has many other groups, including the community that the company islocated in an and the broader society which may be affected by the way that thefirm’s business functions. Any business, even the most prosperous ones, cannot exist in a vacuum. Theyrequire the investors to give them money, customers to buy theirgoods/services, employees to serve the customers, suppliers to sell them thegoods that they will sell, and a community within which they can thrive. Thebusiness cannot be successful in the absence of any of thesegroups. Of course, these groups might interact in a hostile way. However, theinterests of all involved would be better represented if everyone’s preferencescould be satisfied. This approach to business is known as the StakeholdersModel.It can be easily argued that to a large extent the Stakeholder Theory isa better representation of the network of relationships that exist in anybusiness’ interactions.
After all it most certainly involves moreresponsibilities than the Shareholder theory. Therefore, it encompasses moregroups than just the Shareholders. Any business that follows the StakeholderTheory is responsible for taking into account the needs and wishes of a greatmany people. CONCLUSION The struggle at Plachimada continues tothis day as villagers seek to recover the loss of livelihood and counter theextreme damage to the water resources in the area. The struggle represents theefforts of villagers and activists to wage a battle against a multi-nationalcompany both at the level of the grassroots and the judiciary.
It is also atestament to the ability of local self-governance bodies to effectivelydetermine the nature of development in their respective areas, and their rightto prevent undue extraction of their resources. Every firm exists within a communityand it is expected to play a positive role in improving the quality of life ofits community. It certainly has anobligation to see that this community is at least not worse off with the firmas a part of it.
As seen in case of Coca-Cola, the consequences of actingcarelessly towards a community and by extension to the society is bound toharsh and detrimental. The firm has an obligation not todamage its environment, air, water, grazing lands etc on which the communitydepends for its existence or quality of life. Polluting water sources or theair infringes on the rights of others to have access to these resources andhence is clearly unethical. This is especially since the executives of the firmmay not live in that area and hence may not be affected by them. The interaction of the firm with thecommunity starts right at the time land is to be acquired. IT is essential toestablish communication at the different stages of the process and find commongrounds that will be satisfactory to everyone.
Therefore, even though a corporationdraws is capital resources from its shareholder, it also draws resources fromother stake holders including its employees, the government, the community andsociety. It is hence essential to find the optimum balance among all thesestakeholders. BIBLIOGRAPHY · SurendranathC, “Coke vsPeople : The Heat is on in Plachimada”, in India Resource Centre,April 14, 2004· Bijoy,C.R., “Adivasis groupsvs. Coca Cola”,in Ghadar, Vol. 10, November 2006· PeoplesUnion for Civil Liberties, “The Struggleagainst Coca Cola in Kerala », PUCL Bulletin, Nov 2002D.
V. MURALEEDHARANNAIR “A Study of theStruggle for Water at. Plachimada, Kerala”