A multinational corporation or MNC is a large joint stock company or a firm that has operations and assets in at least one foreign country other than its home country. They are characterized by having multi product portfolio, worldwide market, selling billions of worth goods & services, large consumer base, worldwide competitors, global perspective, large R&D base, employing thousands of workers globally, with only one motive i.e. Profit making. According to recent statistics the combined sales of top 200 MNC’s were around 28% of world’s GDP. Least developing country, or LDC’s, symbolise the weakest section of the international economic community comprising of almost 12% of world population, about 880 million people, accounting for only 2% world GDP & 1% global trade (UN-OHRLLS). These countries are lacking in infrastructure, have poor economy & inadequate industrial base, large population below poverty line. As per the 2012 UN list, there are 48 least developed countries in the world with countries like Africa, Latin America being a part of the list. A multinational companies’ primary motive is to reap profits by employing cheaper, efficient and reliable resources, for which LDC’s or developing economies are ideal as they are economically weak, burdened by unemployment, debt and structural instability. To woo these investors and bring in FDI, the governments lower trade restrictions and give a free reign to the country’s resources to boost their weak economy.
While MNC’S are perceived as a positive force that bring employment, economic growth, better technology & living standards in the developing economies, but their greed for profit maximisation has led them to exploit the natural resources, human resource, and environment of these developing countries.
Coke and its Impact on India’s Economy, Natural resource (water), Environment
India’s Reliance on Coke: The worldwide markets in 1990’s for soft drinks industry was shrinking and Coca Cola faced a shrinking market in the US and EU as the western consumer got more health conscious and started banning such products. The market focus shifted to India as it was a developing market with a large middle class population base. Coke returned back to India in 1993 and invested more than 1 billion US$ in 10 years’ time making it the country’s top international investor. With a record growth of “16% sales volume in India in 2012, 59 bottling operations, 21 contract packers manufacturers, 700,000 retail outlets”, (“The Coca-Cola Company) Coke has created millions of jobs through its contract manufacturing, procurement, supply, and distribution networks. The company plans to “invest another $5 billion” to double its revenue and volume by 2020 making it one of the most promising MNC to boost the Indian economy. (“The Coca-Cola Company)
Access to natural Resources: Coca Cola, the American multinational invested in India to reap heavy profits and gets access to cheap ground water, low extraction and labour cost. Coca-Cola extracts about 2.5 million litres of water/day, equivalent to meet the basic needs of 100,000 residents every day (India Resource Centre).The use of ground water for bottling Coke and its products in various regions in India has led to drought leading to inability of farmers to continue farming. Indians face extreme water shortages due to unequal distribution of water and also because it’s a highly agrarian economy where 70% people rely on agriculture (Srivastava, 2008). Coke’s plant in Kala Dera, Rajasthan, has caused severe water shortages resulting in depletion of groundwater levels. TERI (The Energy & Resources Institute), India’s largest NGO, in its report in 2008 said that in the peak summer months of its production, the plant accounted for using 8% of water extraction within 2 km radius of the plant making it non-sustainable. Another bottling plant in Kerala, Palakkad, draws 1.5 million litres of water daily (Arjun Sen, The Statesman) resulting in drying up of irrigation wells and producing thousands of gallons of toxic sludge (BBC). Hindustan Coca-Cola Beverages Private Limited (HCCBPL), the bottling partner of Coke India, has a plant near Mehdiganj, UP. The plant’s annual requirement is 50,000 cubic metres of water, and uses 2 bore wells of depths 103 and 137 meters, drawing almost 12,290 cubic meters/month of water during its peak season (Central Groundwater Authority, India). As part of ‘Replenishment Policy’, the company has initiated 400 rainwater harvesting projects to restore groundwater resources, provide potable water to over 100 schools, restored traditional water bodies and is pioneering sustainable agricultural practices. Coca Cola also installed Rain Water Harvesting systems in 39 SOS children’s villages in its bid to give back the water they are using.
Environmental impact – A multinationals’ primary aim is profit and utilisation of production practices that are cheap and efficient, even though they might have a negative impact on environment. The contaminated farmlands comprising of toxic-laden waste and unacceptable levels of pesticides in Coke products, leaves toxic environmental footprints in India. Coca Cola has been discharging its waste and effluent into the fields, rivers around the plant areas indiscriminately resulting in the pollution of ground water and soil, making the water of wells and hand pumps unfit for consumption. In Plachimada and Mehdiganj areas Coke distributed its waste to farmers as Fertilisers. Tests conducted by BBC found traces of cadmium and lead in the waste proving its toxicity. Coke products have been proved to have high level of pesticides including DDT, lindane and Malathion with the pesticides and insecticides averaging 0.0150 mg/l, 30 times higher than the European Economic Commission (EEC) limit (Pollution Monitoring Laboratory), infact Coke’s Ballia plant is located in an area with a severe contamination of arsenic in its groundwater.
Coca-Cola has introduced various initiatives for sustainable supply of agricultural crops, green manufacturing and packaging practices to support the farmers in improved yields and to protect the natural resources across the supply chain. Project ‘Unnati’ in Chittoor, has piloted ultrahigh-density plantations (UHDP) in mango cultivation, to raise productivity, conserve water & land resources and increase the incomes of around 25,000 small farmers covering 50,000 acres.
Unilever and its Impact on Workers and Environment
Impact on Workers: The Unilever can be found across 150 countries, it’s a trusted name in nutrition, hygiene and personal care. They have been in 3 key countries (Nigeria, Ghana, Kenya). Unilever has made an employee programme called, Lamplighter employee programme to improve the fitness, nutrition, and mental health of employees. (“Employee Health, Nutrition & Well-being.”) This programme had already been used in 30 countries, reaching 35,000 people. In 2012, they restricted Smoking for employees whilst at work due to health issues, reaching a “100% compliance by 2013” (“Employee Health, Nutrition & Well-being.”) According to the labour act, the maximum working hours is 8 hours/day, 40 hours/week. Also the employers working engaged in the harvesting the oil palms need to work on Saturdays but are paid twice the daily wage for working on Saturday. The wage paid to the workers in Ghana is relatively good as their “daily minimum wage in Ghana is ¢13,200 (about €1.25)” (Enu-Kwesi). Unilever’s labour act strictly prohibits the employment of children but the Ghana Employers Association (GEA) found children working in oil palms and rubber plantations. These children confront hazards like exposure to toxic substances, sexual abuse, violence, snake bites and accidents, such as from falling fruits, and cuts.
Impact on Environment: Unilever is highly dependent on the environment as the raw materials it requires directly come from nature. According to Greenpeace, Unilever drives deforestation in Borneo by buying palm oil. Unilever is clearing the country’s rainforests, threatening native people and wildlife. Borneo is very important to Unilever because of the presence of palm oil, a common ingredient used in soaps and many other personal care products. Unilever purchases “1.3 million tons of palm oil each year.” (Hance, Jeremy.) Deforestation is endangering species and resulting in climate change through greenhouse gas emissions (GHG). In Sumatra and Borneo, palm-oil expansion threatens elephants, tigers and rhinos, as well as orang-utans. (“The Other Oil Spill.”) However, Unilever has taken various initiatives to save the environment by reducing their emissions GHG in the atmosphere, with acts like reducing greenhouse gas emissions from transport, they will achieve this by reducing truck mileage, employing alternative transport such as rail or ship. There has been “18% improvement in CO2efficiency since 2010 and 7% reduction of CO2 emissions in 2013 compared to 2012.” (“TARGETS & PERFORMANCE.”) As Unilever is the largest producer of ice cream, making their consumption of refrigerators very high, they have tried to reduce gas emissions from refrigerators by using the hydrocarbon climate friendly refrigerators. Unilever has already bought “1.5 million refrigerator, exceeding their target of 850,000 units.” (“TARGETS & PERFORMANCE.”)
Conclusion: While MNC’S are perceived as a positive force that bring employment, economic growth, better technology & living standards in the developing countries, but their greed for profit maximisation has led them to exploit the natural resources, human resource, and environment of these developing countries. The overwhelming data proves that the MNC’s are indeed taking due advantage of the weak regulatory authority of these countries at the cost of human health, well-being & global environment. In India, Coca Cola may claim to ‘replenish water’ but the glaring truth is reflected by drying hand pumps, bore wells, ponds low ground-water levels and the drying agricultural farms because of lack of irrigation water. The environmental initiatives taken by the company are motivated by the intent to improve the productivity and yields, rest are all side benefits. Rather than bringing in economic prosperity, Coca-Cola has managed to bring in environmental degradation, toxic dumping, economic and health problems in Indian communities. Similarly Unilever boasts of many environmental & human initiatives but it cannot balance out the damage it’s causing to the environment and the human labour, especially children of these developing countries. Is blatant liberalisation the answer to all the problems of these developing countries? Does the blame of over exploitation lies only at the doorsteps of the MNC’s and not the local governments, who give a free reign to these MNC’s to boost their economies? Who is accountable for the human and environmental damage these companies are incurring? When will we see the real “Responsible Corporate Citizen MNC’s” that are dictated by a moral code and not just the profit mode?