A Business Scandal of Environmental Sustainability

A BUSINESS SCANDAL OF ENVIRONMENTAL SUSTAINABILITY

Organizational behavior refers to the study of how people interact within groups and is normally applied to enhance efficiency in business organizations. The concepts of organizational behavior are grouped into two major categories; nature of people and nature of organization. Some of the major factors identified at the organizational level that affect the nature of people include perception and motivation. Perception is simply the way individuals interpret things in order to give meaning to their surrounding environment. People’s behavior is based on perception hence the level of accuracy in an individual’s perception determines the effectiveness of their action or behavior. On the other hand, motivation can be described as the intensity, persistence and direction of effort shown by an individual so that they can reach their goals (Schermerhorn, 2004).

When it comes to the nature of the organization, this is what defines the nature of an organization either based on its social system and leadership structure. It can either be a matrix structure, simple structure or bureaucracy. Each leadership structure has its advantages and limitations. Organizational behavior theories on the other hand involve trait theories, contingency theories and motivational theories among others. All these concepts and theories are important in organizational sustainability because they all individually have their effects on businesses and play a role in making them sustainable (Hersey, 1969).

Theories surrounding Corporate Social Responsibility are also linked to organizational behavior. An organization will act on certain situations depending on which CSR theory it uses in its operations. This paper will focus on the contingency theory and show how this can be helpful in making the best decisions under given situations. A case study on Coca Cola and the water shortage and pollution that it caused in India will be used to show application of the contingency theory would have made a difference in that case.

Environmental sustainability is an issue that has become increasingly important in the corporate world over the years. Businesses are expected to carefully watch the effects their activities have on the surrounding environment but this was not the case for Coca Cola particularly in India where it caused water shortage and pollution forcing a closed down of its bottling plant in Kerala in 2004. For many years, communities living around Kerala and Plachimada areas in India depended on wells for their water needs but once the Coca Cola Company opened its factory there, the water levels started going down (Bijoy, 2006). Residents also started complaining of burning sensations on their eyes and skins whenever they used the water. They did not know the water had been poisoned by wastes from its bottling plant. Even the soil was no longer suitable for growing food. Even when it rained heavily, once the water hit the ground, it was no longer of any help to the residents as it was already contaminated (aman, 2005).  The south village of Kerala was home to about 2000 people whose main occupations were farm labor and agriculture. This issues of water shortage and pollution really set these communities back by far.

Considering most of the company’s products are made using water and that the company holds one of the largest bottling facilities in India, it created a huge water shortage for the surrounding communities hence compromising both the quality and quantity of water in various districts within India (Brown, 2003). When Coca Cola were confronted by various authorities such as village councils, NGOs and even the state government about the substances that were polluting the water and soil which came from their products, the company strongly insisted that their products had been tested following the set standards and declared safe (Hills, 2005). The company as not willing to make any changes. They did not care that they were operating at the expense of the communities living there who depended on the water and soil to earn their daily food.

This was definitely an effect of lack of use of the contingency theory by the company’s management. The contingency theory shows that there is no specific acceptable leadership style but rather the leadership style used is dependent on specific environmental variables. The situation at hand is what should determine the leadership style that managers should use to handle it (Pennings, 1998). There are various leadership styles such as Autocratic leadership, Democratic leadership, Strategic leadership and many more. Instead of an organizations sticking with one leadership style such as autocratic leadership which has very little flexibility, it should be ready to make changes when they are deemed necessary.

Coca Cola should have applied the contingency theory in handling the water pollution and shortage in India caused by its operations. This would have meant making the decision to use alternative water sources since that is what the situation called for. Coca Cola’s management chose to stick with their results that claimed proved their products did not contain any harmful substances hence could not be responsible for the water pollution that was occurring. The leadership of the company had the power and authority to change the situation that the surrounding communities were facing through one utterance or one action but they chose to let the community suffer just so they could not face losses.

Contingency approaches show that organizations are open systems which need careful management or leadership in order to satisfy and also balance internal needs as well as adapt to environmental situations (Hofer, 1975).The company, in applying the contingency theory would have found alternative water sources or even created one through advanced technology that grows every day. On the other hand, they would have a found ways to replenish the water sources and reduced their water usage to a reasonable amount that would not harm the surrounding communities. They would have also tested their products through the right channels and indeed identified that they contained harmful substances that were polluting the water and taken steps to fix it. Instead, Coca Cola stuck to its production process causing the communities’ wells to run dry and even those that had water left were no longer fit for consumption. This finally saw the company’s operations completely shut down in India.

Suggestions for Change in Management and Conclusion

The management of any organizations faces great challenges with situations of risk and those that create some sort of conflict with the organizational objectives. The main objectives of the Coca Cola Company revolve around its brand, quality, availability, marketing and innovation. Openly admitting that their products contained toxic substance would have greatly hurt the company brand and quality that it is associated with. The management therefore decided to make people believe otherwise. It all comes down to decision making. The approach to decision making used by an organization can make a difference between proper and poor management.

The classical decision theory assumes that those in charge of making decisions are objective individuals who gather complete information, look at all possible alternatives along with their consequences then go forward to identify the best possible solution under the given circumstances. Using this theory in decision making, Coca Cola would have taken time to look into the peoples’ complaints and see that they were justified (Burnett, 2007). The management would have then followed to look into the possible alternatives it could use in order to preserve the communities water sources and what effect each alternative would have. The decision should have been made to enable the company keep producing its products but without endangering the water sources. This way, surrounding communities and other organizations would not have protested and led to the company’s bottling plant being shut down. It would still be operational in India whose population has now grown tremendously since then.

Coca Cola should consider applying JIT production (Just-In-Time). The case of India would not have happened if this is the method of production they had being using. It is growing to be a method adapted by many organizations today. JIT is a system of production developed to improve productivity and ensuring competitiveness by reducing the waste levels. Some of the waste in this system include poor quality finished goods which is exactly what Coca Cola had and distributed to consumers (Worthington, 2007). Through the JIT system, since production is done when the products are needed, the employees play a very important role by ensuring the flow of production continues all the time by identifying problems and addressing them immediately. This means the JIT system would have enabled the company employees to identify that the products contained toxic substances and fixed the problem right on time before it got out of hand. Coca Cola may have revived its business since it is now a global beverages company. However, had it applied these changes, the communities in India would be living much better lives now and the company would be thriving there.

References

aman, K., 2005. Corporate violence, legal nuances and political ecology: Cola war in Plachimada. Economic and Political Weekly, pp. pp.2481-2486.

Bijoy, C., 2006. Kerala’s Plachimada struggle: a narrative on water and governance rights. Economic and Political Weekly, pp. pp.4332-4339.

Brown, P., 2003. Coca-Cola in India accused of leaving farms parched and land poisoned. The Guardian, 7(25).

Burnett, M. a. W. R., 2007. Case study: Coca‐Cola and water in India: episode 2. Corporate Social Responsibility and Environmental Management, 5(14), pp. pp.298-304.

Hersey, P. B. K. a. J. D., 1969. Management of organizational behavior. Englewood Cliffs, NJ: Prentice-Hall.

Hills, J. a. W. R., 2005. Coca‐Cola and water in India. Corporate Social Responsibility and Environmental Management, 3(12), pp. pp.168-177.

Hofer, C., 1975. Toward a contingency theory of business strategy. Academy of Management journal, 4(18), pp. pp.784-810.

Pennings, J., 1998. Structural contingency theory. Organizational psychology, Volume 5, pp. pp.39-60.

Schermerhorn, J. H. J. O. R. a. O. R., 2004. Core concepts of organizational behavior. Hoboken, NJ: Wiley.

Worthington, F., 2007. Change and Innovation: New Organizational Forms. In: Introducing Organizational Behaviour and Management. s.l.:Cengage Learning, pp. 375-402.

 

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