Corporate Governance and Social Responsibility

This article discusses the relationship between corporate governance and social responsibility using Coca-Cola as a case study. It covers issues such as reduction of carbon footprint and giving back to the community, and applies stakeholder theory and agency theory to analyze the company's actions.

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Corporate Governance and Social Responsibility
Author’s Name
Institutional Affiliation
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Corporate Governance and Social Responsibility
Introduction
The multinational company selected for the assignment is Coca-Cola Company. It is an
American corporation, with subsidiaries around the world. As a beverage company, Coca-Cola
has been able to serve the global consumers with over 500 sparkling brands. However, the
media report of interest here is the sustainability report of 2017. The Sustainability Report of
Coca-Cola generally tells its story holistically. The report looks into the social and environmental
impact of the company and their interconnectedness. There is interconnectedness between the
environmental and social implications of the activities of Coca-Cola. This points out that the
annual review cover reflects the diverse beverages the company produces for its customers
around the world (The Coca-Cola Company, 2017).Most importantly, the report cover shows its
packaging that is centered on reuse and recycling. Ideally, this sustainability statement raises
significant items that concern corporate governance. It was found that there is a relationship
between corporate governance and the triple bottom line sustainability performance (Ferrero-
Ferrero et al, 2015). This research looked into this relationship through stakeholder theory and
agency theory. From this research, it is without a doubt that corporate governance is linked to the
triple bottom line which includes economic, social and environmental functions of a business to
the society. Thus, the sustainability paper of the company is one that aims to improve the
organization’s corporate governance and social responsibility.
Corporate governance or CSR issues

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The first thing raised in its sustainability report is a reduction of carbon footprint.
Secondly, this paper would investigate as addressed in the article is giving back. The giving back
is equivalent to philanthropy (The Coca-Cola Company, 2017). These two issues are two-
pronged in the sense that they feature corporate governance commitment to SR and at the same
time its organizational approach to gain a competitive advantage. Businesses do not just engage
in corporate social responsibility, but they do so to increase their competitiveness.
Coca-Cola believes that it has a social responsibility to the environment. It is aware that
climate change is real and as a business it has to commit its resources and time to curb it. To
reduce carbon footprint, the company collaborates with its suppliers. Its supply chain is
determined to reduce emissions. In the supply chain, the packaging, ingredients, distributing and
manufacturing are some of the areas that the company is focused on lowering its carbon
footprint. (Ghosh, & Shah,2015), inform that addressing green supply chain initiatives and
sharing contracts with the supply chain team that undertake green initiatives is essential to a
business dedicated to eliminating carbon footprint. Besides, these authors assert that to eradicate
carbon footprint, the organization has to redesign its products. This is precisely, what Coca-Cola
is doing. It is engaging suppliers that are practicing sustainable agriculture and able to provide
them with raw material that is environmentally friendly (The Coca-Cola Company 2017 Climate
Update, 2018).In details, the company asserts that they are increasing their climate resilience and
dedicated to mitigating impacts on climate change on their business. In essence, the focus on
reducing carbon footprint is both environmental and economic problem. As a business it believes
that it has an environmental SR and this actualized through reducing environmental footprint.
This is also an economic issue that is of concern to the corporate governance because it

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determines competitiveness. In essence, the entity is leveraging its carbon footprint reduction to
boost its sales and corporate image.
Giving back is a social responsibility of Coca-Cola to the community. Since its founding
in 1886, we are told that they have built a giving back legacy. Though, its foundation was
formed in 1984, the company started a global philanthropic arm (The Coca-Cola Company 2017
Climate Update, 2018). Since the inception of the foundation, the organization has continued to
participate in charitable activities without any discrimination. The company spends one percent
of its annual operating income on philanthropic programs. In its philanthropic grants, it
prioritizes water, community and women well-being. The Giving Back program is an extensive
one, and it plays a crucial role in changing the lives of the communities. In areas hit by disasters
like hurricane, Coca-Cola has been chipping in to meet its charitable obligations to communities
in need.
According to Powell, (2018) corporate philanthropy is not just done by business blindly,
but it is a business strategy that aims at improving the financial interests of stakeholders. Giving
back program is, therefore, one that aims at influencing policymakers and builds trust with
communities or public. For instance, empowering women and supporting other charitable
activities create an impression that firm is consumer-centric. Besides, through corporate
philanthropy, this multinational industry is boosting its brand across all its market segments. It is
on this basis that this paper argues that Coca-Cola is one company that understands that social
responsibility is strength and one way to maintain profits through competitiveness. Herrera,
(2015) believes that organizations that institutionalize sustainability, and social responsibility

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gain competitive advantage. Thus the organization has a competitive advantage, because, since
its founding in 1884, it has believed that SR is core to its operations.
Application of theory
Stakeholder theory applies to the several actions the industry is taking to meet its
environmental and social obligation. The stakeholder theory addresses the morals as well as
values that the organization needs in its management (Jones et al, 2017). The theory is pegged on
organizational management and business ethics, where it asserts that the organization needs to
act morally and ethically in all its activities. The theory explains that the company has a social
responsibility to all its stakeholders like customers, community, employees among others. Based
on this principle, it is plausible that Coca-Cola runs its giving back and reduction in carbon
footprint because that is what is ethically required of it. By supporting women and creating
charitable programs the company is merely meeting its obligation to the external stakeholders
like the community. According to (Jensen, 2017), it is a corporate function to meet its social
responsibility, objectively to change the behaviors of stakeholders toward the organization. This
is to mention that the firm is responsible to the communities it serves and the environment in
which it operates, to maximize value or competitive advantage. Besides, (Hörisch et al, 2014),
found that there is a relationship between the business owners’ theory and sustainability
management in that it helps the organization through their shareholders engagement in
sustainable activities. Hence, Coca-Cola’s commitment to the reduction of carbon footprints is
one that engages stakeholders to focus on sustainable activities to keep the environment safe and
healthy.

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The actions of the firm can also be linked to agency theory. This theory looks into the
problems a business is likely to face with its agents (Shi et al, 2017). The business has principals,
who are executives and business agents. Agency relationship is likely to be problematic, and it is
upon the executives of the company to see how to resolve differences. For instance, it is expected
to have a frosty relationship with its shareholders, if it fails to make profits for them
shareholders. Shareholders feel comfortable and confident of businesses that are profitable. Since
the shareholders are interested in profits, it has been a responsibility of Coca-Cola to strike a
balance between its investor interests and other external stakeholders like the community.
(Bosse, & Phillips, 2016) noted that agency theory has bounded self-interests, but the business
has to balance them. Thus, this industry has been able to adjust the interests of its shareholders
and those of communities or customers, to stay competitive and more profitable. It was indicated
by (Jensen, 2017), that businesses use social responsibility to expand its market. Due to that, it is
apparent that Coca-Cola has been pursuing its social responsibility to gain a competitive
advantage, which boosts its profits and return on investments, which are extended to the
investors. Hence, the agency relationship of the organization is sustainable, because of the strong
strategies.
Personal Opinion
In my view, Coca-Cola has been able to reduce carbon footprint and its giving back
initiative is effective. Across the world, there is no any other beverage company that is
developed and successful to such a level. This could be attributable to its commitment to
leveraging social responsibility. However, the company has not achieved significantly in

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reducing carbon footprint, but according to its sustainability report of 2017, it would have
improved its packaging and further made its bottles recyclable.
Conclusion
The commitment of Coca-Cola to its social responsibility is proof that the company is not
just investor-centric, but looks at its duties from a broader perspective. From its 2017
sustainability article, is focused on ensuring that it fulfills its social responsibilities, because
failure to do so, affects their business performance. In essence, today the businesses rely on the
social responsibility to boost competitive advantage. All in all, social responsibility is an issue of
concern in corporate governance. Managers are in a realization that to be profitable and
competitive; they must make a significant contribution to the community through social
responsibility.

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References
Bosse, D. A., & Phillips, R. A. (2016). Agency theory and bounded self-interest. Academy of
Management Review, 41(2), 276-297.
Ferrero‐Ferrero, I., Fernández‐Izquierdo, M. Á., & Muñoz‐Torres, M. J. (2015). Integrating
sustainability into corporate governance: an empirical study on board diversity. Corporate
Social Responsibility and Environmental Management, 22(4), 193-207.
Ghosh, D., & Shah, J. (2015). Supply chain analysis under green sensitive consumer demand and
cost sharing contract. International Journal of Production Economics, 164, 319-329.
Herrera, M. E. B. (2015). Creating competitive advantage by institutionalizing corporate social
innovation. Journal of Business Research, 68(7), 1468-1474.
Hörisch, J., Freeman, R. E., & Schaltegger, S. (2014). Applying stakeholder theory in
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Jensen, M. C. (2017). Value maximisation, stakeholder theory and the corporate objective
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Jones, T. M., Wicks, A. C., & Freeman, R. E. (2017). Stakeholder theory: The state of the art.
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Powell, D. (2018). The ‘will to give’: corporations, philanthropy and schools. Journal of
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Shi, W., Connelly, B. L., & Hoskisson, R. E. (2017). External corporate governance and
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The Coca-Cola Company 2017 Climate Update: (2018).Doing Business the Right Way and
Driving Collaboration on Climate. Retrieved from:
https://www.coca-colacompany.com/stories/2017-climate
The Coca-Cola Company. 2017 Sustainability Report (2017). Retrieved from:
https://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/
2018/2017-Sustainability-Report-The-Coca-Cola-Company.pdf
The Coca-Cola Company (2017). 2016 Sustainability Report: Giving Back. Retrieved from:
https://www.coca-colacompany.com/stories/2016-giving-back