Inside Coca-Cola

by Neville Isdell

  The old-fashioned environmental community looked at corporations more as enemies than partners, said Carter. Under the new model, that is changing. Carter himself has an MBA from Harvard and formerly worked for big corporations such as Proctor & Gamble. He understands that there are business leaders who also believe in protecting the planet and are incorporating steps to do so in their business models. “I’ve always said that these partnerships really don’t work unless I can look the CEO in the eye and know that they are committed at the highest levels,” said Carter.

  Corporate efforts on behalf of the environment are producing real results. In late 2010, the Consumer Goods Forum, cochaired by Muhtar, pledged to begin phasing out hydrofluorocarbon refrigerants as of 2015 and to achieve zero net deforestation by 2020, all in an effort to fight climate change. The forum’s members include the world’s largest corporations, among them Walmart, General Mills, and Johnson & Johnson.

  In the long term, corporations will benefit from these efforts because they will become increasingly efficient, developing methods and technology that will allow them to consume less of the world’s natural resources, which are becoming increasingly scarce, Carter said.

  “We have a finite planet,” Carter said. “We have to meet the needs of a population that is going to grow to nine billion people. Something has to give. A big part of that is becoming more efficient.”

  NGOs, while partnering with corporations, are by no means their shills, Carter explained. They reserve the right to publicly complain when companies don’t deliver on their promises. NGOs, like corporations, have to preserve the credibility of their own brands. The NGOs ensure that corporations keep their side of the bargain. At the same time, NGOs realize that corporations are not philanthropic entities, and must make a profit if they are to remain engaged in these global efforts.

  “We want the good guys to prosper,” said Carter.

  The partnerships are not always easy to maintain. Organizations are run by humans, and all the normal human conflicts, egos, and pride come into play.

  My first detailed involvement with an NGO which endorsed the many germinal thoughts I had about business and society working together was when the Coca-Cola Company asked me in 1995 to join the Prince of Wales International Business Leaders Forum. It was founded in Charleston, South Carolina, in 1990, shortly after the Exxon Valdez oil spill. The organization was inspired by the vision of Prince Charles together with the visionary Robert Davies, who led the organization for many years and was to become a good friend of mine. IBLF was a new model and a breakout model. It promotes corporate profitability and community sustainability at the same time, acknowledging that the two do not have to conflict.

  I left the IBLF board when I retired the first time in 2001 but returned after much persuasion to chair the board in 2006 after I had returned to Coca-Cola. Sadly, Robert Davies fell ill and died the following year. What had been for me a role of supporting a dynamic leader and attending two board meetings a year—one with Prince Charles—became a very stressful experience, as I was then Chairman and CEO of the Coca-Cola Company.

  Robert had presented to the board a new logo design which reduced the profile of the words “Prince of Wales.” He’d convinced us that the change came with the blessing of the prince and that he was happy for the IBLF to start taking a more independent route. I was later told by another participant in a meeting with the prince that this was not, in fact, the case. At the same time, the private secretary of the prince had begun an exercise in examining the many disparate organizations the prince had founded, not only to allow the prince to focus more closely on his philanthropic enterprises, but also to improve the profile of the extensive interests and commitment he displayed. I attended a few workshops with leaders of the other organizations and an effective model was developing.

  I was shocked, however, to receive a letter from the prince saying he wanted to merge the IBLF with Business in the Community, an organization he’d founded in the United Kingdom that promotes corporate social responsibility. The IBLF had been split off from Business in the Community when it was decided they were very different organizations. They still were very different. IBLF operates solely outside the UK in developing markets and has a somewhat rural focus, working with major multinational companies. Business in the Community was UK based and mostly urban, with a medium-sized industry base. One of the issues with merging the groups was that some of the UK-based companies were members of both organizations; a merger would obviously significantly reduce revenues since those companies would not pay the fees twice.

  The prince was determined to make the merger happen. In the meeting I had with him and a further one with the head of the board of trustees of Business in the Community, Sir Stuart Rose, then the executive chairman of retailer Marks & Spencer, I achieved an agreement to have a major consulting firm evaluate the proposal. The study clearly showed that the financial risks were too great and that the original logic for separate organizations still held. The operating head of Business in the Community, who would ultimately run the merged organization, told me he could not disagree with the study but still believed that the merger should take place. It was clear the prince’s office was applying a great deal of pressure on him to complete what I believed was, in fact, a takeover. I thought, however, that I had the support of Sir Stuart, who endorsed the study in a meeting at his office and stated that he would support the recommendation. A week later, Sir Stuart phoned me to say he had changed his mind.

  There was additional tension with the prince: His office opposed the person selected by the IBLF search committee to succeed Robert Davies; I endorsed the candidate. The IBLF board went ahead and appointed him anyway, despite the prince’s objection, which was fully within their rights since the trustees had complete oversight of the charity and not the prince. However, it had been customary for the prince to give his nod on major decisions. As we disagreed this time, it made for another unhappy meeting with Prince Charles. During my last formal meeting with the prince, he told me his “wishes” were that the merger take place. I told him my board of trustees could not vote for it. There was a rather chilly and formal farewell and a few weeks later a letter arrived in which Prince Charles informed me he was withdrawing his patronage. We were now the International Leaders Business Forum; no Prince of Wales. This, I believe in retrospect, is where Robert Davies was headed, but I would not have supported him as I still favored Prince Charles’s involvement. My opposition to the merger, as I tried to point out to the prince, was something I believed passionately was in his interest. For me to have agreed would have been very easy. With all that I had on my plate at Coca-Cola, one less involvement would have been welcomed. Opposing the merger also ate up a large amount of my time and was an unwelcome diversion.

  The prince, in my view, is very well meaning and while I do not agree with him on every issue, he continues to be seen as being ahead of his time particularly on environmental issues. However, he is a future king, very strong willed, and very used to getting his own way. Those surrounding him are evaluated on how they meet his needs and in my view do not always challenge him enough. The old ways of the court still hold. I suppose I should also say that I have a stubborn streak myself, so ours was a relationship in which two wills collided. Needless to say, my Christmas card from the prince is no more.

  I take no pleasure in this story in that the struggle to keep the identity of the IBLF was difficult. Some members left as a result of the removal of the royal patronage but the situation has since stabilized. In 2011 I handed over the leadership to Mark Foster, who works in London; I’d found it difficult to manage the organization from the distance of Barbados. In retrospect, the biggest and most stressful point in my tenure at IBLF—which really complicated everything—was that Robert Davies’s replacement, whom I supported, did not work out. On that issue, the prince had been right and I had been wrong.

  What’s the message from the previous story? In high-profile, high-stakes
partnerships, conflicts come with the territory, and you must be able to get through them without jeopardizing the greater mission.

  * * *

  Often, the partnerships that address climate change and other broad issues are large and extensive. Then there are the much smaller—but also very important—efforts that connect companies, NGOs, and government, many of which do not involve money at all.

  Just as NGOs and governments have large toolboxes of knowledge and expertise, so do corporations. In the marriage that is Connected Capitalism, these assets should be shared by the partners. Companies can help nonprofits and smaller community-based businesses with technology, supply-chain management, marketing and distribution, and employee training.

  One of the most interesting cases illustrating this involves CARE, the Atlanta-based international relief organization, and United Parcel Service Inc.

  For years, UPS donated cash to CARE, a passive form of help when you stop and realize that CARE distributes relief supplies around the world, and UPS, which operates in more than two hundred countries, is the world’s largest package delivery company. In 2007, a CARE executive, Rigoberto Giron, asked UPS to help the agency with logistics. Giron has a business background and understands the value of what UPS could offer. After all, NGOs, just like corporations, have to remain efficient and competitive. They are competing for donors’ dollars, just as Coca-Cola is competing for the dollars of consumers.

  Two UPS executives, Dale Herzog and Jim Coughlan, started the partnership by visiting CARE offices in Honduras, Darfur, and Indonesia. CARE allowed UPS executives full access to its operations, an unusual openness that at the same time drew the two organizations closer together. Herzog discovered that CARE had no computerized database of its supplies, which were stored all over the world. Instead, each CARE office maintained its own inventory list on spreadsheets which were located on the hard drives of individual computers. Herzog also found that CARE needed to expand the scope of its centralized purchasing system for supplies such as tents and bottled water. The agency had no program for prepositioning those supplies throughout the world so that they could be transported more easily to disaster sites. More troubling to Herzog was the fact that CARE had very little unrestricted funding that could be used, not for a particular disaster such as an earthquake in Haiti but to increase the company’s long-term efficiency. For example, CARE had little money to buy supplies at volume discounts, long before a disaster hit, which would have lowered costs tremendously since prices of supplies always jump immediately following a catastrophe. Donors, however, normally want their money sent directly to the disaster they are watching unfold on their television screens. It’s harder to raise funds for longer-term projects.

  With help from Aidmatrix, a Texas-based NGO, Herzog and CARE developed a computer system that would allow it to track supplies worldwide in real time. UPS has also donated money to Aidmatrix. CARE’s new database was tested in Sri Lanka and Haiti and is now being rolled out worldwide.

  Herzog and CARE are expanding the centralized purchasing system. “Why would I have seventy countries buying fifteen Toyotas each when you could buy all of them at one time and maybe get a bigger discount?” asked Herzog.

  Interestingly, as CARE and UPS worked together in a partnership that was not centered around money, the relationship strengthened and UPS increased its cash donation from $200,000 a year to $1 million. That is the power of engagement. Some of the extra dollars will go toward the prepositioning of relief supplies deemed so important but at the same time so difficult to fund through donor dollars.

  How does UPS benefit from its connections with CARE? It is now deeply involved in the humanitarian relief arena, which is constantly shipping supplies worldwide. “There are billions of dollars of freight moved and maybe 10 percent of the shipping is donated,” said Herzog. “There is a corporate citizenship within UPS that just wants to do what’s right. We can help people in ways that many people can’t. There’s also a commercial aspect of this. It’s a large space that UPS has not been in.”

  It is reasonable to expect that as UPS builds its reputation in the humanitarian relief community through its work with CARE that UPS’s profits will also increase. And its profits are being used to help fund CARE. The relationship is circular, a wonderful example of Connected Capitalism. And like all successful partnerships, it continues to grow.

  Currently, the partners are working on a paperless distribution system for relief supplies. When the UPS delivery man or woman knocks on your door with a package, you sign an electronic keypad, not a piece of paper. It saves an enormous amount of time, money, and paper. UPS and CARE have tested similar devices in Haiti and Bangladesh for the delivery of relief supplies.

  “It’s a natural evolution of efficiency,” said Herzog. “We are bringing good, sound business practices into an area that in many cases is devoid of those.”

  Step back for a moment and consider what is happening with this partnership. The giant corporation is becoming more like an NGO. The NGO is becoming more like a corporation. Both are better organizations from the connection.

  The dollars CARE saves through efficiency can be used to expand its services. At the same time, donors can be assured that CARE is using its money effectively, with help from one of the world’s most efficient corporations. This interrelationship illustrates how we are evolving from an atmosphere of extreme distrust between corporations and NGOs to a relationship that is mutually beneficial, one in which there are fewer and fewer barriers.

  One fringe benefit is the effect on employee morale. It’s invigorating for corporate executives to donate their time and expertise to NGOS. “Everybody wants my job,” said Herzog, laughing. Partnerships between corporations and NGOs indeed help companies recruit the best and brightest. No longer does the idealistic college graduate necessarily have to choose between a career in business or one at an NGO. The lines are blurring and rightly so.

  Corporations want to help and NGOs might be surprised at the enthusiasm these partnerships generate within the business community. Derrick Kayongo, a CARE executive originally from Uganda, was shocked when he came to the United States and saw that soap in hotel rooms was tossed into the trash each day by the cleaning crews, even though the expensive bars were only slightly used. In Uganda, soap was a scarce commodity, yet hotels in the U.S. were tossing tons of it into the garbage daily. Kayongo spoke before a group of Atlanta hotel executives and asked them to donate their slightly used soap to a nonprofit group he established called the Global Soap Project, which would recycle it and ship it to Africa.

  The response was overwhelming. Hotels realized they could save money on landfill costs by recycling the soap instead of discarding it. At the same time they could engage their employees in a program to help reduce disease in the developing world. The Soap Project has now collected fifty tons of used soap from all over the U.S., not just Atlanta. After reading about the project in a news story, one Boston hotel shipped a ton of soap to Atlanta. The Soap Project has partnered with other NGOs, such as Medshare, to ship the soap to Africa, Haiti, and other places where soap is in short supply. A Virginia for-profit company, Relief Cargo, paid $2,700 for one 1,400-pound shipment of soap to Kenya.

  The Soap Project is also exploring social entrepreneurship opportunities, possibly to fund its operations in part by selling the recycled soap to governments for use in jails.

  Social entrepreneurship is another rapidly emerging field that uses profit to help solve problems in the developing world. These companies are investing in microfinance and the development of small companies in India and other countries. One such company is d.light. Born in a Stanford University classroom, the company produces low-cost solar-powered lanterns, marketing the products to the hundreds of millions of people in the world without electricity. The benefits are wide-ranging and obvious: The lights are safer than kerosene lanterns, thus reducing the risk of fire and toxic fumes. There is a strong educational component as well: Children ha
ve more time to study at night. Poultry farmers are even using the solar lights to increase egg production. D.light is very much a for-profit company, funded in part by venture capitalists in the U.S., but it also reaches out to NGOs for donations to help those who can’t afford to buy the lights. We are seeing these types of business interactions all over the world.

  Another Indian startup, PharmaSecure, has developed a system for battling counterfeit prescription drugs, a huge and dangerous problem in India. This company, founded by a Dartmouth College graduate, Nathan Sigworth, and also funded by venture capitalists, created a system that allows pharmaceutical companies to include a unique code with each prescription. The customer can then use their mobile phone to text that code to a phone number printed next to the code. The customer receives a reply text message to let them know whether the medicine is authentic. The system not only saves lives and reduces counterfeiting but provides pharmaceutical companies with a way to distinguish their brands from competitors.

  Capitalism, of course, has its faults. There are good corporations and bad ones, just as there are good governments and corrupt ones, effective NGOs and ineffective ones. Yet it’s capitalism that is allowing companies like PharmaSecure and d.light to actually change the developing world for the better, in real, tangible ways. These companies sometimes work with the help of NGOs, but the most powerful engine of the change they strive to effect is capitalism. Why capitalism? Why did these entrepreneurs embrace the for-profit model rather than simply create their own NGOs and raise donations from the corporate world for their worthy causes?

  Dorcas Cheng-Tozun, a spokeswoman for d.light, summarizes the answer in two words: sustainability and scalability. Donations come and go, but if a company is well-run, profits will be always be there and will sustain the effort over the long term. With 1.6 billion people in the world living without electricity, private investment capital made it much faster for d.light to attack the problem broadly and quickly, Cheng-Tozun said.