Evaluating a company's impact (the case of Coca-Cola)

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You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

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THIS WEEK’S COMPANY

Coca-Cola

This week we dive deep into Coca-Cola’s environmental and social impact.

The Coca-Cola Company is a total beverage company with products sold in more than 200 countries and territories. The company owns more than 500 brands, including Fanta, Sprite, Minute Maid, Powerade, and more.

Some interesting facts:

• Coca-Cola is one of the most recognized brands in the world, and its logo is recognized by 94% of the global population, according to surveys.

• The company played a significant role in shaping the modern image of Santa Claus. In the 1930s, its advertisements depicted Santa as a jolly, plump man in a red suit, which became the popular image we know today.

COMPANY’S IMPACT

Coca-Cola’s overall impact score

Coca-Cola has a general impact score of -1.96 (on a scale from -5 to +5). Its impact is spread across 10 UN Sustainable Development Goals (SDGs) and 11 topics, split between positive and negative analyses.

In the socio-economic sphere,

Coca-Cola delivers approximately 2.2 billion servings daily worldwide, making its products an integral part of people’s daily lives and a source of happiness for billions of people. The company offers 3,900 products ranging from sodas to water to energy drinks and has a network of 30 million retail outlets and 200 bottling partners. It employs roughly 79,000 people (2024) and provides salaries above the industry and country average. It has also achieved gender parity (with over 40% women inclusion as per ILO standards) at all levels, except for its senior leadership roles. The company also supports millions of farmers in its supply chain, and it has impacted more than 7 million people in 41 African countries by providing them access to clean water, sanitation, and hygiene through financing projects that improve water quality and protect critical local watersheds. However, Coca-Cola derives about 64% of its sales from sugary soft drinks, which have been associated with obesity, cardiovascular diseases, cancers, etc., thus contributing to the global disease burden.

Environmentally,

Coca-Cola emits over 64 million tonnes of CO₂ equivalent annually (2023), equal to the emissions of over 12 million homes’ electricity use for a year. The company also withdraws approximately 308.7 million m³ of water annually, 20% in high or extremely high water-stressed areas. Additionally, it generates approximately 1.75 million tonnes of waste (recovers 90% of it) and uses almost 6 million tonnes of packaging (mainly PET bottles), thus contributing to plastic waste, as 91% of plastics worldwide end up in landfills. It also sources about 6.5 million tonnes of raw materials (sugarcane, timber, soy, etc.), which require hundreds of thousands of hectares of land for cultivation, thus contributing to land degradation.

_{*The impact score is current as of July 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is Coca-Cola’s ESG rating?

For comparison, Coca-Cola has an AAA rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Coca-Cola’s impact scores by SDG

Now, back to Coca-Cola’s impact score:

Positively (and by weight), the company scores the highest in Partnership for the Goals SDG (+3.34), followed by No Poverty (+3.24), and Gender Equality (+1.44).

Negatively, the company scores the worst in Good Health and Well-being SDG (-1.61), followed by Responsible Consumption and Production (-2.75), and Climate Action (-3.49).

*the analysis takes into account the weight of the SDGs

Coca-Cola also positively and negatively influences two SDGs (3 - Good Health and Well-being and 8 - Decent Work and Economic Growth). For example, it positively impacts Good Health and Well-being by providing enjoyment to billions of people every day through its products. However, on the downside, 64% of its sales come from unhealthy products, which negatively affect health.

CONCLUSION

Final words

So, Coca-Cola’s key social and environmental impact lies in …

its role in providing drinks that are a source of happiness for billions of people in over 200 countries. The company also provides thousands of jobs, helps millions of farmers in its supply chain, impacts millions of people through its initiatives, and pays billions in taxes.

On the contrary, Coca-Cola has a negative impact through its massive emissions, water use, and waste production. It also derives most of its sales from unhealthy products, thus contributing to obesity, cardiovascular diseases, cancers, and so on.

Its negative -1.96 score is a balance of all of these factors and topics.

If you’d like to delve deeper into Coca-Cola’s impact, you can explore it here.

Next week, we will analyze the impact of the consumer goods giant, Unilever. 🟢

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]