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Coke's dilemma

The beverage giant tries to grow while making carbon cuts the real thing.

By Marc Gunther, senior writer
October 31, 2008: 9:11 AM ET

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Coca-Cola has reduced water use and improved its energy efficiency but faces a challenge in maintaining a zero growth rate in greenhouse gas emissions.

(Fortune) -- Can a company grow and shrink at the same time?

That's what Coca-Cola is trying to do. Like every big company, Coke wants to grow its revenues and profits. It also wants to reduce its environmental footprint. Is this possible?

The answer is probably not, at least not right now.

That's not because Coke isn't trying. Indeed, few companies take environmental issues more seriously than Coca-Cola (KO, Fortune 500). I'm an admirer of the company's chairman, Neville Isdell, and its sustainability guru, Jeff Seabright. (See Coke: The green thing.) The trouble is that the more stuff that Coke sells, the more it is likely to emit, pollute and consume natural resources.

That, in any event, is my takeaway from Thursday's announcement from Coca-Cola and the World Wildlife Fund that they are extending a partnership announced last year and setting new targets aimed at reducing water usage and greenhouse gas emissions throughout Coke's sprawling, global system. Coke beverages - its $1 billion brands include Coke, Diet Coke, Fanta, Sprite, Coca-Cola Zero, Vitaminwater, Powerade, Minute Maid and Georgia Coffee (a coffee-flavored drink marketed in Asia) - are sold in more than 200 countries.

As you may know, Coke products are produced and distributed by dozens independent bottlers, so the seemingly simple task of tracking the system's global environmental footprint isn't simple at all. Getting all those bottlers to line up behind promises to use resources more efficiently can't be easy, either.

Seen in that light, Coke's progress to date and its new targets deserve praise. The company improved its water efficiency by 20% from 2002 to 2007, and it aims to use water even more efficiently by 2012.

"Water is at the core of what we do," Seabright says. Its energy use ratio, another efficiency measure, improved by 19% between 2002 and 2007. These efficiency measures, in essence, means that Coke is using a lot less water and a lot less energy and emitting significantly fewer greenhouse gases per unit of product sold. That's no small accomplishment, but you need to understand that we are talking about eco-efficiency here.

In absolute terms, Coca-Cola cut its water usage by 2% between 2002 and 2007, but it expects to use more water in 2012 than it does now because its business is growing, particularly outside of the U.S. Similarly, Coca-Cola's greenhouse gas emissions actually grew between 2002 and 2007. Going forward, it aims to keep emissions from its manufacturing operations flat between its baseline year of 2004 and 2015. (That's just manufacturing; the company is working separately on refrigeration, packaging and transportation, which aren't part of the targets announced Thursday.)

You see the problem, right? Coke is conceding that it can't grow (the business) and shrink (its footprint) at the same time. I say this not to point a finger at Coke, but to point to the limits of what any company going "green" can do.

If Coke manages to stabilize its water use and carbon emissions, that would be a major accomplishment. But when it comes to greenhouse gas emissions, scientists say we need to first stabilize them and then reduce them dramatically over the next 30 to 40 years.

Put another way, the earth's atmosphere is indifferent to eco-efficiency.

To its credit, Coca-Cola is working on a variety of other projects that could bring about absolute reductions in energy and water usage and emissions. With other non-governmental organizations and corporate partners, it is trying to eliminate HFCs and HCFCs, which are potent greenhouse gases, from the refrigeration industry.

It has a venture arm that is investing in small green companies like RecycleBank and WeatherTrak, which adjusts irrigation systems to changing weather conditions. It is working with WWF on its supply chain, starting with sugar cane, to encourage farmers to increase their output while using fewer inputs of water, fertilizer, pesticides, etc. All important stuff. You can read a lot more about what Coca-Cola is doing in its new 2008 sustainability report.

I do wonder about WWF's role in the partnership, though. Coca-Cola has agreed to pay nearly $24 million over five years to WWF, in part because WWF is helping the company to become more sustainable. But by taking the money, is WWF giving up an opportunity to push Coke harder?

Judge for yourself. Here's what Suzanne Apple, WWF's vice president & managing director of business and industry, said when I asked her whether Coke's efficiency targets go far enough: "Targets like these are very much consistent with our mission and our conservation priorities...We are pragmatic in our approach. We are pushing companies to set ambitious targets. But they have to balance their economic interests and their environmental interests."

Well, sure. But it sounds to me like WFF is also balancing its economic and environmental interests. While I'm all in favor of corporate-NGO partnerships, I'd feel better if big NGOs didn't take big grants from big companies, even good ones like Coke. Then they would only have one client to worry about - the earth. To top of page

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