Why Pepsi and Coca-Cola are Model Corporations

In the age of corporate social responsibility, businesses are increasingly redefining success to involve more than just turning a profit. Today, even in the context of a global economic downturn and historically high rates of unemployment, many of America’s biggest corporations are keenly aware that giving back to the community can yield many dividends down the road.

But the biggest contributions that corporate America can make are beyond the bounds of its philanthropic foundations and spending power. By integrating key social goals into their core business models, multinationals and the supply chains they operate have more power to influence positive change than nearly any other institution on this planet.

Two of the world’s largest beverage companies, Pepsi and Coca-Cola, are powerful examples of these possibilities. In Mexico, PepsiCo CEO Indra Nooyi built a partnership with the Inter-American Development Bank to provide financing for local farmers to produce sunflower oil, creating jobs for thousands of agricultural workers. Pepsi currently purchases the oil at market rates to produce its own products for the Mexican market. The result: Goods can be brought to consumers without the need for expensive long-distance transportation networks, thereby eliminating greenhouse gas emissions in the process. These types of mutually beneficial public-private partnerships are the hallmark of what businesses can achieve if they begin to recognize the possibilities of investing beyond the traditional bottom line.

Not to be outdone, Coca-Cola CEO Muhtar Kent committed his company to empowering five million women entrepreneurs by 2020. With massive supply chains that deliver products to over 20 million retailers every week, Coca-Cola uses small micro-distribution centers across Africa and Asia since it cannot reach all of these retailers through its own vehicles. By providing women access to financing, business training, and mentorships, female entrepreneurs have come to own the majority of these centers in many regions, gaining economic empowerment and all of its associated benefits. Coca-Cola earns a constant return on its investment since, according to Kent, the women-owned centers are often more effective and employ a greater number of people.

The greatest challenge with these types of programs is shifting corporate thinking beyond next quarter’s balance sheet and towards a longer time horizon. Facing pressures from shareholders, risk-averse boards of directors, and profit-oriented bonus packages, many business leaders are hesitant to invest short-term capital in the pursuit of long-term social value, even when it comes with a payoff. For every Indra Nooyi and Muthar Kent, there are still countless others that continue to ignore the environmental and social impacts of their businesses; or perhaps even worse, those who sincerely believe that writing a check or starting a foundation can sustainably offset those externalities.

The greatest philanthropic power of American business today is the potential for integrating social value directly into the corporate balance sheet. For innovative companies willing to take the risk, doing well doesn’t have to be a trade off with doing right.

Photo Credit: Joris-Jan