I. Introduction: Cape Town’s Crisis Exposes Coca-Cola’s Shortcomings

While Coca-Cola portrays itself as a ‘water neutrality’ leader, its failures during Cape Town’s water crisis exemplify the changing nature of corporate human rights obligations in the face of climate change. Between 2015 and 2018, drought conditions plunged Cape Town into a crisis, leading to increasingly strict household water restrictions and depriving families of their constitutionally guaranteed water allowance.Footnote ¹ However, in December 2017, when Cape Town officials called for a 45% reduction in commercial water use, Coca-Cola’s local independent bottler – Coca-Cola Peninsula Beverages (CCPB) – refused to reduce its 44 million-litre monthly withdrawals.Footnote ² The city subjected households to water restrictions and price increases up to 556%, while businesses only saw a 104% price increase with no consumption restrictions.Footnote ³

By February 2018, the city limited water consumption to 50 litres per person per day,Footnote ⁴ and a coalition of over 70 community groups called for CCPB to halve its production for three months or distribute free water to Cape Town’s poorest communities.Footnote ⁵ CCPB refused. Instead, CCPB merely temporarily exempted bottled water sold in the Western Cape from planned nationwide price increases.Footnote ⁶

As average rainfall returned in June 2018, Cape Town narrowly avoided disaster; yet the crisis had already devastated Cape Town’s economy – especially the agriculture sector, in which over 30,000 farmworkers lost their jobs.Footnote ⁷ Furthermore, the crisis left many poor households with outstanding debts and fines to pay for years after the water crisis ended.Footnote ⁸ Meanwhile, the companies whose unchecked water use exacerbated the crisis faced no notable legal or financial consequences.

II. The Duty of Businesses to Respect the Right to Water Amid a Changing Climate

The right to water has historically sparked debate on the international stage – often with companies arguing that water is an economic good rather than a human right – but numerous United Nations bodies have clearly articulated and subsequently affirmed the existence of a right to water.Footnote ⁹ In 2010, the UN General Assembly recognized ‘the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights’.Footnote ¹⁰ In response to this, the CEO Water Mandate – an initiative of the UN Global Compact – expressed concern over the uncertainty of business responsibilities with respect to water,Footnote ¹¹ and the World Economic Forum established the Water Resource Group, whose purpose was to aggressively pursue corporate interests with respect to water resources.Footnote ¹² Coca-Cola boasts its founding member status with both the CEO Water Mandate and the Water Resource Group, as well as its partnerships with organizations such as the World Wildlife Fund, Water for People, and WaterAid, as evidence of its self-proclaimed leadership on water issues.Footnote ¹³ However, its performance during the Cape Town water crisis exposed its broader non-compliance with the UN Guiding Principles on Business and Human Rights (UNGPs) with respect to the right to water.

Coca-Cola has often come under fire globally for completely depleting the water supplies of water-scarce areas, especially in India.Footnote ¹⁴ While much of South Africa’s climate is arid, Cape Town’s is Mediterranean,Footnote ¹⁵ with its mountains receiving about five times as much rainfall as Los Angeles.Footnote ¹⁶ Although signs pointed to the likelihood of increasingly severe and long-lasting droughts in the area, Cape Town’s climate does not pose as substantial of a water risk as dry regions of India, for example.Footnote ¹⁷ Because of this, the company might argue that the Cape Town water crisis would not trigger an obligation to decrease water intake. However, as Principle 13 indicates, this duty to respect human rights requires that companies ‘avoid causing or contributing to adverse human rights impacts’,Footnote ¹⁸ meaning Coca-Cola was obligated to decrease its water consumption in order to avoid contributing to adverse impacts on the right to water.

Coca-Cola’s Human Rights Policy states that the company engages with communities on human rights matters that are important to them, including access to water.Footnote ¹⁹ The policy also states that Coca-Cola respects the human need for sustainable water supplies, assesses local water risks, and consults with relevant stakeholders to develop water stress solutions.Footnote ²⁰ There are two key shortcomings with this approach. First, engaging with the community does not indicate a policy of receiving consent from the community, nor does it indicate that Coca-Cola has a policy of choosing not to site new plants in high water risk areas; on the contrary, at least 250 of its facilities are currently operating in high water risk areas.Footnote ²¹ Second, a policy of community consultation does not protect against unforeseen or emergency situations, such as the Cape Town drought, which will only increase in frequency as the climate crisis worsens. This means that this siting policy – even if it did include community consent and a policy of not siting plants in arid areas – would still fail to protect the right to water in a water crisis like Cape Town’s if not paired with a policy on curtailing water withdrawals during emergencies. In contrast, Coca-Cola’s competitor PepsiCo takes a mitigation-oriented approach. PepsiCo consults similar instruments to Coca-Cola’s in generating a water risk assessment but diverges from Coca-Cola in setting mitigation requirements – including water efficiency improvements and local watershed replenishment – for sites receiving a score within the high water risk range.Footnote ²²

Coca-Cola pledged to become ‘water neutral’ in 2007, but it quickly became clear that the initiative was at worst greenwashing and at best ineffective.Footnote ²³ In 2019, Coca-Cola claimed that 160% of the water used in its finished beverages was replaced in nature and communities.Footnote ²⁴ The company’s depiction of water neutrality suggests that it is both an action to prevent adverse impacts on the right to water and a remedial measure – replacing water that the company has taken. In reality, it is neither.

Even though human rights scholars are already denouncing this approach in the greenhouse gas emissions context,Footnote ²⁵ the concept of offsetting makes even less sense as a mitigating or remedial tool in the context of water: there is no global benefit that arises from Coca-Cola using water offsets to decrease its water footprint.Footnote ²⁶ Even a discussion paper put out by the CEO Water Mandate, of which Coca-Cola is a member, clearly states, ‘a company that does not respect the right of access to water in one community where it operates cannot compensate for that failure by having an extensive philanthropic/CSR program elsewhere.’Footnote ²⁷

Coca-Cola’s water neutrality effort is not a mitigation measure because it is temporally delayed, and it is not a remedial measure because it does not replenish local water resources. For example, Coca-Cola reported that its foundation donated US$150,000 to clear 64 hectares of invasive plants in the Western Cape – action which was projected to replenish around 10 million litres of water to an aquifer by December 2019.Footnote ²⁸ Not only was the one-time replenishment less than a quarter of the company’s monthly water consumption, but the December 2019 target did nothing to mitigate the acute impact of Coca-Cola’s large water withdrawals at the height of the crisis.

Furthermore, Coca-Cola’s approach to water neutrality and water stewardship is not a local one – meaning that they do not replenish water from where they withdraw it.Footnote ²⁹ As one article points out, under Coca-Cola’s water neutrality approach, the company could completely run a vital oasis in a desert dry and then simply put the same amount of water into a rainforest river, like it did under its collaborative watershed program with World Wildlife Fund.Footnote ³⁰ The water Coca-Cola took from Cape Town could be ‘replenished’ in New York, China, Fiji, or in any other corner of the world; this is not a remedy for adverse human rights impacts to which Coca-Cola contributed in Cape Town. PepsiCo, in comparison, has set a goal of replenishing 100% of the water they use for manufacturing in high-risk areas by 2025, and to ensure that the replenishment takes place in the same watershed where the extraction occurred. Footnote ³¹ Of course, PepsiCo’s goal is far from perfect in that it is only addressing high-risk areas and, like Coca-Cola, is not including agricultural water use in its replenishment goals and measurements. However, the decision to replenish the same water sources from which the company extracted water is an important one.

III. Looking Ahead: What Can Other Companies Learn From This?

The example of Coca-Cola in Cape Town poses several interesting issues. First, climate change can render low-risk areas water insecure relatively quickly, as was the case in Cape Town. Researchers from Stanford University and the National Oceanic and Atmospheric Administration determined that the rainfall deficit that led to the Cape Town water crisis was 5.5 times more likely to occur due to anthropogenic climate change, and their results point to ‘a dramatic increase in the risk of meteorological droughts of similar or even more serious magnitude by the end of the 21st century’.Footnote ³² Climate change-induced uncertainty poses significant financial, legal and reputational risks for companies. Coca-Cola has warned its shareholders that increasing demand for water means that the company ‘may incur increasing production costs or face capacity constraints which could adversely affect our profitability or net operating revenues in the long run’.Footnote ³³ While Coca-Cola conducts in-depth due diligence on water security, its decisions on plant siting and consumption levels do not reflect respect for the adverse human rights impacts that are likely to arise. As climate-induced water emergencies become more frequent, as scientists predict they will,Footnote ³⁴ companies must comply with Principle 15’s requirement that they put processes in place to take mitigating actions and provide a remedy when unforeseen circumstances cause a company’s normal operations to contribute to adverse human rights impacts.

Next, while much analysis of the causes of the climate crisis has focused on government mismanagement,Footnote ³⁵ a government’s failure to respect human rights does not relieve companies of their duties to respect human rights. In fact, companies have a duty to push for the government to implement rights-respecting policies. Not only does this comply with the UNGPs, but encouraging legislation that safeguards the right to water in a place like Cape Town provides companies like Coca-Cola more regulatory predictability without fear that they would lose competitive advantage to more scrupulous competitors. Companies can help prepare for the uncertainty of climate change by working in good faith with government actors to ensure that both anticipated and unanticipated climate impacts do not adversely affect human rights.

Finally, although climate change is a global crisis, severe impacts can be highly localized. Water being added to a spring in the United States does not help the citizens of Cape Town have enough water to cook dinner at night. Coca-Cola should follow PepsiCo’s lead in adopting a more localized approach to water replenishment. The same is true for other climate impacts that will adversely affect the human rights to land, food and health. Local impacts require local remedies.

Applying the UNGPs to Coca-Cola’s actions during the Cape Town water crisis illustrates the need for companies to reckon with the reality that ‘business as usual’ may adversely impact human rights in ways that it has never done before. Current corporate human rights policies and climate initiatives fail to recognize impacted communities’ right to climate adaptation, and companies have largely failed to recalibrate their water use policies to meet the increasing threat of sudden and prolonged drought conditions. As the Cape Town water crisis also shows, governments too are unprepared for the uncertainty and that companies must – perhaps more than ever – commit to fulfilling their human rights obligations, even when domestic or local law does not require them to do so.