Corporate Social Responsibility Does Not Avert the Tragedy of the Commons - Case Study: Coca-Cola India

ABSTRACT. "Tragedy of the commons" is a powerful concept to analyze a variety of problems related to environmental sustainability. The commons problem can be solved if individuals behave altruistically. In the business context, this article studies the proposition that corporate social responsibility (CSR) can avert the tragedy of the commons by examining one case study in depth: Coca-Cola's bottling operations in Rajasthan, India. In spite of choosing a context favorable to the proposition, the results indicate that CSR does not avert the tragedy of the commons. To address the major environmental challenges, it is essential to develop regulatory regimes with appropriate incentives and ability to enforce sanctions.JEL Codes: G34; M14; Q56Keywords: corporate social responsibility; tragedy of the commons; common-pool resource; environmental sustainability1. IntroductionIn one of the most cited scientific articles ever written, Garrett Hardin outlined "the tragedy of the commons," a powerful metaphor that the users of a commons are caught in an inevitable process that leads to the destruction of the very resource on which they depend.1 It is now a central concept in human ecology and the study of the environment, and can be used to view a variety of commons related problems, such as population growth, environmental pollution, groundwater basins, forest management, climate change, fishing, wildlife habitats, and traffic congestion. The prediction of the inevitable tragedy assumes that all individuals are inherently selfish. The tragedy of the commons, of course, can be averted if individuals behave altruistically, and voluntarily act in the interests of others in the wider community. Translating this to the business context, the tragedy of the commons can be averted if companies have a corporate social responsibility (CSR) to go beyond making profits and achieve some positive social goals.This article studies the proposition that CSR can avert the tragedy of the commons by examining a case study in depth. I choose a case study - CocaCola's bottling operations in Rajasthan, India - that is favorable to the proposition. The company Coca-Cola, both globally and in India, vociferously proclaims to be socially responsible. Since water is the critical input to CocaCola's operations, it is not surprising that the company emphasizes its water stewardship efforts, especially in the desert location of Rajasthan. In spite of choosing a context favorable to the proposition, the results indicate that CSR does not avert the tragedy of the commons.Following Hardin's famous article, there is a vast literature on managing the commons. I provide a very brief overview of the critical concepts for solving the commons problem, and translate these ideas to the business context. There is also a vast literature on CSR, and the next section provides a brief overview of this concept, and links together these two fields. The rest of the paper describes the case study and draws conclusions about the effectiveness of CSR for averting the tragedy of the commons.2. The Tragedy of the CommonsHardin explained the tragedy of the commons using the fable of a pasture open to all. Each herdsman "rationally" adds more sheep because his expected benefits are greater than expected costs, since he selfishly ignores the costs imposed on the others. Thus, individual decisions cumulate to tragic overuse and the potential destruction of the commons. Subsequent research has argued that it is necessary to distinguish between the intrinsic nature of the resource and the property regime under which it is held.2 Common-pool resources (CPRs) are characterized by 1) difficulty of excluding beneficiaries through physical and institutional means, and 2) subtractability, that is use by an individual reduces resources available to others. The literature identifies four types of property rights: open access (that is, no property rights), individual property, group property and government property. …