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The case discusses the controversy surrounding the Indian subsidiaries of
multinational cola majors Coca-Cola and Pepsi in 2002-03. The two companies had caused
severe ecological damage in the state of Himachal Pradesh by painting their
advertisements on rocks. The case describes the ecological importance of these rocks and
the nature and extent of environmental damage caused by the companies. Besides giving a
detailed account of the legal proceedings initiated against them, the case also discusses
the efforts taken by the companies to repair the damage. The case also gives information
on the various other controversial activities of Coca-Cola and Pepsi in India.

» Rationale behind seasoned companies exploiting natural resources for

commercial gains from the business ethics perspective

"What Coke and Pepsi need to realize is that passing the buck is not the solution. The
fact remains that their dealers and franchisees have defaced the mountains and caused
irreparable damage to the ecosystem."

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"The fine imposed by the Supreme Court on Coke, Pepsi and others is a warning for other
violators who think that in India you can completely disregard the principles of corporate
governance and get away with it."

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On August 10, 2002, Coca-Cola India (Coke) and Pepsi Foods Limited (Pepsi), the
Indian subsidiaries of multinational cola majors Coca-Cola and PepsiCo, found themselves
under attack. In an article published by leading Indian newspaper, Indian Express (titled
'Rape of the Rock'), the two companies were accused of destroying the ecological balance
of the Himalayan state of Himachal Pradesh (HP).
Coke and Pepsi had allegedly defaced rocks that were over 45 million years old
along the Manali-Rohtang road in the state. These companies had painted their
advertisements on the rocks, thus harming the ecosystem and disfiguring the beauty of
the mountainous region (Refer Exhibit I for pictures of the painted rocks). While many
other companies were also found to have damaged the rocks in this way, Coke and Pepsi
were the most high profile organizations involved in this activity as a result they attracted
the maximum criticism. This news report (and many other related reports that followed)
generated wide-spread outrage against the companies and their illegal use of government-
land for advertising products. Many environmentalists referred to this act as 'commercial
vandalism.'

One such protestor, P. K. Manohar, a Supreme Court (SC) advocate and member of
the Legal Action for Wildlife and Environment (LAWE), said, "This is not a free-for-all,
and painting old, geologically valuable rocks this way cannot be allowed."

Environmentalists argued that the damage done by the companies to the fragile
ecosystem was irreparable. They pointed out that though the damage might seem to be
repairable on paper; in reality it was virtually impossible. Commenting on this, Professor
Ashok Sahni (Sahni) of Punjab University said, "It becomes a very expensive proposition
trying to wash off the paint with gallons and gallons of thinner and then too completely
cleaning it and restoring the original surface is impossible." Worldwide, companies
following good corporate governance policies do not exploit natural formations for
commercial purposes. Analysts said that by harming the ecology of the Manali-Rohtang
road area, Coke and Pepsi had shown a gross negligence of their duties as socially
responsible corporate citizens.

Both the companies, however, refused to acknowledge responsibility for the

damage done. Instead, they tried to pass the buck to their local partners (distributors,
advertisers etc.). While Pepsi stated that it had little operational control over the
affected Manali-Rohtang region, Coke argued that it was an 'extremely environment
conscious' company and that the incident was a local mistake. As media coverage of this
issue intensified, Coke and Pepsi began fearing the damage the controversy could cause to
their image and popularity.

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The matter attracted the attention of the judiciary when a three judge bench
headed by the Chief Justice of India B.N. Kripal pointed out the incident while hearing a
public interest litigation regarding the conservation of forests in the country. The
Supreme Court (SC) expressed concern over such acts by companies and said that they
should be "made to pay" for the damage they did to the ecology in order to promote their
business. Disturbed over the damage done to rocks in forests, Justice Kripal said that it
would be proper to take up the matter in court. A person named Harish Salve was
appointed amicus curiae (friend of the court) by the SC to investigate the matter and take
the necessary legal action.
Salve filed a case against the companies for commercial vandalism. The SC stated that the
painting of the rocks was a non-forest activity and could not be carried out without the
prior permission of the concerned authorities. Therefore, it asked the companies to
explain why they painted the rocks.

After this, Salve, upon the court's direction, approached the National Environment
Engineering Research Institute (NEERI) to inspect the entire Rohtang-Manali road for
advertisements painted on the rocks. Three days after the first news report was
published, the court issued notices to the cola companies, charging them of violating the
Forest Conservation Act 1980. A detailed report on the damage done by the companies
(submitted by Salve) stated that "from the village Kothi to Rallah waterfalls to Beas Kund,
a stretch of about 56 kilometers, advertisements have been plastered on the entire
mountainside." Environmentalists pointed out that these mountainous facades were home
to huge ecosystems that had developed over millions of years...

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Over the decades, many companies in India had painted their advertisements on
rocks but nobody seemed to have been bothered by this practice till the Indian Express
reported the damage to the ecosystem.

Once the controversy erupted, many people suddenly found that they had
something to say about the issue. Analysts felt that companies opted for this mode of
advertisement since it was very cost-effective - they only had to invest in the paint and
labor.

Since they did not seek permission from the government, to whom the land
belonged, they did not have to make any payment in this regard.

The advertisements ranged in size from 10 square feet (sq.ft.) to about 100 sq.ft.
Most of the Coke and Pepsi advertisements were between 10 to 20 sq.ft. each, with many
smaller ones (painted by other companies) in clusters along the road and the river bed...
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Analysts felt that the court's ruling sent a clear and firm message to corporates
who had been abusing natural creations for commercial purposes.

This case was regarded by many corporates, lawyers and environmentalists as one
of the fastest to be resolved - the court took a little more than a month to convict those
who were found guilty and order restoration work (Refer Exhibit IV for a timeline of the
case). Applauding the court's decision, Professor C K Varshney, School of Environmental
Sciences, Jawaharlal Nehru University, New Delhi, said, "This is really a decision in the
right direction, and perhaps ought to have been taken long back, for it really sets the rigor
India needs in dealing with environmental issues. Such defacing of rocks is not something
restricted to the Himalayas in India. I have seen this across the country. In supporting
the protection of nature in its original form, in whatever way possible, the courts have set
a great precedent"...