Calvert News & Commentary

The Coca-Cola Company (KO) Meets Calvert Signature® Criteria and Added to Calvert Social Index®

Coca-Cola now meets Calvert’s environmental, social and governance criteria as a result of clear progress in labor and human rights and a substantive dialogue with Calvert.

1/28/2011

Calvert Investments (“Calvert”) recently determined that The Coca-Cola Company (“Coca-Cola”) now meets all criteria for investment in the Calvert Funds that apply the Calvert Signature Strategies™. This decision was made after careful research and analysis, as well as over ten meetings with the company in the past four years across a range of corporate responsibility and sustainability issues. Calvert has been encouraged by the company’s progress – even emerging leadership – in two key areas: labor / human rights and water – even as it continues to face serious challenges in both areas. Calvert remains concerned about the contribution of certain Coca–Cola products to the global obesity epidemic and the company’s marketing practices related to children, though significant progress has been made on that front as well. Calvert is committed to continuing its engagement with senior Coca-Cola management on each of these sets of important issues, as well as a similar dialogue with PepsiCo, which satisfied the Calvert Signature Strategy™ criteria in 2007.

Labor and Human Rights

In Calvert’s assessment, Coca-Cola has recently but seriously come to accept that it shares responsibility for the human rights performance of its affiliated bottlers as well as across its supply chain, and has developed what is now the most comprehensive human rights and labor policy framework in its industry. The company suffered reputational damage in the late 1990s and early 2000s for abuses allegedly committed by bottlers and suppliers, most acutely in connection with Colombia, where the company’s bottler was accused of complicity in the murder of a trade unionist at the factory in 1996, and threatening other union organizers. Over the last half dozen years, and especially since 2005, the company has made significant policy commitments and concrete progress in addressing workers’ rights. The company explicitly supports the right to collective bargaining and freedom of association throughout its entire system, from bottlers around the world to its headquarters in Atlanta. The company launched efforts to monitor the labor and human rights performance of all bottlers, and has significantly improved its relations with unionized workers. According to Ron Oswald, General Secretary of the IUF (International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations), “Coca-Cola has made positive progress in recognizing and engaging unions internationally and addressing labor rights issues across its global system through that process. We look to the company to sustain this progress – including a continued and growing willingness to engage trade unions – as it continues to face issues in many countries where it operates.”

Labor and human rights remain risk factors for the company, and indeed, for the entire industry, but Calvert has gained confidence in the company’s overall commitment and the structures and processes it has put in place. “Members of the Interfaith Center on Corporate Responsibility (ICCR) have engaged Coca-Cola for a decade on the development and implementation of human rights policies that impact its bottling system and suppliers,” stated Rev. David M. Schilling, ICCR’s director of human rights.  “In recent years, the company has made substantial progress in monitoring and remediating workplace issues and has worked with key stakeholders to prevent the occurrence of human rights violations.” Among its supply chain initiatives, the company has joined the Better Sugar Initiative in order to address issues of child labor in sugar production.

Water and Environmental Justice

Coca-Cola has an enormous water footprint, requiring water for its finished product, for factory processes, and in its agricultural supply chain. Both Coca-Cola and PepsiCo have improved monitoring, disclosure and stakeholder engagement on water issues over the past few years in response to controversies, especially in drought-prone India. There, Coca-Cola and its bottlers operate several sites with growing populations and water stress. At one plant in the state of Kerala, the community complained that the company’s wholly-owned bottler had overdrawn local supplies of water, leaving residents with insufficient and polluted water. In 2008, the company began requiring all plants to assess the vulnerabilities of the quality and quantity of their water source.  Along with PepsiCo, Coca-Cola has taken a leadership role in the CEO Water Mandate and committed to extensive water disclosure, including entire water footprints of specific products. The company also committed to a “rights-based” approach to water use, and to be “water-neutral” through water recycling and recharging of aquifers by watershed management and community access. “Investors and stakeholders expect companies to manage their water footprint proactively, both up and down their supply chain,” said Brooke Barton, senior manager for water programs at Ceres, North America's largest coalition of investors and environmental groups. “Coke stands out as a company that is striving to meet this expectation. From driving water use efficiencies in operations, to improving its wastewater discharge standards, and requiring bottlers to implement comprehensive water stewardship plans, the company has shown a commitment to begin addressing the kind of water risks that are critical to the long-term financial health of the company.” Nevertheless, Calvert remains concerned about water-related risk to communities posed by both Coca-Cola and PepsiCo, and will continue high-level dialogue on this issue with both companies.

Bottled Water

Coca-Cola has aggressively embraced bottled water as a healthy alternative to sodas. Although Calvert agrees that bottled water is far healthier than sugary drinks, we feel that the inherent resource consumption associated with bottled water relative to tap water (i.e. energy, packaging, cost) does not add up to a solution for the industry. We will continue to engage in dialogue with both Coca-Cola and PepsiCo on this issue.

Nutrition and Obesity

As long as Coca-Cola produces sodas and other sugary beverages, the company will be a lightning rod for criticism and controversy, especially in the current public health crisis of obesity in industrial countries. Public health proponents have focused largely on limited marketing to children, and the US beverage industry has responded by reducing the amount of unhealthful beverages sold in elementary schools and adopting marketing standards. The company refined its marketing policy in 2010 to further discourage marketing to children under twelve, has reformulated some products, and developed some healthier alternatives. The company’s critics contend that it still manages to reach children through online contests and other media. In order to maintain and grow market share, beverage companies must diversify their product offerings to include truly healthy options.

Going Forward

Calvert is encouraged by the continuing improvement of Coca-Cola’s sustainability reporting as reflected in the newly released 2009/2010 report, as well as by the growing sophistication of its stakeholder engagement. We believe that Coca-Cola is poised to contribute even more positively to the significant corporate responsibility and sustainability challenges it faces around the world.

Calvert Asset Management Company, Inc., 4550 Montgomery Avenue, Bethesda, MD 20814.


As of 12/31/10, accounts managed by Calvert Asset Management Company, Inc. held securities issued by The Coca-Cola Company (KO). Calvert may or may not still invest in, and is not recommending any action on, Coca-Cola.



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