World Water Day

A number of investors sat with a management team from Coke regarding this issue on the 18^th of March. This dialogue is part of an SRI process which serves the mutual interest of religious investors and the long term and sustainable goals of our companies. The process serves the interest of religious stakeholders by creating a venue where we can offer our moral position and share the social concerns that we have either from our own missionary experiences or from the public concern that catches our attention. In this way we engaged with our corporate partners in developing a strategy for sustainable and just business practices that relate to the moral concerns that we have.

In representing a Catholic religious community our moral perspective is informed by the social teachings and position of our Catholic Church. There are a number of Catholic social principles involved here and certainly one of them is the “Universal Destination of Goods” which I elaborated in a previous blog post, “Revisiting trade and introducing the ‘Universal Destination of Goods.’” However in a 2003 message prepared by the Pontifical Council for Justice and Peace to the Third World Water Forum in Kyoto the Catholic moral concern on access to water was primarily addressed through the “Right to Life” principle. Presenting the message Cardinal Martino stated:

Many people living in poverty, particularly in the developing countries, daily face enormous hardship because water supplies are neither sufficient nor safe. Women bear a disproportionate hardship. For water users living in poverty this is rapidly becoming an issue crucial for life and, in the broad sense of the concept, a right to life issue. …

Respect for life and the dignity of the human person must be the ultimate guiding norm for all development policy, including environmental policy. While never overlooking the need to protect our eco-systems, it is the critical or basic needs of humanity that must be operative in an appropriate prioritisation of water access. Powerful international interests, public and private, must adapt their agendas to serve human needs rather than dominate them.

“Right to Life” is usually associated with the issue of abortion but in the recent social teachings of Pope Benedict XVI I have noticed a broadening use of this principle. The “Right to Life” principle is used to defend all social issues that essentially impact human life. In this case the Vatican is concerned with water access because without access to potable drinking water a struggling community is essentially facing extermination.

Our social interest as investors of a company like Coke is that their product requires the steady use of a water supply. In certain water scarce regions the use of this supply may further deplete potable water to a community that is already struggling. This shareholder dialogue began in response to a 2004 concern that was raised when Coca-Cola lost the use of its water license in the water scarce area of Kerala, India. Our own Passionist community has a missionaries and ministries in Kerala and our concern was with the potential negative impact that a company which we invest in may have to a suffering community that we minister to.  

While Coke has defended what they consider their responsible use of water this issue did serve as a wakeup call for Coke to become a corporate leader in sustainable water usage. This incident demonstrates the potential business loss due to water concerns. The loss was felt immediately with the loss of the water license to a plant in India but it was also felt with the negative public relations stemming from this incident.  The purpose of these shareholder dialogues is to further commit our company to demonstrate corporate leadership in this crucial issue which other companies especially in the agro-business sector are causing even greater water scarcity issues. Coke’s leadership here may provide a standard process for measuring its water footprint and achieving a ‘water neutrality’ impact on the local communities where they do business.

We are impressed with Coke’s current involvement with this issue and we are excited about emerging developments in water risk management. Coke is also moving ahead with addressing the water needs of other local communities that it operates in with a number of water recycling technologies. Recently Coke announced its Replenish Africa Initiative (RAIN) where Coke will invest 30 Million dollars for water projects in Africa with the goal of offering potable water to 2 million people in Africa by 2015. Coke’s stated goal on this overall issue is to “safely return to nature and to communities an amount of water equivalent to what we used in all our beverages and their production by 2020.” This is quite a challenge. Our job as a responsible investor is to annually evaluate this goal with Coke while raising any further social considerations.

As a history student I was given a wonderful metaphor to help explain the importance of studying the past as we analyze the policies of the future: the rowboat. The metaphor is simple, in order to move forward one has to be seated in a way that looks behind. In this case, the best signal you have with regards to where you are going is to notice how much you are deviating from where you have been. The 1930’s offered us an amazing lesson, our policies should not be governed by private or market interest alone.   

Early in 2010 the Supreme Court held a controversial ruling in the Citizens United case. It expanded the influence of businesses in politics. Prior to 2010 Businesses could only contribute to campaign ads through Political Action Committees (PAC). This had the effect of making their political campaign contributions transparent. Now, since Citizens United, that is no longer the case. Corporations can now fund their own campaign ads to promote their own political interest and agendas during the election cycles. The Interfaith Center on Corporate Responsibility (ICCR) has noticed the massive financial interest that a variety of industries had through the campaign ad contribution by the Chamber of Commerce. Many pharmaceutical industries increased their campaign ads in the 2010 election focusing on the issue of health care. 10 years ago people were concerned about campaign finance reform. One does not hear about campaign finance these days, worst yet, people don’t seem to care about the increasing influence of corporate campaign finance.

Not all people share in this apathy. An increasing group of responsible shareholders have voiced their interest in promoting corporate disclosure of political activity. Responsible shareholders recognize that important interaction that a business should have in promoting their own particular interest within the political landscape, but they also recognize the potential backlash that over and undue political influence can have. The Center for Political Accountability (CPA) has released a “Handbook on Corporate Political Activity.” In light of Citizens United case CPA has created this informative resource for shareholder groups to be actively involved in encouraging businesses to adopt internal policies to increase transparency and to oversee political spending.    

In the 1986 document by the U.S. Bishops, Economic Justice for All, many Catholic communities, like ourselves were introduced to the moral imperative of being a socially responsible investor.      

Individual Christians who are shareholders and those responsible within church institutions that own stocks in U.S. corporations must see to it that the invested funds are used responsibly…  As part owners, they must cooperate in shaping the policies of those companies through dialogue with management, through votes at corporate meetings, through the introduction of resolutions and through participation in investment decisions. We praise the efforts of dioceses and other religious and ecumenical bodies that work together toward these goals. – #354

Through ICCR and the Tristate Coalition for Responsible Investments the Passionist are engaged in promoting our Church’s moral teachings through by being socially active shareholders. Many ICCR members like us have begun engaging with some of our corporate investments with the purpose of promoting greater disclosure on corporate political activities. Recently the Passionist co-filed a resolution with Walden Asset Management asking one of our corporate investments that happens to be a Board member of the Chamber of Commerce for a comprehensive review of political spending policies and oversight processes. We also look forward to a potential dialogue with one of our Pharmaceutical companies on their political activity.

Promoting social justice can be a daunting task and sometimes it may seem like we are facing an uphill battle. The battle may still be uphill but working with coalitions and finding creative solution allows a group to even out the field a bit.

Catholic social teaching calls us take this economic responsibility seriously:    

Individual Christians who are shareholders and those responsible within church institutions that own stocks in U.S. corporations must see to it that the invested funds are used responsibly. Although it is a moral and legal fiduciary responsibility of the trustees to ensure an adequate return on investment for the support of the work of the church, their stewardship embraces broader moral concerns. As part owners, they must cooperate in shaping the policies of those companies through dialogue with management, through votes at corporate meetings, through the introduction of resolutions and through participation in investment decisions. (Economic Justice for All, 354)

The work of promoting corporate responsibility involves all the issues that are of social concern to our Catholic faith. However there was one issue that was raised at the ICCR sessions that I would like to profile here as an issue that calls us awareness and action. The issue involves the production of cotton in the country of Uzbekistan. The product is now called Uzbek cotton. Cotton is a prominent commodity in the world. It’s primary use is in textile goods and our clothing wear. Cotton is also a key ingredient in the food supply. Uzbekistan is a major producer of cotton. There are two major issues revolving around Uzbek cotton production and they both are critical issues of social injustice.

The first issue that needs to be raised is with regards to forced child labor. In this case we are not talking about individual private enterprises that engage in this practice. Instead we are referring to a government sanctioned program that forces children to work in the cotton fields of Uzbekistan. Uzbekistan forces children officially from the age of 10 (although children as young as 7 have been found working the fields) to pick cotton. There are approximately 2 million children that are sent to work for 2-3 months a year and they are given a specific quota that they must pick. Children are forced to work in the field unless they are able to buy their way out. The government of Uzbekistan owns all the cotton gins and this have a purchase monopoly of cotton through 3 state owned trade organizations. Uzbekistan pays their farmers $.03 per kilo of cotton. The basic dignity of these children are being violated on these grounds

The second issue that is no less troubling is the critical environmental degradation that is taking place with regards to water, the most basic necessity for all humans. The Aral Sea was once the 4^th largest inland sea in the world. Since 1960, when the Soviet Union diverted all their rivers in order to irrigate the cotton fields, the Sea began to decline steadily until now it is less than 10% of its original size. All native species of fish are gone. Because of the nature of the cotton industry the remnant of the Aral Sea and the diverted rivers have been horribly polluted, dyes have contaminated the fresh water rivers and because the sea has shrunk so dramatically what remains is a highly salinized. Ironically the area now has 70% unemployment (ironic in that the reason for the environmental degradation was for the promotion of a particular industry.) This unemployment has been particularly felt in the fishing industry which is practically non-existent.

Even with international pressure Uzbekistan is unwilling to seriously address this issue. As religious investors the Passionist and the other ICCR members are strategizing how to utilize our investment portfolio to organize on this issue. Investors can go to ICCR to take part of these strategies as Socially Responsible Investors (SRI) advocates. As consumers however everyone can take part of this issue. The Uzbek cotton campaign is a very popular movement and many companies are boycotting Uzbek cotton in their own products. Most recently LL Bean, Hanes and J. Crew are now part of this movement. However there are still a number of American garment companies that are using Uzbek cotton like Gymboree, Abercrombie & Fitch and Fred’s. Here are two organizations that offer updates on the boycott of Uzbek cotton.

The Cotton campaign: http://www.cottoncampaign.org/

Environmental Justice Foundation: http://www.ejfoundation.org/page141.html