Myanmar: Coca-Cola discloses ties with sanctioned jade industry in new report to US govt.
In June 2015, Coca-Cola released an updated report under the mandatory US Reporting Requirements on Responsible Investment in Burma. In the report, Coca-Cola admitted the a number of challenges remain, including in relation to labour rights, land rights and gender equality. It also discloses tie with the controversial jade industry: the director of Coca-Cola Myanmar’s partner, Pinya Beverages Myanmar, is also the director of the Xie Family Company, active in the domestic jade business – which is linked to corruption and rights abuses and banned to export to the US under industry-wide sanctions. The disclosure came after Global Witness had alerted Coca-Cola of the link. According to Global Witness, this show the limitations of private due diligence in Myanmar.
On 24 June 2015, EIRIS Conflict Risk Network and 11 institutional investors, asset owners and asset managers wrote to Caterpillar Inc., Chevron Corporation and Hilton Worldwide Holdings Inc. The letters urge all three companies to submit comprehensive and timely reports pursuant to the U.S. Government’s Burma Responsible Investment Reporting Requirements.
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Coca-Cola far ahead of other companies in human rights disclosure, commentary by Vicky Bowman of Myanmar Centre for Responsible Business
Author: Vicky Bowman, Myanmar Centre for Responsible Business
"New reports under the State Department’s Burma reporting requirements underline the importance of thorough due diligence", 3 July 2015
Coca Cola’s third report under the US Reporting Requirements for Burma confirms them...as far ahead of their US and international peers in disclosure of the human rights and business integrity challenges they face in Myanmar. It provides useful advice based on experience, and should be read closely not just by their international food and beverage peers in Myanmar such as Heineken, Carlsberg, Pepsi, Nestlé and Unilever, but by any company doing business there including local companies...[S]ince the last report, Coke is making progress on a number of the issues raised in their human rights due diligence and audits. These include improvements in gender equality in their workforce (around 99% of which is from Myanmar), and bearing down on excessive overtime, including in the long journeys across country by their lorry drivers, where overtime has health and safety impacts. It is also good to see that Coke Myanmar now has functioning trade union relationships in both their plants. This should help demonstrate the value of healthy employer-employee relations and social dialogue, particular to Myanmar businesses who are still distrustful of trade unions and lack knowledge about new Myanmar legal requirements...[refers to Telenor, Ball, Gap, H&M]
Author: Michael Peel, Financial Times (UK)
The complications facing western companies looking to enter Myanmar have been laid bare after Coca-Cola disclosed a local business partner is linked to the much-criticised jade industry. Daw Shwe Cynn, a director of the Coca-Cola Pinya Beverages Myanmar joint venture, is also a director and shareholder of Xie Family Company, which is active in the domestic jade business but is barred from exporting to the US under industry-wide sanctions....Coke said “comprehensive” due diligence on potential business partners in Myanmar in the years leading up to launching operations there in 2013 had not raised any sanctions-related concerns about Shwe Cynn or its partner company Pinya Manufacturing, in which she has a 37.7 per cent stake. Coke said it had completed “another level” of investigation this year after Global Witness approached it with information about Shwe Cynn’s involvement in Xie Family Company, which “reportedly operates jade mines in Myanmar”. Coke said a number of official records on the ownership of Xie Family were made public only late last year. It did not comment on whether Shwe Cynn had earlier disclosed all her commercial interests, or been asked to....Myanmar’s jade industry is fuelled by Chinese demand and is worth billions of dollars a year but it has been plagued by allegations of smuggling, corruption and rights abuses in the northern mining region.
Author: Eryn Schornik & Juman Kubba, Global Witness
"Who are you really doing business with? Learning lessons from Coca-Cola's experiences in Myanmar", 1 July 2015
The Coca Cola Company has just come face to face with the limitations of private due diligence in Myanmar. After deciding to re-start operations in the country in 2012, the conglomerate did the right things, hiring big name due diligence companies and spending substantial sums on checks and vetting procedures before setting up local business ventures. Despite these efforts, it wasn’t until Global Witness alerted Coke earlier this year that the company realised that its only local director also had interests in a jade business called Xie Family. Involvement in jade should be a red flag, given that Myanmar’s jade sector is notorious for corruption, military involvement and environmental and human rights abuses, and that Myanmar jade is still subject to US sanctions. Global Witness research shows that, over the past two decades, Xie Family has been a key jade mining subcontractor of army company Myanmar Economic Holdings Limited (MEHL). Subject to US sanctions, MEHL has been embroiled in controversy over allegations of land-grabbing, environmental abuse and the use of violence against protestors at its Letpadaung mining project. Xie Family and MEHL have told Global Witness that they have not worked together since 2012, but figures from last year’s jade auction show that they jointly marketed jade that sold for over 5 million euros at that time. That doesn’t meant that the Coca Cola local director or Xie Family have committed any wrongdoings, but these connections are ones that due diligence should be picking up, in order that incoming companies can make an informed decision on their partners.
"Responsible Investment in Myanmar 2015 Update", 30 June 2015
In June 2012, The Coca-Cola Company...announced plans to re-enter Myanmar after more than 60 years. As part of the re-entry, the Company completed a rigorous and indepth due diligence process which is described in detail in the 2013 Responsible Investment Report. The first plant was inaugurated in June 2013 and the business in Myanmar has just completed its second year of operations. This is the third report...and continues to focus on mitigation, as well as new challenges and engagement efforts...One key challenge continues to be attracting, training and retaining talent in the competitive labor market. Another challenge has been the slow construction progress in completing renovations at one plant and the implications this has had on completing the wastewater treatment plant at that plant. Many of the key human rights risks identified in our initial report remain relevant and, as such, require ongoing due diligence and engagement. In particular these include: environment, excessive hours of work, lack of awareness about health and safety, child labor in downstream and upstream entities, bribery and corruption, land rights and gender inequality. This update addresses our efforts in these and other areas since the June 2014 report. As Myanmar continues to open up and our business develops, our due diligence will remain ongoing and we will continue to report publically on our findings and mitigation actions.