Coca-Cola questions and answers

What is the Vendor Code of Conduct?

The Vendor Code of Conduct was developed in Spring 2004 upon the recommendation of a task force composed of faculty, staff and students. In response to some complaints about the business practices of a small number of University vendors, the task force was appointed to review U-M’s purchasing practices and recommend policies that would help encourage the University to do business with organizations that most closely share its ethical values.

The Vendor Code of Conduct states, "The ideal University-vendor relationship is in the nature of a partnership, seeking mutually agreeable and important goals. Recognizing our mutual interdependence, it is in the best interest of the University to find a resolution when responding to charges or questions about a vendor’s compliance with the provisions of the Code."

The University’s Vendor Code of Conduct can be found on the web at http://www.umich.edu/%7Epurch/news/code.pdf. The complete task force report is posted at http://www.umich.edu/pres/committees/tf_report.html.

What is the Dispute Review Board?

The Dispute Review Board was established to look into any formal complaints that the University’s business partners may have violated its Vendor Code of Conduct. The DRB is chaired by a faculty member and includes two additional faculty members, two staff members and two students. Its operating procedures are posted to the web at http://www.umich.edu/%7Epurch/Complaint_Resolution_Procedures.pdf.

What are the complaints against Coca-Cola?

On November 30, 2004, a U-M student organization called Students Organizing for Labor and Economic Equality lodged a formal complaint about Coca-Cola’s business practices in Colombia and India. The complaints alleged that Coca-Cola’s bottling plants in these countries have violated various provisions of the Vendor Code of Conduct by fostering unsafe working conditions in Colombia and failing to support freedom of association and collective bargaining by the labor union representing employees there; and by environmental practices in India that have depleted the groundwater and led to products with unacceptably high levels of pesticides. Details of the complaints are included in the Dispute Review Board’s report issued June 13, 2005 (see http://www.umich.edu/%7Epurch/news/finalrecommendation.pdf).

What process did the University follow to review the complaints?

Initially, the University’s Procurement staff reviewed the complaints through an informal process, meeting with the student complainants, representatives from Coca-Cola and activists from India and Colombia, and reviewing documents provided by the various parties. U-M staff members were unable to completely resolve the complaints through an informal process, so on March 7, 2005, the University requested that the Dispute Review Board launch a formal investigation.

The DRB requested additional, detailed information from Coca-Cola and the complaining parties; held a public hearing on April 25, 2005; and met several times to deliberate and develop a report summarizing its findings and recommendations regarding the University’s business relationship with Coca-Cola. The report (posted at http://www.umich.edu/%7Epurch/news/finalrecommendation.pdf) was presented to Timothy Slottow, U-M executive vice president and chief financial officer, on June 13, 2005. Slottow accepted the DRB’s recommendations in a letter on June 17, 2005 (see http://www.umich.edu/%7Epurch/news/EVPCFOResponse.pdf).

What were the DRB’s recommendations?

On the issues of pesticides in India and labor practices in Colombia, the DRB found evidence that Coca-Cola may have violated standards of the University's Vendor Code of Conduct. Regarding the issues of groundwater depletion and disposal of bio-solid wastes, the DRB said it could not determine whether Coca-Cola is in compliance with the code, and recommended that additional assessment is needed.

The DRB recommended establishing a series of deadlines that could be used to measure progress toward investigating and resolving the concerns. The deadlines were as follows: by Sept. 30, 2005, Coca-Cola should agree in writing to a third-party, independent audit; by Dec. 31, 2005, an independent auditor satisfactory to all parties should be selected and an agreement reached on details of the review protocol; by March 31, 2006, the audit should be completed; by April 30, 2006, U-M should receive the findings of the audit; and by May 31, 2006, Coca-Cola should put a corrective action plan in place if one is found to be warranted.

The DRB recommended that the University should not enter into new contracts or renew any expiring contracts during this period, and agree only to short-term, conditional extensions with reassessment at each of the established deadlines to determine if Coca-Cola has made satisfactory progress toward demonstrating its compliance with the Vendor Code of Conduct.

If the deadlines are not met and satisfactory progress is not made, the board recommended that "the University business relationship with Coca-Cola shall be suspended and Coca-Cola products shall not be offered at the University, which includes but is not limited to vending, food service operations, athletic events and University-catered events."

What progress has been made toward resolving the concerns?

Slottow designated Dennis Poszywak, assistant director of procurement and logistics, as the point person to follow up on the recommendations and work with Coca-Cola on implementing the third-party review.

Poszywak joined with representatives of six other interested universities to form a Commission to work with Coca-Cola on these issues. By Sept. 30, 2005, Coca-Cola had agreed in principle to the third-party review, but had to resolve pending issues prior to proceeding. It was the University’s sense that Coca-Cola was making good-faith efforts to launch the review and resolve the concerns. Based on that assessment, Slottow decided to continue extending the University’s contracts with Coca-Cola on a short-term basis.

However, in December 2005, Coca-Cola wrote to the Commission to indicate that concerns over a lawsuit filed against its Colombian bottling plants will make it difficult for Coca-Cola to agree to an independent review in that country, the results of which might be used in the litigation. In its letter (see URL), Coca-Cola outlined other measures of progress to date.

The Commission continues to work with Coca-Cola in an effort to bring about an independent review of the company’s labor practices in Colombia and environmental practices in India. The University of Michigan continues to participate in the Commission and to work with Coca-Cola on resolving the concerns.

How much business does the University do with Coca-Cola?

In FY2005, the University had 13 direct and indirect contracts for providing Coca-Cola products, for a total U-M expenditure on Coca-Cola products of about $1.4 million.

What is the status of the University’s contracts with Coca-Cola?

Most of the University’s Coca-Cola contracts expired between June and November 2005. Those contacts have been extended on a short-term basis through the end of the year, but no new contracts have been entered into by the University.

Beginning on Jan. 1, 2006, the University will begin the process of suspending its purchasing of Coca-Cola products. This decision involves not granting any additional extensions to contracts that already have expired.

Why did the University suspend purchasing from Coca-Cola?

The University followed the established process recommended by its Dispute Review Board. The DRB developed a set of goals and deadlines for achieving those goals as a way of measuring progress on resolving the concerns. Based upon Coca-Cola’s inability to cooperate with a third-party, independent review of bottling plants in Colombia, the University is unable to resolve concerns about the company’s compliance with the Vendor Code of Conduct.

Will Coca-Cola products be completely eliminated from campus?

No. The University will eliminate its direct purchases from Coca-Cola, and will communicate with department heads across campus to instruct them not to purchase Coca-Cola products through University accounts. Vending machines that have been stocked with Coca-Cola either will be stocked with alternate products, or will remain empty.

However, some third-party vendors (such as restaurant franchises) have agreements that require them to distribute Coca-Cola products. Those vendors likely will continue to sell Coca-Cola as part of their food-service operations.

Will the University consider resuming purchasing from Coca Cola in the future?

Yes. The University plans to resume procurement of Coca-Cola products if the details of conducting an independent, third-party investigation in Colombia can be resolved with Coca-Cola, and if agreement can be reached on the process for a third-party review of environmental concerns in India. Progress in launching and completing these independent reviews, as well as remediation of any identified problems, will continue to be important to the University’s ongoing business relationship with Coca-Cola.