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Updated 12:00 PM June 23, 2005
 

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CFO accepts recommendation for short-term extension
of Coca-Cola contracts

Timothy P. Slottow, executive vice president and chief financial officer, has accepted a recommendation by the Vendor Code of Conduct Dispute Review Board (DRB) that the University’s contracts with Coca-Cola be extended on a short-term, conditional basis while the company is given an opportunity to respond to alleged violations of the Vendor Code of Conduct (VCC).

The DRB was created in 2004 to consider complaints against vendors with respect to the code of conduct, and recommend University action in response to the complaints. The board’s recommendations go to the executive vice president and chief financial officer, who makes the final decision.

Students Organized for Labor and Economic Equality (SOLE) submitted formal complaints Nov. 30 in four areas of concern:

  • Bio-solid waste disposal in India—the complaint alleged that bottling plant sludge containing cadmium and other contaminants has been distributed to local farmers as fertilizer.
  • Use of groundwater in India—the complaint alleged that the water table/aquifer is being drawn down by Coca Cola, which uses deep bore wells; water quality has declined; shallow wells used by local farmers have gone dry; and poor crop harvests near bottling plants have resulted from lack of sufficient irrigation water.
  • Pesticides in the product in India—studies have found that pesticides have been detected in Coca-Cola products in India that are in excess of local and international standards.
  • Labor practices in Colombia—data show a steep decline in membership in SIALTRAINAL, a Colombian bottler’s union, from approximately 2,300 to 650 in the past decade. SOLE claims repeated incidents with paramilitary groups threatening and harming union leaders and potential members, including allegations of kidnapping and murder. SOLE also is concerned about working conditions within the plants.

In considering these allegations, the board relied on extensive research by U-M Procurement and Logistic Services, which included meetings with representatives of Coca-Cola, SOLE, and activists and union leaders from India and Columbia. Coca-Cola, SOLE, and other concerned parties also provided written documentation. After a public hearing April 25, the parties responded in writing to additional questions from the board.

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

The University currently has 12 direct and indirect contracts with Coca-Cola and its bottlers, for a total U-M expenditure on Coca-Cola products of just under $1.3 million in FY2004. The first of these contracts, a vending contract for the Dearborn campus, expires June 30. Seven additional indirect contracts expire between July and November.

The board recommends that Coca-Cola agree in writing no later than Sept. 30 to a third-party, independent audit to review the complaints. An independent auditor satisfactory to all parties must be selected by Dec. 31. The audit must be completed by March 31 with findings received by U-M no later than April 30, 2006. Coca-Cola will be expected to put a corrective action plan in place by May 31, 2006.

The board recommends 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 VCC.

If the deadlines are not met and satisfactory progress is not made, the board recommends 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.”

The DRB report and recommendations were forwarded June 14 to Slottow. In accepting the recommendations, Slottow wrote: “One of the most important goals of the Vendor Code of Conduct is to influence U-M vendors to exercise a high standard of conduct. I believe that the recommendations are consistent with this goal.”

Slottow says his staff will work to ensure progress toward the goals outlined in the recommendations, and will review progress with the board on a periodic basis. Dennis Poszywak, assistant director of procurement and logistics, has been designated the point person for follow-up.

The board’s complete report can be found on the web at http://www.umich.edu/~purch/news/index.html. The CFO’s response letter is posted at http://www.umich.edu/%7Epurch/news/EVPCFOResponse.pdf. The VCC is at http://www.umich.edu/~purch/news/code.pdf.

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