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Sugar's sticky trail: Coke and Pepsi work to clean up their supply chains

Source: Thomson Reuters Foundation - Wed, 21 May 2014 11:01 GMT
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Tim Phanna, 15 chews on the stalk of a sugarcane at a farm in Kandal province, Cambodia, May 15, 2011. REUTERS/Samrang Pring
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WASHINGTON (Thomson Reuters Foundation)  – Selling cans of cola that don’t contain sugar grown on land forcibly taken from poor communities is proving to be a challenge for Coca-Cola and Pepsi. Under pressure from activists and consumers, the soda giants are struggling to clean up their act as they launch new policies to source sugar untainted by human rights concerns.

Activists hope that, as two of the world’s largest sugar purchasers, Coca-Cola and Pepsi will lead the sugar industry to change its practices. But as both companies begin investigating thousands of suppliers, their efforts could be derailed by local land disputes and human rights violations that are difficult to track.

"Because these policies are so new, I don't think that we fully grasp the challenges that might arise during their implementation,” said Ellen Kennedy, senior sustainability analyst at Calvert Investments, which advised Coca-Cola and Pepsi on the policies.   

Boosted by the world’s growing sweet tooth and burgeoning demand for ethanol, sugar production has driven the exchange of more than 3.5 million hectares of land since 2000, Land Matrix data show. Much of the new sugar development is on land that was once used by local communities and small farmers, thousands of whom have been violently or unjustly displaced by corrupt governments and sugar companies, said an Oxfam report published in October 2013.  

Shortly after the publication of the report, Coca-Cola announced that it would take steps to resolve and prevent land grabs in its supply chain. In March, Pepsi followed suit.

FOGGY LAND RIGHTS

According to the United Nations, there is no documentation to prove who owns or has rights to about 70 percent of land in developing countries. Many poor and indigenous communities don’t have title deeds to land they may have used for years, decades or even generations. This, often combined with corrupt local elites, facilitates murky land deals.

“Local governments and power structures often make trying to do the right thing very difficult,” said Kennedy.

In Cambodia, activists have accused sugar producer Mitr Phol, one of Coca-Cola’s top global sugar suppliers, of riding roughshod over the rights of local communities.

David Pred, managing director of Inclusive Development International, an NGO that conducted a study on land grabs in Cambodia, said the company was “responsible for massive land grabs, destruction of community forests and violent evictions.”

A Mitr Phol spokesperson told Thomson Reuters Foundation in an email that the company does not support forced evictions, the land concession process was conducted legally, and that it paid the Cambodian government to consult with local communities and to arrange compensation for affected land owners. But activists say relying on the government isn’t good enough.

“Most of the victims of land grabbing have legal rights to their land under Cambodian law, but they just haven’t been able to get a definitive land title to confirm that,” Pred explained in an interview. “The ruling elite has taken advantage of this ambiguity to concession off nearly three million hectares of land to their cronies and foreign investors, much of which, in fact, belongs to local communities and small-holder farmers.”

At least 12,000 people have been displaced by sugar production in Cambodia, Pred said.

Meanwhile, in some parts of Brazil, farmers have legal titles to land to which indigenous people can also make a legal claim, said Olaf Brugman, who is responsible for sustainable policy and reporting at Rabobank, a bank that works with Brazilian agribusiness.

“It will take some exploring and understanding to address the gray areas (of land disputes),” Paul Boykas, vice president of public policy at Pepsi, told the Thomson Reuters Foundation.  “… There are significant challenges that will take people on the ground and a thorough investigation.” 

But doing right by poor and indigenous communities can be difficult.

Those displaced may not know their rights or may be illiterate, said Derek Newberry, a PhD student at the University of Pennsylvania who studies sugar cane farms in Brazil.

It’s also challenging for outsiders to understand how indigenous communities make decisions, said Fergus MacKay, a lawyer and expert on indigenous rights, at a World Bank conference in March. It can be a mistake to say, “Ok, that guy has feathers on his head. He must be the leader. Let’s go talk to him,” he explained, adding that the “take-me-to-your-leader approach” often creates serious divisions within communities.

Adding to a complex picture, local governments might lack the resources to make sure their own environmental regulations and labour laws are implemented, said Newberry in an interview.

For Pepsi, it’s going to be a learning experience, said Boykas. “We’re going to learn from our suppliers and, working with them (and NGOs), we’re going to learn from the communities that are there. … The idea of how complex these supply chains are can’t be underestimated.”

SUGAR'S STICKY TRAIL 

Tracing sugar is tricky. Sugar cane from different farms and refined sugar from different mills is mixed at various stages of the production, shipping and storage process.

“Since mills have multiple contracts (with farmers), and Coca-Cola (or Pepsi) may have multiple suppliers, we can only say with probabilities where the sugar from a particular farm ends up, or where the sugar in a particular can of coke has come from,” said Benjamin Richardson, assistant professor at the University of Warwick in England who researches the sugar industry.

To kick off the complicated process of cleaning up their supply chains, both Coca-Cola and Pepsi are conducting environmental and social impact studies in the countries where they source most of their sugar.

“My guess is that we will find an amazing array of problems that range from really explicit land grabbing that is actually in our supply chain to land grabbing that might be the result of a country deciding they want to be a major player in the ethanol market,” said Ed Potter, director of global workplace rights at Coca-Cola, at the World Bank in March. 

“What is the company’s accountability where it is not really directly and specifically related to your supply chain where you get sugar?” Potter added.

Companies could decide to avoid being linked to possible human rights abuses by canceling or not renewing tainted contracts.

Potter said that was one possible course of action for Coca-Cola, although the company plans to work with suppliers to resolve problems and may consider compensating poor communities for lands they’ve lost.

“Because the primary duty to protect (people) is the state’s duty, what companies are doing here is they’re filling the gap in the governance of a particular country,” he said.

SPILLOVER EFFECTS

But, as Coca-Cola and Pepsi figure out their new policies, communities living near sugar cane plantations need urgent change.

In Cambodia, children whose families have lost land to sugar cane farms have to work, instead of attending school, so their families can survive, a report by Inclusive Development International and Equitable Cambodia said.

In Mato Gross do Sul, Brazil, indigenous children suffer from diarrhea and skin infections when rains channel sickening pesticides from sugar cane plantations on their ancestral lands into their water supply, Oxfam’s report said.

And, last year, sugar cane plantations used up so much water that they contributed to a man-made drought in Maharashtra, India.

“It’s not just land rights which are important, but also the spillover effects from the sugar cane production,” said Richardson of the University of Warwick.

 “So when you’re spraying chemicals, when you’re burning the cane, where there might be waste water dumped into rivers – all that affects people who live around the cane farm plantation.” 

((Alia Dharssi is a Fellow in Global Journalism at the Munk School of Global Affairs, University of Toronto.  This story was reported as part of a journalism training program on Land and Poverty, funded by the World Bank, USAID, and Thomson Reuters)) 

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