Poverty Footprint Study on how the Coca Cola - Oxfam America

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3 Executive summary The World Bank estimates that about 1.4 billion people live below the international poverty line of USD1.25 a day, which is roughly equivalent to a quarter of the developing world’s population. 1 It is estimated that the recent global financial crisis has left 64 million2 more people in extreme poverty than anticipated this year and has underscored the importance of private sector activity and investment at a time when governments’ ability to provide aid and foster development has come under pressure. A recent United Nations conference refocused the world’s attention on the need to scale up efforts to meet the Millennium Development Goals’ (MDG) 2015 deadline. The recent financial, fuel and food crises have slowed the progress made by many developing countries toward the MDGs. Although aid flows reached record highs in 2009, there remains a funding shortfall of approximately $20 billion relative to the aid targets agreed upon by the Group of Eight (G8) five years ago. 3 While public investment is only one part of a much more systemic problem, the impact of this funding gap is particularly concerning for the world’s least developed countries. 12 Exploring the links between international business and poverty reduction Over the past 30 years, the private sector has been a primary driver of economic growth and has contributed significantly to poverty reduction. Businesses provide vital jobs and services and pay taxes, which help fund public services. The positive and negative impacts of business in developing countries continue to be debated, but increasingly the development community has recognized the significant contribution the private sector can make when business and social benefits align and when leading global businesses promote high social and environmental standards throughout their value chains. At the same time, as companies gain a deeper understanding of their impact on poverty reduction, they recognize that their own success is often directly linked to the success of the communities in which they operate. This recognition has driven some companies to take a more strategic approach to development. Many are investigating how to transfer knowledge and skills to low-income people along their value chains in a more inclusive manner. Small enterprises and large multinationals alike are creating innovative new products and services that simultaneously satisfy the needs of people at the
ase of the pyramid, achieve a development impact4 and create new consumer markets. Furthermore, businesses are increasingly working in partnership with governments and civil society organizations to find multi-stakeholder solutions to common challenges. Economic growth requires an enabling environment including good governance, robust regulation and enforcement practices, and clear accountability mechanisms. Together these elements provide a framework for governments to lead on poverty reduction in partnership with business and civil society. This study aims to bolster that sort of collective problem-solving. This report is one such instance. This study is the output of a multi-year collaboration among The Coca-Cola Company (all references to The Coca- Cola Company refer also to any direct or indirect subsidiaries that are relevant for purposes of this report), Oxfam America and SABMiIIer to apply Oxfam’s <strong>Poverty</strong> <strong>Footprint</strong> Methodology to the Coca-Cola/SABMiIIer value chain in Zambia and El Salvador. This methodology, which was originally developed and applied to Unilever’s operations in Indonesia, is designed to help companies understand and improve their poverty impacts, and provides a platform for dialogue, innovation and accountability. Zambia and El Salvador were chosen for this study because of their sociopolitical diversity and their significant sugar industries, which allowed visibility into the entire Coca-Cola/SABMIller value chain, from agricultural producers to bottlers to local consumers. Industrias La Constancia (ILC) in El Salvador and Zambian Breweries in Zambia are the names of the local SABMiller operations in each country. Both countries have very high levels of poverty. Despite recent economic growth, Zambia is one of the poorest countries in the world, characterized by low life expectancy, high HIV/AIDS infection rates and a poorly diversified economy. El Salvador is equally among the poorest countries in Latin America and is still recovering from a decade-long civil war and extreme exposure to natural disasters5 . Recommendations are made at the end of each section of this report for The Coca-Cola Company and SABMiller’s consideration going forward. These recommendations should be seen as guiding principles and suggestions for action, and not as formal commitments made by either The Coca-Cola Company or SABMiller. Both organizations are committed to engaging with key stakeholders in each country to begin to address these important issues. Key findings Macroeconomic impacts An examination of the Coca-Cola/SABMiller value chain’s macroeconomic impacts reveals that its Gross Value Added (GVA) in 2008 was approximately $21 million in Zambia and $83 million in El Salvador. In addition, the Coca-Cola/SABMiller value chain supported an estimate of more than 3,741 formal and informal jobs in Zambia and 4,244 formal jobs in El Salvador. In both countries, the formal jobs linked to the Coca- Cola/SABMiller value chain are in nonfarm supplies, bottling, distribution and sales. However, as in many developing countries, the majority of jobs in the value chain are in the informal sector, either in sugar harvesting or in the retailing of Coca-Cola products. The system supports a sizable small-scale retail sector in both countries, with approximately 64,000 outlets in El Salvador and approximately 25,000 in Zambia. Owing to the relatively small size of the economy and weak supply base, in some circumstances, supply purchases in both countries are made either regionally or internationally. Recommendations for follow-up action Convene community stakeholders and business partners in focused discussions on the barriers to local sourcing and options to address these barriers. Create a process to capture and share best practices among small and medium enterprises (SMEs) in the Coca-Cola system to more broadly foster continual improvement among local businesses and contribute to the development of local industry Engage with NGOs and financial groups to discuss providing microcredit to SMEs in the Coca-Cola system, perhaps with a particular focus on women. Exploring the links between international business and poverty reduction 13
Page 1 and 2: Exploring the links between interna
Page 3 and 4: Contents About the organizations 4
Page 5 and 6: The Coca-Cola Company sustainabilit
Page 9 and 10: Muhtar Kent Chairman and Chief Exec
Page 11: Graham Mackay Chief Executive SABMi
Page 15 and 16: Recommendations for follow-up actio
Page 17 and 18: with the community includes not onl
Page 21 and 22: The role of business in development
Page 23 and 24: It is projects such as this that co
Page 25 and 26: Zambia El Salvador Our approach Oxf
Page 29 and 30: Six percent of the population lives
Page 31 and 32: SABMiller’s role as bottler In Za
Page 33 and 34: Zambia El Salvador Figure 4: The Co
Page 35 and 36: The Coca-Cola/SABMiller value chain
Page 37 and 38: Zambia El Salvador In the absence o
Page 39 and 40: Table 8: Aggregate employment impac
Page 43 and 44: In all markets, with few exceptions
Page 45 and 46: Figure 9: Auditing in The Coca-Cola
Page 47 and 48: employment include some workers in
Page 49 and 50: El Salvador The highest wages in th
Page 51 and 52: Many people are hired during the su
Page 53 and 54: Investment in training and capacity
Page 55 and 56: The union is an excellent organizat
Page 57 and 58: Recommendations for follow-up actio
Page 59 and 60: Crime in El Salvador El Salvador fa
Page 61 and 62: 0 [When] we get out at night, we ar
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Mill work is also physically strenu
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0 Table 10: Sales by packaging type
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Table 12 Water use ratios at SABMil
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The Coca-Cola Company Sustainable P
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Product portfolio The Coca-Cola pro
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Recommendations for follow-up actio
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0 Civil society groups encourage co
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According to The Coca-Cola Company
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Engage with NGOs and financial grou
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Exploring the links between interna
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We also wish to thank the many stak
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43. This was developed by the Unive
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