Sasha Lilley

The Dirty Truth About Green Fuel

The town of Columbus, Nebraska, bills itself as a "City of Power and Progress." If Archer Daniels Midland gets its way, that power will be partially generated by coal, one of the dirtiest forms of energy. When burned, it emits carcinogenic pollutants and high levels of the greenhouse gases linked to global warming.

Ironically this coal will be used to generate ethanol, a plant-based petroleum substitute that has been hyped by both environmentalists and President George Bush as the green fuel of the future. The agribusiness giant Archer Daniels Midland (ADM) is the largest U.S. producer of ethanol, which it makes by distilling corn. ADM also operates coal-fired plants at its company base in Decatur, Illinois, and Cedar Rapids, Iowa, and is currently adding another coal-powered facility at its Clinton, Iowa ethanol plant.

That's not all. "[Ethanol] plants themselves -- not even the part producing the energy -- produce a lot of air pollution," says Mike Ewall, director of the Energy Justice Network. "The EPA (U.S. Environmental Protection Agency) has cracked down in recent years on a lot of Midwestern ethanol plants for excessive levels of carbon monoxide, methanol, toluene, and volatile organic compounds, some of which are known to cause cancer."

A single ADM corn processing plant in Clinton, Iowa generated nearly 20,000 tons of pollutants including sulfur dioxide, nitrogen oxides, and volatile organic compounds in 2004, according to federal records. The EPA considers an ethanol plant as a "major source" of pollution if it produces more than 100 tons of any one pollutant per year, although it has recently proposed increasing that cap to 250 tons.

Sulfur dioxide is classified by the EPA as a contributor to respiratory and heart disease and the generation of acid rain. Nitrogen oxides produce ozone and a wide variety of toxic chemicals as well as contributing to global warming, according to the EPA, while many volatile organic compounds are cancer-causing. Last year, Environmental Defense, a national environmental group, ranked the Clinton plant as the 26th largest emitter of carcinogenic compounds in the U.S.

For years, ADM promoted itself as the "supermarket to the world" on major U.S. radio and television networks like NPR, CBS, NBC, and PBS where it underwrites influential programs such as the NewsHour with Jim Lehrer. Now, as it actively promotes its ethanol business, ADM has rolled out its new eco-friendly slogan, "Resourceful by Nature" which "reinforces our role as an essential link between farmers and consumers."

Despite the company's attempts at green packaging, ADM is ranked as the tenth worst corporate air polluter, on the "Toxic 100" list of the Political Economy Research Institute at the University of Massachusetts. The Department of Justice and the Environmental Protection Agency has charged the company with violations of the Clean Air Act in hundreds of processing units, covering 52 plants in 16 states. In 2003 the two agencies reached a $351 million settlement with the company. Three years earlier, ADM was fined $1.5 million by the Department of Justice and $1.1 million by the State of Illinois for pollution related to ethanol production and distribution. Currently, the corporation is involved in approximately 25 administrative and judicial proceedings connected to federal and state Superfund laws regarding the environmental clean-up of sites contaminated by ADM operations.

Friends in high places

Environmentalists have cried foul, but they are up against the 56th largest company in the United States, as ranked by revenue in Fortune Magazine. ADM has more than 25,000 employees, net sales last year of $35.9 billion, with $1 billion in profits, as well as a recent 29 percent profit increase in the last quarter. The comany is a global force: ADM is one of the world's biggest processors of soybeans, corn, wheat, and cocoa, which it buys from growers in the U.S. and around the world. The company recently hired Patricia A. Woertz, an executive vice president of Chevron Corporation, as its chief executive officer.

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Paving the Amazon with Soy

The sprawling state of Mato Grosso, in central west Brazil, could be thought a paradise of sorts, at least from a distance. The lush rainforest of the Amazon basin, often called the "lungs of the world," straddles the state, as does the grassy Brazilian savanna or cerrado. Parrots, jaguars and pumas are just a few of the abundant species found in the savanna, considered one of the most biodiverse in the world, along with endangered species like the maned wolf, anteater and river-dwelling giant otter.

The landscape, however, is rapidly being altered as vast fields of soybeans and cattle ranches replace grasslands and forests. Soy rules Mato Grosso and it's not the soy that much of the world associates with the ostensibly eco-friendly, vegetarian diet, either.

In the wake of the Mad Cow disease scare, soy producers have benefited from increased demand in affluent countries for meat from cows that are fed soy meal, rather than animal-based feed. This is only the latest in a series of factors that have allowed a company named the André Maggi Group to spearhead, along with the Brazilian government, the expansion of soy in Mato Grosso and adjacent states over the last two decades, with disturbing consequences.

"Soy – at this moment – is the most important driver for deforestation, directly and indirectly," says environmental analyst Jan Maarten Dros. "Directly because the cerrado is being converted from natural vegetation into soy fields. But indirectly, because in this region a lot of cattle farms are being replaced by soy farmers buying or renting land from cattle farmers." This means, according to Dros' 2003 WWF study on the impacts of soybean cultivation in Brazil, that the "cattle farmers tend to advance into new forest area, causing more deforestation."

The governor of the state of Mato Grosso is Blairo Maggi, the owner of the Maggi group, who is also known as the rei da soja – the Soybean King. In fact, the Maggi Group is the largest private soy producer in the world. The company grossed $600 million in sales this year, primarily managing the production, trade and processing of over 2 million tons of soy, most of it destined for livestock in Europe and Asia. Maggi has also been key in establishing transportation infrastructure that further opens the Amazon to development and deforestation.

In 2003, Maggi's first year as governor, the deforestation rate in Mato Grosso more than doubled. Last year when the New York Times pointed out that the destruction of the Amazon had risen by two-fifths, Blairo Maggi responded: "To me, a 40 percent increase in deforestation doesn't mean anything at all, and I don't feel the slightest guilt over what we are doing here. We are talking about an area larger than Europe that has barely been touched, so there is nothing at all to get worried about."

Despite the fragile ecosystem in which it operates, and the controversy around its practices, the Brazilian agribusiness giant has had little trouble getting bankrolled by private banks in Europe and Japan, and by public institutions like the International Finance Corporation (IFC), the private-lending arm of the World Bank. In 2002 the Maggi Group's soy production division, Amaggi Exportação e Importação Limitada, landed two back-to-back US $30 million loans from the IFC – one in 2002 and second that was granted in September of 2004.

World Bank Audits Loan to Amaggi

The Maggi Group, however, has encountered a bump in the road. Under pressure from NGOs in Brazil and abroad, World Bank president James Wolfensohn has called for an audit by the IFC's Office of the Compliance Advisor Ombudsman of the 2004 loan to Amaggi, stating in a letter to Brazilian NGOs that "the audit will provide an independent review of the issue and the results will be made public."

In the cases of both loans, the IFC assigned the projects a Category B social and environmental rating, meaning that "a limited number of specific environmental and/or social impacts may result which can be avoided or mitigated," according to Rachel Kyte, director of the IFC's Environmental and Social Development Department, although this classification may now be under review.

"If civil society's arguments were to have been considered two months earlier," says Roberto Smeraldi, director of Friends of the Earth Amazonia, in response, "this audit would not have been necessary." Brazilian and foreign NGOs have argued that the loan should have warranted a Category A classification, defined as "likely to have significant adverse environmental impacts that are sensitive, diverse, or unprecedented." Such a categorization would flag the project's potential for serious harm to the fragile ecosystem of the cerrado.

The IFC loan provides Amaggi with capital to expand its inventory capacity for storing soy products while simultaneously supplying pre-finance loans to the 900 medium-sized soy farmers in Mato Grosso and Rondônia states from whom Amaggi buys the majority of the soy it sells. These tenant farmers tend to have limited capital and therefore must turn to Amaggi for financing, since the Brazilian government only provides loans at a very high interest rate. In return, the farmers sign contracts to sell their product to Amaggi on terms dictated by the agribusiness company.

The problem with this arrangement, says geographer Wendy Jepson, whose work focuses on soy production in the states of Mato Grosso and Rondônia, is that the pre-financing loans that Amaggi provides lack detailed conditions about the environment, while locking farmers into deals with Amaggi. "The IFC loan is wrongheaded because it doesn't seem there are any environmental stipulations on how these producers actually cultivate. It's facilitating the expansion of production and not dealing with the fact that these farmers have little choice in how they produce."

Steve Schwarzmann of the Washington DC-based Environmental Defense guardedly welcomes the World Bank audit, while scoffing at the IFC's Category B classification of the loan. "To say that financing the expansion of soybean production in the Amazon in 2004 is the kind of project whose impacts stop at the farm gate, is simply not credible."

Banking on 'Green Gold'

More significant than the direct consequences of the IFC loan, according to Dutch analyst Dros, is the prestige that the international lending body has given to Amaggi, which in turn has attracted much larger loans from private banks. Rabobank, the Netherlands' biggest agricultural bank, has lead a consortium of 11 banks, including ING Bank (Netherlands), HSBC (UK), BNP Paribas (France), Crédit Suisse First Boston (Switzerland), UFJ Bank (Japan), WestLB (Germany), Fortis Bank (Netherlands/Belgium), HSB Nord Bank (Sweden), Banco Bradesco and Banco Itaú (Brazil), to loan Amaggi $230 million.

This is the second large loan Rabobank has arranged for Amaggi. The first loan for $100 million, in 2002, included ABN Bank and Fortis Bank, Banque Cantonale, BBVA, WestLB, and Standard Chartered, as well as three Brazilian banks.

In September of this year, Rabobank launched an advertising campaign presenting itself as "a bank that puts corporate social responsibility into practice." Rabobank is a signatory of the IFC's Equator Principles, a voluntary set of guidelines for managing social and environmental issues, and also has its own official standards on forest protection.

Dros, who has written a number of studies on soy in Brazil and South America for the World Wildlife Fund and AIDEnvironment, believes that the IFC's imprimatur has given private banks a means of skirting their own environmental policies. "Rabobank's reasoning was that if IFC approves this project and they classify it only as a class B, low-risk project, we can safely invest $230 million, eight times more than what IFC is investing, in this corporation."

Rabobank public affairs manager Hans Ludo van Mierlo counters that the bank has an excellent record on environmentally sustainable lending. "We see no cause of concern by World Bank president James Wolfensohn's call for an audit of the IFC's loan to Amaggi," says van Mierlo. "The current discussion among NGO's is about the IFC procedures, which resulted in a classification of Category B. This is more an internal discussion about the procedures of IFC and does not mean that Amaggi is doing something wrong."

The Maggi Group has also received a loan of $24 million in March 2001 by a foreign banking syndicate arranged by Deutsche Investitions und Entwicklungsgesellschaft (DEG), two loans headed by Standard Chartered Bank in July 2001 and July 2002 for $70 million and $50 million respectively, a $80 million loan arranged by WestLB in June 2003 and a $34 million dollar loan from Banco Nacional de Desenvolvimento Econômico e Social (BNDES), Brazil's development bank, in June of this year.

Environmental Defense's Schwarzmann notes the irony of the IFC loaning money to the Maggi Group, given the corporation's ability to draw large private loans. "The ostensible justification of [IFC lending] is to take public resources to support private business in the developing world that would not have access to international capital markets," states Schwarzmann. "What the IFC has done with the Amaggi loans is anything but that."

Paving Paradise

The controversy around IFC and private bank loans to the Maggi Group has highlighted the agribusiness company's potential for ecological damage as soy producer and broker. But equally consequential has been Maggi's role in reshaping the Amazon region, owing partially to the substantial political and economic power of the Maggi family.

Governor Maggi, with largesse from the Brazilian and Mato Grosso state governments, as well as from private companies including his own, has built roads, ports and expanded waterways through the Amazon rainforest that, according to critics, have further opened up the region to soy farms, cattle ranches and small colonists.

Maggi has initiated the creation of roads cutting through the heart of the Amazon, including the BR-163 highway currently being paved from Cuiabá, the capital of Mato Grosso, to the deep-water Amazon River port of Santarém. The asphalting of BR-163 is part of a public-private arrangement between the Brazilian government, Maggi and US agribusiness giants Cargill, Bunge, ADM and others who want a cheap way to export soy. According to the Amazonian Institute for Environmental Research, or IPAM, this 1600 kilometer road will cut a 10 million hectare swath of land through the region, opening the area for further colonization.

Blairo Maggi has shrugged off criticisms by those who see a conflict of interest between his position as Mato Grosso state governor and Brazil's largest soy producer. "My electoral platform was based on the need to keep up economic development in Mato Grosso," Maggi told Soybean Digest last year. "As governor, my key goal is to ... triple agricultural production in Mato Grosso within 10 years, and to develop agro-industry in order to add value to that production."

No End In Sight?

Given the power of agribusiness interests like the Maggi Group, the march towards soy and cattle-driven deforestation may seem unstoppable. But the export-driven soy expansion may slow down for reasons of demand, for the time being.

After reaching a fifteen-year high in April, the price of soy has fallen on the world market to half its peak value, partly owing to record soy production in the US and to decreased demand from China. The price of soy started to slip this spring after China refused to accept shiploads of soy from Brazil owing to high levels of pesticides on the beans. The Maggi Group estimates that it could take several years for the price to pick back up.

Over the long run, demand for soy is only expected to grow. As long as consumers continue to demand meat from soy-fed livestock and international banks continue to finance its growth, the Maggi Group will stay in business. Meanwhile, the vital ecosystems of Mato Grosso's Amazon rainforests and cerrado remain in danger.

Sweating the Athens Apparel

At the Olympic Games in Athens this year, the logos of McDonalds, Samsung, Coca-Cola, and other multinational advertisers are saturating the festivities to the tune of $1.339 million. But the corporate self-promotion and commercial branding won't end when the games come to a close. Sportswear companies have negotiated $81 million worth of licenses from the International Olympic Committee, allowing them to adorn their products with Olympic emblems. Behind the five intertwined rings and the Athens 2004 kotinos laurel wreath insignia, hidden from the eyes of the world, non-union, underpaid labor will be sewing the shirts, gluing the shoes, and putting zippers to running suits and track apparel branded as Olympic in working conditions that would make even the most highly trained athlete sweat.

While the sportswear market was valued at over $58 billion in 2002, and select athletes garner millions of dollars through corporate endorsements – such as football champion David Beckham's $161 million lifetime deal with Adidas - workers in sweatshops in Indonesia, Bulgaria, Cambodia, Turkey, China, Thailand, and elsewhere are paid a dollar or two a day, while facing hyper-exploitation, unhealthy working environments, sexual harassment, verbal and even physical violence from their employers.

This year, Global Unions, Oxfam, the Clean Clothes Campaign and other groups are aiming to change these conditions by turning the spotlight on the situation of workers producing apparel and athletic footwear for sportswear giants Nike, Adidas, Reebok, Fila, Puma, ASICS, Mizuno, Kappa, and Umbro. They call their campaign "Play Fair." "Play Fair campaigners interviewed close to 200 workers in factories worldwide and in factories producing goods for Olympic brands," says Katherine Daniels, trade policy advisor at Oxfam, "and they found cases of workers working shifts up to 16 – even 18 – hours for pittance wages that are not enough to live on. And they found gross intimidation and violations of workers rights, and intimidation for those who wanted to form or join trade unions."

Gearing up

In the past decade, anti-sweatshop activists have targeted highly visible firms like Nike, Reebok and Adidas, with campaigns on college campuses, at major retailers like the Gap, and at other athletic events. However, until recently sportswear giants like Fila, Puma, ASICS, Mizuno, Kappa, and Umbro have stayed below the radar. Now, these colossal Italian, British, Japanese, German, and American companies increasingly marketing sportswear as street clothes to young people using advertisements placing more emphasis on lifestyle than on athletic performance.

Fila and Puma are cases in point, selling their fashionable wear and old school sneakers to skaters, jocks, and hip-hop heads. Fila spends $116.4 million a year to maintain its image – the company shelled out $7 million to basketball star Grant Hill to peddle the Fila brand – while Puma pays more than $107 million per annum on advertising.

Originally an Italian company, Fila has been owned since 2003 by a private New York-based holding company called Sports Brands International, closely associated with the investment fund manager Cerberus Partners, which controls 20 sportswear and footwear subsidiaries, including the Ciesse brand. Fila promotes itself as on the luxury end of the sporting apparel industry, with "an Italian flair for style," partnering in promotion with the automakers Ducati, Ferrari, and Pininfarina. As a private company, SBI is not required to disclose its finances.

German-based Puma makes "lifestyle" sportswear such as funky suede trainers, track suits, and up-market Nuala yoga clothing endorsed by supermodel Christy Turlington. Puma is the world's sixth largest sportswear brand, doubling its profits in 2003 from $108 million to $228 million.

Sports brands like Fila and Puma do not manufacture shoes and apparel themselves, but instead subcontract out the work to factories around the globe, which are described by the Play Fair at the Olympics campaign as sweatshops. While both Fila and Puma have stated their commitment to honoring the labor rights of the workers who produce their merchandise, the reality on the factory floor seems to belie these claims.

"I have many health problems: headaches, diarrhea, stomach flu, back pains, and muscle cramps," says Fatima, a 22-year-old woman working for a Indonesian factory that produces for Puma, Fila, and other sportswear companies. "All these are caused by the situation in the factory – the bad air, having to stand all day, and the long hours of work without sufficient rest, water or food."

According to the campaign's report, Puma and Fila contract out to companies that regularly abuse workers, such as a factory in Indonesia where managers sexually harass the women, a Puma subcontractor in Bulgaria that threats to fire workers if they refuse to work overtime, and Puma and Fila subcontractors in Turkey that force overtime work on employees, among many examples.

Puma and Fila also subcontract out to companies that are virulently anti-union. Rana, a Turkish garment worker for a factory that produces for Puma and Lotto, says "Last year while the workers of the next factory were striking in front of their factory, our supervisor said to us 'You will see – all of them will lose their jobs. You never make this mistake. Otherwise you will face the same consequences."

Fair Play

Fila counters that it follows a very strict code of conduct. According to Fila spokesman Mark Westerman, "Fila takes the Oxfam report seriously and has very strict standards that we adhere to in the production of our products all around the world.... In addition, we have requested a meeting with the leaders of Oxfam so that we can better understand their claims, while at the same time clearing up any misunderstanding they may have with regard to our business practices."

Fila's Code of Business Conduct states that Fila will not do business with those who employ forced labor, that factories "must be free of any hazardous conditions," and that "Vendors/Suppliers must respect and recognize the rights of all employees to lawfully organize and bargain collectively."

While Puma did not respond to repeated inquiries from CorpWatch, Puma's Social and Environmental Report states: "The observance of human rights at all our global production sites is one of our fundamental requirements.... [Manufacturing partners production] must not be realized on the grounds of exploitative activities such as child labor or forced overtime work."

The actual impact of codes of conduct like these on the employment practices of sportswear companies is questionable. The Play Fair at the Olympics report documents the falsification of evidence during codes of conduct inspections at plants producing for Fila, Nike, Umbro, Speedo, Reebok, and ASICS, including the creation of false wage records, pressuring workers to say that they work a ten hour day and have two days off a week, and similar bogus claims.

Hee Wan Khym, senior research analyst with the US union UNITE HERE who has traveled around the world investigating sweatshops, says that codes of conduct and monitoring are limited. "My concern is whose paying these monitors? Is it the same corporations that are breaking the law?"

Picking up the Pace

According to critics, the companies are not just indirectly complicit in the treatment meted out to workers by their subcontractors. They are directly responsible for pushing their suppliers, who in turn squeeze their workers.

"When consumers go into a store we can buy any number of these sportswear brands, so you have Nike, Reebok, Fila, Puma in an intense price war with each other to gain our dollars," says Oxfam's Katherine Daniels. "What this means is that they in turn push that competition onto their suppliers, requiring their suppliers to reduce their prices, who in turn push down the competition, and squeezing competition out of their workers in the form of longer hours, requiring them to sew and manufacture faster, and lower wages."

Elsa, an Indonesian worker who makes apparel for Fila, Puma, ASICS, Lotto, and Nike, says that speed up in production is particularly hard on the factory workers. "In the garment division, the usual target is a thousand pieces per lane, per day. But during export days, the target doubles to two thousand pieces. This doubling is very stressful for us, and we often cannot reach it."

Seeing Red

Organizing around workers' rights in sweatshops poses many challenges, particularly since capital invested in the garment industry is some of the most mobile in the global economy. Campaigners and workers are constantly aware that shops may close down and relocate at the merest sign of labor unrest.

And while the conditions in apparel and footwear factories in the global South may be appalling, sweatshop jobs may often be better than other local jobs. Some critics in developing countries have expressed concern that anti-sweatshop activism might backfire and lead to the shutting down of factories and the loss of jobs.

Hee Wan Khym of UNITE HERE, which is an affiliate of the International Textile, Garment, and Leather Workers' Federation that is spearheading the Play Fair at the Olympics campaign, responds that closing these factories is not on the agenda. "In all of the international solidarity campaigns we undertake, our goal is not to shut the factory down. On the contrary we dialogue with the brands to ensure that they continue a steady order with the factory, at the same time trying to improve the working conditions, trying to implement the demands that the workers collectively outline as most pertinent to them."

The issue of the survival of jobs in the garment industry, including in sweatshops, is a pressing concern for other reasons. Many countries will face the devastation of sportswear jobs at the end of 2004 when the World Trade Organization lifts the quotas that have regulated trade in the apparel industry. "On December 31st of this year, those subsidies will be completely dismantled, says Alejandra Domenzain of Sweatshop Watch. "There are entire countries – for example, in Bangladesh something like 70% of their national income comes from their textile industry – [whose] economies are going to be devastated."

How those workers who produce for the sportswear industry will cope with such sea changes remains to be seen. Yet building international solidarity with other unions, targeting high profile companies like Fila and Puma at events like the Olympics and building consumer pressure will undoubtedly continue to be a central part of the strategy.

UNITES' Khym says that, despite the difficulties, working for collective bargaining rights is the most important issue. "At the end of the day, I believe the best monitors [of working conditions] are workers themselves – that is, when they organize and organize unions."

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