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How Will KKR Apply Its ESG Policy at Newly Acquired Refresco?

Private equity firm KKR recently acquired a majority stake in Refresco, the world’s largest independent bottling company. Refresco produces beverages such as BodyArmor Sports Drink for Coca-Cola, Gatorade for Pepsi, Arizona Iced Tea, and Tropicana juices.

KKR touts its responsible investing and stated concern for environmental, social and governance (ESG) issues. The company’s website states, “We believe that thoughtful management of environmental, social and governance (ESG) issues is smart business and see it as an essential part of long-term success in a rapidly changing world. KKR is committed to investing responsibly by integrating material ESG considerations into our investment policy.”[1]

However, Refresco’s actions raise questions about how KKR will apply its ESG policy to the company. Refresco has engaged in practices that endanger the health and safety of its workforce and the environment.

Workforce

In June 2021, a majority of the almost 250 workers at the Refresco bottling plant in New Jersey voted to join the United Electrical, Radio, and Machine Workers of America union (UE) to counter the abusive treatment by supervisors, the low wages, minimal benefits, sexual harassment, constant schedule changes, and an unforgiving attendance system that penalized workers for getting sick.

The Wall Street Journal reported that in the spring of 2020, workers at the Refresco plant staged a walk out to protest the unsafe working conditions during the pandemic after a manager berated a worker who was worried about the coronavirus and said he felt ill.[5]

Refresco hired a notorious union busting law firm that has a long history of trying to prevent workers from organizing. Workers were not intimidated by Refresco’s aggressive anti-union campaign, and a majority of the workers voted to unionize. Nine months later, Refresco is still refusing to recognize the union and refusing to bargain, even though the National Labor Relations Board has officially certified the union.

Health and Safety

Refresco says that “safety first” is its highest priority. The company states, “We want everybody to feel safe and secure in their work, day in day out.”[6] Refresco lists becoming “one of the safest places to work in the industry” as a Key Performance Indicator.[7]

However, Refresco and the bottling operations Refresco has acquired have a history of being cited for serious workplace violations by the US Department of Occupational Safety and Health Administration (OSHA). OSHA defines a serious violation as “such that there is a substantial probability that death or serious physical harm could result.”[8]

In 2015, OSHA cited the Cliffstar bottling plant in New York for seven serious violations. Cliffstar was then acquired by Refresco. In April 2019 the New York Refresco bottling plant was cited by OSHA for another ten serious health and safety violations.[9]

Also in 2015, OSHA cited the New Jersey Refresco plant for eight serious violations, one repeat violation for something Refresco had previously been cited for, and two willful violations. The willful violations were for not providing hearing tests for workers exposed to prolonged noise.[10] OSHA defines “willful” as when the employer either knowingly failed to comply with requirements or acted with plain disregard to worker safety.[11] In 2018, OSHA cited the plant for several more serious violations.

Unsafe working conditions are one of the main reasons that workers at the Refresco bottling plant in New Jersey organized a union. They want to negotiate with Refresco to make the plant a safer and healthier workplace.

In November 2021, the union filed a complaint with OSHA detailing a number of health and safety concerns at the New Jersey plant, including extreme noise. Refresco’s own logs show that three workers suffered hearing loss last year, and OSHA has previously cited the plant for willful violations regarding the prolonged loud noise. Workers report that they have brought these issues to the company’s attention, but there has been no improvement.

OSHA requires that employers keep a record of work-related deaths, injuries, and illnesses. This log is intended to help in evaluating the type, frequency, and severity of workplace injuries and illnesses. The injuries that were recorded in the log just last year include a concussion, a dislocated shoulder, a burn due to a ruptured can, and the three instances of hearing loss, mentioned above.

OSHA cited Refresco for four more serious violations at Refresco plants in 2021.[12]

Environment

Refresco notes that it has developed three pillars on which to focus its corporate social responsibility, one of which is “Happy Planet,” and lists making “sure our company’s impact on the environment is as low as possible” as one of its sustainability Key Performance Indicators.[2]

Despite these pronouncements, the Refresco bottling plant in Walla Walla, Washington has been cited for dozens of violations “of discharging dirty and potentially dangerous wastewater.” Inspectors found that Refresco’s wastewater frequently contained toxic PCBs in excess of regulatory limits sometimes as much as forty-three times the limit.[3]

Refresco was cited for forty violations from 2019 through 2021, resulting in $440,000 in fines. In the summer of 2021, the city of Walla Walla issued a final notice and threatened to shut the plant down if Refresco did not come into compliance by July 2022. The city announced that it would fine Refresco $500 per day until the plant was in operation.[4]

KKR needs to take steps to ensure that its portfolio companies, including Refresco, are following its ESG policy.


[1] https://www.kkr.com/responsibility/responsible-investment

[2] https://www.refresco.nl/drupal/media/data/nl/2020-12/sustainability-KPIs-RB-2020.pdf

[3] https://www.union-bulletin.com/news/more-wastewater-fines-for-walla-walla-refresco-bottlingplant/article_cbcd9336-14d6-11ec-a2b2-c3907f244570.html

[4] https://www.union-bulletin.com/news/more-wastewater-fines-for-walla-walla-refresco-bottlingplant/article_cbcd9336-14d6-11ec-a2b2-c3907f244570.html

[5] https://www.wsj.com/articles/u-s-plant-workplaces-emerge-as-coronavirus-battlegrounds-11585775230

[6] https://www.refresco.com/en/stories/go-for-zero/

[7] https://www.refresco.nl/drupal/media/data/nl/2020-12/sustainability-KPIs-RB-2020.pdf

[8] https://www.osha.gov/publications/fedrites

[9 ] US Department of Labor Occupational Safety and Health Administration Enforcement Data, accessed 11/28/21

[10] US Department of Labor Occupational Safety and Health Administration Enforcement Data, accessed 11/28/21

[11] https://www.osha.gov/publications/fedrites

[12] US Department of Labor Occupational Safety and Health Administration Enforcement Data, accessed 11/28/21

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