Lessons from Veolia: Supporting the occupation is bad for business

Mondoweiss

Veolia has finally sold the last of its remaining businesses in the occupied Palestinian territories, as reported by WhoProfits.org on August 27, 2015.  This elevates Veolia to the status of the first major BDS target company to fully withdraw from all of its various Occupation enterprises

Veolia has been deeply invested in the Israeli occupation.  It ran bus services for Israel on the segregated Israeli-only roads in the West Bank, while Palestinians were and are still relegated to slow side roads, burdened with checkpoints and sometimes entirely blocked to traffic.  It was a member of the consortium that built the Jerusalem light rail system, connecting West Bank settlements to West Jerusalem.  It held the exclusive right to operate the Jerusalem light rail system. It also operated the Tovlan landfill operation in the West Bank’s Jordan Valley, which had been the fertile breadbasket of Palestine, and a wastewater treatment facility for Israelis who live in Israel and in the settlement of Modi’in Illit.

Veolia’s West Bank business activities overwhelmingly benefit Israeli settlers and commuters, rather than Palestinian residents. [1] All of these business activities were unlawful under international law, as seizures and development by an occupying power of the occupied land, facilitating the transfer of Israelis to the occupied territories, which is also unlawful.

Veolia’s profiteering from the Israeli occupation became a major focus of all forms of BDS activism – boycott, divestment, and sanctions campaigns — in Europe and the United States.  By the end of 2013, Veolia reported a staggering debt, exceeding $20 billion.  Its investment rating was reduced to junk status. Of significance to the BDS movement was that the amount of Veolia’s debt load equaled, almost exactly, the value of all of its lost contracts, failures to win expected new contracts, and voluntary withdrawals from bidding for contracts in places where there were active anti-Veolia BDS campaigns.

The victory against Veolia is especially noteworthy, given the daunting difficulties faced by campaigners:

  1. an extremely challenging target – a long-term corporate contractor for major public services to municipalities, states, and countries;
  2. in the U.S., widespread low-bidder laws, typically requiring public entities to accept the low contract bidder, whoever it may be;
  3. an enormous and seasoned corporate target – Veolia is often the sole or only qualified bidder; and
  4. the hard reality that once contracts are signed, activists must refocus on campaigns against contract renewals.

The victory is a significant movement milestone, with notable implications:

  1. Importantly, it demonstrates the power of the BDS movement.  While Veolia has in the past denied a causal connection, it is impossible to ignore the tight parallel between its debt load, on one hand, and, on the other, contracts that were not renewed or won and contract campaigns that were inexplicably abandoned in places where there were active anti-Veolia BDS campaigns.  Under any standard, a $20 billion loss by a single company is a staggering wound, and Veolia cannot credibly deny the magnitude of the injury it suffered from BDS activism.
  2. This important movement victory carries a subtler lesson about boycott versus divestment as BDS campaign strategies:  Both are powerful organizing tools, and both were actively deployed against Veolia by BDS activists.  Both take time, hard work, and gritty determination.  It is noteworthy, though, that – with one enormous exception – positive outcomes of Veolia divestment campaigns are hard to find in this success story.  The one exception was TIAA-CREF’s divestment from Veolia across all of its SRI accounts, after a relatively short 3-year national divestment campaign – the first in the U.S. BDS movement – by WeDivest, the informal consortium of several groups, initiated by Jewish Voice for Peace.

As demonstrated by the daunting obstacles to success against Veolia, boycotts are not a magic bullet. But the general absence of positive outcomes from divestment campaigns against Veolia warrants analysis.  Here is a hypothesis, offered to open discussion on other platforms about tactical issues:  The culprit bogging down otherwise promising divestment campaigns appears to be a process called “engagement.”  In theory, engagement is a laudable effort to persuade a targeted company to end the business practices perceived to violate SRI legal and human rights. [2]  In practice, engagement has become an albatross that is strangling divestment efforts, dragging them out for years, sometimes as long as a decade.

It doesn’t have to be this way!  No law or fiduciary duty requires more than a reasonable effort, or any engagement, at all, especially when it seems a futile process; the decision to engage is purely a tactical one.  It should suffice to engage a greedy, amoral, scofflaw corporation simply long enough to provide fair notice of what will happen if it continues to refuse to withdraw from its Occupation enterprises.

Almost all for-profit corporations exist for one purpose:  to earn profits.  The threat of reduced profits is what’s most effective in getting their attention.  If the message seems to be falling on deaf ears, it’s reasonable to decide that it’s time to move on.

3. The success against Veolia, especially in light of the formidable challenges faced by campaigners, underscores the value of the many coalition efforts that formed among environmental, water, and Palestinian justice advocates, to make this outcome possible.

4. The now successful campaign against Veolia makes a persuasive case that profiteering from legal and human rights violations can be bad for business when the opposition is organized.  The Veolia victory adds a new arena to the BDS arsenal, in addition to the SRI arena of corporate ethics:  the “reputational risk” of thumbing corporate noses at BDS campaigns for Palestinian justice.  Fiduciaries most definitely do have the obligation to assess potentially destabilizing market risks to companies in their entities’ portfolios – as duly noted by Veolia itself, when it decided – five years ago – to sell off all of its Israeli Occupation businesses.  Other corporations will now increasingly take note that Veolia’s romance with profiteering from human rights violations came close to bringing this giant corporation down.  Supporting Israel’s occupation is now clearly bad for business.

Big thanks to Sydney Levy for his invaluable comments on an earlier draft of this piece.  He had no chance to read the final version and cannot be blamed for any of its deficiencies.

Notes

  1. Two Jerusalem light rail station stops in Palestinian areas of the route, presumably built in response to the international uproar over Israel’s segregated and highly discriminatory transportation systems in the West Bank and Jerusalem.  These stations have operated sporadically, often being closed, and therefore fail to provide the reliable transportation that all commuters need.  The Tovlan landfill serves some Palestinian towns, but the civil society Palestinian call for global BDS did not spare targeting this landfill operation in the fertile Jordan Valley.
  2. In 2011, the UN Human Rights Council endorsed the “Ruggie Principles,” which encourage corporations and grassroots activists to resort to “engagement,” and “dialog” in using corporate shareholder remedies to resolve disputes.  See http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf

ALSO
http://whoprofits.org/content/veolia-sells-its-shares-jerusalem-light-rail-and-completes-withdrawal-israeli-market

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