HEINEKEN Construction of the Rayados Football Stadium in La Pastora Park - negocios controversiales 2010 SOMO

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erview of controversial business practices in


April 2011

Overview of controversial
business practices in 2010


Amsterdam, April 2011

Overview of controversial business practices in 2010


H eineken
Overview of controversial business practices in 2010

April 2011

uthor: SOMO
Cover Design: Annelies Vlasblom


Th is publication was made possible with financial
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content of this publication is the sole responsibility of SOMO

and can in no way be taken to reflect the views of the Dutch
Mi nistry of Foreign Affairs.

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entre for Research on Multinational Corporations

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This company profile has been drafted by SOMO (Centre for Research on Multinational Corporations)
and provides an overview of controversial business practices that occurred or were addressed in
2010. In the context of the upcoming annual general meetings (AGMs) of shareholders of Heineken,
this overview aims to provide additional information to shareholders and other stakeholders of
Heineken regarding outstanding CSR issues. By highlighting such issues, the overview can be used to
identify areas of the company's corporate responsibility policies and practices that need improvement
and to formulate a more informed assessment of a company's corporate responsibility performance.

The range of sustainability and corporate responsibility issues included in this overview is broadly
based on issues and principles that are present in global normative standards for responsible
business behaviour, such as the OECD Guidelines for Multinational Enterprises. Rather than an
exhaustive analysis of Heineken's corporate responsibility policies, operational aspects of corporate
responsibility management, implementation systems, reporting and transparency, or total performance
on any issue, the overview provides a description of a limited number of corporate responsibility-
related issues and cases that might merit further attention or reflection. Heineken's positive
sustainability achievements in 2010 are not addressed here. Information on positive achievements can
usually be found in a company's annual and/or sustainability report and on the company's website.

The research methodology for this overview primarily involved desk research methods, relying on
information from SOMO's global network of civil society organisations, the company's own website
and publications, media reports, and company information databases. All sources are cited in
footnotes in the text. As per SOMO's standard research methodology, Heineken was informed about
the research in advance and was given two weeks to review a draft report and provide comments and
corrections of any factual errors in the draft version prior to publication. Heineken made use of this
opportunity and provided SOMO with a response which has been taken into account in the final text of
this overview.

This company profile is part of a joint project of SOMO and the VBDO (Dutch Association of Investors
for Sustainable Development - Vereniging van Beleggers voor Duurzame Ontwikkeling).

About SOMO
SOMO is an independent, non-profit research and network organisation working on social, ecological
and economic issues related to sustainable development. Since 1973, the organisation has been
investigating multinational corporations and the consequences of their activities for people and the
environment around the world. SOMO supports social organisations by providing training, coordinating
networks and generating and disseminating knowledge on multinational corporations in a context of
international production, trade, financing and regulation.

Overview of controversial business practices in 2010

Construction of the Rayados Football Stadium
in La Pastora Park

The Mexican company Femsa, whose beer operations were acquired by Heineken in 2010, is
planning to build a football stadium in La Pastora Park in Monterrey, Mexico. Consequences of this
construction would be biodiversity loss, deterioration of soil and water quality in the park, elevated
contamination levels, and more. Furthermore, local citizens' collectives and environmentalist groups
claim that the stadium, which is a private enterprise, will be built on public property so that the future
costs for decommissioning will have to be borne by the state. With the construction of the football
stadium in La Pastora park, Femsa may risk breaching the sustainability criteria on environmental care
and community involvement laid down in the OECD guidelines, the UN Global Compact, the UN CEO
Water Mandate and Femsa's own sustainability scheme. Although Heineken is not legally responsible
for the building of the Rayados football stadium, it is a stakeholder with high commercial interests in
the matter, its vice president is at the same time CEO of Femsa, and Heineken and Femsa are linked
through Femsa's high percentage of shares in the Heineken Holding. Therefore, the business
relationship between Heineken and Femsa is such that Heineken has a responsibility to avoid causing
or contributing to the adverse impacts of the project, to which it is associated through its commercial
interests and its business relationship.
In January 2010, Heineken purchased the beer selling operations of Mexico's most important
beverage company, the Fomento Economico Mexicano, S.A.B. de C.V. (Femsa). These operations
consist mainly of the Mexican brewery Cuauhtemoc Moctezuma (CM) and the Brazilian Kaiser
Cerveza (now Heineken Brazil). In return for the deal, Femsa received 20% of the shares in Heineken
Holding, becoming the largest shareholder after the Heineken family.

One of Femsa's subsidiaries, namely Desarollo Deportivo y Comercial, is planning to build a football
stadium with a capacity of 55,000 seats and 5,000 parking lots in La Pastora Park, located in the
municipality of Guadalupe which is part of the metropolitan area of Monterrey. Monterrey is the second
largest city in Mexico and La Pastora is the biggest recreational green area of the city. The football
stadium would occupy 20% of the park's surface, 26 hectares of the total 130 ha. The stadium is to
host the Monterrey Rayados soccer club, currently the national champion and owned since 2006 by
Femsa itself. Since the acquisition of Cuauhtemoc Moctezuma, Heineken is sponsor of Monterrey
Rayados.1 Upon completion, Heineken will enjoy the exclusive rights of selling its beverages in the
stadium. As Jose Antonio Fernandez Carbajal, CEO of Femsa and Vice Chairman of the Board of
Heineken put it, it will be a `very beer-like stadium.'2

1 `Mega proyecto para Rayados', Vanguardia, 13 January 2010,
http://www.vanguardia.com.mx/mega_proyecto_para_rayados-452275.html (08/04/2011)
2 Ibid.

The state of Nuevo Leon is to invest 500 million Mexican Pesos (MXN) (approximately 42 million US
Dollars - USD) in infrastructure and roads in and surrounding the park and another 200 million MXN
(USD17 million) in the park itself. Femsa is investing USD180 million.3 Femsa gets to own and use the
stadium for 60 years, after which the stadium reverts back to the state. According to the official
documentation, the stadium is to be used for 18 matches and 2 concerts/events a year.4

Monterrey is the most contaminated city of Mexico and in the summer temperatures can reach as high
as 45 degrees Celsius. La Pastora is the biggest park and forest in the city and the river La Silla runs
through it. The park is currently made up of a large forest, a lake, ponds, a zoo and an amusement

In February 2010 Profepa, the federal environmental prosecutor closed down the planned area of the
stadium because the preliminary excavations and the clearing of the terrain were being carried out
before a permit was obtained from Semarnat, the Ministry of the Environment and Natural Resources.
Geoimsa, the company which has carried out the excavation works for Femsa has been fined and
obliged to replant trees in the Cumbres de Monterrey National Park just outside Monterrey. Although
work since then has been halted and the construction of the stadium has not yet started, in February
2011 Femsa requested the missing permits from Semarnat.
The environmental impact assessment carried out for the plan recognises 46 adverse effects and 9
beneficial impacts of the project. The adverse effects include deterioration in the quality of the
underground as well as the surface waters of the park (the river La Silla), the composition and
topography of the land, the livelihoods of different plant and animal species in the park and socio-
economic effects like noise and public health concerns. The beneficial impacts mainly consist of job
creation, aesthetic qualities for the park and some recuperation of the flora and fauna of the park with
the construction of green areas around the stadium.

Femsa will have ownership of the stadium for 60 years, which is supported by the fact that the costs
for building and maintaining the stadium will be recovered in 60 years. According to state jurisdiction,
public property can be leased to private actors for a maximum period of 30 years, which may be
extended by another 30 when, according to economic circumstances the project is only viable with an
extended period.5 However, other stakeholders claim that the costs for the stadium could be recovered
in much less time, approximately 18 years, but that to reach these figures Femsa only uses the
income generated by the sale of the 5,000 VIP tickets and sky boxes per event in the stadium.6
Moreover, after 60 years a stadium would probably be at the end of its use, thus the decommissioning
and deconstructing costs for the project would have to be borne by the state.

According to environmentalist groups, the project endangers the 52 types of flora and the 107 types of
fauna living in the area. The project would also require chopping down 12 ha of forest which now
functions as the `natural lungs' of the city. This should also be viewed in the perspective of

3 Femsa announced in 2008 to invest MXN2,000 million in the project. In its cash flow analysis it mentions USD180 million.
Femsa press release 8 September 2008, http://www.femsa.com/es/press/news/construir-femsa-estadio.htm (10/02/2011)
4 Documentation prepared by Desarollo Deportivo y Comercial, subsidiary of Femsa.
5 Ley de Administracion Financiera para el Estado de Nuevo Leon, art 93,
6 `Gobierno y diputados no le quieren quedar mal a Femsa', http://www.youtube.com/watch?v=JVTULclZj_U (04/02/2011)

Overview of controversial business practices in 2010
deforestation in the region, which is happening at the highest rate in Latin America and the Caribbean
at the moment.7

In September 2008, when the construction of the stadium was announced, the creation of the Nuevo
Parque Ecologico La Pastora
(La Pastora New Ecological Park) was also made public. With this act
La Pastora Park was declared a natural reserve (area natural protegida - ANP). However, the area of
the ANP excludes the area where the stadium is planned to be built within the park.8 Moreover, the
foundation of the newly created Nuevo Parque Ecologico La Pastora, which oversees the
management and the usage of the park, also announced its new president: Jose Antonio Fernandez
Carbajal, CEO of Femsa and Vice Chairman of the Board of Heineken Holding. While the park and the
stadium are two different projects, there is clearly a conflict of interest at hand with Femsa's CEO
being the president of the park's foundation.

The Environmental Law of Nuevo Leon regulates the management and use of the ANPs in the state.9
It specifies the conditions under which construction activities can be carried out, as well as which
activities are prohibited in and around a natural reserve. These include soil and water contamination
and the removal of the ground. Although the stadium would not be located in ANP La Pastora, but just
outside of it, construction works and use of the facility would require some soil removal and would lead
to water contamination. Also the construction infrastructure surrounding the stadium would cause
damage to the natural reserve. Furthermore, the law stipulates that only those activities can be carried
out in and surrounding the ANP which have been undertaken or supported by the communities living
in or near the natural reserve.

A third-party environmental impact assessment commissioned by the Citizens' Collective in Defence
of La Pastora (Colectivo Ciudadano en Defensa de la Pastora) pointed out that from an urban
planning point of view, the stadium in the park is not being planned in the right location. There is no
adequate public transportation infrastructure (metro) near the park, nor are there any plans to build
such infrastructure, which would mean that to see sport events most of the spectators would have to
travel by car, resulting in elevated emission levels and the need for expansion of parking facilities in
the park.
Normative/legal standards violated
By building the new Rayados stadium in the La Pastora Park in Monterrey, Femsa risks breaching the
following standards, principles and policies:

Femsa's own sustainability scheme, which has four core values, two of which are community
engagement: encouraging `education and productivity, quality of life in the communities
surrounding our facilities' and environmental care: `mitigation of climatic change, availability of
drinking water for our communities, reforestation.'10

7 `Advances in environmentally sustainable development in Latin America and the Caribbean' (Santiago: United Nations'
Economic Commission for Latin America and the Caribbean (ECLAC), January 2010,
http://www.eclac.cl/publicaciones/xml/2/38502/2009-697-ODM-7-WEB.pdf (04/02/2011)
8 A. Hernandez, `Nuevo Parque Ecologico La Pastora `, Reporte Indigo website, no date,
http://www.reportebrainmedia.com/blog/nuevo-parque-ecologico-la-pastora (04/02/2011)
9 Ley ambiental del estado de Nuevo Leon, http://www.ciza.mx/apps/site/files/lanl.pdf (10/02/2011)
10 Femsa website, Social responsibility, `A longstanding commitment to responsible operation', http://www.femsa.com/en/social/

Principles 7 and 8 of the United Nations Global Compact, which both Femsa and Heineken are
signatories of. Principle 7 stating that `businesses should support a precautionary approach to
environmental challenges' and principle 8 stating that companies should `undertake initiatives to
promote greater environmental responsibility.'

The OECD Guidelines for Multinational Enterprises, chapter V. Environment: provision 2
states that companies should a) provide the public [...] with adequate and timely information on
the potential environment, health and safety impacts of the activities and b) engage in adequate
and timely communication and consultation with the communities directly affected by the
environmental, health and safety policies of the enterprise.

The UN CEO Water Mandate, which has guidelines on community engagement, states that
companies supporting the initiative should `be active members of the local community, and
encourage or provide support to local government, groups and initiatives seeking to advance
the water and sanitation agendas.'11

Principle 13 of the Guiding Principles on Business and Human Rights (Protect, Respect
and Remedy Framework)
developed by the UN Special Representative of the Secretary-
General on the issue of human rights and transnational corporations, John Ruggie, which states
that business enterprises `should seek to prevent or mitigate adverse human rights impacts that
are directly linked to their operations, products or services by their business relationships, even
if they have not contributed to those impacts. [...] Business enterprises may be involved with
adverse human rights impacts either through their own activities or as a result of their business
relationships with other parties. [...] Its `business relationships' are understood to include
relationships with business partners, entities in its value chain, and any other non-State or State
entity directly linked to its business operations, products or services.'12
Response of the company
In May 2010, when the issue received publicity in the Netherlands, Heineken reacted as follows in one
of the country's main daily newspapers: `Femsa is known for its positive role in social development in
Mexico and we are confident that any environmental concerns associated with the project will be dealt
with carefully by Femsa.'13

Commenting upon a draft version of this report, Heineken stated the following: `The building of the
Rayados Football Stadium is a project that is 100% designed by, planned by and owned by Femsa.
[...] Neither Heineken nor its Mexican subsidiary Cuauhtemoc Moctezuma are or can be involved in
any aspect of the project. [...] Given the above information we believe your
[SOMO's] assessment of
the Stadium project as a controversial business practice for Heineken is incorrect.'14

SOMO argues that although Heineken is legally not responsible for the building of the Rayados
football stadium, it does have a responsibility to avoid causing or contributing to adverse human rights

11 UN CEO Water Mandate, http://www.unglobalcompact.org/docs/news_events/8.1/Ceo_water_mandate.pdf (23/02/2011)
Since 2009 Heineken is a signatory of the UN CEO Water Mandate, Heineken CSR Report 2009, p 6.
12 John Ruggie, `Guiding Principles on Business and Human Rights: Implementing the United Nations `Protect, Respect and
Remedy' Framework', 21 March 2011, Advanced Edited Version, p. 14, http://www.business-
humanrights.org/media/documents/ruggie/ruggie-guiding-principles-21-mar-2011.pdf (11/04/2011) Although the UN Human
Rights Council has not yet adopted the Guiding Principles, they are already regarded an important frame of reference
defining corporate responsibility.
13 `Heineken criticised for football stadium' [Kritiek op Heineken om voetbalstadion], NRC Handelsblad, 14 May 2010,
http://vorige.nrc.nl/economie/article2543965.ece/Kritiek_op_Heineken_om_voetbalstadion (04/02/2011)
14 Heineken's reponse to a draft version of this document. Email received 4 April 2011.

Overview of controversial business practices in 2010
and environmental impacts related to the project. Heineken's non-legal involvement in the stadium
consists of the following:

Through its subsidiary Cuauhtemoc Moctezuma, Heineken is the sponsor of the Rayados
football team, which will be playing in the stadium.

Femsa is the owner of the Rayados football team. Not only is Femsa the second largest
shareholder of Heineken, it's CEO Jose Antonio Fernandez Carbajal, who is one of the main
promoters of the stadium, is Vice Chairman of the Board of Heineken Holding.

Heineken has a commercial interest in the stadium, as it will be an property exclusively selling
this company's beverages.

As Michiel Herkemij, CEO of Heineken Mexico put it: `We are very enthusiastic about the stadium,
Heineken and Femsa are one family. Jose Antonio [Fernandez Carbajal] is the second shareholder,
he is Heineken's second, we are a very good family'

15 ` El Presidente si quiere el estadio, dice FEMSA', Milenio, 23 March 2011, http://impreso.milenio.com/node/8932674

Trade Union Freedom at Cuauhtemoc
Moctezuma Breweries

The rights of employees to form or join an independent trade union in most of Heineken's Cuauhtemoc
Moctezuma breweries in Mexico are in danger of being breached. Most of the trade unions operating
at the production facilities are so-called yellow unions, which lack independence and are being
controlled by company management. These unions provide the fewest economic benefits for
employees, there is no collective bargaining on behalf of workers and employees are not involved in
the (re-)election of union leaders. By operating in a country where such practices are widespread,
Heineken risks operating in violation of several guidelines and conventions on the freedom of
association and collective bargaining, including the UN's Global Compact, the OECD Guidelines and
several ILO core conventions. Furthermore, independent research by a Mexican NGO indeed
indicates that concerns in this area do exist at the Cuauhtemoc Moctezuma breweries.
In January 2010, Heineken bought Femsa's beer selling activities, which in Mexico consisted of the
Cuauhtemoc Moctezuma (CM) breweries. This overview describes the labour relations at the CM
breweries at the time that Heineken just recently had taken over its operations in Mexico (2010). When
reference is made to `Femsa's breweries', this is referring to the CM group of companies.

In Mexico there are generally three types of trade unions which can be distinguished. First, there are
independent unions, with workers who are free in their choice to join (or not to join) the union, where
collective agreements are negotiated on behalf of the members and where union leaders are elected
democratically. Second, there are the so-called phantom unions, which only exist on paper. In case of
a phantom union, upon contracting, all employees are automatically affiliated to the union often
without even knowing about the existence of the union. Phantom unions are set up by company
management in order to prevent employees from joining independent unions. And third, yellow unions,
which are positioned between the phantom and the independent unions: they have a regular trade
union structure, but are controlled by company management.16 Yellow unions are the most prevalent
among the unions operating at the CM breweries in Mexico.
Role of Cuauhtemoc Moctezuma
In June 2010, FNV Bondgenoten and the Mexican NGO Centro de Investigacion Laboral y Asesoria
Sindical (CILAS) published a report on trade union freedom at Dutch multinational companies in
Mexico. The research included aspects of freedom of association and collective bargaining at the
Cuauhtemoc Moctezuma group companies, a subsidiary of Heineken. The findings in this overview
are based on the 2010 CILAS report.17

16 In Mexico, the term sindicato blanco (white union) is used to denote unions controlled by company management.
17 L. Bueno Rodriguez (coord.), `Freedom of association and collective bargaining at Dutch companies in Mexico' (CILAS, June
2010), http://tradeunionfreedom.fnvcompanymonitor.nl/research-reports/mexico-report.php (09/03/2011)