Veolia

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Introduction

Considering itself globally as the 'benchmark in environmental solutions', Veolia, formerly known as Vivendi and with many subsidiaries, provides services in four key areas: water cycle management, waste recovery and recycling, energy efficiency and transportation of people and goods. Globally, in all sectors, they employ nearly 320,000 people. Out of 32.6 billion Euros of consolidated revenue, water was the largest contributor with 34% of that revenue, Veolia Environmental Services (Waste) brought forth 28%, energy was 21% and transportation 17% [1]. In water they are the second biggest supplier of water and waste water services in the world. A vast global concern, they provide essential services in countries right across the globe. They were helped in their recent expansion by the unique system in France, which saw municipalities often outsource essential public services out to the private sector. Consequently they were in prime position to take advantage of the neo-liberal revolution that advocated and then practiced outsourcing from the public to private sector and partnership between the two. As an implicit and explicit consensus took hold: private was good and dynamic and the public was bad and stagnant.

In their annual report for 2007 Veolia are pretty pleased with the financial results borne from their expansionist strategy. Jérôme Contamine, Senior Executive Vice President said, “Our 2007 performance confirms our expansion strategy, which is based on the ability of Veolia Environnement’s teams to generate steady and sustainable organic growth in buoyant markets. This was complemented in 2007 by a policy of making selective acquisitions, which strengthen our leadership position.”[2]. These aquisitions include buying out Thames Water stake in the joint venture Scottish Water Solutions and their PFI contracts for Wastewater Treatment Plants in Scotland.

Veolia advances the view that they are best placed to manage the diverse and increasing demands for water. They recognise that agriculture, industry and domestic needs - population growth and rapid urbanisation are both burgeoning - all have competing needs for water. In their annual report for 2007 they proclaim themselves best placed to manage these competing interests, through their technological expertise, ability and resources [3]. They don't mention costing as a mechanism to manage these interests. This is however the dominant policy prescription articulated by all the main actors in the water sector. The arguments goes that by placing in price adequate tariffs usage will be curbed and regulated. Moreover, by extension, water is categorised as a commodity like any other and one that they are fighting to win the right to supply or, more accurately, to sell.

Veolia has been plagued by controversy in recent times, however. Prosecutions and convictions of employees on corruption charges have stained their name and accusations of environmental degradation and price-gouging persist [4]. Veolia Water sector is clear that one of their top priorities is to pursue growth opportunities in Europe, Asia and the Middle East [5]. Europe is where the vast majority of their business takes place: 44% in France itself and 36% elsewhere in Europe. Given that the bulk of their business is carried out in Europe, it is not surprising that Veolia lobbies so hard in and around the European Union.

Private water companies providing for the poor: A flawed approach?

The policy deployed by Veolia to locate themselves in developed countries, such as in Europe, is evidence that the promotion of private business, mainly by governments and supra-national institutions, as the provider of water in the world's poorest places is a flawed approach. It is clear that they are not motivated by notions of philanthrophy or altruism, rather they need to ensure they meet their legal obligation to provide their shareholders with a dividend from their investment. More often than not, private companies cannot square the magic circle of increased investment, an increase in connections to the poor, appropriate and scaled progressive tariff systems that ensure access for the poor, and the provision of dividends. The model currently in vogue, Full-Cost Recovery, designates that companies will only supply to those they believe can afford to pay them back. The world's poorest do not fit that criterion. Indeed, even the biggest companies recognise the fact that water can be a risky business model and that they are not best placed to meet the needs of those without water and sanitation [6].

Veolia themselves acknowledged this thinking. Corporate Watch reported how 'Yves Picard, managing director of Vivendi in South Africa, said his company is not interested in concessions in southern Africa unless the World Bank or other institutions finance the capital costs. Otherwise, there is no payback for the company because people are too poor to pay the high water rates private company’s charge to cover their capital costs' [7]. Evidently, private water companies such as Veolia have acted within that context by looking for 'affarmage' contracts and relocating to what they perceive to be more stable, less turbulent and regulatory conducive countries. Only government and supranational subsidies, grants, soft loans, etc., as recommended by the now famous Cammedessus Report, will placate, soothe and allay their concerns. Effectively they are looking for monies from governments in a way that amounts to a form of corporate welfare. Achieving this goal requires time, effort and money into systematic lobbying efforts.

Serial and powerful lobbyists

Veolia has employed a broad, far reaching, formidable and systematic approach to lobbying. They are active on various fronts which they believe will assist the needs of their business and which they perceive to be in need of political action. These include the expanded liberalisation of trade, favourable regulatory environments, the introduction of competition, the opening up of public services to the private sector, and institutional financing. To garner knowledge and influence, they employ ex-political appointees or elected officials. They also belong to and fund various lobby groups, think tanks and trade associations, and sponsor conferences that bring together various actors/participants interested in current and future water policy.

Political links

As befits a company which requires a suitable and appropriate regulatory environment, as well as grants and 'soft' loans from governments and supra-national institutions, Veolia has a formidable lobbying operation. As part of this strategy, many members of their board have a history in politics. Therefore, people are employed who know the architecture of government – for instance, former French and US government officials. In the UK they employ a current Member of Parliament John Selwyn Gummer as a UK board member and ex-EU officials, thus placing Veolia in a strong position to exploit opportunities from policy initiatives. And, possibly much more importantly, this gives Veolia the know how to influence policy affecting their business.

This revolving door between politics and finance has seen many people from various political backgrounds recruited and then employed by Veolia. A list follows.

Daniel Bouton was a French Government official before entering into the private sector.

Membership of and collaboration with think tanks, trade associations and lobby networks

Conferences

Controversy never far away

In the last 10 years or so, Veolia, mainly as Vivendi, has been forced to pull out of a plethora of contracts across the world. Various instances of environmental degradation, pollution, customer dissatisfaction, attacks on workers' terms and conditions, reduction of staff cover, reduction in investments and higher tariffs have seen the forced withdrawal of Veolia from places as diverse as Argentina, the USA, Kenya, Puerto Rico and Brazil. The company has accumulated large fines in the UK as a result of prosecutions for incidents where their subsidiaries polluted the wider environment [8]. Its true to say that all of these practices have not happened at all places at all times, however they do indicate a general trend to maximise profit, an objective that often does not syncronise with social and environmental needs.

Vivendi has accumulated multi-billion pound debts as a consequence of its continual diversification and expansion into various sectors – a strategy that proved its undoing. An investigation in 2005 reported that 'the once-massive Vivendi Universal empire, of which Vivendi (now Veolia) Environnement was a part, was a maelstrom of corporate corruption and chaos, bribery convictions, raids on corporate offices by evidence-seeking securities investigators, class action suits filed by shareholders on both sides of the Atlantic, collapses in both its stock price and its credit rating, massive debt necessitating a fire-sale of assets, a discredited and ultimately ousted corporate chieftain, dizzying financial uncertainty, and an identity crisis' [9].

The perils of treating water like any other commodity are shown in the case of Vivendi. Providing an essential element for life is different from making and showing movies, yet water was part of the portfolio of a company that treated both equally: as a means to enhance their profit. To increase that profit they expanded their business in the entertainment industry, financed by money meant to upgrade vital water infrastructure in France. This was described in the report by Public Citizen: 'As part of their contracts, Vivendi set aside a portion of revenues to be saved for maintenance and repair of the water system. A recent book by former Vivendi employee, Jean-Luc Touly, and investigative journalist, Roger Lenglet, reveals that by 1996 Vivendi’s “capital improvement” account added up to 27 billion francs, which were invested in a reinsurance company, General Re Financial Products. Lenglet and Touly claim that these funds were then used to finance Vivendi’s ill-fated end-of-the-century buying spree. The French consumers’ 27 billion Francs, enough money to replace the entire water network of France, have gone down the drain, leaving Vivendi with a multi-billion dollar debt and the citizens of France with aging pipes in desperate need of rehabilitation [10] [11]. Since then Veolia has spanned the globe for management contracts that enable them to profit without making any investment. The public, rather than Veolia, makes the investment, through higher tariffs, grants, subsidies, tax breaks, etc.


Or, in other words


Veolia is seeking 'management contracts with clear cash flows and little in the way of capital commitment. These are contracts where the company can lease assets and collect revenue without being required to make any major capital investments in maintaining, expanding or rehabilitating the water system infrastructure. In other words, the public must pay for pipes, treatment plants and other infrastructure, and the company gets to make the money. The French term for the model is affermage, but several English phrases serve more than adequately to describe the arrangement; for instance, “corporate welfare,” “subsidy” or “consumer rip-off.”' [12]. This is the type of deal that they have entered into in Scotland.


Corruption

In their pursuit of expansion of 'affermage' contracts Veolia, through Vivendi or Generale Des Eaux, has often stepped outside legal boundaries. Manifesting itself most prominently through the bribing of public officials in exchange for public contracts; happening so regularly that it seemed common practice.

Their were convictions of officials in the following places.

  • Strasbourg, France, 1991
  • St. Denis, Isle de La Reunion, France, 1996
  • Angouleme, France, 1996
  • New Orleans, Louisiana, USA, 2001
  • Milan, Italy, 2001
  • Bridgeport, Connecticut, USA, 2002

In recent times this litany of cases has increased. In Rockland, USA, a subsidiary of Veolia was recently made to pay the town $746000, $232500 fines and the rest legal fees for colluding with Rockland's former sewer superintendent in order to win a 1998 contract [13]. Moreover, there is a lingering concern that in many of the places throughout the world where Veolia hold contracts that the regulatory and judicial environment is not as strong as where they have been prosecuted. Thus, making it easier to indulge in illegal activity if so inclined.


A Director of Veolia, Daniele Bouton, was under Judicial Investigation and placed under trial for apparent involvement in a multi- billion Euro money laundering scheme between France and Israel. Formerly Chief Executive of the bank Societie Generale he was forced to stand down after a banking scandal early in 2008 [14]. Mr Bouton is still a Director of Veolia.


Veolia's transport section was also linked to a corruption case In Marbella, Spain. There officials were arrested on suspicion of bribery in connection with the renewal of the local transport concession granted by the Marbella local council [15].

Veolia and Israel

According to the French Embassy in Israel Veolia has been active in Israel since 1993 [16]. Recently Veolia's links with Israel have provoked the ire of many groups concerned at the continued occupation of Palestinian land. As their most recent collaboration is for a tramline, to be constructed on occupied Palestinian territory in East Jerusalem. Other investments and interests they have in Israel include the Ashkelon desalination plant; the privatization and outsourcing of water and waste management services for local authorities;the government's energy savings tender for hospitals plus they have signed signed a cooperation agreement with the Israel Electric Company to provide electricity services for the Jerusalem Light Railway. Other projects include providing light railway lines in additional cities across the country; Veolia Transport already has won the tender to operate the Jerusalem Light Railway, which is expected to commence in 2009 [17]. The investments by Veolia in Israel did inspire a response from the Dutch Bank ASN. They decided based on their ethical and social policy that it would end its relationship with Veolia Transport, and all companies that benefit from Israel's occupation of Palestinian territory [18].


Veolia and Scotland

Veolia has recently attained a significant a foothold in the Scottish Water Industry. They have bought out Thames Water's stake in various PPP schemes and their holding in Scottish Water Solutions (SWS). This incursion into Scotland progresses their expansive affarmage policy and places them in a position primed to take advantage should water in Scotland liberalise further or even privatise.

People

Executive Team


The Board of Directors at March 31, 2008


The Board of Directors for Veolia UK

Water: Key figures

  • €10,927.4 million in revenue
  • 60 operating countries
  • 82,867 employees
  • 78 million people provided with water service
  • 53 million people provided with wastewater service
  • More than 4,400 contracts managed around the world [21].

References

  1. ↑ Veolia Annual Report 2007 (p9), Accessed 12 October 2008
  2. ↑ Veolia Annual Report 2007 (p13), Accessed 12 October 2008
  3. ↑ Veolia Annual Report 2007 (p48-51), Accessed 12 October 2008
  4. ↑ Report by Public Citizen: Veolia Environment, a Corporate Profile Accessed 13th October 2008
  5. ↑ Veolia Water Management, Accessed 13th October 2008,
  6. ↑ Eric Swyngedou "Retooling the Washington Consensus: The contradictions of H2O under neo-liberalisation and the tyranny of participatory governance", Accessed 15 October 2008
  7. ↑ Corporate Watch, Vivendi's Empire Building May 2003, Accessed October 16th 2008,
  8. ↑ A Report by Public Citizen: Veolia Environment, a Corporate Profile, (p5-10) Accessed 15 October 2008
  9. ↑ A Report by Public Citizen: Veolia Environment, a Corporate Profile Accessed 13th October 2008
  10. ↑ Lenglet, Roger and Touly, Jean-Luc (2003) L’eau de Vivendi: Les Vérités Inavouables, Paris : Alias, Patrick Lefrancois, p. 18-20.
  11. ↑ A Report by Public Citizen: Veolia Environment, a Corporate Profile Accessed 13th October 2008
  12. ↑ Report by Public Citizen: Veolia Environment, a Corporate Profile (p2) Accessed 13th October 2008
  13. ↑ Lightman, A, Rockland; 'Sewer corruption case began in 1998; Firm pays up, ending scandal' The Patriot Ledger, 1st July 2008
  14. ↑ 'Prosecution seeks acquittal in Societe Generale laundering case' Agence France Presse - English, 3 June 2008
  15. ↑ LOCAL BUS TRANSPORT EXECUTIVES HELD IN MARBELLA CORRUPTION SCANDAL, Expansion, April 26th 2006
  16. ↑ Adri Nieuwhof, The Electronic Intifada The Israel Veolia "Connexxion", September 13 2006, Accessed 13 October 2008,
  17. ↑ Jeruselam Post French water giant Veolia to invest $1b. in Israel, May 8th 2007, Accessed 13 October 2008
  18. ↑ Adri Nieuwhof, The Electronic Intifada Principled Dutch ASN Bank ends relations with Veolia November 26th 2008, Accessed 13 October 2008
  19. ↑ Veolia Board of Directors as of March 31, 2008, Accessed 15 October 2008.
  20. ↑ Veolia Water UK, About Us Our Board, Accessed 15 October 2008,
  21. ↑ Veolia Annual Report 2007 (p48-51), Accessed 12 October 2008
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