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PepsiCo's world-class ESG agenda is centered on supporting people, communities, and the entire packaged goods industry

Erica Sweeney   

PepsiCo's world-class ESG agenda is centered on supporting people, communities, and the entire packaged goods industry

  • For years, PepsiCo has been a leader in the ESG space.
  • The company has aggressive sustainability goals over the next decade.
  • Here's how the company is planning to bolster sustainability internally, and throughout the industry.

PepsiCo — the parent company of iconic brands like Pepsi, Lay's, Gatorade, and Quaker Old Fashioned Oats — has been committed to environmental, social, and governance, or ESG, initiatives for several years. In 2021, the consumer packaged goods company expanded that commitment with the debut of PepsiCo Positive, a strategic sustainability and governance plan focusing on three pillars: agriculture, value chain, and choices.

"It's a strategic end-to-end transformation with sustainability and human capital at the center," Anna Palazij, PepsiCo's vice president of ESG reporting and strategic investments, told Insider. "What we're trying to do is transform the way we source our products in a more sustainable way, how we manufacture our products, and how we bring them to consumers."

PepsiCo has been a leader in the ESG space. The company recently ranked second on the 2022 list of 100 Best Corporate Citizens by 3BL Media, and it's made the list every year since 2009. Palazij said PepsiCo Positive aims to drive growth internally and throughout the consumer packaged goods (CPG) industry.

Expanding its ESG commitment comes as investors, suppliers, stakeholders, and customers are asking for more commitments on sustainability. The CPG industry is also feeling strained through droughts and hotter temperatures. Governance is crucial to all of this because it ensures companies are setting goals, tracking performance, and reporting to stakeholders to ensure accountability.

"We knew that now was the time to act, and we felt a responsibility and an opportunity," Palazij said.

PepsiCo Positive is a standalone ESG program to help the company grow and become more resilient for the future. It's embedded into the company's overall financial framework, Palazij said. PepsiCo issued a $1 billion green bond in 2019 to produce a more sustainable food system by focusing on better packaging, decarbonization of operations and supply chain, and water sustainability. At the end of 2020, PepsiCo had distributed $858 million of the bond, which had helped reduce greenhouse gas emissions and water use and improve energy efficiency.

Here's a look at how PepsiCo is transforming its business operations to produce products more sustainably.

Sustainability and governance are interconnected

Governance is intertwined with PepsiCo's ESG goal-setting and progress reporting.

PepsiCo aligns its sustainability efforts with the Science-Based Targets initiative, which ensures it's meeting ambitious goals that follow the latest climate science. For example, the company plans to reach net-zero emissions by 2040 — meaning the greenhouse gas emissions produced are balanced with emission reductions — and be net water positive by 2030, in which the company will replenish more water than it uses. In 2020, PepsiCo achieved 100% renewable electricity in its US operations, which is the company's largest market, and plans to expand that to 15 countries by the end of 2021.

Progress on sustainability is reviewed by the Executive Council, which comprises members of the executive leadership team. "Our governance starts at the top of PepsiCo," Palazij said, adding that executive compensation is tied to sustainability performance and progress.

PepsiCo regularly shares progress on ESG initiatives with stakeholders, including investors and consumers. The company provides updates on its website, where it lists details for more than 50 ESG topics, including environmental impact, people, product and nutrition, and ethics and governance.

"We continue to look at what's needed to be transparent and tell our story, but in an authentic and transparent way, and we align our reporting to that," Palazij said.

Supporting people and communities is central to the value chain commitment

Creating a safe and equitable environment for employees, the communities it reaches, and everyone involved in its supply chain is a key part of PepsiCo's initiatives.

"People are such an important part of PepsiCo and sustainability as a whole, and ultimately our PepsiCo Positive agenda looks at how we drive better outcomes for people and the planet," Palazij said. And that spans the full value chain from the farmers who grow the crops to the consumers who enjoy them.

PepsiCo plans to expand regenerative farming across 7 million acres and so far has rolled out regenerative farming on 345,000 acres. The company, Palazij said, is committed to improving the livelihood of the 250,000 people in its agriculture supply chain through partnerships with the National Black Growers Council and the US Agency for International Development. PepsiCo plans to sustainably source 100% of ingredients, like oats and potatoes — a goal it's already achieved in some countries. The company also hopes to provide safe water access to 100 million people by 2030, and Palazij said the company now delivers water to 68 million people globally.

Building diverse, inclusive, and equitable workplaces across the company is part of its commitment to people. In 2020, PepsiCo launched the Racial Equity Journey with plans to invest $570 million in the next five years to support Black and Hispanic businesses and communities. PepsiCo also pledged $100 million through 2025 to support opportunities for women in the workforce.

Driving ESG innovation to improve the packaged goods industry

PepsiCo's recognition for its ESG initiatives helps validate the value of the company's work and shows that it's resonating with stakeholders and others in the industry, Palazij said.

The company seeks to drive innovation in sustainability through its PepsiCo Labs program, which works with venture capital to identify new technology to help accelerate its sustainability agenda. PepsiCo champions innovation from competitors, which ultimately improves the CPG sector as a whole.

"Consumers consume our products more than a billion times a day, so we have a unique opportunity from a size and scale standpoint to transform," Palazij said. "We think that is both an obligation and an opportunity to change the way business is done. It goes beyond the competition with others because we want everyone engaged in this collaboration."


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