Analysis

Results 

Performance with Purpose is an important sustainability vision to PepsiCo since the main reason for this project is to leave a positive imprint on the society and the environment. In order to protect the environment, PepsiCo has developed this vision statement to conserve the planet and to help communities and employees to achieve a common goal; “the triple bottom line”. Its sustainability vision statement is achievable since they mainly focus on having a great financial performance while focusing on providing a good brand image and having an extraordinary environmental responsibility. PepsiCo provides a clear sustainability vision as it also gives a plan for the future and their achievements starting from the environment to profits.

The chart below displays the team’s findings regarding PepsiCo’s compliance of its 2015 GRI report to the content and quality guidelines of the G4 version of the GRI.

Figure 1. Analysis of PepsiCo’s GRI Compliance

Figure 2. Shadow Reports & ESG Issues

C. Creating Shared Value & the 4 Pillars

When examining PepsiCo’s Performance With Purpose 2025 Agenda, the company creates shared value by intertwining sustainable strategies into the 4 pillars (products, planet, people and profits). The company believes it should not only generate revenue for the good of the company but use the revenue earned to invest in a better environment and society. They recognize societal value in their business as opposed to just economic opportunities.

The table below lists the methods of creating shared value as established by Porter and Kramer (2011) followed by PepsiCo’s sustainability methods on addressing the 4 pillars.

Figure 1.3 PepsiCo’s Agenda to Create Shared Value in the 4 Pillars

II. PepsiCo’s Sustainability Strategy

A. Application of Performance Frontier Initiatives for Sustainable Strategy

The section below applies the concepts presented in the Performance Frontier to PepsiCo in order identify its sustainable strategy.

1. Identify Material ESG Issues

The company under Team 2’s analysis, PepsiCo, is classified as being in the “Beverage Food Processing” industry. However, since the company classifies in two of the divisions of the consumption category on the SASB Materiality Map (Processed Foods and Non-Alcoholic Beverages) the team has decided to prioritize examination on issues indicated in the Non-Alcoholic Beverages section as the company has a larger share of beverages as opposed to foods.

On the materiality map, that the Non-Alcoholic Beverages division has a total of 9 materiality issues. The issues and their characteristics are listed below. In addition, the most material ESG issues have been bold and also include a more detailed description of their materiality evidence:

1.) Environment:

a. Energy Management (Energy & Fleet Fuel Management): Interest [medium], Financial

[Medium], Forward impact [yes, probability].

b. Fuel Management (energy and fleet fuel management): Interest [medium], Financial

[medium], Forward impact [yes, probability].

c.  Water and wastewater management (water management): Interest [high, HM

Score:79, IWG Score:89%], Financial [high], Forward impact [yes, probability].

2.) Social Capital:

a. Customer welfare (nutrition and health): Interest [high, HM Score: 92, IWG Score:

83%], Financial [high], Forward impact [yes, probability & externalities].

b. Fair disclosure and labeling (product Labeling & marketing): Interest [high], Financial

[Medium], Forward impact [yes, probability].

c. Fair Marketing and advertising (product labeling & marketing): Interest [high],

Financial [Medium], Forward impact [yes, probability].

3.) Business Model and Innovation

a. Product packing (packaging lifecycle management): Interest [medium], Financial

[Medium], Forward impact [yes, probability].

4.) Leadership and Governance

a. Materials sourcing (environmental & social impacts): Interest [medium], Financial         

[high], Forward impact [yes, probability].

b. Supply Chain Management (environmental & social impacts of ingredient supply

chains): Interest [medium], Financial [high], Forward impact [yes, probability].

From the data above, the team has gathered that of the 9 issues, 2 are the most material issues. These two ESG issues are water management (1c) and customer welfare regarding their health and nutrition (2a). The water management division has a HM Score of 79 and its IWG Score 89%. When it comes customer welfare, the main concern is the issue of nutrition and health with its HM score at 92 and its IWG score at 83%. The HM (heat map) score displays how many investors and stakeholders are really concerned and interested in this issue. The IWG (Industry Working Group) Score indicates the percentage of participants that believe the issue to definitely be material.The section below, titled, “Work to Achieve Positive Water Impact” contains their strategies on how create integrated water management.

Figure 2.1 Water Management Improvements

(Source: Performance with Purpose, PepsiCo Sustainability Report, pg. 28)

2. Quantify the Relationship between Financial and ESG Performance

When comparing the company’s total net revenue in 2005 to 2006, we can see that there is a net increase from $32,562M to $35,137M. One reasoning behind this increase may be due to the company’s first launch of its Performance with Purpose Report in 2006. By 2014, the company saw an increase in its profits to $66,683M. Seeing the progressive increase in profits, PepsiCo took sustainable reporting a step further and formulated its 2025 Agenda which comprises methods to address its ESG issues and how to not only increase it profits but also shared value.

3. Innovate Products, Processes, and Business Models

The company, PepsiCo, is widely known for its soft drink product “Pepsi.” Water is a major substance (in addition to sugar) that is needed to create the product and is becoming very scarce. To resolve the issue and limit its water management, PepsiCo has created a 2025 Agenda with a section that lays out several improvement actions on the issue.

The means on how to achieve their 2025 agenda can be done by targeting four divisions: direct agricultural suppliers, direct manufacturing operations, local watersheds, and advocacy for safe water access. The following are the areas they wish to contribute to to strive for a positive water impact and accompanied by an example with the company’s intended actions, sourced from PepsiCo’s 2015 Sustainability Report:

1.) Direct Agricultural Suppliers: Promote less-water intensive irrigation methods, low-water

crop varieties where appropriate, and use of on-farm water-saving technology and tools.

2.) Direct Manufacturing Operations: Provide water, sanitation and hygiene for our global

manufacturing employees.

3.) Local Watershed: Replenish the water consumed to make our products within the watershed-

meaning the land from which it came- in high-water-risk areas.

4.) Advocacy, Collaboration and Supporting Access to Safe Water: Advocate for strong water

governance locally and nationally, with the aim of promoting solutions that meet local needs and reflect the best practices in water management.

The other, major ESG issue indicated from the materiality map was regarding customer welfare in nutrition and health. The image below can also found on the company’s 2015 Sustainability Report on their agenda for healthier product selections and methods to achieve those goals.

Figure 2.2 Health and Nutrition Improvements

(Source: Performance with Purpose, PepsiCo Sustainability Report, pg. 20)

4. Communicate the Company’s Innovations to Stakeholders

PepsiCo continues to rely on its sustainability strategy by leaving a positive impact on society and the environment. The company calls it “Performance with Purpose” (PepsiCo, 2014). In this report, the company identifies its sustainability strategies by highlighting the focus on health and safety in subject areas and functions. The company is focusing more on the eco-efficiency by working to achieve an absolute reduction in their greenhouse gases (GHG) emissions and reducing energy use in their manufacturing and delivery operations (PepsiCo, 2014).  By using renewable alternatives to fossil fuels, the company would improve efficiency so that it will help to manage and reduce energy, water use, and emissions. PepsiCo’s mission is to understand the urgency of the global crises and to implement new goals and performance metrics to continue to build upon its environmental sustainability progress.

It is also important to not that for PepsiCo’s advertisements of its products, compared to its competitors, PepsiCo prioritizes on advertising its dietary products as opposed to its regular products. The charts display PepsiCo’s and its competitors’ TV Advertising Costs of its regular vs. dietary products.

Figure 2.3 PepsiCo’s Differential Strategy

B. PepsiCo’s Stage of Sustainability

PepsiCo stand in Stage 5 in the Sustainable Development as the company continues to create and next-practice platforms. PepsiCo use of optical sorting technology, supplier collaboration and innovative business processes. Energy and waste management is important in this stage as companies use this mechanism to maximize profits and become cost-efficient. PepsiCo Sustainability Agenda 2025, Performance with a Purpose, highlights three issues that the company set out to accomplish. One, helped protect and conserve global water supplies, especially in water-stressed areas, and provided access to safe water (PepsiCo, 2015). Second, worked to achieve an absolute reduction in greenhouse gas (GHG) emissions across global businesses (PepsiCo, 2015). Last, continued to support sustainable agriculture by expanding best practices with our growers and suppliers (PepsiCo, 2015).

In 2015, PepsiCo Sustainability reported a reduction of water usage per unit of production by 25.8 percent since 2006, exceeding the sustainable goal of 20 percent, while saving approximately $80 million in costs over five years (PepsiCo, 2015). In addition, PepsiCo achieved more than 4 percent reduction in greenhouse emissions for operations despite significant production volume growth in the business. As a result, the company has become more energy efficient with a boost of 18 percent since 2006, While continuing to create energy efficiencies in their operations, PepsiCo continues to collaborate with suppliers to help them transition to a cost-efficient and energy-efficient business process (PepsiCo, 2015).

C. PepsiCo Life Cycle Assessment

        PepsiCo’s 2025 Sustainability Agenda and Performance with a Purpose, invest deeply in searching for innovative practices to reduce their carbon emission footprint, eliminate waste, and operate in a effective matter. PepsiCo beverage package products have been the main focus for the company's life cycle assessment due to the different brands competing in the market. Water is a vital substance (in addition to sugar) in the production of all beverage products. Due to the high demand by companies and society, water has become a very scarce necessity for personal and corporate survival. To resolve the problem and improve its water management, PepsiCo has created a 2025 Agenda with a section that lays out several improvement actions on the issue.

To achieve their 2025 agenda PepsiCo is targeting four divisions: direct agricultural suppliers, direct manufacturing operations, local watersheds, and advocacy for safe water access. The following are the areas they wish to contribute to strive for a positive water impact accompanied by an example with the company’s intended actions. Direct Agricultural Suppliers refers to the promotion of less-water intensive irrigation methods, low-water crop varieties where appropriate, and use of on-farm water-saving technology and tools. Direct Manufacturing Operations provide water, sanitation and hygiene for our global manufacturing employees. Creating local watershed is the practice of replenishing the water consumed to make our products within the watershed- meaning the land from which it came- in high-water-risk areas. And lastly, collaboration and supporting access to safe water is the advocation for strong water governance locally and nationally, with the aim of promoting solutions that meet local needs and reflect the best practices in water management.

D. Sustainable Product Design Principles

PepsiCo is committed to market recoverable and recyclable products in the food and beverage industry. By reducing reliance on petroleum-based materials and using agricultural scraps as feedstock for new bottles, this advancement continues to deliver a double win for the environment and PepsiCo. The invest and develop of safe reusable of plastic packaging and alternative materials rather than their single use and disposal which promote a “circular economy.” Nonetheless, the company has recognized that the actual recovery of products packaging is difficult, with the limited recovery methods provided to consumers. PepsiCo current recycling rate of beverage packaging is not as high as it could be— or as high as the demand for recycled polyethylene terephthalate (rPET) on the part of PepsiCo and other companies, who use this recycled material to reduce their packaging footprint. As a result, the company is working to close the loop through efforts in packaging design, public recovery and recycling infrastructure by collaborating with the Closed Loop Fund, and consumer behavior which work in concert to avoid more packaging waste being sent to landfill or polluting the oceans.

Figure 2.4 PepsiCo’s Closing the Loop

(Source: Performance With Purpose, PepsiCo Sustainability Report, pg. 25)

Recoverable standards implemented by PepsiCo meets different standards set by International Organization. The Packaging and Environmental Standards (ISO 18601) is applicable to a supplier responsible for placing packaging or packaged goods on the market. PepsiCo complies with many of the Packaging and the environment Standards such as Material Recycling (ISO 18604), Energy Recovery (ISO 18605) and Organic recycling (ISO 18606). The compliment with these standards have resulted in the reduction of waste to landfills.

E. PepsiCo’s Green Manufacturing

        The implementation of “Performance with Purpose”, PepsiCo has been able to constantly search for green business practices to eliminate waste in water, emission energy and food. In these different areas, the company has been able to tackle 3 GHG emission within the company’s value chain. The three scopes detail the focus on agriculture, packaging and Third-Party Transportation and other energy resources utilize. In the agriculture area, PepsiCo is collaborating with suppliers to reduce water usage with a water management program. The packaging area continue to pilot different green bottles to reduce the amount of bottles in landfills. To further generate a greener manufacturing re, a third party transportation system is implemented in any step of the supply chain to ensure that economies of distance are being met. A long term goal for Pepsi is to search for innovate the operations waste in the energy used to create the final goods.

Figure 2.5 PepsiCo’s Green Manufacturing

(Source: Performance With Purpose, PepsiCo Sustainability Report, pg. 28)

F. PepsiCo Sustainable Supply Chain Practices

        As previously mention, PepsiCo sustainable supply chain practices has allowed the company to become more environmental and social conscious. Focusing on the social aspect, the involvement of stakeholders has allowed the company to not solely focus on profiting its investors, but guide and support its suppliers and communities. In the report, Performance with Purpose 2025, PepsiCo continues to invest deeply in new program such as the Sustainable Sourcing Program (SSP) which creates a formal risk assessment, third party audit and mitigation process for first tier supplier. Sustainable Farming Initiative launched in 2013 aims to improve crop yields and grows livelihood in order to source local ingredients. In addition, PepsiCo was able to increase environmental responsibility practices and respect day to day workers within the human rights. As of now, PepsiCo has over 15 within the Sustainable Farming Initiative program that serves as the best practice in sustainable agriculture. In 2015, PepsiCo has been able to serve 28,000 farmers in their supply chain and over 800,000 acres of cropping land. The company is planning to work closer with farmers and suppliers to source sustainable ingredients and increase traceability.

        In addition to suppliers the company understands that is essential to protect and support the safety, health, professional development and human rights of employees. To do so, PepsiCo invest a great amount of time in training new staff complying with the Human Rights Policy and PepsiCo Global Code of Conduct, as well as by asking business partners to review and comply with PepsiCo’s Supplier Code of Conduct (SCoC). It can be concluded that PepsiCo promotes diversity through these policies as a recent research showed that 90 percent of the global talent pool is made up of diverse individuals and only 10 percent are white men. Global programs for promotion of job safety, growth, and development has allowed PepsiCo to increase women engagement and increase diversity in management and executive positions. In the US, PepsiCo is a proud signatory of the White House Equal Pay Pledge which is a committed to pay equity for equal work regardless of race, color, religion, sex, sexual orientation, gender identity, age, national origin, disability or veteran status or any other protected category under applicable law. In a Global aspect, PepsiCo’s Employee Resource Groups (ERGs) provide opportunities for leadership development, connection and support for associates while also driving employee engagement. The programs within the Employee Resource Groups (ERGs) are: the Mosaic (African Americans), PAN (PepsiCo Asian Network), Equal (Gay, Lesbian, Bisexual & Transgender), Adelante (Latinos/Hispanics), EnAble (People with Different Abilities), and Women’s Inclusion Network (WIN).

G. PepsiCo Compliance with Principles of the Circular Economy

It can be concluded that PepsiCo follows the principles of the circular economy through the different programs and business practices. PepsiCo is working in complying with Principle 1 that focuses on the preservation and enhancing natural capital by controlling finite stocks and balancing renewable resource flows. The company water management serves as an example of how PepsiCo is complying with the first principle of the circular economy. PepsiCo has not yet complied with the other principles, yet it's making advancements in transitioning to utilize renewable energy to power all of their plants.

1. Product Ratings on GoodGuide App

When having installed the GoodGuide app to determine PepsiCo’s product’s rating, it is important to recognize that PepsiCo offer products from 22 different brands. These brands are then broken down into 3 divisions: 1.) Good for You, 2.) Better for You, and 3.) Fun for You. Although not all of the 22 brands appears on the GoodGuide App, the team was able to find at least one brand from each division. There is a distinguishable rating of the products from the different divisions depending on concepts of health and safety. Those products in the Good For You, such Quaker Oats, score with higher ratings than those in the Fun for You division, which includes the brand of Cheetos.

III. Sustainable Innovation Systems

A. PepsiCo’s Use Green IT, Green IS & Sustainable Innovation

To help reduce the negative impacts that PepsiCo has on the environment, they primarily utilize Green IS and sustainable innovation. In regards to IS greening, the company implements its Global Environmental, Health and Safety Management System (GEHSMS) as a platform for its Environmental, Health and Safety (EHS) Policy. PepsiCo’s GEH SMS is used to help control risks and to improve the company’s environmental and safety impact. Their GEHMS helped PepsiCo ensure consistency of certain standards and also promote continuous innovation.  To help monitor its operations and prevent environmental incidents, occupational injuries and illness, PepsiCo established 8 EHS principles that the company must abide by: ownership culture, business integration, resource allocation, regulatory compliance, performance measurement, continual improvement, stakeholder collaboration, and annual review. The company’s EHS police, implemented under the GEHSMS, conforms with the ISO 14001 standards of setting up an effective environmental management system while also using “global standards for risk areas” all throughout the company. The “ownership culture” EHS principle establishes PepsiCo’s promises to create a proactive culture by driving ownership of the environment, health and safety across individual, managerial and organizational levels. Also, the company has generated a microsite called “#HowWeWill” to help increase the population's awareness of what the company is doing to decrease its environmental footprint and how it is also tackling social issues as well.

Sustainable innovation was previously defined as  “...designing and implementing sustainable organizational processes and practices that generate social, environmental, and economic value for all stakeholders involved.” PepsiCo is a true advocate for sustainable innovation as their sustainable practices are not only for the intent of bettering the environment but also to work towards building a better foundation for all its stakeholders in the future. Although PepsiCo’s GRI and Sustainability report does discuss practices to address environmental issues, it furthers by mentioning other strategies to address environmental, social, and economic worth for all stakeholders. In addition, its goal of trying to reduce added sugars and saturated fat in its products by expanding its sustainable farming initiative, this will not only reduce costs for the company but also work towards yielding healthier, well nutritional lives for future generations. According to PepsiCo’s 2025 Agenda, they intend on using appropriate agricultural technologies and practices through collaboration with industry peers, NGOs and public-private partnerships to achieve their goal. Currently, the company increases the public's awareness of how healthier nutrition practices may lead to both short and long term benefits through its support of the “Let’s Move” initiative established by Michelle Obama in which the combat child obesity. Supporting the first lady in 2010, PepsiCo had launched it “PepsiCo Hope” to help inner-city communities by increasing their access more affordable nutrition and helped create local employment.

        PepsiCo has a great history of working with its key stakeholders to address sustainability-related challenges to bring forth social, environmental, and economic sustainability. Another highlight from the company’s 2025 Agenda is its goal to spur prosperity within the human race by investing $100 million to help benefits at least 12.5 million women and girls around the world. To accomplish such an objective, the company is working towards providing women and their families with education and supporting specialized disciplines such as science, technology and engineering. Through this, the company indicates that it will furthering education for women will help create social and economic opportunities that will benefit their broader communities.  

B. PepsiCo’s Types of Information Technology (IT) Assets

PepsiCo stands in Stage 5 as the company continues to search for next-practice platforms. The company invest in transformational assets and informative assets.  In the transform assets PepsiCo alter traditional business practices by reconstituting their supply chain by collaborating with green sourcing.  PepsiCo uses optical sorting technology, supplier collaboration and innovative business processes. Energy and waste management are important in this stage as companies use this mechanism to maximize profits and become cost-efficient. PepsiCo Sustainability Agenda 2025, Performance with a Purpose, highlights three issues that the company set out to accomplish. One, helped protect and conserve global water supplies, especially in water-stressed areas, and provided access to safe water. Second, worked to achieve an absolute reduction in greenhouse gas (GHG) emissions across global businesses. Last, continued to support sustainable agriculture by expanding best practices with our growers and suppliers. While continuing to create energy efficiencies in their operations, PepsiCo continues to collaborate with suppliers to help them transition to a cost-efficient and energy-efficient business process.

C. PepsiCo’s Information Systems & Its Sustainability Stage

PepsiCo is in Stage 5, Creating Next-Practice Platforms, as the companies continues its search to find innovative ways to conduct business as the company partners with different organization to generate mobile platforms. During this stage, investments are made in automate, informate  and infrastructure assets to provide data of the impact done by the company within the Triple Bottom Line.

PepsiCo developed a microsite, www.howwillwe.com, that informs stakeholders some of the issues relevant to the world and the company. The website explores and share ideas around the questions of “How Will We: Grow Sustainably?, Thrive in a Changing Environment? and Create Opportunity? Each section details the different invest assets the company invest to fully comply with the stage. As mentioned in previous seminars, PepsiCo focuses on closing the loop with product re-designing to eliminate landfills and the negative impacts of waste to the environment. Transitioning to local sourcing also helps local farmers and the environment as transportation pollution is eliminated and the utilization of all materials in making the final products. Informative assets allow the company to become more transparent and showcase the data collected in relation of PepsiCo to the environment and society.

In the society aspect, the company has partner with different program such as The World Food Programme, Water.Org, and STEM connectors to perform in a more sustainable practice. Through these different partnerships the company has become a major contribution in decreasing the number of families without food in the US and the world, increase water resources for communities that lack accessibility, and promote growth opportunities within all areas.  

Figure 3.1 Mircosite, HowWillWe

1. PepsiCo 2015 Global Reporting Initiative Report Keywords Search

a.) Keyword Used: “Information System”

PepsiCo, Inc. contracted Bureau Veritas North America, Inc. (BVNA) to verify that the information shared and the information systems used to obtain the information were accurate and valid. This particular verification was conducted to provide independent verification on the accuracy of the GHG emissions reported, and on the underlying systems and processes used to collect, analyze and review the information. The company obtained the following response from BVNA:

“It is our opinion that PepsiCo has established appropriate systems for the collection, aggregation and analysis of quantitative data for determination of these GHG emissions for the stated period and boundaries”

Figure 3.2 Bureau Veritas North America, Inc. (BVNA) Verification GHG Emission Report

b.) Keyword: “System”

PepsiCo, Inc implements a Global Environmental, Health and Safety Management System (GEHSMS) as a platform for its Environmental, Health and Safety (EHS) Policy. PepsiCo’s GEHSMS is used to help control risks and to improve the company’s environmental and safety impact. This system helps PepsiCo ensure consistency of certain standards and also promote continuous innovation.  To help monitor its operations and prevent environmental incidents, occupational injuries and illness, PepsiCo established 8 EHS principles that the company must abide by: ownership culture, business integration, resource allocation, regulatory compliance, performance measurement, continual improvement, stakeholder collaboration, and annual review.

Figure 3.3 Global Environmental, Health and Safety Management System (GEHSMS)