PepsiCo: We expect suppliers to share our values

Mehmood Khan
Gordon Murray
Mehmood Khan, PepsiCo vice chairman and chief scientific officer of Global R&D, spoke Wednesday at GreenBiz 17.

PepsiCo’s 10-year-old sustainable business philosophy, Performance with Purpose, is embedded deeply into its workplace culture — so deeply, that it’s part of the "code of conduct" that must be signed and upheld by every employee.

By 2025, the $62.8 billion company will ask every supplier, down to the farm worker, to make that same pledge, a process that may require the multinational food and beverage giant to rewrite thousands of contracts, according to Mehmood Khan, the company’s vice chairman and chief scientific officer for global research and development.

Pepsi orange farmers
<p>By 2025, PepsiCo will require all of its suppliers to commit to the same Performance with Purpose code it requires employees to sign. Here, an orange farm.</p>

"If PepsiCo can do it, we’re hoping that others will follow now," Khan said during a keynote interview at the GreenBiz 17 event in Phoenix, Arizona. "That should become the global norm. Every human being has the right to some basic rights: water, labor practices, decent income to support themselves."

While many progressive companies speak often about holding their suppliers more accountable to their own energy efficiency, water conservation and other environmental goals, few penalize them — at least publicly — for non-compliance. But the reality is that the next wave of progress is inextricably linked to corporate action at the Scope 3 level, and PepsiCo's recently updated Performance with Purpose targets — mapped to the year 2025 — reflect a heightened scrutiny of its intricate, sprawling supply chain.

Take PepsiCo’s new water stewardship framework. The company already has cut its own consumption by 26 percent, an impressive number. But that number applies only to the 3 percent of the company’s overall water footprint that lies within its direct control. The other 97 percent comes from farmers, production organizations and other partners.

"If we can eliminate 15 percent of their water use in water-stressed areas around the world, on the farms, that’s more than equal to every single drop of water that Pepsi uses," Khan noted.

The company is also calling for another 25 percent reduction from its own internal operations.

How PepsiCo check up on progress?

One hint lies in a data collection project it ran earlier this decade in England, called "50 in 5." The goal was to reduce the water consumption and greenhouse gas emissions of its potato growers there by 50 percent over five years — using sensor technologies and a software analytics program to collect data about crop yields, irrigation habits, fertilizer usage and labor practices.

"As they upload this information, it accumulates into a data set that we can use to provide them reports," Khan said.

Since that program began, PepsiCo has collected information about more than 1 million acres of the agricultural land used to support its products — 2,800 farmers participate from 15 countries. The goal is to map more than 7 million acres by 2025.

"We know the technologies exist; it’s about understanding them, configuring them and deploying them," Khan said.

Ironically, many people automatically equate PepsiCo with the eponymous soft drink upon which it Khan its original fortune. But the company is taking elaborate steps to change that image.

During its latest financial update Wednesday, CEO Indra Nooyi said 45 percent of PepsiCo’s revenue comes from "guilt-free" products. That doesn’t necessarily mean they are positioned as healthy, although they generally contain less sugar and fats. The Naked juice brand, make from "natural" ingredients, could be PepsiCo’s next $1 billion brand.