Responsible Sourcing means looking at what we purchase beyond the traditional aspects of cost, quality and consistent supply.
We are using our relationships within our global supply chains to ensure that those we work with operate ethically and responsibly, respecting the environment and pursuing continuous packaging and agricultural innovation. We are committed to continuously improving our procurement practices within and beyond our direct material supply chain by leveraging our talents, programs and policies across the globe to all associates involved in purchasing functions and decisions.
Our commitment to responsible sourcing falls into four main areas: Supplier Social Capability Management, Environmental Supplier Outreach, Sustainable Packaging and Sustainable Agriculture.
Our products depend on a safe, high-quality and affordable supply of agricultural raw materials to meet the demands of our business and the expectations of our consumers, customers and other stakeholders. Increasing pressure on global food supplies combined with a growing focus on greenhouse gas management create a new set of challenges and opportunities for our business.
These challenges and opportunities are not only connected to the crops we need to support our brands, but also to a complex, global supply chain that involves thousands of independent farmers, hundreds of intermediaries and a small number of company-owned farms.
The PepsiCo Global Procurement Supplier Social Capability Management Program is a robust holistic approach to help ensure our suppliers understand and comply with PepsiCo's Supplier Code of Conduct (SCoC).
At the supplier level, our four-dimensional process addresses Accountability, Engagement, Risk Assessment and Mitigation.
Partnering with our Suppliers on Social Capability Management
Our approach to supplier standards encompasses four dimensions: Accountability for Supplier Code of Conduct (SCoC); engagement through code training; assessment of CSR risks; and mitigation through third-party audit and corrective action planning/resolution management.
We include our Supplier Code of Conduct (SCoC) in supply base contracts to ensure accountability to its principles.
PepsiCo Global Procurement provides effective supplier training to clearly communicate our SCoC principles and expectations that suppliers "do business the right way." We do this through live or recorded webinars and through in-person meetings with our suppliers.
We proactively identify social risk exposure embedded in our supply base to ensure sustainable supply. We prescreen suppliers to prioritize existing supplier sites to determine if they require further evaluation.
Our goal is to protect the reputation of the PepsiCo brand and ensure long-term sustainable supply by addressing known social risks and building supplier capability. The third-party audit results are uploaded to the Supplier Ethical Data Exchange (SEDEX) platform, accessible by PepsiCo and other secured customers. As part of the process, corrective action plans for issue resolution are itemized for review and tracking.
To learn more about complying with PepsiCo's supplier standards, please visit our supplier resources page. If suppliers have questions about Supplier Social Capability Management, please contact the PepsiCo commercial contact or PepsiCo's Responsible & Sustainable Sourcing team via firstname.lastname@example.org.
Supplier Code of Conduct
PepsiCo has a Supplier Code of Conduct to clarify our global expectations in the areas of labor practices, associate health and safety, environmental management, and business integrity. Our Supplier Code is based on standards promulgated by the International Labour Organization as well as the United Nations Global Compact and aligns with other internationally recognized standards.
We have translated our Supplier Code of Conduct into more than 25 languages, have proactively communicated it, and it appears in procurement contracts globally. To ensure our suppliers fully understand and comply with our Supplier Code of Conduct, we created Supplier Code of Conduct eLearning module in 6 languages and require suppliers to complete this training.
CSR Risk Evaluation and Management
While we use our Supplier Code of Conduct to spell out our priorities, we use our Supplier Social Capability Management Program to communicate and educate our suppliers, validate compliance and facilitate continuous improvements within our supply chain. We partner with our industry peers, our own suppliers, and third party service providers like SEDEX and social audit providers to drive transparency and social accountability in our supply chain.
Partnering with Our Peers
PepsiCo is a founding member of an industry-wide initiative known as AIM-PROGRESS-PROGram for RESponsible Sourcing. As an active member, we work with our peer companies to develop and implement common methods of evaluating supplier CSR performance, improve the effectiveness and efficiency of the evaluation process, and elevate CSR performance within our supply base.
Partnering with Service Providers
PepsiCo is a member of Supplier Ethical Data Exchange (SEDEX), a collaborative platform that allows a secure exchange of data regarding CSR topics between suppliers and customers. Through SEDEX's web-based system, companies can maintain and share data on practices in the areas of labor, associate health and safety, environmental management, and business integrity at their owned facilities. The SEDEX platform enables member suppliers to share self-assessment and third-party social audit results with customers, easing the burden on suppliers facing multiple audits, questionnaires and certifications. SEDEX also supports risk assessment screening, issue resolution and validation through corrective action planning.
Along with assuring responsible sourcing, PepsiCo is committed to supporting diverse suppliers.
Supplier Diversity Program
In 2012, we spent $1.4 billion with minority- and women-owned suppliers in the U.S. alone. PepsiCo views supplier diversity as a real business advantage because it supports building economic wealth with diverse businesses and the development of minority communities. It also helps us develop innovation to spur sustainable growth and creates a supplier base that mirrors our employee and customer base. PepsiCo has also established a strong Tier 2 program. We engage our Prime (non-diverse) suppliers in this important objective by requesting they incorporate diverse suppliers in their business with PepsiCo.
Environmental Supplier Outreach
We educate and work with our suppliers to improve social responsibility performance across our supply chain. Working with strategic suppliers on specific initiatives enables us to grow and extend our resource conservation programs and set quantifiable goals for energy, greenhouse gas, water, agriculture and forestry resource conservation within the extended supply chain.
One example of how PepsiCo is engaging its supply chain is through the deployment of our ReCon program in North America to our key suppliers and franchise operations in in the U.S., Mexico, Latin America, South America, and Western Europe.
CDP Supply Chain
Our membership in the CDP Supply Chain demonstrates to our suppliers how important we feel climate change is to business decision making. It also communicates our desire to work collaboratively. In 2012, 106 of the 206 invited suppliers in North America and Europe participated in the program. This response rate of 51 percent exceeds the global rate of 39 percent. We shared our results with our purchasing agents through webcasts conducted by CDP.
PepsiCo has worked to establish supply arrangements not only with large-scale farming units, but also with farmers who have small land holdings or low incomes.
As part of an expanded requirement for high-oleic acid sunflower oil (HOSO) to be used in manufacturing, PepsiCo targeted 180 farmers and increased production from 136 tons in 2011 to 180 tons of oil in 2012.
Since beginning our work with ASPROAGRO and several local foundations in the Algeria Valle del Cauca area in 2008, PepsiCo has increased the amount of sustainably sourced plantains by almost 550 percent for our Natuchips and Detodito brands. In addition, the number of farms that are Global GAP certified has grown to 20. This effort has established a direct purchasing model with small farmers, eliminating interim channels and increasing farmer profits while keeping the same cost structure for PepsiCo.
PepsiCo India contracts directly with 24,000 potato farmers. Most of them have small holdings farms with less than three acres of land.
Making a positive impact on local communities
We recognize the impact our purchasing activities have on local communities where crops are produced, and we support activities that improve the welfare of these communities. For example, in China, where we continue to practice contract farming, potatoes are the cornerstone of our agricultural operations. We work with local government agencies to improve the yield and quality of contract farms by providing a network of highly trained agronomists to visit contract farmers throughout the crop cycle. Farmers working with PepsiCo have enjoyed yield improvements of up to three times China's national average. And PepsiCo extends seed, fertilizer and equipment loans to famers ahead of the crop, reducing their financial risks.