The Council identified these issues following detailed analysis of input from Council members, data from our audit and assessment programs, and feedback from external organizations that we engage with including business groups, NGOs, human rights bodies, and socially responsible investors. The Council annually reviews progress on our salient issues and whether other issues should be considered salient. Our current geographic priorities are Brazil, Indonesia, India, Mexico and Thailand, although our human rights impacts – and our programs to manage them – are intended to apply globally.
During 2016, human rights related issues were raised by external organizations in Brazil (land-related impacts), Indonesia (working hours, workplace safety, and child labor) and India and Pakistan (freedom of association). In each of these situations, we have conducted a thorough investigation into the allegations, and when necessary, have engaged in mitigating actions. As an example, we agreed to voluntary mediation under OECD with the International Union of Foodworkers (IUF) and our supplier in India. Although we were not able to resolve the dispute in mediation, the U.S. State Department had one, single recommendation at the conclusion of mediation— that PepsiCo update its Human Rights Policy. That policy update was already under way, as acknowledged by the State Department, and has now been completed. We have maintained regular engagement with IUF in a continued effort to resolve this dispute.
We also conducted assessments in Thailand, Mexico, and the Philippines during 2016 and early 2017 that looked at land related impacts, as well as labor issues more generally to inform the human rights priorities for our key raw materials sourced around the world. The Mexico assessment can be found here. Please see our initial response here.
Our commitment to respect human rights throughout our value chain is articulated in our Human Rights and Salient Issues Statement, Human Rights Workplace Policy, Code of Conduct, and Supplier Code of Conduct, as well as related policies, including those on land rights and sustainable agriculture. All of these policies are publicly available on our website. They are communicated internally through on-boarding materials and annual training programs. They are communicated to our suppliers when they join the PepsiCo supply chain and through ongoing engagement such as through our Sustainable Sourcing Program.
- Our Global Human Rights Statement outlines our approach to respecting human rights in our own operations and in our relationships with suppliers and other business partners throughout our value chain.
Our Human Rights Workplace Policy sets out the expectations we have of all our employees in the area of human rights. It is aligned with our Code and reflects the principles contained in the International Bill of Human Rights and the International Labor Organization Declaration on Fundamental Principles and Rights at Work. It also applies to all PepsiCo employees and joint venture employees over which we have management control.
Our Global Code of Conduct (Code) serves as our roadmap for acting ethically and in compliance with all applicable laws, wherever we do business. It recognizes the importance of maintaining and promoting fundamental human rights in our operations, and it applies to all PepsiCo employees and joint venture employees over which we have management control.
Our Supplier Code of Conduct (SCoC) sets out the expectations we have of our suppliers in the areas of business integrity and anticorruption, labor practices, health and safety, and environmental management. The SCoC is based on recognized international human rights standards, and all suppliers, vendors, contractors, consultants, agents and other providers of goods and services who do business with or on behalf of PepsiCo (“suppliers”) are expected to follow it and all other relevant policies as a condition of doing business with PepsiCo.
The HROC regularly reviews our policies to ensure their alignment with emerging legal and regulatory developments, as well as recognized best practices. The most recent review included the identification of our salient issues, a detailed assessment of emerging human rights and regulatory trends, and input from various internal and external stakeholders. The review identified the need to develop our new Human Rights and Salient Issues Statement and update our Human Rights Workplace Policy, which were both approved by our Chairman & CEO and published in June 2017.
To ensure ethical and legal compliance, we conduct an annual Global Code of Conduct Training and Awareness Program to ensure our employees understand their obligation to comply with our Code and the behaviors that are expected under the Code. In our 2016, more than 69,000 salaried employees completed a web-based Code of Conduct training and certification course. Our custom-written, scenario-based training Code course featured the theme of “Make Ethics Part of Your Daily Routine” and was designed to help employees make ethical business decisions. It was available in 24 languages and mandatory for all salaried employees who met our eligibility criteria. In addition, more than 179,000 frontline employees in our plants and warehouses received in-person training on the principles of our Code and our Values through training workshops.
We use our Sustainable Sourcing Program to communicate our Supplier Code of Conduct to suppliers, evaluate compliance, and facilitate continuous improvements within our supply chain. In 2016, approximately 95% of our targeted key suppliers completed our SCoC training. This training helps to ensure suppliers understand and comply with the principles of our SCoC and support our goal of long-term sustainable supply by addressing known social risks and building capability in their operations.
In 2017, we piloted targeted human rights training with associates in the most relevant functions (i.e., Human Resources, Global Procurement, Legal, and Compliance), with 95% of associates completing the training. The training was designed to raise awareness of potential forced labor and human trafficking issues and strengthen employee ability to identify and prevent potential impacts across our supply chain. We anticipate rolling out follow-up training in 2018 to reinforce these learnings.
Assessing Impacts and Taking Action
Our initial focus has been on our own operations, direct suppliers, and agricultural partners. These areas were identified through internal analysis and external stakeholder feedback as the points along our value chain where we have the greatest leverage (i.e., our operations) to prevent and respond to human rights impacts and where the risks to rights holders is highest (i.e., supply chain and agricultural partners).
We have due diligence programs in place to assess risk, independently audit sites, and remediate issues found along each tier of our value chain, specifically:
- Our Global Labor Human Rights Assessment Program (GLHR) assesses potential human rights impacts at all of our nearly 300 company-owned manufacturing sites. GLHR assessments are conducted by third-party auditors and conform to the SMETA (Sedex Member Ethical Trade Audit) protocol requirements. The program takes steps to identify and address the root cause of each issue found, including through the introduction of on-site corrective action plans to remediate non-compliances. We conducted audits at 77 sites in 2016.
Our Sustainable Sourcing Program (SSP) assesses risk and monitors supplier compliance with our Supplier Code of Conduct through third-party auditing of our most business-critical direct suppliers and contract manufacturing and co-packing locations. In 2016, 794 on-site audits were conducted or recognized with first-tier suppliers.
- Our Sustainable Farming Initiative (SFI) helps us assess our direct growers, identify potential non-compliances, and implement corrective action plans to address human rights issues and improve agricultural practices at the farm level. As of the end of 2016, we have implemented SFI across 33 countries since its launch, with active programs representing 36,000 growers in our supply chain.
We regularly consult with external stakeholders and human rights experts on our overall approach, specific allegations, and our salient issues. We understand the importance of capturing the voice of rights holders, and we are committed to engaging with potentially and actually affected stakeholders, including our employees, supply chain workers, and the communities where we operate.
For example, following feedback from several stakeholders including the Interfaith Center on Corporate Responsibility (ICCR) and the UN Global Compact, we are taking an active role in the Consumer Goods Forum’s initiative to fight forced labor. The initiative seeks to establish common standards amongst its large retail and consumer goods company members for key issues such as document retention and fees for our own companies and those in our value chains, as well as seeking other ways to collaboratively tackle forced labor. In addition, we are focusing on improving our engagement with local stakeholders on a regular basis and in response to specific issues raised. This was highlighted as an area for improvement by Oxfam in particular.
We also participate in conferences and business group initiatives to improve our knowledge of specific issues and to encourage industry-wide progress where it is needed. We are a member of Shift’s Business Learning Program to help us review and improve our human rights management approach and performance. With their help, we identified the need to move from material issues to salient issues, to create a Human Rights and Salient Issues Statement, and to update our Human Rights Workplace Policy.
In line with the UNGPs, we are committed to providing effective remedy where we have caused or contributed to adverse human rights impacts. Where we find impacts directly linked to our business relationships, we will use our influence to encourage our suppliers and business partners to respect human rights.
In order to ensure access to a transparent, confidential, and safe process for investigating grievances of affected parties, we will use appropriate grievance mechanisms, such as the PepsiCo Speak Up Hotline, to provide for anonymous reporting of suspected breaches of our policies. We encourage our suppliers and business partners to use their own effective grievance mechanisms and make the PepsiCo Speak Up hotline available for their use.
PepsiCo Speak Up Program
All employees are encouraged to ask questions, raise issues, and seek guidance when a course of action is unclear. Furthermore, all employees have an obligation to report suspected violations of our Values, our Code, our policies or applicable law. Our employees have several avenues for reporting issues and seeking advice, including their manager, HR, the PepsiCo Law Department, the Global Compliance and Ethics Department, and the Speak Up hotline. Our Speak Up program is an important component of our culture of ethics and integrity.
Agricultural Commodities Grievance Mechanism
In July 2017, PepsiCo launched an enhanced grievance mechanism for agricultural commodities to reflect the seriousness of some of the complaints, the scrutiny that palm oil and other raw materials are under and the complexity of both the supply chains and the issues. It is complementary to our existing Speak Up! Process.
The Grievance Mechanism is open to anyone who has a concern that PepsiCo’s policies and commitments related to agricultural commodities are not being met.
Further details of our grievance mechanism can be found here.