We hold our suppliers to the same standards of integrity to which we hold ourselves. An unethical or illegal act by a supplier may hurt PepsiCo's reputation as a world-class company and cause a loss of goodwill in the communities we serve. Therefore, all suppliers are expected to follow our Supplier Code of Conduct, and relevant policies and commitments as a condition of doing business with us. These include:
These standards are based on international conventions including the Universal Declaration of Human Rights; the International Covenant on Civil and Political Rights; the International Covenant on Economic, Social and Cultural Rights; and the ILO Declaration on Fundamental Principles and Rights at Work.
Suppliers, vendors, contractors, consultants, agents and other providers of goods and services who do business with PepsiCo entities worldwide are expected to follow this Guideline, where the standards apply.
Our approach to enhancing supply chain compliance with our policies and commitments is based on:
- Our Sustainable Sourcing Program – a formal risk assessment, third party audit and mitigation process for first tier suppliers who have gone through our Business Continuity Planning;
- Our Sustainable Farming Initiative – a continuous improvement program based on environmental, social and economic indicators for farms that ultimately source products for PepsiCo within specific commodities (see also: Agriculture);
- Awareness and training for all suppliers through ensuring our Global Supplier Code of Conduct is included in all new contracts and ongoing training for suppliers through webinars and in-person meetings;
- Specific programs to improve knowledge, awareness and outcomes on new and priority supply chain issues. For example we are committed to third party audits focused on social and environmental aspects of land rights in Brazil, Thailand, Mexico and the Philippines (see also: Land Rights).
Our Supplier Code of Conduct (SCoC) sets out the expectations we have of our suppliers in the areas of business integrity, labor practices, health and safety, and environmental management. It is based on recognized international human rights standards and explicitly prohibits all forms of forced labor and child labor. Compliance with our SCoC is a condition of PepsiCo’s supplier contracts.
The SCoC is available in 26 languages, and associated online training is available in 6 languages. Our online training helps suppliers further understand the principles of our SCoC and supports our goal of long-term sustainable supply by addressing known social risks and building capability within suppliers’ operations.
In 2016, approximately 95 percent of our targeted key suppliers completed this SCoC training as part of our Sustainable Sourcing Program.
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Our Sustainable Sourcing Program (SSP) assesses risk and monitors supplier compliance with our SCoC through third-party auditing of our most business-critical direct suppliers and contract manufacturing and co-packing locations across 68 countries.
Suppliers are responsible for demonstrating their compliance with our expectations through activities within the SSP, including an Initial Risk Assessment, completion of SCoC training, a site-level Self-Assessment Questionnaire which is graded, and participation in on-site audits, as required. Suppliers are expected to take action to correct any non-compliances identified through the on-site audits, with a focus on continuous improvement throughout their operations.
In 2016, 794 on-site audits were conducted or recognized with first-tier suppliers using the SMETA 4-Pillar Audit Protocol or an equivalent assessment.
Following the on-site audits, sites were scored based on any non-compliances reported by the auditor, with sites scored from red to green based on the severity and number of instances of non-compliance found on-site. The most frequent findings in 2016 focused on health, safety, and hygiene, environmental and management systems, and working hours. Health, safety, and hygiene stood out as a key category, with the majority of noncompliance related to:
- Fire safety
- Health and safety management systems
- Chemical safety
- Building and site maintenance
- Worker health/first aid
Where non-compliances are found during the on-site audit, a corrective action plan with a timeline for remediation is put in place by the supplier site and verification of closure is conducted through follow- up review by an approved third party auditing firm.
Since the SSP launched in 2015, we have seen strong improvement from sites as they learn from audit findings and demonstrate closure through a corrective action plan and subsequent follow-up audit. High-level results of this improvement are presented below, based on sites that have completed both initial and follow-up audits.