PepsiCo is committed to respecting the rights of workers and local communities throughout our operations and value chain. This can be a challenge for a global company with a complex value chain that relies not only on its own operations but also hundreds of franchise bottlers, joint ventures, and co-manufacturers, and thousands of suppliers to make and distribute its products around the world. Nevertheless, we recognize that we have the ability to contribute to positive human rights impacts and the responsibility to prevent, mitigate, and address adverse impacts that we have caused or contributed to and to use our leverage, where we are linked to potential or actual human rights impacts, to encourage our suppliers and business partners to respect human rights in our broader value chain.
PepsiCo is committed to respecting the human rights of all workers and local communities throughout our operations and value chain. As part of our approach, we are committed to implementing the UN Guiding Principles on Business and Human Rights (UNGPs) throughout our business and publicly reporting on our progress in line with the UN Guiding Principles Reporting Framework. Guided by the UNGPs, our approach for advancing respect for human rights throughout our value chain is centered on:
- Embedding respect for human rights throughout our business practices;
- Conducting due diligence to proactively identify, address, and track potential and actual human rights impacts in our value chain;
- Engaging with stakeholders, including rights holders, to inform our programs and approach; and
- Providing effective grievance mechanisms and access to remedy where we have caused or contributed to adverse human rights impacts, and using our leverage to encourage our suppliers or partners to provide remedy where we find impacts directly to our business operations, goods, or services.
With this approach as our foundation, we prioritize our efforts by focusing our attention on our salient human rights issues - the human rights at risk of the most severe negative impact through our company activities and business relationships. This process helps to ensure that we have the appropriate policies and management systems in place to prevent, identify, and address potential human rights risks across our value chain.
Embedding Respect for Human Rights Throughout Our Business Practices
We believe that strong governance is essential to successfully embed respect for human rights throughout our business. We have established a formal governance structure to oversee and manage human rights at various levels throughout our business, with our Board of Directors, Executive Committee, and Chief Human Rights Officer serving central oversight and management roles.
Board of Directors
As stewards of PepsiCo, our Board of Directors (Board) plays an essential role in determining strategic priorities and considers sustainability issues an integral part of its business oversight. In early 2017, our Board redefined the roles of its Committees by creating a Public Policy and Sustainability Committee (Committee). The Committee assists the Board in providing more focused oversight of PepsiCo's policies, programs, and related risks that concern key public policy and sustainability matters, including human rights. In 2018, the Committee reviewed the progress of our human rights program, including a deep-dive session where they discussed our human rights strategy as well as emerging human rights trends and risks. As part of this dedicated session, the Committee received a detailed update from our Chief Human Rights Officer on our ongoing work to address our salient human rights issues and other key risks, including excessive working hours in our direct operations and forced labor risks in our supply chain.
PepsiCo Executive Committee
The PepsiCo Executive Committee (PEC) has direct oversight of human rights. The PEC is made up of the Chairman & CEO, Sector CEOs and top functional leaders, ensuring that sustainability is a key accountability for every member of our senior leadership team. Strategy and progress against our sustainability goals are discussed during meetings of the full PEC four times a year so that our senior leadership can align on major strategic decisions related to sustainability and human rights. In between these meetings, PEC members remain actively engaged in executing against our sustainability goals, driving the agenda with their teams. In 2018, the PEC discussed our human rights strategy and performance at several of its meetings. The PEC also received a detailed update from our Chief Human Rights Officer during their November session, where they focused their attention on a review of our human rights strategy, our annual due diligence findings, and our ongoing work to address key risks, including excessive working hours and forced labor.
Chief Human Rights Officer
Day-to-day responsibility for human rights sits with our Chief Human Rights Officer (CHRO), who also serves as Senior Vice President and Chief Counsel for Global Human Resources at PepsiCo. The CHRO leads our Human Rights Office, chairs our Human Rights Operating Council (HROC), and reports directly to our Executive Vice President, Government Affairs, General Counsel and Corporate Secretary, a member of the PEC. In 2018, our CHRO led the HROC’s annual review of our due diligence findings and salient issue work streams, with insights and recommendations from those sessions being shared with the PEC and Board.
Human Rights Operating Council
The Human Rights Operating Council (HROC) is comprised of senior corporate and sector representatives from core functions (e.g., Human Resources, Global Sustainability, Global Procurement, Global Operations, Law Department, Public Policy, Risk Management, and Sales) as well as the heads of our due diligence programs. Some of HROC’s key responsibilities include:
- Annually reviewing our business activities, due-diligence findings, and stakeholder feedback to determine our salient human rights issues;
- Prioritizing initiatives and identifying partnerships to address human rights risks and opportunities;
- Monitoring progress towards our human rights goals and targets;
- Regularly reviewing our human rights policies for alignment with legal and regulatory requirements; and
- Submitting periodic reports and action plans to the PepsiCo Executive Committee and Board of Directors for review and/or approval.
Human Rights Office
We have a dedicated team in our Law Department that is responsible for driving our human rights strategy, facilitating performance against our goals and managing our salient human rights issues. The team coordinates our Human Rights Operating Council and works closely with the heads of our due diligence programs and other internal stakeholders (e.g., Human Resources, Global Sustainability, Global Procurement, and Public Policy) to help prevent and address issues throughout our value chain. PepsiCo's Chief Human Rights Officer and Human Rights Director, who are tasked with delivering our human rights program and managing our salient issues across our value chain, have clear annual performance targets that link their pay with the performance of our program and execution of our human rights commitments. This includes their responsibility for a wide range of issues, including working hours, forced labor, and vulnerable worker populations.
Our policies play an important role in our ongoing work to embed respect for human rights throughout on business activities. They help us set clear expectations for our employees, suppliers, and other business partners, and they also establish a framework for monitoring compliance with our standards. Our Global Human Rights & Salient Issues Statement outlines our overall approach to respecting human rights and details our salient human rights issues. We have additional policies that apply to specific segments of our value chain and others that cover specific issues such as Land Rights and Palm Oil. We regularly review all of our policies for alignment with stakeholder feedback, emerging regulatory developments, and internationally-recognized best practices.
All PepsiCo employees and joint venture employees over which we have management control are required to comply with our Global Code of Conduct (Code) and Human Rights Workplace Policy. Our Code serves as our roadmap for acting ethically and in compliance with all applicable laws, wherever we do business, and it recognizes the importance of maintaining and promoting fundamental human rights in our operations. Our Human Rights Workplace Policy is embedded within our Code, and it reflects the principles contained in the International Bill of Human Rights and ILO Declaration on Fundamental Principles and Rights at Work. Our Human Rights Operating Council revised our Global Human Rights Workplace Policy in 2017 to clarify our approach and provide further guidance on our expectations. We engaged with a variety of stakeholder groups (e.g., employees, NGOs, and customers) during the development process, and the revised policy was finalized and approved by our Chairman & CEO.
All suppliers, vendors, contractors, consultants, agents and other providers of goods and services who do business with or on behalf of PepsiCo (“suppliers”) are required to comply with our Supplier Code of Conduct (SCoC). Our 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 compliance with it is a condition of PepsiCo’s supplier contracts. Suppliers are also expected to communicate and apply the SCoC and other relevant policies throughout their supply chain.
During the annual review of our policies in 2017, we identified the need to refresh our SCoC to clarify our expectations of suppliers in several key areas, including forced labor, migrant workers, and anticorruption. As a part of this process, we aligned our SCoC with the Consumer Goods Forum Priority Industry Principles and the Employer Pays Principle to help ensure that:
- Every worker has freedom of movement,
- No worker has to pay for a job, and
- No worker is indebted or coerced to work.
We will continue working with our suppliers and exploring industry partnerships and other collaborative efforts to help address potential forced labor issues in our supply chain and help ensure these goals are realized. For example, in 2017 we co-sponsored an AIM-PROGRESS supplier capability building event in Kuala Lumpur, Malaysia for over 150 participants that focused on strengthening internal and external grievance mechanisms and reducing forced labor-related risks.
Our Business Partners
To further advance respect for human rights among our business partners, we have established a goal to extend the principles of our Code to all franchisees and joint venture partners by 2025. Compliance with our Code and all other applicable PepsiCo policies is already required for all joint ventures where we have management control. In 2017, we initiated work to develop a formal engagement program around this goal for all of our other joint venture partners and franchisees. We have met with a number of our partners and franchisees over the past several months to discuss our human rights agenda and gather input on the engagement program. Our aim is to finalize and launch the program later this year.
Training and Awareness
Training also plays an important role in our work to embed respect for human rights throughout our business activities. It not only allows us to communicate our policies, standards, and expectations to our employees and suppliers, but it also allows us to raise awareness of potential human rights risks across our value chain and strengthen our ability to identify and prevent potential impacts. We have formal training programs for our employees and direct third-party suppliers.
Training Our Employees
We require employees at all levels in the company to complete annual Global Code of Conduct training, which is designed to ensure that our employees understand their obligation to comply with our Code and the behaviors expected under it. In 2018, over 70,000 employees worldwide completed an online Code training course, with an additional 179,000 frontline employees in our plants and warehouses receiving Code and Values training through in-person workshops.
In addition to our annual training, the Code is reinforced throughout the year with local and global communications including internal newsletter articles, digital signage, portal updates, tone at the top messaging and Ethics and Values campaigns.
In 2017, we conducted modern slavery and human trafficking training with over 4,200 employees across our core functions (i.e., Human Resources, Global Procurement, Law Department, and Compliance), with these functions being selected because they serve as critical touchpoints for our employees, suppliers, and other business partners. The training was designed to raise awareness of potential forced labor issues and to strengthen employee ability to identify and prevent potential impacts across our value chain. To build on learnings from that training, we launched an additional human rights training module to our employees in 2018 that was completed by over 70,000 employees worldwide. This training was designed to raise awareness and provide employees with a detailed understanding of how human rights are relevant for businesses, PepsiCo’s salient human rights issues and key risks, such as forced labor, and the role they can play in helping advance respect for human rights throughout our value chain. Moving forward, we plan to explore additional function-specific training to provide more targeted guidance to our employees on how they can help address key human rights issues.
In addition, we launched an anti-harassment training course, which has been completed by more than 62,000 employees in 2018.
Training Our Direct Suppliers
We use our Sustainable Sourcing Program to communicate our Supplier Code of Conduct to our direct third-party suppliers and to conduct our annual SCoC Training. This training helps to ensure suppliers understand and comply with the principles of our SCoC and support our goal of a sustainable supply chain by building capability in their operations and addressing known social risks. In 2018, we revised our SCoC Training to clarify our expectations in several areas, including forced labor and migrant worker protections. As part of this process, we strengthened guidance to our suppliers on key issues such as recruitment fees, freedom of movement, and clear worker contracts. In 2018, 100% of our business critical direct suppliers completed SCoC Training. Our current SCoC training can be viewed here.
Assessing Potential Impacts and Taking Action
Our Salient Issues
As one of the largest food and beverage companies in the world, we recognize there are a variety of ways that our business activities might directly or indirectly impact human rights. To help us prioritize our efforts, our HROC conducted a detailed assessment in 2017 to identify our salient human rights issues - those human rights at risk of the most severe negative impact through our company activities and business relationships.
In partnership with Shift, an organization that advises companies, governments, civil society, investors and others on human rights and the UNGPs, we started by defining our focus as the most salient issues for rights holders in our vale chain. We then mapped the potential impacts that our business activities might have on rights holders in our value chain, and this process involved detail analysis of our business operations and supply chain, past assessment and audit findings, and input from internal and external experts, including industry groups, NGOs, human rights bodies, and socially responsible investors. After identifying a list of potential impacts, we determined our salient issues by applying the “severity of impact” and “likelihood of occurrence” criteria outlined in the UNGP Reporting Framework. Through this process, the HROC identified six salient issues for our value chain.
- Freedom of Association
- Human Right to Water
- Land Rights
- Vulnerable Workers (Migrant Workers, Young Workers, Contract/Temporary Workers, and Women)
- Working Hours and Wages
- Workplace Safety
While we take steps to address all potential risks in our value chain, saliency informs our strategy and helps us prioritize where we should focus our work. We regularly review our salient issues to determine whether other human rights have become greater priorities over time. We set out the initial framing for our salient issues issue in our Global Human Rights & Salient Issues Statement, and we are currently establishing detailed roadmaps for each of them.
Below are some examples of our recent work on several of our salient issues.
- We are working with our sector business units to better understand the root causes of excessive working hours.
- We are using our leadership position within AIM-PROGRESS and the Sedex Stakeholder Forum to help evolve the current auditing protocol used by PepsiCo and other companies to better reflect changes in risk, including forced labor and land use practices.
- We are engaging with peer companies and civil society on a land rights dispute in Northeast Brazil involving a cane sugar supplier. We have also conducted land-related impact assessments in Thailand, Mexico, and the Philippines in 2016 and 2017 to inform the land rights and wider human rights priorities for our key raw materials in those countries.
- We are addressing risks and impacts to vulnerable workers, including temporary workers and women, in our palm oil supply chain and the industry more broadly. This means working with peers, suppliers, civil society, and others to identify and address systemic issues as well as to address non-compliances in our own supply chain.
- On freedom of association, we have engaged with International Union of Food Workers to resolve a dispute at one of our snacks plants in Pakistan. See the “Grievance Process and Access to Remedy” section for more information.
Our Due Diligence Programs
We have established a due diligence process that assesses potential human rights impacts in our value chain, integrates its findings into our internal systems, tracks the effectiveness of our actions, and regularly communicates our progress. Our initial focus has been on our own operations, direct suppliers, and agricultural partners, as these areas were identified as being the points along our value chain where we have the greatest ability to prevent and respond to human rights impacts (i.e., our operations) and where the risks to rights holders are highest (i.e., supply chain and agricultural partners).
We have established due diligence programs for these areas that assess potential risks and remediate identified impacts.
- Our Global Labor Human Rights (GLHR) Assessment Program assesses potential human rights impacts across our company-owned manufacturing operations. GLHR assessments are conducted by third-party auditors and conform to the Sedex Member Ethical Trade Audit (SMETA) protocol requirements. Approximately 90% of our direct manufacturing operations have been assessed through the GLHR Assessment Program.
- Our Sustainable Sourcing Program (SSP) assesses risk and monitors supplier compliance with our Supplier Code of Conduct through scored self-assessments and third-party auditing of our most business-critical direct suppliers and contract manufacturing and co-packing locations across 68 countries. SSP audits leverage SMETA 4-Pillar requirements. Approximately 94% of our total business critical direct suppliers have been assessed through our Sustainable Sourcing Program.
- Our Sustainable Farming Program (SFP) engages the farmers that we directly source from and helps us assess and remediate potential impacts at the farm level. Over 40,000 growers have been engaged through the Sustainable Farming Program.
While our initial focus has been on these areas, we recognize that potential human rights impacts can occur at any point along our value chain, and we are continuing to expand our due diligence programs to cover additional areas, using a risk-based approach. For instance, we are continuing the expansion of our Sustainable Sourcing Program to our third-party labor providers, promotional material suppliers, and additional suppliers in high-risk markets. We have also established a new program for our franchisees and joint ventures that will help us assess potential impacts in those areas of our value chain. We piloted this program in late 2017 and held a series of consultations with our franchise partners and joint ventures in 2018 to discuss our shared priorities and elicit their feedback. We finalized the program’s methodology in late 2018 and anticipate its initial rollout in 2019.
Learnings and insights from our due diligence programs are regularly integrated into our internal processes to help ensure that we have the appropriate policies and management systems in place to prevent, identify, and address potential human rights risks across our value chain. In addition to our formal due diligence programs, we also aim to assess, prevent, and mitigate human rights issues through other ongoing initiatives. For instance, we are heavily engaged in our palm oil supply chain in Indonesia and Mexico, and we are working with our peers, civil society, and others to address a variety of environmental and societal issues, including human rights. See our Palm Oil Page for more information.
In 2018, our Global Labor Human Rights Assessment Program conducted 88 on-site audits of our company-owned manufacturing operations across 28 countries, and our Sustainable Sourcing Program conducted or recognized over 960 on-site audits of our first-tier suppliers across 56 countries. The following diagram illustrates the top 5 non-compliance categories identified through the audits of our own manufacturing operations and direct third-party suppliers in 2018.
When non-compliances are identified through our due diligence programs, they are addressed through the implementation of corrective action plans. Each corrective action plan has a set timeframe, depending on the type of non-compliance and its severity. Once in place, corrective action plans are tracked through our respective programs, which may require an additional on-site audit to verify remediation of the non-compliances. Business relationships can be impacted when a serious non-compliance is found and there is a failure to meaningfully engage in its remediation. For instance, this may include the reduction and/or termination of purchasing from suppliers.
Below are a few examples of the types of issues we found and addressed through our programs.
- Helping reduce risky working conditions in Egypt: In 2017, we identified that employees at one of our suppliers in Egypt were being exposed to unsafe working conditions due to a lack of Personal Protective Equipment (PPE) and blocked emergency exits. Once notified, the supplier shared their corrective action plan with us and quickly implemented steps to address these non-compliances. During the follow-up audit, the monitoring company verified that employees were provided with all required PPE, all emergency exits continued to be free from blockage, and that the internal management systems had been updated accordingly.
- Helping alleviate fatigue from long working hours in China: In 2017, we identified that employees at one of our suppliers in China were working 21 consecutive days. We asked the supplier to develop and implement a corrective action plan to address the underlying working hours and rest day non-compliances. During the follow-up audit, the monitoring company verified that working hours were now in compliance with local standards and that all workers had at least one day off every seven days.
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 local communities in which we operate. In 2019, we will conduct a detailed review of our approach for engaging rights holders and integrating their interest and concerns into our grievance management systems and overall approach.
Our global and local Public Policy and Government Affairs teams, in conjunction with other internal groups, support our business in identifying and engaging with external stakeholders including civil society, industry, government officials and elected representatives on specific issue areas, including our salient human rights issues. While the frequency (e.g., quarterly) and form of engagement (e.g., direct consultations, multi-stakeholder collaborations) may vary, we have regular dialogue with a diverse array of stakeholders throughout the year on our program, salient issues, and overall performance. For example, following feedback from several stakeholders including the Interfaith Center on Corporate Responsibility (ICCR), we are taking an active role in the Consumer Goods Forum’s initiative to fight forced labor through the Priority Industry Principles. The initiative seeks to establish common standards amongst its large retail and consumer goods company members to tackle forced labor through key issues such as ensuring freedom of movement for workers, no document retention, and no fees paid by workers for our own operations and our value chains. In addition, following feedback from Oxfam, we are focusing on improving our engagement with local stakeholders on a regular basis in response to specific issues raised.
We also participate in a variety of multi-stakeholder groups and business initiatives to enhance our knowledge of specific issues, drive industry-wide progress, and help address the systemic challenges facing our industry. For instance, we have used our leadership position within AIM-PROGRESS and the Sedex Stakeholder Forum to help evolve the current auditing protocol used by PepsiCo and other companies to better reflect changes in our understanding of specific risks, including forced labor. We are actively engaged in the Sedex Stakeholder Forum’s Forced Labor Working Group, which is working to enhance Sedex assessments and improve the training, tools, and resources available to help suppliers remediate potential forced labor impacts. In addition, we are an active member of the Consumer Goods Forum Social Sustainability Committee, which drives global collaboration on key sustainability challenges, including the eradication of forced labor. We are also an active member of the Steering Committee for the Consumer Goods Forum Sustainable Supply Chain Initiative, which promotes good social and environmental practices in global supply chains by benchmarking and recognizing third-party auditing and certification programs.
Grievance Process and Access to Remedy
We recognize that our policies and programs may not prevent all adverse impacts in our value chain, and we aim to provide effective remedy where we have caused or contributed to those impacts and to using our leverage to encourage our suppliers or partners to provide remedy where we find impacts directly linked to our business operations, goods, or services. We have established a variety of mechanisms that allow our employees, stakeholders, and other potentially affected individuals to raise grievances and seek remedy. Where appropriate, we will also collaborate in external initiatives and with other companies to prevent, mitigate, and remedy adverse human rights impacts.
All PepsiCo employees have an obligation to report suspected violations of our Values, Code of Conduct, policies or applicable law. Our employees have several avenues for reporting issues and seeking advice, including their manager, Human Resources, the Law Department, the Global Compliance and Ethics Department, and our Speak Up hotline. The Speak Up hotline is an important component of our culture of ethics and integrity. We encourage our suppliers and business partners to develop and use their own effective grievance mechanisms, and we make the PepsiCo Speak Up hotline available for their use through our SCoC Training.
All Speak Up reports are initially reviewed and evaluated by our Global Compliance and Ethics (C&E) Department. Each matter is then assigned to the appropriate party for investigation or follow-up in accordance with our internal incident management processes. Depending on the nature of the allegation, the investigation may be conducted by a professional from the Human Resources, Control, Security, Audit, Law, or Global C&E Department or by an outside firm. In line with our Code of Conduct Escalation Policy, complaints may also be escalated to senior leadership as necessary. With respect to Code violations, our Global C&E Department provides oversight for consistency of the investigative process, discipline, and appropriate corrective actions. The time to review and investigate each report varies depending upon the nature of the allegation, but our goal is to close out average routine cases within 60 days.
In the spirit of transparency, we regularly publish information on the usage of our Speak Up hotline, including the total number of reports and their categorical distribution. Our latest report can be viewed here.
Our Supply Chain
We expect our suppliers and business partners to operate with the same high standards of integrity to which we hold ourselves. This includes having an effective grievance management system in place for their operations and prohibiting potential retaliation against individuals who raise concerns. To complement their systems, their employees and contractors may also report suspected violations of our policies and standards through the PepsiCo Speak Up Hotline, which is made available through our Supplier Code of Conduct and Supplier Training.
To facilitate broader access to remedy, in 2017, we launched an additional grievance channel for third parties to raise potential environmental and social concerns regarding agricultural commodities in our supply chain. The agricultural grievance mechanism is open to anyone who has a concern that PepsiCo’s policies and goals related to agricultural commodities are not being met. The grievance mechanism provides further detail.
Additional information on our agriculture grievance mechanism can be found here.
In addition to these formal grievance mechanisms, we also actively engage with external stakeholders to address issues they raise on behalf of individuals in our value chain. For example, in September 2016 the International Union of Foodworkers (IUF) alleged that the distribution of permanent employees and contract workers in our Lahore, Pakistan snacks plant was not compliant with local standards. An investigation by global and local PepsiCo leaders substantiated this claim. We met with the affected parties and continued open dialogue with IUF throughout the process, which resulted in us implementing corrective actions plans to address the root cause of the issue. We insourced more than 460 contract workers into permanent positions in our Lahore snacks plant to ensure compliance with local standards.