Our Approach and Policy
Through our Performance with Purpose vision, PepsiCo is working to transform how we do business in an effort to deliver strong financial returns in a way that is responsive to the needs of the world around us. We recognize we have an opportunity to use our global scale and resources to help influence positive change across our entire value chain – starting with the way our product ingredients are grown and sourced.
We work with farmers in our global supply chain to help them incorporate industry-leading policies, practices and technologies, which are designed to make our food system more sustainable and productive. Palm oil, the most widely used edible oil in the world, is a key area of focus. While PepsiCo is one of the largest global buyers of palm oil in the consumer products industry, our purchase in 2017 represented less than 1% of the global supply, which we use primarily in snack manufacturing because of its wide availability and shelf stability. In the United States, we use almost no palm oil, but it is used in Asia and other markets. We have a complex global supply chain with 39 direct suppliers sourcing from more than 1,500 mills and tens of thousands of farmers who grow the palm.
PepsiCo aims to source 100% Roundtable on Sustainable Palm Oil (RSPO) physically certified sustainable palm oil by 2020 while helping to lift production standards across the palm oil sector. To help us achieve these objectives, we are implementing a strategy built on four pillars:
1) Risk management: How we understand areas of concern and opportunity in our supply chain.
2) Supplier engagement: How we engage with suppliers to communicate expectations and improve performance.
3) Positive impact: How we work collaboratively to help transform the wider industry.
4) Transparency and stakeholder engagement: How we report on our progress and engage with the broader stakeholder community.
Our strategy is informed by our understanding of the key sustainability challenges facing palm oil, including deforestation, biodiversity loss and human rights abuses. We are also mindful of the economic benefits provided by palm oil production, including rural economic development and improved livelihoods for farmers. As we seek to expand these benefits while reducing any potential harm, it is important that we address standards in our own supply chain while addressing systemic issues through collaboration with suppliers, peer companies, civil society, governments and certification bodies, to help sustainable production become the norm and human rights be respected.
Certification of palm oil is part of our strategy, and we are working to source 100% RSPO physically certified sustainable palm oil by 2020. We recognize, though, that certification is only one part of a holistic approach to building a sustainable palm supply chain. We augment certification with a risk assessment process that allows us to better understand our supply chain and prioritize actions and investments, including our approach to supplier engagement, impact programs that we support, and our reporting and stakeholder engagement.
Our strategy is underpinned by a series of policies that are embedded in our business and supply chain. In 2015, we published a comprehensive set of commitments and an action plan for sustainable palm oil as part of a broader suite of related global policies dealing with human rights, forestry stewardship, land rights and our Supplier Code of Conduct.
After three years of progress on our action plan, PepsiCo updated its approach by integrating our commitments in our Global Policy on Sustainable Palm Oil with an associated implementation plan looking out through 2020, which we published in June 2018 concurrent with our Progress Report. The updated policy provides our long-term vision for a sustainable palm oil sector and updates our commitments to no deforestation, no development on peatlands, and no exploitation of indigenous peoples and local communities (“NDPE commitments”). Attached to the policy is our implementation plan to 2020, which provides readers with an understanding of how we translate our policy vision into specific actions and results.
Our policies and commitments apply to all palm and palm kernel oil that we use globally and covers our entire supply chain, from direct suppliers to production sources, as well as all of PepsiCo’s operations, subsidiaries, joint ventures, brands and products worldwide. We believe that fulfillment of these policies and commitments will make our supply chain more secure and support stable social, economic and environmental conditions for producers, mills and the communities they support.
In 2015, PepsiCo launched its Palm Oil Action Plan, committing to help advance palm oil sustainability in the industry. We published our first Annual Progress Report in 2016. The same year, we reiterated our specific commitment to source 100 percent certified sustainable palm oil as part of a new, broader set of sustainable sourcing goals under our Performance with Purpose 2025 Agenda.
Our second Annual Progress Report was published in July 2017 and provided detailed information on the strides we are making toward our palm oil sustainability goals. As discussed in our third Palm Oil Progress report – published in June 2018 – we consider the following developments to best illustrate our recent progress toward meeting our palm oil commitments and addressing the challenges that remain:
- Achieved 32% RSPO physically certified sustainable palm oil, exceeding our interim target of 30% for 2017, with the aim of hitting 50% by the end of 2018 and 100% by the end of 2020
- Increased traceability to the mill to 94% at the end of 2017 -- up from 65% in 2015 -- with the aim of achieving traceability to plantation by 2020
- Piloted our third-party traceability-to-mill system assessment process with Cargill
- Disclosed a complete list of our 2018 direct suppliers and our 2017 mill list
- Continued to identify and address risks associated with smallholders, worker rights, deforestation/ peatlands and land rights
- Published a formalized grievance mechanism for our agricultural supply chain
- Implemented our supplier scorecard to build capability and promote partnership and continuous improvement among suppliers
- Achieved 100% RSPO membership among direct suppliers (not including Venezuela)
- Updated and consolidated our commitments in our Global Policy on Sustainable Palm Oil, reflecting our goal for a supply chain free of deforestation, peat development and exploitation by the end of 2020
- Announced our participation in Oxfam’s FAIR Company-Community Partnerships project to enhance livelihoods in Indonesian palm oil producing communities
- Launched our program to boost sustainable palm oil production in Mexico, in collaboration with Femexpalma, Oleofinos, Oleopalma, The Roundtable on Sustainable Palm Oil (RSPO) and smallholder farmers
In January 2018, we published further information about our palm oil sourcing and approach in Indonesia, including how we manage grievances raised by third parties. Following this, in March 2018 we published our list of direct palm oil suppliers as well as our palm oil mill list.
In February 2018, PepsiCo committed to participate in Oxfam’s FAIR Company-Community Partnerships project in Indonesia. The project promotes a model for sustainable palm oil that benefits women, smallholder farmers, local communities, the environment, and participating companies. FAIR Partnerships address sustainability, human rights, and economic development issues holistically through a multi-stakeholder, inclusive, and landscape based approach.
About FAIR Company-Community Partnerships
The rapid expansion of oil palm has often been accompanied by devastating loss of forests and exploitation of local communities. FAIR Company-Community Partnerships offer an alternative vision and business model for palm oil production.
FAIR is an acronym that stands for 1) Freedom of choice; 2) Accountability; 3) Improvement of benefits; and 4) Respect for rights.
At the core of the project is the promotion of rights and development aspirations among women, small-holder farmers, and host communities, while ensuring environmental protection and implementation of companies’ commitments to human rights, land rights, and zero deforestation/climate protection. The initiative will operate as a multi-stakeholder platform that brings together companies across the palm oil value chain, local communities, local governments and a range of civil society organizations. PepsiCo is the first palm oil buyer to publicly commit its participation and will be joined by others as the project progresses.
Participating companies are expected to invest financially, contribute expertise to the process, learn, and share best practices.
PepsiCo is contributing funds for the first eighteen months of project implementation amounting to nearly fifteen percent of the project budget. Other funding will be provided from a number of foundations and institutions, including the David and Lucile Packard Foundation, and other private sector participants. PepsiCo will also contribute relevant business perspective to the initiative as well as share the lessons in its own supply chains and with its sector peers.
“Multi-stakeholder collaboration is needed to ensure that palm oil production benefits women, smallholder farmers, and local communities and that our policies and commitments on human rights, deforestation, and land rights are more than just words on paper. The FAIR Company-Community Partnerships presents a unique vision for achieving this. We look forward to working with Oxfam and others through this project to benefit communities in Indonesia and applying the learnings more widely as we continue to advance our sustainable palm oil program.”
- Michele Thatcher, Chief Human Rights Officer Senior Vice President, and Chief Counsel Global Human Resources, PepsiCo, Inc.
“As one of the world’s largest buyers of palm oil, PepsiCo’s participation in FAIR Company-Community Partnerships demonstrates leadership in the development of an alternative business model for palm oil production that seeks to truly benefit women and smallholder farmers. PepsiCo’s participation also demonstrates the company’s efforts to put its human rights and sustainability commitments into practice.”
- Irit Tamir, Director, Oxfam America’s Private Sector Department