October 29, 2025 • 39 mins
PepsiCo’s food and beverage products depend on reliable access to agricultural commodities and water, driving the company’s sustainability strategy. On this episode of ESG Currents, BI senior ESG analyst Gail Glazerman is joined by Jim Andrew, PepsiCo’s chief sustainability officer. They discuss how sustainability intersects with PepsiCo’s business strategy, the company’s progress toward its goals and challenges such as fragmented global policy. The episode was recorded on Oct. 8.
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Episode Transcript
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Speaker 1 (00:09):
ESG is constantly evolving. Over the years, it shifted from
socially responsible investing to impact to sustainable finance. While the
terminology continues to change, what hasn't changed are the underlying science,
market pressures, and tangible physical and financial impacts of the
climate crisis, increasing regulatory scrutiny, and rising consumer expectations. We
(00:31):
aim to filter out the noise by speaking with industry
experts to identify what is really driving value. Welcome to
ESG Currents. I'm Gail Glazerman, senior ESG analyst, your host
for today's episode. While there has been growing pushback against
ESG in the US in recent months, global companies still
have to contend with expectations and many other jurisdictions, and,
(00:52):
more importantly, the tangible manifestations of ESG, such as water scarcity,
extreme heat, and wildfires. Speaking with Jim Andrew, EVP and
chief Sustainability Officer at PepsiCo, a company that has been
at the crossroads of these competing pressures. Jim, thanks for
joining us today.
Speaker 2 (01:11):
Gail, thanks for having me very excited. Can you maybe
walk us.
Speaker 1 (01:14):
A little bit through your background and of particular interest
to me, was you started in consulting and just how
that translated into sustainability and how it influences your approach
to sustainability.
Speaker 2 (01:28):
Sure well, and guilty is charged. I'm a reform consultant
and spent a long time in consulting and at the
Boston Consulting Group, and it was a great background because
it it taught me a couple of things. One is,
every business is a people business, and you know, if
you get the right people, you can do a whole lot.
And the second was how do you approach problems in
(01:50):
a very analytical, thoughtful way. And I think that has
served me well with regards to sustainability because it's really
about how do we mobilize organizations in our case PepsiCo,
but also broader systems to be able to make the
(02:10):
changes that are necessary. And then how do you take
what are very large problems and break them down into
manageable chunks that you can actually go and attack. I'm
a very pragmatic business guy. I don't have an environmental engineer.
I'm about, you know, how do we connect what we're
doing in sustainability with the business and use it to
(02:33):
strengthen our business, to drive our business forward and to
be responsible in the communities that we operate, but also
be able to make sure that we have, for example,
in our case, the crops that we need source from
three hundred thousand odd farmers across our directly and direct
value Chaine to be able to move forward and grow,
(02:54):
and to do that you have to deal with the
people side, for sure. Ian you also have to deal
with how do you take some a massive problem and
break it down into pieces you can move forward at
pace and create action around. And so I think consulting,
you know, has really helped both at Phillips where I
was before, and certainly at PEPSI COO.
Speaker 1 (03:15):
All Right, so there's a lot there that I think
will impact as we move through this discussion. But maybe
just starting what ESG issues, Certainly you mentioned the crops
and the people specifically, what ESG issues do you think
are the most important to PEPSI COO And how has
that evolved over time? Like if I'd asked you this
like three years ago, would you be giving me the
(03:37):
same answer or is your thinking shifted at all?
Speaker 2 (03:40):
Yeah, So maybe we can wind back and to sort
of twenty twenty when I took over the Chief Sustainability
Officer role. And one of the things that we did
then with my boss, our current CEO, Ramon Laguarte, and
PepsiCo has been about sustainability for a very long time.
What he saw is I really want to take sustainability
(04:01):
and put it squarely in the center of our strategy,
which which I had been very involved in building when
I headed up strategy for PepsiCo and he had taken
over a CEO, and so then it was really about
how do we further integrate it into the business. Where
I started was what's really important? What are the things
(04:21):
that matter? What are the things that we as PepsiCo
can have impact on? And we really landed on sort
of three broad areas, and we're branding company, we'll bring
we brand everything. So we called the whole transformational program
PepsiCo Positive, and in that we have three pillars. We
have positive agriculture and most people positive agriculture, positive value chain,
(04:44):
and positive choices. And let me just briefly unpack each
of those and then you want to go into more details. Certainly,
can people think of PepsiCo is a very large beverage company,
and of course we are, but we'ren't even much larger
food company. And so we need a steady supply of
agricultural crops and ingredients to be able to run our business. Potatoes, oats, wheat,
(05:07):
all sorts of things. And so we said we need
a focus on agriculture, and that's regenerative practices, that's sustainable sourcing,
that's livelihoods of farmers and communities, agricultural communities. Then we
also said, we have a value chain, and that's when
you have those when you've sourced those crops, how do
you turn them into the delicious food and beverage products
(05:31):
that consumers want? And then how do you get them
to where they are? So we call it make, move,
and sell. And that's where our emissions goals are, that's
where our water goals are, that's where our packaging goals are.
And then Positive Choices, which is really about our portfolio,
the products in it, the ingredients that we incorporate, and
those three things positive agriculture, positive value chain, Positive choices
(05:54):
really is what we launched Pettico Positive with in twenty
twenty one and have really been the hallmark of what
we've been doing ever since. And obviously there's a people
component that fits into all of those. And I'm pleased
to say that those have proven to be pretty durable.
Those are the same priorities that we're executing against now
(06:18):
as well as in twenty twenty one. So the priorities,
I think we did a pretty good job at picking
the things that matter to the business and places where
we are because of our size and our scale, we
can actually have an impact on. And you know, since then,
it's been learning more, working more, pushing more to make
progress against those largely same set of goals.
Speaker 1 (06:41):
And do you have a sense do you work much
with investor relations how those goals align with what your
investors care about. Do you think they kind of understand
the priorities for the business?
Speaker 2 (06:52):
Yeah, so our head of investor relations, Robbie, and I
talk quite frequently and what investors care about. I think
our pet for us it's not sustainability over in some
distant galaxy and the business you know, in the center,
it's really again, how did we bring those two things together?
(07:13):
Because what investors care about it is they want to
see growth, and they want to see sustainable growth. And
I don't mean sustainable growth in an environmental sense. I
mean growth that is durable, long lasting, and continues to
move forward, and for us, because of our agricultural footprint,
because of the you know, the use, our need for
(07:34):
water and so on, we have to for for us
sustainable in terms of environmental concerns. Sustainability and growth go
hand in hand. They really can't be separated because otherwise
we don't actually we don't. We don't have a business.
And so I think investors understand risk, they understand durable
(07:57):
uh if you, if you will, durable growth. And so
that's what we've always tried to communicate it. We're not
out to save the world. We're out to make our
business better, and in doing that there's a set of
things we need to do that will also have positive
impact on the planet and the people in it. But
we've always tried to make those those two pieces, you know,
hand in glove and make sure they don't get separated.
(08:19):
That makes sense.
Speaker 1 (08:20):
But I mean, have there been any changes maybe that
would have surprised you coming from investors, just given all
the pushback that if she has undergone over the past year,
or anything that surprised you, or anything that you're getting
asked about maybe a little bit more frequently than you
might have, there's really.
Speaker 2 (08:36):
Not and I think that's a testament honestly to Robby
and our IR team and to our communications team, and
also to how we've set the priorities you know, from
the board and ramoned on down, which is we're doing
things are important to the business. We're balancing what we're doing,
(08:57):
how we're doing it, where we're doing it with things
that matter to how we actually grow and make money.
And because of that, I think you know, there's there's
been pretty good alignment. So no, I haven't seen big
changes in what people are asking about or commenting on.
Speaker 1 (09:14):
And can you maybe give some specific examples both in
terms of things that you've initiated that have impacted the
business performance and also maybe how that translates into actual
business operations and getting that buy in with the business
leaders and taking it out of the c suite.
Speaker 2 (09:32):
Yeah, I mean maybe the best maybe the best example
is around Ridge, owner of agriculture. So if you again,
if you go back, I think you know there was
obviously a group of people in R and D, in
parts of supply chain and procurement who spend a lot
of time worrying about potatoes, for example, or or oats.
(09:54):
But I would but now if you were to sort
of do a compare contrast from five years ago and
now there's a much much larger part of the company
that actually understands and you know, have spent time on farms,
have spent time talking to farmers, have gotten educated on
the importance of healthy soil to our business. You don't
(10:16):
just pick up the phone or you know, get on
a website and order up tons and tons and tons
of potatoes. You need to nurture relationships. You need to
do what we can to help farmers keep farming to
be successful as business people, and so we've adopted We
(10:37):
originally adopted a goal to bring regenerative practices to seven
million acres by twenty thirty, and we've since increased that
goal to ten million acres and added some nature components
around protect and restore still by twenty thirty, because by
last year twenty twenty four, of the most recent information,
(10:57):
we were already three and a half million acres. We
were making good progress, and that's because the business around
the world understands the importance of if you don't have potatoes,
you're not going to have a business. And the ability
to support farmers with you know, financial support, technical support
(11:18):
and sort of social and emotional support. You know, we
we we do that we work with farmers, but that
really comes from our business and the realization that we
need a steady supply of high quality potatoes. Our R
and D team has done a great job of having
proprietary genetics. But if those aren't planted in the healthy soil,
if they don't have enough water, if there's extreme weather events,
(11:41):
all of which are you know, becoming more and more common,
we're not going to have the type and quantity of
supply that we need to be able to make lays
or Quaker oats or do any of our others. So
I think that's a great example of where the business
has come along and really understood the importance of the
(12:03):
work that we do around regener of agriculture and making
sure that farms are in healthy environments by working with
farmers to do that. In the business, which is, you know,
how do we grow and sell more and satisfy more consumers.
Speaker 1 (12:19):
Okay, and you touched in that that you've raised your
goal for acreage from seven million to ten million. You've
changed some other sustainability goals in recent months. Can you
walk through what you've changed and why just give a
little bit of perspective there.
Speaker 2 (12:36):
Yeah. Sure, So again kind of go back to twenty
twenty when we started sort of really thinking about what
what are the goals? And again I'm not an environment
manageer and I'm a business I'm a business guy, so
I'm you know, what are we going to do? How
do we get the plans lined up? How do we
execute against it? How do you know if we're making progress?
And that's true on whether we're trying to grow a
(12:57):
business or make sure that we are sustainability activities are
moving forward. It's you know, the world was a very
different place in twenty twenty right and twenty twenty one
when we launched, right, there were all sorts of what
I call tailwinds. You know, there was going to be
all sorts of government policy. There was going to be
all sorts of financing that was going to be made available.
(13:20):
There was going to be required regulation and reporting that
was going to bring others into the ecosystem. You know,
there were a whole set of things, and most of
those things around the world have turned into headwinds and
made you know, so we've learned a lot and we've
seen what's been happening. The science has I think gotten
(13:40):
very clearer on a number of things, and so we've
really tried as we went through the goals, we said,
what have we learned? Right? I mean, if you're four
or five years into something you haven't learned something, shame
on you. So what have we learned? What is it
that we can Again same questions we ask at the beginning,
what is it that we can do that's important for
the business where we as PepsiCo can have an impact
(14:03):
that can actually matter. And so we looked at some
of the regeneral Agriculture goal that I talked about. We
we expanded it both in its scope but also in
breadth and that was you know, that was that was important.
Our climate goals, we updated those. So the SBTi had
Science Based Target Initiative, as you know, had set a
(14:26):
requirement for companies like ours that you need to have
a flag goal and you know, break your scope three
into two parts. So we needed to do that because
where we have a big enough for you know, land
use component, and so we we needed to do that.
So we broke that and then what we did was
we made two changes. The first was we had had
(14:50):
our climate goals at twenty forty, which for us is
quite challenging because we're ninety three ninety four percent Scope three.
So to think that we or any other company is
going to move a system as big as ours across
you know, tens of thousands of suppliers, hundreds of thousands
(15:10):
of farmers in the direct and indirect supply chain faster
than the world is going to move because most countries
have lined up their NDCs even more since then to
twenty fifty. Moved that ten years faster than Paris and
ten years faster. You know, that was honestly, it was
just going to be unrealistic. So we adjusted that. But
(15:33):
what we did. What we also did was again the
science had become increasingly clear, and so we made sure
that all of our goals Scope one, Scope two, Scope three, Flag,
Scope three E and I all are now aligned to
one point five. And that was not the case before.
Our Scope three goal was well below two. So we
(15:53):
increased the ambition on the climate goal. And I was
talking with the leader of one of the very influential
large NGOs and she said, you know, I took her
through the goals and what we were thinking. She said,
that's the most important thing you've told me, which is
you have your goal your climate goals aligned to one
point five that because that's the most important thing of everything,
(16:15):
and that was you know, that was that That felt good.
But also we again trying to align goals with where
we can have an impact, what we think we can do.
On packaging, we adjusted our focus to really focus on
driving scale and some of the key packaging markets that
were our business's biggest, where we feel like we can
have the most impact. And we maintained efforts to reduce
(16:38):
virgin plastic use, which not everybody is doing, and improve
our packaging design because that's an important component. And then
we retained our We retained our twenty thirty netwater positive vision,
which has both a water use efficiency goal and a
replenishment goal, and we really focus at on the places
(16:58):
where it's most important, high water risk area, so that's
sort of the broad areas. We had a set of
goals around positive choices our nutrition portfolio. A number of
those we've already met, a number of those we've increased,
most recently sodium. And then we added a goal around
diverse ingredients, where by twenty thirty we will have one
hundred and our goal is to have one hundred and
(17:21):
forty five billion servings a year annually of diverse ingredients
through our products around the world. And so we continue
to refine our goals based on the latest science, based
on our business and how that's changing, the growth of it,
the areas of focus, and then also in the places
we think we can have the most impact.
Speaker 1 (17:43):
All right, and you touched on headwinds and regulation in that,
and I'm just wondering how does that play in which
regulations in particular do you think would be needed, if any,
to actually accomplish your goals? And you know, where do
you think the biggest headwinds have come when you think
(18:03):
of business since twenty twenty? Is it just the lack
of kind of financial support from government initiatives or is
it something else?
Speaker 2 (18:14):
It's it's many things, and maybe there's maybe I can
pull a theme that comes across a number of different
specific areas, and that's lack of harmonization and fragmentation. A
large company like ours, we're active in two hundred countries
and territories in the world. We're active in beverages, we're
active in foods, we're in all sorts of foods and
(18:35):
all sorts of places. We have packaging of all shapes
and sizes. We have farmers that we work with in
a number of countries, and having you know, without harmonized
policies and definitions, and this came up a lot when
I was a climate week across a whole lot of
companies and you know, I know you were there as well.
Without having standardized, harmonized definitions and rules, it becomes horribly inefficient.
(19:02):
And that's true whether it's reporting or EPR or lack
of EPR, or subsidies and incentives, right, And so we
were very disappointed that there was not that the world
was not able to come to agreement on a global
plastics treaty. I mean, we were on record publicly in
(19:22):
favor of legally binding, globally harmonized rules, and if you
think about you know, that might seem counterintuitive, but we
believe that that was very important to help the world
move forward and to have well designed EPR systems to
enable circular economy and circularity to happen. It didn't happen,
(19:44):
and so now there's a patchwork of regulations. The same
is true in reporting, The same is true in subsidies
and the same is true in incentives. And so rather
than any particular area, it's this fragmentation and lack of harmonization,
even on things like how do you report carbon, which
(20:05):
would seem to be somewhat simple, but as you well know,
is extremely complex and every jurisdiction seems to have its
own way. And you know, we're we're a leader. We're
literally I think many would would acknowledge we're a world
leader in reporting. We are one of those companies that
does extremely well. We really believe in transparency because transparency
(20:30):
plus accountability is how you build trust. We believe that's
critically important when it comes to partnerships in collaboration. But
the transparency comes at a cost. And the if I
could report one time in one way, I could take
a lot of money that today goes towards fragmented, unharmonized
(20:53):
reporting and spend it on doing but I don't. That's
not something that we can do. And so the the
money that goes into reporting is you know, I think
regulators and others around and NGOs need to ask themselves
what is the benefit for yet another incarnation of you know,
(21:16):
how we report carbon or something similar.
Speaker 1 (21:19):
Oh, so many questions there. From my background at SASBY,
I will just say there have been attempts to make
that a little bit easier, but somehow the alphabet soup
is still pretty stocked. I fully appreciate that that's a cost,
and I do think actually quite a few people listening
may not appreciate that. I know, for my Sasby day's
people that just put in request for data and information
(21:40):
sometimes don't understand what it takes to supply it. But
I guess maybe just flipping that, is there any are
there any examples of like a data point that maybe
you wouldn't normally have collected that once you did start
collecting it, you started realizing there was a lot of
business impact and benefit from being able to measure something.
Speaker 2 (21:58):
Totally Okay, sure, no, we're always looking to learn, and
you know what, I'm a great believe again goes back
to the very first question you asked. You know, I'm
quite analytical. I like to understand cause and effect. If
you get into the numbers, you can often understand why
things are happening. And you know, sure, we've collected data
(22:20):
in a number of areas. And again I would say
let's go back to regeneral agriculture. Once we looked at
you know, what are the what are how many acres
are are we on in terms of working with the
farmers where regeneral practice is being adopted and where they
not being adopted. Well, just that simple data point allows
(22:40):
you then to say, if I want to increase that number,
what do I need to do? But that was that
was not a number that we had before four years ago.
Now we have it, and now we you know, PepsiCo
is a company that's very goal oriented, and so when
when you have a number and you, you know, say
it's important, then there's lot of people that wake up
(23:01):
and try and figure out how to make it happen.
And when you link that to the health of the business,
you link that to supply security, you link that to resilience,
you link that to keeping farmers farming. I mean farmers
have a choice. They have land which they can use
for something else, whether it's put up a solar panels
or you know, some a data center, you know, some
(23:22):
sort of competition for land. But they also have a
choice on what crupt they're going to farm. And we
need them to farm potatoes, for example, or oats, which
are not you know, they're more specialty. They take some expertise,
they take some experience. Generally is quite helpful when you
link what we're doing in regeneral of agriculture internally and
(23:45):
how we're doing in terms of the numbers to the
health and success of the business. People get it. And
so that's a great example where when we started to
just something as simple as track the number of acres
and where they are, it's made a very big difference.
And that's why we've made very strong progress. And that's
why we were able to increase our goal because we
(24:07):
got the organization mobilized around it. Not because it's right
for the planet, even though it is, but it's because
it's good for the business. And oh, by the way,
it's right, it's good for the planet. So yeah, I
think anytime you measure something, you almost always you learned something,
all right.
Speaker 1 (24:27):
And so one of the bigger developments I think this
year in food and beverage in particular, has been the
focus on healthier product, which you've obviously identified previously in
your choices, but with all these increasing pressure and pledges
to remove artificial dies, clearly it's a social issue with
(24:48):
health and nutrition, but I imagine there's also some you know,
certainly business implications, but also environmental implications behind that. I
also imagine you have some experience with this because you
already have your Simply line of snacks, which I believe
tries to do colors.
Speaker 2 (25:05):
And flavors correct.
Speaker 1 (25:07):
But as you think about that becoming a broader trend
across the industry, can you kind of break down what
that means? Because I just feel you're turning from something
that's consistently developable in a you know, chemical plant, towards
something growing in a field that there's some things that
you need to think about and challenges there.
Speaker 2 (25:27):
Yeah. Yeah, And I personally recommend highly the simply white
cheddar Cheetos if you're if you're looking for somewhere to
enter into simply that would be the place I would start.
But yeah, but you're right. I mean, core nutrition has
been a core part of PepsiCo Positive since it started,
and then certainly is part of what the company's been
(25:49):
trying to do for a very long time. And in
twenty twenty five, you know, we actually surpassed a number
of targets that we had already put in place. Around
sugar and sodium reduction. Uh, those were a full year
ahead of when we had originally laid them out, and
so that's something that you know, we we again, we
(26:10):
have numbers, we track them, and we're making progress. I
think specifically with your question, excuse me, it's it's what
do consumers want? And what do what? What will consumers buy?
And I'm not talking by at a premium. I'm talking
by because ultimately, you know, consumers are making these choices.
(26:30):
In our case, we we we have about a billion
occasions a day, so you know, it's consumers making those
choices on a regular basis. And the question I think
really is around how do you provide consumers what they
want in a way that uh, you know work works
(26:53):
all the way around for for the business. And so
as you say, I mean we we partner a lot
my team, the stainability team part is a lot with
R and D partners, a lot with the business units
as we look to reformulate, whether that's the core so
the existing you know business again, many of which, as
you said, simply already has it. Lays and Tostitos, you know,
(27:15):
which are two of the larger food brands in the
world will have you know, no artificial uh flavors, colors
UH and flavors by the end of the year. So
these are very big steps that are already underway. But
you know, how do we make sure the tastes and
affordability are preserved because that's super super important and sort
of jobs one A and one B. If you will,
(27:37):
the supply chain impacts which you which you highlighted. If
you're going to move to natural colors, which we're in
the process of doing, you need to understand where those
where those ingredients gonna come from. Uh, what is the
footprint of those how durable is that supply chain is different?
Handling and processing necessary, what happens with regards to shelf life, right,
(28:01):
There's all these complexities that go into it. And then
also you know, there are a set of environmental trade offs.
The the farming intensity of natural colorants is a very
because and varies by color and actually even varies by
the source of the color. Red radishes are different than
than beats, both of which are making you know, something
(28:22):
something on the red spectrum. So that's that, you know,
this is a prime example of where sustainability is involved
and has to be involved in the decisions that you know,
you might think are strictly product decisions, but again, the
way we look at it, these are holistic business decisions
(28:43):
and we've got to consider all those parts to be
able to do it. But yes, we've we've got publicly
stated goals. We're moving aggressively forward on a number of them,
and uh, you know around artificials and the removal of
and we're considering all of these things as we as
we do that.
Speaker 1 (29:00):
Okay, that's interesting, And I'm guessing a lot of people
maybe don't understand the work that goes into doing this.
Speaker 2 (29:07):
Try It is a commendous amount of work.
Speaker 1 (29:09):
So and I think that raises something that I also
want to dig into. A lot of times people see
ESG as like a simple black and white good and
bad issue, but I think there is a lot of
nuance that can get lost. For instance, something like with
a packaging decision, you know, there can be a lot
of different trade offs and and I feel like when
people look at a company like pepsi Co they might
(29:31):
miss that. I'm wondering if you can talk about like
what you see as maybe some of those bigger trade
offs that are least appreciated in the markets.
Speaker 2 (29:41):
Yeah, well you're using one of my favorite words, which
is trade offs. You know, and I frequently and a
lot of contexts will say life's about trade offs, right.
Rarely is any decision in any corner of our lives
black or white. And so what are the trade offs
that you're going to make and how do you manage
the applications of those trade offs? And importantly, one of
(30:02):
the things that we try and do is make sure
that the business is aware of the trade offs, or
that regulators are aware of the tradeoffs, or the NGOs
you know, who might have a particular point of view,
are aware of the trade offs. And you know, packaging,
I mean, packaging is a great example. If there's a
blanket ban on an entire material or class of materials,
(30:26):
for example, there's often technical considerations that may or may
not have been fully considered, and there's often supply chain
realities around that. And so you very quickly and I'll
give you an example in a second, but you very
quickly get into things like is this going to disrupt
(30:47):
the supply chains, it's going to disrupt product delivery? Is
it going to increase costs? Which is not something that
we as a manufacturer with mass market products, we don't
want to increased costs ortability. You know they say taste
in affordability right now or sort of one A and
one B when you come to food products. So, but
(31:07):
sometimes decisions that are made make it extraordinarily difficult not
to have cost increase. And then there's often sustainability trade offs.
You know, a paper solution, right like paper put everything
in paper A. Technically I wish I could, but I can't. Second,
(31:27):
that might reduce plastic usage, but it might increase water usage,
and often it will increase the carbon footprint. So again,
what's the trade off that we're trying to make. What's
the problem we're trying to solve? A reusable system you
often hear and we have reusables in seventy or eighty
countries around the world, So we understand reusable systems and
(31:51):
they do reduce waste, but they require energy and they
require water toize sanitize something like a glass bottle. Also,
often the carbon footprint is much higher, at least for
a while, until you get a lot of trips because
you're moving heavy glass bottles, for example, into directions. On
(32:16):
the consumer side, all of those considerations are irrelevant. If
a consumer has a different preference, it isn't going to
buy whatever the question is in whatever the product in
the form factor is in question, and you know that,
then there can be an implication on product costs, consumer acceptance,
(32:37):
right overall acceptance. Those things all have to be a
part of it. And then if you throw regulatory on
top of it. You know, investments in compostable packaging, for example,
may never scale due to legal considerations in many jurisdictions.
So all those things have to go into the equation,
(32:59):
if you will. And often to your point, they they
well meaning people often want to get black and white
and have things be simple, and rarely are they simple.
They don't have to be complicated, but some of these
things are in fact complex, and those trade offfs need
to be carefully thought through and managed and a realization
(33:19):
by all that there are tradeoffs that are you know,
being taken on. You know, I maybe maybe one example
of something that again we're working very hard on as
reusable cups, and you know, those those we're finding. We
have a number of pilots, you know, the Arizona Diamondbacks,
the San Francisco forty nine ers the University of Washington
(33:42):
Huskies football team. Right, those are stadiums and environments where
we're offering reusable cups in a environment where you have
a pretty good chance of getting that cup back. You've
got pretty good densities to be able to then support
the systems that are necessary to get those cups sanitized.
(34:05):
In return, we've been able to go from pilots to
full season in a couple of those places. But again,
there these are still things that are still being worked
and proven out and uh and and driven forward.
Speaker 1 (34:19):
That certainly makes sense. And I know I worked on
a plastic project when I was at Sasby and these
are things that I think the markets need to need
to know and maybe don't fully appreciate. I know we're
running late on time. Maybe just a couple of last questions.
There's a lot that you can control, but there's a
lot that maybe is a little that's outside of your control.
(34:40):
What what what is it the biggest thing that that's
the hardest for you to be able to control? And
you know how and how can you defend against it
at least to some extent or position yourself.
Speaker 2 (34:55):
To some extent?
Speaker 1 (34:57):
Uh?
Speaker 2 (34:57):
Yeah, great, great, great question.
Speaker 1 (35:00):
Or maybe what keeps you up at night. Yeah, it
might be another way of putting it.
Speaker 2 (35:05):
Yeah, yeah, great question. You know, weather weather concerns me
a lot. And I don't just mean is it going
to rain or is it going to be sunny though
of course that that matters. But extreme weather events, right,
are becoming increasingly common. There's too much water, there's not
enough water, it's too hot, it's not hot enough. Right,
there's a major windstorm of some sort, and it knocks
(35:29):
all the crops down. I mean, farmers get one shot
a year to literally put food on their table or not,
and they need to be successful. And again we need
them to be successful. And the increasing prevalence of extreme
weather events. I mean I heard a great statistic recently
which was according to the United Nations Commission on to
(35:52):
Combat Desertification, since since the year two thousand, climate change
in poor land management and often those those go together, unfortunately,
have contributed to a twenty nine percent increase in droughts. Okay,
that absolutely affects and impacts and threatens agricultural viability. So
(36:15):
for a company like US, right, weather writ large again,
as I say, it's climate change is the impacts, it's
and yes, there's veriability at any point time, and farmers
understand that. But when you know, I spent a lot
of time on farms, and when you're with a farmer
and they say, you know, boy, the way my father
and you know, usually it's a father, but the way
(36:37):
my father farmed and when they would go and plant
and when they harvested, it was you know, this this
month and this month that has fundamentally changed and I
can no longer farm the way and on the schedule
that they did because the weather has changed. Well, they
(36:58):
don't mean the weather on sete Saturday, they mean a
climatic system and ecosystem in which they're farming. And so
what can we do. That's why again we've adopted a
set of goals to really help make, you know, do
what we can to support farmers to adopt re generative practices,
things that we know and they know, help them become
(37:19):
more resilient, help secure supply, and ultimately help enhance their livelihoods,
because again, if they can't make money, they can't feed
their family farming, whether they are a big farmer or
small fim, we're going to go do something else, and
that takes important supply and livelihoods out of the food system.
And you know, we as PepsiCo, we need a resilient, successful,
(37:43):
productive food system across all the various dimensions to be successful,
to have a business. And I would argue the world
needs resilient, successful food systems if we're going to feed ourselves.
So we're doing our part to do what we can.
Speaker 1 (37:59):
Okay, that answer ended much more hopefully than I expected,
which is great, and I think maybe we're maybe we'll
leave it there, unless you have any last thoughts.
Speaker 2 (38:09):
I think the only other thought I would say is
the more organizations I mean, whether it's companies or NGOs
or governments or you know, financiers, the more that we
can get aligned and focused on how do we improve
the strength, the health, the resilience of the food system,
(38:30):
the better off we're going to be. And you know,
we're we're trying to help move that system forward and
change that system. But I always say, sustainability as a team sport,
and we need a lot more people on the team
on the field trying to trying to win the game,
and we don't have enough right now, but you know,
we'll keep moving, all right.
Speaker 1 (38:49):
Definitely a great pleace to end, Jim, thank you so
much for your time and your insights. You can find
more information on corporate ESG exposure and issues by going
to BI ESG on the Bloomberg terminal or calling up
a ticker like PEP and typing ESG go. If you
have any es G questions you would like to ask
(39:10):
bi's expert analysts, please send us an email at ESG
Currens at Bloomberg dot net. Thank you very much and
thanks again, Jim
ESG is constantly evolving. Over the years, it shifted from
socially responsible investing to impact to sustainable finance. While the
terminology continues to change, what hasn't changed are the underlying science,
market pressures, and tangible physical and financial impacts of the
climate crisis, increasing regulatory scrutiny, and rising consumer expectations. We
(00:31):
aim to filter out the noise by speaking with industry
experts to identify what is really driving value. Welcome to
ESG Currents. I'm Gail Glazerman, senior ESG analyst, your host
for today's episode. While there has been growing pushback against
ESG in the US in recent months, global companies still
have to contend with expectations and many other jurisdictions, and,
(00:52):
more importantly, the tangible manifestations of ESG, such as water scarcity,
extreme heat, and wildfires. Speaking with Jim Andrew, EVP and
chief Sustainability Officer at PepsiCo, a company that has been
at the crossroads of these competing pressures. Jim, thanks for
joining us today.
Speaker 2 (01:11):
Gail, thanks for having me very excited. Can you maybe
walk us.
Speaker 1 (01:14):
A little bit through your background and of particular interest
to me, was you started in consulting and just how
that translated into sustainability and how it influences your approach
to sustainability.
Speaker 2 (01:28):
Sure well, and guilty is charged. I'm a reform consultant
and spent a long time in consulting and at the
Boston Consulting Group, and it was a great background because
it it taught me a couple of things. One is,
every business is a people business, and you know, if
you get the right people, you can do a whole lot.
And the second was how do you approach problems in
(01:50):
a very analytical, thoughtful way. And I think that has
served me well with regards to sustainability because it's really
about how do we mobilize organizations in our case PepsiCo,
but also broader systems to be able to make the
(02:10):
changes that are necessary. And then how do you take
what are very large problems and break them down into
manageable chunks that you can actually go and attack. I'm
a very pragmatic business guy. I don't have an environmental engineer.
I'm about, you know, how do we connect what we're
doing in sustainability with the business and use it to
(02:33):
strengthen our business, to drive our business forward and to
be responsible in the communities that we operate, but also
be able to make sure that we have, for example,
in our case, the crops that we need source from
three hundred thousand odd farmers across our directly and direct
value Chaine to be able to move forward and grow,
(02:54):
and to do that you have to deal with the
people side, for sure. Ian you also have to deal
with how do you take some a massive problem and
break it down into pieces you can move forward at
pace and create action around. And so I think consulting,
you know, has really helped both at Phillips where I
was before, and certainly at PEPSI COO.
Speaker 1 (03:15):
All Right, so there's a lot there that I think
will impact as we move through this discussion. But maybe
just starting what ESG issues, Certainly you mentioned the crops
and the people specifically, what ESG issues do you think
are the most important to PEPSI COO And how has
that evolved over time? Like if I'd asked you this
like three years ago, would you be giving me the
(03:37):
same answer or is your thinking shifted at all?
Speaker 2 (03:40):
Yeah, So maybe we can wind back and to sort
of twenty twenty when I took over the Chief Sustainability
Officer role. And one of the things that we did
then with my boss, our current CEO, Ramon Laguarte, and
PepsiCo has been about sustainability for a very long time.
What he saw is I really want to take sustainability
(04:01):
and put it squarely in the center of our strategy,
which which I had been very involved in building when
I headed up strategy for PepsiCo and he had taken
over a CEO, and so then it was really about
how do we further integrate it into the business. Where
I started was what's really important? What are the things
(04:21):
that matter? What are the things that we as PepsiCo
can have impact on? And we really landed on sort
of three broad areas, and we're branding company, we'll bring
we brand everything. So we called the whole transformational program
PepsiCo Positive, and in that we have three pillars. We
have positive agriculture and most people positive agriculture, positive value chain,
(04:44):
and positive choices. And let me just briefly unpack each
of those and then you want to go into more details. Certainly,
can people think of PepsiCo is a very large beverage company,
and of course we are, but we'ren't even much larger
food company. And so we need a steady supply of
agricultural crops and ingredients to be able to run our business. Potatoes, oats, wheat,
(05:07):
all sorts of things. And so we said we need
a focus on agriculture, and that's regenerative practices, that's sustainable sourcing,
that's livelihoods of farmers and communities, agricultural communities. Then we
also said, we have a value chain, and that's when
you have those when you've sourced those crops, how do
you turn them into the delicious food and beverage products
(05:31):
that consumers want? And then how do you get them
to where they are? So we call it make, move,
and sell. And that's where our emissions goals are, that's
where our water goals are, that's where our packaging goals are.
And then Positive Choices, which is really about our portfolio,
the products in it, the ingredients that we incorporate, and
those three things positive agriculture, positive value chain, Positive choices
(05:54):
really is what we launched Pettico Positive with in twenty
twenty one and have really been the hallmark of what
we've been doing ever since. And obviously there's a people
component that fits into all of those. And I'm pleased
to say that those have proven to be pretty durable.
Those are the same priorities that we're executing against now
(06:18):
as well as in twenty twenty one. So the priorities,
I think we did a pretty good job at picking
the things that matter to the business and places where
we are because of our size and our scale, we
can actually have an impact on. And you know, since then,
it's been learning more, working more, pushing more to make
progress against those largely same set of goals.
Speaker 1 (06:41):
And do you have a sense do you work much
with investor relations how those goals align with what your
investors care about. Do you think they kind of understand
the priorities for the business?
Speaker 2 (06:52):
Yeah, so our head of investor relations, Robbie, and I
talk quite frequently and what investors care about. I think
our pet for us it's not sustainability over in some
distant galaxy and the business you know, in the center,
it's really again, how did we bring those two things together?
(07:13):
Because what investors care about it is they want to
see growth, and they want to see sustainable growth. And
I don't mean sustainable growth in an environmental sense. I
mean growth that is durable, long lasting, and continues to
move forward, and for us, because of our agricultural footprint,
because of the you know, the use, our need for
(07:34):
water and so on, we have to for for us
sustainable in terms of environmental concerns. Sustainability and growth go
hand in hand. They really can't be separated because otherwise
we don't actually we don't. We don't have a business.
And so I think investors understand risk, they understand durable
(07:57):
uh if you, if you will, durable growth. And so
that's what we've always tried to communicate it. We're not
out to save the world. We're out to make our
business better, and in doing that there's a set of
things we need to do that will also have positive
impact on the planet and the people in it. But
we've always tried to make those those two pieces, you know,
hand in glove and make sure they don't get separated.
(08:19):
That makes sense.
Speaker 1 (08:20):
But I mean, have there been any changes maybe that
would have surprised you coming from investors, just given all
the pushback that if she has undergone over the past year,
or anything that surprised you, or anything that you're getting
asked about maybe a little bit more frequently than you
might have, there's really.
Speaker 2 (08:36):
Not and I think that's a testament honestly to Robby
and our IR team and to our communications team, and
also to how we've set the priorities you know, from
the board and ramoned on down, which is we're doing
things are important to the business. We're balancing what we're doing,
(08:57):
how we're doing it, where we're doing it with things
that matter to how we actually grow and make money.
And because of that, I think you know, there's there's
been pretty good alignment. So no, I haven't seen big
changes in what people are asking about or commenting on.
Speaker 1 (09:14):
And can you maybe give some specific examples both in
terms of things that you've initiated that have impacted the
business performance and also maybe how that translates into actual
business operations and getting that buy in with the business
leaders and taking it out of the c suite.
Speaker 2 (09:32):
Yeah, I mean maybe the best maybe the best example
is around Ridge, owner of agriculture. So if you again,
if you go back, I think you know there was
obviously a group of people in R and D, in
parts of supply chain and procurement who spend a lot
of time worrying about potatoes, for example, or or oats.
(09:54):
But I would but now if you were to sort
of do a compare contrast from five years ago and
now there's a much much larger part of the company
that actually understands and you know, have spent time on farms,
have spent time talking to farmers, have gotten educated on
the importance of healthy soil to our business. You don't
(10:16):
just pick up the phone or you know, get on
a website and order up tons and tons and tons
of potatoes. You need to nurture relationships. You need to
do what we can to help farmers keep farming to
be successful as business people, and so we've adopted We
(10:37):
originally adopted a goal to bring regenerative practices to seven
million acres by twenty thirty, and we've since increased that
goal to ten million acres and added some nature components
around protect and restore still by twenty thirty, because by
last year twenty twenty four, of the most recent information,
(10:57):
we were already three and a half million acres. We
were making good progress, and that's because the business around
the world understands the importance of if you don't have potatoes,
you're not going to have a business. And the ability
to support farmers with you know, financial support, technical support
(11:18):
and sort of social and emotional support. You know, we
we we do that we work with farmers, but that
really comes from our business and the realization that we
need a steady supply of high quality potatoes. Our R
and D team has done a great job of having
proprietary genetics. But if those aren't planted in the healthy soil,
if they don't have enough water, if there's extreme weather events,
(11:41):
all of which are you know, becoming more and more common,
we're not going to have the type and quantity of
supply that we need to be able to make lays
or Quaker oats or do any of our others. So
I think that's a great example of where the business
has come along and really understood the importance of the
(12:03):
work that we do around regener of agriculture and making
sure that farms are in healthy environments by working with
farmers to do that. In the business, which is, you know,
how do we grow and sell more and satisfy more consumers.
Speaker 1 (12:19):
Okay, and you touched in that that you've raised your
goal for acreage from seven million to ten million. You've
changed some other sustainability goals in recent months. Can you
walk through what you've changed and why just give a
little bit of perspective there.
Speaker 2 (12:36):
Yeah. Sure, So again kind of go back to twenty
twenty when we started sort of really thinking about what
what are the goals? And again I'm not an environment
manageer and I'm a business I'm a business guy, so
I'm you know, what are we going to do? How
do we get the plans lined up? How do we
execute against it? How do you know if we're making progress?
And that's true on whether we're trying to grow a
(12:57):
business or make sure that we are sustainability activities are
moving forward. It's you know, the world was a very
different place in twenty twenty right and twenty twenty one
when we launched, right, there were all sorts of what
I call tailwinds. You know, there was going to be
all sorts of government policy. There was going to be
all sorts of financing that was going to be made available.
(13:20):
There was going to be required regulation and reporting that
was going to bring others into the ecosystem. You know,
there were a whole set of things, and most of
those things around the world have turned into headwinds and
made you know, so we've learned a lot and we've
seen what's been happening. The science has I think gotten
(13:40):
very clearer on a number of things, and so we've
really tried as we went through the goals, we said,
what have we learned? Right? I mean, if you're four
or five years into something you haven't learned something, shame
on you. So what have we learned? What is it
that we can Again same questions we ask at the beginning,
what is it that we can do that's important for
the business where we as PepsiCo can have an impact
(14:03):
that can actually matter. And so we looked at some
of the regeneral Agriculture goal that I talked about. We
we expanded it both in its scope but also in
breadth and that was you know, that was that was important.
Our climate goals, we updated those. So the SBTi had
Science Based Target Initiative, as you know, had set a
(14:26):
requirement for companies like ours that you need to have
a flag goal and you know, break your scope three
into two parts. So we needed to do that because
where we have a big enough for you know, land
use component, and so we we needed to do that.
So we broke that and then what we did was
we made two changes. The first was we had had
(14:50):
our climate goals at twenty forty, which for us is
quite challenging because we're ninety three ninety four percent Scope three.
So to think that we or any other company is
going to move a system as big as ours across
you know, tens of thousands of suppliers, hundreds of thousands
(15:10):
of farmers in the direct and indirect supply chain faster
than the world is going to move because most countries
have lined up their NDCs even more since then to
twenty fifty. Moved that ten years faster than Paris and
ten years faster. You know, that was honestly, it was
just going to be unrealistic. So we adjusted that. But
(15:33):
what we did. What we also did was again the
science had become increasingly clear, and so we made sure
that all of our goals Scope one, Scope two, Scope three, Flag,
Scope three E and I all are now aligned to
one point five. And that was not the case before.
Our Scope three goal was well below two. So we
(15:53):
increased the ambition on the climate goal. And I was
talking with the leader of one of the very influential
large NGOs and she said, you know, I took her
through the goals and what we were thinking. She said,
that's the most important thing you've told me, which is
you have your goal your climate goals aligned to one
point five that because that's the most important thing of everything,
(16:15):
and that was you know, that was that That felt good.
But also we again trying to align goals with where
we can have an impact, what we think we can do.
On packaging, we adjusted our focus to really focus on
driving scale and some of the key packaging markets that
were our business's biggest, where we feel like we can
have the most impact. And we maintained efforts to reduce
(16:38):
virgin plastic use, which not everybody is doing, and improve
our packaging design because that's an important component. And then
we retained our We retained our twenty thirty netwater positive vision,
which has both a water use efficiency goal and a
replenishment goal, and we really focus at on the places
(16:58):
where it's most important, high water risk area, so that's
sort of the broad areas. We had a set of
goals around positive choices our nutrition portfolio. A number of
those we've already met, a number of those we've increased,
most recently sodium. And then we added a goal around
diverse ingredients, where by twenty thirty we will have one
hundred and our goal is to have one hundred and
(17:21):
forty five billion servings a year annually of diverse ingredients
through our products around the world. And so we continue
to refine our goals based on the latest science, based
on our business and how that's changing, the growth of it,
the areas of focus, and then also in the places
we think we can have the most impact.
Speaker 1 (17:43):
All right, and you touched on headwinds and regulation in that,
and I'm just wondering how does that play in which
regulations in particular do you think would be needed, if any,
to actually accomplish your goals? And you know, where do
you think the biggest headwinds have come when you think
(18:03):
of business since twenty twenty? Is it just the lack
of kind of financial support from government initiatives or is
it something else?
Speaker 2 (18:14):
It's it's many things, and maybe there's maybe I can
pull a theme that comes across a number of different
specific areas, and that's lack of harmonization and fragmentation. A
large company like ours, we're active in two hundred countries
and territories in the world. We're active in beverages, we're
active in foods, we're in all sorts of foods and
(18:35):
all sorts of places. We have packaging of all shapes
and sizes. We have farmers that we work with in
a number of countries, and having you know, without harmonized
policies and definitions, and this came up a lot when
I was a climate week across a whole lot of
companies and you know, I know you were there as well.
Without having standardized, harmonized definitions and rules, it becomes horribly inefficient.
(19:02):
And that's true whether it's reporting or EPR or lack
of EPR, or subsidies and incentives, right, And so we
were very disappointed that there was not that the world
was not able to come to agreement on a global
plastics treaty. I mean, we were on record publicly in
(19:22):
favor of legally binding, globally harmonized rules, and if you
think about you know, that might seem counterintuitive, but we
believe that that was very important to help the world
move forward and to have well designed EPR systems to
enable circular economy and circularity to happen. It didn't happen,
(19:44):
and so now there's a patchwork of regulations. The same
is true in reporting, The same is true in subsidies
and the same is true in incentives. And so rather
than any particular area, it's this fragmentation and lack of harmonization,
even on things like how do you report carbon, which
(20:05):
would seem to be somewhat simple, but as you well know,
is extremely complex and every jurisdiction seems to have its
own way. And you know, we're we're a leader. We're
literally I think many would would acknowledge we're a world
leader in reporting. We are one of those companies that
does extremely well. We really believe in transparency because transparency
(20:30):
plus accountability is how you build trust. We believe that's
critically important when it comes to partnerships in collaboration. But
the transparency comes at a cost. And the if I
could report one time in one way, I could take
a lot of money that today goes towards fragmented, unharmonized
(20:53):
reporting and spend it on doing but I don't. That's
not something that we can do. And so the the
money that goes into reporting is you know, I think
regulators and others around and NGOs need to ask themselves
what is the benefit for yet another incarnation of you know,
(21:16):
how we report carbon or something similar.
Speaker 1 (21:19):
Oh, so many questions there. From my background at SASBY,
I will just say there have been attempts to make
that a little bit easier, but somehow the alphabet soup
is still pretty stocked. I fully appreciate that that's a cost,
and I do think actually quite a few people listening
may not appreciate that. I know, for my Sasby day's
people that just put in request for data and information
(21:40):
sometimes don't understand what it takes to supply it. But
I guess maybe just flipping that, is there any are
there any examples of like a data point that maybe
you wouldn't normally have collected that once you did start
collecting it, you started realizing there was a lot of
business impact and benefit from being able to measure something.
Speaker 2 (21:58):
Totally Okay, sure, no, we're always looking to learn, and
you know what, I'm a great believe again goes back
to the very first question you asked. You know, I'm
quite analytical. I like to understand cause and effect. If
you get into the numbers, you can often understand why
things are happening. And you know, sure, we've collected data
(22:20):
in a number of areas. And again I would say
let's go back to regeneral agriculture. Once we looked at
you know, what are the what are how many acres
are are we on in terms of working with the
farmers where regeneral practice is being adopted and where they
not being adopted. Well, just that simple data point allows
(22:40):
you then to say, if I want to increase that number,
what do I need to do? But that was that
was not a number that we had before four years ago.
Now we have it, and now we you know, PepsiCo
is a company that's very goal oriented, and so when
when you have a number and you, you know, say
it's important, then there's lot of people that wake up
(23:01):
and try and figure out how to make it happen.
And when you link that to the health of the business,
you link that to supply security, you link that to resilience,
you link that to keeping farmers farming. I mean farmers
have a choice. They have land which they can use
for something else, whether it's put up a solar panels
or you know, some a data center, you know, some
(23:22):
sort of competition for land. But they also have a
choice on what crupt they're going to farm. And we
need them to farm potatoes, for example, or oats, which
are not you know, they're more specialty. They take some expertise,
they take some experience. Generally is quite helpful when you
link what we're doing in regeneral of agriculture internally and
(23:45):
how we're doing in terms of the numbers to the
health and success of the business. People get it. And
so that's a great example where when we started to
just something as simple as track the number of acres
and where they are, it's made a very big difference.
And that's why we've made very strong progress. And that's
why we were able to increase our goal because we
(24:07):
got the organization mobilized around it. Not because it's right
for the planet, even though it is, but it's because
it's good for the business. And oh, by the way,
it's right, it's good for the planet. So yeah, I
think anytime you measure something, you almost always you learned something,
all right.
Speaker 1 (24:27):
And so one of the bigger developments I think this
year in food and beverage in particular, has been the
focus on healthier product, which you've obviously identified previously in
your choices, but with all these increasing pressure and pledges
to remove artificial dies, clearly it's a social issue with
(24:48):
health and nutrition, but I imagine there's also some you know,
certainly business implications, but also environmental implications behind that. I
also imagine you have some experience with this because you
already have your Simply line of snacks, which I believe
tries to do colors.
Speaker 2 (25:05):
And flavors correct.
Speaker 1 (25:07):
But as you think about that becoming a broader trend
across the industry, can you kind of break down what
that means? Because I just feel you're turning from something
that's consistently developable in a you know, chemical plant, towards
something growing in a field that there's some things that
you need to think about and challenges there.
Speaker 2 (25:27):
Yeah. Yeah, And I personally recommend highly the simply white
cheddar Cheetos if you're if you're looking for somewhere to
enter into simply that would be the place I would start.
But yeah, but you're right. I mean, core nutrition has
been a core part of PepsiCo Positive since it started,
and then certainly is part of what the company's been
(25:49):
trying to do for a very long time. And in
twenty twenty five, you know, we actually surpassed a number
of targets that we had already put in place. Around
sugar and sodium reduction. Uh, those were a full year
ahead of when we had originally laid them out, and
so that's something that you know, we we again, we
(26:10):
have numbers, we track them, and we're making progress. I
think specifically with your question, excuse me, it's it's what
do consumers want? And what do what? What will consumers buy?
And I'm not talking by at a premium. I'm talking
by because ultimately, you know, consumers are making these choices.
(26:30):
In our case, we we we have about a billion
occasions a day, so you know, it's consumers making those
choices on a regular basis. And the question I think
really is around how do you provide consumers what they
want in a way that uh, you know work works
(26:53):
all the way around for for the business. And so
as you say, I mean we we partner a lot
my team, the stainability team part is a lot with
R and D partners, a lot with the business units
as we look to reformulate, whether that's the core so
the existing you know business again, many of which, as
you said, simply already has it. Lays and Tostitos, you know,
(27:15):
which are two of the larger food brands in the
world will have you know, no artificial uh flavors, colors
UH and flavors by the end of the year. So
these are very big steps that are already underway. But
you know, how do we make sure the tastes and
affordability are preserved because that's super super important and sort
of jobs one A and one B. If you will,
(27:37):
the supply chain impacts which you which you highlighted. If
you're going to move to natural colors, which we're in
the process of doing, you need to understand where those
where those ingredients gonna come from. Uh, what is the
footprint of those how durable is that supply chain is different?
Handling and processing necessary, what happens with regards to shelf life, right,
(28:01):
There's all these complexities that go into it. And then
also you know, there are a set of environmental trade offs.
The the farming intensity of natural colorants is a very
because and varies by color and actually even varies by
the source of the color. Red radishes are different than
than beats, both of which are making you know, something
(28:22):
something on the red spectrum. So that's that, you know,
this is a prime example of where sustainability is involved
and has to be involved in the decisions that you know,
you might think are strictly product decisions, but again, the
way we look at it, these are holistic business decisions
(28:43):
and we've got to consider all those parts to be
able to do it. But yes, we've we've got publicly
stated goals. We're moving aggressively forward on a number of them,
and uh, you know around artificials and the removal of
and we're considering all of these things as we as
we do that.
Speaker 1 (29:00):
Okay, that's interesting, And I'm guessing a lot of people
maybe don't understand the work that goes into doing this.
Speaker 2 (29:07):
Try It is a commendous amount of work.
Speaker 1 (29:09):
So and I think that raises something that I also
want to dig into. A lot of times people see
ESG as like a simple black and white good and
bad issue, but I think there is a lot of
nuance that can get lost. For instance, something like with
a packaging decision, you know, there can be a lot
of different trade offs and and I feel like when
people look at a company like pepsi Co they might
(29:31):
miss that. I'm wondering if you can talk about like
what you see as maybe some of those bigger trade
offs that are least appreciated in the markets.
Speaker 2 (29:41):
Yeah, well you're using one of my favorite words, which
is trade offs. You know, and I frequently and a
lot of contexts will say life's about trade offs, right.
Rarely is any decision in any corner of our lives
black or white. And so what are the trade offs
that you're going to make and how do you manage
the applications of those trade offs? And importantly, one of
(30:02):
the things that we try and do is make sure
that the business is aware of the trade offs, or
that regulators are aware of the tradeoffs, or the NGOs
you know, who might have a particular point of view,
are aware of the trade offs. And you know, packaging,
I mean, packaging is a great example. If there's a
blanket ban on an entire material or class of materials,
(30:26):
for example, there's often technical considerations that may or may
not have been fully considered, and there's often supply chain
realities around that. And so you very quickly and I'll
give you an example in a second, but you very
quickly get into things like is this going to disrupt
(30:47):
the supply chains, it's going to disrupt product delivery? Is
it going to increase costs? Which is not something that
we as a manufacturer with mass market products, we don't
want to increased costs ortability. You know they say taste
in affordability right now or sort of one A and
one B when you come to food products. So, but
(31:07):
sometimes decisions that are made make it extraordinarily difficult not
to have cost increase. And then there's often sustainability trade offs.
You know, a paper solution, right like paper put everything
in paper A. Technically I wish I could, but I can't. Second,
(31:27):
that might reduce plastic usage, but it might increase water usage,
and often it will increase the carbon footprint. So again,
what's the trade off that we're trying to make. What's
the problem we're trying to solve? A reusable system you
often hear and we have reusables in seventy or eighty
countries around the world, So we understand reusable systems and
(31:51):
they do reduce waste, but they require energy and they
require water toize sanitize something like a glass bottle. Also,
often the carbon footprint is much higher, at least for
a while, until you get a lot of trips because
you're moving heavy glass bottles, for example, into directions. On
(32:16):
the consumer side, all of those considerations are irrelevant. If
a consumer has a different preference, it isn't going to
buy whatever the question is in whatever the product in
the form factor is in question, and you know that,
then there can be an implication on product costs, consumer acceptance,
(32:37):
right overall acceptance. Those things all have to be a
part of it. And then if you throw regulatory on
top of it. You know, investments in compostable packaging, for example,
may never scale due to legal considerations in many jurisdictions.
So all those things have to go into the equation,
(32:59):
if you will. And often to your point, they they
well meaning people often want to get black and white
and have things be simple, and rarely are they simple.
They don't have to be complicated, but some of these
things are in fact complex, and those trade offfs need
to be carefully thought through and managed and a realization
(33:19):
by all that there are tradeoffs that are you know,
being taken on. You know, I maybe maybe one example
of something that again we're working very hard on as
reusable cups, and you know, those those we're finding. We
have a number of pilots, you know, the Arizona Diamondbacks,
the San Francisco forty nine ers the University of Washington
(33:42):
Huskies football team. Right, those are stadiums and environments where
we're offering reusable cups in a environment where you have
a pretty good chance of getting that cup back. You've
got pretty good densities to be able to then support
the systems that are necessary to get those cups sanitized.
(34:05):
In return, we've been able to go from pilots to
full season in a couple of those places. But again,
there these are still things that are still being worked
and proven out and uh and and driven forward.
Speaker 1 (34:19):
That certainly makes sense. And I know I worked on
a plastic project when I was at Sasby and these
are things that I think the markets need to need
to know and maybe don't fully appreciate. I know we're
running late on time. Maybe just a couple of last questions.
There's a lot that you can control, but there's a
lot that maybe is a little that's outside of your control.
(34:40):
What what what is it the biggest thing that that's
the hardest for you to be able to control? And
you know how and how can you defend against it
at least to some extent or position yourself.
Speaker 2 (34:55):
To some extent?
Speaker 1 (34:57):
Uh?
Speaker 2 (34:57):
Yeah, great, great, great question.
Speaker 1 (35:00):
Or maybe what keeps you up at night. Yeah, it
might be another way of putting it.
Speaker 2 (35:05):
Yeah, yeah, great question. You know, weather weather concerns me
a lot. And I don't just mean is it going
to rain or is it going to be sunny though
of course that that matters. But extreme weather events, right,
are becoming increasingly common. There's too much water, there's not
enough water, it's too hot, it's not hot enough. Right,
there's a major windstorm of some sort, and it knocks
(35:29):
all the crops down. I mean, farmers get one shot
a year to literally put food on their table or not,
and they need to be successful. And again we need
them to be successful. And the increasing prevalence of extreme
weather events. I mean I heard a great statistic recently
which was according to the United Nations Commission on to
(35:52):
Combat Desertification, since since the year two thousand, climate change
in poor land management and often those those go together, unfortunately,
have contributed to a twenty nine percent increase in droughts. Okay,
that absolutely affects and impacts and threatens agricultural viability. So
(36:15):
for a company like US, right, weather writ large again,
as I say, it's climate change is the impacts, it's
and yes, there's veriability at any point time, and farmers
understand that. But when you know, I spent a lot
of time on farms, and when you're with a farmer
and they say, you know, boy, the way my father
and you know, usually it's a father, but the way
(36:37):
my father farmed and when they would go and plant
and when they harvested, it was you know, this this
month and this month that has fundamentally changed and I
can no longer farm the way and on the schedule
that they did because the weather has changed. Well, they
(36:58):
don't mean the weather on sete Saturday, they mean a
climatic system and ecosystem in which they're farming. And so
what can we do. That's why again we've adopted a
set of goals to really help make, you know, do
what we can to support farmers to adopt re generative practices,
things that we know and they know, help them become
(37:19):
more resilient, help secure supply, and ultimately help enhance their livelihoods,
because again, if they can't make money, they can't feed
their family farming, whether they are a big farmer or
small fim, we're going to go do something else, and
that takes important supply and livelihoods out of the food system.
And you know, we as PepsiCo, we need a resilient, successful,
(37:43):
productive food system across all the various dimensions to be successful,
to have a business. And I would argue the world
needs resilient, successful food systems if we're going to feed ourselves.
So we're doing our part to do what we can.
Speaker 1 (37:59):
Okay, that answer ended much more hopefully than I expected,
which is great, and I think maybe we're maybe we'll
leave it there, unless you have any last thoughts.
Speaker 2 (38:09):
I think the only other thought I would say is
the more organizations I mean, whether it's companies or NGOs
or governments or you know, financiers, the more that we
can get aligned and focused on how do we improve
the strength, the health, the resilience of the food system,
(38:30):
the better off we're going to be. And you know,
we're we're trying to help move that system forward and
change that system. But I always say, sustainability as a team sport,
and we need a lot more people on the team
on the field trying to trying to win the game,
and we don't have enough right now, but you know,
we'll keep moving, all right.
Speaker 1 (38:49):
Definitely a great pleace to end, Jim, thank you so
much for your time and your insights. You can find
more information on corporate ESG exposure and issues by going
to BI ESG on the Bloomberg terminal or calling up
a ticker like PEP and typing ESG go. If you
have any es G questions you would like to ask
(39:10):
bi's expert analysts, please send us an email at ESG
Currens at Bloomberg dot net. Thank you very much and
thanks again, Jim
Host
Eric Kane
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