SPECIAL REPORT: Pepsico's New Sustainability Targets Show CSR is Evolving

24 Oct 2016 --- The value of Corporate Social Responsibility (CSR) targets was thrown under the spotlight this month when PepsiCo unveiled a raft of new targets, which its CEO said showed it being “responsive to the needs of society” though critics dub such targets a racket.

The US company behind Pepsi and Walker published an updated wide-ranging list of targets spanning “People, Planet and Products” encompassing goals across water, sourcing, energy and sugar and salt reduction.

The targets have been aligned with the UN's recently-adopted Sustainable Development Goals and come amid a landscape in which the population is increasingly concerned about the welfare of the planet and clued up on the environmental footprint of the companies they buy products from.

“To succeed in today's volatile and changing world, corporations must do three things exceedingly well: focus on delivering strong financial performance, do it in a way that is sustainable over time and be responsive to the needs of society,” said PepsiCo Chairman and CEO Indra Nooyi.

CSR targets are now an indelible part of the corporate world, with companies' annual report crammed full of projects and charities they support and how the environmental initiatives they are undertaking are helping the future of the planet.

According to consulting firm EPG, US and British companies are now spending $15bn year on CSR work.

However, corporate scandals and disasters, such as wrongdoing at the German car giant Volkswagen and BP's Deepwater Horizon oil disaster - two companies which made a big play about their green credentials - have led some to claim CSR targets are a racket.

Companies flaunt their virtues through such initiatives while internally standards are falling, they argue.

For the food and drink industry, experts believe such targets are a necessary feature of the corporate world and are expected both from investors and a company's customers.

Speaking to FoodIngredientsFirst, Matt Loose, a director at the think tank SustainAbility said: “If you don't set a target, it's very hard to both drive and coalesce performance in a certain direction internally in an organisation and it's also very hard to monitor a company's progress towards a more sustainable planet.”

“Much as you would set financial targets for the business, setting sustainability targets is just a feature of quality approach to management.”

It's not only about appealing to customers and investors, though, said Loose, who says, for example, that a pledge to source all key commodities sustainably can help protect a licence to operate in a water-stressed area.

That said, the likes of Coca-Cola, Diageo and others have come under fire for their CSR activists.

Drinks giant Diageo recently missed seven out of its eight main environmental targets.

For example its carbon emission and waste water levels were down 33.3 percent and 45.3 percent, below the 50 percent target.

Diageo defended itself by saying that its sustainability performance had improved overall.

David Croft, global sustainability director at Diageo, said: “We could all set targets that are readily achieved but what we’ve tried to do is look at the science and the wider context, such as where climate change is heading.”

Experts believe that missing targets is excusable, as it shows a company is on the path to becoming a more socially responsible company.

Loose said: “I think generally setting targets helps to increase trust in the business. If people see you are being really ambitious, that helps set expectations and helps to demonstrate a level of commitment.”

Generally speaking, sustainability targets are voluntary and exceed the minimum demanded by law, but critics say this allows the corporate world carte blanche to do what they want with no punishment for failure.

However, an increasing number of CSR targets are tied to national and international goals and frameworks, such as a demand from the UK government that all 1,400 companies on the main London Stock Exchange have to report data on their greenhouse gas emissions.

According to Vicki Hird, campaigns and policy director at War on Want, which fights global poverty, targets need to be backed up by regulation.

Speaking to FoodIngredientsFirst, she said: “It is vital that any targets are actually backed up by regulation. Form our perspective, we have seen so many voluntary initiatives fail or look like greenwashing or provide an awful lot of good PR for a company.”

Hird adds: “If they publish them [targets] and they can be scrutinised by an independent body that can be useful.”

Despite the criticism, a report by Ceres, a non-profit organization focused on sustainable business, found a number of food and drink companies deserved praise for their CSR initiatives amidst a wider group of companies which it said were showing a lack of progress.

Included in the list was PepsiCo, which it praised for presenting its sustainability targets at its Annual General Meeting as well as identifying climate change, water scarcity and public health issues as core sustainability challenges in its annual financial filings.

Others deemed praiseworthy, it said, were General Mills, which it said published a set of sustainable sourcing commitments that begins with a robust risk assessment process undertaken in partnership with a third party.

Coke was also picked out for praise improving “the efficiency of its water use by 20% and identified the need for a rigorous third-party evaluation of its water management approach.”

With governments and citizens more aware than ever about the welfare of the planet, it seems that sustainability goals will be increasingly scrutinized.

By setting goals such as intention to “reduce absolute greenhouse gas emissions across our value chain by at least 20 percent” PepsiCo is setting some big goals.

While others such as General Mills and Kelloggs have set similar greenhouse gas emission reduction goals, PepsiCo should be applauded for such an ambitious goal not only for itself but for its suppliers too.

by John Reynolds

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