PepsiCo is committed to respecting the human rights of workers and local communities throughout our operations and value chain. This can be a challenge for a global company with a complex value chain that relies not only on its own operations but also hundreds of franchise bottlers, joint ventures, and co-manufacturers, and thousands of suppliers to make and distribute its products around the world. Nevertheless, we recognize that we have the ability to contribute to positive human rights impacts and responsibility to prevent, mitigate, and address adverse impacts that we have caused or contributed to and to use our leverage, where we are linked to potential or actual human rights impacts, to encourage our suppliers and business partners to respect human rights in our broader value chain.
We have established a formal governance structure to oversee and manage human rights at various levels throughout our business.
Board of Directors
As stewards of PepsiCo, our Board plays an essential role in determining strategic priorities and considers sustainability issues an integral part of its business oversight. In early 2017, our Board redefined the roles of its Committees by creating a Public Policy and Sustainability Committee. The Committee assists the Board in providing more focused oversight of the Company’s policies, programs and related risks that concern key public policy and sustainability matters, including human rights. In 2017, the Committee reviewed our human rights strategy, discussed emerging human rights trends and potential risks, and reviewed progress against our policies, goals, and salient issues.
PepsiCo Executive Committee
The PepsiCo Executive Committee (PEC) has direct oversight of human rights. The PEC is made up of the Chairman & CEO, Sector CEOs and top functional leaders, ensuring that sustainability is a key accountability for every member of our senior leadership team. Strategy and progress against our Performance with Purpose (PwP) goals are discussed during meetings of the full PEC four times a year so that our senior leadership can align on major strategic decisions related to sustainability and human rights. In between these meetings, PEC members remain actively engaged in executing against our PwP goals, driving the agenda with their teams. The PEC discussed human rights at several meetings in 2017, which included reviewing our human rights strategy, annual performance and due diligence findings, ongoing work to address our salient issues, and specific challenges raised by external stakeholders regarding our sourcing of palm oil.
Chief Human Rights Officer
Day-to-day responsibility for human rights sits with our Chief Human Rights Officer (CHRO), who also serves as Senior Vice President and Chief Counsel for Global Human Resources at PepsiCo. The CHRO leads our Human Rights Office, chairs our Human Rights Operating Council, and reports directly to our Executive Vice President, Government Affairs, General Counsel and Corporate Secretary who is a member of the PEC.
Human Rights Operating Council
The Human Rights Operating Council (HROC) is comprised of senior corporate and sector representatives from core functions (e.g. Human Resources, Global Sustainability, Global Procurement, Global Operations, Law Department, Public Policy, Risk Management, and Sales) as well as the heads of our due diligence programs. Some of HROC’s key responsibilities include:
- Annually reviewing our business activities, due-diligence findings, and stakeholder feedback to determine our salient human rights issues;
- Prioritizing initiatives and identifying partnerships to address human rights risks and opportunities;
- Monitoring progress towards our human rights goals and targets
- Regularly reviewing our human rights policies for alignment with legal and regulatory requirements; and
- Submitting periodic reports and action plans to the PepsiCo Executive Committee and Board of Directors for review and/or approval.
Human Rights Office
We have a dedicated team in our Law Department that is responsible for driving our human rights strategy, facilitating performance against our goals and managing our salient human rights issues. The team coordinates our Human Rights Operating Council and works closely with the heads of our due diligence programs and other internal stakeholders (e.g., Human Resources, Global Sustainability, Global Procurement, and Public Policy) to help prevent and address issues throughout our value chain.
Our policies play an important role in our ongoing work to embed respect for human rights throughout on business activities. They help us set clear expectations for our employees, suppliers, and other business partners, and they also establish a framework for monitoring compliance with our standards. Our Global Human Rights & Salient Issues Statement outlines our overall approach to respecting human rights and details our salient human rights issues. We have additional policies that apply to specific segments of our value chain and others that cover specific issues such as Land Rights and Palm Oil. We regularly review all of our policies for alignment with stakeholder feedback, emerging regulatory developments, and internationally-recognized best practices.
All PepsiCo employees and joint venture employees over which we have management control are required to comply with our Global Code of Conduct (Code) and Human Rights Workplace Policy. Our Code serves as our roadmap for acting ethically and in compliance with all applicable laws, wherever we do business, and it recognizes the importance of maintaining and promoting fundamental human rights in our operations. Our Human Rights Workplace Policy is aligned with our Code, and it reflects the principles contained in the International Bill of Human Rights and ILO Declaration on Fundamental Principles and Rights at Work. In 2017, we updated our Human Rights Workplace Policy to clarify our approach and provide further guidance on our expectations. The revised policy was approved by our Chairman & CEO and published in June 2017.
All suppliers, vendors, contractors, consultants, agents and other providers of goods and services who do business with or on behalf of PepsiCo (“suppliers”) are required to comply with our Supplier Code of Conduct (SCoC). Our SCoC sets out the expectations we have of our suppliers in the areas of business integrity and anticorruption, labor practices, health and safety, and environmental management. The SCoC is based on recognized international human rights standards, and compliance with it is a condition of PepsiCo’s supplier contracts. Suppliers are also expected to communicate and apply the SCoC and other relevant policies throughout their supply chain.
During the annual review of our policies in 2017, we identified the need to refresh our SCoC to clarify our expectations of suppliers in several key areas, including forced labor, migrant workers, and anticorruption. As part of this process, we aligned our SCoC with the Consumer Goods Forum Priority Industry Principles and the Employer Pays Principle to help ensure that:
- Every worker has freedom of movement,
- No worker has to pay for a job, and
- No worker is indebted or coerced to work.
We will continue working with our suppliers and exploring industry partnerships and other collaborative efforts to help address potential forced labor issues in our supply chain and help ensure these goals are realized. For example, in 2017 we co-sponsored an AIM-PROGRESS supplier capability building event in Kuala Lumpur, Malaysia for over 150 participants that focused on strengthening internal and external grievance mechanisms and reducing forced labor-related risks.
Our Business Partners
To further advance respect for human rights among our business partners, we have established a goal to extend the principles of our Code to all franchisees and joint venture partners by 2025. Compliance with our Code and all other applicable PepsiCo policies is already required for all joint ventures where we have management control. In 2017, we initiated work to develop a formal engagement program around this goal for all of our other joint venture partners and franchisees. We have met with a number of our partners and franchisees over the past several months to discuss our human rights agenda and gather input on the engagement program. Our aim is to finalize and launch the program later this year.
Training and Awareness
Training also plays an important role in our work to embed respect for human rights throughout our business activities. It not only allows us to communicate our policies, standards, and expectations to our employees and suppliers, but it also allows us to raise awareness of potential human rights risks across our value chain and strengthen our ability to identify and prevent potential impacts. We have formal training programs for our employees and direct third-party suppliers.
Training Our Employees
We require associates at all levels in the organization to complete annual Code training so they understand their obligation to comply with our Code and the behaviors that are expected under the Code. In 2017, over 72,000 employees worldwide completed an online Code of Conduct training course available in 24 languages. Also in 2017, over 184,000 frontline employees in our plants and warehouses received Code and Values training through in-person training workshops. In addition to our annual training, the Code is reinforced throughout the year with local and global communications including internal newsletter articles, digital signage, portal updates, tone at the top messaging and ethics and Values campaigns.
We also conduct global and targeted training to help mitigate key risks. For example, in 2017:
- Over 72,000 employees completed online Anti-Bribery training.
- More than 1,100 contract workers were trained on our SCoC and over 3,800 newly hired employees completed a Code and Anti-Bribery course.
- Over 2,100 employees received in-person training on PepsiCo’s Third Party Due Diligence Program, a global risk-based program that vets certain of PepsiCo’s third parties by conducting anticorruption due diligence on them.
- Over 4,200 employees across our core functions (i.e., Human Resources, Global Procurement, Law Department, and Compliance) completed targeted human rights training on modern slavery and human trafficking, with these functions being selected because they serve as critical touchpoints for our employees, suppliers, and other business partners. This training was designed to raise awareness of potential forced labor issues and to strengthen employee ability to identify and prevent potential impacts across our value chain.
In addition, we launched an anti-harassment training course in mid-2018, which has been completed by more than 57,000 employees to date. We also plan to launch additional human rights training in 2018.
Training Our Direct Suppliers
We use our Sustainable Sourcing Program to communicate our Supplier Code of Conduct to suppliers, evaluate their compliance, and facilitate continuous improvements within our supply chain. In 2017, 100% of our targeted key suppliers completed our SCoC training. This training helps to ensure suppliers understand and comply with the principles of our SCoC and support our goal of long-term sustainable supply by addressing known social risks and building capability in their operations. We are currently revising our SCoC training to provide additional guidance on forced labor related issues, particularly recruitment fees, freedom of movement, and clear worker contracts. Our aim is to launch the revised training later this year. Our current SCoC training can be viewed here.
Our Salient Issues
As one of the largest food and beverage companies in the world, we recognize there are a variety of ways that our business activities might directly or indirectly impact human rights. To help us prioritize our efforts, our HROC conducted a detailed assessment in 2017 to identify our salient human rights issues - those human rights at risk of the most severe negative impact through our company activities and business relationships.
In partnership with Shift, an organization that advises companies, governments, civil society, investors and others on human rights and the UNGPs, we started by defining our focus as the most salient issues for rights holders in our vale chain. We then mapped the potential impacts that our business activities might have on rights holders in our value chain, and this process involved detail analysis of our business operations and supply chain, past assessment and audit findings, and input from internal and external experts, including industry groups, NGOs, human rights bodies, and socially responsible investors. After identifying a list of potential impacts, we determined our salient issues by applying the “severity of impact” and “likelihood of occurrence” criteria outlined in the UNGP Reporting Framework. Through this process, the HROC identified six salient issues for our value chain.
- Freedom of Association
- Human Right to Water
- Land Rights
- Vulnerable Workers (Migrant Workers, Young Workers, Contract/Temporary Workers, and Women)
- Working Hours and Wages
- Workplace Safety
While we take steps to address all potential risks in our value chain, saliency informs our strategy and helps us prioritize where we should focus our work. We regularly review our salient issues to determine whether other human rights have become greater priorities over time. We set out the initial framing for our salient issues issue in our Global Human Rights & Salient Issues Statement, and we are currently establishing detailed roadmaps for each of them.
Below are some examples of our recent work on several of our salient issues.
- We are working with our sector business units to better understand the root causes of excessive working hours.
- We are using our leadership position within AIM-PROGRESS and the Sedex Stakeholder Forum to help evolve the current auditing protocol used by PepsiCo and other companies to better reflect changes in risk, including forced labor and land use practices.
- We are engaging with peer companies and civil society on a land rights dispute in Northeast Brazil involving a cane sugar supplier. We have also conducted land-related impact assessments in Thailand, Mexico, and the Philippines in 2016 and 2017 to inform the land rights and wider human rights priorities for our key raw materials in those countries.
- We are addressing risks and impacts to vulnerable workers, including temporary workers and women, in our palm oil supply chain and the industry more broadly. This means working with peers, suppliers, civil society, and others to identify and address systemic issues as well as to address non-compliances in our own supply chain.
- On freedom of association, we have engaged with IUF to resolve a dispute at one of our snacks plants in Pakistan. See the “Grievance Process and Access to Remedy” section for more information.
Our Due Diligence Programs
We manage our human rights risks by assessing adverse human rights impacts in our value chain; integrating these findings into our internal systems, controls, and processes; tracking the effectiveness of our actions and influence; and communicating with our external stakeholders.
We recognize that potential human rights impacts can occur at any point along our value chain, and our aim is to identify and address these risks wherever they occur. Our initial focus has been on our own operations, direct suppliers, and agricultural partners. These areas were identified through internal analysis and external stakeholder feedback as the points along our value chain where we have the greatest ability (i.e., our operations) to prevent and respond to human rights impacts and where the risks to rights holders are high (i.e., supply chain and agricultural partners).
We have established programs to assess potential risks, independently audit sites, and identify and remediate impacts found along these areas of our value chain.
- Our Global Labor Human Rights Assessment Program (GLHR) assesses potential human rights impacts at all of our nearly 300 company-owned manufacturing sites. GLHR assessments are conducted by third-party auditors and conform to the Sedex Member Ethical Trade Audit (SMETA) protocol requirements. The program takes steps to identify and address the root cause of identified non-compliances, including through the implementation of on-site corrective action plans. Approximately 80% of our direct operations have completed GLHR assessments, and we anticipate achieving 100% completion by the end of 2018.
- Our Sustainable Sourcing Program (SSP) assesses risk and monitors supplier compliance with our Supplier Code of Conduct through scored self-assessments and third-party auditing of our most business-critical direct suppliers and contract manufacturing and co-packing locations across 68 countries. SSP audits leverage SMETA 4-Pillar requirements. To date, roughly 83% of our total business critical direct suppliers have been assessed through the SSP.
- Our Sustainable Farming Program (SFP) helps us assess our direct growers, identify potential non-compliances, and implement corrective action plans to address human rights issues and improve agricultural practices at the farm level. From 2013 to 2017, we have implemented SFP across 38 countries since its launch, with active programs representing over 40,000 growers in our supply chain.
To better understand the risks along other points in our value chain, we are continuing to expand our due diligence programs. For example, we are expanding our Sustainable Sourcing Program to include indirect suppliers, such as third-party labor providers, and establishing a new program to engage our franchisees and joint venture partners.
In addition to formal due diligence programs, we also aim to assess, prevent, and mitigate human rights issues through other ongoing initiatives. For instance, we are heavily engaged in our palm oil supply chain in Indonesia and Mexico, and we are working with our peers, civil society, and others to address a variety of environmental and societal issues, including human rights. See our Palm Oil Page for more information.
In 2017, we conducted 80 GLHR on-site audits of our company-owned manufacturing operations and conducted or recognized over 1,000 on-site audits of our first-tier suppliers through our Sustainable Sourcing Program. The following represent the categories where we found the most frequent non-compliances from these audits of our own manufacturing operations and our direct third-party suppliers in 2017.
Top 5 Non-Compliance Categories in 2017
1. Health, Safety, & Hygiene
2. Working Hours
3. Wages & Benefits
4. Regular Employment
5. No Rest Day Provided
When non-compliances are identified through our due diligence programs, they are addressed through the implementation of corrective action plans. Each corrective action plan has a set timeframe, depending on the type of non-compliance and its severity. Once in place, corrective action plans are tracked through our respective programs, which may require an additional on-site audit to verify remediation of the non-compliances. We also take additional steps to identify and better understand the root cause(s) of the non-compliances we find.
Here are a few examples of the types of issues we found and addressed in 2017.
- Helping reduce risky working conditions in Egypt: We identified that employees at one of our suppliers in Egypt were being exposed to unsafe working conditions due to a lack of Personal Protective Equipment (PPE) and blocked emergency exits. Once notified, the supplier shared their corrective action plan with us and quickly implemented steps to address these non-compliances. During the follow-up audit, the monitoring company verified that employees were provided with all required PPE, all emergency exits continued to be free from blockage, and that the internal management systems had been updated accordingly.
- Helping alleviate fatigue from long working hours in China: We identified that employees at one of our suppliers in China were working 21 consecutive days. We asked the supplier to develop and implement a corrective action plan to address the underlying working hours and rest day non-compliances. During the follow-up audit, the monitoring company verified that working hours were now in compliance with local standards and that all workers had at least one day off every seven days.
We understand the importance of capturing the voice of rights holders, and we are committed to engaging with potentially and actually affected stakeholders, including our employees, supply chain workers, and the local communities in which we operate. For a detailed example of our engagement, please see the “Grievance Process and Access to Remedy” section below.
We regularly engage a wide range of external stakeholders and human rights experts on our approach, salient issues, and specific concerns. For example, following feedback from several stakeholders including the Interfaith Center on Corporate Responsibility (ICCR), we are taking an active role in the Consumer Goods Forum’s initiative to fight forced labor through the Priority Industry Principles. The initiative seeks to establish common standards amongst its large retail and consumer goods company members to tackle forced labor through key issues such as ensuring freedom of movement for workers, no document retention, and no fees paid by workers for our own operations and our value chains. In addition, following feedback from Oxfam, we are focusing on improving our engagement with local stakeholders on a regular basis in response to specific issues raised.
We also participate in multi-stakeholder dialogues, consultations, and business group initiatives to improve our knowledge of specific issues and to encourage industry-wide progress where it is needed. We are a member of Shift’s Business Learning Program to help us review and improve our human rights management approach and performance. With their help, we identified the need to move from “material issues” to “salient issues,” to create our Human Rights and Salient Issues Statement, and to update our Human Rights Workplace Policy.
We recognize that our policies and programs may not prevent all adverse impacts in our value chain, and we aim to provide effective remedy where we have caused or contributed to those impacts and to using our leverage to encourage our suppliers or partners to provide remedy where we find impacts directly linked to our business operations, goods, or services. We have established a variety of mechanisms that allow our employees, stakeholders, and other potentially affected individuals to raise grievances and seek remedy.
All of our employees are encouraged to ask questions, raise issues, and seek guidance when a course of action is unclear. Furthermore, all employees have an obligation to report suspected violations of our Values, our Code, our policies or applicable law. Our employees have several avenues for reporting issues and seeking advice, including their manager, HR, the PepsiCo Law Department, the Global Compliance and Ethics Department, and our Speak Up hotline. Our Speak Up program is an important component of our culture of ethics and integrity, and we encourage our suppliers and business partners to use their own effective grievance mechanisms and make the PepsiCo Speak Up hotline available for their use through our Supplier Code of Conduct.
In July 2017, we launched an enhanced grievance mechanism for agricultural commodities that is complementary to our existing Speak Up! Process. The agricultural grievance mechanism is open to anyone who has a concern that PepsiCo’s policies and goals related to agricultural commodities are not being met. Further details on the grievance mechanism can be found here.
In addition to these formal grievance mechanisms, we also actively engage with external stakeholders to address issues they raise on behalf of individuals in our value chain. For example, in September 2016 the International Union of Foodworkers (IUF) alleged that the distribution of permanent employees and contract workers in our Lahore, Pakistan snacks plant was not compliant with local standards. An investigation by global and local PepsiCo leaders substantiated this claim. We met with the affected parties and continued open dialogue with IUF throughout the process, which resulted in us implementing corrective actions plans to address the root cause of the issue. To date, we have insourced more than 460 contract workers into permanent positions in our Lahore snacks plant to ensure compliance with local standards.