Sustainable Development at PepsiCo|Business Ethics|Case Study|Case Studies

Sustainable Development at PepsiCo

            
 
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Case Details:

Case Code : BECG122
Case Length : 17 Pages
Period : 2006-2011
Organization : PepsiCo
Pub Date : 2012
Teaching Note : Available
Countries : Global
Industry : Food and Beverages

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"Great companies are built to succeed today, tomorrow, and well into the future. Our commitment to balancing excellent operating performance with sustainable business practices is a big reason PepsiCo has become one of the world’s top performing food and beverage companies."

-Indra Nooyi, Chairman and CEO of PepsiCo, in September 2011.

Since mid-2011, PepsiCo's Chairman and CEO, Indra Nooyi (Nooyi), had been facing some difficult questions. During the first five years of her tenure at the helm of the consumer packaged goods major, Nooyi had been credited with transforming PepsiCo by spearheading the company's sustainable development journey with her 'Performance with Purpose' strategy. But since mid-2011, she had been facing criticism that this had come at the cost of marketing and positioning of PepsiCo's products to boost sales. Faced with environmental and social criticism, PepsiCo started an ambitious new sustainable development program called 'Performance with Purpose' in 2009.

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The five-year mission was based on the philosophy that that the organization should not only keep focus on financial performance but also on its responsibilities. The new program listed 47 commitments that PepsiCo had toward society and these came under four broad areas: Performance, Human Sustainability, Environmental Sustainability, and Talent Sustainability. The first commitment was to its shareholders to give good returns for their investments while the others were to its other stakeholders. PepsiCo took several steps to fulfill its commitments. It increased the content of fruits, vegetables, nuts, grains, and low-fat dairy in its global product portfolio. It achieved a positive water balance in India where it had been involved in controversies regarding the use of groundwater for its operations. It introduced several affordable and nutritious products for the underprivileged sections of society and reduced the use of electricity and fuel for its operations. It also undertook several steps to increase the diversity of its workforce around the world. For the year 2011, PepsiCo was named the top food and beverage company in the DJSI Food and Beverage Super sector and was included in the Dow Jones Sustainability Indexes.1 PepsiCo was the only company based in the US to earn the top ranking in the 19 super sectors assessed for the year 2011. This was the third consecutive year that the company had been named the leader in the beverage sector. The top ranking achieved by PepsiCo was the result of its focus on sustainable development practices around the world, according to some analysts.

However, with PepsiCo's flagship cola brand Pepsi being relegated to the #3 position in the US market behind arch-rival The Coca Cola Company's2 (Coca Cola) Coke and Diet Coke, key stakeholders such as shareholders and bottlers had begun to question Nooyi's focus. They contended that her philosophy had also led her to back 'Pepsi Refresh' and social-responsibility positioning of the same kind and that this had cost the company in terms of the sales of the products themselves. In addition to this, they felt that the company’s revamped food product lines had produced mixed results. Moreover, despite all the measures taken under the new sustainable development program, PepsiCo still continued to face criticism from certain quarters regarding the social and environmental impact of its business practices.

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1] Dow Jones Sustainability indexers are a group of indexes which evaluate the world’s leading companies in their sustainability practices.
2] The Coca Cola Company, headquartered in Atlanta, Georgia, US, is a maker of non-alcoholic drinks. It is best known for its flagship product Coke. Its revenue and profit for the fiscal year 2010 were US$ 35.12 billion and US$ 11.81 billion respectively.


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