PepsiCo’s commitment to respecting the human rights of workers throughout our value chain, as well as the local communities in which we operate, is articulated in our Human Rights and Salient Issues Statement, Human Rights Workplace Policy, Code of Conduct (Code), Supplier Code of Conduct (SCoC) and relevant policies including those on land rights, deforestation, and sustainable agriculture. These policies are publicly available on our website, and communicated internally through annual training and on-boarding. They are also communicated to suppliers as they join the PepsiCo supply chain and through ongoing engagement.
Our aim is to ensure that all rights holders that might be affected by PepsiCo directly and through our value chain can enjoy the human rights described in the International Bill of Human Rights (consisting of the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights) and the ILO Declaration on Fundamental Principles and Rights at Work. This can be a challenge for a company with a global footprint, making products directly and through franchise bottlers, joint ventures and co-manufacturers and utilizing thousands of suppliers for ingredients and products - from a single supplier to many tiers of suppliers between the raw material and finished products.
Our initial focus has been on our own operations, our direct suppliers, and agricultural partners. These areas were identified through internal assessments and feedback from external human rights experts as the points in our value chain where we have the greatest leverage (i.e., our operations) to prevent and respond to human rights impacts and where the risks to rights holders is highest (i.e., supply chain and agricultural partners). We have programs to assess risk, independently audit sites, and remediate problems at each of the tiers in our value chain. Our Global Labor Human Rights Assessment Program (GLHR) covers all of our nearly 300 company-owned manufacturing sites. Our Sustainable Sourcing Program (SSP) assesses risk and drives our independent audit program for direct suppliers. To further advance human rights in the supply chain, we are expanding our Sustainable Farming Initiative (SFI) to include more farms in our efforts to advance human rights in our value chain.
Day-to-day responsibility for human rights at PepsiCo sits with our Chief Human Rights Officer (CHRO) and SVP, Chief Counsel, Global Human Resources. Our CHRO chairs our Human Rights Operating Council (HROC), which is made up of senior representatives from relevant corporate and sector functions (HR, PPGA, Legal, Global Procurement, Operations, Global Risk Management, R&D, Sales, Global Compliance and Ethics, Global Sustainability and Communications). The CHRO reports up through our Executive Vice President, Government Affairs, General Counsel and Corporate Secretary, who is also a member of PepsiCo’s Executive Committee.
As defined in its charter, the HROC’s role is to:
- Define the strategy and framework for the assessment, implementation, and communication of our human rights management approach
- Regularly review PepsiCo’s human rights policies to ensure compliance with legal and regulatory requirements
- Monitor legislative and regulatory developments, stakeholder expectations, the competitive landscape, and emerging human rights trends;
- Prioritize initiatives and identify internal and external partnerships to address human rights risks and opportunities;
- Monitor PepsiCo’s progress with respect to its external commitment and human rights management approach on an ongoing basis; and
- Submit periodic reports, recommendations, and/or action plans, as appropriate, to the PepsiCo Executive Committee for review and approval.
During 2016, the HROC was focused on bringing the following topics to senior management for their input and agreement:
- Specific human rights allegations connected to land rights, deforestation and labor issues, and freedom of association.
- The development of a global human rights statement that outlines our approach to respecting human rights in our direct operations and in our relationships with suppliers and other business partners throughout our value chain, published in July 2017.
- The identification of the most salient human rights risks to rights holders in PepsiCo’s value chain and developed plans to address them.
- The revision of our human rights workplace policy, which applies to our employees and was originally drafted in 2009. The changes reflect external developments such as the establishment of the United Nations Guiding Principles on Business and Human Rights, as well as recognition of a wider range of human rights issues that are important in our business.
- The creation of a strengthened grievance mechanism for our agricultural supply chain to facilitate greater consistency internally and more transparency externally of complaints by NGOs and others about our value chain. The new mechanism was established in July 2017.
- The development of new human rights targets as part of our new sustainability goals to 2025 launched in October 2016, the goals focus on extending the reach of our commitment to respect human rights further into our supply chain and to joint ventures and bottlers.
- Reframing of our approach to reporting on human rights issues to reflect the UNGP Reporting Framework.
The HROC has identified the following as the most salient human rights issues for the business.
- Freedom of Association: The principle of freedom of association still faces many challenges in its application around the world. We recognize the rights to freedom of association and collective bargaining and will continue our work to ensure that, while complying with local laws, our practices seek to respect international human rights standards.
- Human Right to Water (HRTW): In 2009, we publicly committed to respecting water as a basic human right. Our understanding of what it means to respect the HRTW in practice continues to evolve, as we aim to improve our water use without compromising the ability of others to enjoy their HRTW. Building on goals established in 2016, we will strive to respect all peoples' right to safe, sufficient, acceptable, physically accessible, and affordable water in the communities where we operate.
- Land Rights: Land rights issues can directly impact the lives of rights holders, such as through physical displacement. We are committed to implementing our Land Policy and working with external stakeholders to identify and address land rights issues in our value chain. Our initial focus has been on our agricultural supply chain, and we will continue our work to ensure compliance with our policy by conducting supply-chain assessments.
- Vulnerable Workers: Migrant workers, women, young workers, and temporary/contract workers have been identified as populations who have a higher risk of facing threats to their human rights, including forced labor. Our initial focus has been on developing training for our associates to help them better identify and manage risks specific to each of our geographies.
- Working Hours and Wages: Companies involved in the manufacturing and agriculture sectors are at a higher risk of adverse impacts related to working hours and wages, such as mandatory overtime and excessive working hours. We are committed to providing fair and equitable wages, benefits, and other employment conditions in accordance with local law, and we expect the same of our suppliers and business partners. To address this risk, we are working with the management teams in our direct operations to help them better understand the root causes and possible mitigation solutions for working hour-related issues.
- Workplace Safety: Protecting the safety, health and wellbeing of our associates is one of our top priorities. We rely on a variety of methods to support and sustain a culture of safety within PepsiCo, with the aspiration of achieving an incident-free workplace. We will expand assessment programs for our direct operations, first-tier supply chain, and agricultural supply chain to better identify areas where we can invest to prevent potential issues in the workplace, such as road safety.
These issues were identified by the HROC following a detailed analysis based on input from council members, data from existing audit and assessment programs, feedback from external organizations that PepsiCo engaged with including business groups, NGOs, human rights bodies, and socially responsible investors, and issues highlighted in reports and other documents. The HROC will review progress on our salient issues, as well as whether other issues should be considered salient, on an annual basis.
We consult regularly with external stakeholders on our overall approach on human rights, on specific allegations and on our salient issues. We participate in Shift's Business Learning Program to help us review and improve our approach to human rights management and performance in line with the UN Guiding Principles on Business and Human Rights. With their help we identified the need to move from material issues to salient issues, to create a Human Rights and Salient Issues Statement, and to update our Human Rights Workplace Policy. They assisted us in developing a robust process and stronger understanding internally of what is needed. During 2017, our work will focus on additional steps that need to be taken to manage our salient issues.
We also participate in conferences and business group initiatives to improve our knowledge of specific issues and to encourage industry wide progress where it is needed. For example, following feedback from several stakeholders including the Interfaith Center on Corporate Responsibility (ICCR) and the UN Global Compact, we are taking an active role in the Consumer Goods Forum’s initiative to fight forced labor. The initiative seeks to establish common standards amongst its large retail and consumer goods company members for key issues such as document retention and fees for our own companies and those in our value chains, as well as seeking other ways to collaboratively tackle forced labor. In addition, we are focusing on improving our engagement with local stakeholders on a regular basis and in response to specific issues raised. This was highlighted as an area for improvement by Oxfam in particular.
Our current geographic priorities are focused on Brazil, Indonesia, India, Mexico and Thailand, although our human rights impacts – and our programs to manage them – are intended to apply globally. During 2016, potential human-rights issues included land-related impacts, working hours, workplace safety and child labor, and freedom of association. In each of these situations, we have conducted a thorough investigation into the allegations, and if necessary, engaged in mitigating actions.
We also conducted assessments in Thailand, Mexico and the Philippines during 2016 and early 2017 that looked at land related impacts, as well as labor issues more generally to inform the human rights priorities for our sustainable agriculture team as we seek to deliver sustainably sourced raw materials from around the world. The Mexico assessment can be found here. Please see our initial response here.
The policies that address our key human rights issues can be found in our Human Rights and Salient Issues Statement, Human Rights Workplace Policy, Code of Conduct (“Code”) and Supplier Code of Conduct, as well as related policies such as on land rights, forestry stewardship, and sustainable agriculture.
Our Code is our road map to acting ethically and in compliance with all applicable laws. It was updated in 2012 to address changes in laws and evolving risk areas, and undergoes minor edits each year to reflect new processes and policies. Our Code is organized around four principles:
- Respect in the workplace
- Integrity in the marketplace
- Ethics in our business activities
- Responsibility to our shareholders
Our Code applies to all PepsiCo employees (including employees of our subsidiaries), members of the PepsiCo Board when they act in their capacity as directors, our joint ventures over which PepsiCo has management control, and every employee, officer and director of such joint ventures. Our Code is available in over 25 languages on our internal and external websites and is promoted annually through our global Training Program and Awareness Campaign. The full text of our Code is publicly available on our website.
In our 2016 training program, over 69,000 salaried employees completed a Web-based Code of Conduct training and certification course. Our Corporate Governance, Risk Management & Compliance custom-written training course featured the theme of “Make Ethics Part of Your Daily Routine” and was designed to help employees make ethical business decisions. This interactive, scenario-based training was available in 24 languages and mandatory for all salaried employees who met our eligibility criteria. In addition, more than 179,000 frontline employees in our plants and warehouses received in-person training on the principles of our Code and our Values through training workshops. In many areas, the front-line training sessions were manager-led and included a custom-written training video.
For information on our Supplier Code of Conduct and training, see the Sustainable Sourcing section.
Assessing impacts and taking action
Our Global Labor Human Rights Assessment Program (GLHR) assesses potential labor rights impacts at all of our nearly 300 company-owned manufacturing sites. GLHR assessments are conducted by third-party auditors and conform to the SMETA (Sedex Member Ethical Trade Associate) audit protocol requirements. The program takes steps to identify and address the root cause of each issue found, including through the introduction of on-site corrective action plans to remediate non-compliances. We conducted audits at 77 sites in 2016.
Our Sustainable Sourcing Program (SSP) assesses risk and monitors supplier compliance with our Supplier Code of Conduct through third-party auditing of our most business-critical direct suppliers and contract manufacturing and co-packing locations. In 2016, 794 on-site audits were conducted or recognized with first-tier suppliers. During 2016, we received two alerts of potential forced labor issues from our on-site auditors. Upon further examination and follow-up, both cases were found not to be forced labor situations. The internal management processes at each site were tested by our SSP third-party auditors, and these locations will undergo additional assessments in 2017 to further verify and confirm no non-compliances have been found.
Our Sustainable Farming Initiative (SFI) 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. In 2016, the SFI continued to expand its coverage globally and was implemented across 18 countries, representing 5 crop types (cassava, corn, oats, plantain, and potato) and engaging over 2,500 farmers. As of the end of 2016, we have implemented SFI across 33 countries since its launch, with active programs representing 36,000 growers in our supply chain.
All 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 the Speak Up hotline. Our Speak Up program is an important component of our culture of ethics and integrity.
Because of the scrutiny that we believe palm oil and certain other raw materials are under, and the complexity of our supply chain, we have developed a Grievance Mechanism for third parties to raise potential environmental and social concerns regarding agricultural commodities in our supply chain.
The Grievance Mechanism, which was launched in July 2017, is complementary to our existing Speak Up! Process.
The Grievance Mechanism is open to anyone who has a concern that PepsiCo’s policies and expectations related to agricultural commodities are not being met. Further details of our grievance mechanism can be found here.