Performance with Purpose
PepsiCo Corporate Sustainability Report
Human Sustainability
Environmental Sustainability
Talent Sustainability
2006 ~ 2007
PepsiCo–Performance with Purpose
TABLE OF CONTENTS
REPORT BOUNDARIES . . . . . . . . . . . . . 2
GOVERNANCE . . . . . . . . . . . . . . . . . . . . 20
MESSAGE FROM THE CHAIRMAN . . . . . 3
Our Governance Structure . . . . . . . . . . . . . . 20
TABLE OF SIGNIFICANT
ACCOMPLISHMENTS . . . . . . . . . . . . . . 4
Communications with the Board of Directors . . . 20
PROFILE . . . . . . . . . . . . . . . . . . . . . . . . 6
Our Business . . . . . . . . . . . . . . . . . . . . . . . . 6
Our Products . . . . . . . . . . . . . . . . . . . . . . . . 7
Our Customers . . . . . . . . . . . . . . . . . . . . . . 8
Shareholder Proposals . . . . . . . . . . . . . . . . . 22
Board and Executive Compensation . . . . . . . 22
Conflicts of Interest . . . . . . . . . . . . . . . . . . . 23
Director Nomination Process . . . . . . . . . . . . 23
Annual Performance Evaluation of the Board . . 23
Capital Expenditure Filter . . . . . . . . . . . . . . 23
Our Operations . . . . . . . . . . . . . . . . . . . . . . 9
Our Sustainability Journey . . . . . . . . . . . . . . 10
EXTERNAL CHARTERS . . . . . . . . . . . . . . 24
Memberships and Partnerships . . . . . . . . . . . 24
OUR VISION, MISSION,
VALUES AND GUIDING PRINCIPLES . . . 10
Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
OUR CONSTITUENCIES . . . . . . . . . . . . . 27
Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . 27
Stakeholder Engagement . . . . . . . . . . . . . . . 28
Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Guiding Principles . . . . . . . . . . . . . . . . . . . . 11
ECONOMIC PERFORMANCE . . . . . . . . . 30
Code of Conduct . . . . . . . . . . . . . . . . . . . . . 12
Summary of Economic Performance 2006 . . 30
Speak Up . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
RISK MANAGEMENT . . . . . . . . . . . . . . 14
Risks and Responses . . . . . . . . . . . . . . . . . . 14
Risk Management Process . . . . . . . . . . . . . . 18
Public Policy . . . . . . . . . . . . . . . . . . . . . . . . 31
Economic Contributions . . . . . . . . . . . . . . . . 31
Contributions and Community . . . . . . . . . . . 32
Corporate Honors . . . . . . . . . . . . . . . . . . . . 35
Cause Marketing . . . . . . . . . . . . . . . . . . . . . 36
PepsiCo–Performance with Purpose
HUMAN SUSTAINABILITY . . . . . . . . . . . 37
TALENT SUSTAINABILITY . . . . . . . . . . . 69
Product Responsibility: Our Portfolio . . . . . . 38
Our Commitment . . . . . . . . . . . . . . . . . . . . 70
Smart Spot . . . . . . . . . . . . . . . . . . . . . . . . . 39
Diversity and Inclusion . . . . . . . . . . . . . . . . 71
Portfolio Transformation . . . . . . . . . . . . . . . 40
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Nutrition Timeline . . . . . . . . . . . . . . . . . . . . 42
Health and Safety . . . . . . . . . . . . . . . . . . . . 75
Health and Wellness Partnerships . . . . . . . . 42
Training . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Product Labeling . . . . . . . . . . . . . . . . . . . . . 46
Human Rights . . . . . . . . . . . . . . . . . . . . . . . 78
Food Safety . . . . . . . . . . . . . . . . . . . . . . . . . 46
Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Consumer and Customer Relations . . . . . . . . 47
Talent Honors . . . . . . . . . . . . . . . . . . . . . . . 79
Consumer Privacy . . . . . . . . . . . . . . . . . . . . 48
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . 48
GRI INDEX . . . . . . . . . . . . . . . . . . . . . . . 81
ENVIRONMENTAL SUSTAINABILITY . . . . 49
Our Commitment . . . . . . . . . . . . . . . . . . . . 50
Environmental Sustainability Timeline . . . . . 50
Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Management . . . . . . . . . . . . . . . . . . . . . . . . 53
Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . 54
Capital Expenditure Filter . . . . . . . . . . . . . . 54
Our Environmental Policy . . . . . . . . . . . . . . 54
Education and Awareness . . . . . . . . . . . . . . 55
Our Approach . . . . . . . . . . . . . . . . . . . . . . . 56
Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Dow Jones
Sustainability Indexes
PepsiCo has been selected for the Dow Jones Sustainability World
Index (DJSI World) and the Dow Jones Sustainability Index North
America (DJSI North America). The DJSI World comprises the
leading companies in terms of sustainability around the world. The
DJSI North America captures the leading companies in terms of
sustainability out of the largest North American companies.
Packaging and Waste . . . . . . . . . . . . . . . . . . 63
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . 66
Environmental Honors . . . . . . . . . . . . . . . . . 66
PepsiCo–Performance with Purpose
PepsiCo World Headquarters in Purchase, NY, includes the Donald M. Kendall Sculpture Gardens, an outdoor sculpture and botanical garden open to the public.
REPORT BOUNDARIES
This report covers areas of importance to PepsiCo’s business. It is organized in four
sections. The first section covers areas of governance and reports on economic
impacts. The next three sections report on PepsiCo’s three sustainability planks:
• Human Sustainability — how we work to nourish people with our products.
• Environmental Sustainability — how we work to replenish the environment.
• Talent Sustainability — how we work to cherish people.
This report covers 2006. When 2007 information is included it is noted. Our last
report covered 2005.
Our report includes PepsiCo operations that we own and operate. In the
United States and in some other countries, independent franchise bottlers
manufacture and distribute beverage products. Our three largest bottlers are
The Pepsi Bottling Group (PBG), PepsiAmericas and Pepsi Bottling Ventures.
Our ownership of each of these bottlers is less than 50% and because we do
not control these bottlers, we do not consolidate their results or include their
information in this report except as noted in the text.
The report is expected to be read by employees, customers, consumers,
shareholders, analysts and other non-governmental (NGO) groups interested in
PepsiCo and sustainability.
Data is prepared following PepsiCo-established metrics and protocols, which often
follow external methods. There are no restatements or significant changes from
the prior report.
For additional information contact the PepsiCo Communications Department.
PepsiCo–Performance with Purpose
A MESSAGE FROM THE CHAIRMAN
Indra K. Nooyi
Chairman and Chief Executive Officer
Dear Friends,
When I was a child in India, my mother
would ask my sister and me a simple
but compelling question: “What
would you do to change the world?”
Today, I know my answer would be
that I want to lead a company that
is a force for good in the world. A
company that delivers good financial
performance while embracing “purpose”
in everything it does.
It therefore gives me great pride to
present PepsiCo’s sustainability report to
you. Our commitment to sustainability
is long-standing and today forms the
foundation of our operating strategy
which we call “Performance with
Purpose.” It means we bring together
what is good for business and good for
the world.
Our goals, like my mother’s question,
are simple, but the journey is long. This
report will demonstrate that PepsiCo
has made considerable progress, yet we
know there is much more to be done.
Our priorities under the Performance
with Purpose strategy have been
consistent. We are focused on driving
sustainability against three priorities:
• Human Sustainability: Nourishing
consumers with a range of fun and
healthy products, and making the
healthier choice the easy choice.
• Environmental Sustainability:
Replenishing the environment, and
working toward a net-neutral impact
on the environment in which we
operate.
• Talent Sustainability: Cherishing our
employees, and making PepsiCo the
most desirable place for people of all
backgrounds to build a career.
These priorities reflect the many
challenges PepsiCo faces: rising obesity
and the need for more balance between
energy intake and physical activity;
food safety; water quality and scarcity;
energy efficiency, emissions and climate
change; increasing amounts of waste
and the need for more recycling; hiring
and retaining the best people and
helping them achieve work-life balance;
to name a few.
is what makes PepsiCo such a good
company.
One notable example is that in 2007,
PepsiCo was named to the Dow Jones
Sustainability World Index and again
to the Dow Jones Sustainability North
America Index. We are proud that this
exhaustive review of our sustainability
work has led to PepsiCo being
recognized as among the world’s most
sustainable companies.
I thank everyone who has worked with
us to make this positive difference. I
look forward to continuing to work
with you.
Cordially,
Indra K. Nooyi
Chairman and
Chief Executive Officer
No one person, and no one company,
can solve them all. But each one of
us can make a difference. And every
associate I’ve spoken with at PepsiCo
wants to make that difference. This
PepsiCo–Performance with Purpose
SIGNIFICANT ACCOMPLISHMENTS
Area
Action/Results
Vision/Mission/Governance
Performance with Purpose (2007)
Articulated PepsiCo vision in the areas of human, environmental and talent
sustainability.
Human Rights policy
Adopted policy defining PepsiCo’s commitment to human rights.
Political contributions policy
Provides clarification of policy and publication of contributions.
Environmental policy
Provides clear explanation of PepsiCo environmental standards.
International Anti-Bribery policy
Policy adopted and communicated to PepsiCo International employees. Provided training
to nearly 15,000 employees.
Supplier Code of Conduct
Launched Supplier Corporate Social Responsibility Assurance program, including a global
Supplier Code of Conduct.
Public Policy Coordinating Group (2007)
The group was formed to formalize review and management of policy and sustainability.
Leads for each of sustainability areas:
human, environmental and talent. (2007)
Appointed leaders to ensure key areas of sustainability are addressed.
Millennium Development Goals (2007)
Embraced Millennium Development Goals (MDG) and will focus on areas where we can
make a difference.
Dow Jones Indexes
Named to the Dow Jones Sustainability World Index (2007) and Dow Jones
Sustainability Index North America (2006 and 2007).
Business Ethics Magazine
Named to 100 Best Corporate Citizens list.
Economic
Contributions
Donated an estimated $58.5 million in contributions and in-kind donations.
PepsiCo Foundation
Supported a number of programs directed to health and wellness that are advancing
knowledge about how to effect positive behavior change.
Community Service
Organized Global Week of Community Service during which employees served more than
8,000 hours and contributed services worth an estimated $200,000 to improve local
communities. Volunteers built playgrounds in inner cities.
Human Sustainability
Strategic Portfolio Transformation
Made portfolio acquisitions, reformulated existing products and introduced new
products as we transformed our portfolio to address issues of obesity.
Smart Spot
Increased the number of Smart Spot eligible products as we move toward 2010 goal of
deriving 50% of U.S. revenues from Smart Spot eligible products.
Smart Spot Dance (2007)
Partnered with America on the Move, YMCA of the USA, National Urban League and
National Council of La Raza to engage the African American and Latino communities to
get more active.
PepsiCo International Nutrition Team (2007)
Created a global team of internal advisors on portfolio transformation.
International Food Safety and Nutrition
Network (2007)
Created global network of PepsiCo R&D and food science professions to establish
specific priorities and codes of practice regarding PepsiCo food safety.
Alliance for a Healthier Generation (2007)
Became a part of voluntary industry, government and health official group working to
adopt a practical school vending policy in the United States.
Genetically Modified Ingredients (2007)
Developed worldwide policy on biotechnology.
Advertising to children
Joined with other food and beverage companies to strengthen guidelines concerning
advertising to children.
PepsiCo–Performance with Purpose
Environmental Sustainability
Strategy and Goals
Adapted a strategy to reduce water use, greenhouse gas emissions and packaging
and solid waste and set goals for water, electricity and fuels consumption. Developed
a waste protocol to standardize data collection around waste. Began collecting
greenhouse gas emissions data more broadly across the Company.
Environmental Sustainability Leadership
Team and Environmental Council (2007)
Established a leadership team to ensure that environmental impacts are considered
throughout the organization.
Capital Expenditure Filter (2007)
Implemented an analytic framework to ensure that sustainability is factored into capital
expenditures at an early stage of the proposal process.
Water projects
Implemented a number of programs to conserve water, change our water processes, and
find innovative ways to improve water management, including in communities.
Global Water Tool
Worked with the World Business Council on Sustainable Development to develop a
Global Water Tool for free use.
China Mother Water Cellars Project
Project reached landmark of touching more than 1 million people over the last five
years.
India water
Established holistic approach to water management that includes water management as
well as many other community factors.
Ethos Water (2007)
Entered an agreement to distribute Ethos Water that will increase donations to projects
that bring clean water to children around the world.
Exnora Waste Management (2007)
PepsiCo’s Exnora’s zero waste management project in India was selected by UNICEF as a
model project.
Renewable Energy Certificates (2007)
Made landmark purchase of Renewable Energy Certificates to offset the purchased
electricity used by all PepsiCo U.S. facilities. Our three anchor bottlers also purchased
RECs.
U.S. Climate Action Partnership (2007)
Joined with other business members and NGOs to promote governmental action on
climate change.
Ozone friendly refrigeration
Joined Refrigerants Naturally!, a business-NGO group dedicated to moving to HFCfree refrigeration at point-of-sale cooling. More than 99% of our new purchases of
refrigerated point-of-sale equipment uses HFC-free insulation.
LEED Certification (2007)
Achieved Gold LEED status at QTG Tolleson Distribution Center and Wytheville
Gatorade plant.
Alternative energy (2007)
Installed Arizona’s largest privately-owned photovoltaic electricity generation system.
Carbon Footprint (2007)
Walkers Crisps in the United Kingdom became the first major food brand in the world to
display a carbon footprint reduction logo.
Sustainable Packaging Council
Established a team to develop sustainable packaging strategies.
Packaging and Waste Material
Reduced PET bottles, paperboard and corrugated materials by more than 20 million
pounds, continuing our achievement of year-over-year reductions.
Recycled PET
Continued to meet goal of including 10% recycled material in our PET soft drink bottles.
EPA Energy Star Partner of the Year (2007)
Recognized by Environmental Protection Agency (EPA) for energy conservation.
CEO Water Mandate (2007)
Joined the United Nations initiative to address water issues.
Talent Sustainability
Diversity and Inclusion Leadership
Legacy Award
Established a new award to recognize senior leaders who champion diversity and
inclusion over time.
Diversity and Inclusion
Recognized for diversity and inclusion programs and progress by several magazines.
Safety
Added new Occupational Safety & Health Administration (OSHA) Voluntary Protection
Programs (VPP) sites — giving Frito-Lay more VPP Star sites than any other food
company and maintaining all Tropicana sites as VPP Star. QTG was accepted by OSHA to
participate in Corporate VPP Program.
HIV/AIDS and Pandemic Preparation
Advanced HIV/AIDS work and established Avian Bird Flu task force.
Code of Conduct
Approximately 30,000 employees completed mandatory training, with 100% completion.
Supplier Code of Conduct
Introduced Supplier Code of Conduct.
Supplier Diversity
Passed $1 billion mark in purchases from women-owned and minority-owned
businesses.
PepsiCo–Performance with Purpose
PROFILE
Our Business
PepsiCo Inc. is a leading global snack
and beverage company with 2006 net
revenues of more than $35 billion and
total operating profit of more than
$6.4 billion. PepsiCo manufactures and
markets snack foods in North America
through our Frito-Lay North America
division (31% of revenues); beverages
in North America through PepsiCo
Beverages North America (27% of
revenues); cereals and rice products in
North America through Quaker Foods
North America (5% of revenues) and
beverages, sweet and salty snacks and
Quaker brands outside North America
through PepsiCo International (37% of
revenues). PepsiCo is a publicly-listed,
widely-held company.
On November 5, 2007, PepsiCo
announced a strategic realignment
of its organizational structure to
position the Company for continued
strong growth and more fully leverage
the talents of its senior leaders.
PepsiCo, which previously comprised
PepsiCo North America and PepsiCo
International, will now be organized
into three major operating units:
• PepsiCo Americas Foods (PAF) — which
includes Frito-Lay North America,
Quaker and all Latin American Food and
snack businesses, including the Sabritas
and Gamesa businesses in Mexico.
• PepsiCo Americas Beverages (PAB) —
which includes Pepsi-Cola North
America, Gatorade, Tropicana and all
Latin American beverage businesses.
Our roots go back more than 100 years
to the creation of Pepsi-Cola by New
Bern, N.C. pharmacist Caleb Bradham
and his founding of the Pepsi-Cola
Company in 1898. The H.W. Lay
Company was founded by Herman W.
Lay in 1932. In 1961, Lay merged his
potato chip company with The Frito
Company, founded by Elmer Doolin, to
form Frito-Lay. PepsiCo was formed in
1965 through the merger of Pepsi-Cola
Company and Frito-Lay.
Tropicana was started by Anthony Rossi,
who pioneered a pasteurization process
for orange juice. Tropicana became part
of PepsiCo in 1998. Gatorade, which
was created in 1965, became part of
the Quaker Oats Company in 1983. The
Quaker Oats Company, which dates
back to 1901 when several American
pioneers in oat milling came together
to incorporate, became a part of
PepsiCo in 2001.
PepsiCo, Inc. was incorporated
in Delaware in 1919 and was
reincorporated in North Carolina in 1986.
At year-end 2006, PepsiCo employed
approximately 168,000 people throughout
the world, with approximately 63,000 in
the United States.
From left to right: Caleb Bradham, the pharmacist
who formulated Pepsi-Cola; Elmer Doolin, who
bought the recipe for Fritos and started the Frito
Company; Herman W. Lay, founder of H.W. Lay
Company, links arms with Donald M. Kendall,
CEO of Pepsi-Cola, as they mark the creation
of PepsiCo in 1965; Anthony Rossi, founder of
Tropicana, Dr. James Robert Cade, Gatorade
inventor; the Quaker trademark.
Net Revenue
Total $35,137
Quaker Foods
North America
PepsiCo
International
37%
PepsiCo
Beverages
North America
27%
5%
Frito-Lay
North America
31%
We reported: ($ In millions)
$29,930
Total Assets
Total Liabilities
14,562
Total Common
Shareholders’ Equity
15,447
Our common stock (PEP) is traded
principally on the New York Stock
Exchange. PepsiCo is also listed on
the Amsterdam, Chicago and Swiss
Stock Exchanges. At year-end 2006,
there were approximately 190,000
shareholders of record.
• PepsiCo International (PI) — which
includes all PepsiCo businesses in
the United Kingdom, Europe, Asia,
Middle East, and Africa.
Frito-Lay
North America
(FLNA)
PepsiCo
Beverages
North America
(PBNA)
PepsiCo
International
(PI)
Quaker Foods
North America
(QFNA)
PepsiCo–Performance with Purpose
Our Products
We offer great tasting convenient
foods and beverages to consumers
around the world. Our principal brands
include Frito-Lay, Pepsi-Cola, Tropicana,
Gatorade and Quaker. We manufacture
and sell more than 500 products that
serve the needs of consumers of all ages
in approximately 200 countries.
bottled water, 7UP (outside the United
States); ready-to-drink Lipton teas,
Quaker cereals, Ruffles potato chips,
Mirinda carbonated soft drinks, Tostitos
tortilla chips, Sierra Mist carbonated
soft drinks (diet and regular) and Fritos
corn chips. Many of these brands are
known around the world.
Our products offer fun and refreshment
and many can contribute to good health
and nutrition. Our largest brands at
retail include Pepsi-Cola, Gatorade
thirst quencher, Mountain Dew (diet
and regular), Diet Pepsi, Lay’s potato
chips, Doritos tortilla chips, Tropicana
Pure Premium orange juice, Cheetos
cheese flavored snacks, Aquafina
As part of our Smart Spot initiative, we
offer a growing number of products
that can contribute to healthier
lifestyles. For a PepsiCo product to carry
the Smart Spot it must:
1) contain at least 10% of the Daily
Value of certain targeted, positive
nutrients and meet limits on other
nutrients;
2) be formulated to have specific health
or wellness benefits, or
3) be reduced in calories, or nutrients
such as fat, sodium or sugar.
These criteria for Smart Spot eligible
products are based on authoritative
statements from the U.S. Food and Drug
Administration (FDA) and the National
Academy of Sciences (NAS). In 2006,
revenues from Smart Spot eligible
products represented over two-thirds of
our growth in North America. And we’ve
set a goal of deriving 50% of all our
U.S. revenues with Smart Spot eligible
products by 2010.
PepsiCo–Performance with Purpose
Our Customers
Our customers include large supermarkets and small grocery stores, warehouse
and club stores, mass merchandisers, convenience and gas station stores,
drug stores and other retail outlets as well as restaurants and foodservice and
vending operations. We distribute our products to customers through a variety of
distribution methods including direct-store-delivery, broker-warehouse delivery and
foodservice and vending distribution networks. We manufacture the majority of our
products, sourcing from both independent and contract farmers, processing and
packaging in our own plants. With respect to soft drinks, we provide concentrate
to bottlers who manufacture and distribute our brands. In the United States, these
bottlers are independently owned and operate under franchise agreements.
Retail consolidation continues to increase the importance of major customers.
In 2006, sales to Wal-Mart (including Sam’s) represented over 16% of our North
American net revenue. This percentage included concentrate sales to our bottlers
which are used in finished goods sold by them to Wal-Mart. In addition, sales
to The Pepsi Bottling Group (PBG), represented approximately 10% of our total
net revenue.
PepsiCo–Performance with Purpose
Our Operations
Outside of the United States, our largest markets are Mexico, the United Kingdom and Canada.
($ In millons)
All other countries $7,580
22%
Canada $1,702
5%
United States $20,788
59%
5%
United Kingdom $1,839
9%
Mexico $3,228
PepsiCo World Headquarters are located
in Purchase, New York, USA. Pepsi-Cola
North America headquarters are also
located in Purchase, New York. Other
North America headquarters include
Frito-Lay North America in Plano, Texas,
USA and QTG (Quaker Foods, Tropicana/
Gatorade) headquarters in Chicago,
Illinois, USA.
PepsiCo International headquarters are
located in Purchase, New York, USA.
There are international business units
headquarters located around the world:
PepsiCo Asia — Hong Kong
PepsiCo Europe — Switzerland
PepsiCo Latin America Region Foods and
Beverages — Mexico
PepsiCo Middle East and Africa —
United Arab Emirates
Sabritas — Mexico
In addition to our various headquarters,
our major properties include:
Frito-Lay North America — Owns
or leases approximately 40 food
manufacturing and processing plants
and approximately 1,980 warehouses,
distribution centers and offices.
PepsiCo Beverages North America —
Owns or leases (by us or our co-packers)
approximately 60 plants and production
processing facilities and 37 warehouses,
distribution centers and offices. In
addition, authorized bottlers in which
we have an ownership interest own or
lease approximately 70 bottling plants.
Quaker Foods North America — Owns or
leases approximately 35 manufacturing
plants and production processing facilities.
PepsiCo International — Owns or
leases approximately 150 plants and
approximately 1,500 warehouses,
distribution centers and offices. In
addition, authorized bottlers in which
we have an ownership interest own or
lease approximately 350 plants and
distribution centers.
During 2006, we acquired several
companies that fit with our portfolio
including:
• Stacy’s bagel and pita chips in
North America;
• Izze carbonated beverages in
North America;
• Naked Juice fruit beverages (acquired
January 2, 2007) in North America;
• Duyvis nuts in the Netherlands;
• Star Foods snacks in Poland;
• Bluebird snacks in New Zealand
(in early 2007).
World Map of Headquarters
Chicago, IL
Plano, TX
Mexico
Purchase, NY
Switzerland
United Arab Emirates
Hong Kong
PepsiCo–Performance with Purpose
Mission
OUR VISION, MISSION, VALUES AND
GUIDING PRINCIPLES
Vision
Values
PepsiCo’s responsibility is to
continually improve all aspects
of the world in which we operate
– environment, social, economic –
creating a better tomorrow than today.
Our commitment is to deliver
sustained growth, through empowered
people, acting with responsibility and
building trust.
Here is what this means:
PepsiCo’s Sustainability Vision is the
foundation for Performance with
Purpose. It expresses our fundamental
belief that doing the right thing for
society is the right thing for business.
It encompasses the health of our world
and the health of the Company.
Along with our Mission, Core Values
and Guiding Principles it articulates
what we stand for and what we are
committed to support. The behaviors
that will help us achieve our mission
are articulated in our Values Statement.
Sustained Growth is fundamental
to motivating and measuring our
success. Our quest for sustained growth
stimulates innovation, places a value
on results, and helps us understand
whether actions today will contribute
to our future. It is about growth of
people and company performance. It
prioritizes making a difference and
getting things done.
Empowered People means we have the
freedom to act and think in ways that
we feel will get the job done, while
being consistent with the processes
that ensure proper governance and
being mindful of the rest of the
company’s needs.
We aspire to make PepsiCo
the world’s premier consumer
products company, focused on
convenient foods and beverages.
We seek to produce healthy
financial rewards to investors
as we provide opportunities for
growth and enrichment to our
employees, our business partners
and the communities in which
we operate. And in everything we
do, we strive to act with honesty,
openness, fairness and integrity.
Responsibility and Trust form the
foundation for healthy growth. It’s
about earning the confidence that other
people place in us as individuals and as
a company. Our responsibility means we
take personal and corporate ownership
for all we do, to be good stewards of
the resources entrusted to us. We build
trust between ourselves and others by
walking the talk and being committed
to succeeding together.
Our Sustainability Journey
• PepsiCo Headquarters in Purchase opened
to the public to visit the outdoor sculpture
gardens and grounds, later known as Donald
M. Kendall Sculpture Gardens.
• Pepsi-Cola Foundation founded in 1962.
• PepsiCo Foundation founded in 1965.
Legacy Programs
10
• Code of Conduct introduced.
• Community Affairs has active
sponsorship programs.
• Diversity focus and African American
Advisory Board formed.
• Divisions operate environmental programs.
• Speak Up hotline introduced.
• Corporate Governance policies developed.
• Advertising policies developed.
PepsiCo–Performance with Purpose
Guiding Principles
PEPSICO VALUES
GUIDING PRINCIPLES
Care for customers, consumers and the world we live in
Sell only products we can be proud of
Speak with truth and candor
Balance short term and long term
Win with diversity and inclusion
Respect others and succeed together
This is how we carry out our commitment.
We must always strive to:
Care for customers, consumers and
the world we live in. We are driven by
an intense, competitive spirit in the
marketplace, but we direct this spirit
toward solutions that achieve a win
for each of our constituents as well
as a win for us. Our success depends
on a thorough understanding of our
customers, consumers and communities.
Caring means going the extra mile.
Essentially, this is a spirit of growing
rather than taking.
Sell only products we can be proud of.
The test of our standards is that we
must be able to personally endorse
our products without reservation and
consume them ourselves. This principle
extends to every part of the business,
from the purchasing of ingredients to
the point where our products reach the
consumer’s hands.
Speak with truth and candor. We
speak up, telling the whole picture,
not just what is convenient to
achieving individual goals. In addition
to being clear, honest and accurate,
we take responsibility to ensure our
communications are understood.
Balance short term and long term. We
make decisions that hold both shortterm and long-term risks and benefits
in balance over time. Without this
balance, we cannot achieve the goal of
sustainable growth.
Win with diversity and inclusion. We
leverage a work environment that
embraces people with diverse traits and
different ways of thinking. This leads to
innovation, the ability to identify new
market opportunities, all of which help
develop new products and drives our
ability to sustain our commitments to
growth through empowered people.
Respect others and succeed together.
This company is built on individual
excellence and personal accountability,
but no one can achieve our goals by
acting alone. We need great people
who also have the capability of working
together, whether in structured teams
or informal collaboration. Mutual
success is absolutely dependent on
treating everyone who touches the
business with respect, inside and
outside the company. A spirit of fun,
our respect for others and the value we
put on teamwork make us a company
people enjoy being a part of, and
this enables us to deliver world-class
performance.
• Latino/Hispanic Advisory Board formed.
• Environmental Task Force formed.
• PepsiCo becomes a member of the Global
Business Coalition on HIV/AIDS.
• Established packaging goal of 10%
recycled content.
2000
2001
2002
11
PepsiCo–Performance with Purpose
Code of Conduct
PepsiCo has had a Code of Conduct
since 1976. It is regularly updated
and it applies to all employees and
to all divisions and subsidiaries. It is
communicated to all our employees
annually. PepsiCo’s Code of Conduct
is made available on-line and in 30
languages.
Our Code of Conduct includes
sections on:
• PepsiCo’s Mission
• Respect for Our Employees/Diversity
• Customers, Suppliers and Competitors
• Global Relations
• Business Gifts and Payments
• Health and Safety
• Environment
• Political and Community Activities
and Contributions
• Conflicts of Interest
12
• Insider Trading and Proprietary
Information
• Accounts and Record Keeping
• Protection and Use of Company Assets
• Reporting Code of Conduct and Other
Ethics Issues
• Responsibility for Compliance
In addition to our Code of Conduct,
we have specific policies regarding
key topics such as the International
Anti-Bribery Compliance Policy, AntiHarassment/Discrimination Policy,
Customer Trade Agreement Policy,
Disclosure Policy, Equal Employment
Opportunity Policy, Environmental
Policy, Human Rights Workplace Policy,
Information Security Policies and Travel
and Entertainment Policy. These policies
apply to all of our associates worldwide.
Specific employees, including
management and any individual with
access to sensitive information or in a
position to acquire goods and services,
are required to complete mandatory
• Voluntarily adopted Global Reporting
Initiative (GRI) Guidelines.
• Health and Wellness Advisory Board formed.
• Worldwide HIV/AIDS policy adopted.
• Sustainability Task Force formed.
• Sustainability Vision –
Tomorrow>Today defined.
• PepsiCo joins the World Business Council on
Sustainable Development.
2003
2004
web-based training on our Code of
Conduct and to certify their compliance
with the Code. Each year, we distribute
and communicate the Code to
employees. In addition, we regularly
communicate and reinforce our Code
of Conduct and our Values through a
variety of means, including in-person
training, Town Hall meetings, articles
in our daily in-house e-newsletters,
information on our intranet,
management presentations and awards
for ethical behavior.
In 2005, PepsiCo established a
compliance and ethics leadership
structure, appointing a Vice President,
Deputy General Counsel, Business
Practice and Compliance, who is
focused on business practices, ethics
and compliance.
In the event of a breach of the Code
of Conduct, appropriate disciplinary
action is taken, ranging from
counseling to termination, depending
on the type and seriousness of the
matter. PepsiCo’s outside auditor
receives reports regarding potentially
significant violations that relate to
fraud, accounting, auditing and internal
• Smart Spot introduced.
• Values Statement adopted.
• HealthRoads introduced.
PepsiCo–Performance with Purpose
control matters. The Audit Committee
also receives regular reports regarding
compliance with the Code of Conduct.
In order to maintain the confidentiality
and anonymity of PepsiCo’s hotline,
PepsiCo does not publicly report on
breaches of its Code of Conduct or
other policies.
Any reports of potential corruption are
investigated immediately under the
direction of the Law Department. If
employees are found to have engaged
in questionable behavior they will
be disciplined accordingly. When
appropriate law enforcement authorities
are notified, PepsiCo cooperates with
law enforcement activity to the fullest
extent possible.
Anti-corruption policies and procedures
are included in our Code of Conduct. In
addition, PepsiCo’s International AntiBribery Policy was communicated to
all Corporate and PepsiCo International
employees in 2006 and web-based
training was provided to approximately
15,000 employees on this Policy
in 2007.
Speak Up
To promote high ethical standards and open communication across a global
organization, we ensure that employees have clear lines of communication to
report potential issues. We have a telephone hotline called “Speak Up” for this
purpose. It is accessible from around the world at no charge to employees. To
further ensure an environment that fosters open communications, employees may
remain anonymous. The availability of the Speak Up line is communicated across
PepsiCo. Types of incidents that may be reported through the Speak Up line include,
but are not limited to:
• Employee mistreatment
• Discrimination, including sexual harassment
• Product tampering
• Substance abuse
• Falsifying Company records
• Accounting irregularities
• Questionable business practices
• Fraud or theft
• Criminal conduct
• Impermissible gifts
• Safety hazards
• Sustainability Capital Expenditure
filter piloted.
• Metrics for water and energy developed.
• PepsiCo Environmental Management
System established.
• Human Rights policy adopted.
• Political contributions policy adopted.
• Environmental Policy adopted.
• Performance with Purpose introduced.
• Public Policy Coordinating Group formed.
• Environmental Sustainability Leadership
Team formed.
• Sustainability Capital Expenditure filter
refined and implemented.
2005
2006
2007
13
PepsiCo–Performance with Purpose
RISK MANAGEMENT
Risks and Responses
PepsiCo is subject to risks in the normal course of business
due to adverse developments with respect to several areas,
including those relating to sustainability. These risks include:
product demand; our reputation; information technology;
supply chain; retail consolidation; the loss of major
customers and failure to maintain good relationships with
our bottling partners; global, economic, environmental and
political conditions; the regulatory environment; workforce
retention and outsourcing; raw materials and other supplies;
competition; and market risks.
Our risk management process is intended to ensure that risks
are taken knowingly and purposefully. As such, we leverage
an integrated risk management framework to identify, assess,
prioritize, manage, monitor and communicate risks across
the Company.
Product demand
Risk:
Demand for our products may be adversely affected by
changes in consumer preferences and tastes or if we are
unable to innovate or market our products effectively. Our
14
continued success depends on our ability to respond to
consumer trends, such as consumer health concerns about
obesity, product attributes and ingredients, as well as
product innovation.
Response:
With respect to risks related to demand for our products,
such as consumer health concerns, we continued to focus
on the development of products that respond to consumer
trends, including formulating products to lower sugar,
fats and sodium and adding ingredients and new products
that can deliver nutritional benefits. For example, at FLNA
we introduced a new portion control line of 100-calorie
offerings, and we switched to NuSun sunflower oil, an
oil containing 90% mono-and polyunsaturated fats and
less saturated fat than most other cooking oils, for our
Lay’s and Ruffles potato chips. We reduced the amount of
saturated fats in our Walkers crisps in the United Kingdom
by 70% and the amount of salt by 25%. In an effort to help
address the growing concerns regarding childhood obesity
trends in the United States, we joined with the Alliance for
a Healthier Generation, a joint initiative of the William J.
Clinton Foundation and the American Heart Association, to
set voluntary beverage guidelines for U.S. schools and limit
portion sizes and establish voluntary guidelines for snacks
and side items in U.S. schools.
PepsiCo–Performance with Purpose
Our reputation
Supply chain
Risk:
Any damage to our reputation could have an adverse effect
on our business, financial condition and results of operations.
Maintaining a good reputation globally is critical to selling
our branded products.
Risk:
Disruption of our supply chain could have adverse effect on
our business, financial condition and results of operations.
Response:
Through the PepsiCo Product Integrity Council (PPIC), a crossfunctional forum to share leading practices and confer about
areas of potential risk, we completed a third-party review
of our food safety and food security programs which helped
identify opportunities to better leverage internal practices
across all our businesses. We also enhanced our product
sampling and testing protocols.
Information technology
Risk:
If we are not able to build and sustain proper information
technology infrastructure, our business could suffer.
Response:
We have embarked on a multi-year Business Process
Transformation (BPT) initiative that includes the delivery of
an SAP enterprise resource planning application, as well as
the migration to common business practices across
our operations.
Response:
We continued to assess our capability to address disaster
recovery, crisis management and business continuity. For
example, having recognized the potentially significant
impact of a pandemic such as avian influenza, we formed a
cross-functional, cross-divisional Pandemic Planning Team
that worked to develop strategies and tactics to mitigate that
impact.
Retail consolidation, the loss of major customers
and failure to maintain good relationships with our
bottling partners
Risk:
Trade consolidation, the loss of any key customer, or failure to
maintain good relationships with our bottling partners could
adversely affect our financial performance. We must maintain
mutually beneficial relationships with our key customers,
including our retailers and bottling partners, to effectively
compete.
Response:
We continued to work to ensure consistent and equitable
trade practices across our customers, to deliver value-added
product innovation and differentiation, to achieve the most
effective trade spend across customers and channels through
productivity programs, and to more effectively communicate
to our customers the economic advantages of our directstore-delivery (DSD) system.
15
PepsiCo–Performance with Purpose
Global economic, environmental and
political conditions
Risk:
Our business and that of our suppliers may be adversely
impacted by unfavorable global economic or environmental
changes, political conditions or other developments and
risks in the countries in which we operate.
Response:
We continue to monitor global conditions and enhance our
ability to take a positive role in making a difference in the
world. We continue to work to broaden and strengthen our
presence in emerging markets and to create scale in key
international markets.
The regulatory environment
Risk:
Regulatory decisions and changes in the legal and regulatory
environment could increase our costs and liabilities or limit
our business activities. Such regulatory environment changes
include changes in food and drug laws, changes related to
advertising and deceptive marketing practices, accounting
standards, taxation requirements, competition laws and
environmental laws, including laws relating to the regulation
of water rights and treatment.
16
Response:
To address risks relating to legal and regulatory issues
we have launched an enhanced Code of Conduct training
program in multiple languages. We improved the functionality
of our employee hotline. We completed environmental and
health & safety audits to help focus our mitigation efforts in
these areas going forward.
Workforce retention and outsourcing
Risk:
If we are unable to hire or retain key employees or outsource
certain functions effectively, it could have a negative impact
on our business.
Response:
We continued to focus on leveraging diversity and inclusion.
We worked to expand the breadth and depth of our
succession planning. We reinforced our focus on managing
our people through an increased emphasis on people
development as part of our performance management process.
PepsiCo–Performance with Purpose
Raw materials and others supplies
Market risks
Risk:
Our operating results may be adversely affected by increased
costs, disruption of supply or shortages of raw materials and
other supplies.
Risk:
We are exposed to market risks rising from adverse
changes in:
Response:
We continue to reduce our input cost volatility by employing
various hedging strategies where appropriate. We also
continue to utilize our scale to achieve maximum value and
ensure adequate supply, including working with our suppliers
to help minimize volatility.
Competition
Risk:
Risk: Our business could suffer if we are unable to compete
effectively. We compete against global, regional and private
label manufacturers on the basis of price, quality, product
variety and effective distribution. Increased competition could
adversely affect our results.
• Commodity prices, affecting the cost of our raw materials
and energy
• Foreign exchange rates
• Interest rates
• Stock prices
• Discount rates affecting the measurement of our pension
and retiree medical liabilities.
Response:
In the normal course of business, we manage these risks
through a variety of strategies, including productivity
initiatives, global purchasing programs and hedging strategies.
Response:
We continue to take action to be more competitive. We
believe the strength of our brands, innovation and marketing,
coupled with the quality of our products and flexibility of
our distribution network, allows us to compete effectively.
17
PepsiCo–Performance with Purpose
Risk Management Process
PepsiCo utilizes an integrated risk management framework to identify, assess,
prioritize, manage, monitor and communicate risks across the Company. This
framework includes:
• The PepsiCo Executive Committee (PEC), comprised of our most senior leadership
group and chaired by PepsiCo’s Chairman and Chief Executive Officer.
• Five Division Risk Committees (DRCs), comprised of cross-functional senior
management teams which meet quarterly to identify, assess, prioritize and
address operating risks within our businesses and Information Technology
Services group.
• PepsiCo’s Risk Management Office, headed by the Vice President, Enterprise Risk
Management, which manages the overall risk management process, provides
ongoing guidance, tools and analytical support to the PEC and the DRCs,
identifies and assesses emerging risks, and facilitates ongoing communication
among the divisions, as well as with PepsiCo’s Audit Committee and Board of
Directors.
• PepsiCo Corporate Audit confirms the ongoing effectiveness of the risk
management framework through periodic audit and review procedures.
There are a number of work processes across PepsiCo that incorporate risk
management principles, including PepsiCo’s compliance programs, internal audit
protocols, financial polices and reviews, operating policies and procedures, strategic
planning, annual operating plans, business and joint venture reviews, advertising
guidelines and reviews, product safety and security programs, crisis management
procedures and protocols, disaster recovery plans and people planning and
development processes.
In addition to the embedded risk management activities that take place each and
every day within our normal business process, PepsiCo uses an integrated risk
management framework to explicitly identify, assess, prioritize, manage, monitor
and communicate risks across the Company.
18
PepsiCo–Performance with Purpose
Risk Identification
Risk Response
This takes place annually from both a
top-down (PEC) and bottom-up (DRC)
viewpoint. Our risk identification efforts
seek to evaluate both external risks
(customer trends, consumer trends,
government and public policy risks), as
well as risks associated with internal
capabilities.
Following our prioritization of risks, the
PEC and DRCs are required to explicitly
determine the response to each
significant risk. The responses include
accepting, avoiding, mitigating and
transferring (via third party insurance).
The DRCs also identify which risks will
be monitored on an ongoing basis and
what measurement index will be used
for such a purpose.
Risk Assessment
After identifying our most significant
inherent risks, each assessing body
(PEC, DRCs, Risk Management Office
(RMO) ) assesses the most significant
risks from both a probability, impact
and vulnerability perspective at two
levels – inherent and residual. This
assessment requires that we fully
understand the existing capabilities,
controls, programs, insurance coverage
and other mitigating factors that enable
an accurate assessment of the risk.
Risk Prioritization
After assessment, all risks that exceed a
predetermined threshold are prioritized
by both assessment itself as well as the
ability to influence and/or mitigate.
In addition, the RMO aggregates the
risk assessment information to look for
risk interdependencies and common
mitigation solutions.
Communication
Each DRC is required to summarize its
risk management efforts by providing
meeting minutes, as well as semiannual submissions of risk maps and
“heat maps.” Risk maps are used to
document specific information about
identified risks, including the likelihood,
the impact and risk response. “Heat
maps” provide an aggregate view of the
Company’s risks.
For PepsiCo’s top risks, PepsiCo has
assigned Executive Risk Owners that
are responsible for understanding the
risk across the Company and providing
annual updates to the PEC as well as
the Audit Committee and Board of
Directors, depending upon the risk
area. The Executive Risk Owners are
required to provide risk templates that
provide a company-wide assessment
and description of mitigation efforts
across the Company. A semi-annual
risk management update is provided to
the PepsiCo Audit Committee, during
which our risk profile, risk mitigation
efforts and risk management process
are discussed.
More Information
For a list of major products see:
http://www.pepsico.com/PEP Company/
BrandsCompanies/index.df.
For more information on Health and
Wellness and Smart Spot see:
http://www.smartspot.com and
http://www.pepsico.com/PEP
Citizenship/HealthWellness/index.cfm.
For a list of subsidiaries of PepsiCo, see
Exhibit 21 of PepsiCo’s 2006 Form 10-K.
For more information on many of these
topics see PepsiCo’s website http://www.
pepsico.com, divisional websites, the
PepsiCo Annual Report and PepsiCo’s
Management Discussion and Analysis
included in PepsiCo’s Form 10-K.
19
PepsiCo–Performance with Purpose
PepsiCo Board of Directors: Front row, left to right: Dina Dublon, Consultant, Former Executive Vice President and Chief Financial Officer, JPMorgan Chase & Co.; James J.
Schiro, Chief Executive Officer, Zurich Financial Services; Indra K. Nooyi, Chairman and Chief Executive Officer, PepsiCo.
Second row: left to right: Michael D. White, Chief Executive Officer, PepsiCo International and Vice Chairman of PepsiCo; Ray L. Hunt, Chief Executive Officer, Hunt Oil
Company, and Chairman, Chief Executive Officer and President Hunt Consolidated, Inc.; Arthur C. Martinez, Former Chairman of the Board, President and Chief Executive
Officer, Sears Roebuck and Co.
Back row, left to right: Victor J. Dzau, M.D., Chancellor for Health Affairs, Duke University and President and Chief Executive Officer, Duke University Health Systems;
Alberto Ibargüen, President and Chief Executive Officer, John S. and James L. Knight Foundation; Sharon Percy Rockefeller, President and Chief Executive Officer, WETA
Public Stations; Daniel Vasella, Chairman of the Board and Chief Executive Officer, Novartis AG.
GOVERNANCE
Our Governance Structure
PepsiCo was founded in 1965 on a
handshake between Donald M. Kendall,
President and Chief Executive Officer
of Pepsi-Cola and Herman W. Lay,
Chairman and Chief Executive Officer of
Frito-Lay. Trust has been a cornerstone
of PepsiCo since the merger of these
two companies. Today we pursue that
goal as vigorously as ever.
Our governance includes the following:
• Board of Directors and Standing
Committees
• Disclosure Committee
• PepsiCo Executive Committee
Board of Directors and Standing Committees
PepsiCo’s business strategy and affairs are overseen by our Board of Directors. Our
Board of Directors has three standing Committees:
1. Nominating and Corporate Governance
2. Audit
3. Compensation
As of September 2007, our Board of Directors has 10 members, including eight
independent outside directors and two executive directors. Members of all Board
Committees are independent outside directors.
PepsiCo’s independence director standards are defined in Section B of the
Corporate Governance Guidelines entitled “Director Qualification Standards.”
These standards conform to the director independence rules of the New York Stock
Exchange. For a full discussion of how we define an independent director see
PepsiCo’s Corporate Governance Guidelines on our website at www.pepsico.com
under “Investors – Corporate Governance – Corporate Governance Guidelines.”
PepsiCo’s Board has an independent Presiding (Lead) Director. Effective May 2,
2007, Sharon Percy Rockefeller serves as Presiding (Lead) Director of PepsiCo’s
Board. Prior to May 2, 2007, Robert Allen served as Presiding (Lead) Director
to the Board.
• Public Policy Coordinating Group
Steven S Reinemund served as Chairman and CEO until October 1, 2006. From
October 1, 2006 to May 2, 2007, Indra K. Nooyi served as CEO and Steven S
Reinemund served as Chairman. Indra K. Nooyi became Chairman and CEO as of
May 2, 2007.
20
PepsiCo–Performance with Purpose
PepsiCo’s Board of Directors and Board
Committee responsibilities are detailed
on PepsiCo’s website in the Investor
section under Corporate Governance.
Among the responsibilities of the Board
and Committees are the following:
• PepsiCo’s full Board has responsibility
for overseeing strategic planning.
As part of this strategic oversight
capacity, the Board reviews key social
responsibility and sustainability issues
on an as-needed basis. In addition,
the Board Committees periodically
review specific issues or initiatives
consistent with the scope of each
Committee’s charter.
• PepsiCo’s Audit Committee has audit,
accounting and risk management
responsibilities.
• PepsiCo’s Nominating and Corporate
Governance Committee is responsible
for selection, nomination and
remuneration of Board members.
• PepsiCo’s Compensation Committee is
responsible for remuneration of senior
executives.
Disclosure Committee
This Committee consists of the
Company’s Controller, General Counsel,
General Auditor and Head of Investor
Relations. Its responsibilities are
detailed in the Disclosure Committee
Charter available on our website
at the link below. The purpose of
the Committee is to ensure that all
disclosures made by PepsiCo to its
security holders or the investment
community are accurate and complete
and fairly present the Company’s
financial condition and results of
operations in all material respects, and
are made on a timely basis as required
by applicable laws and stock exchange
requirements.
http://www.pepsico.com/PEP_
Investors/CorporateGovernance/
DisclosureCommitteeCharter/index.cfm
PepsiCo Executive Committee
(PEC)
This Committee is comprised of our
most senior leadership team and meets
regularly on all areas of the business.
Public Policy Coordinating Group
In July 2007, PepsiCo established the
Public Policy Coordinating Group to
address issues of public policy including
sustainability. The group is under the
direction of PepsiCo’s General Counsel
and includes senior functional heads as
well as other Company leaders who are
focused on the sustainability platforms
of Human Sustainability, Environmental
Sustainability and Talent Sustainability.
Responsibility for performance in
our three key areas of sustainability
includes:
• Human Sustainability, encompassing
our products, is led by our chief
Health and Wellness Innovation
Officer, working with our R&D
functions and divisions.
• Environmental Sustainability and
the Environmental Sustainability
Leadership Team (ESLT) are led by
the head of the supply chain at
each of our four businesses. They
are supported by the Environmental
Council, which is responsible for
recommending and implementing
actions. The ESLT replaces the
Sustainability Task Force.
• Talent Sustainability resides primarily
with our Chief Personnel Officer,
including diversity officers, training
and compensation and benefits groups.
21
PepsiCo–Performance with Purpose
Communications with the Board of Directors
To facilitate communications with our shareholders, we provide a telephone
number, mailing address and electronic link to contact the Board of Directors.
These may be found under “Contact the Board of Directors/Audit Committee” in
the Corporate Governance section of our website and page 8 of PepsiCo’s 2007
Proxy Statement. In addition, PepsiCo’s Proxy Statement, which is distributed to
all shareholders, details the process for contacting the Board, a Committee of the
Board or an individual member of the Board.
The PepsiCo Corporate Law Department reviews all communications sent to
the Board of Directors relating to the duties and responsibilities of the Board
and its Committees. The Corporate Law Department maintains a log of all such
communications and regularly provides a summary of communications to the
Board. Certain communications are sent to the Chair of the relevant Board
Committee, the Presiding Director or to an individual Board member, as applicable.
Concerns relating to PepsiCo’s accounting, internal accounting controls or auditing
matters are referred to members of the Audit Committee.
Shareholder Proposals
Shareholders wishing to submit shareholder proposals may do so in accordance
with the instructions on page 45 of the Proxy Statement. One shareholder
proposal, pertaining to Charitable Contributions, was included in the 2007 Proxy
Statement. The resolution did not receive enough votes to pass.
Board and Executive Compensation
Most of the annual compensation provided to directors is tied to PepsiCo stock
performance. Directors receive a straight-forward compensation package that
includes a market competitive annual stock unit grant and annual retainer that
can be deferred into PepsiCo stock units. Directors do not receive any meeting
fees, nor do they have a retirement plan or receive any benefits such as life or
medical insurance.
Pay levels for executive officers are designed to be competitive and, most
importantly, align with the Company’s performance. Pay-for-performance is
a critical policy in designing our executive compensation and, as a result, our
“pay mix,” defined as the amount of fixed base salary relative to at-risk annual
and long-term cash incentive awards and at-risk equity-based awards, places
the greatest emphasis on variable pay incentives. As a result, over 90% of our
Chairman and CEO’s target total compensation is variable and at-risk.
Performance-related annual incentive awards are earned based on the achievement
of Company and individual performance measures. In particular, Company
22
PepsiCo–Performance with Purpose
Governance Recognitions
2007
• PepsiCo received a perfect 10 out
of 10 corporate governance rating
from Governance
Metrics
International in 2006
and 2007.
• Institutional
Shareholder
Services said that in 20062007, PepsiCo outperformed
99.2% of the S&P 500 companies
and 100% of the companies
performance includes financial
performance measures related to
profit, net revenue and volume
growth. Individual performance
includes measures relating to an
individual’s contribution to PepsiCo’s
strategic business imperatives, such
as improved operating efficiencies
and driving PepsiCo’s Performance
with Purpose priorities in the areas of
human sustainability, environmental
sustainability and talent sustainability.
We believe that grants of stock-based
incentive awards are the best way to
align the interests of executives with
those of PepsiCo’s shareholders. Longterm incentive awards to PepsiCo
executive officers are comprised of:
• Stock options, which have no intrinsic
value to the recipient on the date of
grant and only deliver meaningful
value if PepsiCo achieves sustained
long-term stock price growth,
• Performance-based restricted stock
units, which only vest if pre-approved
earnings targets are achieved, and
• Performance-based long-term cash
awards, which are earned based on
the same Company and individual
performance measures used to
determine performance-related
annual incentive awards.
Not only is the value of PepsiCo’s
long-term incentive awards linked to
Company and stock price performance,
but the size of the award is also
performance-based. For example,
the actual size of grants awarded to
executive officers range from 0% to
150% of target based on PepsiCo’s
financial performance relative to
our Board-approved peer group as
well as each executive officer’s
individual contribution to PepsiCo’s
strategic imperatives.
Conflicts of Interest
Our Code of Conduct, which applies to
all PepsiCo employees and directors,
contains clear guidelines regarding
conflicts of interest. PepsiCo’s Corporate
Governance Guidelines also include
director independence standards to
address potential director conflicts
of interest.
Director Nomination Process
The Nominating and Corporate
Governance Committee does not solicit
director nominations but will consider
recommendations for director nominees
if the individuals recommended meet
certain minimum Board membership
criteria detailed on pages 9-10 of the
2007 Proxy Statement and, if so, if the
candidates expertise and particular set
of skills and background fit the current
in the Food, Beverage and
Tobacco Industry group in key
governance measures.
EXTERNAL CHARTERS
needs of the Board. This process is
designed to ensure that the Board
includes members with diverse
backgrounds, skills and experience,
including appropriate financial
and other expertise relevant to the
business of the Corporation.
Annual Performance
Evaluation of the Board
The Board and its Committees
conduct a self-evaluation at least
once annually to assess Board and
Committee performance.
Capital Expenditure Filter
All requests for capital expenditures
over $5 million must include a
review of sustainability issues and
performance against appropriate
benchmarks. Additionally,
opportunities for improving the
sustainability of the project
surrounding the capital request
must be highlighted. The goal is
to incorporate more sustainability
opportunities in projects right from
the start. This is expected to help
drive continued improvement.
23
PepsiCo–Performance with Purpose
EXTERNAL CHARTERS
Memberships and Partnerships
PepsiCo has always prided itself on being a good corporate citizen and taking
action or aligning itself with organizations focused on emerging social issues.
Examples of this include addressing health and wellness, advertising to children,
HIV/AIDs, climate change and water resources.
Through our memberships and partnerships, PepsiCo endorses a number of
initiatives related to our businesses. In addition to the initiatives noted below, on a
global level, we have endorsed the UN Millennium Development Goals.
We are also members of many trade and professional groups and take an active
role in these as suitable. These are sometimes local and specific to the business.
Among these are:
®
• American Beverage Association (ABA)
• Snack Food Association
• International Life Science Institute
• International Society of Beverage
Technologists
• National Safety Council
• American Industrial Hygiene Association
• American Society of Safety Engineers
• Con Mexico
• European Association of Industries of
Juices & Nectars
• International Council of Beverage
Associations
• CEEREAL European Breakfast Cereals
Association
• European Food and Drink
Federation (CIAA)
24
NATIONAL URBAN LEAGUE
PepsiCo–Performance with Purpose
Memberships and Partnerships (Selected Listing)
Organization
Purpose
Overall Sustainability
Global Reporting Initiative
PepsiCo began voluntary reporting in 2003.
World Business Council on Sustainable
Development
Member companies are united by shared commitment to sustainable development.
PepsiCo is active in the Water Group and helped create a water assessment tool available
for free use.
World Economic Forum
Members are committed to improving society and the environment.
Human Sustainability
Alliance for a Healthier Generation
This is a joint alliance with William J. Clinton Foundation and American Heart Association
to combat childhood obesity.
American Council on Fitness and Nutrition
A group dedicated to helping people improve health. PepsiCo is a founding member.
America On the Move
A group dedicated to helping people improve health through small changes in diet and exercise.
Children’s Advertising Review Unit (CARU)
Members evaluate child-directed advertising and self regulate.
Communication Council Association
This is a Mexican group promoting a productive, united and just society.
Consortium to Lower Obesity in
Chicago’s Children
Members work to lower obesity in Chicago area children.
Cuban American National Council
PepsiCo is working with this group on Health and Wellness initiatives, including
Smart Spot Dance.
Family Friendly Programming Forum
Members support family-friendly programming on TV.
National Council of La Raza
PepsiCo is working with this group on Health and Wellness initiatives, including Smart
Spot Dance and a research project to equip affiliate organizations with effective
community-based healthful lifestyle programs.
National Urban League
PepsiCo is working with this group on Health and Wellness initiatives, including Smart
Spot Dance and providing capacity development support to build organizational expertise
in health and quality of life.
Environmental Sustainability
Air and Waste Management Association
Environmental professionals share information.
Beverage Packaging Environmental Council
Members are committed to increasing recycling.
Climate Leaders
PepsiCo is a member of this U.S. Environmental Protection Agency program focused on
voluntary reductions of greenhouse gases.
CEO Water Mandate
PepsiCo signed this mandate to contribute positively to the emerging water crisis.
Energy Star
PepsiCo participates in this U.S. Environmental Protection Agency program focused on
improving energy performance..
Environmental Law Institute
PepsiCo joined in 2007 as a sponsoring company.
European Organization for Packaging and the Members are dedicated to resolving the environmental challenges facing the packaging
Environment (EUROPEN)
chain. PepsiCo is represented at the Board level.
Exnora International
PepsiCo is working with this environmental group in India to manage solid waste in an
environmentally friendly manner.
Global Beverage Industry Roundtable on
Water Stewardship
Members are dedicated to addressing water issues.
Grocery Manufacturers Association/Food
Products Association (GMA/FPA)
Through this group, PepsiCo is the chair for industry development of common reporting
protocols and procedures for reporting sustainable packaging improvements.
ISO 14001
This group sets environmental standards. PepsiCo facilities in Leicester, United Kingdom
and Spain have received certification. PepsiCo’s Environmental Management System (EMS)
framework is built along the lines of ISO 14001.
Keep America Beautiful
This group is dedicated to recycling and community cleanups. Pepsi-Cola is a “Great
American Cleanup” founding partner.
Mother Water Cellars Project
PepsiCo China is working with this group to improve water availability in rural China.
National Arbor Day Foundation
Frito-Lay has committed to planting 300,000 trees through this group’s “Make America a
Little Greener” initiative.
25
PepsiCo–Performance with Purpose
National Recycling Partnership
Members are committed to increasing recycling in the U.S.
Refrigerants Naturally!
This coalition of business and non-governmental members are committed to moving to
ozone friendly point-of-sale refrigeration.
Safe Water Network
Members are working to help provide safe water for communities in need.
SmartWay Transport Partnership
This is a U.S. Environmental Protection Agency partnership. Members are committed to
promoting greater energy efficiency and air quality within the freight transport business.
Frito-Lay North America is a member.
Sustainable Packaging Coalition/GreenBlue
This industry leading organization provides life-cycle analysis and design guidelines for
sustainable packaging. PepsiCo is a member of the Executive Committee.
SUSTENTA
Members of this Mexican group are committed to the betterment of solid waste
management.
The Energy and Resource Institute (TERI)
PepsiCo is working with this group in India to expand the availability of water.
US Climate Action Partnership (USCAP)
Member companies are working to encourage climate action to reduce greenhouse
gas emissions.
World Health Organization (WHO)
PepsiCo subscribes to WHO Guidelines on drinking water quality.
Talent Sustainability
Committee to Encourage Corporate
Philanthropy
Members work to raise the level and quality of corporate philanthropy.
Cuban-American National Council
PepsiCo is working with this group to advance diversity and inclusion, including building
leadership capacity.
Ethics Resource Center
Members are devoted to the advancement of high ethical standards and practices.
Global Business Coalition
Members lead the business fight against HIV/AIDS and related diseases.
Habitat for Humanity
This Tropicana and Tostitos partnership with the national organization builds homes for
the needy.
Hispanic Association of Corporate
Responsibility
PepsiCo is working with this group to advance diversity and inclusion.
League of United Latin American
Citizens (LULAC)
PepsiCo is working with this group to advance national leadership and
grass-roots activation.
MacBride Principles
Members subscribe to Northern Ireland diversity principles.
Make a Wish Foundation
Frito-Lay North America is working with this group to encourage donations.
NAACP
PepsiCo is working with this group to advance National Leadership and grass-roots
activation.
National Council of La Raza (NCLR)
PepsiCo is working with this group to advance diversity and inclusion.
National Minority Supplier Development
Council
Members support minority supplier development.
National Urban League (NUL)
PepsiCo is working with this group to advance diversity and inclusion.
Organization of Chinese Americans
PepsiCo is working with this group to advance diversity and inclusion, especially through
national leadership and grass-roots activation.
OSHA Voluntary Protection Plan
This is a government health and safety program. Four of Tropicana’s facilities and 26 of
our Frito-Lay facilities have received Star certification demonstrating safety. QTG has been
accepted to participate in OSHA Corporate VPP program.
Susan G. Komen Breast Cancer Foundation
Frito-Lay North America has joined with this group to use SunChips multigrain snacks to
raise awareness for a cure for breast cancer.
Sullivan Principles
Members subscribe to human rights principles.
Supplier Ethical Data Exchange (Sedex)
PepsiCo joined this group to partner with suppliers to improve performance across the
supply chain.
US Pan Asian Chamber of Commerce
PepsiCo is working with this group to advance diversity and inclusion, especially through
national leadership and grass-roots activation.
Women’s Business Enterprise National Council Members work to promote women’s enterprise.
(WBENC)
26
PepsiCo–Performance with Purpose
OUR CONSTITUENCIES
Our Stakeholders
We touch the lives of many people through our businesses. We welcome honest
discussion with individuals, groups and advocates who represent community,
environmental and social interests. Issues of concern brought to the attention of
PepsiCo will be considered with a view toward our businesses and our sphere
of influence.
We interact with many stakeholders.
Our Investors — We strive to provide investors a reasonable return on their
investment, based on consistent financial growth in the marketplace and consistent
financial results. We take a long-term view and make appropriate investments
to strengthen our brands, develop our capabilities and pursue new opportunities.
We seek healthy year-over-year growth and report honest, transparent and timely
financial results.
Our Employees — Our employees are the greatest factor in our success. Their
hard work, dedication and resourcefulness enables PepsiCo to compete effectively,
serve the needs of customers and deliver the results our investors expect. We are
committed to providing a work environment that allows our employees to achieve
professional growth and personal fulfillment.
Our Customers, Partners and Suppliers — We work with our retail
customers, franchise bottlers, joint-venture partners and suppliers to
ensure that our partnerships appropriately balance the interests of
all parties.
• Our retail customers are supermarkets, grocery stores, mass
merchandisers, club stores, drug stores, gas stations, convenience
stores, restaurants, foodservice outlets, vending machine operations
and others who carry our products and make them directly available
to consumers. We provide our products as well as marketing support
that contributes to their growth, profit and positive cash flow.
• Our bottlers and other business partners manufacture many of our
products. We provide certain needed ingredients and supplies as
well as quality assurance and technical assistance. We conduct our
business to allow both our partners and PepsiCo to earn a reasonable
return and grow together.
• Our suppliers provide us with the goods and services needed in our
business. We buy goods and services at competitive prices, allowing
both our suppliers and PepsiCo to make a reasonable profit. We seek
efficient suppliers with whom we can work and grow as long-term
partners. We especially seek suppliers that are owned by minorities
and women.
27
PepsiCo–Performance with Purpose
Our Consumers — We offer
consumers great tasting products
that provide outstanding quality,
convenience and value. Each year, we
invest in innovation to better serve
consumer wants and needs through new
products and packaging. We continually
expand our distribution network
to make our products more widely
available. And we work relentlessly to
improve productivity so we can offer
affordable products to a broad range
of consumers.
Our Communities — We recognize
our responsibility to be a contributing
member of our communities, both on
a global and local level. We operate
our businesses responsibly and seek
to be a positive force. We support our
communities through our businesses by
contributing to not-for-profit groups
and by working with organizations
dedicated to improving the lives of
people. We have advisory groups that
focus on health and wellness, AfricanAmerican and Latino/Hispanic issues.
Stakeholder Engagement
PepsiCo actively listens and encourages
communications with all our
constituencies. Here are some examples
of engagement:
Investors — We regularly conduct
web-based quarterly conference calls
to provide updates to analysts and
investors, and we broadcast our annual
shareholder meeting on our website.
Associates — We ask associates to
respond to an “Organizational Health”
survey, generally every other year. Topics
28
include benefits, working conditions,
compensation, career development,
diversity and inclusion initiatives,
community activities and many others.
The results of the survey are shared
with associates and action plans to
address issues are developed and made
a part of performance goals.
We have active employee networks
for our associates, including networks
for African-Americans, Latinos, Asians,
Native Americans, Women, Gay/Lesbian/
Bisexual/Transgender and “Enable” for
individuals with different abilities. Our
most senior level executives reporting
to our chief executive officer sponsor
these groups across PepsiCo.
We have a daily e-newsletter which
offers associates the opportunity to ask
questions. We conduct regular “Forum”
and “Town Hall” meetings during which
employees are encouraged to ask
questions and are updated on topics
including the business and our priorities.
All associates have access to Speak
Up, our telephone hotline to report
potential issues.
Customers, Partners and Suppliers —
We have dedicated teams for our
customers, partners and suppliers and
interact with them on a regular basis.
We have a team dedicated to Supplier
Diversity, including working with our
women and minority suppliers to
build their capabilities and business
with PepsiCo. Our website includes
a dedicated site for information on
our women and minority supplier
diversity program.
Consumers — We have toll-free
telephone numbers consumers can
call with questions or comments. The
call center numbers are included on
our product packaging. We provide a
number of websites where consumers
can get information about our brands,
including nutritional content and
answers to many other questions. These
websites can be found by clicking on
the company icons on pepsico.com.
Communities — Our Ethnic Advisory
Boards provide counsel and advice on a
wide range of business areas including:
• Marketing to targeted communities.
• Building alliances with retailers.
• Creating products for a more diverse
consumer base.
• Developing a more diverse supplier
base and other business relationships.
• Promoting PepsiCo’s diversity and
inclusion efforts.
• Recommending diverse talent for
employment opportunities.
• Encouraging the expansion of diverse
representation among PepsiCo
employees.
• Providing a perspective on diversity
and inclusion issues or questions.
Our African-American Advisory Board
was formed in 1999. Our Latino/
Hispanic Advisory Board was formed
in 2000. Our Canada business has
convened an Asian Advisory Board.
PepsiCo–Performance with Purpose
Community, Environmental and
Social Interests — During 2006
we interacted with several groups
representing community, environmental
and social interests where we believed
we could make a difference. We
consulted with shareholders to discuss
water, recycling, genetically modified
commodities, humane treatment of
animals, climate issues, labeling and
supply chain.
As a result of these actions, we have
done the following:
• further increased our focus on water
and recycling;
• developed a corporate-wide position
on genetically modified commodities;
• joined the United States Climate
Action Partnership (USCAP) to address
climate change;
• continued our work with Refrigerants
Naturally! to move to HFC-free
refrigerants in point-of-sale coolers.
More Information
For more information on many of
these topics see PepsiCo’s website,
http://www.pepsico.com, divisional
websites, the PepsiCo Annual Report
and PepsiCo’s Management Discussion
and Analysis included in PepsiCo’s
Form 10-K.
• revised our U.S. Aquafina bottled
water label to state that Aquafina
originates from public water sources
before undergoing a proprietary seven
step purification process to yield
purified water; and
• developed a Supplier Code of Conduct.
29
PepsiCo–Performance with Purpose
ECONOMIC PERFORMANCE
Summary of Economic Performance 2006 ($ in millions)
(The following should be read in conjunction with Management’s Discussion and Analysis
and Consolidated Financial Statements included in PepsiCo’s 2006 report on Form 10-K)
2006
Net Revenue
$ 35,137
Cost of Sales
15,762
Selling, general and administrative expenses
12,774
Common Share Repurchases
3,000
Capital Spending
2,068
Dividends paid
1,854
Taxes paid/net of refunds
2,155
Payments of long-term debt
157
Retained earnings
24,837
Brands
Largest PepsiCo Brands
Estimated Worldwide Retail Sales $ in Billions
Pepsi-Cola
Gatorade Thirst Quencher
Mountain Dew (diet and regular)
Diet Pepsi
Lay’s Potato Chips
Doritos Tortilla Chips
Tropicana Pure Premium Orange Juice
Cheetos Cheese Flavored Snacks
Aquafina Bottled Water
7UP (outside U.S.)
Lipton Teas
Quaker Cereals
Ruffles Potato Chips
Mirinda
Tostitos Tortilla Chips
Sierra Mist (diet and regular)
Fritos Corn Chips
0
5
10
15
20
We market hundreds of brands in more than 200 countries and territories around
the world. The consumers who eat and drink our products spent an
estimated $92 billion on our brands in 2006. This includes 17 mega-brands
that each delivers retail sales of more than $1 billion.
30
Glossary
Consumers the people who eat and
drink our products.
Customers the authorized bottlers
and independent distributors and
retailers who buy our products
from us.
Bottlers customers to whom we
have granted exclusive contracts
to sell and manufacture certain
beverage products bearing our
trademarks within a specific
geographical area.
Retailers customers who buy
our products to sell to consumers
through a variety of distribution
channels including mass
merchandisers, superstores, club
stores, drug stores, restaurants and
foodservice operations, vending
machines, grocery and supermarkets,
convenience stores and gas stations.
PepsiCo–Performance with Purpose
In addition to benefiting our own
associates, this powerful performance
helps support our independent bottler
network, distribution operations and
contributes to the sales of retailers
throughout the world. Our economic
reach is broad and deep.
Taxes
In 2006 our annual tax rate was 19.3%
compared to 36.1% in 2005. The
decrease primarily reflects:
1. N
on-cash tax benefits, substantially
all of which related to the Internal
Revenue Service’s (IRS) examination
of our consolidated tax returns for
the years 1998 through 2002.
2. T he absence of a 2005 tax charge
related to the American Jobs Creation
Act (AJCA), which created a one-time
incentive for U.S. corporations
to repatriate undistributed
international earnings.
Public Policy
PepsiCo believes that both as a
Company and as individuals it is
important to be engaged in the public
policy and political arena. PepsiCo
has always disclosed information
on how we are spending resources
for political purposes as required by
law and regulation. In 2005, PepsiCo
developed a Political Contributions
Policy that provides shareholders with
details on the policies, procedures
and criteria used in connection with
all political contributions. In addition,
we are now providing details of
PepsiCo political contributions on our
website. Shareholders were involved in
discussions leading to the development
of this policy.
Our Economic Contributions
Through our businesses, we make
economic contributions in the following
ways:
Shareholders — We provide
shareholders with a strong return on
their investments. In 2006, we paid
nearly $1.9 billion in dividends and
provided shareholders with an 8%
return, which is stock appreciation plus
dividends reinvested.
Associates — We directly employ
approximately 168,000 people. Our
customers and business partners, such
as franchised bottlers and licensees,
employ tens of thousands of additional
people as they manufacture and
distribute our brands.
Retailers — We create income and
profit for our customers, which mean
jobs and opportunities in millions
of retail establishments around the
world. Our brands are among the most
profitable brands that retailers carry.
Suppliers — In 2006, we purchased
more than $12 billion in supplies,
services and raw materials. These
purchases help to support hundreds of
thousands of additional jobs in many
communities. Goods and services from
women-owned and minority-owned
businesses accounted for a record
$1 billion in 2006. We have a robust
Supplier Diversity Program. Steven S
Reinemund, PepsiCo’s past Chairman
and Chief Executive Officer, serves as
Chairman of the National Minority
Supplier Development Council (NMSDC).
Governments — Our businesses have
a positive impact on the economies of
the countries and localities in which
we operate by generating billions of
dollars of revenue for governments
through taxes paid directly by PepsiCo
and indirectly by PepsiCo employees,
investors, commercial partners and
suppliers. In 2006, PepsiCo paid $2.2
billion in income taxes, net of refunds,
worldwide. In addition to income taxes,
PepsiCo paid hundreds of millions of
dollars in payroll, property, transactionbased and other miscellaneous taxes
worldwide. These tax payments make an
important contribution to the countries
and communities in which PepsiCo has
a presence.
Technology — We share expertise and
technologies that provide important
benefits to communities and countries.
In emerging markets, such as India and
China, our agricultural development
programs have significantly improved
crop yields for local farmers. For
example, in China, we share knowledge
about potato farming with the Chinese
Ministry of Agriculture, and we have
established an advanced potato
research laboratory. In India, we are
using our knowledge to improve the
water supply in the Kerala area. As part
of our work with the World Business
Council on Sustainable Development
(WBCSD), we contributed technical
knowledge to the creation of the Global
Water Tool, a water assessment tool
that is being offered without charge.
31
PepsiCo–Performance with Purpose
Contributions and Community
As a corporate citizen, PepsiCo, Inc. and its companies
have a long and proud history of supporting
communities in which we do business. We give to
nonprofit community groups and initiatives through the
PepsiCo Foundation, corporate contributions, our various
operating divisions and PepsiCo Community Affairs.
We encourage employees to volunteer and sponsor a
volunteer week with paid time. Additionally, we provide
gifts-in-kind, support community and nonprofit events,
conventions, journals and sponsor meetings.
Contributions
Monetary Value of Philanthropic Contributions and
Voluntary Social Investments in 2006 ($ in millions)
PepsiCo Foundation
$21.9 million
Corporate Giving
5.2 million
Division Giving
4.2 million
Estimated In-kind donations
Total
Health and wellness initiatives advance the knowledge of
how to effect positive behavior changes in diet and exercise.
.
27.2 million
$58.5 million
In-kind donations include food, beverages, equipment and services and are
estimated at cost to PepsiCo.
PepsiCo Foundation
The PepsiCo Foundation focuses its
grant making in the following areas:
The PepsiCo Foundation also provides
assistance for humanitarian aid and
recovery efforts following major disasters.
• Health and Wellness
Health and Wellness
• Diversity and Inclusion/Education
• Environment
• Employee Engagement
Education programs reduce high
school drop out rates and encourage
youth into higher educations and on to
economic security and mobility.
32
Much of PepsiCo’s and PepsiCo
Foundation’s funding has been directed
to health and wellness initiatives which
advance the knowledge about how to
effect positive behavior change in diet
and activity.
PepsiCo–Performance with Purpose
For example, as a result of PepsiCo Foundation funding, Chicago
Communities in Schools and the Consortium to Lower Obesity
in Chicago Children have partnered to develop Healthy Foods
Healthy Moves: Inform Chicago, a community-wide awareness
and prevention program using the social marketing campaign
5-4-3-2-1 GO! and activated in neighborhoods across Chicago
by youth ambassadors who champion and teach key healthy
lifestyle messages and programs.
PepsiCo Foundation supported Tufts University, Friedman School
of Nutrition’s community-based intervention program called
Shape Up Somerville, which showed a positive slowdown in
childhood weight gain as a result of Tuft’s comprehensive
community interventions. A second research project was launched
in 2007 to evaluate and replicate the Shape Up model in three
U.S. cities.
Healthy eating and active living programs help
improve the health of Americans.
With PepsiCo Foundation funding,
motivations and barriers to healthful
living are being researched at the
University of Florida. Psychologist
Dr. Carolyn Tucker leads the
research project Family Health SelfEmpowerment Project: Modifying and
Preventing Obesity. This research and
intervention program is family focused
and community based with particular
emphasis toward cultural sensitivity and
resonant engagement. It is designed to
increase health-smart behaviors among
lower income African Americans and
Hispanic/Latino Americans by providing
segmented health promotion resources
to medical professionals across the nation.
AIM-HI (Americans in Motion — Healthy
Interventions) is a pilot organizational
behavior change process of the
American Academy of Family Physicians
funded by PepsiCo Foundation intended
to guide family physicians and their
practices to be better focused on healthful
eating and active living as a primary
core mission and prevention activity to
improve the health of Americans.
Healthy Living Initiative is the Girl
Scouts of the USA (GSUSA) core
commitment to making Americans
healthier. PepsiCo Foundation funding
enables the development, testing
and distribution of entirely new
holistic health educational resources,
community activation and activities
to engage girls and adult leaders in
life-long wellness. In collaboration
with America On the Move Foundation,
GSUSA will roll out the Healthy
Kids and Family Day program across
all scouting council communities
nationwide in 2008.
Diversity and Inclusion/Education
In partnership with the National Council
of La Raza, PepsiCo Foundation has
developed and funds the national Latino
education model called ESCALERA:
Taking Steps to Success to reduce high
school drop out rates and move Latino
youth into higher education and on to
economic security and mobility. Within
the model’s initial six years, 98% of its
students have entered and remained in
two- and four-year colleges. The 20072009 focus is to bring the network of
five hub sites into readiness for greater
scale through establishing expanded
and sustainable partnership support
and funding.
Environment
Providing better access to safe drinking
water for families and communities in
Western and Central China is the work
of the Mother Water Cellars Project
by the China Women’s Development
Foundation with funding provided by
PepsiCo Foundation. Five communities
in Gansu and Sichuan Provinces are
evaluating pilot interventions of site
specific technical installations that
deliver increased quantities, and
improved quality of drinking water
to impoverished farming villages.
Advancing the repertoire and expertise
around watershed management,
water delivery systems and quality
improvement process (both residential
and village/system-based) is the primary
focus of this project. By providing
33
PepsiCo–Performance with Purpose
centralized water systems and
introducing new methods to harvest
rainwater, small rural farming villages
are able to experience significantly
improved quality of life since women
and children no longer spend at
minimum, more than half of every
day walking to collect water for their
households, crops and livestock.
In India, the Development and
Rehabilitation Outreach Program
comprises two pilot water - sanitation
programs (in the north and south)
funded by PepsiCo and implemented
by The Energy and Resources Institute.
Common to each of these holistic
programs is the fundamental approach
of engaging local communities in
developing affordable sustainable
solutions to improve water availability
while simultaneously invigorating local
economies. A wide array of education,
interventions and activities, tailored to
individual communities are advancing
hygiene and sanitation in addition to
bringing awareness of the need to and
methodologies of managing water
resources as a non-renewable resource.
to encourage the personal contributions
and volunteer leadership of PepsiCo
associates includes the Foundation’s
Matching Gifts program, support for
United Way Campaigns, and Community
Service Days. The PepsiCo Foundation
matches employee gifts to nonprofit
organizations through a Matching Gifts
program and United Way. In 2006,
Matching Gifts totaled $4,436,795
and United Way $2,880,769. Grants
are made to nonprofit groups where
employees volunteer.
Many PepsiCo associates are active
in local communities as volunteers.
In addition to the wide spectrum of
individual volunteer work, teams of
associates often represent PepsiCo at
events such as runs and walkathons to
raise funds to fight cancer or HIV/AIDs
and community clean-up days.
To encourage community involvement
around the world, in 2006, the PepsiCo
Foundation granted $542,881 in support
of the PepsiCo Employee Community
Service Days initiative. During PepsiCo’s
2006 Global Week of Community
Service, 1,082 associates spent their
working time serving their local
communities and service organizations.
Employees served more than 8,000
hours and contributed an estimated
value of $200,000 to improve local
community resources.
Employees built playgrounds in inner cities to
encourage children to be more physically active.
Employee Engagement
PepsiCo Foundation has a long history
of encouraging employee involvement
in the community through nonprofit
groups. The Foundation’s commitment
34
Community Affairs
PepsiCo’s Community Affairs is an
integral part of the way we do business.
We are currently active in these areas:
Health and Wellness
We participate in conferences, events
and volunteer activities to increase
awareness of PepsiCo’s commitment
to health and wellness in ethnic
communities, along with awareness
of our Smart Spot symbol and Smart
Spot Dance, a program to promote
exercise in a healthy, fun way. We form
partnerships with community-based
organizations to encourage active
lifestyles. We have key partnerships
with The National Council of La Raza
and the National Urban League.
Funding provides better access to safe drinking water and
significantly improves the quality of life, especially for women
and children.
Diversity and Inclusion
We create awareness of PepsiCo’s
goals of recruiting diverse associates
by representing PepsiCo at national
recruiting conferences, such as the
National Black MBA Associations, Inc. and
the National Society of Hispanic MBAs.
PepsiCo–Performance with Purpose
Corporate Honors
2006
The Smart Spot Dance program is a multi-city instructional dance program that offers a fun way for
families, especially moms, to get active. Mario Lopez, from the television show Dancing with the Stars
and LaChanze, from the Broadway hit, The Color Purple, joined choreographer Maria Torres to get people
in urban communities dancing.
We provide leadership and support PepsiCo’s commitment to increase
procurement from minority-owned and women-owned businesses. We
participate in events and conferences where we seek first and second tier
suppliers. We provide support for events and initiatives of the following groups:
U.S. Pan Asian American Chamber of Commerce (USPACC), National Minority
Supplier Development Council (NMSDC); U.S. Hispanic Chamber of Commerce
(USHCC) and Women’s Business Enterprise National Council (WBENC). The
PepsiCo Foundation continues its seed funding to the National Council of
La Raza for a scalable national Latino education and workforce model.
Government and Legislative
In partnership with the Black Caucus and the Hispanic Caucuses, we build
community awareness of PepsiCo’s health and wellness commitment and
program initiatives. We initiate and participate in panels and workshops with
the goal of creating understanding and awareness of our commitment to
health and wellness.
Employee Involvement
PepsiCo is proud to be an active part of the community. We sponsor and
participate in a wide variety of local and national activities through employee
involvement. In 2006, PepsiCo volunteers and KABOOM, a not-for-profit
organization, built 11 playgrounds for inner cities to encourage children to be
more physically active.
In-Kind Donations
PepsiCo provides in-kind donations for many nonprofit organizations. The
largest program is America’s Second Harvest and its network of food banks. We
also make in-kind donations of products, premiums, equipment, meeting space
and other services.
• Institutional Investor magazine
identified PepsiCo as one of America’s
Most Shareholder-Friendly Companies.
• PepsiCo ranked as 15th Most-Admired
Company on Fortune magazine’s List of
the Top 20.
• PepsiCo was named among the
2006 Industry Week 50 Best
Manufacturing Companies and
recognized as the top performer in the
beverages industry.
• PepsiCo won Sam’s Club Supplier of
the Year award.
• PepsiCo was named to Business Ethics
magazine’s 100 Best Corporate
Citizens list.
• PepsiCo was among the 10 Top Ranked
Companies in the 2005 Rittenhouse
Candor Rankings.
• Pepsi Brands swept Brandweek
Magazine’s Customer Loyalty Awards.
• PepsiCo Foodservice won Target
Corporation's 2005 Partner Award of
Excellence in the Food Operations/Food
Avenue category.
• For the second consecutive year,
Gamesa-Quaker was named a socially
responsible company by Empresa
Socialmente Responsible.
• PepsiCo ranked among ''World’s Most
Respected Companies’’ by Barron’s.
• PepsiCo’s Treasury Department won two
awards, Alexander Hamilton Award
for Excellence and the Association
for Financial Professionals Pinnacle
Award, for its strategic, industryleading solutions in treasury and
financial management.
• Ethisphere Council gave PepsiCo an
“A” rating in our Code of Conduct
Report Card for creating competitive
advantage through ethical leadership.
• PepsiCo Foodservice was awarded as
Supplier of the Year by Sysco
Food Services.
35
PepsiCo–Performance with Purpose
2007
• Covalence published its Ethical Ranking
for 2006, ranking PepsiCo 6th for Best
Reported Performance.
• The Hay Group and Chief Executive
magazine ranked PepsiCo as #3 in
the 2006 Top 20 Best Companies
for Leaders.
• PepsiCo was been named to the 100
Best Corporate Citizens list for 2007
by Business Ethics Magazine.
• PepsiCo was named among Most
Influential Multinationals in China
for the third consecutive year.
• PepsiCo China was awarded a 2006
Best Corporate Public Image Award
for its brand image of vitality and
youthfulness.
• PepsiCo was recognized among the
2007 100 Best Corporate Citizens in
the United States by CRO magazine.
• Fortune Magazine ranked PepsiCo
to the Top 10 of America’s Most
Admired Companies in the World.
• Institutional Investor magazine
identified PepsiCo as one of America’s
Most Shareholder-Friendly Companies.
• PepsiCo ranked #10 in the
LOHAS Index for our corporate
social responsibility program and
communications.
• Business Week named PepsiCo to its
2007 Best Performers list.
• PepsiCo was named to the Dow Jones
Sustainability World Index (DJSI
World) and retained its position on
the Dow Jones Sustainability North
America Index (DJSI North America).
For each bottle of Ethos Water that is sold, a $0.05 donation is made to help children and their
communities around the world get access to clean drinking water.
Cause Marketing
When appropriate, we have begun to enlist our products in promoting key
issues. For example, through the North American Coffee Partnership, our joint
venture with Starbucks Coffee Company, we entered into an agreement to
increase distribution of Ethos Water. For each bottle of Ethos Water that is
sold, a $0.05 donation is made to help children and their communities around
the world get access to clean drinking water.
Frito-Lay’s SunChips brand sponsored the Komen Race for the Cure National
Volunteer Recognition Program in the United States. The partnership included
SunChips’ “Crunch for the Cure” pink bags, with part of the proceeds going
to the Susan G. Komen Breast Cancer Foundation to support the fight against
breast cancer.
More Information
Listings of PepsiCo Foundation, corporate and divisional donations are
available on PepsiCo’s website: http://www.pepsico.com under Citizenship/
Contributions.
Listings of PepsiCo Political donations are available on PepsiCo’s website:
http://www.pepsico.com under Corporate Governance/Policies and Guidelines.
For more information on many of these topics see PepsiCo’s website
http://www.pepsico.com, divisional websites, the PepsiCo Annual Report and
PepsiCo’s Management Discussion and Analysis included in PepsiCo’s
Form 10-K.
36
PepsiCo–Performance with Purpose
HUMAN
SUSTAINABILITY
37
PepsiCo–Performance with Purpose
HUMAN SUSTAINABILITY
Financial results tell only part of the PepsiCo story. As we achieve success with
profitable growth, we continuously give back to the communities we serve. We
believe we can do this in ways directly related to our business, beginning with
our products. We have a fundamental belief that humans need to be nourished in
multiple dimensions — ranging from simple treats to healthier eats. We call this
human sustainability and we’re continually transforming our portfolio of products
to meet consumer needs.
Product Responsibility: Our Portfolio
As a food and beverage company, we nourish people in many forms. We nourish
them with treats and we nourish them with nutritious foods and beverages. In
between is a wide range of our foods and beverages that are enjoyable, including
those that are reduced in sugar, fats or sodium when compared to our more
indulgent varieties. Our goal is to offer great tasting foods and beverages for the
wide spectrum of needs and tastes. We consider the health and wellness and safety
aspects of our products from start to finish. There is nothing more important.
In line with current interest in health and wellness and efforts
to address the obesity crises, we are changing our portfolio,
moving toward the nutritious end of the spectrum.
38
• Are formulated to have specific health
or wellness benefits, and/or
• Are reduced in calories or nutrients
such as fat, sodium or sugar.
Smart Spot
In the United States and Canada, we
have introduced the Smart Spot to make
it easier for consumers to identify those
of our products that can contribute
to healthier lifestyles. All PepsiCo
products carrying the green Smart Spot
symbol meet nutrition criteria based
on authoritative statements from the
U.S. Food and Drug Administration and
the National Academy of Sciences or
provide other functional benefits.
Products that carry the Smart Spot:
• Contain at least 10% of the Daily
Value of a target nutrient (i.e. protein,
fiber, calcium, iron, vitamin A, vitamin
C) and meet limits for fat, saturated
fat, trans fat, cholesterol, sodium and
added sugar, and/or
In 2006, 43% of PepsiCo Net Revenues
in the United States and Canada came
from Smart Spot products, and Smart
Spot eligible products represented twothirds of our growth in North America.
We’ve set a goal of deriving 50% of
all our U.S. revenues from Smart Spot
eligible products by 2010.
Today, the Smart Spot symbol appears
on more than 300 products in the
United States. It helps retailers join us
in the drive to sell healthier products
by aligning our product strategy with
their promotion and selling strategies.
Each Smart Spot eligible product label
includes the Smart Spot symbol and an
explanation of why the product
meets Smart Spot criteria. We
complement the science and marketing
savvy with detailed scorecards and
tracking processes.
Outside the United States, our progress
has also been extraordinary and we are
transforming our portfolio in both welldeveloped and less-developed markets.
When we have a success with one
product in one part of the world, we
want to be able to extend it globally.
PepsiCo Net Revenues from Smart Spot
Eligible Products U.S. and Canada
% Net Revenue
Smart Spot
43%
Non-Smart Spot
57%
A wide variety of PepsiCo products carry the Smart
Spot symbol to identify choices that can contribute to
healthier lifestyles.
39
PepsiCo–Performance with Purpose
Portfolio Transformation
In 1997, Quaker Oats petitioned
for and received from the U.S.
Food and Drug Administration
(FDA) the first food-specific
health claim granted by the
FDA. The claim provides that the
soluble fiber from oats can help
reduce heart disease risk. Scores
of Quaker-branded oat-based
products qualify for and make
this health claim.
This journey to transform our portfolio has been in process for nearly two
decades. To guide us on our journey we rely on science to transform our products
and intensive engagement with key internal and external experts to guide us in
delivering real improvements. At the same time, we encourage physical activity,
which increases the number of calories out on the calorie-in/calorie-out nutritional
balance scale.
We have achieved more balance and are continuing to achieve it in our
portfolio — in three key ways:
1. S trategic portfolio transformation through acquisitions, large-scale and
“tuck-ins,” which drive nutrition.
2. Reformulation of existing products to driver healthier consumption and nutrition.
3. Development of new products that drive healthier consumption and nutrition.
Strategic Portfolio Transformation
For the past two decades, PepsiCo
has been on a journey that reflects a
proactive portfolio transformation.
• We began in 1988 to become a “total
beverage company” and began adding
new beverages, waters and sports
drinks to our traditional carbonated
soft drink products.
• In 1992, we began a partnership with
Thomas J. Lipton Co. to sell ready-todrink tea brands.
• In 1994, we introduced Aquafina
bottled water, and we also began a
strategic partnership with Starbucks
to market ready-to-drink coffee.
40
• In 1998, we acquired Tropicana and
expanded the Dole brand.
• We acquired SoBe, the producer of
several varieties of tea and energy
drinks in 2001.
• Our merger with Quaker in 2001 put
us in the cereal and side dish business
—putting us firmly in the business of
good nutrition.
• Recent, smaller “tuck-in” acquisitions
are adding such products as nuts, rice
crackers, fruit smoothies, pita chips
and various juices to our portfolio.
• In 2006, we announced our alliance
with Ocean Spray to market,
bottle and distribute cranberry
juice products.
• Gatorade Thirst Quencher sports
drinks and Propel Fitness Water
also became a part of our beverage
business when we merged with
Quaker in 2001.
Recent sample “tuck-in” acquisitions
Acquisition
Product
Year
Location
Izze Beverage Company
Sparkling fruit juice
2006
USA
Naked Juice
Juice
2007
USA
Stacys Pita Chip Co.
Pita chips
2006
USA
PJs
Fruit Smoothies
2005
United Kingdom
Punica
Juice
2005
Germany
Sakata
Rice Crackers
2005
Australia
Duyvis Nuts
Nuts
2006
Europe
Sandora (Joint Venture)
Juice
2007
Ukraine
PepsiCo–Performance with Purpose
Product Reformulation
We start with science and authoritative
statements from the Food and Drug
Administration (FDA) and National
Academy of Sciences for classifying
ingredients. We look at nutrition-based
standards for fats, sugar, cholesterol,
fiber, vitamins and other ingredients.
Then, we begin by re-formulating
our products to reduce the level
of indulgent ingredients like fats
and added sugar. We add healthy
ingredients such as fruit, whole grains
and fiber.
Examples of our product
reformulations include:
• Removing trans fats
• Moving to healthier oils
• Development and use of
sugar substitutes
• Use of whole grains
• Elimination of sugar
• Natural flavorings replacing
artificial flavorings
• More baking
• Fewer preservatives
• Processing techniques that improve
the nutrition profile.
greater nutrition or functional benefit.
For example, new varieties of Aquafina
water and Lipton tea, Gatorade sports
drinks, options for Quaker oatmeal,
zero-calorie soft drinks, nuts and seeds
and fruit snacks.
In these cases, a product delivers a
specific functional benefit, such as
heart-health or hydration. Examples
include Gatorade, which delivers
superior hydration, or Baked snacks,
which have significantly reduced
fat content.
Our goal is to ensure that even though
we contribute a very modest portion of
calories in a typical diet in most of the
markets within which we operate, we
believe we should provide continually
improving wholesomeness on a
calorie-by-calorie basis. In addition
we continue to give the highest
priority to assuring the safety of all
our products worldwide and depend
upon international norms developed by
the Codex Alimentarious Commission,
complemented by national norms, to
do so.
New Products
Our pipeline of innovation includes
a stream of new products that offer
41
PepsiCo–Performance with Purpose
Sample Product Initiatives
• Frito-Lay eliminated trans fats from
Doritos, Cheetos and Tostitos in
the United States and Canada by
converting to corn oil.
• Frito-Lay changed the oils in Lay’s
and Ruffles brand potato chips in the
United States and Walkers crisps in
the United Kingdom to sunflower oil
to reduce saturated fat.
• We provided lower sugar options in
Instant Quaker oatmeal.
• We added Take Heart Weight Control
versions to our
instant Quaker
oatmeal products.
• Tropicana Light ‘n
Healthy has onehalf the sugar and
the calories of
regular orange juice.
• Tostitos Multigrain
tortilla chips
brought wholesome
grains to snacking.
• We introduced whole grain side dishes
to our Rice-A-Roni brand.
• In the United
Kingdom, Potato
Heads offered
a lower-fat
snack with no
artificial colors or
preservatives.
• Quaker Oatmeal-to-Go bars provided
a heart-healthy breakfast in a
convenient, portable form.
• Tropicana FruitWise fruit strips
and bars are made from real fruit
and juice.
• In 2007, we introduced Flat Earth fruit
and vegetable crisps that provide a
half serving of fruits or vegetables per
ounce.
In 2003, Frito-Lay completed
a full conversion from
partially hydrogenated to nonhydrogenated cooking oils,
virtually eliminating trans fatty
acids from all Frito-Lay snack
chips. Frito-Lay was the first
company to include trans fat
information on the nutrition
labeling of its packaging — prior
to the FDA ruling requiring
inclusion of this information by
January 2006.
Health and Wellness
Partnerships
We are teaming up with several people
and groups to get the best science
on how to really make a difference in
health and wellness. Internally, our
health and wellness team calls upon
the strategic and practical insights of
our Blue Ribbon Health and Wellness
Advisory Board (BRAB).
• We introduced Baked! Cheetos and
Doritos snacks in our line of 100calorie Mini Bites that take the
guesswork out of portion control.
Nutrition Timeline
PepsiCo nutrition innovations go back half a century.
42
1954-Tropicana introduced the first ready-toserve not from concentrate orange juice.
1964- Diet Pepsi carbonated soft drink was
introduced, giving consumers great Pepsi taste
with only one calorie.
1965 – Gatorade was the first commercially
available sports drink.
1989 – Reduced Fat Ruffles was introduced.
1991 – SunChips snacks made with whole
grain was introduced.
1995 – Baked Lay’s potato chips
was introduced.
1950 – 1970
1980 – 1995
1997- Quaker Oatmeal was the first food to
receive a Food and Drug Administration (FDA)
approved health claim for the relationship
between oat soluble fiber and reduced risk of
heart disease.
1998– Pepsi One carbonated soft drink, was
introduced and reinvigorated the low-calorie
soft drink category.
1996 – 1999
PepsiCo–Performance with Purpose
Blue Ribbon Health and Wellness Advisory Board
In 2006, members of the Blue Ribbon
Health and Wellness Advisory Board
included:
Front row, left to right: Brock H.
Leach; Kristy F. Woods, M.D., M.P.H.;
James O. Hill, Ph.D.; Gro Harlem
Brundtland, M.D.; Susan Love, M.D.
Second row, left to right: David
Herber, M.D., Ph.D.; Pamela Peeke,
M.D., M.P.H.; Antonio Lucio (PepsiCo);
Antonia Demas, Ph. D.; Mario
Maranhao, M.D.; Janet Taylor, M.D.
Back row, left to right: Kenneth
Cooper, M.D., M.P.H.; Fernando M.
Trevino, Ph.D., M.P.H.; James B. Hunt,
Jr.; Dean Ornish, M.D.; Ambassador
Thomas Foley; David A. Kessler, M.D.,
J.D.; Samuel Ward Casscells, M.D.;
William Sears, M.D.
The BRAB provides high level and
independent insight about major health
and wellness policies. In addition, it
provides science-based guidance on
product transformation, labeling and
marketing to support our health and
wellness goals. The BRAB also helps
the Company initiate and participate in
partnerships promoting physical activity.
time, professional nutritionists with
backgrounds in food science, nutrition
and regulations, are located in major
markets around the world such as
Mexico, the United Kingdom, Australia
and other locations.
PepsiCo International
Nutrition Team
In addition to these experts, PepsiCo
has created our International Food
Safety and Nutrition Network (IFSNN).
This is a global network of PepsiCo R & D
and food science professionals. They
have established specific priorities and
codes of practice for PepsiCo regarding
such things as food safety policy and
promotional insert policies. They also
work with outside opinion leaders and
agencies to provide advice and the
Outside North America, PepsiCo has
created the PepsiCo International
Nutrition Team. This group is charged
with monitoring and advising on
product formulation issues worldwide.
They are internal advisors on our
portfolio transformation. This
global network of about 16 full-
International Food Safety and
Nutrition Network
PepsiCo perspective as needed.
Global Alliance for
Improved Nutrition
Our health and wellness initiatives
are bolstered by external partnerships.
In 2007, PepsiCo became an active
participant in the Global Alliance for
Improved Nutrition (GAIN). We are
working closing with GAIN in India.
Oxford Health Alliance
The Oxford Health Alliance is a global
organization that works to reduce the
burden of chronic diseases. Oxford is
especially active in the United Kingdom,
Mexico, China and India.
2000 – Tropicana Pure Premium Juice received
FDA approval for health claim regarding the
relationship of potassium to reduced risk of
high blood pressure and stroke.
2000 - Propel Fitness water with added
vitamins was introduced.
2003 – Frito-Lay removed trans fats from
Frito-Lay branded products. PepsiCo was the
first major food company to make this change.
2004 – Smart Spot symbol was introduced to
help U.S. consumers identify PepsiCo food
and beverage choices that contribute to
healthier lifestyles.
2006- PepsiCo became part of voluntary, proactive move to adopt a school vending policy
in the United States.
2006 – Frito-Lay produced Lay’s and Ruffles
potato chips with sunflower oil, reducing
saturated fats by 50%.
2000
2003 – 2004
2006
43
PepsiCo–Performance with Purpose
44
PepsiCo–Performance with Purpose
YMCA
PepsiCo is engaged in a partnership
with the YMCA to fund and strengthen
activities, especially playgrounds and
other physical activity programs. The
YMCA is the largest provider of fitness
programs in the United States. An
added element is the multi-cultural
focus on reaching communities that
suffer disproportionate rates of obesity
and poor nutrition.
World Health Organization
how to adopt healthier, more active
lifestyles. PepsiCo is the only food
and beverage company to have signed
both a beverage agreement and snacks
agreement in schools. As a first step, in
May 2006, Pepsi-Cola North America
adopted a revised school policy in which
beverage companies would no longer
offer full-calorie soft drinks, juice drinks
or teas in any K -12 schools and that
it would limit the calories and portion
sizes of other beverages, including
sports drinks and juices.
The World Health Organization/World
Economic Forum “Workplace Wellness
Unit” is a global program and the first
cooperative program between these
organizations. PepsiCo is a chief
partner and is working with both
organizations to develop better
workplace wellness solutions.
In October 2006, Frito-Lay and Quaker
Foods joined the snack food industry to
set the first-ever voluntary guidelines
for snacks and foods in schools.
Many of PepsiCo’s snacks, such as our
reduced-sugar granola bars, reduced
fat popcorn and low-fat baked potato
chips, meet the standards for schools.
Vive Saludable Program
Our PepsiCo Foundation is deeply
engaged in developing new models of
partnerships that will lead to health
gains in communities and new research
insights. In the United States, support
for Tufts University has helped to
develop one of the few examples of a
community based approach to reducing
obesity in children. Internationally, we
have recently announced support for
large scale community based research
projects in India, China, Mexico and the
United Kingdom to reduce the impact
of the major risk factors for chronic
diseases. Both the Company and the
Foundation are involved in a wide
range of initiatives aimed at increasing
physical activity around the world in
settings as diverse as Mexico (through
Vive Saludable which addresses both
healthy eating and physical activity
in primary schools), and in the United
States (through America On the Move).
We see involvement in physical activity
promotion as part of our commitment
to promoting better understanding of
energy balance.
This is a PepsiCo program now in
implementation across Mexico and
Latin America. The program is a
commitment to promote healthy
lifestyles, including diet and exercise,
for consumers and employees. It
is focused on reducing the risk of
nutrition-related health problems,
including obesity.
Alliance for a Healthier Generation
In 2006, PepsiCo became part of this
voluntary, pro-active and collaborative
movement involving the U.S. beverage
industry and government and health
officials in taking steps to adopt a
practical school vending policy in the
United States. PepsiCo partnered with
the American Heart Association and
the William J. Clinton Foundation.
Called the Alliance for a Healthier
Generation, its goal is to develop
model school wellness programs, take
a comprehensive approach to fitness,
health and nutrition, and teach students
45
PepsiCo–Performance with Purpose
To ensure that PepsiCo provides safe
products with the highest quality,
we only use foods, ingredients and
packaging materials that have been
deemed safe by scientific consensus and
regulatory review. The health and safety
of our consumers is of the highest
importance to us.
Genetically Modified Ingredients
Product Labeling
PepsiCo is committed to providing
safe, wholesome products and
protecting equity in our brands,
trademarks and goodwill. Our divisions
have implemented policies related to
food safety, labeling, product integrity
and quality.
Our policies ensure strict adherence
to all applicable regulations and
legislations. Our policies cover food
safety, sanitation, recalls and allergens
and require that our products are
coded, labeled, identifiable and
traceable. PepsiCo is in full compliance
with required nutrition labeling and
has voluntarily led the industry in “full
container labeling” on products where
consumers may be reasonably expected
to eat or drink the full container on
one occasion.
In the United Kingdom and Europe,
PepsiCo is joining other food and drink
multinationals in labeling products
46
with common Guideline Daily Amounts
(GDAs) for salt/sodium, sugars, fats,
saturates and calories. PepsiCo is
currently participating in the Keystone
Foundation’s analysis of whether such
labeling would make sense in the
United States.
Our compliance systems include website
training, monitoring, preventative
measures and readiness for corrective
action. We have regular management
reviews of our procedures and activities
regarding our products.
Food Safety
PepsiCo, like many consumer product
goods companies, sources ingredients
from around the globe to ensure that
we use the freshest, best tasting and
highest quality ingredients available for
our products. Food safety is at the top
of our priority list as we select these
materials, and we have an excellent
record in providing safe, wholesome and
nutritious products to our consumers.
PepsiCo is dedicated to producing
the highest quality, greatest tasting
food and beverage products in every
part of the world. PepsiCo ensures
all products meet or exceed stringent
safety and quality standards and uses
only ingredients that are safe and
approved by applicable government
and regulatory authorities. Approval of
genetically modified foods differs from
country to country regarding both use
and labeling. For this reason, PepsiCo
adheres to all relevant regulatory
requirements regarding the use of
genetically modified food crops and
food ingredients within the countries
it operates. Where legally approved,
individual business units may choose
to use or not use genetically modified
ingredients based on regional preferences.
Organic Foods
PepsiCo currently offers certified
organic products from Tropicana
and Quaker. Two varieties of Quaker
Oatmeal are certified organic, as well
as a line of Tropicana chilled products.
Certification follows the USDA National
Organics Program and follows the
National Organics Standards (NOS)
established in October 2002. Frito-Lay’s
Natural snacks are made with organic
ingredients and have been certified by
the USDA accredited certifying agency
Oregon Tilth. Organic products do not
account for a significant portion
of revenues.
PepsiCo–Performance with Purpose
of Consumer Relations professionals are available 24/7
and can be contacted through our emergency line and will
immediately return a call to a consumer or one of our
field representatives.
Based on 2006 surveys, an overwhelming majority of
consumers are pleased with the resolution they received
based on their inquiry.
Customers
Consumer and Customer Relations
PepsiCo serves the needs of two important groups:
• The consumers who purchase and consume our
products and
• The retailer and bottler customers who purchase and resell
these items.
PepsiCo has several methods in place for measuring and
improving consumer and customer relations.
Consumers
PepsiCo’s key customers are retailers and bottlers. PepsiCo
commissions retail customer surveys that measure customer
satisfaction, including such things as target setting and
strategic planning. As an indication of PepsiCo’s success in
customer satisfaction, the Company has received several
honors, including being named “Supplier of the Year”
by Sam’s Club, Wal-Mart Mexico and Sysco Food Service, as
well as receiving Target’s “2005 Partner of the Year Award
of Excellence.”
Dedicated PepsiCo Customer Teams work across our divisions
to provide the highest level of service to our major customers.
These individuals work closely to assure that all customer
feedback is understood and addressed as quickly as possible.
As a cornerstone to understanding consumers’ needs, all
PepsiCo divisions conduct research. These studies range
from small focus groups to learn from individual consumers
to large telephone or online surveys to gain statistically
significant insights. These consumer insights are translated
into product improvements, new product ideas and
communications.
Packages produced in the United States under authority of
PepsiCo carry a toll-free number and web address to allow
consumers easy access to the Company if they have questions
or comments regarding the Company or one of its products.
Each business has a Consumer Relations Department that
serves as the first point of contact for all communications
and correspondence received from our consumers.
Should consumers need to contact us after hours, they can
dial our toll-free number and a message will be activated
offering them an emergency line number. A special team
47
PepsiCo–Performance with Purpose
Consumer Privacy
Consumer privacy is important to
PepsiCo and we make every effort to
ensure that consumers understand
our policies. Each division maintains
its own marketing website and these
are accessible by consumers. Brandspecific websites and promotionspecific micro-sites are also maintained.
On each website, consumers can
voluntarily provide personal information
to participate in online programs
and promotions. A privacy policy is
conspicuously posted on each website
that outlines the types of information
collected by each division on that site
and how the information is used and
protected. We comply with applicable
laws, rules and regulations, including
the Children’s Online Privacy Practices
Act (COPPA). Also, personal information
received through consumer relations
toll-free number is kept confidential
and is not shared outside the Company.
Advertising
PepsiCo has a longstanding policy on
the kinds of television programs that
can carry our advertising messages.
We’re committed to high standards
in all our advertising, including
the environment in which our
advertising appears.
We avoid advertising in excessively
violent programs, programs that may be
distasteful as judged by contemporary
society and those that may be offensive
to large groups of people. We also
attempt to avoid programs containing
material inconsistent with or adverse
to our products. We seek to avoid
programs featuring exceptionally
controversial or potentially
inflammatory discussions.
48
Children are a special audience and
we take particular care developing
marketing practices and evaluating
programs that carry messages to
children. In 2006, we joined many
of the largest food and beverage
companies in the Untied States in an
effort to strengthen the guidelines of
the Children’s Advertising Review Unit
(CARU). In 2007, we joined with 10 of
those companies – through CARU—to
pledge our continuing commitment to
responsible children’s advertising. This
CARU initiative requires participating
companies to devote at least half of
their advertising to children under 12
to promote healthier products and/or
encourage good nutrition or active
lifestyles. PepsiCo has gone considerably
farther, committing that 100% of
PepsiCo advertising directed to those
under age 12 will be for Smart Spot
products. In addition, we have pledged
we will not advertise our products in
elementary or middle schools.
More Information
For more information on many of
these topics see PepsiCo’s website
http://www.pepsico.com, divisional
websites, the PepsiCo Annual Report
and PepsiCo’s Management Discussion
and Analysis included in PepsiCo’s
Form 10-K.
PepsiCo–Performance with Purpose
ENVIRONMENTAL
SUSTAINABILITY
49
PepsiCo–Performance with Purpose
ENVIRONMENTAL SUSTAINABILITY
Our Commitment
PepsiCo views our environmental responsibility as covering all areas of our
business. We are committed to continuously improving our environmental
programs and to finding solutions to our environmental challenges. We’ve focused
our environmental sustainability efforts on water, energy, packaging and solid
waste — areas where we can make the biggest impacts. In addition, we have many
programs in the area of sustainable agriculture and we partner with our growers.
Our key elements of our environmental sustainability strategy are
as follows:
• Reducing water usage through conservation, reuse and
replenishment.
• Reducing greenhouse gas emissions through energy conservation
and use of clean energy sources.
• Reducing, recycling and reusing packaging and solid waste.
PepsiCo is committed to
being an environmentally
responsible corporate
citizen. We are committed
to minimizing the impact
of our businesses on
the environment with
methods that are socially
responsible, scientifically
based and economically
sound. We encourage
conservation, recycling
and energy use programs
that promote clean air
and water and reduce
landfill waste.
Our commitment to being an environmentally responsible corporate
citizen is so important that a commitment to care for the world
we live in is a cornerstone of our Values and we include our commitment in our
Worldwide Code of Conduct.
Environmental Sustainability Timeline
50
1991 – Frito-Lay established “Green Teams”.
1992 – Frito-Lay North America established its
environmental management system.
1999- Frito-Lay North America began a formal
resource conservation program.
2001 – PepsiCo Environmental Task Force (ETF)
was formed to share best practices. The ETF
developed the Environmental Policy, standard
metrics and Environmental Management
System framework.
2002- Pepsi-Cola U.S. set 10% recycled content
goal by 2005 for plastic carbonated soft drink
beverage packaging. PepsiCo responded to the
first Carbon Disclosure Project questionnaire
and continues to participate.
2003- Global Reporting Initiative Guidelines
adopted.
1990 – 1999
2001
2002 – 2003
PepsiCo–Performance with Purpose
REDUCE WATER
CONSUMPTION
20%
Metrics
PepsiCo’s corporation-wide goal is to reduce water consumption by 20%, electricity
consumption by 20% and fuels consumption by 25% per unit of production by
2015 when compared to our consumption metrics in 2006.
REDUCE ELECTRICITY
CONSUMPTION
PepsiCo established uniform protocols for energy and water measurement and
reporting in 2005 and rolled them out for use across all divisions for the first
time in 2006. Prior to this, Frito-Lay North America had been collecting data
since 1999. Quaker/ Tropicana/ Gatorade began data collection in 2004. PepsiCo
International was the final division to implement the metrics and has collected one
full year of data.
REDUCE FUELS
CONSUMPTION
The data collected represents 100% of usage at FLNA, approximately 97% of the
usage at Quaker/Tropicana/Gatorade. As this is the first year of gathering data from
all facilities, year-over-year comparisons are not yet available for PepsiCo
as a whole.
20%
25%
2004- Sustainability Task Force formed with
focus on environment. Sustainability Vision
formed.
2005- PepsiCo Environmental Management
System structure developed. Formal
environmental metrics rolled out to North
America. Frito-Lay North America awarded
LEED Gold certification for its “Green”
distribution center in Rochester, NY.
2006 – PepsiCo announced Environmental
Policy. Formal environmental metrics rolled out
internationally. Dow Jones Sustainability Index
North America names PepsiCo to the list.
2004
2005
2006
51
PepsiCo–Performance with Purpose
FRITO-LAY NORTH AMERICA
QTG(Quaker/Tropicana/Gatorade) NORTH AMERICA
Water, Fuels and Electricity Use 1999-2006
1999 Baseline (Per Unit of Production*)
Water, Fuels and Electricity Use 2004-2006
2004 Baseline (Per Unit of Production*)
100%
100%
90%
90%
80%
80%
70%
70%
60%
1999
2000
Water
2001
2002
2003
Fuels
2004
Electricity
*Pounds or Kilograms
Our performance in our North American
divisions of Frito-Lay and QTG (Quaker,
Tropicana, Gatorade) continued to
improve. Measured per unit of product
produced, Frito-Lay North America
(FLNA) reduced its fuel, electricity and
water consumption by 4%, 1.6% and
6% respectively compared to 2005.
When compared to the baseline year
of 1999, FLNA manufacturing has
reduced fuel use by 24%, electric use
by 19% and water use by 35% per unit
of product made. QTG’s performance in
2006 resulted in reductions compared
to the prior year of 7% in fuels, 11% in
electricity and 5% in water per unit of
product produced. Measured against QTG
manufacturing’s more recent baseline
year of 2004, usage is 24% lower in
fuels, 24% lower in electricity and 10%
lower in water per pound or gallon of
QTG product.
Our beverage Concentrate Operations,
including 12 plants throughout the
world, reduced overall energy use per
unit of production by 21% between 2003
and 2006, with further targets set.
Pepsi-Cola U.S. bottling operations,
which is a franchise system, reduced
2007 – PepsiCo named EPA Energy Star Partner
of the Year. LEED Gold certification awarded
to Gatorade manufacturing facility in Virginia,
the largest food and beverage LEED-certified
facility and to the QTG Tolleson Distribution
2007
52
2005
2006
60%
2004
Water
2005
Fuels
2006
Electricity
*Gallons or Liters for beverages; Pounds or Kilograms for foods
water use ratios (gallons vs gallons of
product) by more than 2% versus prior
year and had a less than 1% increase in
energy use/8 oz. case versus prior year.
The rise in energy use was the result of
increased manufacturing of PET bottles
at the bottling plants versus off-site
manufacturing. The water data represents
61% of the bottler unit case sales in 2005
and 83% in 2006. Energy data represents
81% of bottler unit case sales in 2005 and
83% in 2006.
Our international division, PepsiCo
International (PI), represents a diverse
operating environment, and includes
snacks and beverage operations. PI is
making significant progress in resource
conservation. In India, for example, our
company-owned and franchise beverage
partners conserved over 1.4 billion liters
of water in 2006. Similarly, in China, our
operations have conserved 1.1 billion
liters of water, and we have successfully
grown potatoes under desert conditions.
PepsiCo’s Thailand Lamphun plant was
honored in 2007 with the “Excellent
Performance in Energy Conservation” by
the Thai Government’s Department of
Energy. Plans are in place in Thailand to
reduce water from ground resources by
Center. QTG establishes “QTG Green” initiative.
PepsiCo becomes the largest purchaser of
Renewable Energy Credits (RECs). PepsiCo
anchor bottlers collectively would be second
largest purchaser of RECs. PepsiCo joins
50% over the next three years, and to
save 2.6MM Kwh annually in energy.
In 2006 PepsiCo’s Environmental
Task Force (ETF) developed a waste
protocol to standardize data collection
and reporting around the waste that
is generated, reused, recycled and
disposed of by each manufacturing site.
The intent of this protocol is to continue
our efforts to reduce the generation of
waste, increase the recycling and reuse
of materials, and to ensure that any
waste that cannot be recycled or reused
is disposed of in an environmentally
responsible manner. This protocol will be
implemented in 2008.
GHG emissions data are available for
Frito-Lay operations in the United
States and began to be collected across
the Company beginning in 2006.
Frito-Lay has joined the US EPA
Climate Leaders program. Frito-Lay
has set a 2010 goal to reduce GHG
emissions per pound of product by 14%
from a 2002 baseline. As of 2006, FritoLay has achieved a reduction of 8.8%
from that 2002 baseline and a reduction
of 16.1% from a 1999 baseline.
United States Climate Action Partnership.
PepsiCo named to Dow Jones Sustainability
World Index as well as remained on Dow Jones
Sustainability Index North America.
PepsiCo–Performance with Purpose
Management
Environmental performance leadership is the responsibility of PepsiCo’s four
executive supply chain heads of our operations: Frito-Lay North America, Quaker/
Tropicana/Gatorade, Pepsi-Cola North America (including working with our
bottlers) and PepsiCo International. These leaders head up our newly-formed
(2007) Environmental Sustainability Leadership Team (ESLT). The ESLT includes
senior executives from all functions to make sure that environmental impacts are
considered in all areas of the business.
ESLT
Environmental Council (EC)
FLNA
QTG
PCNA
PI
The ESLT charter includes the following:
• Create and maintain PepsiCo’s environmental sustainability strategy.
• Develop, administer and maintain PepsiCo-wide policies on matters of
environmental sustainability.
• Develop goals and timelines for PepsiCo environmental performance.
• Assess the gaps and strengths of performance relative to our aspirations and
external benchmarks.
• Provide support to divisions in improving PepsiCo’s long-term environmental
sustainability performance.
• Advise and inform the Chairman and CEO, the PepsiCo Executive Committee and
the Board of Directors on matters of environmental sustainability.
The ESLT is supported by the Environmental Council (EC) which replaces
the Environmental Task Force and includes the environmental and resource
conservation program managers from each of our divisions.
The EC’s mission is to provide subject matter expertise within and across the
Divisions. It supports the ESLT to ensure that we have a strategic environmental
sustainability vision for PepsiCo, uniform system-wide metrics, standards and
practices, sensible environmental goals and accurate reporting to internal and
external stakeholders.
Each division is held responsible for implementing its own environmental programs
and for training associates, tracking, monitoring, correcting and improving
environmental aspects of its business.
53
PepsiCo–Performance with Purpose
Monitoring
In 2005, the PepsiCo Environmental Management System (EMS) framework
was developed with the help of an independent third party, which also
helped to develop division specific implementation plans. PepsiCo and its
divisions periodically conduct internal and external audits and reviews of their
environmental management systems and environmental compliance. The external
audits are conducted by experienced environmental experts.
Key features of the PepsiCo Environmental Management System (EMS)
framework include:
• A risk-based management approach.
• Documented systems that capture and maintain institutional knowledge.
• Objectives and targets for continuous improvement.
• Integration of environmental considerations into core business processes.
• Routine performance monitoring and internal management reporting.
The EMS framework is built along the lines of ISO 14001. At least three PepsiCo
International facilities are ISO 14001 certified.
Capital Expenditure Filter
PepsiCo incorporated sustainability criteria into our Capital Expenditure Filter
(CapEx Filter) and we are using it on all capital expenditure requests over $5
million. Each request must include a review of the sustainability issues and
opportunities surrounding the request. The goal is to incorporate sustainability
aspects in projects right from the start and track sustainability-related capital
spend across PepsiCo. This is expected to help drive continued improvement.
Our Environmental Policy
PepsiCo’s Environmental Policy
applies to all our operations.
PepsiCo monitors company owned
operations and joint ventures
where we hold a majority share.
We encourage our suppliers,
service providers, bottlers and
other partners to adhere to the
policy.
1. We will comply with
applicable legal and regulatory
requirements and Company
standards and conduct regular
audits to verify compliance.
2. We will apply sound
environmental management
practices where, in our
judgment, existing legal
requirements are insufficient
for our operations.
3. We will consider our potential
environmental impacts in
our daily business decisionmaking processes.
4. We will encourage conservation
of natural resources, recycling,
source reduction and pollution
control to ensure cleaner
air and water and to reduce
landfill wastes. We will share
environmental best practices
across the Company.
5. We will monitor emerging
issues and keep abreast
of regulatory changes,
technological innovations
and stakeholder interests.
Advanced routing technologies and a “no-idle” policy cut fuel consumption on delivery routes.
54
PepsiCo–Performance with Purpose
6. We will establish metrics to
monitor our environmental
performance, and use these
to set goals for continuous
improvement.
7. We will implement
environmental management
systems to identify and
manage environmental risks,
obligations and opportunities.
8. We will work with our
licensed bottlers, suppliers
and customers to reduce the
environmental impacts of our
products throughout their
life cycle.
9. We will annually review the
Company’s performance in
implementing this policy.
10. We will review this policy
periodically and update it
as needed.
Education and Awareness
Educating our associates and making them aware of the environment is a part of
all we do. In addition to regular training of environmental personnel, we conduct
special events, such as a Sustainability Summit, in which new ideas are shared.
Information is also shared with all other associates. Examples include:
• Holding special events to mark Earth
Day and World Water Week.
• Creating a PepsiCo video on
environmental programs.
• Organizing an employee contest in
the Peterborough plant in the United
Kingdom to identify compressed
air losses.
• Presenting a “Performance with
Purpose” tent at the headquarters
Family Inclusion event, complete with
environmental information.
• Presenting to employees and
providing information.
• Hosting special contest asking for
employee sustainability suggestions.
• Incorporating environmental
information into the daily enewsletter as well as special
sustainability editions.
• Providing energy-saving light bulbs as
contest giveaways.
• Including environmental information,
education and ideas for behavioral
changes in multiple communications.
Green Teams
Frito-Lay North America
maintains a dedicated
team of experts across our
manufacturing facilities
focused on reducing
consumption of electricity,
fuels and water. Through
“Green Teams,” made up
of groups of volunteer
employees, more than 12,000
manufacturing associates have
been trained to improve their
environmental awareness and
to understand how they can
do their jobs without adversely
impacting the environment.
NAME:
PepsiCo Green Team
FIGHTING GLOBAL WARMING BY:
Empowering employees to help make their
facilities and manufacturing processes more energy efficient.
SAVINGS SINCE 1999:
NEXT PROJECT:
$179 million | 20 trillion Btu | 3 billion lbs. CO2
Winning the softball championship
QTG has established “QTG
Green,” an overarching
environmental sustainability
initiative to raise employee
awareness and create
JOIN PEPSICO IN THE FIGHT AGAINST GLOBAL WARMING.
actionable tactics to
PepsiCo is one of thousands of organizations saving energy with help from EPA's ENERGY STAR
Program. That means lower energy bills for PepsiCo and a cleaner environment for all of us.
improve the business and
Learn how your organization can be a part of the solution at energystar.gov.
each associate’s personal
environmental footprint.
A Frito-Lay North America Green Team
The focus is to raise awareness, incite
was featured in an Energy Star ad.
action and institutionalize sustainability
improvement efforts across Quaker/
Tropicana/Gatorade and PepsiCo.
PHOTO: RUSS QUACKENBUSH
Working with governments,
academia, nongovernmental
organizations, business
associations and other
interested stakeholders, we
will strive to develop effective
and sustainable solutions to
environmental challenges we
face in our business activities.
®
55
PepsiCo–Performance with Purpose
Our Approach
We approach water and energy
environmental performance with four
key strategies:
1. Overall conservation
2. Process change
3. Innovation, including new, creative
technologies and approaches.
4. O
ptimize renewable or low impact
sources for water and energy to the
greatest extent possible.
In the United Kingdom, two champions
of sustainability stand in front of tanks
holding starch removed from the water
used to make products.
Water
Overall Conservation
Capturing and Re-circulating — During
fruit processing, the Tropicana plant
in Bradenton, Florida captures and
re-circulates approximately 550,000
gallons of water a day from feed mill
evaporators to reuse in washing and
cleanup operations. Another 150,000
gallons a day of city reclaim water
is used for irrigation and special
utility services. The Fort Pierce,
Florida Tropicana facility captures
approximately 150,000 gallons per day
during fruit processing.
Irrigation — Five Frito-Lay locations
use treated wastewater to irrigate more
than 1,300 acres of alfalfa and Bermuda
grass hay grown for animal feed in the
United States.
Starch Removal — In making potato
chips, water is used to wash away
the excess starch that comes from
56
the potato slices. Once the starch
is removed, the water is cleaned
and recycled for use in processing
operations. In the United States,
Frito-Lay recovers almost 66 million
pounds of starch a year, reducing the
waste load to municipal wastewater
treatment plants. The recovered
starch is a valuable product for other
industries to use.
Starch Removal and Reuse — In the
United Kingdom, the starch removed
from the water is processed to food
grade level and can be reused in our
own products.
Cooling with Recycled Water — Several
QTG facilities use recycled water for
cooling water and plant maintenance.
Pepsi Bottling Ventures, one of our
largest bottlers, put systems in place
to collect and recycle the water used
to cool the equipment on its bottling
lines. The changes were made at the
suggestion of one of the employee/
management “green teams” formed to
identify ways to conserve water.
India Efficiency Strategies — In India,
we have shown farmers techniques
to save approximately 40% of their
agriculture water by directly seeding
rice paddies, rather than growing the
rice through highly water-intensive
conventional seeding. By direct seeding
only 1,800 hectares of land, we can
conserve water equivalent to the
combined yearly use of our snacks and
beverage operations across India. Our
company-owned and franchise beverage
partners conserved over 1.4 billion liters
of water in 2006. In our Panipat plant
the treated wastewater is supporting
aquatic life.
PepsiCo–Performance with Purpose
Process Change
Advanced Air Rinsing — Gatorade continues to install state-of-the-art high
speed lines. U.S. Gatorade lines are now utilizing air-only rinsing, achieving a 20%
reduction in water consumption where installed. This allows PepsiCo to conserve
more than 175 million gallons of water annually. The technology also has been
incorporated as standard design across our newest hot-fill plants, which means
that once those newest plants are on-line, PepsiCo will conserve an additional 210
million gallons of water a year.
Improved steam condensate return — In
the United Kingdom, for example, steam
reduction will generate savings.
Low-water Corn Cook — Frito-Lay
developed a process which reduces
the amount of water and heat used to
cook corn for tortilla chips and Fritos by
25%, and the redesign of washer spray
nozzles optimize the flow, pressure and
orientation. These systems are installed
in approximately 75% of the corn
processing lines in the United States.
Gatorade is installing air-only rinsing technology at its plants.
Innovation
Membrane bio reactor to treat and
re-use waste water — We installed
the first membrane bio reactor in
our Florida Gatorade plant in 1998.
Currently 85-90% of the process
wastewater from the plant feeds into a
municipal “grey water” line and is used
for local irrigation and municipal power
plants for turbine cooling. Now, we are
taking this to the next level to treat
and re-use the water ourselves for such
things as cooling towers.
Potatoes in the Desert — In China,
we have developed a method to grow
potatoes under desert conditions
that uses pivot irrigation systems
to save water.
Bottlers — Our independent bottlers are
saving water in many ways:
• Buffalo Rock, the Pepsi bottler in
Birmingham, Alabama, reclaims 15
million gallons of water a year from
their rinsing process. That’s enough
to fill their 40 thousand gallon water
tank every day and more.
• Pepsi Bottling Ventures collects and
recycles water used to cool equipment
on its bottling line, conserving
2.5 million gallons per year.
• Pepsi Bottling Group water recovery
systems installed on the reverse
osmosis filters conserve 280 million
gallons of water annually.
Water Sources
For new sites, each of our businesses
applies the elements of an
environmental site assessment, similar
to the EPA/ASTM Standard for Phase
One Environmental Site Assessment.
With specific regard to water sources, in
the United States, we utilize a mixture
of municipal supplies, which may be
from surface or groundwater sources,
and private wells. The selection and
management of municipal sources fall
under the jurisdiction of the United
States Environmental Protection
Agency (USEPA) and any applicable
corresponding state authority. These
sources must comply with the EPA
National Primary Drinking Water
Regulations and any other applicable
regulations and practices related
to water resource selection and
development (for example site selection,
well construction, drought management
plans, and many other elements).
Sites are selected to assure ample water
supply and minimal impact to the
local watershed.
PepsiCo is involved as a full supporter
and Advisory Board member in the
development of a Water Resource
Assessment Tool which has been
introduced by the World Business
Council for Sustainable Development
57
PepsiCo–Performance with Purpose
(WBCSD), in conjunction with a
world recognized environmental
consulting firm. This tool provides
an assessment of relative water
availability (abundance, stress, scarcity)
for any physical location coordinates
entered, in addition to a wealth of
other water-related information.
This is the first comprehensive tool
of its kind that was entered into the
public domain completely free of
charge—for use by any and all business
sectors, governments, NGOs, and other
stakeholders. It was launched August
2007 to great acclaim during World
Water Week in Stockholm.
Water Quality
Our facilities in the United States are
primarily supplied by municipal water
sources. As such, these sources comply
with all applicable water quality
requirements and provide Consumer
Confidence Reports (CCR), which detail
the water quality being provided to the
consumer as it compares to compliance
with EPA quality requirements. Our
facilities in the United States are, in
essence, consumers of this municipal
drinking water just as are residential
customers of the same supplies. As
such, the quality data for the water
that is purchased is available from the
municipal water purveyors, whether
the purchaser is PepsiCo, one of our
franchise partners, or a home consumer.
Similarly outside the United States,
many of our plants are supplied by
water from municipal sources, and
the same approach would apply—the
governing national and local regulations
for water resources and water quality
would, and do, apply. In areas of the
world where we develop our own
water sources (for example, extraction
from commercial wells) we do so in
58
The China Mother Water
Cellars Project increases water
availability in remote areas of
China.
full compliance with
applicable regulations
concerning use of local
resources. In these
cases, we work with
the local authorities
to assure that the
quantity of water
needed to run our
business and thereby to
help support the local
community and economy, is consistent
with regulations and safe for the
natural resource.
Where we develop our own wells to
supply water from groundwater sources,
every source is tested by an approved,
external laboratory which is capable
of reporting drinking water testing
results. The test protocol is based on
the most current revision of the World
Health Organization (WHO) Guidelines
for Drinking Water Quality, and also
includes testing required by local
authorities as well.
Every water source used for our
beverages must first be analytically
qualified, which includes using
government-accredited/recognized
laboratories to test for a harmonized
list of roughly 100 parameters,
covering many classes of raw water
chemical/physical constituents. In
addition, the microbial quality of the
source is evaluated to help confirm
that our products will be microbial
and chemically safe. We also believe
that protection of water at the source
is important; accordingly, a formal
training program is provided to all of
our key beverage plant personnel, which
covers areas such as water source
selection, well construction, and source
protection. At every plant, the incoming
water is then further purified, using a
variety of treatments depending on the
raw water characterization, to meet
the high standards of quality to be
used in our products—whether these
products are bottled water, carbonated
beverages, or non-carbonated drinks.
In addition to source qualification, our
plants monitor the raw, in-process,
and treated water for a core list
of parameters, and at frequencies
ranging from hourly, to daily, to
weekly (depending on the specific
parameter and application). We have
also established internal laboratories
in the United States and Europe which
monitor raw, treated, and bottled water
quality worldwide.
Community Engagement
PepsiCo has been involved in
positive community engagement for
decades. When locating a facility,
we consider the availability of water
to the community. When we build
or expand in a water-stressed area,
we consider the availability of water
to the community. Two major recent
examples of this, particularly as they
relate to water and the environment,
are our partnerships with the Chinese
Women’s Development Foundation
(CWDF) as part of their China Mother
Water Cellars Project, and The Energy
& Resources Institute (TERI), a leading
environmental NGO in India.
PepsiCo–Performance with Purpose
In China, we have partnered with CWDF to continue their mission of making
water available to the most water scarce regions of China. The CWDF has touched
approximately 1,000,000 people over the last five years, through their 90,000
cellars and 1,200 wells constructed. The Mother Water Cellars Project has made
a tremendous difference in the lives of people. Where once getting water took
hours of walking, today it is available at the homes. It is used for
agriculture and livestock as well as washing and boiling for drinking.
As a result, the lives of entire families have been changed.
With TERI in India, we have a multi-year partnership
to take a holistic approach to sustainability in two very
diverse villages. The areas for our community engagement
are many, and include:
• Community watershed management, including rainwater
harvesting systems.
• Augmentation of existing water systems to ensure
sufficient water.
• Sanitation and hygiene promotion — including public
education, toilet installation, waste management
systems, and adequate drainage.
• Health and education — to improve awareness levels and
provide health care facilities.
• Agriculture — improve irrigation systems, high-yield
cash crops, integrated pest management systems,
education on organic approaches, and improvement in the moisture content/
retention of soil.
Water projects in India are changing the
lives of families.
• Enterprise Development — train villagers in mushroom processing. Train self help
groups in income generation activities to help create a viable local economy.
In 2007, as in previous years, we were
active supporters of World Water Day.
Our most visible activity was with Ethos
Water, which is a part of the PepsiCo
water family. Last year, Starbucks Coffee
Company and PepsiCo, through our
North American Coffee Partnership,
signed an agreement to significantly
increase distribution of Ethos Water,
including co-packing, distribution
and marketing.
Ethos Water has a unique business
model, which includes helping to
raise awareness of the severity of the
world water crisis. PepsiCo is helping
to increase the distribution of Ethos
Water. For each bottle of Ethos Water
sold, Starbucks makes a $0.05 donation
to water projects with the goal of
contributing $10 million by the end
of 2010 to help children and their
communities around the world get
clean drinking water.
The two new grants made in 2007,
in addition to those in 2006, totaled
$2.12 million. In India, working through
WaterAid, a $1 million grant will help
develop an integrated approach to
water and sanitation-related health
problems for an estimated 120,000
beneficiaries in Madhya Pradesh. In
Kenya, working through International
Medical Corps, a $1 million grant
will help improve water, hygiene and
sanitation services in Samburu.
59
PepsiCo–Performance with Purpose
Energy
PepsiCo is installing the largest privately-owned system of photovoltaic electricity generation in Arizona.
PepsiCo understands it is increasingly
important to address climate change.
In addition to impacting our employees,
communities and the world around us,
climate change may adversely affect
the raw materials and other supplies we
use, including our sources of water and
many agricultural products. Our
supply chain could be damaged or
disrupted by weather, natural disasters
or other areas related to climate
change. Climate changes may also
affect our energy costs.
Many of our programs address
climate change issues and include
reduction of energy, encouragement
of renewable sources of energy and
water programs. Key actions include
our landmark purchase of Renewable
Energy Certificates (2007) and that of
our anchor bottlers (2007), as well as
our membership in the United States
Climate Action Partnership (2007).
Reclaimed land surrounds the Frito-Lay North
America Jim Rich Distribution Center in Rochester,
New York, a LEED Gold-level facility.
Overall Conservation
Energy Efficiency — Our facilities are increasingly putting in place measures
to reduce the amount of energy used to produce our products. These measures
include installation of Energy Star rated equipment, energy efficient motors and
energy efficient windows and skylights to enhance natural lighting. Our facilities
have also installed variable frequency drive systems, which allow efficient energy
use, and thermal regeneration systems to capture waste heat. We perform periodic
energy audits to find opportunities to continuously improve.
Waste heat recovery — Frito-Lay’s tortilla chip oven stack draft control and heat
recovery system, installed closed-loop, controlled, stack dampers on tortilla chip
ovens to control the amount of exhaust heat. Then the exhaust heat is captured
and used to heat tortilla chip fryer oil. The first heat recovery system for fryer oil
was installed in San Antonio, Texas in 2006 and additional installations are being
implemented. Quaker cereal ovens are also being fitted with oven draft control
technology to improve their efficiency.
Cogeneration — Frito-Lay manufacturing facilities at Kern,
California, and shortly, Killingly, Connecticut, produce their
own electricity through cogeneration, one of the most
energy-efficient means of power generation. Tropicana
operates a cogeneration system for producing power in its
Bradenton, Florida facility. Cogeneration systems help offset
utility companies’ need to build additional power plants.
Compressor efficiency improvements — A United Kingdom
program to catch compressed air leaks included an
employee contest.
60
Process Changes
Cooling equipment — All Pepsi-Cola vending machines, fountain equipment
and cooler display units in North America have been converted to nonchloroflurocarbon (CFC) refrigerants. More than 99% of all new purchases of
refrigerated point-of-sale equipment use hydroflurocarbon (HFC) free insulation.
Refrigerants Naturally! — We have joined with other corporate members and
Greenpeace in a global initiative called ‘Refrigerants Naturally!’ whose goal is
to address climate change and ozone layer depletion caused by HFC gases in
refrigeration equipment. We are working together to eliminate use of HFC in
refrigerated point-of-sale equipment.
Compressed air — Pepsi-Cola Concentrate operations are optimizing production of
compressed air and managing air leaks to save energy.
Fuel Consumption — With most snack
and beverage products delivered by
truck, fuel efficiency is important. Both
Frito-Lay and our bottlers use advanced
routing technologies and have a “noidle” policy to reduce miles and cut
fuel consumption on delivery routes.
Pepsi Bottling Group (PBG), our largest
bottler, has verified the electronic
settings on vehicles with electronic
controls to ensure idling reduction and
speed parameters are set efficiently.
Lighting upgrades — Solar
concentrators in our Gamesa business
in Mexico have provided lighting
equal to conventional fixtures, saving
30,000 watts in a single distribution
center. Many other plants have also
had lighting upgrades, such as our
Concentrate plants in the United States
where high-efficiency lighting and
translucent ceiling panels have
been installed.
Potato Chip surface moisture
reduction — By reducing the amount
of water that is carried into the fryer
on the surface of our potato chips, we
have significantly reduced the natural
gas required to make the same amount
of chips.
Fuels — Sabritas, our Mexican snack
food business, has 13,000 distribution
vehicles, about 6,000 of which were
converted over the past ten years to
burn liquid propane gas. This reduces
carbon and nitrogen emissions and
generates fuel savings of between 15
and 22% (depending on geographic
conditions and fuel costs).
Innovation
LEED Certification — The U.S. Green
Building Council recognized the
Gatorade Thirst Quencher Blue Ridge
facility in Wytheville, Virginia with its
Leadership in Energy and Environmental
Design (LEED) designation at Goldlevel status. At 950,000 square feet,
the facility is the largest food and
beverage site in the world to achieve
this designation. The plant’s design
helps drive energy and environmental
optimization. The facility has stateof-the-art energy savings measures
such as high efficiency boilers,
water heaters and calibrated control
systems. Frito-Lay and Gatorade
operate three LEED Gold certified sites.
PepsiCo is constructing new domestic
manufacturing and distribution sites to
LEED standards.
Photovoltaic electricity generation —
Frito-Lay has installed photovoltaic
cells at six distribution centers (five in
California and one in New York). We
installed the largest privately-owned
system at our Arizona service center.
In our China operations, we have
constructed a boiler that uses solar
power to minimize the consumption of
fossil fuel.
The Gatorade Thirst Quencher Blue Ridge facility in
Wytheville, Virginia is the world’s largest food and beverage
site to achieve LEED Gold-level status.
61
PepsiCo–Performance with Purpose
Walkers Crisps is the first major food brand
in the world to display a carbon footprint
reduction logo on its packs.
Group, Inc., PepsiAmericas, Inc.
and Pepsi Bottling Ventures,
LLC also purchased RECs. The
combined purchases of these
three companies would rank
second among the largest
purchasers with the EPA, right
behind top-ranked PepsiCo.
Renewable Energy — In Cupar, Scotland,
our Quaker oat mill is contracting
for electricity from 100% renewable
sources. At our Frito-Lay plant in
Modesto, California, we’re building
a solar collection and concentration
system to supply nearly three-quarters
of the heat needed to produce SunChips
brand multigrain snacks from solar
thermal energy. In China, harnessing
the sun’s energy for sugar processing
has resulted in significant fuel savings.
Renewable Energy Certificates —
PepsiCo purchased renewable energy
certificates (RECs) to equal 100%
of purchased electricity used by ALL
PepsiCo U.S. facilities. The threeyear purchase of more than 1 billion
kilowatt-hours annually became the
largest purchase to-date. The US
Environmental Protection Agency (EPA)
estimates the PepsiCo purchase is the
same amount of electricity needed to
power nearly 90,000 American homes
annually. The purchase supports the
development of renewable energy
capacity nationwide, including solar,
wind, geothermal, biogas, bio-mass
and low-impact hydro. Three PepsiCo
anchor bottlers, The Pepsi Bottling
62
Biofuels — Tropicana’s Ft. Pierce,
Florida facility has partnered
with St. Lucie County to burn
landfill gas in its boiler. Landfill
gas displaces the use of natural
gas and reduces the amount
of carbon dioxide emitted into the
atmosphere. The landfill gas provides
the equivalent environmental benefit
of 3,600 acres of pine or fir forest or
removing 1,000 cars from the road per
year. These environmental benefits will
increase as availability of landfill gas
increases. At Frito-Lay’s Rosenberg,
Texas plant, a third of the steam load
for the entire plant is generated by
landfill gas.
Greenhouse Gases —
Frito-Lay is a
member of the
U.S. EPA’s Climate
Leaders Program.
This is a voluntary
program established
by the EPA to set
goals and track
reductions in
greenhouse gas
emissions across the
United States.
Hybrid Cars — Starting in 2005,
Frito-Lay sales personnel in three zones
(Jacksonville, Florida; Peoria, Illinois; Las
Vegas, Nevada) piloted a hybrid vehicle
program. Subsequently, a PepsiCowide hybrid company car program was
implemented. As company-supplied
vehicles end their lease, new hybrid
vehicles are leased. In addition, we are
testing two hybrid electric delivery vans
for distribution of Frito-Lay products
in Texas.
Carbon Footprint Reduction Logo —
Walkers Crisps has reduced its energy
use per pack by 33%, and water use by
45%, since 2000. They are
currently working on plans
to reduce energy use per
pack by 3% year-on-year,
and water use per pack by
5% year-on-year. In 2007
Walkers became the first
major food brand in the
world to display a carbon
footprint reduction logo
on its packs. The logo is
certified by the Carbon
Trust, a United Kingdomgovernment funded
independent business that
supports business and the
public in cutting carbon emissions and
supports the development of low carbon
technologies.
PepsiCo–Performance with Purpose
2 Litter PET Carbonated Soft Drink (CSD) Source Reduction
Bottle Weight (grams)
80
60
40
20
0
75
55
53
52
49
46
1980
1992
1993
1994
1998
2007
The weight of the 2 liter
PET soft drink bottle has
been reduced by 39%
since 1980.
Packaging and Material Waste
The goal of PepsiCo’s sustainable packaging policy is the design and development of packaging
systems that are environmentally responsible throughout their entire life cycle. We have
developed a sustainable packaging roadmap to achieve this vision.
To implement this policy, PepsiCo has established a Sustainable Packaging Council. The
objectives of this team are to develop sustainable packaging strategies, goals and targets and
alternative packaging material technologies, as well as to support responsible disposal practices.
PepsiCo has taken an industry leadership position in packaging. Two significant programs are:
Lighter weight PET bottles are among
our initiatives to reduce packaging.
• Sustainable Packaging Coalition: PepsiCo is a member of the Executive Committee for this
industry-leading organization that provides life cycle analysis and design guidelines for
sustainable packaging.
• Grocery Manufacturers Association/Food Products Association (GMA/FPA): PepsiCo is
the GMA/FPA chair for Packaging Sustainability Working Group. These procedures aim
to create an industry-wide public reporting process for consumers, investors and other
stakeholders to understand packaging and environmental improvements in a consistent
and transparent manner.
Reduce
Across all of our divisions, initiatives conducted in 2006 to reduce packaging
have resulted in over 20 million pounds of material reductions across PET bottles,
paperboard and corrugated materials.
• Aquafina 500 ml PET bottle weight has been reduced by nearly a third since 2000.
• Gatorade’s 20 ounce bottle weight has been reduced 10% and corrugated
packaging reduced 70% since the early 1990s, reducing solid waste by nearly 100
million pounds per year.
• The 64-ounce bottle of Gatorade has been reduced 19% since 1987, with total
waste reduction of more than 6 million pounds per year.
• A change in design on the seals on Frito-Lay North America salty snack packaging
has reduced overall film use by more than 2 million pounds annually.
• The aluminum in the Pepsi-Cola beverage can has been reduced 10% since 1993,
which saves 75 million pounds of aluminum a year.
63
PepsiCo–Performance with Purpose
• Community – PepsiCo India established a partnership with Exnora International, an environmental nongovernment organization, to manage domestic solid waste in an environmentally friendly manner. In 2007, the
collaboration which began in 2005, was selected by UNICEF as a model project and as a center for international
learning. The project involves reuse and recycling of waste.
• PET programs — A recent PET bottle light weight savings program has removed 40,000 metric tons of material
from eight of our top international (non-U.S.) markets over the past three years.
• Single-piece closures — For our beverage products, single-piece closures are under development to significantly
reduce materials.
• “Flexi” bag elimination — Tropicana re-engineered the way it delivers apple juice concentrate in the United States.
Its move to recyclable “flexi” bags eliminates the need for nearly 43,000 steel drums annually.
Reuse
Tropicana minimizes landfill waste by using virtually every part of the orange as well as
its by-products after the juice is extracted.
At PepsiCo, many programs exist to
reuse materials, ranging from packaging
to agriculture. These programs make
the most of our resources:
• Potato and Corn Solids — In the
United States, Frito-Lay sends close
to 20 million pounds of potato and
corn solids (potato pulp and peelings,
cracked corn and corn husks) to
America’s livestock and dairy farms
where it is used for feed.
• Chips for Animal Food — Chips that
do not meet Frito-Lay strict quality
control standards and chips not sold
in stores by the Guaranteed Fresh
date, can be used by livestock feeders
and pet food manufacturers as a feed
supplement. This process diverts 16
million pounds of unusable snacks
that otherwise might have been sent
to landfill.
• Composting Tea and Coffee Grounds —
PepsiCo in Valhalla, New York is
composting the leftover tea and
coffee grounds from its extraction
process. The 40 tons of spent
grounds per week are sent for local
composting, diverting them
from landfill.
64
• All the Orange — Tropicana minimizes
landfill waste by using virtually every
part of the orange, as well as its byproducts after the juice is extracted.
The by-products become scent
extracts and animal feed.
• Returnable cases — Programs to
return cases have been implemented
in areas of the world where
appropriate infrastructure exists,
notably Greece, Spain, Turkey, and
South Africa.
• Oat Hulls — Quaker optimizes the use
of all oat hull by-products. Quaker
delivers oat hulls to local animal feed
markets and a nearby university that
utilizes oat hulls as a raw material for
the generation of power.
• Bag-In-Box — The old carbonated soft
drink bag-in-box (BIB) is being reused
to produce food and fuel grade ethanal.
PepsiCo–Performance with Purpose
Recycle
Across all of our packaging platforms,
strategies exist to expand and promote
recycling. These programs make the
most of our resources:
• Recycled material in our packaging —
Our beverage cans are made from
40% to 50% recycled aluminum. In
2002, we committed to using 10%
recycled material in our PET soft
drink bottles by 2005. Thanks to
our bottlers, we met that goal on
schedule.
• Designed for Recycling — Beverage
containers like the ones used by
PepsiCo are designed for easy
recycling. Beverage containers are the
most recycled consumer packaging in
the United States.
• National Recycling Partnership —
PepsiCo helped found the National
Recycling Partnership, an initiative to
increase recycling across the United
States.
• Corrugated and Paperboard — At
Frito-Lay, cartons used to transport
bags of chips to retail stores are
reused several times before recycling.
In the United States this reduces the
demand for paperboard by more than
250,000 tons a year. This recycling
effort saves more than 4.5 million
trees from being harvested for
paperboard production and annually
diverts about 500 million pounds of
cardboard away from landfills. QTG
programs reduce our corrugated and
paperboard use by more than
8 million pounds saving more than
60,000 trees annually from being
harvested for paperboard production.
• Film Packaging — For Frito-Lay's
North American and International
products, Frito-Lay recycles packaging
film waste from our suppliers' sites
for use in various other products (park
benches, boards, etc).
PepsiCo supports many programs to encourage recycling.
Renewable Sources
Both for the production of packaging and the packaging itself, R&D investments
continually look for opportunities to promote sustainable packaging.
• Cutting edge technology — PepsiCo innovation teams are working to develop and
discover creative packaging solutions, which include the investigation of cutting
edge technologies that promote environmentally-friendly packaging.
• Supplier operations — PepsiCo promotes and works with its suppliers to use more
renewable energy sources in the production of materials.
• Suppliers — In North America, PepsiCo has increased the selection of suppliers
certified in credible resource conservation initiatives. Examples include the FSC/
Forest Stewardship Council, SFI/Sustainable Forestry Initiative and Energy Star.
65
PepsiCo–Performance with Purpose
Environmental Honors
2006
Dow Jones
Sustainability Indexes
Agriculture
•PepsiCo was added to the Dow Jones
Sustainability Index North America,
an index of companies considered
most sustainable.
•In Mexico, our Sabritas, Gatorade and
Gamesa-Quaker group received the
prestigious 2006 Mexican Center of
Philanthropy Socially Responsible
Company Award. The award
recognizes outstanding achievement
in four areas: Quality of life for
employees, business ethics, community
involvement and care and preservation
of the environment. This is the first
time that three PepsiCo Mexican
businesses received the award.
•The City of Arlington, Texas honored
Frito-Lay's Arlington plant with
the Waste Water Pre-Treatment
Excellence award.
•Frito-Lay's San Antonio, Texas
site was one of seven companies
and organizations honored by the
San Antonio Water System with a
WaterSaver Award for its focus on
water conservation.
•Frito-Lay, Vancouver in Washington
State was a winner of the
15th annual Governor's Award
for Pollution Prevention and
Sustainable Practices.
PepsiCo works with our growers to encourage sustainable agricultural
practices. Examples from each of our businesses include:
Frito-Lay North America (FLNA)
• Has developed protocols to wash potatoes at the farm to reduce or
eliminate the residual soil shipped to our plants, thereby allowing this soil
to be redistributed at the farm rather than disposed of through the plants
waste water discharge and reducing diesel fuel requirements.
• Practices low or no till soil preparation which results in lower irrigation
requirements. Pivot irrigation practices are used (versus flood irrigation)
which are more efficient in the use of water.
• Has developed potato varieties that store longer and are resistant to disease.
This allows FLNA to grow its potatoes in the most efficient agronomic areas
across the United States. This results in higher production per acre. Higher
production per acre minimizes the use of all farm inputs including, water,
fertilizer, pesticides, and herbicides.
• Practices optimal crop rotation policies which result in improved soil fertility
and a reduction in the required nitrogen and other fertilizers.
• Practices plant tissue analysis of our raw materials which allows for a more
precise application of fertilizer.
• Continuously develops new growing areas closer to FLNA manufacturing
plants reducing the diesel fuel used to transport inbound potatoes.
• Practices the use of cover crops to reduce soil erosion at our
suppliers’ farms.
• Requires an independent chemical use and agricultural practice audit of all
of our potato and corn growers in North America.
• Includes terms in its contracts with all corn and potato growers that
require chemical application practices, quantities and timing to be in full
compliance with the label instructions.
• Shares agricultural best practices with all of its corn and potato growers.
66
PepsiCo–Performance with Purpose
PepsiCo Beverages — North America (Pepsi-Cola, Tropicana
and Gatorade)
• Have initiated programs at PepsiCo’s largest anchor bottler PBG and a
major supplier of High Fructose Corn Syrup (HFCS) which involve improving
water conservation practices for the preparation of ingredients. This
improved process has already resulted in over 1 million gallons of water
in annual savings. This project is being expanded to additional suppliers
throughout the entire PepsiCo bottling system and the QTG manufacturing
network for additional water conservation saving.
• Uses virtually every part of the orange, including the peels which are sold
as cattle feed. Before the peel is dried into cattle feed, Tropicana extracts
valuable oils, essences and biodegradable solvents. These products are then
sold or used by the company.
• Encourages its growers to follow various Best Management Practices
(BMPs) published by the University of Florida, as well as several
regional Grower Trade Associations, which include guidelines for water
conservation.
Quaker and Convenience Foods — North America
• Sources corn locally, reducing the environmental impact of transportation.
• Works with major suppliers and railroads to optimize oat rail freight
throughout the year via the use of multi-car, unit trains.
• Encourages the use of established, low till practices on oats that conserve
both water and fuel.
•The Environmental Protection Agency
(EPA) and the Department of Energy
(DOE) honor Frito-Lay as an Energy
Star Partner of the Year.
•Frito-Lay’s Kern and Modesto plants
won the California Waste Reduction
Awards Program (WRAP) Awards. The
program annually recognizes California
businesses that have made outstanding
efforts to reduce non-hazardous waste
and send less garbage to our landfills.
•Keep America Beautiful, Inc., the
nation’s largest nonprofit community
improvement organization, awarded
PepsiCo, Inc. its 2006 Vision for
America Award for its leadership
role in preserving the environment
through many diverse conservation and
educational efforts.
•PepsiCo China won four major awards
at the Fifth Anniversary Award
Ceremony of the Mother Water Cellars
Project. The recognition was presented
on behalf of the China Women’s
Federation. The Mother Water Cellars
project helps provide access to water
to residents in dry areas of rural China.
Sustainable agricultural practices, such as pivot irrigation versus flood irrigation, conserve water.
67
PepsiCo–Performance with Purpose
2007
PepsiCo International (PI)
• PepsiCo’s Thailand Lamphun plant
received an Excellent Performance in
Energy Conservation Award from the
Thailand Government Department
of Energy.
• PI agro-programs encourage the application of environmentally sound
agricultural practices with our suppliers. We provide assistance to farmers and
raw material suppliers where appropriate and assess their compliance against
both regulations and Frito-Lay agro-standards.
• PepsiCo was among a select group
of business and organizations that
the U.S. Environmental Protection
Agency (EPA) and the U.S. Department
of Energy (DOE) recognized with its
EPA Energy Star Partner of the Year
Award for energy conservation.
• PepsiCo was named to the 100 Best
Corporate Citizens list for 2007 by
Business Ethics Magazine. The review
included environmental sustainability.
• Frito-Lay Jonesboro facility received
the EPA Performance Track
Distinction, which recognizes
facilities that set goals for continuous
improvements in environmental
performance.
• As a result of their forward-looking conservation approaches, our Walkers
United Kingdom snacks business recently became the first major food brand
in the world to display a carbon footprint reduction logo on its packs for
select products. The logo is certified by the Carbon Trust, a United Kingdomgovernment funded independent business that supports business and the
public in cutting carbon emissions and supports the development of low
carbon technologies. This effort required close partnership with our plants, as
well as with our packaging and raw material suppliers.
• In China, through various collaborations, our foods team there is successfully
growing potatoes under desert conditions. By utilizing in-plant conservation
approaches, coupled with the installation of pivot irrigation systems, in 2006,
our China team saved over a billion liters of water compared to the prior year.
• The U.S. Green Building Council
Leadership in Energy and
Environmental Design (LEED) program
awarded LEED Gold Status to the
Gatorade Blue Ridge facility in
Wytheville, Virginia and Gatorade
Tolleson facility in Arizona.
• PepsiCo Boxford plant, located in
England, was presented with an
Environmental Awareness Award
by the Colchester Evening Press. The
plant produces Copella Apple Juice,
Tropicana Pure Premium and Tropicana
Go for chilled distribution in the
United Kingdom.
• PepsiCo was named to the Dow Jones
Sustainability Index and the Dow
Jones Sustainability North America
Index.
• PepsiCo was named to the Best Green
Companies for America’s Children list
in Working Mother Magazine.
• PepsiCo was named a 2007 Green
Power Partner of the year by the EPA.
68
Frito-Lay North America and The National Arbor Day
Foundation are in a national partnership to “Make
America a Little Greener,” which will provide 300,000
tree seedlings for reforestation efforts in areas blighted
by natural disasters and to beautify communities.
More Information
For more information on many of these topics see PepsiCo’s website
http://www.pepsico.com, divisional websites, the PepsiCo Annual Report and
PepsiCo’s Management Discussion and Analysis included in PepsiCo’s Form 10-K.
PepsiCo–Performance with Purpose
TALENT
SUSTAINABILITY
69
PepsiCo–Performance with Purpose
TALENT SUSTAINABILITY
Our Commitment
PepsiCo’s goal is to attract the highest caliber associates, assist
them with achieving their goals that can make a difference in the
Company and provide them with a work environment and benefits
to retain them.
PepsiCo is committed to hiring, training and retaining the
best people. To do this, we recognize that we must build an
environment where all our associates can achieve a better quality
of life and know that we cherish them.
To achieve our goals, our programs include a strong commitment
to diversity and inclusion; competitive compensation and benefits;
strong health and safety programs, including HIV/AIDS programs;
our SharePower program which provides stock options to eligible
associates around the world and encourages them to act like
owners of the Company; employee networks; opportunities for
career growth; lifestyle and personal development opportunities,
including job training programs; a Human Rights Policy introduced
in 2006 and robust programs to measure employee satisfaction
and award achievement.
Each year we ensure compliance with our Code of Conduct and
provide our associates with information on accessing our Speak
Up hotline.
In addition to our associates, we have begun to reach out to
our suppliers to ensure corporate responsibility. Our Talent
Sustainability agenda includes working to increase the number of
suppliers that are minority or women-owned.
PepsiCo’s Talent Sustainability strategy is overseen by the Senior
Vice President of Human Resources, who is a member of the
PepsiCo Executive Committee.
70
PepsiCo–Performance with Purpose
Diversity and Inclusion
PepsiCo approaches diversity and inclusion as a fundamental
business strategic priority. We believe our leadership in this
area gives us an opportunity to drive our growth and gain a
competitive advantage.
To attract and retain the brightest, most capable people,
we must create a diverse and inclusive culture where
everyone feels they have equal opportunity to succeed and
grow-regardless of gender, race, ethnicity, religion, sexual
orientation or different abilities.
recognize outstanding achievement in support of PepsiCo’s
diversity and inclusion efforts.
Our Diversity and Inclusion Governance Council, formed in
2005, is a cross-divisional, cross-functional group composed
of internal and external thought leaders. Our Ethnic Advisory
Boards provide counsel and advice on a broad range of social,
cultural and business needs, including marketing, hiring,
supplier development and diversity. In the United States we
have African-American and Latino/Hispanic Ethnic Advisory
Boards. In Canada, we have an Asian Advisory Council.
We have active employee networks for our various groups.
Each of our employee groups is represented at the most
senior levels by an executive reporting to our chief executive
officer. Our U.S. groups include African-Americans, Latinos,
Asians, Native Americans, Women, Gay/Lesbian/Bisexual/
Transgender (GLBT) and “Enable,” for individuals with
different abilities. PepsiCo has also created a group, led
by a member of the PepsiCo Executive Committee, that is
dedicated to ensuring white males are included as an integral
part of our diversity and inclusion journey. Outside North
America, we have a growing number of programs to promote
diversity and inclusion and support employees.
All employees participate in inclusion training sessions. Our
Harvey C. Russell Inclusion Award was introduced in 2003 to
71
PepsiCo–Performance with Purpose
African-American Advisory Board — 2007
Back row, left to right; Kweisi Mfume, Keith Clinkscales, Roderick D. Gillum, Reverend Al Sharpton, Earl G. Graves, Jr., Robert Holland, Jerri DeVard, Warren M. Thompson.
Front row, left to right: Darlene Williamson, Ph.D., Ray M. Robinson, Reverend Dr. W. Franklyn Richardson, Glenda McNeal, Amy Hilliard, Earl G. Graves, Sr., Dawn Hudson,
Benaree Pratt Wiley, Johnny F. Johnson, Clarence Avant.
Latino/Hispanic Advisory Board — 2007
Left to right: Isabel Valdès, Cid Wilson, Carlos H. Arce, Ph.D., Deborah Rosado Shaw, Raul Yzaguirre, Albert P. Carey, Raquel Malo, Douglas X. Patiño, Ph.D., Maria ContrerasSweet, Carlos A. Saladrigas, Victor Arias, Jr., Ricardo R. Fernández, Ph.D., Gibert Aranza.
72
PepsiCo–Performance with Purpose
U.S. Diversity & Inclusion Statistics Year—End 2006
Total
Women
%
Minority
%
Board of Directors
14
3
21
4
29
Senior Executives
23
4
17
6
26
2,165
696
32
422
19
All Managers
12,903
3,919
30
2,903
22
All Employees
62,251
15,169
24
18,573
30
Executives
Benefits
Benefit Programs
In the United States, we offer a full
range of health care, savings and
retirement benefits. Our health and
welfare benefits include medical, dental,
vision, prescription drugs, mental
health, life and accident insurance,
disability and flexible spending
accounts. We also offer commuter
reimbursements, adoption assistance,
Employee Assistance Program, child
and elder care referral and resources,
smoking cessation programs, care
and lifestyle management programs
and family and medical leaves.
Domestic partners who meet certain
eligibility requirements may be covered
under PepsiCo benefits. Eligible part
time employees receive medical,
dental, vision, life insurance and
disability benefits.
In 2004, we introduced HealthRoads,
a wellness benefit for employees and
As of May 2007 the Board of Directors
consisted of 10 members, including
three women and three minorities.
Although PepsiCo is a global
corporation, the way it operates in the
marketplace is more local in character.
In markets outside the United States,
PepsiCo businesses rely primarily on
hiring local managers and employees.
their families. HealthRoads provides
our employees with information,
resources and tools, financial incentives
and encouragement to reach exercise,
weight management, nutrition, smoking
cessation and stress management goals
to help them live healthier lifestyles.
Financial benefits include companyfunded pension plans, a 401 (k)
Plan with a Company match, the
PepsiCo Stock Purchase Program and
SharePower, a broad-based stock option
program. SharePower was introduced
in 1989 and is a global program that
offers eligible employees stock options
that may be exercised after a vesting
period. We believe SharePower clearly
reflects a culture that places a high
priority on ownership.
Many of our headquarters offer on-site
fitness centers and wellness classes.
We offer lifestyle benefits such as
employee credit unions offering on-site
banking, ATM machines, dry cleaning
and other amenities.
An extensive bi-annual survey process,
supplemented by shorter and targeted
surveys, provides feedback and input on
how associates view the business and
drives action plans and improvements
throughout the corporation.
73
PepsiCo–Performance with Purpose
Award Programs
PepsiCo offers a variety of Award Programs to recognize associates. Common
to all businesses are gift awards for length of service. All associates are eligible
to receive stock option grants as recipients of The Chairman’s Award, which
recognizes significant achievement above and beyond the individual’s job role.
The Harvey Russell Inclusion Award for achievement in the area of diversity and
inclusion is a part of this, as are awards for environmental achievement.
The Steve Reinemund Diversity & Inclusion Leadership Legacy Award is a new
PepsiCo leadership award announced in January 2007. It will be given to senior
leaders who champion diversity and inclusion over time and move PepsiCo to new
levels of diversity and inclusion accomplishments and behaviors through their
words and actions. Front line associates are those who make, sell and distribute our brands. These
associates, as well as the front line employees of our bottlers, are eligible for
the President’s Ring of Honor. This annual award inducts high achievers into a
permanent role of honor.
We have a variety of other award programs within our divisions.
74
PepsiCo–Performance with Purpose
Management of health and safety
within PepsiCo International (PI)
operates on three different levels:
site level, region/business unit level
and division level. Division health and
safety professionals provide strategic
direction, propose and develop PI-wide
policies and practices, and facilitate the
communication and sharing of practices
and knowledge of health and safety
across our operations. Regions/business
units and sites are responsible for all
managerial and operational aspects of
health and safety. To support them in
fulfilling these responsibilities, PI has
dedicated health and safety professionals
around the world. Lost time injury rates
are tracked across PI with a uniform
web-based reporting tool.
Health and Safety
Workplace Programs
Our Code of Conduct includes a
commitment to provide a safe and
healthy work environment. It is
our goal to design, construct,
maintain and operate our facilities
in a manner to protect our people
and physical resources.
At Frito-Lay North America, each
manufacturing and distribution center
has a safety manager who is responsible
for safety. Routine training programs
consist of both injury prevention and
vehicular training. Injury prevention
programs focus on ergonomic issues
such as repetition and manual handling,
while defensive driver’s training includes
classroom, behind the wheel and
obstacle courses. Audits conducted on
a regular basis also support program
and process compliance. In addition,
leadership commitment is visible through
formalized safety management training
and rewards and recognition programs.
Frito-Lay operations have partnered
with Occupational Safety and Health
Administration (OSHA) and their
Voluntary Protection Program (VPP). In
2007, OSHA recommended Frito-Lay’s
Rhinelander Agricultural Research site
for VPP at the highest level, STAR.
Frito-Lay has 26 VPP STAR sites — far
more than any other food company.
In the United States, PepsiCo tracks
occupational health and safety
performance based on OSHA definitions
and recording criteria. We do not
track illness frequency rates. In other
countries where we operate, we
track and report according to local
regulatory requirements.
QTG manufacturing sites have one
or more dedicated professionals who
assist in managing health, safety
and environmental expectations. A
division staff supports sites through
standardized programming, onsite
consultation, training and auditing.
A comprehensive management
system exists to assure appropriate
planning and resources, execution
and accountability are in place. These
efforts are delivered through a series
of organizational practices that apply
to both employee safety and health
and environmental considerations.
All manufacturing facilities in the
Tropicana business unit are OSHA
VPP Star sites and QTG was recently
accepted by OSHA to participate in the
Corporate VPP Program.
75
PepsiCo–Performance with Purpose
HIV/AIDS
HIV/AIDS poses an increasingly serious
health risk to human society. PepsiCo
has recognized the importance of
joining the fight against HIV/AIDS.
In 2002, PepsiCo’s South Africa snack
food operation, Simba, adopted a formal
HIV/AIDS policy. That same year, PepsiCo
joined the Global Business Coalition
(GBC), a not-for-profit group dedicated
to fighting HIV/AIDS and related
diseases by providing information,
counsel and sharing best practices.
PepsiCo established an internal task
force on HIV/AIDS to address the issue
in our businesses. In addition to the
United States and South Africa, the task
force identified priority countries where
there is a high or rising prevalence and
we have major businesses: India, China
and Russia.
In 2004, in consultation with interested
shareholders, PepsiCo prepared its first
report on the known impact of HIV/
AIDS in our businesses in the identified
countries. We also developed our
PepsiCo Worldwide HIV/AIDS policy.
We made great progress as we
developed and implemented workplace
programs in the four countries: South
Africa, India, Russia and China. Thailand
joined the first tier efforts and Mexico
recently joined.
In 2005, we announced
our global HIV/AIDS policy
and communicated it
across all PepsiCo.
In South Africa,
we launched
a direct AIDS
intervention
program which
included full
treatment
coverage for
76
all employees and spouses. We are
continuing the program, providing
community outreach through peer
education and providing assistance to
affected families.
In India, we have provided education,
treatment and community outreach
programs, including peer education.
In China, we have provided education,
engaged in programs with outside
groups and have a dedicated wellness
doctor who visits our business unit
facilities to provide information on
health and wellness issues, with an
emphasis on HIV/AIDS. An information
hotline was established to answer
questions about HIV/AIDS and other
health issues, as well as to provide
referrals to treatment facilities and
case management where appropriate.
In Russia, in addition to employee
education and awareness, PepsiCo is
participating in community educational
programs.
The Thailand business has been a part of
a number of activities,
including a National
Children’s Day’s
activity book
on AIDS
prevention for children and how to
live with AIDS-infected children.
The business has a certificate of
gold level from the AIDS Response
Standard Organization (ASO Thailand)
for outstanding HIV/AIDS work. The
Thailand business also received a
certificate of outstanding HIV/AIDS
Management in the Workplace on a
country level for World AIDS Day in
2006, a recognition sponsored by the
Thai Red Cross Society and UNAIDS.
In the United States, PepsiCo has
an active program that includes
information on HealthRoads website,
review of benefit plans to ensure
coverage of HIV/AIDS. In addition,
associates participated in HIV/AIDS
awareness marches across the
United States, raising funds to fight
this disease.
Pandemic Preparation
PepsiCo recognizes the dangers of
Avian (Bird) Flu, and other pandemics,
and has established a task force that
is addressing this and other potential
pandemics. In the United States, this
includes education, awareness
and steps to take regarding
work related issues.
PepsiCo–Performance with Purpose
Training
Career Management
Values and Code of Conduct Training
Employee training is year round at PepsiCo.
Training covers a large number of areas.
Associates are regularly updated on the
business through forums, town halls, daily
e-newsletters, web information, videos
and other forms of communications.
PepsiCo has a very robust program
for helping associates manage their
careers. Elements include a guide for
career growth tailored to PepsiCo,
as well as guides focused on specific
functions. Our year-long proprietary
career process includes objective
setting, performance and development
reviews, development action plans,
mid-year reviews and 360 degree
evaluations, all supported by training
and materials. Executive leadership
training focuses on helping high
potential managers learn to be more
effective leaders and to gain a broader
perspective of our business. In 2007,
we introduced a concept called “One
Simple Thing” at our headquarters,
which strives to help associates better
balance work and home by agreeing
with their manager to make one
change. All employees receive regular
performance and career development
reviews annually.
PepsiCo has provided interactive
training in its Values to associates
worldwide. PepsiCo has also provided
interactive training on its Code of
Conduct. In 2007, approximately
30,000, associates around the world
completed mandatory Code of Conduct
training. The training was offered in
six languages. Of the active employees
who were solicited, we achieved 100%
completion. PepsiCo also provided
web-based training on our Anti-Bribery
Policy to nearly 15,000 employees. We
provided web-based Sexual Harassment
and Trade Spending Compliance courses
and tracked completion.
Diversity and Inclusion Training
Health and Wellness Information
On-Boarding
New associates are introduced to the
Company and receive information on a
variety of areas, including the Company,
history, career information and benefit
information.
Job Training
Associates receive specific job training
as required, including attending
professional conferences to enhance
their skills.
Skill Improvement Training
PepsiCo offers associates opportunities
to improve their skills through a variety
of training opportunities, including an
educational week during which associates
can select from courses in everything
from learning to prepare presentations to
balancing home and work.
PepsiCo supports its commitment
to fostering a diverse and inclusive
workplace with training. Associates
move through training levels
specifically developed for PepsiCo.
Lifestyle and Personal Development
PepsiCo offers associates the
opportunity to hear speakers on a
variety of topics and to participate in
workshops of special interests. Examples
include presentations on diversity,
market trends and health topics.
PepsiCo offers employees health
information and presents speakers on
topics related to health and wellness.
77
PepsiCo–Performance with Purpose
Human Rights
PepsiCo Values include a commitment
to respect others, inside and outside
the Company, which is consistent
with our value of treating people with
dignity. Our commitment to employees
includes a work environment that is
free from all forms of discrimination,
including sexual and other forms of
harassment, and fostering a work
environment where people feel
comfortable and respected. PepsiCo’s
Code of Conduct requires all employees
to follow local employment laws and
regulations, including child labor laws
and treatment of employees. We have
set 15 as the minimum age anyone can
work for PepsiCo.
Human Rights Training
Training is provided throughout PepsiCo
on our Code of Conduct and Speak Up
hotline. We encourage employees to
report issues such as discrimination,
In 2006, PepsiCo adopted our Human Rights Policy, which states:
PepsiCo Human Rights Workplace Policy
PepsiCo respects the dignity of our workers in the workplace and we work to
ensure our associates’ rights to personal security, a safe, clean and healthful
workplace, and freedom from harassment or abuse of any kind.
We deal fairly and honestly with our associates regarding wages, benefits
and other conditions of employment, and recognize our associates’ right to
freedom of association. We do not use compulsory or child labor.
We do not tolerate discrimination and work to ensure equal opportunity
for all associates.
We comply with all applicable laws, regulations, and other employment
standards, wherever we operate or work.
We encourage our partners, suppliers, contractors and vendors to support these
policies and we place substantial value on working with others who share our
commitment to human rights.
78
harassment and mistreatment of
employees. In addition, in the United
States, PepsiCo is providing inclusion
training to associates, that includes
all managers. During the training, we
explore the human rights intrinsic to
all and the importance of sustaining an
inclusive culture.
Reporting Issues and Speak Up
The employee grievance system
includes employee and manager
communications, intervention by human
resource generalists and the Speak Up
line. All associates can use Speak Up as
a method to raise any issue. Speak Up
is a 24-hour, toll-free hotline available
to report any suspected violation of
the Code of Conduct, PepsiCo’s Values
or the law. Callers can be anonymous.
Speak Up calls are received by a thirdparty vendor – not a PepsiCo employee
– to ensure anonymity. All calls are
free to employees and contractors. The
toll-free numbers and an explanation of
Speak Up are provided on the PepsiCo
intranet, on posters and in PepsiCo’s
Worldwide Code of Conduct. The
Code of Conduct includes PepsiCo’s
policy prohibiting retaliation against
employees and contractors who raise
grievances.
PepsiCo–Performance with Purpose
Talent Honors
2006
• PepsiCo was given Best Employer of
University Graduates in China by
chinahr.com.
• PepsiCo was named to America’s Top
Corporations for Women’s Business
Enterprises list by The Women’s Business
Enterprise National Council (WBENC).
• PepsiCo was presented with the
International Corporate Courage Award
by the AIDS Responsibility Project (ARP).
• PepsiCo ranked 18 on DiversityInc’s Top
50 Companies for Diversity list.
Suppliers
Supplier Codes
PepsiCo products are produced and manufactured locally by our own
operations and by authorized bottlers. Our suppliers primarily provide raw
materials such as agricultural commodities and packaging. PepsiCo has
worked to strengthen its policies with suppliers by providing clarity with
respect to our Values and expectations for socially responsible performance.
PepsiCo’s Worldwide Code of Conduct applies to all employees of PepsiCo,
its subsidiaries and joint ventures over which it has management control.
In 2007, PepsiCo developed a specific Supplier Code of Conduct. This Code
establishes our expectations in the areas of labor practices, employee health
and safety, environmental management and business integrity. This Supplier
Code of Conduct reflects PepsiCo’s Environmental Policy commitment to work
with our suppliers to reduce environmental impacts; our Human Rights Policy;
and the leading international codes of conduct. It is shared with suppliers
and it states we place substantial value on working with others who share
our commitment to human rights.
Minority-Owned and Women-Owned Suppliers
We have teams dedicated to increasing the diverse spend of our suppliers.
In 2006, we surpassed $1 billion in purchases from U.S. minority-owned and
women-owned suppliers. Minority and women suppliers are invited to contact
PepsiCo online.
In the United Kingdom, PepsiCo was a founding member of the National
Minority Supplier Development Council (NMSDC) international pilot program
to inspire supplier diversity. PepsiCo has taken a leadership position in
the new group, which is called Minority Supplier Development
United Kingdom (MSDUK).
• Black Enterprise magazine named
PepsiCo among 40 Best Companies for
Diversity and 10 Best Companies in
Marketing Diversity.
• The Women's Foodservice Forum (WFF)
honored PepsiCo with the inaugural
Jackie B. Trujillo SOAR Award.
• PepsiCo was awarded the prestigious
2005 NAAAP Convention Excellence
award at the 19th Annual National
Association of Asian American
Professionals Convention.
• PepsiCo was honored as one of The
50 Best Companies for Latinas
to Work for in the U.S. by LATINA
Style magazine.
• Hispanic Business magazine named
PepsiCo one of the Top 50 Companies
for Hispanics.
• Frito-Lay ranked as one of the Top
Three Leaders in the area of Supplier
Diversity in North Texas area survey. • PepsiCo UK and Ireland was named
in The Times Top 50 Places Where
Women Want to Work.
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PepsiCo–Performance with Purpose
2007
• PepsiCo was given the title of 2007
Outstanding Employer of China
in Shanghai Region jointly by CRF,
Holland’s professional publication
and ranking organization, and China
Business News Group.
• Diversity Business named PepsiCo as
one of America’s Top Organizations
for Multicultural Business
Opportunities.
Purpose and Scope
This Supplier Code of Conduct sets forth the business conduct standards to
which PepsiCo expects its suppliers to adhere. This Code covers suppliers,
vendors, contractors, consultants, agents and other providers of goods and
services who do, or seek to do, business with PepsiCo entities worldwide.
Business Conduct Standards
PepsiCo expects its suppliers to conduct business responsibly, with integrity,
honesty and transparency and adhere to the following standards:
• Catalyst honored PepsiCo with the
2007 Catalyst Award for its Woman
of Color Multicultural Alliance.
1. Comply with all applicable laws and regulations of the countries
of operation.
• Human Rights Campaign named
PepsiCo as one of the Best Places to
Work for GLBT Equality and gave
PepsiCo 100% on the Corporate
Equality Index.
2. Compete fairly for our business, without paying bribes, kickbacks or
giving anything of value to secure an improper advantage.
• PepsiCo was named to list of America’s
Top Corporations for Women’s
Business Enterprises.
4. Treat employees fairly and honestly, including with respect to wages,
working hours and benefits.
• PepsiCo was among the Top 10 of
DiversityInc’s Top 50 Companies for
Diversity list.
• Black Enterprise magazine named
PepsiCo one of 40 Best Companies.
• Diversity Careers.com honored
PepsiCo’s longtime commitment to
Supplier Diversity.
• Working Mother magazine named
PepsiCo one of the top five among
the Top 50 Best Companies for
Multicultural Women.
• LATINA Style magazine named PepsiCo
Company of the Year.
• Latin Business magazine named
PepsiCo to its Corporate Diversity
Honor Roll.
• Essence magazine named PepsiCo one
of the 25 Best Companies for Black
Women.
• PepsiCo and EnAble received
the Innovation Award from the
Chicagoland Chamber of Commerce.
80
PepsiCo Supplier Code of Conduct
3. Encourage a diverse workforce and provide a workplace free from
discrimination, harassment or any other form of abuse.
5. Respect human rights and prohibit all forms of forced or
compulsory labor.
6. Ensure that child labor is not used in any operations.
7. Respect employees’ right to freedom of association, consistent with local laws.
8. Provide safe and humane working conditions for all employees.
9. Carry out operations with care for the environment and comply with all
applicable environmental laws and regulations.
10. Keep financial books and records in accordance with all applicable legal,
regulatory and fiscal requirements and accepted accounting practices.
11. Deliver products and services meeting applicable quality and
safety standards.
12. Support compliance with this Code by
establishing appropriate management
processes and cooperating with reasonable
assessment processes requested by PepsiCo.
13. Observe PepsiCo’s policies regarding gifts
and entertainment and conflicts of interest
when dealing with PepsiCo employees.
More Information
For more information on many
of these topics see PepsiCo’s
website http://www.pepsico.
com, divisional websites,
the PepsiCo Annual Report
and PepsiCo’s Management
Discussion and Analysis included
in PepsiCo’s Form 10-K.
PepsiCo–Performance with Purpose
Global Reporting Initiative (GRI) Index
The Global Reporting Initiative (GRI) is a system of reporting on financial, social, and environmental programs and progress.
GRI Indicator
PepsiCo Location
Strategy and Analysis
1.1 Statement from CEO.
3
1.2 Section 1-- Description of key impacts risks and opportunities including:
a. Description of significant impacts on sustainability, challenges and opportunities.
b. Approach to prioritizing challenges and opportunities.
c. Key conclusions about addressing the topics.
d. Description of the main process in place to address performance and changes.
3, 14, 18, 37-48, 49-68, 69-80
1.2 Section 2 -- a. Description of most important risks and opportunities arising from
sustainability trends.
b. Prioritization of risks and opportunities.
c. Table summarizing performance against targets and lessons learned.
e. Description of governance mechanisms in place to manage.
3, 4-5, 14, 18, 20, 23, 37-48, 49-68,
69-80
Organizational Profile
2.1 Name of the organization.
6
2.1 Primary brands, products and services.
6, 7, 30
2.3 Operational structure of the organizations, divisions, operating companies, subsidiaries
and joint ventures.
6
2.4 Location of organization’s headquarters.
9
2.5 Number of countries where the organization operates and names of countries with major
operations or those specifically relevant to sustainability issues.
7, 9
2.6 Nature of ownership and legal form.
6
2.7. Markets served (including geographic breakdown, sectors served and types of customers/
beneficiaries).
7, 8, 9
2.8 Scale of the reporting organization including:
a. Number of employees.
b. Net sales.
d. Quantity of products or services provided.
e. Total assets.
g. Breakdowns by country/region of sales, costs, employees that make up more than 5%.
6, 8, 9, 30
2.9 Significant changes during the reporting period regarding size, structure or ownership,
including facility openings, closings, expansions and changes in share capital structure.
9
2.10 Awards received during the reporting period.
23, 35-36, 66-68, 79-80
Report Profile
3.1 Reporting period.
2
3.2 Date of most recent previous report.
2
3.3 Reporting cycle.
2
3.4 Contact point for questions regarding the report or its contents.
2
3.5 Process for defining report content including:
a. Determining materiality
b. Prioritizing topics within the report.
c. Identifying stakeholders the organization expects to use the report.
2
3.6 Boundary of the report (eg countries, divisions, subsidiaries, leased facilities, joint
ventures, suppliers).
2
3.7 State specific limitations on the scope of the boundary of the report.
2
3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations,
and other entities that can significantly affect comparability from period to period and/or
between organizations.
2
81
PepsiCo–Performance with Purpose
3.9 Data measurement techniques and the bases of calculations, including assumptions and
techniques underlying estimations applied to the compilation of the indicators and other
information in the report.
2
3.10 Explanation of the effect of any re-statements of information provided in earlier reports
and the reasons for such re-statements, eg mergers, acquisitions, change of base years/
periods, nature of business, measurement methods.
2
3.11 Significant changes from previous reporting periods in the scope, boundary or
measurement methods applied to the report.
2
3.12 Table identifying the location of Standard Disclosures in the report. Identify the page
numbers or web links.
19, 29, 36, 48, 68, 80
Governance, Commitments and Engagement
82
4.1 Governance structure of the organization, including committees under the highest
governance body responsible for specific tasks, such as setting strategy or organizational
oversight.
20- 22
4.2 Indicate whether the Chair of the highest governance body is also an executive officer.
20
4.3 For organizations that have a unitary board structure, state the number of members of
the highest governance body that are independent and/or non-executive members.
20
4.4. Mechanism for shareholders and employees to provide recommendations or direction to
the highest governance body. Include reference to processes regarding:
a. The use of shareholder resolutions or other mechanisms for enabling minority shareholders
to express opinions to the highest governance body, and
c. Identify topics related to economic, environmental, and social performance raised through
these mechanisms during the reporting period.
22-23, 27-29
4.5 Linkage between compensation for members of the highest governance body, senior
managers, and executives and the organization’s performance.
22-23
4.6 Process in place for the highest governance body to ensure conflicts of interest
are avoided.
23
4.7 Process for determining the qualifications and expertise of the members of the highest
governance body for guiding the organization’s strategy on economic, environmental and
social topics.
23
4.8 Internally developed statements of mission or values, codes of conduct, and principles
relevant to economic, environmental and social performance and the status of their
implementation.
10-13, 39, 43, 46, 48, 53-55, 58, 75, 76,
78, 79-80
4.9 Procedures of the highest governance body for overseeing the organization’s
identification and management of economic, environmental and social performance,
including relevant risks and opportunities and adherence or compliance with internationally
agreed standards, codes of conduct and principles.
18-19, 20-21
4.10 Processes for evaluating the highest governance body’s own performance, particularly
with respect to economic, social and environmental performance.
23
4.12 Externally developed economic, environmental and social charters, principles or other
initiatives to which the organization subscribes or endorses.
24-26
4.13 Memberships in associations (such as industry associations) and/or international
advocacy organizations.
24-26, 29, 31, 33-36, 42-45, 58-65, 68,
75, 76, 79
4.14 List of stakeholder groups engaged by the organizations.
27-29
4.15 Basis for identification and selection of stakeholders with whom to engage.
27-29
4.16 Approaches to stakeholder engagement, including frequency of engagement by type and
stakeholder group.
27-29
4.17 Key topics and concerns that have been raised through stakeholder engagement,
and how the organization has responded to those key topics and concerns, including
through reporting.
27-29
PepsiCo–Performance with Purpose
Economic Performance Indicators
EC 1 Direct economic value generated and distributed, including revenues, operating costs,
employee compensation, donations and other community investments, retained earnings and
payments to capital providers and governments.
30-32
EC 2 Financial implications and other risks and opportunities for the organization’s activities
due to climate change.
14-17, 60
EC 4 Significant financial assistance received from government.
31
EC 6 Policy, practices and proportion of spending on locally-based suppliers at significant
locations of operation.
31
EC 7 Procedures for local hiring and proportion of senior management hired from the local
community at locations of significant operation.
73
EC 8 Development and impact of infrastructure investments and services provided primarily
for public benefit through commercial, in kind or pro bono engagement.
31, 32-36, 39-45, 56-59, 60, 62, 64, 66,
68, 76,
EC 9 Understanding and describing significant indirect economic impacts, including the
extent of impacts.
28-29, 31
Environmental Performance Indicators
EN 2 Percentage of materials used that is recycled input materials.
56-57, 60-62, 63-65, 66-67
EN 3 Direct energy consumption by primary energy source.
51-52
EN 5 Energy saved due to conservation and efficiency improvements.
51-52
EN 6 Initiatives to provide energy-efficient or renewable energy based products and services,
and reductions in energy requirements as a result of these initiatives.
50-68
EN 7 Initiatives to reduce indirect energy consumption and reductions achieved.
50-68
EN 8 Total water withdrawal by source.
50-52, 56-59
EN 9 Water sources significantly affected by withdrawal of water.
50-59
EN 18 Initiatives to reduce greenhouse gas emissions and reductions achieved.
60-62
EN 26 Initiatives to mitigate environmental impacts of products and services, and extent of
impact mitigation.
50- 68
En 29 Significant environmental impacts of transporting products and other goods and
materials used for the organization’s operations, and transporting members of the workforce.
61-62
Social Performance Indicators
LA 1 Total workforce by employment type, employment contract and region.
6, 9,
LA 3 Benefits provided to full-time employees that are not provided to temporary or parttime employees, by major operations.
73
LA 7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of workrelated fatalities by region.
75
LA 8 Education, training, counseling, prevention, and risk control programs in place to assist
workforce members, their families, or community members regarding serious diseases.
76
LA 10 Average hours of training per year per employee by employee category.
77, 78
LA 11 Programs for skills management and lifelong learning that support the continued
employability of employees and assist them in managing career endings.
77
La 12 Percentage of employees receiving regular performance and career
development reviews.
77
LA 13 Composition of governance bodies and breakdown of employees per category
according to gender, age group, minority group membership and other indicators of diversity.
73
Human Rights Performance Indicators
HR 1 Percentage and total number of significant investment agreements that include human
rights clauses or that have undergone human rights screening.
78-80
HR 3 Total hours of employee training on policies and procedures concerning aspects of
human rights that are relevant to operations, including the percentage of employees trained.
78
83
PepsiCo–Performance with Purpose
Society Performance Indicators
SO 3 Percentage of employees trained in organization’s anti-corruption policies and
procedures.
12-13
SO 4 Actions taken in response to incidents of corruption.
12-13
SO 5 Public policy positions and participation in public policy development and lobbying.
25-26, 29, 31
SO 6 Total values of financial and in-kind contributions to political parties, politicians and
related institutions by country.
31
Product Responsibility Performance Indicators
PR 1 Life cycle stages in which health and safety impacts of products and services are
assessed for improvement and percentage of significant products and services categories
subject to such procedures.
38-48, 54-68
PR 3 Type of product and service information required by procedures and percentage of
significant products and services subject to such information requirements.
46
PR 5 Practices related to customer satisfaction, including results of surveys measuring
customer satisfaction.
47-48
PR 6 Programs for adherence to laws, standards, and voluntary codes related to marketing,
communications, including advertising, promotion and sponsorships.
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PepsiCo’s Corporate Sustainability Report contains many of the valuable
trademarks owned and/or used by PepsiCo and its subsidiaries and affiliates
in the United States and internationally to distinguish products and
services of outstanding quality. This report also contains several of the
trademarks owned and used by the partners we mention.
PepsiCo Corporate Headquarters
PepsiCo, Inc.
700 Anderson Hill Road
Purchase, N.Y. 10577
Telephone: 914-253-2000
PepsiCo Website: www.pepsico.com
© 2007 PepsiCo, Inc.
Design: Eisenman Associates, a Certified Woman Owned Business (WBE).
Photography: Stephen Wilkes, PhotoBureau, Ben Rosenthal, Jonathan Kirn, Grover Sterling,
Steve Bonini, Kayte Deioma, Getty Images, Corbis.
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