PepsiCo hails progress on Palm Oil sustainability agenda

PepsiCo hails progress on Palm Oil sustainability agenda

Today (13 September), PepsiCo publishes the first update on its "palm oil action plan". Ben Cooper spoke with Andrew Aulisi, senior director for global environmental policy at ‎PepsiCo, about the progress to date and how the company's initial actions and achievements are likely to be received by environmental campaigners.

PepsiCo chose not to launch its "palm oil action plan" with a great flourish or fanfare last October. Instead, it simply shared its plan with a number of key NGOs before posting it on its website. Proud rhetoric and mission statements are not uncommon in how companies approach sustainability but there is a palpable sense that PepsiCo wants to place the emphasis on action and not intention.

Nevertheless, there has to be a framework for action and PepsiCo's palm oil plan provides a detailed blueprint for the sustainable palm oil supply chain it hopes to have by 2020. Included in the plan is a commitment to report regularly on progress, with the first update published today (13 September).

Andrew Aulisi, senior director for global environmental policy at ‎PepsiCo, says the company is in "full execution mode" on its palm oil commitments, adding "the ball is rolling and there's a lot of momentum behind our programme". Leaving no doubt that PepsiCo wants to highlight action, he says: "It's called an action plan and what we're reporting on is actions that we've taken over the year."

"We have a very comprehensive plan," Aulisi continues. "And there's a sequence of things that have to happen for us to get to 2020 and meet all of our commitments, and so it starts with this year. In a way, year one is the most important year and we've made incredible progress this year."

PepsiCo had set two specific targets for 2016. It has committed to ensure all its direct suppliers are members of the Roundtable on Sustainable Palm Oil (RSPO) by the end of the year. By midway through 2016, approximately 91% of its direct suppliers had joined the RSPO, the report states, representing 96% of anticipated volumes.

Aulisi says the suppliers currently not in the RSPO are outside East Asia where RSPO growth and implementation has been the strongest. "These suppliers happen to be on the other side of the world. We're talking to them and it's not hard for them to sign up. I think we'll get there."

PepsiCo has also committed to ensure traceability to the mill of origin by end of 2016. As of July 2016, PepsiCo estimates approximately 72% of the palm oil it expects to use for the year has been traced to the mill level, against the 65% reported when the action plan was launched. Aulisi is confident the end-year target will also be achieved.

The plan includes a further target to map supply chains all the way to the farm/plantation level by the end of 2020, which represents a far greater challenge. "We always knew that was going to be very difficult," Aulisi says. However, he stresses full traceability to those tens of thousands of farms and plantations is vital to achieving a sustainable supply chain. "What is necessary and what our stakeholders expect is that we know specifically where the palm oil is coming from, right down to the plantation level."

As the company has sought to achieve the first stage in traceability this year, Aulisi says PepsiCo has been able to discuss the task of establishing total traceability with suppliers. "To the credit of some of the big suppliers they have begun doing this work, trying to get that look through to the plantation level." The progress report details numerous examples of PepsiCo engaging with suppliers across a range of issues pertaining to its palm oil commitments.

For Aulisi, this speaks to the fundamental need for stakeholder collaboration in achieving its aims on palm oil. "There has to be broad and deep collaboration within the industry and what we are indeed seeing right now is movement on all fronts."

The other key target in the plan is to source 100% physically certified sustainable palm oil by end of 2020. This is a vital component in the bid to establish a sustainable palm oil market. PepsiCo in fact achieved its target of sourcing 100% certified sustainable palm oil (CSPO) by 2015 but this was achieved largely through the use of GreenPalm credits. Advocates for the GreenPalm system contend that it represented an important initial step to foster market development but it has attracted criticism from campaigners.

Underlining the extent of the challenge, PepsiCo's use of mass balance physically certified palm oil in 2015 was only 8% of its volumes, up from 5% in 2014. However, Aulisi is bullish. "We will meet the 2020 target. 2015 was slower than we thought it would be. We are ramping up significantly now and we're confident we'll meet the target."

The complete list of our Sustainability Watch series of interviews with key names in the field

The complexity of the definitions and certification system for palm oil prompts one to question the degree of consumer knowledge around the issue. There is relatively broad public awareness about palm oil primarily because of concerns over deforestation but the details of how, for instance, the CSPO certification system works is little appreciated. PepsiCo has not conducted any research specifically on consumer knowledge of palm oil but Aulisi says consumers have broader expectations on sustainability, informed by their awareness of headline issues around human rights or the environment.

"We will get into the weeds with the technical stakeholders but I think for our consumers it's a more generalised set of expectations," he says.

Among those scrutinising the PepsiCo progress report and those which will follow will be the many campaign groups who have become impatient at the slow progress on palm oil sustainability generally. Recently, PepsiCo has been subject to some particularly hefty criticism and campaigning.

Consumer rights group SumofUs has created a parody ad, mimicking an iconic Pepsi ad from the 1990s featuring Cindy Crawford. Timed to coincide with the re-launch of Pepsi Crystal, the ad ends with the words "Crystal Pepsi. New look. Same old palm oil problem."

In June, a report from Rainforest Action Network (RAN), Indonesian NGO OPPUK and International Labor Rights Forum, based on interviews with 41 workers at two palm oil plantations operated by IndoAgri Resources (IndoAgri), a subsidiary of PepsiCo's Indonesian partner, Indofood, alleged abusive labour practices and child labour.

PepsiCo addresses this in its update, stating that chairman and CEO Indra Nooyi had "conveyed PepsiCo's concerns to Indofood and expressed her expectation that Indofood is taking such allegations as seriously as PepsiCo does".

While PepsiCo has been targeted by some campaigners, possibly because of the ubiquity of the Pepsi brand, Aulisi sees the primary message from NGOs as urging the company to accelerate what it is doing. The RSPO itself has been subject to similar criticism, with campaigners unhappy at the slow pace of development. This prompted the RSPO to launch the RSPO Next enhanced criteria earlier this year. "The main line of criticism is 'could we do it faster'. There's a lot of urgency around the palm oil issue, particularly in South East Asia, and what we often hear is could you accelerate and do it more quickly."

The PepsiCo palm oil action plan recognises the value external stakeholders can bring. For example, the progress report details examples of utilising specialist expertise from Proforest, a non-profit group that supports companies and other organisations in implementing commitments to sustainable production, and Netherlands-based public-private partnership IDH Sustainable Trade Initiative. It also states that during the past year PepsiCo "met on multiple occasions with Greenpeace, Oxfam, World Wildlife Fund, RAN and other NGOs to discuss our efforts, exchange information and consider ways to achieve shared objectives".

The focus on PepsiCo by some activists is perhaps not surprising given that a report from WWF in 2014 placed PepsiCo among the slower moving multinational companies on the palm oil issue. Also, the company did not join the RSPO until 2009, some five years after its formation.

Even if justified, PepsiCo could say that is the past, and it should now be judged by its actions and planned actions for the coming four years. Aulisi believes the work it has done over the past year will be positively received by campaigners. "The campaigners want to see action and I think what we've demonstrated over the last year is we got started right away, we made a lot of progress, we put a lot of resources to this and importantly, critically, we're reporting against it in a very transparent way."