Case study: How PepsiCo innovates its packaging to make it increasingly sustainable, minimizing PepsiCo’s impact on the environment
According to the U.S. EPA, in most parts of the developed world, packaging constitutes as much as one-third of the nonindustrial solid waste stream. As consumption increases with higher living standards, more countries are seeing significant growth in their packaging waste. While most packaging is recyclable, recycling rates remain lower than expected.
This case study is based on the 2014 GRI Report by PepsiCo published on the Global Reporting Initiative Sustainability Disclosure Database that can be found at this link. Through all case studies we aim to demonstrate that CSR/ sustainability reporting done responsibly is achieved by identifying a company’s most important impacts on the environment and stakeholders and by measuring, managing and changing.
Packaging materials represent a significant portion of PepsiCo’s supply chain spend. Reducing the amount of packaging used for PepsiCo products both helps to reduce the amount of waste sent to landfills and reduces costs for the company. PepsiCo is also constantly working to design more recyclable packaging to increase recycling rates globally. After measuring and setting targets, PepsiCo took action to reduce its packaging Tweet This! – in 2014, PepsiCo eliminated over 11 million pounds of film packaging and over 29 million pounds of corrugated packaging from its global food and snacks packaging, delivering a combined cost savings of nearly $20 million –, increase the recycled content and recyclability of PepsiCo’s packaging – PepsiCo is the only major beverage company consistently using recycled polyethylene terephthalate (rPET) in its containers in the U.S. – and, also, help consumers to recycle.
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With this case study you will see:
- Which are the most important impacts (material issues) PepsiCo has identified;
- How PepsiCo proceeded with stakeholder engagement, and
- What actions were taken by PepsiCo to innovate its packaging to make it increasingly sustainable, minimizing PepsiCo’s impact on the environment
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What are the material issues the company has identified?
In its 2014 GRI Report PepsiCo identified a range of material issues, such as public policy engagement, innovating healthier options, responsibly marketing PepsiCo products, climate change, talent attraction, engagement & growth, human rights, workplace safety. Among these, innovating its packaging to make it increasingly sustainable stands out as a key material issue for PepsiCo, given the company’s commitment to strive for the smallest possible environmental footprint while still meeting the value, cost and performance criteria expected by consumers and customers.
Stakeholder engagement in accordance with the GRI Standards
The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:
Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.
Key stakeholder groups PepsiCo engages with:
| Stakeholder Group | Method of engagement |
| Consumers
| · Consumer insights · Dedicated, 24-hour, toll-free phone line · Contact pages on branded websites · Social media |
| Retail and Food Service Customers | · Annual retail customer survey · Dedicated customer teams |
| Communities
| · Volunteer programs · Community service · Outreach by local offices/ manufacturing sites, etc. · Availability of Speak Up |
| Employees
| · Human Resources tools and representatives · Individual action plans and performance goals · Organizational health surveys and pulse surveys · Speak Up · Employee forums · Social media |
| Suppliers
| · In-person meetings · Environmental Supplier Outreach Program · Supplier Social Capability Management Program · Live and pre-recorded webinars |
| Investors | · Ongoing dialogue through in-person meetings and conference calls · Annual shareholder meetings · Earnings calls and investor forums · Participation in organizations such as the Harvard Law School Program on Corporate Governance, the Stanford University Rock Center for Corporate Governance, the Council of Institutional Investors and the Weinberg Center for Corporate Governance |
| Partnerships | · Ongoing dialogue through in-person meetings and conference calls · Individual engagement plans for each partnership |
| NGOs | · Individual discussions on specific issues |
How stakeholder engagement was made to identify material issues
Throughout the year, PepsiCo regularly engages with its stakeholders on a wide variety of issues. PepsiCo listens carefully and gathers information and opinions from its employees, shareholders, the communities in which it operates, its customers, consumers of its products, regulatory agencies, nongovernmental organizations and other interested stakeholders.
PepsiCo’s stakeholder engagement efforts throughout the year continue to inform its GRI reporting and overarching sustainability strategy. PepsiCo prioritizes the topics it reports on publicly and focuses on those topics most important to PepsiCo and its key stakeholders.
In 2013, PepsiCo completed a formal assessment to identify Material Aspects or what the GRI Sustainability Reporting Guidelines define as those matters that are most important socially, environmentally and economically to both internal and external stakeholders. PepsiCo’s initial assessment of Material Aspects resulted in 16 topics across its three PwP pillars (Human Sustainability, Environmental Sustainability and Talent Sustainability) and financial and corporate governance performance areas. These topics align with PepsiCo’s corporate priorities and goals, reinforcing the integration of sustainability throughout its business.
In 2014, PepsiCo presented its analysis and process for determining its Material Aspects as well as the final list of Material Aspects with stakeholders at its biannual Ceres Stakeholder Forum. No new topics emerged during this forum. However, based on stakeholder feedback, PepsiCo consolidated several topics, made Human Rights a stand-alone Material Aspect and included Land Use as part of its Agriculture Material Aspect.
What actions were taken by PepsiCo to innovate its packaging to make it increasingly sustainable, minimizing PepsiCo’s impact on the environment?
In its 2014 GRI Report PepsiCo set the following targets for innovating its packaging to make it increasingly sustainable, minimizing PepsiCo’s impact on the environment, based on the company’s approach to materiality – on taking action on what matters, where it matters:
- Reducing PepsiCo’s packaging
Initiatives to reduce packaging include lightweighting, film down-gauging, bag optimization, carton size reduction and much more. In 2014, PepsiCo eliminated over 11 million pounds of film packaging and over 29 million pounds of corrugated packaging from its global food and snacks packaging by down-gauging, reducing seal widths and right-sizing both primary and secondary packaging, delivering a combined cost savings of nearly $20 million. On the beverage side of the business, PepsiCo eliminated 46 million pounds of packaging (20 million fewer pounds of plastic, 23 million fewer pounds of paper-based packaging and 3 million fewer pounds of aluminum) versus 2013, through container lightweighting, packaging optimization and improved design for beverages globally. Some specific initiatives that have driven these results include the following:
- PepsiCo’s East Europe region replaced traditional stretch wrap, applied by wrapping all four sides of a package from top to bottom in film, with an innovative shrink hood, eliminating 1 million pounds of plastic.
- Frito-Lay North America reuses its shipping cartons more than five times on average, avoiding the purchase of 295,000 new cartons and reducing 240,000 pounds of CO2e, which is equivalent to 44,750 gallons of gasoline. Spent cartons are recycled.
- Frito-Lay Canada ships many of its products to customers in reusable corrugate cartons that are used more than five times on average, eliminating the need to purchase over 30 million new cartons.
- Increasing the recycled content and recyclability of PepsiCo’s packaging
PepsiCo is committed to increasing the content of post-consumer or post-industrial material in its packaging. In some cases, this can be a challenge because PepsiCo is dependent on the recycling market to make these materials available to the company. Additionally, all packaging must meet PepsiCo’s high safety standards. PepsiCo’s team continues to work to secure a greater share of the post-consumer material currently available, while also working to increase supplier capacity, advance new technologies to make recycling easier and more efficient and increase consumer recycling rates, thereby increasing the amount of material available. Recycled polyethylene terephthalate (rPET) comes from plastic that has already been used for packaging, such as plastic bottles. Prior to being transformed into a new plastic bottle, the plastic is sorted and cleaned in accordance with food safety standards. PepsiCo is the only major beverage company consistently using rPET in its containers in the U.S. In 2014, PepsiCo used 134 million pounds of food-grade rPET, an increase of 23 percent or 25 million pounds versus 2013. In North America, PepsiCo’s beverage packaging included 111 million pounds of rPET in the U.S., which is 30 percent of the food-grade rPET that was available in 2013. In Germany, PepsiCo incorporated 18.7 million pounds of rPET into its bottles, an increase of approximately 85 percent versus 2013, nearly 42 percent of their total resin usage. PepsiCo’s France market sector used 4.4 million pounds of rPET, about 21 percent of their total PET packaging in 2014, with up to 50 percent content in individual product lines. PepsiCo and the MyShelter Foundation partnered to build the Liter of Light program, which brings eco-friendly light to communities in the Philippines living without electricity by recycling packaging materials. The bottle lights make use of everyday materials: PET, water, corrugated sheet metal and chlorine. Each light, lasting up to 10 years, costs about $2 and takes 30 minutes to install. As of April 2014, Liter of Light had installed 190,000 bottle lights in 95,000 homes and donated 800 solar-powered night lamps and 33 street lamps, partly through Pepsi donations and awareness initiatives.
- Helping consumers to recycle
Based on average recycling rates published by the American Beverage Association, the National Association of PET Container Resources, aluminum.org, corrugated.org, American Forest and Paper Association and the U.S. EPA department of Municipal Solid Waste, PepsiCo estimates that, in 2014, approximately 4.3 billion pounds of the 9.3 billion pounds of packaging material used by PepsiCo was recycled by the consumer. PepsiCo set a target to help increase the U.S. beverage container recycling rate to 50 percent by 2018. To contribute to this target, PepsiCo launched the PepsiCo Recycling program (formerly referred to as Dream Machine) in 2010. Since its inception, over 1,150 smart kiosks and 5,200 bins have been installed and more than 434 million post-consumer beverage containers have been recycled. In 2014, 119.9 million containers were collected from a range of locations including kiosks, schools and industrial locations. As of 2013, the U.S. beverage container recycling rate had reached 42 percent, according to an American Beverage Association report. According to a PepsiCo national survey, 81 percent of Americans say they would recycle beverage containers at a retail location if proper bins were available. PepsiCo Recycling expanded its recycling on-the-go partnership with three new retailers in 2014, placing over 700 additional recycling bins and collecting 27,000 pounds of recyclable materials –approximately 540,000 plastic bottles and aluminum cans – from the program. This “recycle-at-the-pump” program is helping retailers divert recyclables from landfill and provide recycling opportunities in places where they did not exist. PepsiCo has also engaged over 500,000 K–12 students on environmental leadership. In 2014, PepsiCo teamed up with K–12 schools in 33 states, collected 5.9 million recycled beverage containers and awarded more than $188,000 in grants and rewards for recycling and other eco-initiatives. Since 2010, PepsiCo has donated $1.67 million to the Entrepreneurship Bootcamp for Veterans with Disabilities and will allocate additional funds over the next two years. Formed in 2014, PepsiCo’s “Recycle for Nature” partnership with The Nature Conservancy, the world’s largest conservation organization, is encouraging consumers to recycle more often to help protect drinking water sources throughout the U.S. This project is part of PepsiCo’s collaboration with Walmart to increase recycling and PepsiCo’s investment in the Closed Loop Fund, a program that provides financing to municipalities and other organizations to improve access to recycling when and where people need it. PepsiCo is now tackling both on-the-go and curbside recycling. For example, working with the NFL, the City of Phoenix and Keep Phoenix Beautiful during the 2015 Super Bowl, PepsiCo placed 500 specially designed recycling bins in the stadium and surrounding area. Additionally, hundreds of PepsiCo volunteers hit the streets to help make the Super Bowl clean and green.
Which GRI indicators/Standards have been addressed?
The GRI indicators/Standards addressed in this case are:
1) G4-EN1: Materials used by weight or volume – the updated GRI Standard is: Disclosure 301-1 Materials used by weight or volume
2) G4-EN2: Percentage of materials used that are recycled input materials – the updated GRI Standard is: Disclosure 301-2 Recycled input materials used
3) G4-EN28: Percentage of products sold and their packaging materials that are reclaimed by category – the updated GRI Standard is: Disclosure 301-3 Reclaimed products and their packaging materials
References:
1) This case study was compiled using published information by PepsiCo which is located at the link below. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link:
http://www.pepsico.com/docs/album/sustainability-reporting/pep_rpt14_gri_v10.pdf?sfvrsn=2 (June 2015)
2) http://www.fbrh.co.uk/en/global-reporting-initiative-gri-g4-guidelines-download-page
3) https://g4.globalreporting.org/Pages/default.aspx
4) https://www.globalreporting.org/standards/gri-standards-download-center/
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