Meet the Change Makers: The New Pepsi Challenge | OnEarth

Can a company making sugary drinks and salty snacks for more than a century modernize for an era when health and sustainability matter? Image by Tom Kelley

Bringing sustainability to the soda and snack food aisles

Editor’s note: This is the first in a series of OnEarth Q&As with business leaders who are transforming their industries.

Since the days when Pepsi challenged Coke to a long-running public taste-off, the cola wars have receded to a quaint memory. PepsiCo has since grown to nearly twice the size of Coke, selling a more diverse line of products. The company based in Purchase, New York, posted sales of $57.8 billion in 2010, but just half of its revenue comes from beverages: Pepsi Cola, Mountain Dew, and Gatorade are its top-sellers. The rest? Those salty snack foods common at picnics and lunch tables, including Lay’s potato chips, Doritos tortilla chips, and Fritos corn chips.

In recent years, PepsiCo has also worked to distinguish itself from its archrival with a more prominent focus on corporate sustainability. Under CEO Indra K. Nooyi, the company has defined its five-year mission, dubbed Performance with Purpose, as “delivering sustainable growth by investing in a healthier future for people and our planet.” On the ground, this has translated into investments in renewable energypackaging reductions, and company-wide efforts to cut the use of energy, food commodities, and water. Those initiatives have already saved nearly 20 billion liters of water since 2006, according to PepsiCo’s most recent assessment. Pumping and treating less water has helped trim energy use substantially, too, because moving less water means using less electricity and fuel to power factories. While PepsiCo won’t reveal a dollar value on these savings, they run into the hundreds of millions.

The successes haven’t insulated PepsiCo from environmental controversy, however. The trash flow from billions of plastic bottles and the private sale of public water resources ignited public ire a few years ago and continues today. In March, PepsiCo unveiled the first fully recyclable disposable beverage bottle made from plant-based materials that don’t compete with food crops. The news won praise from green groups, including NRDC. It came just a few months after the company’s Aquafina brand was given a “D” for transparency by the Environmental Working Group in its Bottled Water Scorecard.

OnEarth contributor Adam Aston recently spoke to Dan Bena, senior director of sustainable development at PepsiCo. A 27-year veteran of the company, he is active in international water issues, having worked with the United Nations CEO Water Mandate and the World Economic Forum, among others, to chart a course toward worldwide water sustainability and security. He opened up about the environmental challenges the snack food giant faces.

Daniel Bena

You’re trying to curb water use across the company. How is PepsiCo changing the way it operates to meet that goal?

In 2009 PepsiCo became one of the first large companies to publish public guidelines recognizing water as a human right. This was just before the United Nations General Assembly did likewise. We’ve gotten a lot of positive feedback, even from non-governmental organizations that wouldn’t have had much time for PepsiCo before then, praising that step as an important line in the sand to draw.


The challenge we face now is to embed those values in our day-to-day operations, and to push them out to our suppliers and customers. To do so, we set out a few specific goals focused on water. Within our own beverage and food factories, we aim to improve our water-use efficiency by 20 percent by 2015, from a 2006 baseline. In fact, we’re already at 19 percent, so we hope to hit that goal very soon, four years early.

Second, we’re aiming to have positive water balance in water-distressed areas. Last month during World Water Week, an annual global summit of water experts in Stockholm, we published a joint report with The Nature Conservancy assessing the benefits of watershed preservation and restoration in five global communities, to help us and others learn better practices for protecting watersheds.

Lastly, we set a goal to provide three million people in water-distressed areas with access to safe water, also by 2015.

How do you define and improve “water-use efficiency?”

It’s a measure of the total water used to make a single unit of our product. For example, as a rough global average, it takes PepsiCo about 2.5 liters of water to produce a liter of beverage. It’s really variable though. At our best plants, it’s probably half that, and a few facilities use twice that amount. That’s the opportunity we face: to lower water use at our least efficient plants.

We track our internal water use for drinks by liters per liter of beverage, or for snacks as liters per kilogram of food. Using an analytical method we developed in house, called Resource Conservation, or ReCon for short, our plants around the world have gone through and meticulously mapped streams of water use.

When you do this, you see how water costs add up. Incoming fresh water is expensive to bring into a factory. On top of that, every liter that enters a factory must be treated, processed, and discharged. Each of these steps carries costs. So by reducing the amount of water entering a plant, you reduce those extra steps, too, and the savings compound. Factory managers used to the idea that “water is cheap” suddenly start paying attention. There’s no better way to get their attention than saying: “This can save you money.”

Since its launch in 2009, ReCon water has prevented the use of 2.2 billion liters of water, with a corresponding cost savings of nearly $2.7 million. We’ve also begun extending ReCon water-saving practices to our key suppliers. So far, those partners have scored a collective 22 percent improvement in water-use efficiency, compared with a 2007 baseline.

What else is water used for in the factories other than the actual beverages and food?

Believe it or not, in a beverage plant, one of the largest users of water is the room where the water is filtered. There, frequent backwashing of filters and advanced membranes consume really high volumes of water. Another of the biggest users is what we call “clean in place” or “sanitize in place,” where water is used to douse conveyers, equipment, floors, and rooms, ensuring they’re sanitary before producing beverage. Sometimes, it’s even used as a lubricant to keep conveyor belts flowing.

Are similar water-saving steps underway at PepsiCo’s food plants?

Yes. Few people realize this but producing food is also highly water-intensive. Making potato chips uses as much water as making beverages. There’s a lot of rinsing as potatoes are processed: to remove dirt when they’re peeled; to take off an outer layer of starch so they fry better. Companies talk about taking factories or buildings off the electric grid, but no one talks about taking plants off the water grid. That’s something we’re exploring at our Walkers potato chip plants in the United Kingdom.

As they arrive from the farm, potatoes are 80 percent water. Frying drives out most of that moisture as steam. The Walkers team is developing a process to capture that steam before it goes out a stack and bring it back into the process. It’s enough water, we think, that the plant could operate without taking fresh water from public supplies.

These efficiencies improve PepsiCo’s internal water usage. But what steps are you taking to help the communities you operate in where water is scarce?

I mentioned before that we’re aiming to achieve a “positive water balance” in water-stressed regions. An example can help explain our approach. One of the easiest areas in which to achieve big water savings is agriculture. Globally, farming accounts for about three-quarters of water use. In India, it’s more — about 85 percent. We make a variety of beverages there, and water supplies are widely at risk. To help lower farms’ water use, PepsiCo developed and patented a relatively simple piece of equipment that automates the direct seeding of rice.

Conventionally, rice is planted in a flooded field, where young shoots sit in three or four inches of water for up to six months. Direct seeding shortens this period and cuts water use by about one-third. We estimate that developing and promoting direct seeding lets us give back 5.5 billion liters of fresh water each year that would have otherwise been drawn from wells or surface streams and lakes.

Critics have cried foul over the idea of selling bottled water in low-income countries. You’ve argued that they’re missing the point — that water is sold anyhow, often at unfair rates in those markets.

There’s a misconception that poor people cannot and should not pay for water. The reality is that in many cases they do pay for water: the trouble is they often pay high prices for poor-quality water. Delivering safe, clean water at a fair price is something that can help close the health and poverty gap between consumers at the “base of the pyramid” — the poorest half of the world’s population — and the developed world.

This relates to PepsiCo’s third goal I mentioned: improving access to fresh water for three million people by 2015. To hit this goal, we’re working with Columbia University’s Earth Institute and — which is the merger of Water Partners International and Matt Damon’s H2OAfrica.

The PepsiCo Foundation provides funding to assist a variety of projects. Under the WaterCredit Program, the money is distributed in microloans, on the order of $120 per loan, and used to build household sanitary facilities or to improve access to fresh water. The loans go almost entirely to women, and repayment has been close to 100 percent. Any global bank would be envious of those kinds of returns.

Earlier this year, we became the first private sector donor to the Inter-American Development Bank’s Aquafund. With our $5 million donation, the plan is to “lift and shift” the WaterCredit model from India to Latin America, and to deliver safe water to 500,000 people there by 2015.

Our third partner is the Safe Water Network, a not-for-profit that PepsiCo founded with Paul Newman’s charity and others who saw the need to bring people safe water. This work is focused on Ghana, India, and Kenya.

Some argue that the nature of the water crisis — its very scale and stubbornness — make it a poor match for corporate efforts. How do you reconcile PepsiCo’s reach with the scope of the challenge?

It’s true that water crises are enormous — so much so that no single entity can solve them alone. That’s why all the key players — governments, NGOs, academia, individuals and, yes, industry — must collaborate on the solutions. Recognition is the start of a long journey to help improve the situation. Commitments are the next step.

At PepsiCo our challenge now is to formalize those efforts, test their success and nurture the best of those practices across our business units around the world. It is a daunting process. But our efforts together with those of others — I think of it as a divide-and-conquer approach — can help achieve steady, small steps.

So, do companies have a role in protecting water? Not just a role, but an absolute obligation.


Checking industry claims with NRDC’s sustainability experts

PepsiCo has been in the middle of more environmental and health controversies over the past decade than at any time in the century since it patented the recipe for Pepsi-Cola. In recent years, its Aquafina brand of bottled water came under fire. Today, the waste caused by the beverage industry, as well as questions about the commoditization of a public resource, persist as lighting-rod issues. Health is another knotty challenge. Concerns continue to mount over the role of sugary drinks as childhood obesity and diabetes rates skyrocket.

While some companies have shied away from acknowledging such problems, PepsiCo has responded with a range of industry-leading efforts. “Does one praise a company making an unsustainable product such as bottled water? I don’t know,” says Jonathan Kaplan, an NRDC senior policy specialist in San Francisco. “But there’s no question that they’re forward thinking on these issues relative to their competitors.”

For example, in 2009, the company conducted a life-cycle assessment  to gauge the environmental impact of its Tropicana orange juice line and published the results in the New York Times. “Many companies spend time doing LCAs, but they rarely make the findings public,” says Kaplan. Likewise, its public focus on developing plant-based plastic bottles, recycling, and greener operations boost the pressure on its competitors to follow suit, Kaplan adds.

Water use is another area where PepsiCo is leading its peers, Kaplan says. “Food manufacturers, in general, are closer to recognizing that we’re headed toward a future with finite resources, where water, grain, and other inputs are less available and more expensive.” By this measure, the company’s efforts to curb water use at its plants gives it an edge — and just might drive competitors to do likewise. “Companies that figure out how to become part of the solution will have an advantage.” — Adam Aston

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