PepsiCo has gone one up against Coca-Cola in the latest Dow Jones sustainability index

PepsiCo has gone one up against Coca-Cola in the latest Dow Jones sustainability index

The latest Dow Jones Sustainability Index saw PepsiCo named as leader of the food and beverage sector, while Coca-Cola lost its place altogether. Ben Cooper reports on the reactions of the two companies and examines the growing importance of sustainability issues, such as water use and packaging, to soft drinks companies.

Having given sustainability such prominence, PepsiCo will have derived considerable satisfaction from being named leader in the food and beverages sector of the Dow Jones Sustainability Index (DJSI) last month. 

Its high achievement may have been all the more sweet given that The Coca-Cola Co was among some high-profile names to be dropped from the DJSI this year. 

Bold sustainability aspirations – buffed up with plenty of PR spin – are fairly commonplace in today’s corporate world, and the media – not to mention the public – are ready for it. External recognition of progress is therefore extremely valuable. Indeed, when Coca-Cola made the DJSI for the first time two years ago, it said the index was “a testament” to its sustainability efforts and “exemplified leadership in sustainability”. 

What was true in 2009 remains true in 2011, so it is no surprise to find that Robert ter Kuile, senior director, environmental sustainability in the PepsiCo Global Public Policy group, is upbeat about PepsiCo’s strong showing.

“The DJSI is a really big deal for PepsiCo,” he says, adding that the company was “honoured” to be leader of the Food and Beverage super-sector. In fact, PepsiCo was the only US-based company to lead a super-sector, which also includes travel and leisure, financial services and retail.

Robert ter Kuile, senior director for environmental sustainability in PepsiCo's Global Public Policy group

When asked to comment on Coca-Cola’s deletion, ter Kuile unsurprisingly resists, saying only that the DJSI “affirms” the view that, when it comes to companies that combine strong business performance with responsible business practices, “PepsiCo is among the very best”.

Good corporate etiquette no doubt has much to do with this restraint. However, the sustainability arena is unpredictable and full of potential reputational pitfalls. Setting challenging targets alone can make companies hostages to fortune, without raising the stakes further with triumphalist rhetoric.

Indeed, while the DJSI reflects the progress PepsiCo has made across many sustainability criteria, this summer the company had to concede that it had made slower progress on some of its goals related to healthier products than it had hoped.

The Health Update 2011, published by PepsiCo UK & Ireland in July, revealed that it had achieved - or was on track to achieve - some of its targets but was off the pace in others. Ter Kuile sees this as a demonstration that the company is not setting itself easy targets. “PepsiCo sets goals that challenge the business to continuously improve and innovate," he says. "Implementing the programmes to achieve these goals will take time, some longer than others.” 

Also, while it is an area where competitive advantage can be realised, sustainability issues are supposed to transcend traditional corporate rivalries, and seeking to score points over competitors rather goes against the ethos. 

For that reason perhaps, ter Kuile prefers to concentrate on PepsiCo’s own achievements. With the strong championing of CEO Indra Nooyi, sustainability is a major focus for PepsiCo, which groups its 'Performance with Purpose' sustainability platform under three “pillars”: Human, Environmental and Talent.

Clearly, improving the nutritional profile of products is critical for both food and beverage companies but, for beverage companies in particular, two notable sustainability ‘hotspots’ are packaging and water use.

Ter Kuile agrees that both water and packaging are “big issues”. While PepsiCo did not have the leading DJSI sector score on water-related risks, its score was double the sector average. In 2007, it set itself a target to improve water efficiency by 20% per unit of production by 2015 against a 2006 baseline. “We’ve seen an improvement since 2006 of more than 19% per unit of production already, so we’re well on our way to achieving that goal,” says ter Kuile. 

Location-specificity is critical in assessing water use. Global figures for a multinational company are virtually meaningless if it is hyper-efficient in regions where water is plentiful and inefficient where it is scarce. For this reason, PepsiCo “drills down very specifically to as local as we can possibly get”, ter Kuile says. “We track (water use) by facility, and then we roll it up on a country, division and regional level.” 

He also draws attention to the company’s community investment around water. Last year, PepsiCo announced goals to provide access to safe water for 3m people in developing countries by 2015, and to “continuously strive” for positive water balance in its operations in water-distressed areas, working in partnership with NGOs such as the Earth Institute and Water.org.

In packaging, ter Kuile points to innovation in lightweighting, recycling and the search for alternative materials, such as the inclusion of at least 10% of recycled PET in its primary soft drink containers in the US and the launch of a green PET bottle in Canada. “We have a 100%-recycled PET container for our Naked Juice products in the US,” ter Kuile adds, “[and] we’re looking to launch in 2012 a plant-based PET bottle.” 

Packaging is significant not only for the sustainability benefits and long-term cost savings it can bring. It is also a very tangible aspect of the sustainability drive with consumers. Customers pick up and feel these soft drinks containers; they even drink from them. Ter Kuile says PepsiCo understands that how it produces and styles its packaging, whether this relates to the materials used or what is on the label, is “an opportunity for us to engage the consumer directly”. 

Interestingly, Coca-Cola also points to water and packaging as critical areas. In a statement to just-drinks on its deletion from the DJSI, Cassandra Garber, senior manager of corporate external affairs, said: “We were disappointed to learn that we were not included in this year's Dow Jones Sustainability Index, but were pleased to see that the index showed an uptick in our scores in packaging, water-related risks and raw material sourcing, reflecting our continued leadership and investments in these critical areas.” 

Garber added: “Sustainability is core to our business and we see it as a key driver for creating long-term value. We will continue to advance our efforts and actions to make a positive difference everywhere we engage.” 

It is perhaps no surprise that Coca-Cola’s reaction to the publication of the DJSI was rather more succinct than PepsiCo’s. But it is significant that it made no attempt to play down its importance. This would have been somewhat inconsistent with its view two years ago but also reflects the value companies attach to high-calibre, independent evaluation on sustainability criteria. 

Ter Kuile says the DJSI ranking represents, for instance, “a big leverage point” in conversations with external stakeholders such as NGOs, and is also helpful in conversations with investor groups. What it undoubtedly provides, not least because it bears the Dow Jones brand, is a degree of legitimacy in an area where talk is often cheap.