ConflictPalmOilandPepsiCosEthicalDilemma.pdf

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with rainforests being cleared to make way for palm oil plantations. This added to global warming emis-sions and resulted in a shrinking of the habitat of many already threatened species.

On the heels of a wave of zero deforestation commitments from other consumer products com-panies, PepsiCo committed through the Roundtable for Sustainable Palm Oil4 (RSPO) in 2010 to source exclusively 100% RSPO certified sustainable palm oil by 2015.

Conflict Palm Oil posed an ethical dilemma for PepsiCo which bought approximately 470,045 met-ric tonnes of palm oil annually, making the company the biggest purchaser of palm oil worldwide.5 Several environmental groups criticized PepsiCo for selling its popular products like Doritos and Lays, which were not covered by the commitment to use responsible palm oil, at the expense of the environment. PepsiCo was one of the “Snack Food 20”6 group of compa-nies targeted by RAN’s Conflict Palm Oil campaign for its inadequate palm oil policy. The group repeat-edly called on PepsiCo’s CEO Indra Nooyi (Nooyi) to go on record about her company’s continued use of palm oil. According to RAN, PepsiCo’s commit-ment to sourcing sustainable palm oil was weak and it should adopt and implement a responsible palm oil procurement policy. With mounting pressure, Pep-siCo announced a new Forest Stewardship Policy and Palm Oil Commitment in May 2014. Though in

In September 2015, US-based consumer food giant, PepsiCo Inc. (PepsiCo), was dropped from the annual Dow Jones Sustainability Indices (DJSI)1 as, according to some reports, the company’s sus-tainability performance had failed to make the grade. PepsiCo was singled out by a number of environmen-tal groups for its continued use of large quantities of Conflict Palm Oil,2 the production of which was responsible for large-scale destruction of rainfor-ests, human rights violations, and climate pollution in tropical countries like Indonesia where palm oil was produced. The groups criticized PepsiCo for not having a robust sustainable palm oil policy and for not acknowledging the damage its supply chain had caused in countries such as Indonesia and Malaysia. According to an international environmental and human rights organization, the Rainforest Action Network (RAN), “What Pepsi does has a huge impact on the climate, the rainforests of Southeast Asia, and the people and animals that rely on these forests for their lives and livelihoods. The company is a major Conflict Palm Oil laggard. It is dragging its feet and is refusing to admit it even has a problem. It could rise above its competitors and do the right thing, but, instead, it has relied on half measures and a commitment with gaps big enough to drive a bull-dozer through.”3

Palm oil obtained from the fruit of the oil palm tree and the most widely used vegetable oil in the world, went into the processing of a wide array of food and non-food products. Over the years, the demand for palm oil had increased sharply as it was one of the cheapest vegetable oils on the global market with no trans fats. The rising demand led to large-scale deforestation across South East Asia

Syeda Maseeha QumerIBS Hyderabad

Debapratim PurkayasthaIBS Hyderabad

Conflict Palm Oil and PepsiCo’s Ethical Dilemma

CASE 31

© 2016, IBS Center for Management Research. All rights reserved. This case was written by Syeda Maseeha Qumer and Debapratim Purkayastha, IBS Hyderabad. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

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the new policy PepsiCo included measures which it claimed went beyond RSPO standards, it failed to guarantee that its entire supply chain would be free from deforestation and social conflict. Meanwhile, several campaigns were launched by environmen-tal activists that targeted specific brands of PepsiCo over the palm oil issue making it a PR nightmare for the company.

Following months of protests from several environmental groups, PepsiCo came out with a revamped palm oil commitment in September 2015. Though the new commitment identified the compa-ny’s sources of palm all the way back to the planta-tion and addressed workers’ rights, it did not cover any joint venture in which PepsiCo had a minority stake. Environmental groups were disappointed with the changes in the new commitment and said PepsiCo continued to fail to take responsibility for the impact of its products sold globally. Given the size and impact of its business, PepsiCo was expected to play a huge role in the problematic global production of Conflict Palm Oil. PepsiCo, however, insisted that its policy was strong enough. But criticism of the company grew more strident and PepsiCo was pro-jected as a “Conflict Palm Oil laggard.” This put the brands and corporate reputation of PepsiCo at serious risk. According to Ginger Cassady, Forest Program Director at RAN, “Reforming the palm oil sector is not an easy task. Real change will only be achieved if PepsiCo invests the time and resources to implement innovative solutions that address the depth, scope, and urgency of the problems currently caused by palm oil production in its supply chain. My question for you Ms. Nooyi is will PepsiCo com-mit to necessary revisions to its policies, and invest the resources needed to eliminate Conflict Palm Oil from the global palm oil supply chain?”7

ABOUT PEPSICOPepsiCo, headquartered in Purchase, New York, USA, was a global food and beverage company. Its products are sold in more than 200 countries and territories around the world. Its portfolio included 22 brands that each generated more than $1 billion in estimated annual retail sales. For the year 2014, PepsiCo had total revenues of $66.68 billion and net profit of $6.51 billion (see Exhibit 1).

The origins of PepsiCo date back to the late 19th century when a young pharmacist Caleb Bradham (Bradham) started selling a refreshing drink called “Brad’s Drink” in his pharmacy. The drink was later renamed Pepsi-Cola, and went on to become a key challenger to rival brand Coca-Cola. In 1965, Pepsi-Cola merged with Frito-Lay8 to form PepsiCo Inc. In the subsequent years, the company reshaped its portfolio, built new capabilities, invested in new geographies, and went on to become a key player in the global beverage market along with the Coca-Cola Company (Coca-Cola).

In the new millennium, PepsiCo decided to focus on its packaged foods business to effectively com-pete with Coca-Cola. It also acquired Tropicana, the world’s biggest producer of branded juices, in July 1998. Other steps taken by PepsiCo included hiving-off its bottling operations into a separate new com-pany called the Pepsi Bottling Group (PBG). The company’s restructuring efforts paid off and its oper-ating profits rose from $ 2.58 billion for the year 1998 to $ 3.23 billion in 2000. In December 2005, PepsiCo overtook Coca-Cola in market capitalization for the first time as its market value reached $98.4 billion, compared with $97.9 billion for Coca-Cola. Analysts attributed the company’s growth to a diversified prod-uct portfolio and a strong marketing strategy.

EXHIBIT 1 Financial Summary for PepsiCo, Inc. 2011–2014 (in billions of $)

2014 2013 2012 2011

Total Revenue $66.68 $66.42 $65.49 $66.50

Gross Profit 35.80 35.17 34.20 34.91

Operating Income 9.58 9.71 9.11 9.63

Net Income 6.51 6.74 6.18 6.44

Source: www.nasdaq.com/symbol/pep/financials?query=income-statement#ixzz3syQYQ7ED.

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of the organization must go hand-in-hand with its responsibilities toward society and the environment. The declaration by PepsiCo called the “The Prom-ise of PepsiCo” had 47 commitments which were to guide the organization over the following decade. The “Performance with Purpose” contained both promises made to its shareholders for providing good financial returns and the promises made toward the society and environment. In its promise to shareholders viz. “Per-formance,” PepsiCo vowed to deliver superior and sustainable financial performance, to maximize their wealth. PepsiCo’s responsibilities toward the society and the environment were broadly categorized into three areas viz. Human Sustainability, Environmental Sustainability, and Talent Sustainability.

Human sustainability referred to the efforts put in by PepsiCo to meet the different nutritional needs of the people. Environmental sustainability focused on protecting the environment and reducing Pep-siCo’s reliance on natural resources and conserving them for future generations. It also focused on miti-gating the impact of its operations on the environ-ment. Talent sustainability focused on developing its employees by building the skills required to meet its growth needs and making PepsiCo an attractive tar-get for the world’s best brains. Commenting on Pep-siCo’s initiatives in sustainable development, Nooyi said, “The talents and skills of our global workforce, coupled with our operational capabilities, provide PepsiCo with a unique opportunity to have a positive impact on society. The goal of our sustainable devel-opment journey is to operate as a force for bringing greater good to the world.”9

Under its environmental sustainability initia-tives, PepsiCo promised to be a good citizen of the world committed to protecting natural resources by proper use of land, energy, and packaging in its oper-ations. For the company, a large part of its sustain-ability efforts involved reducing the negative effects resulting from the production and consumption of its products. This included “going green” through water conservation and the reduction of waste products and reducing its carbon footprint. PepsiCo committed to increasing its water use efficiency by 20% by 2015. In view of the protests that it was facing in countries like India regarding its water use practices, it prom-ised to strive for a positive water balance in its opera-tions where water was scarce. It also promised to use more recycled material in its packaging operations to reduce environmental damage. PepsiCo committed

As of 2014, PepsiCo was one of the world’s leading food and beverage companies that marketed, distrib-uted, and sold a wide variety of beverages, foods, and snacks to customers in more than 200 countries. The company owned a global portfolio of diverse brands, and of them, 22, including Pepsi, Lays, Quaker, Tropi-cana, Aquafina, and Gatorade, generated more than $1 billion each in annual retail sales. The company oper-ated through six segments— Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), Latin America Foods (LAF), PepsiCo Americas Bev-erages (PAB), PepsiCo Europe (Europe), and PepsiCo Asia, Middle East and Africa (AMEA). In 2014, the company generated more than $66 billion in revenues.

However, the growth in the company’s business led to more controversies dogging its operations. The company faced criticism from environmentalists regarding the effect of its operations on the environ-ment. Its beverage products were packed in plastic bottles and tin cans, which the environmental activ-ists alleged, could cause environmental pollution. The company was also criticized for the contents in its snack and beverage products, which were blamed for leading to an increase in health problems like obesity and diabetes.

In the face of growing criticism, PepsiCo started to focus more on sustainable development practices worldwide. It started a new sustainable development program in 2009 with a five-year mission “Perfor-mance with Purpose.”

“Performance with Purpose”Faced with environmental and social criticism, in 2009, PepsiCo started an ambitious new sustainable development program called “Performance with Pur-pose” under the leadership of Nooyi, who took charge as CEO in 2006. India-born Nooyi was a graduate of Madras Christian College in Chemistry, Physics, and Mathematics, a management graduate from the Indian Institute of Management, Calcutta, and Master’s in Public and Private Management from Yale. After stints with companies such as ABB, Johnson and Johnson, and Management consulting firm, Boston Consulting Group, she joined PepsiCo as the chief strategist in 1994. She served as the Senior Vice-President of Stra-tegic Planning and Development and Chief Financial Officer of PepsiCo before becoming the CEO.

The “Performance with Purpose” mission was based on the belief that the financial performance

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soups. Its non-food uses were in detergents, soaps, personal care products, and as a feedstock for bio-fuels. The palm tree, native to Western Africa, was grown mostly in the tropics. About 85% of palm oil was sourced from the tropical countries of Indone-sia, Malaysia, and Papua New Guinea (PNG) where rainforests mostly occurred (see Exhibit 2).

Over the years, the demand for palm oil had increased sharply as it was one of the cheapest vegetable oils available on the global market with no trans fats. By 2013 the production of palm oil reached nearly 55 million metric tons and surpassed Soya oil to become the world’s most widely traded and used edible vegetable oil. In the US, the con-sumption of palm oil grew rapidly, increasing nearly sixfold since 2000 to reach 1.25 million metric tons in 2012.11

However, the rising demand for palm oil led to large-scale deforestation across Southeast Asia (see Exhibit 3). Rainforests were cleared to make way for palm oil plantations in nations with large tropical forests such as Indonesia and Malaysia. This severely impacted the environment and the local communi-ties and led to the destruction of carbon-rich forests and peatlands.12 The large-scale oil palm expansion between 1990 and 2010 resulted in direct forest loss of about 3.5 million hectares in total in Indonesia, Malaysia, and PNG. In 2009, the Indonesian gov-ernment announced plans to allocate approximately 18 million more hectares of rainforests for palm oil cultivation.13

to counter climate change by improving electricity use efficiency by 20% by 2015, reducing the fuel used by 25% by 2015, reducing the greenhouse gas (GHG) emissions from its operations, and applying on its farmed lands agricultural practices that had proved to be sustainable.

PepsiCo’s focus and the progress it had made on sustainable development gave it good results, according to analysts. In recognition of the progress it had made till then on sustainable development, PepsiCo was named as the top food and beverage company in the DJSI Food and Beverage Super sec-tor and included in the Dow Jones Sustainability Indexes for the year 2011.10 PepsiCo was the only company based in the US to earn the top ranking in the 19 super sectors assessed. It was the third con-secutive year that PepsiCo had been named as the leader in the beverage sector. However, PepsiCo’s successes on sustainable development didn’t make it impervious to controversy. Some environmental activist groups continued to criticize its practices.

PALM OIL AND RAINFORESTSPalm oil, obtained from the fruit of the oil palm tree (Botanical name Elaeis guineensis), was the most widely used vegetable oil in the world and went into the processing of a wide array of food prod-ucts including cookies, chocolates, peanut butter, crackers, breakfast bars, potato chips, instant noo-dles, baby formula, margarine, and dry and canned

EXHIBIT 2 Global Demand for Vegetable Oil, 2002–2016

tric

Palm

Soybean

Rapeseed

Sunflower

2002

200

2003

200

2004

200

2005

200

2006

200

2007

200

2008

200

2009

201

2010

201

2011

201

2012

201

2013

201

2014

201

2015

201

Source: Oilseeds—World Markets and Trade, USDA, June 2015.

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communities in Indonesia, Malaysia, PNG, Liberia, Cameroon, Latin America, and other rainforest regions often faced threats to their security and derived marginal economic benefits by the expan-sion of palm oil production. A single palm oil plan-tation destroyed the forest resources of thousands of Indonesians who relied directly on the rainforests for their livelihoods, leaving entire forest communities in the grip of poverty. Moreover, irresponsible palm oil practices affected the health and wellbeing of local people as burning of forests led to large-scale forest fires, which were one of the main causes of the haze that caused both health impacts and signifi-cant economic losses.

With widespread concern over large-scale destruction of forests for palm oil production, some environmental groups wanted palm oil develop-ment to be shifted away from forests and peatlands to degraded non-forest lands and other areas. These groups put pressure on major palm oil companies to

Tropical rainforests covered about 7% of the earth’s surface and were vital to the ecosystem as they nurtured about 50% of the world’s plants and animals. Indonesia’s tropical rainforests provided a critical habitat to species including the highly endangered Sumatran tigers, elephants, and orang-utans. Deforestation threatened these species. As of 2014, only 60,600 orangutans remained in the wilds of Indonesia’s Sumatra and Borneo islands. Palm oil production was a big contributor to climate change as deforestation and drainage of carbon rich peat-lands was carried out in Malaysia to make way for palm oil trees that released sequestered carbon into the atmosphere as carbon dioxide, and contributed to global warming.

The production of palm oil was also responsible for widespread human rights violations as palm oil producing companies forcefully evacuated indige-nous peoples and rural communities from their lands and pushed them into forced and child labor. Rural

EXH IB IT 3 Palm Oil Supply Chain

FRESH FRUIT BUNCH (FFB)

25kg

PLANTATION

COLLECTION PORT

45,000tonnes

200,000tonnes

MANUFACTURER

REFINERY/FRACTIONATION PLANT

20%stearin

80%Olein

100tonnes/hour

PALM OILSUPPLY CHAINNOTE: Volumes in this infographic are averages.There is a lot of variation in processing, transport capacity, and ingredient use.

MILL

18 tonnespalm oil/ hour

90tonnes FFB

/hour

COOKIE250gr cookies

15gr palm oil

MARGARINE

MANUFACTURER

250gr margarine

100gr palm oil

Source: www.rspo.org/certification/how-rspo-certification-works.

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approximately 0.7% of the total global supply, for its snack foods.14 It was alleged that PepsiCo’s products were made using palm oil grown in Indonesia by some of the companies associated with the destruc-tion of rainforests.

Rainforest Action Network (RAN)RAN, a prominent environmental NGO based in San Francisco, California, had been working to protect rainforests and the human rights of those living in and around those forests. Established in 1985, the organization’s mission was to “campaign for the forests, their inhabitants, and the natural systems that sustain life by transforming the global market-place through education, grassroots organizing, and non-violent direct action.”15 RAN played a key role in strengthening the rainforest conservation move-ment globally by supporting activists in rainforest countries as well as mobilizing consumers and com-munity action groups through media campaigns, conferences, and publications.

With Conflict Palm Oil being one of the world’s leading causes of rainforest destruction and a major driver of human induced climate change, RAN put pressure on some well-known food companies in the world to get Conflict Palm Oil off the shelves. In September 2013, RAN launched a campaign called “Conflict Palm Oil” to eliminate deforestation, human rights violations, and carbon pollution from the palm oil supply chains of US snack food com-panies. As part of the campaign, RAN identified 20 major global food manufacturing companies using Conflict Palm Oil. These included PepsiCo, Heinz, Hershey’s, Kraft, and Smuckers. RAN felt that these companies, which it dubbed as the “Snack Food 20,” had the power to get involved with their global supply chains to transform the way palm oil was traded and produced if they each adopted strong policies with clear public commitments and time-bound imple-mentation plans. According to RAN, the implemen-tation of responsible palm oil policies by the “Snack Food 20” companies would increase the demand for sustainable palm oil and drive a transition to trans-parent and traceable palm oil supply chains.

To make these major food companies com-mit to using only traceable palm oil, RAN launched another national campaign called “The Last Stand of the Orangutan: The Power Is in Your Palm.” As part of the campaign, several RAN supporters wore

move new plantations away from forest lands and adopt better labor standards.

Round Table on Sustainable Palm Oil (RSPO)In an effort to stop the tide of criticism against rain-forest destruction and to get the sector to move toward sustainable palm oil, the global palm oil industry cre-ated the Round Table on Sustainable Palm Oil (RSPO) in 2004. The aim of RSPO was to promote the growth and use of sustainable palm oil. It was a not-for-profit group that united stakeholders from seven sectors of the palm oil industry comprising palm oil producers, processors or traders, consumer goods manufactur-ers, retailers, banks/investors, and environmental and social non-governmental organizations (NGOs), com-mitted to produce, source, or use sustainable palm oil certified by the RSPO. As of 2015, RSPO had more than 1,700 members worldwide.

RSPO developed a set of environmental and social criteria which companies had to comply with in order to produce Certified Sustainable Palm Oil (CSPO). Palm oil producers were certified after accredited certifying bodies carried out a strict verification of the production process in accordance with RSPO principles and criteria for sustainable palm oil pro-duction. All companies in the supply chain that used RSPO certified sustainable oil products were audited to prevent overselling and mixing palm oil with non-sustainable palm oil products. In case of infringement of the rules and standards, their certificates could be withdrawn at any time.

With mounting pressure from green groups, many companies began to make public commitments of their own to use deforestation-free palm oil in their products. Nestlé S.A and Unilever were two of the first consumer packaged food companies to make deforestation free palm oil commitments. Following this, PepsiCo too committed, through the RSPO, to source exclusively 100% RSPO certified sustain-able palm oil for its products by 2015. In 2013, it further strengthened this commitment to purchase 100% Physical RSPO certified palm oil by 2020, giv-ing additional visibility to its palm oil supply chain. However, PepsiCo which used huge amounts of palm oil annually in its products was accused of lagging behind in its efforts to source sustainable palm oil. In 2014, the company purchased approximately 470,045 metric tons of palm oil, which represented

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chain was fully traceable, legally grown, and sourced from verified responsible palm oil producers.

RAN pointed out to the reputational risk Pep-siCo ran by sourcing Conflict Palm Oil. As more consumers become aware of the dangers of palm oil production, PepsiCo had to break its ties to the drastic deforestation and shocking human rights violations in its supply chain, especially in Indonesia and Malaysia, where the risks of destroying critical rainforest and continued human rights abuses were extremely high, it said (see Exhibit 4). RAN even offered to work with the company to find solutions and draft a comprehen-sive, time bound responsible palm oil policy. “Palm oil is found in nearly 50 percent of the packaged foods on our grocery store shelves, and tragically it is also the leading cause of orangutan extinction and rain-forest destruction in Indonesia and Malaysia. Pep-siCo and the Snack Food 20 can and must solve their problem with Conflict Palm Oil before it’s too late for the great red ape,”18 said Tillack.

However, PepsiCo refuted the allegations saying that it was a member of the RSPO, and had commit-ted to purchase exclusively 100% certified sustainable palm oil for PepsiCo products by 2015. The company said it had integrated responsible palm oil procure-ment guidelines with its sourcing strategies. “While we are working in a number of regions to convert to oils that are low in saturated fat, in some parts of the world, palm oil is often our only option. When we do purchase palm oil, we look for suppliers that oper-ate responsibly and in a sustainable manner,”19 said Aurora Gonzalez, spokesperson of PepsiCo.

PEPSICO’S PALM OIL POLICYIn March 2014, the Union of Concerned Scientists20 (UCS) released a scorecard grading the palm oil sourcing commitments of 30 top companies in the packaged food, fast food, and personal care sectors including PepsiCo. According to the report, PepsiCo, with a score of 33.7 points out of 100, had demon-strated “little commitment” to procuring palm oil from deforestation-free sources. Environmentalists demanded that PepsiCo should look into its palm oil policies and solve the Conflict Palm Oil problem.

Following this, PepsiCo adopted a new Forestry Stewardship Policy and Palm Oil Specific Commit-ment in May 2014, saying that it was an improve-ment over its 2010 and 2013 pledges which were limited to using palm oil certified under the RSPO

orangutan masks and held signs displaying the logos of the Snack Food 20 companies and banners reading, “Cut Conflict Palm Oil, Not Rainforests.” Lindsey Allen, executive director of RAN, said, “In the 21st century, customers don’t want to buy crackers and cookies that are responsible for pushing the world’s last wild orangutans to extinction and for horrifying child labor violations. That’s why Rainforest Action Network is putting these top 20 snack food companies using ‘conflict palm oil’ on notice.”16

RAN singled out PepsiCo as a major Conflict Palm Oil laggard on the “Snack Food 20” list as it had failed to put adequate policies and procurement practices in place, and was almost unquestionably using Conflict Palm Oil. Despite being the world’s largest globally distributed snack food company and using a whopping 457,200 metric tons of palm oil annually in snacks like Quaker Chewy Granola Bars, Cheetos, and Lay’s potato chips, PepsiCo was drag-ging its feet, refusing to even admit to the problem, said RAN. According to Gemma Tillack (Tillack), Senior Agribusiness Campaigner of RAN, “The only thing standing in the way of PepsiCo doing the right thing and taking a leadership position on this urgent issue is the company’s refusal to act. PepsiCo’s con-tinued unwillingness to take responsibility for the consequences of the palm oil in its supply chain is shocking. While more and more of its peers have acknowledged the crisis created by Conflict Palm Oil production and engaged with experts like us to adopt binding policies to root out the problem, PepsiCo continues to fry its chips and fill its products with palm oil sourced from unknown plantations.”17

According to RAN, PepsiCo had a weak palm commitment that lacked a time-bound implementation plan to cut out Conflict Palm Oil. RAN felt that the RSPO certified palm oil certificates that were awarded to companies for sustainable palm oil production by no means guaranteed that all of their palm oil was being procured from sustainable sources. Though the RSPO provided criteria for CSPO and offered certi-fication, its standard did not adequately address the risks of purchasing palm oil associated with deforesta-tion and human rights violations, the group added. As a result, palm oil certified by the RSPO while being more sustainable than conventional palm oil, was not deforestation free. RAN urged PepsiCo to go beyond RSPO-certified palm oil and adopt a new global responsible palm oil procurement policy and imple-mentation plan to ensure that the palm oil in its supply

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responsible forestry stewardship. PepsiCo is opposed to illegal or irresponsible deforestation practices. While we are committed to the RSPO and its process and standards, we recognize that in some regions of the world, additional measures may be necessary.”21

Following through on its 2010 commitment, the company planned to source palm oil only through direct suppliers who were also members of RSPO. It planned to collaborate with governments and NGOs to monitor its suppliers for compliance with its For-estry Stewardship and Land Use Policies, in order to reach 100% traceability and accountability to the mill level by 2016 and to the farm/plantation level by 2020. Moreover, PepsiCo planned to support sustainable agriculture practices through the PepsiCo Sustainable Farming Initiative. Workers would be encouraged to report grievances, violations, and policy breaches through PepsiCo’s SpeakUp! hotline and website. The commitment also included specific provisions on no conversion of high carbon stock forests and high conservation value areas or peatlands. It wanted sup-pliers to adhere to free, prior, and informed consent (FPIC) in interacting with local communities around new plantation development.

(see Exhibit 5). In its new policy, PepsiCo committed to contributing to the promotion of responsible and sustainable sources of palm oil and realizing zero deforestation in company-owned and operated activi-ties and supply chain by 2020. As per the new policy, the tons of palm oil sourced annually by PepsiCo would largely be free of deforestation and peatlands conversion by 2016. Through its new commitment, the company planned to partner with the RSPO and other trade associations, government agencies, non-governmental organizations, and other critical external stakeholders to usher in positive changes and improvements in the palm oil supply chain and industry. Analysts felt that the adoption of these com-mitments was a vital first step as it validated Pep-siCo’s commitment to set a higher standard than required by the RSPO. The new policy stated: “As outlined in PepsiCo’s Forestry Stewardship Policy, PepsiCo is committed to doing business the right way and to realizing zero deforestation in our company-owned and -operated activities and supply chain. We recognize that PepsiCo has a responsibility to ensure that we and our suppliers operate in accordance with applicable legal requirements and practice

EXHIBIT 4 Link between Consumers and Rainforest Destruction

Source: www.ran.org.

Rainforest destructionfor palm oil plantations is

causing orangutan extinction,human rights abuses and

massive carbon pollution.

Palm oil plantationsturn rainforests intobiological deserts.

Palm oil is ubiquitious inAmerica’s

Favorite Snack Foods

Help Us takeOrangutan Extinction,

Human Rights Abuses, ClimateChange out of AMERICA’S

FAVORITE SNACK FOODS!

Roughly 50% of allpackaged Goods sold in

the groceryStore contain Palm oil.

Rainforest destructionis likely found in every room

f your home.

Rainforests are hotspotsof biodiversity and filter vast

amounts of carbon fromthe atmosphere.

International commoditytraders like Cargill and IOI

ship huge quantities of palm oilfrom SE Asia to the US

and the rest of the world.

85% of the world’spalm oil comes from

Indonesia andMalaysia

STOPRainforest Destruction

for PALM Oil!

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commit to tracing the company’s palm oil to the plantations where the oil palm fruit grew. They said the new commitments lacked independent third party verification of its suppliers’ compliance and a strong commitment to full traceability and a prohibi-tion of the use of fire. Moreover, the policy did not lend clear support to small and local producers and failed to outline strong human rights protections for local communities and workers, they added. Accord-ing to Joao Talocchi, a campaigner at Greenpeace, “While PepsiCo’s announcement includes measures that go beyond the RSPO, such as the protection of high carbon stock forests and all peatlands, it still lacks a strong commitment to full traceability, a demand for similar commitments from its suppliers, and most importantly, an implementation plan. Con-sumer companies such as P&G, Unilever, and Nes-tle have already committed to policies that—if fully implemented—will guarantee their products will become free from deforestation. There’s no reason PepsiCo can’t follow suit.”25

Some experts were skeptical about PepsiCo’s ability to source responsible palm oil within the aggressive timeframe set by the company in its com-mitment. According to the new commitment, it would source 100% of its oil from deforestation free sources by 2016. In 2013, PepsiCo had expanded its palm oil

PepsiCo: Not Doing Enough?Some environmental groups such as Greenpeace International22 (Greenpeace), RAN, SumOfUs.org23 (SumOfUs), and the UCS expressed concerns over PepsiCo’s new commitment. They felt that while Pep-siCo had acknowledged the problem related to Conflict Palm Oil, its commitments fell short in several key areas as the sustainability measures adopted in the new action plan were weaker than the ones adopted by its peers in the consumer packaged food industry. Accord-ing to them, the commitment was at odds with the company’s publicly stated values as had not taken any explicit efforts to trace palm oil back to the source, to ensure that it was deforestation-free. In July 2014, the groups sent a joint communication to Nooyi pointing out the gaps in the revised palm oil commitment and the need to fill those gaps in order to drive the needed changes in PepsiCo’s global supply chains. “Palm oil is in many of its products, from Quaker Oats to Grand-ma’s Homestyle cookies, PepsiCo’s announcement that it’s joining so many other companies in improving how it sources palm oil is excellent news, but it could do more to ensure that it is delivering on its promise,”24 said Calen May-Tobin, an analyst with UCS.

According to experts, the new policy lacked a time-bound implementation plan and failed to

EXHIBIT 5 PepsiCo Palm Oil Commitment (May 2014)

By 2016, the palm oil that PepsiCo sources through its suppliers would be:

• Sourced exclusively through suppliers who are members of the RSPO.

• Confirmed to have originated from responsible and sustainable sources.

• In compliance with the company’s Forestry Stewardship Policy, which includes adherence to the following principles:

✓ Compliance with applicable legal requirements of each country in which it operates and from which it sources.✓ No further development on High Carbon Stock (HCS) Forests, High Conservation Value (HCV) Forests.✓ No new conversion of Peatlands.✓ Adherence to the Free, Prior, and Informed Consent (FPIC) principles as defined and outlined in the PepsiCo

Land Use Policy.

In addition, PepsiCo would:

• Engage with appropriate industry and other groups to improve its understanding of deforestation issues, adapt its policy, and achieve goals.

• Provide appropriate grievance mechanisms for suppliers to report suspected breaches.

• Leverage its Supplier Code of Conduct (SCoC) as a means of communicating PepsiCo’s Forestry Stewardship Policy and associated commitments to its suppliers.

• Periodically report on its performance against this policy and its associated commitments.

Source: Adapted from www.pepsico.com.

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consumers left thousands of negative reviews on the product’s page urging the company to adopt better palm oil policies. The product was later reinstated. However, PepsiCo said the outcry was a planned effort to mislead consumers and insisted that its palm policy was strong enough. “Pepsi True was subject to an orchestrated effort to post inaccurate information about our product and PepsiCo’s palm oil policy. A few critics have repeatedly been both inaccurate and misleading about our commitments to traceable, sustainable palm oil. PepsiCo has com-mitted to zero deforestation in our activities and sourcing and to 100% sustainable palm oil by 2015. Our critics would be hard pressed to find many com-panies who have taken PepsiCo’s holistic approach to land policy, forest stewardship. and responsible sourcing,”29 said a spokesperson from PepsiCo.

However, environmental activists continued to press PepsiCo to cut Conflict Palm Oil from its sup-ply chain saying that the company could not hide the destruction that it refused to eliminate from its supply chain (refer to Exhibit 6). “Clearly, any of us who have earned a one-star review would react with consterna-tion, so imagine the teeth grating at PepsiCo head-quarters with 3,900 negative reviews rolling in over the weekend. But with companies including Nestlé, Mars, and P&G among the other global firms com-mitting to sustainable palm oil, PepsiCo’s tepid policy is making it stand out for the wrong reasons. Its com-petitors are committing to plans that include trans-parency, tractability, and full safeguards for human rights. PepsiCo’s reputation, especially as consumers become more aware of the dangers of palm oil, would be quickly repaired with a more watertight policy instead of continuing its war of words,”30 remarked Leon Kaye, a strategic communications specialist.

On December 9, 2014, RAN and Orangutan Out-reach31 together organized a Global Call-In Day wherein consumers ranged against PepsiCo and pointed out the consequences of its using Conflict Palm Oil. Through this initiative, the environmental groups wanted to expose the threat to the Leuser Ecosystem.32 A month later, in January 2015, SumOfUs targeted PepsiCo’s Doritos snacks by releasing an online ad to coincide with the Doritos “Crash the Super Bowl” competition that invited customers to submit ads for the popular crisps with the winning ad being aired during the Super Bowl. The ad titled “A Cheesy Love Story—The Ad Doritos Don’t Want You to See” featured a couple falling in love over their common

commitment to cover 100% physically sourced oil by 2020. Reportedly in 2012–2013, PepsiCo sourced 20% of its oil from RSPO certified sources and in the fol-lowing year (2013–2014) the number increased to 21%. Experts questioned whether the company would be able to get the remaining 79% of its oil from RSPO certi-fied sources as there was only a year remaining for the company to fulfil its commitment. They said the critical gaps in the commitment must be addressed first before the company set a new global benchmark for respon-sible palm oil procurement. “Commitments are just the first step. Pepsi Perfect might look great on a label, but it’s what’s inside the bottle that counts. When it comes to palm oil, what counts is how commitments translate into action. And that is where some major concerns about PepsiCo’s commitment crop up,”26 said Calen May-Tobin, a lead analyst with the Tropical Forest and Climate Initiative. Hanna Thomas, senior campaigner at SumofUs, added, “We hope that PepsiCo will take a look over their policies and the current gaps, and make the decision to be a leader in their industry. It’s no good to just do the bare minimum. PepsiCo is such a large company with such a huge amount of purchas-ing power, they should be out in front and taking the impacts of the snack food industry seriously.”27

However, PepsiCo felt it had done enough and said its new palm oil policy was part of a broader 2020 zero deforestation commitment across various commodities.

Consumer CampaignsOn May 20, 2014, a Global Day of Action to Cut Conflict Palm Oil was organized by Palm Oil activ-ists wherein a series of events were held across the world to call on PepsiCo and other companies in the consumer food sector to cut down Conflict Palm Oil from their global product lines. Thousands of peo-ple took part in demonstrations around the world as they gathered on college campuses, beaches, public squares, and multiple PepsiCo factories to send a common message: “PepsiCo, the Power is #InYour-Palm to eliminate Conflict Palm Oil.” Also a peti-tion was launched by SumofUs calling on PepsiCo to commit to a zero deforestation policy for palm oil. More than 223,000 people from around the world signed the petition.

In November 2014, PepsiCo pulled out its newly launched drink Pepsi True28 from online retail site Amazon.com after environmental activists and

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educate consumers the world over about PepsiCo’s inadequate palm oil sourcing policy. The ad received more than 1.5 million views on YouTube.

Defending its palm oil policy, PepsiCo said, “It is no surprise that SumofUs’ continual mischaracteriza-tions of our palm oil commitments are patently false and run counter to the positive reception our policies have received from expert organizations in this arena. PepsiCo has repeatedly stated that we are absolutely committed to 100 percent sustainable palm oil in 2015 and to zero deforestation in our activities and sourcing. This latest public relations stunt, focused on fiction rather than facts, does nothing to foster posi-tive dialogue or affect positive change. We find our policies effective and stand by them.”33

A day after the launch of the Doritos ad, RAN came up with another ad targeting PepsiCo’s popu-lar snack Quaker Oats Chewy Bars. The ad featured the photo of a little boy with his arms crossed in anger, with a box of chewy bars in the background. The tagline of the ad was “Pepsico, you need a time out!” The ad conveyed that PepsiCo was acting like a stubborn child—one who wanted all the toys (profits in PepsiCo’s case) but no responsibility. Some activ-ists also criticized PepsiCo’s #LiveForNow34 mar-keting campaign and wondered whether by “living for now,” PepsiCo meant it could not care less about tomorrow. They were referring to PepsiCo’s weak commitment to using sustainable palm oil.

A Revised Commitment Following months of protests from several envi-ronmental groups over its use of Conflict Palm Oil, PepsiCo released a new palm oil commitment on September 21, 2015 (see Exhibit 7). Through its revamped policy, PepsiCo strengthened its commit-ment to upholding the rights of local communities and workers and identified the plantations where the palm oil used in its products grew. However, accord-ing to experts, the biggest loophole in the commit-ment was that it did not cover any joint venture in which PepsiCo had a minority stake. The policy did not apply to PepsiCo products made by its Joint Venture Partner (JVP), Indofood Sukses Makmur Tbk (Indofood),35 in Indonesia.36 This implied that PepsiCo’s products sold in Indonesia were not cov-ered by any zero deforestation commitment.

Indofood Agri Resources Ltd., the palm oil arm of Indofood, was the third largest private palm oil company in Indonesia with an annual revenue of USD 1.2 billion in 2014.37 The company was involved in

EXH IB IT 6 Palm Oil Reduction Consumer Campaigns

Source: SumOfUs

Source: Rainforest Action Network

Sources: action.sumofus.org/a/doritos-palm-oil/; redapes.org/orangutan-outreach-ran-join-forces-to-challenge-pepsi/; www.ran.org/the_power_is_in_your_palm; thegreendivas.com/2014/09/05/dear-pepsico-conflict-palm-oil/.

love for Doritos, getting married, then going off to a honeymoon to a tropical rainforest. But on arrival there, they find the forest had been cut down to plant palm oil trees. Then the tagline appears “Doritos, May contain traces of rainforest.” The organization felt that the Super Bowl platform could be used to

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of untouched tropical rainforest in East Kalimantan. Apparently the company had used fire to prepare land for new plantations, as satellite images revealed a burned area of nearly 200 hectares inside Indofood’s palm oil plantation in East Kalimantan. Moreover going forward Indofood intended to develop 5,000 to 10,000 hectares of new palm oil plantations annually.

With Indofood being exempted from the new palm oil policy, environmentalists said every drop of palm oil used to make PepsiCo products in Indonesia

large scale production and processing of palm oil with its plantations covering a total area of 246,000 hectares in Sumatra and Kalimantan (Borneo).38 Indofood was the only maker of PepsiCo products in Indonesia. The company did not have a responsible palm oil policy. It was reportedly involved in some questionable business practices, including deforestation through clearing and burning rainforests, labor rights violations, and social conflicts with local communities. According to RAN, in 2013 and 2014, Indofood cleared 1,000 hectares

EXHIBIT 7 PepsiCo Palm Oil Commitment (September 2015)

PepsiCo’s palm oil sources globally would:

• Be sourced exclusively through direct suppliers who are members of the RSPO.

• Comply with the company’s Forestry Stewardship Policy, which includes adherence to the following principles:

✓ Compliance with applicable legal requirements of each country in which it operates and from which it sources.✓ No further development on High Carbon Stock (HCS) Forests1 or High Conservation Value (HCV) Areas.✓ No new conversion of any Peatlands and the use of best management practices for existing plantations on

Peatlands.

• Adhere to the principle of Free, Prior, and Informed Consent (FPIC)—as defined and outlined in the company’s Land Use Policy.

• Adhere to the Universal Declaration of Human Rights, be in basic compliance with applicable laws, prohibit forced, compulsory or child labor, follow ethical recruitment practices, respect freedom of association, recognize the rights of all workers including temporary, migrant, and contract workers; and cooperate with reasonable assessment processes requested by PepsiCo.

• In conjunction with the company’s support of RSPO’s standards, PepsiCo is committed to working with governments, NGOs, suppliers, and other companies to ensure RSPO’s no burning policy is realized through better monitoring and new technology

In addition, PepsiCo would:

• Achieve 100% traceability to the mill level for all its palm oil and palm kernel oil, and assess suppliers’ operations and landholdings on PepsiCo’s Forestry Stewardship and Land Use Policies and the principles of this commitment by 2016.

• Achieve traceability to the Farm/Plantation level of its palm oil and palm kernel oil by 2020.

• Request its palm oil suppliers to report on greenhouse gas emissions through the CDP Supply Chain or similar program.

• Work with its suppliers to ensure that these policies are implemented in such a way that supports the inclusion of smallholders

• Engage with appropriate industry and other groups to improve company’s understanding of deforestation, forest conservation, indigenous and customary land tenure rights, human rights, and labor rights issues in the palm oil industry, adapt our policy, and achieve its goals.

• Use an appropriate means of communicating PepsiCo’s palm oil commitments and associated policies to its suppliers, such as the PepsiCo Supplier Code of Conduct (SCoC).

• Leverage the PepsiCo Sustainable Farming Initiative to support implementation of sustainable agriculture practices that enable farmers to increase production on currently farmed land and minimize impacts on the surrounding area.

• Support a confidential and safe process for investigating grievances raised by affected parties by making the PepsiCo SpeakUp! hotline available, along with any supplier provided grievance mechanisms, for the reporting of suspected breaches of this policy to PepsiCo. In instances where outstanding land rights disputes exist in its supply chain, the company encourages its suppliers to utilize the principles of FPIC to reach a resolution.

Source: Adapted from www.pepsico.com.

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companies to water down their stance by urging them to continue to buy palm oil from their suppliers, even if that company was involved in cutting down forests for new plantations. Allegedly the pressure from the national government came after local governments in Indonesia began taking away concessions from palm oil companies which tried to convert palm oil planta-tions into conservation forests.

THE ROAD AHEADIn April 2015, UCS came out with a revised score-card, ranking companies based on their commitment to deforestation free palm oil. The score of each com-pany was recalculated to account for their progress compared to the previous year. As per the scorecard, in 2015, PepsiCo made remarkable progress on its commitment to source deforestation free palm oil com-pared to the previous year, by scoring 80.7 points out of 100 (see Exhibit 8). Environmentalists attributed the growth to the new Forestry Policy and the palm oil commitment made by the company in 2014 that improved transparency and traceability in its supply chains. They pointed out, however, that though Pep-siCo had been successful to some extent in sourcing sustainable palm oil as was evident from the score-card, it did not guarantee that its supply chain was completely free of Conflict Palm Oil (see Exhibit 9). According to UCS, “PepsiCo talks a good game, but the Union of Concerned Scientists (UCS) is skepti-cal about PepsiCo’s ability to follow through on its commitment. The UCS scorecard is based on com-mitments to buying only deforestation-free palm oil, which is just one issue associated with palm oil pro-duction. Just because we gave the company a passing grade does not give PepsiCo a free pass on human rights, health, or other environmental issues. This is akin to getting a B- in English, but failing math, science and geography. One passing grade does not make a star student.”42

As the global demand for palm oil continued to grow, tropical forests across Southeast Asia, Africa, and Latin America were at risk of being converted into large-scale palm oil plantations. In 2012, Indo-nesia reportedly lost 840,000 hectares (3,250 square miles) of forest while Brazil lost a still more massive 460,000 hectares43 to palm oil plantations. In 2015, Indonesia continued to lead the growth in global palm oil supply, contributing about 32.7 million tonnes from its palm areas.44 According to observers, with

was at risk of having a negative impact on people and the environment. Experts pointed out that PepsiCo’s palm oil commitment should apply to all suppli-ers selling palm oil that was used to make PepsiCo branded products sold globally, not just the products made in PepsiCo’s own facilities. “Rainforest Action Network is disappointed that PepsiCo continues to fail to take responsibility for the impact of its prod-ucts sold globally. PepsiCo has a huge role to play in the highly problematic global production of Conflict Palm Oil, but will continue to accept ‘business as usual’ operations from its suppliers, including Indo-food. With this action plan, PepsiCo has failed to set a deadline for breaking the links between its prod-ucts and companies that are destroying rainforests and peatlands, and abusing human and labor rights. Instead, its action plan reconfirms to only source physically certified palm oil by 2020—a deadline out of step with what is needed,”39 said Tillack.

According to RAN, PepsiCo’s new palm oil commitment had a loophole the size of Indonesia and failed to address the fundamental problems of rainforest destruction. In order to earn the trust of customers, PepsiCo must close this loophole and take action to clean up its supply chain, including the operations of Indofood, the group added. “A company earns trust from its consumers not only by making quality products, but by being honest and transparent in its actions [. . .]. If it (PepsiCo) is not forthright about the bounds of its palm oil commit-ment it risks serious damage to its credibility. After all, trust is like a mirror, difficult to build, easy to break,”40 said Calen May-Tobin, a lead analyst with the Tropical Forest and Climate Initiative.

With palm oil being Indonesia’s most valuable agri-cultural export, the Indonesian government opposed zero-deforestation pledge by some palm oil firms. Though the Indonesian government acknowledged the problem of widespread deforestation, it was reported to have asked major palm oil companies to go back on their deforestation pledges they had made in 2014 as it was concerned that the pledges made by the companies were causing big problems for smaller palm oil firms in their supply chain. Moreover, the government had asked palm oil firms which had signed the Indonesian Palm Oil Pledge (IPOP)41 to exempt small holders because it felt that they were not yet ready to achieve the same level of sustainable forest practices as the big play-ers. Some environmental groups reported that Indo-nesian government was advising some big palm oil

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palm oil demand set to double by 2030, the sourcing of sustainable palm oil would become a critical issue.

Going forward, PepsiCo planned to step up its efforts to source responsible palm oil by understanding its supply chain, confirming the location of the planta-tions from which it sourced its palm oil, and indepen-dently verifying that the suppliers were not involved in deforestation or violation of human rights in any of their operations. The company planned to map the supply chains of its suppliers to ensure that the palm oil it received came from responsible and sustainable sources and was also in compliance with the compa-ny’s Forestry Stewardship Policy and Land Use Policy.

Industry observers felt that PepsiCo had a crucial role to play in eliminating Conflict Palm Oil from food supply and that the company should strengthen its palm oil policies and practices and commit to sourc-ing exclusively from suppliers with traceable, trans-parent, verified, and accountable supply chains across

all operations. Some analysts said the company should step up and break the link between its products and the factors responsible for the destruction of rainforests in order to dismiss customer concerns. It should start taking the palm oil issue seriously and use its buying power to drive real change on the ground, they added. They also pointed out that the Conflict Palm Oil prob-lem was not an easy one to solve. According to Sasha Orman, Editor of FDF World,45 “But with palm oil such a critical issue right now, does PepsiCo’s com-mitment go far enough to enact change? Not everyone is 100 percent convinced yet. The Union of Concerned Scientists (UCS) published a critique raising ques-tions about the wording of PepsiCo’s plan, noting that—while much of it is solid and promising—it only appears to apply to fully PepsiCo-owned lands and operations. Will the company’s joint venture projects covered by the Forestry Stewardship Policy? With that said, it is not certain one way or another yet whether PepsiCo will hold its joint ventures to the same sus-tainability standards as its fully-owned projects. But in a case like this, PepsiCo’s actions down the line will speak for themselves and reveal the full extent of the company’s commitment.”46

EXHIBIT 8 UCS Scorecard for Commitment to Sustainable Palm Oil Sourcing by Packaged Food Companies, 2014–2015

CompanyScore 2014

Score 2015

Nestlé S.A. 85.5 90.5 (Green)

Danone 51.5 89.2 (Green)

Kellogg’s Co. 52.8 88.5 (Green)

ConAgra Foods, Inc. 35.5 84.1 (Green)

Unilever 83.5 83.4 (Green)

PepsiCo, Inc. 33.7 80.7 (Green)

General Mills 42.6 77.8 (Green)

Heinz Company 37.1 42.9 (Yellow)

Mondelēz International, Inc. 68.6 36.8 (Yellow)

Kraft Foods Group Inc. 0 10 (Pink)

Green–Strong commitment

Yellow–Some commitment

Pink–Little commitment

Orange–No commitment

*The list is not exhaustive.

Source: www.ucsusa.org/global-warming/stop-deforestation/palm-oil-scorecard-2015#.Vkl7KHYrLIU.

EXH IB IT 9 UCS Scorecard for Actual Sourcing of Sustainable Palm Oil by Packaged Food Companies, 2014–2015

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Source: www.ucsusa.org/sites/default/files/attach/2015/04/ ucs-palm-oil-scorecard-2015.pdf.

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ENDNOTES17 Gemma Tillack, “All Eyes on PepsiCo: Will It Come Clean or Keep Trafficking Conflict Palm Oil?” www.ran.org, November 10, 2014.18 “Campaign Targets ‘Conflict Palm Oil’ in US Snack Foods‘” oneworld.org, September 12, 2013.19 Jenn Harris, “Rainforest Action Network to PepsiCo, General Mills: Stop Killing Orangutans,” www.latimes.com, September 13, 2013.20 The Union of Concerned Scientists (UCS) is a US-based nonprofit science advocacy group that develops and implements practical solu-tions to some of the earth’s pressing problems such as global warming.21 www.pepsico.com/Assets/Download/ PepsiCo_Palm_Oil_Commitments.pdf.22 Founded in 1971, Greenpeace International is an independent global environmental orga-nization that works to protect and conserve the environment and to promote peace.23 SumOfUs.org is a non-profit online activism group comprising consumers, investors, and workers world over who hold corporations accountable for their actions and forge a new, sustainable, and just path for the global economy.24 “PepsiCo’s New Palm Oil Commitment Marks Major Improvement, but Other Compa-nies Are Going Further, Science Group Says,” www.ucsusa.org, May 20, 2014.25 “PepsiCo Announces Zero Deforestation Commitment for Palm Oil,” news.mongabay.com, May 21, 2014.26 “When It Comes to Palm Oil, PepsiCo Is Less Than Perfect,” blog.ucsusa.org, March 26, 2015.27 Kacey Culliney, “PepsiCo: SumOfUs Doritos Palm Oil Attack Is ‘Patently False,’” www.bak-eryandsnacks.com, January 19, 2015.28 In October 2015, PepsiCo launched a mid-calorie soda called Pepsi True. The soda was rolled out for sale exclusively online through Amazon.com.29 Rhett A. Butler, “Activists Hijack Pepsi’s New Product Launch on Amazon over Deforestation,” news.mongabay.com, November 20, 2014.30 Leon Kaye, “Pepsi True Savaged on Amazon over Palm Oil Controversy,” www.triplepundit.com, November 24, 2014.31 Orangutan Outreach is a New York–based non-profit organization whose mission is to save the critically endangered orangutans and protect their rainforest habitat.32 Leuser Ecosystem, located in the Aceh district of northern Sumatra, is an area of more than 1.8 million hectares and the only place on earth

1 The DJSI is the first global index to track the leading sustainability-driven companies worldwide based on a range of social, environmental, and governance-based criteria, including assessments on corporate governance, crisis management, and environ-mental policy.2 Conflict Palm Oil is produced under condi-tions associated with destruction of rainforests, drainage of carbon-rich peatlands, and human rights violations, including the use of forced labor and child labor.3 Annette Gartland, “Environmentalists Urge Consumers to Pressure PepsiCo Over Palm Oil,” time2transcend.wordpress.com, December 9, 2014.4 In an effort to raise awareness about the adverse consequences of palm oil plantations on peatlands and to transform the sector toward sustainable palm oil, the global palm oil industry created the Round Table on Sustainable Palm Oil (RSPO) in 2004.5 “Palm Oil Free Year,” palmoilfreeyear.word press.com, January 7, 2015.6 The “Snack Food 20” group comprised Campbell Soup Co.; ConAgra Foods Inc.; Dunkin’ Brands Group Inc.; General Mills Inc.; Grupo Bimbo; Hillshire Brands Co.; H.J. Heinz Co.; Hormel Foods Corp.; Kellogg Co.; Kraft Food Group Inc.; Krispy Kreme Doughnuts Corp.; Mars Inc.; Mondelēz International Inc.; Nestlé S.A.; Nissin Foods Holdings Co.; PepsiCo Inc.; Hershey Co.; J.M. Smucker Co.; Toyo Suisan Kaisha Ltd.; and Unilever.7 “Pepsi AGM RAN Statement,” d3n8a8pro7vhmx.cloudfront.net, 2015.8 Frito-Lay, the world’s largest maker of snack chips in the world.9 “PepsiCo Releases Sustainable Development Report,” www.bevnet.com, January 6, 2009.10 “PepsiCo Named Top Food and Beverage Company in 2011 Dow Jones Sustainability Index,” www.csrwire.com, September 9, 2011.11 Jason Mark, “What’s Fueling the Demand for the Palm Oil Destroying the Rainforests of Indonesia?” www.earthisland.org, October 9, 2013.12 Peatlands are carbon-rich swampy areas.13 “Indonesia Allocates 18 Million Hectares of Land for Palm Oil,” www.thejakartapost.com, December 2, 2009.14 www.rspo.org/file/acop2014b/submissions/pepsico-ACOP2014b.pdf.15 www.ran.org/our-mission.16 Jenn Harris, “Rainforest Action Network to PepsiCo, General Mills: Stop Killing Orang-utans,” www.latimes.com, September 13, 2013.

where tigers, elephants, rhinos, and orangutans can be found living together in the wild.33 “PepsiCo Defends Doritos’ Palm Oil Policy,” www.edie.net, January 14, 2015.34 Launched in April 2012, the “Live for Now” campaign invited Pepsi fans to live each moment to the fullest through global pop-culture platforms including relationships with music and entertainment brand evangelists, digital innova-tion, epic events, and unique partnerships.35 Indofood Sukses Makmur Tbk is one of the largest food processing companies in Southeast Asia. The company forms part of the Salim Group, Indonesia’s biggest conglomer-ate. The company manufactures PepsiCo’s products in Indonesia.36 Producing more than 33 million tonnes of palm oil annually, Indonesia has the highest rates of deforestation in the world, and is the fifth largest emitter of greenhouse gases, largely due to the expansion of plantations on peatland forests.37 “A Loophole the Size of Indonesia,” d3n8a8pro7vhmx.cloudfront.net, September 2015.38 Sumatra and Kalimantan are the largest islands in Indonesia and are home to some of the world’s most diverse rainforests.39 Emma Lierley, “PepsiCo Misses Mark with New Action Plan as Indonesia Burns for Palm Oil,” www.ran.org, November 2, 2015.40 Calen May-Tobin, “PepsiCo’s New Palm Oil Commitment: Transparency, Trust, and the Company You Keep,” blog.ucsusa.org, September 24, 2015.41 Signed in September 2014, the Indonesia Palm Oil Pledge (IPOP) is an agreement among leading palm oil producers that com-mits them to industry-leading sustainability practices. The pledge was signed by the CEOs of palm oil companies like Asian Agri, Cargill, Golden Agri Resources and Wilmar.42 Dan Ashley, “Popular Snack Foods May Cause Rainforest Destruction,” abc7news.com, July 10, 2015.43 Samuel Oakford, “Indonesia Is Killing the Planet for Palm Oil,” news.vice.com, July 4, 2014.44 “Growth in Global Palm Oil Supply, Demand Expected,” www.dailyexpress.com.my, February 2, 2015.45 FDF World is an online food and drink magazine featuring news, information, and trends from across the food, drink, and franchising industries.46 Sasha Orman, “PepsiCo Commits to a New Zero Deforestation Palm Oil Policy,” www.fdfworld.com, September 29, 2015.

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