ETHICAL PRACTICES OF

PEPSICO INDIA LTD.

EP JOHN11397044A’ SEC

INTRODUCTION

INTRODUCTION PepsiCo is one of the largest food and

beverage companies in the world. It manufactures and sells 18 brands of

beverages and snack foods and generates over $98 billion in retail sales.

PepsiCo encompasses the Pepsi Cola, Frito-Lay, Tropicana, Quaker, and Gatorade brands and offers products in over 200 countries.

It currently holds 36 percent of the total snack food market share in the U.S. and 25 percent of the market share of the refreshment beverage industry.

The company’s headquarters are in New York and employs over 2,00,000 people.

PepsiCo has received many awards and recognitions over the years, including being ranked in the top 25 of the best global brands, ranking number four overall by Diversity Inc, and earning the Green Award by the Environmental Protection Agency.

INTRODUCTION

OUR VISION

PEPSICO’S RESPONSIBILITY IS TO CONTINUALLY IMPROVE ALL ASPECTS

OPF THE WORLD IN WHICH WE OPERATE – ENVIRONMENT, SOCIAL, ECONOMIC –

CREATING A BETTER TOMMOROW THAN TODAY.

OUR VISION IS PUT INTO ACTION THROUGH PROGRAMMES AND A FOCUS ON ENVIRONMENTAL

STEWARDSHIP, ACTIVITIES TO BENEFIT SOCIETY AND A COMMITMENT TO BUILD SHAREHOLDER VALUE BY MAKING PEPSICO A TRULY SUSTAINABLE COMPANY.

OUR MISSION

PEPSICO’S MISSION IS TO BE THE WORLD’S PREMIER CONSUMER

PRODUCTS COMPANY FOCUSED ON CONVENIENT FOODS AND BEVERAGES,

WE SEEK TO PRODUCE FINANCIAL REWARDS TO INVESTORS AS WE

PROVIDE OPPURTUNITIES FOR GROWTH AND ENRICHMENT TO OUR EMPLOYEES,

OUR BUSINESS PARTNERS AND THE COMMUNITIES IN WHICH WE OPERATE IN

EVERYTHING WE DO, WE STRIVE FOR HONESTY, FAIRNESS AND INTEGRITY.

ISSUE

PepsiCo first entered the Indian market in 1989, and since then the company has become one of the largest food and beverage companies in the country.

Unfortunately for the company, some of the largest and longest running allegations of PepsiCo’s wrongdoing are also based in India.

The company and other competitors in the industry have been heavily criticized about the quality and the quantity of the water used in their beverages.

In 2003, the Centre for Science and Environment (CSE) claimed that the water which PepsiCo and other beverage companies in India were using contained toxins.

ISSUE

ISSUE These toxins included pesticides that can

contribute to cancer and the overall breakdown of the immune system.

According to the CSE, Pepsi soft drinks had 36 times the level of pesticide residues permitted under European Union Regulations.

However, no such law bans the presence of pesticides in India. The issue is still under investigation and the Indian government is trying to find a way to validly detect the pesticide levels and ultimately ban any trace in a soft drink.

This allegation of unsafe levels of pesticide has been denied by both PepsiCo and the Coca-Cola Company.

ISSUE Although there is not yet a law in place, PepsiCo

found that it could still face considerable repercussions for what its stakeholders perceive to be unethical activities.

When pesticides were once again reported in the soft drinks a few years later, the Indian state of Kerala temporarily banned the sale of Pepsi and Coca-Cola.

Five other Indian states also instituted partial bans. These extreme actions on the part of the local governments reveal the care multinational organizations must take to go above and beyond the national law in social responsibility.

Another major concern in India cited by farmers is that the Pepsi manufacturing plants are polluting the lands, making them less fertile for growing crops.

A study conducted in 1992 found that PepsiCo India and similar companies created 10,000 metric tons of plastic through their manufacturing and importation processes.

Similar allegations of waste and pollution arose again in 2006, concerning both farmers and government officials alike.

ISSUE

About 60-70 percent of this plastic was recyclable, creating a large amount of unnecessary plastic waste.

Furthermore, the farmers complained that the PepsiCo plant takes the groundwater to run its operations, making it, once again, harder to effectively grow crops.

In solving these ethical dilemmas, PepsiCo must take the different levels of government into account, as well as the concerns of NGOs and individual Indians.

A thorough stakeholder orientation is needed to discover ethical courses of action and avoid negative repercussions.

ISSUE

The nature of the products manufactured and sold by PepsiCo has caused many problems for the company in the issue of health. Although PepsiCo now has numerous products geared toward health, its most popular product is still its signature Pepsi-Cola.

Also, India, is becoming more health-conscious and desires low calorie, low fat, natural items instead of processed sugary and salty foods. Some of the health concerns of drinking soda include the increased caloric intake as well as the possibility of tooth decay due to soda’s acidity, caffeine dependence, and weaker bones

ISSUE

SOLUTIONPepsi has fought back by creating sodas that

have low calorie and sugar content. Unfortunately, this only helps with the weight risk. The acidic nature of the product can still damage the teeth, and the artificial sweeteners used also have their own set of health risks.

PepsiCo’s traditional snack items have met with similar criticism. Most of the products are processed and contain a high amount of sodium and sugar as well as being highly caloric and fatty.

SOLUTIONFrito-Lay Company has tried to combat the

issue by offering Baked Lays, Baked Cheetos, Sun Chips, and other healthier alternatives.

These alternatives are claimed to be healthier all-around. The health issue is going to be an ongoing battle for the company due to the nature of the industry it is in.

Continual research and product development to offer healthier products is essential for PepsiCo’s future profitability.

SOLUTIONAlthough the battle may be a long one,

PepsiCo is making strides to address these concerns.

For example, the Frito-Lay website has a special area devoted to health that describes the ingredients of Frito-Lay snacks and encourages consumers to practice moderation in snack food consumption. Already the company claims that $10 billion comes from healthy snacks the company offers.

SOLUTION PepsiCo is hiring people that are potential enemies of

the organization: health officials. Formerly employed at institutions like the World

Health Organization and the Mayo Clinic, these Pepsi employees are now researching healthier ingredients to put in PepsiCo snacks.

One success thus far has been the introduction of a zero-calorie natural sweetener called Stevia into new brands, one of which has become a $100 million brand in less than a year.

It is clear that not only is healthier snack foods socially responsible, but it is also good business in an increasingly health-conscious marketplace.

SOLUTIONThe public’s attention was on Aquafina

bottled water in 2007 when the watchdog group Corporate Accountability International claimed that the company was using tap water to fill the water bottles being sold.

The water was not regular tap water but came from a public water supply before processing. Aquafina was accused of not being transparent in its business practices.

SOLUTIONIt was not publically known that the

company’s procedures included a rigorous seven-step process which removes unwanted substances and is then branded as purified drinking water.

Additionally, the label on the Aquafina bottle had snow capped mountains on it, which seems to suggest that the water is purified spring water. PepsiCo is now required to put the words “Public Water Source” on the label..

SOLUTIONThis scenario brings up an ethical situation common in today’s marketplace. Many corporations utilize idyllic scenes on their packages that do not reflect reality.

A giant agribusiness, for example, might have a picture of a traditional farm on its package. Some consumers find this to be misleading.

SOLUTION

However, the increasing popularity of bottled water does not appear to be diminishing anytime soon. PepsiCo is in the process of developing bottles that use less amounts of plastic per bottle to help the waste issue.

Today, the Aquafina bottle weighs 10.9 grams, compared with the 18.5 grams in 2001, and PepsiCo has set a goal to decrease its packaging by 350 million pounds by 2012.

CSR PARTNERS TERI – The Energy and Resources Institute, was

established in 1974 with the purpose of Tackling and dealing with the immense and acute problems that mankind is likely to be faced with in the years ahead on account of the gradual depletion of the earth's finite energy resources which are largely non-renewable and on account of the existing methods of their use which are polluting.

Achievements The Institute has grown substantially over the

years, particularly, since it launched its own research activities and established a base in New Delhi, its registered headquarters.

ADI – Alternative Development Initiative, is devoted to support, promote and nurture sustainable growth, social development and good governance for the empowerment of communities through collaborative action.

ADI facilitates an alternative paradigm of development that values appreciating people's basic potential to lead the process of socio-economic change.

The organization envisages to bring about people centred development by fostering institutional linkages, technology transfer, technological innovation and experiments, demonstrate new ideas, promote new approaches, mobilize resources, demystify concepts and technologies, mediate to bring about collaboration, and impart skills and foster conditions for reflection and learning.

ADI promotes institutions, systems, processes and mechanisms that would bring socio-economic growth.

CSR PARTNERS

Exnora Green Pammal, an award-winning model of public private partnership, improves residents' quality of life by bringing municipal solid waste management services into compliance with the government's regulations.

Exnora Green Pammal and its members, under the able guidance of Mrs. Mangalam Balasubramanian, founder and managing trustee, demonstrate that civil society organizations have tremendous potential to improve local environments.

In Pammal and several other localities, civic engagement, corporate responsibility and people's participation have improved public health by introducing source segregation of solid waste, vermicomposting of biodegradable waste, recovery of recyclables and the restoration of local environmental resources.

CSR PARTNERS

Akshay Patra (registered Trust) started as a pilot feeding program for 1,500 children in 2000 and today reaches out over a million children every day in 7,500 government schools, in 17 locations, across seven states in India. This makes Akshaya Patra the world’s largest NGO-run school meal program. Its vision is: “No child in India shall be deprived of education because of hunger”.

PepsiCo India has completed discussions with Akshay Patra (Mr. Sridhar Venkat lead the Corporate partnership discussions) to enter into a public/ private/NGO partnership with Akshay Patra to set up a kitchen in Gurgaon (PepsiCo India HQ), to feed approx 50,000 needy children across government schools in the neighborhood. The initiative is being launched by PepsiCo India, in Gurgaon as a pilot to enable structured employee volunteerism and giving.

CSR PARTNERS

CAF India A registered public charitable trust set up in

1998Committed to increase the flow of resources to

the non profit sector Has been commissioned by the Planning Commission and validated 1500 charities for

support Supports not-for-profit development and

increases the fundraising capacity of the Indian not-for-profit sector

Provides solutions to companies, individuals and employees to donate to charitable cause of their choice in a professional and tax-effective manner

CSR PARTNERS

CAP Foundation is an independent, registered organization demonstrating Public Private Partnership initiatives between civil societies, corporate and government agencies in linking learning and livelihood for communities of children, youth and women 'at risk'.

The mission of the CAP Foundation is to reach out to the children, adolescents and youth at risk by providing a holistic education and livelihood promotion module, which combines formal education with vocational training, skill development training, life skill modules, job placement and career exploration opportunities through an experiential mode, aimed at developing confident individuals capable of self directed growth.

CSR PARTNERS

"Swashrit" is an NGO that works in the area of uplifting underprivileged children by providing them with basic education and empowering them with better futures and has also been actively involved in conducting training workshops for primary, middle and senior school children as well as teachers.

These workshops have addressed important health related issues such asStress management, Holistic child developmentSubstance abuse prevention.The organization has also undertaken prestigious

annual projects with schools in Delhi and the NCR, such as

Save the Young Heart, Obesity managementGet Active

CSR PARTNERS

Project Healing Touch was launched by Mukesh Anand in the aftermath of the Kargil war in 1999. The project strives to help servicemen in the Indian Army earn a sustainable livelihood after they have retired from the armed forces.

Under the auspices of Project Healing Touch, Mission Vijay – II provides former Indian soldiers an important opportunity to live independently and be financially self-reliant. The partnership has provided employees of the armed forces with a stable source of income in their new roles as distributors, sub-distributors, salesmen or as trolley vending distributors for PepsiCo.

In addition to PepsiCo, Project Healing Touch also partners with Apollo Tyres, ICICI, MICO, Castrol, IOC, Hero Honda and Tata Motors.

CSR PARTNERS

Youth Reach India, Founded in 1997, is a not for profit organisation based in New Delhi

Youthreach India engages in creating awareness on critical issues to sensitise people and institutions and provide opportunities for significant participation in response to community and ecological needs.

Youthreach creates spaces that engender a deeper inquiry into the nature of social and ecological injustices and work towards building a culture that is rooted in the humane and equitable.

Youthreach seeks to bridge two parallel worlds of the haves and have-nots, by sensitising people who have access to resources and opportunities and opening up spaces for them to make a difference to the less advantaged people, and communities.

Youthreach partners with 80 grassroots NGOs, identifying needs, and creates opportunities for individuals, institutions, businesses to volunteer, donate materials and support projects through grants.

CSR PARTNERS

PepsiCo India partnered with the International Labor Organization (ILO) to develop and implement a sustainable HIV/AIDS workplace prevention care and support programme for its employees, their families and community members.

The International Labour Organisation is the UN agency responsible for work related issues. In 2000 it created the Programme on HIV/AIDS and the World of Work (ILO/AIDS). The key objectives of this programme consist of raising awareness on the social, economic and developmental impact of AIDS on labour and employment while helping Governments, employers and workers support national efforts to control HIV/AIDS. This crucial programme also serves to fight discrimination and stigma related to HIV.

CSR PARTNERS

PEPSICO FOUNDATIONActivities in IndiaPepsiCo's philanthropic anchor, PepsiCo

Foundation is committed to developing sustainable partnerships and programmes that provide opportunities for improved health and inclusion and a better environment.

The total funding for India has been $11mn (2008–10)

The programmes have benefited more than 300,000 people in nine States of India

PEPSICO FOUNDATION Health: Food security; Improved and optimum nutrition;

Energy balance Health Alliance Project: This research project focuses on reducing

chronic diseases by promoting healthy diets and physical activity and controlling tobacco use. The project is being implemented through integrated interventions to drive policy and environmental changes.

Impact: Lower rates of obesity and chronic diseases (cardiovascular problems and diabetes).

Reach: 12,000 people in Kerala. India grant: $1.13mn during 2007–10.

PEPSICO FOUNDATION Save the Children Project: The project catalyzes community-based

interventions to deliver integrated health and nutrition solutions to children under 5, young mothers and pregnant and lactating women. Save the Children works with community health educators to provide families important information about health, nutrition, water, sanitation and hygiene.

Reach: 100,000 people in Rajasthan. (The project reaches 50,000 beneficiaries including children under 5, young mothers and pregnant and lactating women through health and nutrition interventions. It reaches another 50,000 people through water and sanitation initiatives.

India grant: $4.4mn during 2009–11.

PEPSICO FOUNDATION Environment: Water security; Sustainable agriculture;

Adaptive approaches to our changing climate Project: The project tests methods that deliver 'more

crop per drop'. This approach focuses on water security through water harvesting, recharging, watershed management and innovative irrigation practices. It is envisaged that the project will empower private and public communities with practical new methods to use water more efficiently both now and in the future. The project is developing research, tools, and strategies to improve agricultural income and water use through policy reform and private sector contributions to the agricultural value chain in terms of market development, technology transfer and risk management.

Reach: 500 farmers across Punjab and Gujarat. India grant: $1.15mn during 2008–10.

PEPSICO FOUNDATION Safe Water Network Project: This project focuses on providing affordable potable

water at the community level by harvesting rainwater, installing small water village kiosk purification systems and building cisterns and community tanks.

Reach: 55,000 people across Rajasthan and Andhra Pradesh. India grant: $1.1mn during 2008

Water.org Project: The project acts as a catalyst to introduce microfinance

to the water and sanitation sector and provides household water connections and toilets.

Reach: 150,000 people in Tamil Nadu, Karnataka, Andhra Pradesh, Orissa and Maharashtra. Water.org is one of the Foundation's largest partnerships in terms of reach.

India grant: $3.64mm during 2008–10.

THANK YOU