PepsiCo is not the first company that trips off the tongue when asked to name leaders in sustainability.
But the food and beverage company is going through a quiet revolution in the way it does business, both from the perspective of its environmental impacts and the health of its products. The company has set a number of "big hairy audacious goals" including over the next decade making the UK operations fossil fuel free and unplugging its largest factories from the water grid. There is also a commitment that by 2020 it will send nothing to landfill across its supply chain and make all its product packaging from renewable sources. In its agricultural operations, PepsiCo plans to use its long-term farming contracts to halve the water and carbon impacts of its key crops, such as potatoes and oats. On the health side, PepsiCo's vision is that by 2020 the company's core business will be based on delivering fruit, vegetables, wholegrain and fibre. To achieve this it plans to change the existing products it is making as well as transform its portfolio towards healthier ranges "providing genuine nutritional benefit." Behind the drive towards environmental sustainability is Walter Todd, the head of operations for PepsiCo UK and Ireland as well as the vice president of sustainability for the company's European operations. He says that key to the success of PepsiCo's environmental programme is the setting of ambitious goals that are beyond the company's current knowledge of how to achieve them. However, Todd says there is a fine line between setting stretching targets, and being so unrealistic that the company ends up looking foolish by falling far short of achieving them. His rule of thumb is that if he knows how to get half the way there, then innovation and ingenuity is likely to take him the full distance. Todd says: "One of the ways that we have triggered innovation is by setting big hairy audacious goals. This forces us to look at every area of our operations and encourages ideas to bubble up.
We want to engage people about what a future possibility would look like
"We want to engage people about what a future possibility would look like. If you come up with a commitment, say to reduce energy by 3% next year, you will not get people engaged or any real financial engagement. But if you set an engaging vision, you can get a coalition of people excited by the possibilities." Todd gives two examples. The first is the company's plan to take its four crisp factories that employ 3,500 people completely off the water mains by extracting the liquids in the potato: "We had that eureka moment of realising we use 350,000 tonnes of potatoes a year and 80% of a potato is water. So we set ourselves the challenge of capturing that water and using it in our operations." The other example is of redesigning the company's lorry fleet so they can deliver crisps to customers and on the return fill them up with potatoes from the fields. So how did PepsiCo reach the point where it became confident enough to take more radical steps?
"There is a permission element to it," says Todd. "Because we wanted to be viewed as a leader in terms of health and sustainability, there is now an expectation that we will lead. There is also an acceptability of risk, a recognition that some things won't work. It feels quite liberating to go and challenge."
While the company wants to be seen as visionary, it recognises the need to set clear annual targets and link these to managers' objectives and bonuses.
Todd is unlike the stereotypical view of an ops manager, who is focussed solely on price, quality and delivering the products on time.
In fact, he is passionate about the challenge of battling the multi-headed hydra of carbon, water, waste, resource depletion and biodiversity. In this, he proves the point that the drive towards sustainability in any company is normally down to one or two passionate individuals in positions of power who just 'get it.' So what was it that got his juices going? "I have a passion for it because it is hard, and sits outside of your day-to-day activities," he says. "Coming out of the operations environment I could see how to drive productivity and reduce costs but I could also see the opportunities around engaging employees.
Change agents
I am also fortunate that within our organisation I have two or three people who are absolutely leading thinkers on sustainability and I let them educate me. They stretch me and drag me along. We have great debates – they are change agents who help me."
What he finds most difficult to believe is that most other companies just don't seem to 'get it,' given that the business case for action is so clear. "I don't understand why companies don't see the benefits. We are cutting costs by saving water, saving electricity and reducing waste. It's not just about doing what's right; there is a clear business case. It's great for your employees, they get it, because they want to be proud of being part of a good business, consumers get it, and customers like it as we reduce waste and packaging. Communities also love it, which is important given that 80% of our employees live within 20 miles of our factories. "It's also about attracting great talent. We go to Warwick Business School as part of our enrolment programmes and students do not ask questions such as how big you are but if you are a good company." If the business case is so clear, then surely it would make sense that most companies would be following in the footsteps of those businesses that are leading the charge on sustainability? Todd says the answer to that conundrum is that a number of ingredients have to be in place if the cake is to rise: "The issue for many companies is they do not have a track record and stories to talk about. It's difficult if they don't have an exec sponsor who is passionate, if they don't have capital or resources concentrated in one place. You've got to put finances and people behind it. "Beyond this, there has to be a top down and bottom up approach. PepsiCo, through ingenuity, has made very aggressive and bold commitments on areas such as packaging, water, and carbon so this sets a top down strategic direction. Then there are the key change agents within the business who are pushing from below. As head of ops, I can corral these resources and be able to articulate as a member of the board the multi-stakeholder benefit of their recommendations. "It's also important to find the right partners. We teamed up, for example, with the Carbon Trust and the Carbon Disclosure Project. We are also teaming up with universities such as Nottingham and Aberdeen on our technology and agro programmes." Todd is prepared to break down the traditional walls of the company by inviting in not just partners but also arch-critics. In the preparation of PepsiCo's latest annual environmental report, the company held a roundtable of experts from business, NGOs and universities to challenge its current thinking. While there were critics at the meeting who believe the world would be better off without PepsiCo, given its current reliance on fizzy drinks and snacks, there was also recognition of the radical steps the company is taking to improve its performance. "There are those who would like to see us closed down," says Todd, "but if you look at our latest health report, you will see that we have some very aggressive goals in making our products healthier and changing our portfolio so we are working in that area. "On the environment, we hope to be seen as a leader, and also as a role model on collaboration. We have been identifying partners, including in our supply chain like GE, that help educate us as we don't have all he knowledge to do it by ourselves. For our part, we bring cash, scale and brand reputation." For those businesses that have not yet taken sustainability seriously, Todd has this message for them: "I just think they are missing a huge opportunity in terms of productivity, employee engagement, employee pride, reducing reputational risk from regulators, and the community, as well as missing out on talent. Beyond all this is the personal satisfaction. I find it invigorating."