Pepsico

Environmental Issues at Pepsi Co and the Indian Regulatory Environment: The two most contested environmental issues of PepsiCo India are the quality and quantity of water extracted for its beverages, and the resulting water pollution due to the companys industrial residue. Another challenge faced by the company is the amount of plastic use and waste generated in bottling and packaging of its products. 1. Industrial water use According to Indra Nooyi, CEO of PepsiCo Inc., soft-drinks and bottle water account for only 0.04% of the total industrial water usage in India (Brady, 2007). However, given the scarcity of drinking water in India, this use still has a large impact on the population that does not have access to clean drinking water. For each liter of soft-drink produced, PepsiCo uses 10 liters of water. In total, the company uses 30 million liters of ground water per year (Shiva, 2004). The company has been alleged to practice water piracy for exploitation of ground water resources, resulting in scarcity of drinking water for the residents of the Palakkad district in Kerala, India. A study done by the Kerala groundwater department reported that the factory extracted 366,000 liters more than the permissible limits (Down to Earth, 2007). The companys factory has also been known to cause water pollution by adding toxic sludge containing heavy metals such as lead and cadmium into the nearby streams (Shiva, 2006). Under the Clean Water Act of 1974, the GoI has not set any formal standards for the industrial use of clean and portable water in their food and beverages, and neither does it have any formal regulation for non-point source of industrial pollution (Kaye, 2004). In addition, neither the Prevention of Food Adulteration (PFA) Act of 1954 nor the Fruit Products Order of 1955the mandatory acts for regulating the quality of beverage contents in Indiaregulate pesticide content in soft drinks (CSE, 2003). In 2003, a study led by the Center for Science and the Environment (CSE), an environmental NGO in New Delhi, nationally released reports confirming that soft drinks of Pepsi and CocaCola contained pesticides. The samples were found to be 24 times above the general standards finalized (but not notified) by the Bureau of Indian Standards (InfoChange, 2006). Observing an outright disregard of BIS standards, in 2005, the Drinks and Carbonated Beverages Sectional Committee of the BIS introduced higher standards. However, it is alleged that the Union Ministry of Consumer Affairs may have asked the BIS to defer setting standards, since there was no significant improvement in the level of pesticides in the following batches (InfoChange, 2006). Snowballing into a national public health scare, in 2006, seven out of 24 states in India, including government-run schools and colleges, banned both Pepsi as well as Coca Cola (Kaye, 2004). 2. Industrial plastic waste management PepsiCo India has been criticized both by consumers and environmental NGOs for the environmental waste created by bottling their drinks. In 1994, the beverage giant experienced

national antagonism over its alleged contamination of the countrys environment through the dumping of plastic waste. Indian environmentalists, along with Greenpeaces Toxic Trade Project, investigated PepsiCos involvement in both production and disposal of plastic waste in India. The study found that in 1992, out of the 10,000 metric tons of plastic waste generated as well as imported by Pepsi and other companies, only 60 to 70 percent could be processed. The remaining 3,000 to 4,000 metric tons of plastic garbage was not recyclable (Leonard, 1994). India still lacks a system of closed loop recycling[1], and therefore the same problems persist today. At the national policy level, the Ministry of Environment and Forests of India established new Municipal Solid Waste Management Rules in 2000. These rules have failed to manage waste as a cyclic process, instead treating waste as a linear system of collection and disposal and thereby creating health and environmental hazards (Gupta, 2004). The current rules and regulations are inadequate to assess the environmental impact of waste generated at the industrial level. At its headquarters in New York, PepsiCo has been criticized for environmental waste created by bottling a drink (water) that people can get from the tap; especially because only 24.6% of PET (polyethylene terephthalate) plastic bottles used for soda, water, and other products are recycled in the US. As a result, PepsiCo has launched its new Eco-Fina bottle that uses 50% less plastic than its traditional Aquafina bottle. Even Coca-Colas Dasani brand and Nestles Poland Springs is known to have been steadily shrinking the weight of their PET plastic bottles (Bauerlein, 2009). Applying the framework: Changes in the Environmental Management of PepsiCo, India This section uses the framework described at the beginning of this paper to illuminate the changes made in the environmental management of PepsiCo India that were prompted by the environmental issues described above. Only the content dimension and the external part of the contextual dimension of the framework are applied to this case study. The content dimension highlights the nature of change in the environmental management of PepsiCo. It refers to the new environmental strategies, policies, or systems that PepsiCo has adopted. This dimension also reveals the underlying environmental strategy followed by the company: its central objectives, source of strategy, and the extent to which the strategy is implemented (Pettigrew, 1987). Following the various environmental issues faced by PepsiCo, the company has made periodic changes in its environmental management. Since 2006, PepsiCo has adopted the mantra of Performance with Purpose. It initiated two main programs to attain environmental sustainability: Replenishing Water and Waste to Wealth. The Replenishing Water program addresses the problem of water quality and ground water depletion by introducing the concept of a positive water balance. The programs adopted under this umbrella at the community level are: In-Plant Water Recharge and Harvesting and Zero Water Discharge. As a part of the overall program, PepsiCo has partnered with TERIa scientific research organization in New Delhito enhance and rejuvenate local water bodies in the states of Karnataka and Uttaranchal. The Replenishing Water program has achieved a current recharge

rate of 300 million liters of water every year. To provide safe water and sanitation for communities in developing countries, the PepsiCo has partnered with Water Partners[2] and the Safe Water Network[3] to improve rural water in India. Figures 4 and 5 show the improvement of water efficiency and reduction of water consumption for manufacturing at PepsiCo worldwide in 2007-08 and in India from 2006 to the year 2009, respectively. Part of the Waste to Wealth program is directed towards reducing material waste through sustainable packaging and recycling of waste generated at its bottling plants. PepsiCo now uses light -weighting in its packaging which is cost-effective, generates less waste, and reduces the amount of energy and raw materials, such as plastic, that are used. In the United States, PepsiCo has launched half-liter bottles of Lipton iced tea, Tropicana juice drinks, and Aquafina Alive that contain 20% less plastic than their original packaging. This reduction has saved PepsiCo more than 50 million pounds of plastic annually. The Pepsi-Cola bottles are made up of 10% recycled plastic, and rank among the most recycled packages made since 1990. Many innovations in terms of packaging reduction and resource conservation have been implemented at PepsiCo universally. In the India beverages, the carbonated soft drink crown lining has been converted to PVC (polyvinyl chloride)-free compound, removing resin and reducing cost (PepsiCo Inc., 2009). The context dimension for PepsiCo refers to the drivers that led to an actionoriented change in the environmental management of the company. The external context in India motivated changes in PepsiCos environmental performance at a macro and national scale. These drivers helped managers of the company to mobilize the contexts around them, and in doing so provide the rationale for change (Pettigrew, 1987). The drivers for change at PepsiCo can be categorized as formal institutional drivers and informal socio-political drivers. With the ground water depletion issue, PepsiCo changed its environmental management primarily due to two informal socio-political drivers: the affected local communities residing in the Palakkad district in Kerala, India and CSEthe domestic NGO from New Delhi. In dealing with the issue of water pollution with toxic waste and pesticides, PepsiCo changed its environmental management based on a host of drivers. The formal institutional drivers are media comment, investor pressure due to fall in sales, and the GoI regulation that established new standards for industrial water use and disposal. The informal drivers attributed to the change are protection of brand image, consumer pressure, and the pressure of domestic NGOs and environmental agencies. For changes made in PepsiCos packaging, headquarter environmental policies and reports revealed by Greenpeace can be identified as the two main institutional drivers. The informal drivers for this move are: protection of brand image, rise in environmental concerns of its consumers, competition, risk management as a result of its falling shares, and attainment of eco-efficiency. Conclusion Using the conceptual framework explained above, this paper identifies the main drivers leading to change in environmental management in PepsiCo, India. These key drivers have spurred

reduction in the companys water use, enhancement of water quality, and reduction of packaging waste. The majority of the drivers fall under informal socio-political institutions rather than formal institutions such as host country regulations and policies followed at the headquarters. This shows that one of the weakest drivers causing a change in the environmental management of an MNC such as PepsiCo is the domestic regulatory standards in India. It highlights the minimum role played by the GoI in assuring a positive change in the environmental standards followed by an MNC in India. These findings show the need for greater enforcement of environmental compliances by the regulatory bodies of India. They also emphasize the potential role of MNCs to act as change agents and collaborate with environmental NGOs and the GoI to formulate a stronger regulatory environment for India.