Pepsico – Environmental Sustainability

Pepsico – the cola drink conglomerate that is best known for its eponymous Pepsi drink – has recently launched and revised their ‘Path to Zero’ strategy concerning environmental sustainability.  This, in a marketing context, concerns developing strategies that are not detrimental to the environment while still maintaining profitability.  Pepsico have established a range of strategies to address key environmental issues where the company is a significant stakeholder: climate change, agriculture, water and their products.  You can see the full details of their strategy update here.

Hence, Pepsico have created a sustainability vision for the company, the first key stage in the strategic marketing process.  Ultimately, the aim is to become fossil fuel free by 2023.  This is something to provide guidance and motivation for the employees and base their decisions on; it is a long-term and external strategy.  What I will be assessing is some of the ways they are going to implement this strategy on a tactical scale.

An immediate, external approach to environmental sustainability has been the implementation of ‘product stewardship’ – minimising a product’s environmental impact through its life-cycle, as opposed to focusing solely on sustainable production.  Pepsico have used a ‘design for environment practice’ to develop FSC certified packaging for its Quaker and Walkers brands.  This reflects the philiosophy of enlightened marketing in two ways.  Firstly, it enables their products to be easily recycled – they have managed to reduce landfill waste by 71%.  This shows a genuine ethical concern: it is not Pepsico’s responsibility to dispose of the product responsibly, but the consumers.  Yet, Pepsico have taken responsibility and initiative; albeit, it is the consumer who will be credited with being environmentally friendly.  Secondly, this leads to increases in efficiency.  Thus, profitability is increased – let alone just maintained.

In contrast to the plan above, to become more sustainable in terms of water use and agricultural influence, Pepsico have developed new environmental technology.  Where as ‘product stewardship’ is an external and immediate approach, research and development is an internal response that focuses on long-term sustainability.  Namely, the company is developing ‘i-crop’ water usage monitoring and management programs to reduce their agricultural growers’ “water impact by 50% in 5 years”.

I personally like this approach: partnering with those in the value-delivery chain.  In the same way a company and its suppliers must work together in order to satisfy the end-consumers’ needs, it is, likewise, just as beneficial when their synergy is focused on their environmental impact.  Moreover, this could mean further environmental benefits beyond Pepsico’s microenvironment: the i-crop technology could be easily adopted by other industries and agricultural practices.  This would be a serious way to earn a green-image that other companies, such as Proctor and Gamble, are so keen to promote.

However, research and development is a very long and expensive process which makes it a very risky investment. Futhermore, Pepsico are developing technology for their suppliers’ use – not their own.  This means that they may lack the experience and insight to produce relevant innovations that will be of up-most effectiveness.  Likewise, their company’s skills are in production and branding.  Thus, perhaps it would be better to maintain a corporate focus by outsourcing the research and development (R&D) process to a specialised firm.  Specialisation, would also mean the i-crop technology could be implemented faster.  Given the long-term focus of developing new technology – in terms of corporate branding – it would be disastrous if i-crop became obsolete while it was still being perfected.

My only other concern is that their attempt at product stewardship and creation of a sustainable vision is too generic and several years too late.  Thousands of major companies are adopting – and in most cases already have adopted – recyclable packaging and more energy-efficient manufacturing processes.  In this sense, Pepsico are being reactive; the best strategies are those that are proactive to match the companies current capabilities to the future, external opportunities.  Having said that, albeit their product stewardship lacks differentiation, as a whole their ‘Path to Zero’ strategy is well-balanced.  Developing new technology, while improving existing products means that they display they have the ability to make an immediate environmental change – which should prove motivating – while also keeping the emphasis on the future.  After all, their sustainability vision concerns the future.

The underlying theme in today’s post, however, is effective strategy.  Pepsico have clearly shown that it is necessary to move through the strategic planning process in a structured way: from defining their mission to reviewing their progress.  In strategic planning, Pepsico have been exemplars; but in environmental sustainability they are at least a few years late. Perhaps if they spent less time focusing on strategy and more time on actually becoming more sustainable, they would be an even more competitive and greener company…

© Joshua Blatchford author of Manifested Marketing 19/01/2011

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