February 25, 2020

Media Briefer: PepsiCo Adopts Comprehensive Shift in Approach to Palm Oil

MEDIA BRIEFER, February 25, 2020

What do these policy and implementation actions do?

Expands the scope of PepsiCo’s policy so that it applies to suppliers at the group level

  • It expands the scope of previous palm oil policies to apply to suppliers at the group level, meaning it applies across the entire operations and third-party supply chains of suppliers, not just the palm oil sold directly to PepsiCo.

Clarifies PepsiCo’s expectation that business partners at the group level are compliant with PepsiCo’s policy

  • PepsiCo explicitly states a commitment to use its leverage and work with business partners where they fall short of the commitments set out in their updated Palm Oil Policy.
  • This includes the Salim Group — parent to Indofood, PepsiCo’s joint venture partner in Indonesia.

Drives an industry-wide approach to independent verification of NDPE

  • PepsiCo states its support for, and commitment to, drive forward an industry-wide approach to independent verification of NDPE with agreed standards that have broad industry and civil society support, and will implement this approach, once agreed.
  • PepsiCo will work with others to strengthen the RSPO verification process, aimed at addressing existing gaps. Following the adoption of strengthened standards through the updated RSPO Principles and Criteria in 2018, most gaps relate to the verification process.

Improves human rights provisions

  • PepsiCo’s updated policy highlights its requirement for palm oil suppliers to uphold human and labor rights by following the United Nations Guiding Principles on Business and Human Rights (UNGPs), adhering to the International Bill of Human Rights and International Labor Organization Declaration on Fundamental Principles and Rights at Work, and to be in compliance with all applicable laws.

Strengthens its grievance process

  • PepsiCo is undertaking a formal review of its grievance process for agricultural supply chains to identify ways to strengthen it in line with the UNGPs. The review is being led by an organization with expertise in the UNGPs and grievance mechanisms.

Aims to address deforestation in the critical Leuser Ecosystem

  • PepsiCo will undertake a suite of interventions that will accelerate the implementation of its policy across the Leuser Ecosystem –– the 6.5-million-acre global biodiversity hotspot on the frontlines of palm oil expansion in PepsiCo’s supply chain.
  • Working through collaborative positive impact programs that bring together palm oil companies, civil society, government, and others, PepsiCo will aim to establish a deforestation monitoring system that will use high-resolution satellite monitoring tools to identify deforestation in the lowland rainforests and peatlands.
  • PepsiCo will work with other stakeholders and government agencies to respond to cases of deforestation by palm oil suppliers and address the underlying economic drivers of deforestation for smallholder farmers.

Aims to address labor rights violations in the Indonesian palm oil industry

  • PepsiCo will work with industry actors, government, civil society, independent unions, and workers with the aim of achieving positive benefits for workers’ livelihoods and the realization of labor rights on palm oil plantations in North Sumatra and Indonesia more broadly, such as through direct engagement with civil society and palm oil workers, and seeking to broaden collaborative impact projects to include labor issues.

Strengthens due diligence, supplier requirements, and stakeholder engagement

  • PepsiCo will work with suppliers to monitor deforestation by satellite and undertake social risk assessments.
  • PepsiCo has enhanced its requirements of suppliers to maintain a moratorium on forest and peatland conversion and to establish a UNGP aligned grievance mechanism.
  • PepsiCo will update its Global Palm Oil Policy implementation plan during 2020, ensuring formal feedback from a wide range of external stakeholders, including RAN.

What role did Rainforest Action Network and its partners OPPUK and ILRF play?

  • RAN launched a campaign on a group of the biggest snack food companies, including PepsiCo –– called the Snack Food 20 –– in 2013.
  • The campaign called on the companies to stop sourcing Conflict Palm Oil, or palm oil that has contributed to deforestation, peatland destruction or human rights violations.
  • After many of the Snack Food 20 had moved, PepsiCo was named as the most significant laggard in the group by 2014.
  • For the last six years, RAN focused efforts in pushing the company to adopt a comprehensive policy and set of actions to address its sourcing of Conflict Palm Oil.
  • Over the course of 2014 – 2018, PepsiCo released a series of palm oil policies, each falling short of fully addressing its palm oil problem including by failing to cover the full group level operations of the company’s Indonesian joint venture partner, Indofood.
  • In 2016 and 2017, RAN, OPPUK and ILRF documented systemic labor violations on Indofood’s palm oil plantations and filed a RSPO complaint against Indofood in 2016.
  • In May 2018, RAN, OPPUK, ILRF and PepsiCo entered an engagement to explore in detail the specific asks of PepsiCo and the palm oil industry more generally, which led to the policy update and actions that PepsiCo has undertaken. 

Facts on PepsiCo’s palm oil use

  • PepsiCo used 478,897mt of palm oil in 2018, equivalent to 79.5 Olympic-sized swimming pools.
  • PepsiCo is the world’s second-largest food and beverage company
  • PepsiCo uses palm oil primarily in snack manufacturing in Asia and other markets.

Facts on palm oil and Indonesia

  • Indonesia is the largest producer and exporter of palm oil globally.
  • Indonesia has experienced one of the most rapid plantation expansions ever witnessed in the world, resulting in some of the highest rates of deforestation in the world.
  • The conversion of forests to palm oil plantations, specifically the destruction of carbon-rich peatlands, is a major contributor to global greenhouse gas emissions.

Facts on Indofood and associated labor rights violations

  • Indofood is Indonesia’s largest food processing company. PepsiCo and Indofood have a joint venture company to sell PepsiCo products in Indonesia.
  • Indofood and its parent company, the Salim Group, have significant palm oil holdings and operations across Indonesia. There have been numerous problems documented under the Salim Group including labor exploitation, legal violations, and peatland clearance.
  • Following a complaint filed with the RSPO by RAN, OPPUK and ILRF, Indofood’s palm oil subsidiary Salim Ivomas had its RSPO membership terminated in March 2019 for refusing to address verified labor violations and illegalities on its palm oil plantations in North Sumatra.
  • PepsiCo tried to use its leverage to encourage Indofood to engage in the RSPO complaints process. However, due to a lack of progress by Indofood in acknowledging and addressing the grievance, PepsiCo ceased sourcing from Indofood’s palm oil plantations both for supplying its joint venture production and all other production.
  • PepsiCo continues to urge Indofood to acknowledge the issues identified in the 2018 RSPO labor complaint decision, to credibly and transparently resolve the issues and rejoin the RSPO, and to strengthen its palm oil policy and grievance mechanism.