ETHICS-COMPANY PEPSICO

Ethics
Business ethics is the accepted set of moral values and corporate standards of conduct in a business organization. These standards of business behavior promote human welfare and the good. Business ethics are exhibited both as written and unwritten codes of moral standards that are critical to the current activities and future aspirations of a business organization. They can differ from one company to another because of differences in cultural perspectives, operational structures and strategic orientations. Therefore, different people have different beliefs about what constitutes ethical behavior. The law defines what is or not legal, but the distinctions between moral right and wrong are not always so clear. In many situations lines between right and wrong are blurred. Such situations can be helped to be cleared by using organization written codes and/or policies. Through the usage of auditors, ethics classes, written codes and policies, numerous companies have reinforced their business ethics and best practices to ensure that fraudulent activities are prevented. The food and beverage sector of the economy has faced increasing pressure from consumers to provide transparency on the sources and operations related to their products. Responsible and ethical procurement is especially challenging for food and beverage, because agricultural commodities typically rely on low-cost labor inputs and environmentally-damaging technology and practices in order to produce high volumes. These negative environmental and social impacts threaten the reputation of food and beverage firms in the short-term, and the certainty of food supply capacity in the long-term. Ethics and compliance professionals in the Food and Beverage industry are accountable for ensuring safety and quality within the supply chain and are increasingly challenged to document and comply with complex government regulations. Mandates by the FDA such as HACCP procedures and ISO 22000 based food safety management systems require a consistent approach not just to the implementation of policies and controls, but also documentation of issues that potentially compromise their compliance efforts. Over the past ten years EthicsPoint has enabled many leading organizations within the Food and Beverage industry to unify their compliance and product quality data into one central repository while also leveraging robust reporting to easily identify trends and proactively mitigate risk across their organization. In order to function with due credibility beverages manufacturers should manage their business with consistent set of working principles. The business management principles of an organization should represent high standards of quality and excellence in both products and services. There dealing with both suppliers and distributors should be based on ethics and respect. The field of beverages manufacturing is highly challenging and a product has to pass through different norms of testing before being launched in the market. Beverages manufacturers have an unwritten obligation to meet all the prescribed standard operating procedures. The quality control process should be stringent with round the clock monitoring. Some common methods of checking the quality of beverages is by applying in line electronic monitors in the manufacturing plant. This helps beverages manufacturer test the ratio and carbonation of the drink. Beverages manufacturers should strive to deliver products that create a stronger and more sustainable business growth. Manufacturers should work towards efficient usage of water and recycle all solid wastes as well. Manufacturers should consistently deliver as per business objectives with sustainability at all levels. You should aim to improve your procurement practices by leveraging your resources at all levels efficiently. PepsiCo, one of the largest firms in the world in consumer products, remains a role model for being both socially and environmentally responsible, placing third worldwide in the “World’s Most Ethical Companies”. PepsiCo has adopted strict corporate standards that govern their operations and ensure accountability for their actions. Such policies cover areas of Corporate Governance, Human Sustainability, Environmental Sustainability and Talent Sustainability. Despite all the effort applied in these policies and standards, the company has still faced some problems related to unethical practices.
PepsiCo is a world leader in convenient snacks, foods, and beverages, with huge revenues and over 285,000 employees. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with the Quaker Oats Company, including Gatorade, in 2001. PepsiCo owns some of the world’s most popular brands, including Pepsi Cola, Mountain Dew, Diet Pepsi, Lay’s, Doritos, Tropicana, Gatorade, and Quaker. Its brands are available worldwide and it reports its operations results in six segments: PepsiCo Americas Beverages (PAB), Frito Lay North America (FLNA), Quaker Foods North America (QFNA), Latin America Foods (LAF), Europe, and Asia, Middle East & Africa. PepsiCo is committed to “Performance with Purpose”. This means doing business the right way by operating responsibly with integrity and with high ethical standards. The company uses a Worldwide Code of Conduct embodies those principles. It is PepsiCo’s statement of how they expect their employees to do business. The Code of Conduct provides guidance for dealing with other employees, customers, suppliers, shareholders, the public and competitors in an ethical and appropriate manner. The Code of Conduct is very general; it cannot describe every possible situation that the employees may experience. What it provides is the foundation for the Purpose behind the company Performance. It is regularly updated and available in 42 languages. Under the Chief Compliance Officer, PepsiCo has implemented support groups that oversee the implementation of the Code of Conduct, such as the Law Department, Human Resources and Internal Audit. The company also incentivizes employee to follow the Code of Conduct by providing prizes, such as the Chairman’s Award and the “Performance with Purpose” award. While the support groups provide assistance in overseeing the implementation, PepsiCo brings in a third party to evaluate the ethical practices and ensures that people are not engaging in unethical conduct. While the Code of Conduct advises employees to act in a certain way, employees at PepsiCo take it a step further by focusing on truth and equity. They do not tolerate discrimination amongst employees, and also ensure that what they market is exactly what they provide to their customers. Given the unhealthy nature of some foods such as soda and chips, PepsiCo ensures that they are responsibly providing their customers with important information. The implemented of its ethical firm policies and marketing tactics help in providing a strong brand image for PepsiCo. Its customers recognize value in the assurance that PepsiCo truly cares about people and aims to provide them with excellent products without deception, and these ethical acts only help the firm in general. While it unfortunate that many firms in the past have sought their profits unethically, this example goes to show that ethics can be much more beneficial to a firm. To strengthen the ethical standards in the corporate and business world, the company joined with over 50 other companies to establish the Business Ethics Leadership Alliance (BELA). BELA is a diverse group of businesses work together to enhance the ethical values of the corporate American that will not only satisfy the employees but also the public. BELA was created as a forum for global leaders to discuss, establish and promote best practices in corporate compliance and ethics and advance the cause of ethics and compliance to corporate executives, stakeholders and consumers. The goals of BELA are: to publicly affirm commitment to certain ethical principles and compliance practices and to provide public resources for BELA members to uphold their commitment and other companies to follow our lead. PepsiCo believes that these issues are key factors in corporate ethics and compliance. PepsiCo has also enacted work policies that are distributed to all their subsidiaries on work conduct, human rights in the workplace, and even HIV and AIDS awareness.
PepsiCo also has a “Speak Up” system to improve and correct ethical violations. Speak Up hotline provides associates, as well as consumers, business partners and others with a means to report potential violations of the PepsiCo Code of Conduct, policies or of applicable law. Every PepsiCo employee is responsible for acting ethically and following the company’s Code of Conduct. The company encourages people to speak up if they see or hear something they believe is illegal or a violation of the Code of Conduct. Callers may remain anonymous if they chose to do so. PepsiCo handles these reports confidentially. PepsiCo policy protects employees who raise concerns in good faith against retaliation. “The Speak Up” Line should be used to report employee misconduct and business abuse. Some reporting examples include: Accuracy of Financial Records, Accounting Irregularities, Bribery, Kickbacks, Illegal Payments, Criminal Conduct, Discrimination, Product Tampering, Safety Hazards, Sexual Harassment, Theft or Fraud, Workplace Violence, etc. The company expects associates to take an active role in identifying situations that may affect the organization’s reputation for ethical excellence and high integrity. The Speak Up system is an important part of PepsiCo culture of ethics and compliance. All employees have an obligation to report suspected Code of Conduct violations, and to ask questions, raise issues and seek guidance when a course of action is unclear. The Speak Up line is widely used and a key component of conducting business ethically and with integrity at PepsiCo.
PepsiCo respects the dignity of their associates in the workplace, and they are accountable to ensure their associates’ rights to personal security, a safe, clean and healthful workplace, and freedom from harassment or abuse of any kind. The company deal fairly and honestly with their associates regarding wages, benefits and other conditions of employment, and recognize their associates’ right to freedom of association. PepsiCo do not use compulsory or child labor. The company does not tolerate discrimination and work to ensure equal opportunity for all associates. They comply with all applicable laws, regulations and other employment standards, wherever they operate or work. They encourage partners, suppliers, contractors and vendors to support these policies, and they place substantial value on working with others who share our commitment to human rights. At PepsiCo, we recognize HIV/AIDS as a uniquely challenging global health issue that poses a significant threat to the sustainability of our business operations worldwide. The company is committed to making a significant contribution to the fight against this devastating pandemic and to assisting associates and their family members affected by it. PepsiCo has established an internal task force on HIV/AIDS to guide actions in addressing the issue in their businesses. Their policy outlines an approach that will be applied across the diverse array of markets in which they operate. In South Africa, for example, they have made important strides, including establishment of a comprehensive HIV/AIDS testing and treatment program. Based on experience there, PepsiCo believes any sustainable program to combat HIV/AIDS must focus first on building awareness, encouraging prevention and reducing the stigma associated with the disease. However, to succeed in the long term, an HIV/AIDS program must include a testing and treatment component. They are currently working toward the company’s goal of ensuring all of their associates and their families have access to affordable treatment for HIV/AIDS, including such services as anti-retroviral drugs, treatment for relief of HIV-related symptoms, nutrition counseling and supplements, stress reduction and treatment for the more common opportunistic infections, including STDs and tuberculosis.
PepsiCo is dedicated to producing the safest, highest-quality and best-tasting beverages and foods in every part of the world. Developing and maintaining robust food safety programs is how they assure safety for every package, every day in every market. PepsiCo has detailed internal programs and procedures for food safety. PepsiCo has policies, programs and actions designed to keep their products safe and meeting high quality standards. PepsiCo has an excellent track record in delivering safe products — this work is guided by the PepsiCo Food Safety Policy. Their efforts are focused on building a sustainable food safety program and providing the framework to develop and sustain food safety of existing brands and new innovation. The scope covers the design, manufacture and distribution of beverage and food products. Their programs and procedures apply to all current and future divisions in PepsiCo. PepsiCo is committed to being an environmentally responsible corporate citizen. The company expresses that commitment in their Environmental Policy and other policies related to Environmental Compliance and Sustainability. PepsiCo’s Environmental Policy applies to all their operations. PepsiCo monitors company-owned operations and joint ventures where they hold a majority share. They encourage their suppliers, service providers, bottlers and other partners to adhere to the policy. PepsiCo has developed and published their Global Sustainable Agriculture Policy, which demonstrates their approach to sustainable development across their entire agriculture supply chain, including water savings, waste reuse, soil protection and chemical use. Their policy addresses six broad objectives within the agriculture supply chain: Water Management, Soil Conservation and Preservation, Agrochemical Management, Energy Management, Farm Economics and Land Management, Social and Community Improvement To support the implementation of the policy, we established a PepsiCo-wide governance structure called the Sustainable Agriculture Council (SAg Council). This council is staffed by agro-scientists, engineers and sustainability professionals from across all of our PepsiCo businesses.
The Pepsi-Cola company is strongly committed to delivering sustained growth through empowered people acting responsibly and building trust, (PepsiCo Inc., 2010). Pepsi-Cola aspires to be an environmentally and socially responsible company and upholds their commitment with six guiding principles: Take care of the customers and consumers; sell high quality products; always speak the truth; equally balance both short-term and long-term goals; win with both inclusion and diversity, and always respect others and succeed as a team. The compliance committee is responsible for managing Pepsi-Cola’s compliance program, using issue resolution strategies and making recommendations to support them. W. Scott Nehs, who is the Chief Compliance Official and Vice President, lead the Pepsi-Cola compliance program, and chairs Pepsi-Cola’s compliance committee. The compliance is broken down into four sub-committees. These subcommittees include:

1. “Anti-trust”- which focuses on the organization’s sales; 2. “Safety and Environment”- which focuses on operations, fleet, plants, and the personnel that staffs them; 3. “Human Resources”- which primarily relates to labor issues and employment; 4. “Finance”- which encompasses all financial integrity, recent overlay of Sarbanes-Oxley, and the requirements that has been placed on the company.

Most organizations employ the use of business plans to be successful. However, ethics and compliance should play an important role in every business to secure success. Through their products and their beliefs nationwide, PepsiCo is committed to ethical behavior and compliance. But despite all its efforts, PepsiCo has been involved in some unethical practices, which the company is trying to improve.

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. 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.
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. About 60-70 percent of this plastic was recyclable, creating a large amount of unnecessary plastic waste. Similar allegations of waste and pollution arose again in 2006, concerning both farmers and government officials alike. 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.
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. At the same time, America 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. Pepsi 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. Frito-Lay Company has tried to combat the issue by offering Baked Lays, Baked Cheetos, SunChips, 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.
Although 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. One of the goals of PepsiCo CEO Indra Nooyi is to invest more in health food; already the company claims that $10 billion comes from healthy snacks the company offers. Nooyi anticipates that further investment will yield $30 billion in the future. Interestingly enough, to tackle this issue, 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.
PepsiCo also faced an unethical problem with its brand Aquafina. The 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. It 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 snowcapped 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.
This 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. Additionally, many consumers do not realize that labeling laws are not as strict in the U.S. as in other countries. For example, U.S. manufacturers do not have to label whether a food product contains genetically-modified ingredients. In these cases, it is often the informed consumer or watchdog group that calls for action, as PepsiCo inevitably discovered.
On top of the tap water dilemma, water bottle companies are dealing with criticisms for the amount of plastic these bottles contribute to land-fills. There are movements around the country like the “Think Outside the Bottle” campaign to challenge people to go back to drinking tap water again in order to stop the amount of waste produced by the bottles. 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.

Business ethics is the application of theories of right and wrong to activity within and between commercial enterprises, and between commercial enterprises and their broader environment. Companies and business people who wish to succeed in a long term basis must adopt good ethical decision making practices. Companies and people who behave in a socially responsible manner are much more likely to enjoy ultimate success than those whose actions are motivated solely by profits. Knowing the difference between right and wrong and choosing what is right is the foundation for ethical decision making. In many cases, doing the right thing often leads to the greatest financial, social, and personal rewards in the long run. Business ethics should be applied in all levels of the organization. Business ethics fundamentally characterizes the organization’s codes of corporate governance. It stipulates the morality standards and behavioral patterns expected of individuals and the business as a whole. It is important to implement successful ethics and compliance guidelines in any organization. Ethics and compliance play a tremendous factor in the overall success of an organization. They are excellent tactics for building organizational trust and transparency. Ethics and compliance empowers the organization to minimize risk and maximize your culture of integrity. The Pepsi-Cola company is strongly committed to delivering sustained growth through empowered people acting responsibly and building trust. Pepsi-Cola aspires to be an environmentally and socially responsible company and upholds their commitment with six guiding principles: Take care of the customers and consumers; sell high quality products; always speak the truth; equally balance both short-term and long-term goals; win with both inclusion and diversity, and always respect others and succeed as a team. PepsiCo utilizes compliance committees and guidelines which help to take the guesswork out of building risk reduction and setting forth standards of the highest ethical standards to ensure that the organization is running at optimal effectiveness comprehensively. These committees helps the organization to also meet unique ethics and compliance requirements that delivers sustained growth through empowered people acting responsibly and building trust. Additionally, PepsiCo still faces heavy criticism for practices and some products that are viewed as largely unhealthy and whose packaging contributes to a large amount of waste. Finally, though PepsiCo has proved to be successful in continually improving its practices and products.

References
PepsiCo Inc. (2012). Corporate Governance. Retrieved from