PepsiCo's New Palm Oil Commitment: Transparency, Trust, and the Company You Keep

September 24, 2015 | 4:42 pm
Calen May-Tobin
Former contributor

Since starting our work on palm oil, UCS has taken a position that a company’s zero deforestation commitment needs to cover all of its operations, not just the products it sells or manufactures in the US. US consumers holding a company accountable for its global operations is not a new concept. The successful boycott of Nestlé in the US and Europe, which started in the late 1970’s, was the result of practices by that company in the developing world. Consumers not only want to buy products that don’t harm the planet but also want to buy products from companies they trust. In large part, businesses understand this and have adopted zero deforestation commitments that cover all of their operations. Most recently PepsiCo, which released a new palm oil commitment this week, has joined that ever-growing list. Or so it would seem.

Clearly there, in 3-point font


Though the brand is owned by Nestle, KitKat’s sold in the US are made by Hershey’s. Photo: Clive Darra, Flickr.

Legal structures and operations of corporations, however, are tricky things. Large companies are rarely monolithic entities. This means the brands consumers buy may not actually be produced by the company they think owns that brand, and the company might be producing products under a brand it doesn’t own. For instance, the KitKat brand is owned by Nestlé, but if you bite into a KitKat in the US you’re eating a Hershey’s product, as the brand is licensed to that company but only within the US. Similarly, if you’re buying a Trader Joe’s chili or mac and cheese, chances are you’re actually buying a product made by Amy’s Kitchen or Annie’s, respectively.

Often joint ventures, newly formed companies that are owned by multiple parent companies, are created when a company wants to expand into a new market overseas. For example, PepsiCo has formed a joint venture with Indofood to manufacture and sell PepsiCo brand products in Indonesia.

Such partnerships make the relationship between costumers and companies much more complex. When buying a KitKit in the US which company is the consumer supporting? Which company’s palm oil policy applies? When a company commits to zero deforestation, does that cover all their partnerships and joint ventures, or just their wholly owned operations?

You’d have to be a lawyer

Palm oil plantation in rainforest, Sumatra, Indonesia

Plantations of palm oil, used in thousands of products such as baked goods and comestics, are expanding into rainforest in Indonesia and causing global warming pollution. Photo: Rhett Butler, Mongabay.

And herein lies the rub with PepsiCo’s new zero deforestation palm oil commitment. In many ways the language of the commitment is quite strong. However, the company’s commitment makes no reference to its joint venture with Indofood. Not only does the commitment fail to mention the joint venture, I can’t find a single reference to it on PepsiCo’s website (though the Indofood website clearly states it). In addition to making consumer products, Indofood is involved in the development of palm oil plantations, and it remains one of the few major palm oil producers that has yet to make a zero deforestation commitment.

So, are PepsiCo brand products sold in Indonesia covered by the commitment? The new palm oil commitment opens by stating “PepsiCo is committed to doing business the right way and to realizing zero deforestation and respect for human rights in all our company-owned and -operated activities and global supply chains.” Having about the same legal knowledge as an average PepsiCo customer, which is to say practically none, the phrase “all our company-owned and –operated activities and global supply chains” seems to me like it should include joint ventures, since the company does technically own part of it. However, a number of NGOs are alleging that this commitment does not cover any joint venture in which PepsiCo has a minority stake. If this is true, it would mean that PepsiCo brand products sold in the world’s fourth most populous country are not covered by any zero deforestation commitment. That is far less than the global commitment PepsiCo is promising its customers.

“Trust is a fragile thing”

I have heard it said that buying a company’s products indicates trust in that company. I think that can be true. Certainly we want to buy products from companies we trust. But trust is not given freely, it must be earned. A company earns trust from its consumers not only by making quality products, but by being honest and transparent in its actions. PepsiCo should take heed of the current blowback against Volkswagen. If it is not forthright about the bounds of its palm oil commitment it risks serious damage to its credibility. After all, trust is like a mirror, difficult to build, easy to break.