PepsiCo’s Performance with Purpose – Implications for Compliance

Thomas Fox

PepsiCo has a program called “Performance with Purpose” (PwP) that I think every Chief Compliance Officer (CCO) or compliance professional needs to become familiar with this for their practice. According to the online site Forum For The Future, PwP means “means delivering great performance while doing the right things for people and communities around the world.  As part of that vision, in 2010 PepsiCo launched ambitious sustainability goals and commitments.”

PepsiCo Chief Executive Officer (CEO), Indra Nooyi, said this strategy is qualitatively different from Corporate Social Responsibility (CSR), which focuses on corporations investing in or giving back to local communities. In an interview with Tim Erblich, Ethisphere CEO, on the Ethisphere podcast Insight,  Nooyi said “Performance with Purpose is really taking a large iconic company like PepsiCo which has a huge footprint, is operating in so many countries and saying, how can we be a positive force in society? How can it be a defining food and beverage company and the way to be a defining food and beverage companies to continue providing the jobs, provide the, uh, livelihoods for farmers, all that stuff we do, but do it in a way that’s sensitive to the changing needs of society. We’re still going to be a high-performance company, but the way you’re going to do it is by transforming the portfolio.”

The key is that by doing business with purpose the company becomes higher-performing allowing greater return to all stakeholders: shareholders, investors, employees, local communities and others. Nooyi was even more clear when she told Erblich “We did performance to fund purpose.” She went on to say, “This is who we are. You are talking about ethics. The ethics of our company is performance with purpose. The ethics of our company is a deep-seated belief that large companies can actually make a difference to societies in which we operate. That’s who we are.”

Think about those series of statements for a moment. Nooyi firmly articulated that by doing business ethically, they improved their performance. PepsiCo put an entire strategy in place to achieve its PwP goals, as they are around products, people and planet. It can be for topics as diverse as environmental, water or sustainability. It is more than doing business the right way; it is fully operationalizing this in a business strategy and profiting from it.

It is more than simply an ideal, PwP is embedded at every level of the organization. In its 2016 Sustainability Report, the company detailed the governance and operationalization of the PwP initiative. Everyone at the company has a role in PwP. The Board of Directors plays the essential role of determining strategic priorities and considers sustainability issues an integral part of its business oversight. Further, the Board redefined the roles of its Committees by creating a Public Policy and Sustainability Committee. The Committee assists the Board in providing more focused oversight for the Company’s policies, programs and related risks that concern key public policy and sustainability matters.

Senior leadership works to identify opportunities to strengthen the integration of PwP into its business agenda and processes. It is a key accountability for every member of the company’s senior leadership team. Both strategy and progress against PwP goals are reviewed on a quarterly basis. The company selected Senior Vice Presidents and Vice Presidents within the Company, referred to as Theme Leads, to create and oversee global strategy and execution for each of the PwP goals. These Theme Leads, selected for their subject-matter expertise, work with teams comprising representatives from key functions and all geographic sectors to ensure successful implementation of processes across our businesses.

In 2016, the company formed a Sustainability Office to drive governance and delivery of the company’s sustainability agenda. The Sustainability Office works closely with Theme and Functional Leads from across the business to ensure continued performance progress against the PwP agenda. It also plays a key role in bringing a sustainability lens to long-term corporate strategic planning and key business processes, ensuring that PwP is always embedded into the fabric of the company.

I have often argued that companies which do business with robust compliance programs are run more efficiently and at the end of the day, more profitably. Ethisphere has demonstrated, with some 15 years of data from its World’s Most Ethical Company awards, that winners have a better average performance than the S&P 500. However, PepsiCo has taken both of these concepts a step further by wedding not just compliance and ethics but equating them to greater performance, i.e. profitability. As Nooyi made clear “This is who we are. You are talking about ethics. The ethics of our company is performance with purpose. The ethics of our company is a deep-seated belief that large companies can actually make a difference to societies in which we operate. That’s who we are.”

When your CEO or Board asks the value of the compliance function, every CCO should point to this PepsiCo model. By putting compliance and ethics at the center of doing business to drive performance, you are fully operationalizing compliance to its most basic, yet useful stratagem. Moreover, as Nooyi noted, “This is not a feel-good program.” This is a specific strategy, implemented through a business process which Nooyi can discuss with front-line PepsiCo employees all the way to Wall Street financial analysts.

Yet as a strategy, it has a structure, including goals and metrics. The company is rigorously tracking and reporting its progress, even for its 10-year goals. There is also transparency and accountability as the company annually publishes its findings and results. All of this is part of the ‘performance’ prong of PwP. In the area of farming, it means creating and building a strong symbiotic relationship between farming communities and companies. Farming communities need companies to bring economic activity to bring a very sophisticated farming technology, water retention, key capabilities to their locale. PepsiCo can import and export those best farming practices across the globe. But companies such as PepsiCo need strong communities and strong consumer behavior to business; to make profit and to its our products.

The PepsiCo PwP program demonstrates how a company can inculcate doing business ethically and in compliance into its very DNA in a way that makes itself more efficient, more marketable and more profitable. When you consider some of the other innovations in compliance, you can see why the CCO can really lead a discussion on how to take a company to the next level of profitability.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

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Thomas Fox

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