PepsiCo Makes Major Shift in Approach to Palm Oil

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By now you’ve heard that after more than 6 years of campaigning on PepsiCo, it has just announced a leading policy and actions to address the destruction of rainforests, the abuse of workers, and the exploitation of communities for Conflict Palm Oil. But for those of you who want a more in-depth understanding of what this means for PepsiCo, for RAN, and for the rainforests, communities, and workers of Indonesia, we lay out below just what has changed in PepsiCo’s new policies and plans for action.

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
  • Meaning, PepsiCo’s palm oil policy now applies across its suppliers’ entire operations and to the third-party supply chains of its suppliers, not just the palm oil sold directly to PepsiCo. So if a PepsiCo supplier has deforestation or exploitation somewhere else in their own operations or third party supply chains, they are still subject to PepsiCo’s policies.
Clarifies PepsiCo’s expectation that business partners are compliant with its policy across each company group’s entire operations and supply chains
  • PepsiCo explicitly states a commitment to use its leverage and work with business partners where they fall short of the commitments set out in its updated Palm Oil Policy.
  • This includes Indofood — PepsiCo’s joint venture partner which sells PepsiCo products in Indonesia — and its parent company the Salim Group. This is critical because Indofood and the Salim Group have significant palm oil operations and land holdings across Indonesia on which labor exploitation, legal violations, and peatland clearance have been documented.
Drives an industry-wide approach to independent verification of No Deforestation, No Peat Destruction, No Exploitation (NDPE)
  • PepsiCo states its support for, and commitment to, drive forward an industry-wide approach to independent verification of No Deforestation, No Peatland Destruction and No Exploitation (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 Roundtable on Sustainable Palm Oil (RSPO). 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 and respond to 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 by 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: 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 Conflict 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 (an Indonesian workers’ rights organization) and International Labor Rights Forum (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 now undertaken.

Facts on PepsiCo’s palm oil use

  • PepsiCo used 478,897 metric tons of palm oil in 2018, equivalent to 79.5 Olympic-sized swimming pools.
  • As of February 2020, PepsiCo is the world’s second-largest food and beverage company (after Nestlé).
  • 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 climate change.

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 operations and land holdings 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 direct and indirect sourcing from Indofood’s palm oil plantations.
  • 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.