PEPSI STANDARDS
Supplier Standards

The PepsiCo Strategic Supply Management Supplier Corporate Social Responsibility (CSR) Assurance Program has two major components: our Supplier Code of Conduct (SCoC) and the Risk Evaluation and Management Program, which supports supplier compliance and risk mitigation.

Supplier Code of Conduct
We have a responsibility to ensure our suppliers honor and respect the people we serve and the environments in which we operate as partners. As part of our responsible and sustainable sourcing strategy, we are committed to working in partnership with our suppliers to follow a specific code of conduct.

Since 2007, PepsiCo has employed a Supplier Code of Conduct (SCoC) globally. The PepsiCo Supplier Code of Conduct communicates our global expectations in the areas of labor practices, associate health and safety, environmental management and business integrity.

Our Supplier Code is based on the International Labor Organization, United Nations Global Compact and other internationally recognized standards. The SCoC includes 13 standards that require suppliers to adhere to the following: basic compliance with local law, respect for human rights and prohibiting all forms of forced or compulsory labor, ensuring no child labor is used, and cooperating with reasonable assessment processes requested by PepsiCo. The SCoC is communicated in 19 languages, and is mandatory in procurement contracts globally.

PepsiCo’s Annual Responsible & Sustainable Sourcing Confirmation process allows us to assess compliance with the SCoC and track whether our suppliers have read, understand and agree to conduct business according to the standards in the Code. In 2010 we enhanced the process by implementing a web-based survey available in 10 languages. Supplier commercial contacts across the globe are requested to review the PepsiCo SCoC and Gift Policy and confirm understanding and compliance.

In 2010, we enhanced our annual confirmation process by challenging our suppliers about their own requirements and those of their supply chain partners. In 2010, nearly 40% of survey respondents confirmed they have their own internal code of conduct, and 15% stated that they require their own suppliers to comply with a supplier code of conduct. We see this as a baseline metric as we continue to encourage our suppliers to challenge their own supply partners to raise the expectations relative to social responsibility.

CSR Risk Evaluation and Management
While we use our Supplier Code of Conduct to articulate our priorities, we use our Supplier Corporate Social Responsibility (CSR) Risk Evaluation and Management Program to educate suppliers, validate compliance and facilitate continuous improvements within our supply chain. We partner with our industry peers, our own suppliers, and third party service providers like SEDEX and social audit providers to drive transparency and social accountability in our supply chain.

Partnering with our Peers
PepsiCo is a founding member of an industry-wide initiative called AIM-PROGRESS - PROGram for RESponsible Sourcing. As an active member of AIM-PROGRESS, we collaborate with our peer companies to develop and implement common methods of evaluating supplier CSR performance, improve the effectiveness and efficiency of the evaluation process, and raise CSR performance within our supply chains.

We leverage our AIM-PROGRESS membership to educate our suppliers on responsible sourcing and help them comply with communicated standards. Through responsible sourcing summits and trainings, we have reached over 2,000 participants representing over 1,000 supplier companies, since November 2009. The training activities continue to drive the number of suppliers that join SEDEX and complete the self-assessment questionnaires and audits in the requested timelines. PepsiCo is proud to take a leadership position in AIM-PROGESS. In 2011, PepsiCo led the Supplier Capability Work Group, sponsored the PROGRESS Supplier Responsible Sourcing Summit in China in the third quarter , and had leadership and supplier participation in other AIM PROGRESS hosted events in South Africa, and Mexico, and online for European suppliers.

Partnering with Service Providers - SEDEX
PepsiCo is a member of SEDEX - Supplier Ethical Data Exchange - a collaborative platform that allows a secure exchange of data regarding ethics topics between suppliers and customers. Through SEDEX’s web-based system, companies can maintain and share data on practices in the areas of labor, associate health and safety, environmental management and business integrity at their production sites. The SEDEX platform allows member suppliers to share self assessment and 3rd party social audit results with customers, easing the burden on suppliers facing multiple audits, questionnaires and certifications. Additionally, SEDEX supports issue resolution and validation. SEDEX members are committed to continuous improvement of the responsible performance of their supply chains.

Partnering with our Suppliers - CSR Risk Evaluation & Management
Overall, PepsiCo’s approach to supplier standards encompasses five levels: the SCoC (policy), supplier risk pre-screen, supplier self-assessment, third-party assessment, and corrective action planning/resolution management.

Level I: SCoC – Required for supply contracts globally.

Level II: Supplier Prescreen – Apply a supplier prescreen to existing suppliers, to prioritize existing supplier sites for review. The prescreen risk evaluation process focuses on four major criteria: supplier country risk; material/service; brand association; extensive use manual labor.

These prescreen characteristics allow us to identify supplier sites for initial SEDEX participation.

Level III: Self-assessment Questionnaire – We expect those suppliers identified in Level II to join SEDEX – linking those requested supplier sites to PepsiCo, and requiring those suppliers complete a Self-Assessment Questionnaire (SAQ). SEDEX generates an initial Risk-Assessment (RA) score, based on risk scoring co-developed with Maplecroft.

Level IV: Third-Party Assessment – PepsiCo reviews 100% of all SEDEX -identified potentially high risk assessed sites while considering additional risk factors like country, commodity, and environmental risks when identifying supplier sites for third-party social audit. To steward responsible sourcing with our suppliers and continue to build a relationship of trust, PepsiCo generally conducts scheduled third-party audits with suppliers, however, we reserve the right to conduct unannounced third-party audits when deemed necessary. PepsiCo leverages the SMETA (SEDEX Member Ethical Trade Audit) methodology, a recognized industry protocol used by several other major consumer products organizations. Third-party assessment results can be shared with multiple customers via SEDEX.

The assessment results in two key documents/data sets (entered directly into SEDEX): SMETA Report; SMETA Corrective Action Plan Report (CAPR).

The SMETA Report documents good practices, observations, and non-compliances to local law and the Ethical Trade Initiative (ETI) basecode. The CAPR provides corrective action recommendations and associated timelines for resolution.

Level V: Corrective Action Planning and Resolution Management – The third-party assessment results are uploaded to the SEDEX platform, accessible by PepsiCo and other secured customers. As part of the upload process, non-compliances and timelines for issue resolution are itemized for customer review and tracking. The suppliers can then update the status of non-compliances as they are addressed, and auditors assess and validate resolution.

The PepsiCo team reviews audit issues regularly, and encourages suppliers to use the SMETA Corrective Action Guidance to help drive timely and effective issue resolution. We recognize that issue resolution may have an impact on the communities in which suppliers operate, and we collaborate to develop the most appropriate solutions for all stakeholders, as we do in our own operations.