Tough economic times mean PepsiCo UK is looking for creative ways to cut energy use

PepsiCo UK, like other food and drink companies, sees environmental sustainability as a way to make its day-to-day business more efficient.

So it is no surprise that PepsiCo UK’s board-level sustainability champion is its vice-president of operations, Walter Todd. He must ensure that the company takes bold steps to cut energy, water and other resource use throughout its manufacturing and distribution network. This will save it money, and protect the environment.

Todd heads a team of 4,500 employees across PepsiCo UK’s major brands: Pepsi Cola, Walkers Crisps, Quaker Oats and Tropicana orange juice, among others. PepsiCo UK & Ireland is part of PepsiCo International, which covers all of PepsiCo’s businesses outside North America.

The UK business has ambitious environmental plans. PepsiCo UK aims to source all the energy for its manufacturing and distribution from renewable energy supplies within the next 15 years. It wants all Quaker and Walkers packaging to be renewable, recyclable or biodegradable within 10 years. And it wants “zero water intake” at its crisp factories. The idea is for all the water used at the plants to come from the potatoes themselves. “We have got the technology to get 80% there,” Todd says.

Todd admits the company does not know how it will meet some of these targets, because the technology is still being developed, or is not yet economic for the firm to use. He points instead to what the brands have already achieved. Walkers Crisps, for example, has cut energy use by a third since 2000, and water use by almost a half since 2001, he says.

Spending hit

Todd reveals that the current economic downturn could hit PepsiCo UK’s annual £10m spending on manufacturing equipment, which is designed to make operations more efficient. “The economic downturn will impact us in terms of what we can afford and how quickly. It will impact the phasing [of sustainability projects], but not the intent.” Every major capital investment by the company is designed to pay back within anything from two to nine years, he says.

So where does this leave the company’s renewable energy plans? Todd says the company is not dropping plans for on-site renewables, but wants to look “creatively” at the issue. In practice this means creating demand for green energy by buying more from the national grid, he indicates.

Hard work ahead

Having already taken simple steps to cut emissions, Todd argues, PepsiCo UK must now make costly capital investment in new technology and infrastructure to further the cause. “Running around switching lights off is not going to do it for us. Employee engagement is still a really big piece, but it is the big heat-exchanger investments, the big lighting investments that are needed,” he explains. And a falling oil price makes sustainability investment plans less viable, he admits. “It drives the economics of what you can do,” he says. Oil has lost two-thirds of its value this year, dropping to about $50 a barrel in November from its July high of $147.

Todd says PepsiCo UK is sticking to its ambitious environmental targets, published in its first environmental sustainability report in August. These pledges mark a change in direction for the company, he says, which has in the past been “cautious” when talking about its work on the environment. The change reflects increased interest, especially from employees, in what the company is doing to go green, he says.

The benefit of aggressive targets is that they help to focus the minds of employees. “It provides an internal engine for us to think differently,” Todd says. Targets also spur innovation. “It’s exciting what some of your people can come up with. Everybody gets this. It’s actually going through all the ideas that’s the biggest challenge.”

One weak spot in PepsiCo UK’s environmental plans is the supply chain, as it is for many companies. Todd says the company is committed to collaborating with suppliers to reduce resource use. Like Wal-Mart, it has held a sustainability summit with suppliers to explore ideas. But Todd admits: “We are still very much at fact-finding stage. They are predominantly doing the work.”

Todd wants PepsiCo UK to become the test-bed for new green technologies, which can then be shared with the company’s global operations. He chairs PepsiCo’s global sustainability council, a new group of 27 representatives from the global businesses that aims to share environmental best practice. The life cycle analysis that Walkers has done to work out the carbon footprint of its products is now being rolled out to eight brands in the US, Todd says.

Although the downturn may see PepsiCo UK scale back green investments in the short term, its long-term desire to use sustainability concerns to drive greater operational efficiency shows no signs of abating.

Green goals

PepsiCo UK has the following environmental targets.

Energy:

• Increase total share of electricity from renewable sources from 8% to 14% within three years.

Packaging:

• Reduce total waste to landfill by 20% during 2008.

Water:

• Reduce water use at UK manufacturing sites by 45% per kg of production within three years.

Source: PepsiCo International: UK & Ireland, Environmental Sustainability Report (2008)