Thera Kalmijn, Founder and CEO of SureGround, speaks with Dan Bena, Director of Sustainable Development at PepsiCo about PepsiCo’s Water Stewardship Approach and the future of sustainable water practices.  The conversation focuses on how to create a comprehensive water management strategy by using tools such as the UN CEO Water Mandate, creating internal metrics, and actively engaging stakeholders and your organization.  Dan also talks about how water strategy impacts reputation, how to track public perception, and how to measure the impact of your sustainability efforts.  The conversation concludes with Dan’s perspective on overcoming global water challenges and how PepsiCo will be part of the solution. 

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Transcript:

(Thera Kalmijn) “This is Thera Kalmijn, Founder & CEO of SureGround, Social & Sustainable Solutions. For today’s Sustainable Life Media interview, I have the pleasure of speaking with Dan Bena, Director of Sustainable Development, at PepsiCo. Mr. Bena leads PepsiCo’s international sustainability efforts across PepsiCo’s food and beverage operations.  The focus of our conversation today will be PepsiCo’s Water Stewardship approach and lessons other brands can learn from PepsiCo’s triple bottom line commitment to water issues.”
 
Dan, thank you for being with us today.” 
 
(Dan Bena) “Thank you, Thera”
 
[PepsiCo’s Water Stewardship Approach]
 
 (TK) “To start; please tell us a little about the main areas of focus in PepsiCo’s water stewardship approach”
 
(DB) Our water stewardship at PepsiCo is really part of a broader operating model for sustainable development and that’s something we call Performance with Purpose. 
 
Performance with Purpose is three planks - one is Human sustainability which is the transformation of our product portfolio to offer “healthier for you” products.  The second is Talent sustainability, which is the way we treat our people and attracting and retaining world class talent.  And the third, which is the most germane to this, is Environmental sustainability. 
 
And under the environmental sustainability umbrella, we have three core focus areas.  One is water, one is land, and one is climate. 
 
So our water stewardship efforts are really unique unto themselves and they have a variety of sub-elements associated with them as well.  Most importantly, the over-arching driver is respecting the human right to water.
 
 (TK) “I understand you have developed some very specific water goals.  Can you tell a little bit about what they are and why those specific goals were chosen over others?”
 
[Setting Water Management Goals]
 
(DB) “Yeah, it’s interesting.  It’s been quite an evolution and I’d say back in 2006, we were the first company of our size to come out publically with quantitative environmental conservation goals. 
 
And one of those was a reduction in our water use intensity by 20% by the year 2015 versus a 2006 baseline year.  And it’s interesting because 2015 was specifically chosen to align with the target year for the United Nations Millennium Development Goals.  So we thought there was kind of a nice integration there between what the business can do via our eco-efficiency efforts and how that could potentially positively impact greater society via the UNMDGs.
 
The second goal is striving for positive water balance.  And that’s something that’s really new.  We just announced that a month and a half ago as part of our annual report and something called the Promise of PepsiCo.  And the Promise of PepsiCo is a promise to a variety of stakeholder groups – our investors, our consumers, our associates, and perhaps most importantly, a promise to the planet.  And that’s where our environmental stewardship efforts fit.
 
And then the third goal, which I’m really excited about because I think this is one that could have the most impact for the greater good, is providing safe water to three million people in developing countries by the year 2015.
 
[Water Metrics that Matter]
 
 (TK) “And I’m in a little while going to ask you a little bit more about the United Nations Millennium Development Goals, but first of all, before we get to that, I know that people often say you can’t manage what you don’t measure and I understand that PepsiCo’s really focused on having metric-driven sustainable water initiatives.  How do you monitor and measure on your on-going basis, quarter to quarter or month to month to ensure that you are making progress against these water goals?”
 
(DB) “That’s one of the truest statements ever said because I hear that an awful lot and I use it myself over and over in presentations.  And it really is very true.  I was just last week in a meeting with Conservation International and that topic came up very, very clearly across multiple sectors which is the importance of having metrics.
 
Thankfully, we’ve had metrics across the board for literally decades and we take a very robust approach to how we measure.  We use something called “data elements”.  So we define a data element or multiple data elements where we have very specific definitions, we have very clear boundaries; we have very specific functions in terms of who is responsible for reporting those data elements. 
 
And then we can take those data elements and combine them into whatever metrics we desire.  And that’s true not only for water, but that’s true across the board for energy and green house gases and health and safety and a variety of other metrics. 
 
All of these are collated in what’s called a Global Benchmarking Metrics Handbook, which is something that we use across PepsiCo.  And then specifically for water, we have something called a PepsiCo Corporate Protocol for reporting water use intensity. 
 
Now it’s great that we have all of this codified, but the reality is, how do you actually operationalize it? How do you implement it?  We do that using a web-based tool.  It’s called Measure Up and it’s something that all of our companies and facilities report on a monthly basis into this web tool.  And then we have a corporate function that aggregates them and then we scorecard the results for all of those plants quarterly.
 
 (TK) “Wow, that’s fantastic.  It sounds like you have really integrated the measurement tool throughout every aspect of your operations and have your finger on the pulse so to speak.
 
[Engaging leadership and the Organization]
 
(DB) “Well you know what is really neat is that it goes beyond metrics because it also involves obviously training.  Because, the metrics, while they may seem intuitive and straightforward in some cases, [they] really aren’t. 
 
You need to have a best practice tool.  So we developed these best practice tools and then we cascade those to our plant floor folks, our plant floor population across the world to make sure that they understand the metrics and how to report them, and really what the importance of those metrics are. 
 
In addition to that, not only do we have the training tools, but we also have a variety of other standards and guidelines across PepsiCo.  One example that comes to mind is something called the Sustainable Engineering Guidelines.  And that is, I guess the easiest way to put it is a short walk to LEED – I don’t know if you are familiar with LEED Certification - it embraces the spirit of LEED design.  So it really incorporates sustainable engineering design into the new plants that we build. And this is a PepsiCo-wide tool.  So also included in that tool would be the metrics that are germane to sustainability.
 
(TK) “Yeah, that’s sounds definitely like a best practice in terms of integrating it into your decision-making process and your management process and it sounds like also your evaluation process with how you evaluate your people. 
 
(DB) “It’s remarkable, Thera, because we actually probably made the most significant impact when we included sustainability, or specifically water and energy conservation goals, in the performance objectives of our senior leadership team.  I mean, we have never seen such progress as once that was done.  It’s remarkable and it’s continued every year since then.
 
[The PepsiCo Journey – Managing Brand Impacts]
 
 (TK) “I’m going to switch gears a little bit to the past now for a minute.  I know in the past, PepsiCo has been met with some challenges related to water use in water distressed areas such as India.  Now, PepsiCo’s recent innovations - such as direct seeding that you’re doing in rice paddies in India and restoring water to aquifers – really tell a different story.   It sounds like it has been an evolution.  Can you tell us a little bit about the journey that senior leadership and the rest of the organization has undertaken to develop the water stewardship approach that you currently employ?”  
 
(DB) “You know it’s interesting.  I’ve been with the company 25 years and I’ve had the good fortune of having a mentor who was with the company 42 years before that.  So we’re going back into the 1950s and 1960s.  And that mentor was specifically something that was the water subject matter expert.  And he would tell me stories.  And a lot of it was anecdote, but he would tell me stories of how, you know, he would engage with communities in the Philippines in the early 1960s and work with them to grow better fish.  And he would engage with farmers in China, giving them some of our water plant treatment waste because we found that it was – number one – not only not toxic, in fact it was very safe, but it also grew very good swine.  So there was kind of a sustainable development component of the things that we were doing, almost naturally as part of the business decades ago. 
 
Now when it comes to water, and I would say kind of the “aha moment” which was a critical epiphany that we had – that goes back to 2003.  And this was some of the water challenges to which you alluded in India.  So in Kerala, both PepsiCo and Coca-Cola were met with media claims of water thievery.   And needless to say it is not only upsetting on a personal level, but it’s upsetting on a business level as well because it could be really crippling to the business when that type of media runs rampant. 
 
And our first response was to get hydro-geologic data because we thought is it really hard to argue with sound scientific data.  And we did, we got a lot of data.  We had great hydro geologists come in to prove that the water in the aquifer in Kerala where were sourcing was actually higher than it was four years previous which was when we started the plant.  And naively now in retrospect, I thought this is all we would need is sound scientific data. 
 
When we approached the local Panchayat, which is the community governing body in Kerala with these data, it couldn’t have been farther from the truth. So the reality is, even though we had sound, accurate data which were applicable to our plant, it completely overlooked the local community perspective. 
 
The community perspective was that in these households and in these communities, where they don’t dig commercial wells, they dig wells usually by hand.  They’re shallow and in fact those wells were drying up. Now it wasn’t because of PepsiCo and it wasn’t because of other industry, but they were drying up nonetheless.  And we were in many ways ignoring some of that local perspective. 
 
So once the proverbial light bulb went on and we realized, how can you be a mother in Kerala whose children are ill because they don’t have water and yet on the other hand they see trucks leaving the PepsiCo facility every day filled with product?  We immediately then began to understand their perspective and that was a really critical lesson for us.
 
[Local Efforts have Brand “Halo Effect”]
 
 (TK)  “Yes, and water being as you’ve indicated here in the situation you’re describing, it’s such a local issue and one of the questions I think about when I think about water and brand is, are you experiencing, when you have a brand impact – clearly this was negative brand impact originally and it had a global reach – but when you’re coming and doing the wonderful things you are doing with water now, are you finding that there is a “halo effect”  from the local region clearly is aware of what you are doing in providing clean drinking water and reducing the impact on aquifers etcetera – are you finding there is a “halo effect” to other markets back in the US or more developed countries that they’re pleased with the efforts that you’re making?”
 
(DB) “I’m glad you made the distinction between US and more developed countries because I would break this up into a couple of components.  It really does vary based almost on the specific consumer segment so it is really hard to generalize geographically. 
 
I would say though the halo certainly applies and has been increasing when we talk about the LOHAS segment – the lifestyles of health and sustainability segment of consumers.  And those are largely in the US and Western Europe and really the more developed countries.  So absolutely where those consumers have a very strong social conscience, I would say that the halo effect is very clearly demonstrated. 
 
The other interesting thing though is brand protection or license to operate in the very communities that are in fact water distressed. And I would describe kind of their reaction to our efforts as much more dramatic than in developed countries.  And I think it’s much more dramatic and it’s certainly understandable because not only is water so local, but it evokes such a visceral response to people that really don’t have it.  That’s more than understandable. 
 
[Telling Your Water Management Story]
 
 (TK) “So how do you tell your story so consumers will know what you are doing with water in other parts of the world?  What’s been the most successful tool for you to really get that message out so you can take advantage of that halo effect in other parts of the world?
 
(DB) “You know, Thera, there are the traditional vehicles that I think many companies of our size use.  What’s really remarkable is that when you think of PepsiCo, you think of a 60 billion dollar company. And to me when you think that we are in as many countries as the United Nations, that’s a remarkable impact that we can have.  If we can collectively tell our story in those countries and to the multiple stakeholder groups, that is remarkable opportunity for impact. 
 
And we’ve been doing this through the traditional vehicles of annual report and our sustainability report and we’ve been doing much more in the past two years through digital advertising and digital communications like Facebook and Twitter and the like.  I now am sort of teased internally as being the PepsiCo evangelist because I have the good fortune of travelling around the world to different venues and telling this story.  And the reason I do it is because I believe firmly that the story is so genuine and so substantive.”
 
[Measuring Water Strategy Impacts on Reputation – how stakeholders can help]
 
(TK) “It’s a deep story that seems to be reaching to all corners of the globe and it’s fascinating the journey that you’ve taken so far.   How do measure then all the wonderful things you’re doing with water and how that actually has, an impact on the PepsiCo brands?  Is there a metric that you track that says, by doing these things, we’ve increased brand share, we’re able to increase our shareholder value – how do you tie one to the other?”
 
 (DB) “I wish I could tell there were a single metric that we could use across the business and the reality is that’s just not so.  So when you think of the diversity of PepsiCo – we have 18 mega-brands that have more than a billion dollars in revenue each, we’re, as I said, a $60 billion company, 300,000 associates, a huge number of brands in a diverse geography. 
 
So the metrics that would be associated with recognizing stewardship would be based on the geography, based on the consumer base.  I would say that the best way to answer this is to say that we use a variety of techniques. 
 
One in particular is called the Edelman Trust Barometer.  I’m not sure if you’re familiar with that (TK: yes, I am).  It’s really a great tool for us to use.   They ask a variety of questions to a variety of audiences and they monitor very quantitatively what the audiences’ reactions are to things like mentioning PepsiCo brands, exactly what impact the communication of a CEO can when they go out and talk about the brands, when they talk about the company. 
 
The other thing we’ve used quite advantageously I would say is a company called GlobeScan and they’re a global survey company.  They’re Canadian-based.  They’ve been doing this for twelve or fifteen years now.  And they survey people across virtually 25 or 30 countries in both developing and developed countries alike.  And they ask them a variety of questions, not only about the environment, but largely about corporate social responsibility.  And we’ve been using a lot of those data as not only a baseline comparison but as an evolving comparison as well as far as how well we’re doing in terms of the company and the brand. 
 
And the last thing I would say is that there is a bunch of really locally relevant techniques that we use which are remarkably important.  One of them that comes to mind is in the U.K. for example.  Our U.K. business, I think, has been a leader.  Our Walker’s business there has been a leader in terms of “on–pack” communication. Because they were the first consumer products company to come out with a certified carbon label on their Cheese and Onion Crisps. 
 
And what they did was, in conjunction with that labeling on pack, they also started a website that is a consumer-facing website that educates the consumer about the importance of what that on-pack label means and also the importance of reducing your carbon footprint.  So they’re monitoring a variety of website metrics related to that website and in addition they’re complementing all of those efforts with routine interviews and surveys to the various ministers of parliament in the U.K..
 
(TK)  “It sounds like you really are looking at metrics from a lot of difference places and from very well respected external sources as well to add to the metrics that you internally already are tracking. 
 
(DB) “That’s the key.  One of the things that the interest in sustainable development has done is it’s started this flurry of kind of niche market entrepreneurs or real opportunities for real entrepreneurs.  And as you might imagine, some of them are much more credible than others.  But frankly just wading through this sea of all of these possibilities to get to those that are the most credible and the most noteworthy was really quite a challenge.
 
(TK) “Yes, because you can definitely run the risk of a green washing accusation if you’re not partnering with the right people in presenting your data.”
 
(DB) “Absolutely!
 
(TK) “Those that you mentioned – GlobeScan and Edelman Trust – are very well respected and recognized.
 
(DB) “And I can tell you, our stakeholders absolutely make sure that they keep us honest and they keep our feet held to the fire.   You know we joined Ceres last year and it is one of the best things that we’ve done in terms of sort of gauging our credibility and transparency efforts internally.  Because they give you very, very frank, very candid feedback as far as how your efforts are perceived externally.  And that’s really critical to a company and to a brand.”
 
(TK) “Yes, very.  Definitively more effective, but you have to have a thick skin I guess!
 
(DB) “That’s for sure!”
 
(TK) “Don’t take it personally, but as a learning opportunity!”
 
[How to Develop a Comprehensive Water Strategy (using the United Nations CEO Water Mandate)]
 
 (TK) Well tell me if you were giving, since you have such deep experience and such rich stories to tell, if you were meeting with someone who was just starting out to develop a water strategy, what do you think are the most critical elements you would tell them to look at?  Where should they start?  How should they set goals that will really impact the triple bottom line?  (What are) the top two or three things that you would tell someone who was just getting started?
 
(DB) “You know, Thera it’s going to come across perhaps from a point of view that’s biased because I have to tell you that I’m on the steering committee of the United Nations CEO Water Mandate this year.  I, just last week in the Conversation International Meeting that I mentioned, I was asked a very similar question.  And it was – for companies that perhaps aren’t as far along as PepsiCo or some of our peers - where do you begin?  What would you do?  How do you even define what a holistic water strategy is? 
 
And I went back to the UN CEO Water Mandate.  Now, it’s only been in operation since 2007, but it remains in my view one of the best, most comprehensive, most holistic ways to formulate a water strategy. 
 
The reason I say that is because, there are six elements that are included in the mandate. One is direct operations, which is usually the most intuitive place companies start because it is where you normally have the most control.  And then the natural evolution from there is the second element which is supply chain and watershed management.  The third is collective action – public policy, which is absolutely critical in the water space as you start to evolve beyond your operations and beyond your own sphere.  Then there is community engagement which is the fifth principle – which is – I mean that can be a make-or-break you – that is absolutely crucial to any really robust water strategy.  And then last is transparency and that is something that we kind of alluded to when I mentioned Ceres.  That’s something where the UN CEO Water Mandate is providing quite a bit of leadership. 
 
We actually developed some transparency guidelines specifically for water reporting.  We had the Pacific Institute, for example, issue - I think they’re up to their second white paper now - where they evaluated all of the CEO Water Mandate endorsing companies, specifically through the lens of transparency and water reporting.  So, we’re sort of auditing ourselves just to make sure that what we are saying and what we’re suggesting in our advocacy efforts, is in fact credible and in fact the best thing to do.”
 
[How will Reporting Water Impacts Drive Change?]
 
(TK) “Yes, and speaking of reporting, I know that the Carbon Disclosure Project is now taking on water disclosure for the first time.  What impact do you think that will have on your specific industry and your upstream suppliers given that agriculture is a big part of the global water footprint?  How do you think that will change the way people are viewing their water strategy or perhaps getting them going – their water strategies going?”
 
(DB) “You know, the short answer is – it will dramatically, and is already beginning to dramatically increase transparency and also engagement.  Um, I can’t tell you how many externally stakeholders with whom I have contact have mentioned things like the Water Disclosure Project of the CDP or Water Risk Matrix that is being developed by Goldman Sachs and General Electric and the World Resources Institute.  There are just so many of these sort of metrics or indices that are being developed specifically related to water that it is remarkable , it is unparalleled. 
 
Now I would say that PepsiCo has decided to become a founding responder of the Carbon Disclosure Project’s new initiative.  But it’s important to realize  - one of the things that went into our thinking, before we actually agreed to become a founding responder – was how the data would be used because one of the last things we was another risk index that comes out prematurely.  Because sometimes companies can find themselves managing so aggressively to a number on a page that you kind of lose the spirit of what the index is intended to do. 
 
So we said to them, how are you going to be using the data that you’re going to be getting from these companies? And they were very clear that there will be no ratings and there will be no scoring until at least 2011, more likely 2012.  And in addition, um, they have taken a very collaborative approach to collecting these data.  And that really figured in quite prominently into our decision to be part of this project from the very beginning. 
 
The other thing is – which is really clearly needed I think in this space – and part of it is because there are so many of these indices and these initiatives that are taking place, is a common lexicon.  So when you ask about how things are changing, I think there is more and more drive toward a common lexicon and toward reciprocal recognition of these various indices.  Because from a company perspective, you really don’t have the time to respond to five or ten or even twenty different indices that cause you to do redundant work.  The more streamlined the response to those processes can be, the more time you have to get down to the business at hand which is returning value to your shareholders.”
 
(TK) “Absolutely, yes, and this is a continual evolution here in the way we are measuring things.  It will be interesting to follow the journey of first year of the Water Disclosure Project and see how that goes.”
 
(DB) “Absolutely agree.”
 
[Looking Forward – PepsiCo is Thinking Ahead]
 
(TK) “Now, I know we’re just about out of time and I just want to ask you with 2015 just around the corner, what do you see, I know you’re probably already starting to think about the next phase, I know you still have goals you want to meet before then, but what would be next in your mind for PepsiCo’s water efforts? What do you see as the next step?
 
(DB) “I love this question, Thera, because it fits right into something that we have done over the past twelve months or so.  We were involved in an initiative an NGO in the U.K. called Forum for the Future.  And for the first time really in PepsiCo’s history, we’re taking a much farther view.  We’re looking out twenty years into the future as far as what the risks and opportunities are to the business and to the communities we serve. 
 
And what’s remarkable is we did that through a variety of scenarios development.  And the scenarios are less important than the messages that were kind of common to all of those scenarios.  One of the messages that was common to all of them was – water is important from a scarcity perspective, from an abundance perspective, because many people link business and risk only with water scarcity, when in fact water overabundance can be just as much of a business risk especially for an agricultural company.  So water is very important. 
 
The other thing which I would say to directly answer your question, is probably the biggest thing coming down the horizon is leveraging the base of the pyramid population.  So those people, those four billion people that are making less than four dollars a day, if we could transform them, not into the beneficiaries of philanthropy, but into real legitimate consumers, I think that would be a win for companies and I think it would be a win for those consumers because the more they can be legitimized, the more they can become lifted out of poverty, and the more they can develop socio-economically, the more they can become customers, and thriving communities.”
 
[The Future of Sustainable Water Management]
 
(TK) “And I think that’s absolutely right and I know that’s an area of passion for you as well as the United Nations Millennium Development Goals and do you believe – it sounds like you are hopeful – that the work that PepsiCo is doing and some of your peers and other industries, that we’ll be able to collectively meet the water, global water related challenges that are outlined in the United Nations Millennium Development Goals.  And they’re also thinking ahead, past 2015, but what’s your viewpoint on that?”
 
(DB) “ Thera, I think just in the short time that we’ve chatted, I hope you know the answer to that – and the answer is a resounding yes,  I am hopeful.  And actually that’s frankly what brings me to work every day, because if I were to think that hope were lost, then it would be increasingly difficult for me to come and do the job that I do.  This has become much more than a job for me, it’s become an evocation.  And it’s not working for PepsiCo, although that is certainly a great company, it’s utilizing PepsiCo’s might and PepsiCo’s impact across the world not only to help the business grow, but to help our societies thrive.”
 
(TK) “Thank you very much, Dan.  I know we’re just now out of time, but thank you very much for taking the time to talk with me today and I definitely will continue to follow what you are doing with great interest and I wish you success and PepsiCo success in achieving your water goals.”
 
(DB) “Thank you so much. It was great meeting you.”