Lessons from PepsiCo’s Laxman Narasimhan, CEO Latin America, Europe and Sub-Saharan Africa for PepsiCo.
From our partners at LatinTrade.com
“Purpose has to be deeply embedded into how you go about making your money as a company. It cannot be what you do with the money that you as a company make at the end,” said Laxman Narasimhan, CEO Latin America, Europe and Sub-Saharan Africa for PepsiCo.
For many, the message of this view is that to have a true purpose-driven company, executives should be ready to upend their business model. At PepsiCo they did 12 years ago, with a program called Performance with Purpose.
It has led the food and beverage giant to set tough goals on three pillars: Products, people and planet. This initiative paid off in that it moved the company closer to all their stakeholders. Authentic closeness is perceived at Pepsi as the only sustainable way to maintain a social license to run a business.
Latin Trade spoke with Laxman Narasimhan about purpose.
How do you make purpose drive a company?
The reality is that purpose must be at the center, it must be the essence of the company and must drive it in the way that people think, in the way that people decide, in the way that they actually do their business.
It is not something you can do after the fact. It has got to be central to what you do. Everything that you do with the business, from start to finish, has to have purpose at the heart of it.
We talk about it in this way: Purpose has to be deeply embedded into how you go about making your money as a company. It cannot be what you do with the money that you as a company make at the end, because then it will not be authentic.
In order to make this work, we at PepsiCo have embedded purpose, our commitment to Performance with Purpose, and our commitment to ensure that the business succeeds in our DNA. We understand that our work needs to be inextricably linked to the sustainability of the world we are in.
But we don’t just say it. We ensure that it gets embedded.
How do you embed it?
First, with leaders that serve as role-models for purpose. Second, we define clear metrics against which we measure ourselves and which we ask others outside to measure us with. We publish what we call the PepsiCo Annual Sustainability Report, that tracks our progress against our commitments, versus the promise that we made in terms of where we will get to in 2025. Third, it’s in the stories that we as leaders tell.
And at the end of it, of course, we do have to make some investments in order to build the capabilities to deliver against these goals.
Could you give an example?
In 2016, we at PepsiCo said that we would reduce added sugars, sodium and saturated fats in our beverages and food portfolios. We also said that we would change the mix of our business in order to have more nutritious products.
We set global goals, for example, that by 2025 we would reduce the added sugars in many of our drinks by about 30 percent.
In 2016 we set the global goal to have at least two-thirds of our beverages to contain 100 calories or fewer from added sugar per 12-oz serving by 2025, with increased focus on zero and lower-calorie products.
What we have done with that goal is that we have actually reformulated our products like 7Up, Mirinda and we have launched Pepsi Zero Sugar, LifeWTR and Pepsi Black in many of our countries. These products have helped us shift the mix of what we make, so that we can achieve the goals that we have set on sugar.
We set the goal, we ensure that we are following through on the goal, we publish our commitment in the PepsiCo Annual Sustainability Report, and we invite people from the outside to give their opinions on what we do.
What are the main pillars of your Performance with Purpose program?
At PepsiCo, these goals are established from the Performance with Purpose standpoint. We’ve established a number of goals for 2025 that break into product, planet and people.
In the case of product, it’s about sugars, sodium and saturated fat, how we are going to reduce these, and move our mix towards more nutritious options. We’ve set the following goals: At least three-quarters of our global foods portfolio volume will not exceed 1.1 grams of saturated fat per 100 calories by 2025 and at least three-quarters of our global foods portfolio volume will not exceed 1.3 milligrams of sodium per calorie. On the other hand, we’ve set the goal to provide access to at least three billion servings of nutritious foods and beverages to underserved communities and consumers.
For example, in terms of planet, we work with farmers to help them reduce the levels of water that they use in farms where they are growing products for us. We’ve set the goal to target 15% improvement in water efficiency of our direct agricultural supply chain in high water-risk areas by 2025 – saving the equivalent of the total water used in PepsiCo’s manufacturing operations.
On people, for example, we work with women and girls. We work closely with the PepsiCo Foundation to ensure that we are making the right investments, that we are providing the right grants to ensure that women get education and workforce training, and that they are ultimately successful in their lives. Here we set the global goal to invest $100 million dollars in supporting initiatives to benefit at least 12.5 million women and girls around the world.
That is how we take an idea like Performance with Purpose: we clarify what it is; we change our business to embed purpose into all of it; we define metrics; we publish reports; we invite scrutiny; and with the actions we take, through the stories we tell, through the metrics we have defined, and the investments we make to help us do all this, we embed purpose in the way we do business. That is how we take an idea and make it real.
Are these goals aggressive enough?
Just look at our product and our formulation goals: they are bold! Look at our planet goals. What we talk about in terms of our packaging – we’ve set the goal to design 100% of our packaging to be recoverable or recyclable by 2025, while partnering to increase packaging recovery and recycling rates.
We’re working with the Board, we’re working with people who are our suppliers, we’re working with our manufacturing plants to ensure we reduce packaging’s carbon impact, and to increase recycling rates.
These are commitments that require investment, that require us to say ‘if we don’t do this we will not have a license to play’. We are investing $100 million dollars towards women’s economic success in the form of an education and workforce training. We are using our global reach to deliver 3 billion servings of healthier food and drink to the places where people need them the most. You see? The numbers are large. We can’t do that unless we are bold, by saying ‘we are going to make this happen’. That’s what we do.
How does the role of CEO change when you are a purpose-driven firm?
As a CEO you have to look at the short term and the long term and need to keep your eye particularly on the long term. You need to ensure that you are a driver of change; that you are a spokesperson for the change, and that you actually encourage, and in fact in some ways, make this change happen, so that you keep your eye on the consumer in the long term. Because it’s these consumers who are going to buy your products, only if you have products that meet their requirements on purpose.
It is very important for the CEO to be front and center and to make that happen.
Do these goals impact the whole company?
These goals impact every part of our business at PepsiCo. They impact the entire company. It’s not that, say, I’m making potato chips in one place and I’m making potato chips at another place, and these goals do not apply on one place or the other. They apply everywhere. We are ensuring that the bar is met across the entire business.
That’s why I said that it is really about how we make the money we make. Not just about what we do in some places with the money we make.
We believe that for companies like us to operate in the world we are in, we need to ensure that we are constructive contributors to the direction that the world is moving in. We think that is the reason it is so central to the culture of our company. And we believe that our success in business is inextricably linked to the sustainability of the world in which we operate. We don’t see any difference between our focus on purpose and our focus on performance.
Could you give us some examples of what are you doing in Latin America on the Performance with Purpose vision?
Hunger is on the rise in Latin America. The number of people suffering from hunger is really large. And we know that access is, in fact, the problem.
At PepsiCo, we have given hunger and malnutrition a big value, and of course, we are a food and beverage business. We recognize that for a government, for a community to be alive, for a community to be sustainable, hunger has to be tackled. This is the reason why we work with partners in order to improve nutrition in Latin America.
We just announced a $7 million-dollar investment for the region with our Nutrition of the Future platform in which we are integrating all of our existing nutrition programs across the region. We also announced a $500,000 grant to our partner The Global FoodBanking Network with which we aim to provide access to at least 6.75 million nutritious food servings over 18 months in communities in Latin America and the Caribbean.
In Mexico we have a program called ‘Amor por la Montaña’ which trains men and women to breed and milk goats. Another for indigenous communities which improves livelihoods through education, health and productivity. Again, these are examples of programs that help us ensure that the communities have access to nutrition, because access is a big problem and they all form part of our Nutrition for the Future platform.
We also need to be educated for healthy lifestyles and balanced nutrition. In Colombia for example, we have a program called ‘Alimentate y Activate’. And this is the program we have put in place to focus on nutrition and promotion of healthy habits. Of all students who were assessed, 38% of all the 2,000 children were identified with malnutrition: obesity or underweight. From this assessment we defined a whole range of actions to help these students.
We are committed to ensuring access to nutritious food and beverages, education for healthy lifestyles and balanced nutrition, and finally, we support agroeconomic self-sufficiency. We are running programs across Latin America along with partners that help us ensure that people have sustainability and self-sufficiency in their agriculture and in the economics of the agriculture that they have.
That is at the heart of what we are doing to ensure that these communities get access to nutrition.