ESG Analysis – Unilever & Pepsico

Introduction
The importance of ESG (Environmental, Social, and Governance) factors is being
recognized at an ever increasing rate in the dynamic business world today. Among the major
manufacturing companies PepsiCo and Unilever, ESG principles are an integral part of their
business model. The comparison of their ESG performance is a significant factor for making
informed decisions in a multicultural business world. Our analysis aims to uncover the
performance of firms on ESG factors and come up with investment advice based on such
dedicated research.
Company Description
Unilever – It is a multinational giant specializing in consumer goods. Having
multiple brands, it reveals presence in more than 190 countries with a mission of
improving wellbeing and the condition of the planet for all.

Pepsico - PepsiCo is one of the most prominent food and beverage

companies in the world and boasts treasure troves of well-known brands
like Pepsi, Lay’s, and Gatorade. The company functions in more than 200
countries, and the sustainability and customer satisfaction are a key factor to them.

Environmental Factors and Performance

Unilever
The Unilever Company does pioneer work within the industry to act as an environmental
steward and has embarked on a variety of initiatives directed at minimizing its environmental
impact and the promotion of sustainability The Sustainable Living Plan is a core component
of their environmental strategy, which was introduced in 2010. The plan entails challenging
targets for carbon reduction, water conservation, and waste generation using inventive ways
of responsible sourcing of raw materials, renewable energy adoption and reducing
packaging waste.
In 2023, the firm obtained its leader indicator on the CDP Index with AAA- rating, meaning
that the organization is in the first place among the companies that progress to our planet
improvement. If we look at company’s own records, here at Unilever, we can find a constant
reduction in water recovery and emissions to our atmosphere. The company has enshrined
its corporate social responsibility (CSR) work which is in accordance with the "Triple Bottom
Line" principle of ensuring profit for the organization, people while also taking care of the
planet in its commitment of sustainability. Unilever's corporate social responsibility (CSR)
approach provides a multi-stakeholder platform that emphasizes relationships and value
chain development through all relevant constituencies that the company is engaging with.
Unilever's sustainability goals are clear through its implementation of "Zero Waste" programs
back in 2016 where they aspire to drastically reduce waste generation and discharges that
lead to a clean environment. By aligning with the SDGs, Unilever looks to contribute to net
positive outcomes in terms of environmental and social performance and take business
sustainability into consideration.

Pepsico
On the other hand, PepsiCo has faced some challenges as well in some instances of
environmental preservation, mostly concerning the utilisation of water and plastic packaging.
Notwithstanding these challenges, the company has exhibited a positive attitude towards the
credit of environmental issues by way of a system of action plans and partnerships.
PepsiCo's recent commitment to move towards a low-emission future by 2040 is a positive
stride in its journey towards environmental sustainability. By 2022, the organization claimed
of shaping over 900,000 acres to practice such principles, against only 345,000 acres in
2021. The geochemical initiative is paramount because it is designed to improve the soil
health, provide habitat for a wider variety of plants and animals and reduce the amount of
GHG emissions. PepsiCo has set this target rather ambitiously, looking to impact 7 million
acres by 2030.
The company’s water stewardship goals towards this milestone are to achieve water usage
efficiency of 15% by 2025 in high water risk areas. Though the company didn’t, create a
specific index of their recent years, but they did increase the 2020 index by 14%. About 55%
of its core ingredients is sustainably sourced in 2022 which is great considering that the
percentage in 2021 is only 50%.
Environmental initiatives of PepsiCo are among the key pep+ (PepsiCo Positive) strategy
components in which each area of its activity is fulfilling sustainability goals. Its success in
these aspects shows the company is in accordance with the principles of environmental,
social and governance and gives evidence of such a company’s willingness to affect a
positive change on the communities and the planet.
Social Factors and Performance
Social factor involves the social communities where the corporation is located and the
effects that incur from its operations. The main faucets of this dimension include- human
rights, worker safety and welfare, relationships between the internal employees and how it
deals with diversity issues, and whether the company is doing anything to the wellbeing of
the society and/or community.
Unilever
The Sustainable Living Plan, a strategy developed by the company in 2010, included the
implementation of specific goals to improve the health and well-being of the people, reduce
environmental impact and strengthen livelihoods. Unilever executes its social activities on
the part of Unilever Compass strategy that is aimed at building a more equitable world with
the equal opportunities. Through various programs, the business focuses on enhancing
safety and health levels throughout its operations, henceforth protecting its workers. The
company would surely stand out in community investment, with initiatives targeted at
improving people's lifestyles; which remain the most vulnerable in regions where Unilever
operates. Another hallmark of Unilever’s operations is its commitment to the participation
and engagement of the outside world as a key indicator for the company’s mission to be
transparent and morally responsible.
Pepsico
The social performance of PepsiCo, as well, deserve mention. PepsiCo’s pep+ (PepsiCo
Positive) strategy clearly articulates its goal in bringing about a positive change to the world.
PepsiCo in 2023 made highly committal investments in community development especially
projects theme water, education and economic uplift. The company has been engaging into
the field of diversity and equality throughout the workplace in an attempt to make sure that
every employee feels respected and appreciated regardless of the background, religion or
gender. PepsiCo's projects that contribute to the improvement of the livelihoods among
people in their agricultural supply chain is laudable, as the projects have brought luck to over
11,000 people by 2022. The PepsiCo’s community engagement strategy is based on the
recognition of the strategic value of partnerships and the importance of the addressing of
societal concerns through the delivery of joint efforts.

Governance
Governance, or ‘G’ in ESG, is a system under which the firm is directed and controlled by
means of leadership, practices, and processes. It means the processes that are utilized to
check and ensure the companies, their leaders and administrators don’t go beyond the law.
Governance, in fact, determines what is the key objective of the company, how the company
is steered and navigated via risk management and even performance optimization.
Unilever
Governance structure of Unilever is designed to ensure accountable, fair and transparent
relationship between employees, customers and all other stakeholders, on the whole. In
2023, Unilever re-affirmed its commitment to the highest standards of governance,
manifested in its thorough governance roadmap incorporating increased level of
accountability, risk management and ethical standards observance. The Unilever’s Board
has been effective in coordinating the corporate strategy, performance, and risk
management while ensuring that Unilever exercises corporate responsibility and
sustainability. Governance as well is seen in the Institute policies and various practices that
guide the operations of the company in its dealings with all the stakeholders. Governance
practices at the Unilever are linked to the corporate purpose and these play an important
role in formulating a long-term strategy.
Pepsico
The governance framework of PepsiCo in 2023 incorporated ethics, accountability, and
stakeholders’ engagement into the leadership approach. PepsiCo's Board of Directors was
divided into two committees, each concerned with the strategic and financial objectives as
well as performing checks on corporate conduct. The management structure of Pepsico also
incorporated a committee structure that addressed specific areas such as audit,
remuneration, and sustainability. The company’s governance frame work was set up as such
to support pep+ strategy which aims at long term profitable performance and value creation.
Being recognized for good PepsiCo governance practices is nothing new for the company,
as it received several awards for its governance, risk, and compliance programs.
Conclusion
In terms of investment decision, Unilever and Pepsico are both trustable options backed with
a strong record for ESG Commitments and eventually, achieving the targets. However, the
comparison boils down to how the firms are prepared for transitioning to sustainable future
and innovating responsibly. In terms of Governance and Social Initiatives, both companies
have taken significant efforts to build various programs and bring in positive change. The
area of work has also been similar and in conclusion, their stakeholders’ demands have
been effectively fulfilled. However, in terms of environmental performance, Unilever stands
out from Pepsico. Not only have they achieved their past targets comprehensively, their
business model allows for a fast paced adoption of sustainable value chain. Thus, from an
Investment perspective, Unilever seems to be a better option and as we go into the coming
years when sustainability would be top concern of public, Unilever is better prepared for
offering higher returns.
Stakeholders’ Outlook & Analysis
Introduction
Our study attempts to uncover the impact of such initiatives and from the lens of different
stakeholders, understand how well these firms serve their non-financial expectations. For
instance, some stakeholders are concerned about ingredient sourcing while some
stakeholders are more focused on condition of workers in factories for the two firms.
Therefore, it becomes imperative to identify what matters to diverse range of stakeholders
and finally, understand which firms performs better on multiple parameters of non-financial
performance. For the purpose of this study we have identified the following stakeholders
relevant to Unilever and PepsiCo:

 Active Consumers and Customers

 Suppliers
 Employees
 Government
 Non-Governmental Organizations (NGOs)
 General Public and Media

Active Customers and Consumers

From a vantage point of customers and consumers, both Unilever and PepsiCo have done a
good job of addressing their non-financial performance. These firms have concentrated on
product quality, invention, and customer needs fulfillment. Unilever for example is the brand
owner of sustainable product categories as in their brands - Dove and Ben & Jerry's.
Customers usually buy their products because they are ethical and environmentally friendly.
PepsiCo has taken a step further with programs like Performance with Purpose which
aspires to sustain the profitability of the company, as well as to contribute positively to the
society and the environment.
Suppliers:
Suppliers are key players in the growth of companies like Unilever and PepsiCo. These
companies have implemented supplier codes of conduct and responsible sourcing practices
to ensure ethical and sustainable supply chains. Unilever, for instance, has its "Sustainable
Agriculture Code" and works closely with suppliers to promote sustainable farming practices.
PepsiCo has also made efforts to ensure responsible sourcing through its "Supplier Code of
Conduct" and engagement with suppliers on sustainability initiatives.
If we look deeply at Unilever,
they have set high targets of
achieving zero emissions by
2030 as part of their Unilever
Supplier Climate Promise.
However, it is of paramount
importance to look at the
impact of Unilever’s past
initiatives to analyze the
performance. Unilever's
commitment to sustainability
not only benefits its own
operations but also extends
to its suppliers. As of March 20, 2024, Unilever's Sustainable Living Plan has already
improved the lives of over 1.3 billion people worldwide, including those within its supplier
network. Along with this holistic approach, relationship with suppliers has improved suppling
chain sustainability and resilience more. Unilever plans to achieve 80% sustainable sourcing
for agricultural raw materials and thus, exemplifies their power in reshaping supplier
practices.
On the other hand, for Pepsico, they have also eyed similar targets. But, Pepsico has
certainly strengthened its relationship with suppliers as it has achieved 98% accuracy rate in
deliveries. Pepsico aims to go Net Zero by 2040 and suppliers have a crucial role to play in
this target. PepsiCo's sustainability strategy hinges on dialogue with suppliers, welfare for
all, and enablement, building collaboration with its vast supplier network. Initiatives like
renewable energy adoption and regenerative agriculture projects not only reduce
environmental impact but also create new economic opportunities.

Employees:
Employees are key stakeholders in
assessing the non-financial performance of
Unilever and PepsiCo. Both companies
have implemented initiatives to foster a
diverse and inclusive workforce,
employee welfare programs, and career
enhancement opportunities. Unilever has
been recognized for its efforts in
promoting diversity and inclusion, with
initiatives such as its "Unilever
Sustainable Living Plan" and its
commitment to gender equality. PepsiCo
has also prioritized diversity and inclusion, as evidenced by its "Global Diversity and
Engagement Strategy."

Delving deeper in maintaining happiness of employees at Unilever, we find a story of

promoting diversity to embracing new tech. More recently, Unilever installed Unabot to help
in employee onboarding and for new employees to become integral part of the Unilever
culture. Looking at data from Glassdoor, Unilever has a positive rating of 4.1/5 with 73% of
employees having a positive outlook. The firm has also remained generous to support
initiatives that promote work-life balance with employees finding it easier to take leaves
when needed.
Looking at Pepsico, the firm performs similar as Unilever with an overall workplace rating of
4.0/5 on Glassdoor with 77% employees willing to recommend Pepsico to work at.
PepsiCo's "Talent Sustainability" policy aims to ensure a safe and inclusive workplace
globally, addressing employee concerns regarding career development and fair
compensation. This emphasizes fairness and welfare in human resource management,
aligning with corporate social responsibility efforts.

Government:
For the government, the two companies must abide by the local laws and regulations that
prevail including the environmental standards, labor laws, and safety regulations for items. In
general, these companies that have demonstrated a willingness to adhere to government
policies. Furthermore, they have set up stringent quality control systems and safety
standards to guarantee the fulfillment of the current market requirements.
Unilever actively collaborates with governments, regulators, and trade associations to
influence policy development, particularly concerning national and international issues as
climate crisis and product safety norms. Their Code mandates transparent and compliant
interactions with these stakeholders, emphasizing adherence to applicable laws and
company Values. A perfect example of how Unilever interacts with government can been
through their partnership with London’s Department for International Develop (DFID) to
create jobs, improve water and sanitation and develop sustainable supply chains in
developing countries.
PepsiCo's global legal and public relations teams manage government-related issues, while
the company implements policies for bottlers, distributors, and suppliers to ensure
compliance with governmental requirements. This comprehensive approach incorporates
government interests as stakeholders within PepsiCo's corporate social responsibility
strategy, fostering regulatory adherence and positive governmental relationships. Even
though Pepsico faced backlash in the past, notably for not allowing workers to form Trade
Union in India 2016, the firm has updated its strategy and allows for strong internal
investigations to ensure no rights violation.

NGOs:
Non-governmental organizations (NGOs) are important actors that can influence and
advocate for the conduct of professionals as well as sustainability. Unilever and PepsiCo
have been contributing the NGO communities in diverse areas, including environmental
preservation, community advancement, and social impact. Such cooperations in turn, give
the companies an opportunity to put to use the NGO’s experience and energy to achieve
such a good purpose.
Unilever has been active in forging relationships with multiple NGOs on a global level, as
enshrined in their Compass Strategy. Globally and regionally acting sustainability groups
drive Unilever to establish the partnerships needed to successfully achieve each brand’s
social mission. Through their work with creative business models, digital technologies, and
external financing they can maximize impact at scale. Additionally, Unilever's leaders are
actively involved in the World Economic Forum and the UN Global Compact besides
engagements with NGOs on development of policy initiatives. Specifically, Unilever
partnered with WWF, Oxfam, Save the Children, Rainforest Alliance, and UNICEF to address
sustainability, poverty, health, and environmental issues globally.
Pepsico has gone a step further to establish the Pepsico Foundation, for its support to NGOs
and other philanthropic purposes. PepsiCo Foundation's collaboration predominantly
focuses on U.S. non-profits like Charities Aid Foundation America. However, their impact
transcends borders through partnerships with international organizations. By supporting
disaster relief efforts and addressing critical issues like food security, safe water access, and
economic opportunity globally, PepsiCo demonstrates a commitment to corporate social
responsibility and humanitarian aid, fostering sustainable development and societal
resilience in communities worldwide.

General Public and Media:

The general public has become increasingly conscious of the non-financial performance of
companies, including their environmental impact, social responsibility, and ethical practices.
Unilever and PepsiCo have made efforts to engage with the public through marketing
campaigns, social media presence, and corporate communications. They are no strangers to
the media, having been featured both for positive impact and various uncertainties pertaining
to consumer safety, marketing, and environment.
Unilever enjoys a positive public perception. But, there have been incidents which hurt the
brand’s public repute. For instance, the Pricing war between Tesco and Unilever back in
2016, even though was resolved in 24 hours, hurt the brands as Marmite on their legitimacy
given by YouGov Brand Index. But, as of 2024, the firm has a positive perception and
focuses on serving the conscious public by promoting initiatives that bring in sustainability.
Pepsico has followed similar story as well. Short-term events have hurt some of their brands
in different regions but overall, the firm has a high level of trust shown by the public and
media. The firm has been seen as a responsible innovator over the years with strong
emphasis given to protecting the environment and building a more responsible world.

Conclusion
Both companies have demonstrated commitment to sustainability, ethical sourcing, and
stakeholder engagement. While Unilever leads in sustainability initiatives and partnerships
with NGOs, PepsiCo excels in supplier relations and community outreach through its
foundation. Despite occasional setbacks, both firms prioritize transparency and
accountability, resonating with the evolving expectations of stakeholders and investors.
Moving forward, continued collaboration with stakeholders and proactive measures to
address challenges will be essential for sustained non-financial performance and societal
impact.