How PepsiCo Creates Lasting Agricultural Connections: Q&A with Margaret Henry

by | Jul 25, 2018

“PepsiCo depends on agricultural communities and their longevity for our future success,” says Margaret Henry, director of sustainable agriculture at PepsiCo.

The company’s recently published 2017 sustainability report included updates on their Sustainable Farming Program, which began in 2013 as an initiative to improve crop yields and growers’ livelihoods as well as increase environmentally responsible practices and advance respect for workers’ human rights.

Last year 79% of PepsiCo’s directly sourced crops were grown by farmers engaged in the program. For 2020, the goal is to reach 100%.

Henry works directly with farming communities and suppliers. A self-described dairy farmer’s daughter, she focuses on the company’s production of agricultural commodities around the world, whether that means explaining personal protective gear in Mexico, working on water-saving irrigation techniques in Thailand, or encouraging cover crops in Idaho.

We caught up with her to learn more about how the company’s Sustainable Farming Program works, and the business case for building long-term relationships with farmers.

What prompted the Sustainable Farming Program and how does it work?

It came from our CEO’s vision of what it would take to be a successful company. Indra Nooyi wants to create sustainable communities around the world, and the Sustainable Farming Program is a manifestation of that in our agricultural work.

Whenever we’re sourcing products in a country, say we want to buy potatoes in Argentina for Frito-Lay. First we’ll work with the farmers to understand their current practices. How do they treat laborers? Do they have contracts? How do they work with water? What goes into the water from their farm? Do they burn their crop residue? How do they manage climate change? We talk about financial literacy and female inclusion in the farm.

We do an assessment on all those different lenses to understand the gaps. Then we put together a program to train the farmers. It’s a continuous improvement program. Farming always has one more thing that’s the next challenge. For us, that’s the next opportunity to make progress.

How were the program’s environmental and social standards developed?

We took a wide swath of NGO and government standards in the social sphere, and looked at which ones were credible and making a difference in farming communities. Many weren’t actually changing agriculture. Maybe they met a consumer desire, but they weren’t making a significant positive impact.

We took into account feedback from a variety of NGOs and other companies. Our program incorporates the best of what’s out there with advice from thought leaders from the World Wildlife Fund to the Environmental Defense Fund to the Nature Conservancy, to different certifications like Rainforest Alliance. We tried to make it fit the crops we’re growing and the geographies we source from.

Do you have an example of ‘significant positive impact’?

In Iowa, our corn farmers there were farming in a traditional way: Planting corn in the spring, harvesting it in the fall, planting it again in the spring, harvesting it in the fall. That meant there was a lot of soil running off all winter, which meant fertilizer getting into the rivers from Iowa to the Gulf of Mexico. There was a hypoxic zone in the Gulf of Mexico.

We’re working with those farmers to make sure they plant something in the fall to keep their soil in place. That also keeps that fertilizer in place. The farmers are now seeing less herbicide, pesticide, and fertilizer they have to use, and less runoff all winter.

What happens if farmers in the program don’t meet PepsiCo’s standards?

There are companies that say ‘If you don’t meet the standards you’re out.’ We try to work with the farmers where they are, and to make progress that continues into the future.

We don’t want to abandon farming communities. We want meaningful improvements. If there’s a group of farmers that’s not meeting our goals, we work with them actively, and we work with their local community.

How do you communicate with farmers?

We’re not in the business of telling farmers how to farm. We’re in the business of helping to bring innovation and ideas.

Sometimes it’s working through folks who farmers trust to understand the challenges and opportunities. That might be a seed seller or fertilizer seller, an NGO, a government extension agent. It varies around the world. If we can work with them to find the business case for cover crops, personal protective gear, whatever it is in that particular community, that’s often a successful way in.

We try to use our power with our suppliers. For example, the ability to use our contracts to access finance for upgrades. Our farmers in India use the PepsiCo Frito-Lay contracts to access financing for improving their irrigation. A stable supplier gives them the opportunity to invest in their farms and in their future.

How does the Sustainable Farming Program benefit PepsiCo?

We want farmers who like selling to us. In Canada with our Quaker Oats farmers, for example, we got their carbon footprint, which is sort of an esoteric exercise of putting data into a tool and getting a number.

Our oats farmers are carbon negative — they’re actually putting more carbon dioxide into the soil than is being emitted into the atmosphere by their farming activities, which is remarkable given that agriculture is responsible for about a third of all climate change emissions. That is a tangible benefit for us.

When we came back to them with that, they got more pride in being Quaker Oats farmers. In the long-term that intangible club of sustainability, that’s a benefit to us. We have a supply chain that’s stable into the future, and we have more open lines of communication.

Are there challenges you’re anticipating, especially in reaching the 2020 sustainable farming target?

There are huge challenges. So many of the things we’re trying to work on involve a shift in human behavior. Some of it is how you help people think about change effectively.

Another is the scope. We have ambitious goals that are going to be very hard to hit, and we can’t do it alone, frankly. Some issues are systemic — how governments incentivize farmers, how farmers work with their input providers and what those contracts look like. There are issues of labor availability.

The next challenge for us is partnership, working with governments, NGOs, civil society, even other companies, and nontraditional partners like the international development sector to understand how to tackle issues that are much larger than a single supply chain.

Thinking about the future of the program, what do you see?

When I go around the world and look at what we’re doing, it all comes back to strengthening communities.

We have a lot of people show up to a training or an engagement. Then if we come back and they’ve been implementing something for a year — working on water, tillage — there is an eagerness to talk about what they learned and how to do it better. There’s almost always a neighbor who chimes in to say, ‘I took that idea and did this other thing.’ It’s a chain of interaction that helps communities innovate and find a sustainable future.

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