Shareholders Push PepsiCo on Recycling for Second Consecutive YearInstitutional Investors Encourage Company to Improve Brand Value While Saving Millions of Barrels of Oil
New York, NY – PepsiCo (NYSE: PEP) shareholders will vote today, Wednesday, May 1 on a proposal asking PepsiCo to establish a comprehensive beverage container recycling strategy. The proposal suggests that PepsiCo set a recycled content plastic goal of 25% and a beverage container recycling rate goal of 80%.
Pepsi sells more than 100 million plastic bottles and aluminum cans of beverages every day in the United States. Two-thirds of the used PET plastic bottles and nearly one-half of the cans sold end up on the garbage heap. The recovery rate for PET plastic bottles, the company’s most profitable and fastest-growing beverage container, plummeted by half in the last five years. This environmental burden strains overflowing landfills and causes unnecessary use of oil and other natural resources.
Concerned by plummeting U.S. recycling rates, a group of institutional investors filed a resolution with PepsiCo for the second consecutive year. Filers of the resolution this year include Walden Asset Management, Domini Social Investments, and Friends Ivory & Sime, who collectively own more than $50 million of PepsiCo shares. A similar resolution was considered at Coca-Cola Company’s annual meeting in April. More than 70 million shares were voted in favor of that resolution
“For more than two years, shareholders have asked PepsiCo to set goals for using more recycled materials and for ensuring their products are being recycled. We are pleased with a new pledge to use 10% recycled content in US soda bottles by the end of 2005. It was a smart business decision that will strengthen our company’s bottom line at the same time that it reduces our impact on the environment,” said Kenneth Scott, portfolio manager at Walden Asset Management.
PepsiCo’s promise to make their bottles more environmentally responsible is similar to a slightly more expansive pledge by Coca-Cola that aims for 10% recycled content in all plastic beverage containers in North America.
“However, we are disappointed with PepsiCo’s and the beverage industry’s lack of progress setting public goals for container recovery,” stated Mr. Scott.
“The national recycling rate has declined by half over the past seven years. Tons of recyclable material is going to waste while millions of barrels of oil are burned to produce plastic bottles from virgin materials. This is not a sustainable path, from either a business or an environmental perspective. We are calling on the leaders of this industry to reverse this trend, and rescue these valuable company assets from the trash heap. We believe that those who respond with meaningful goals will set themselves apart as business leaders for the 21st century,” said Adam Kanzer, General Counsel & Director of Shareholder Activism for Domini Social Investments.
Socially responsive shareholders are also concerned that the PepsiCo position on recycling places the firm’s good name at risk. PepsiCo has been the target of a campaign by grassroots environmental activists led by the GrassRoots Recycling Network and the Container Recycling Institute.
Unfortunately, PepsiCo has taken no action to adopt publicly stated goals or a sustainable plan for achieving higher rates of container recovery. The firm continues to support lobbying efforts to defeat bottle bills, the only currently available system that has achieved 80% recovery rates.
“Setting substantive container recovery goals will help to reverse the decline in national recycling rates, protect brand value, reduce risk by diversifying container feedstock, and allow PepsiCo to gain competitive advantage on this issue,” stated Mr. Scott
An unprecedented study on recycling released in February 2002 by a group of environmentalists and businesses, including Coca-Cola, concluded:
Beverage container recycling saves the equivalent of 32 million barrels of oil annually.
Container deposit systems yield the highest container recovery rates by far.
Reverse vending machines and elimination of brand sorting can significantly decrease the costs of container deposit approaches.
The BEAR report found that container recovery is affordable, and cost-effective solutions are available. For example, in the Canadian province of British Columbia, an industry-run recycling program achieved a 75% recovery rate in 2000 as well as an operating surplus that exceeds $5 million.
Without container recovery goals in place, PepsiCo cannot claim to have a comprehensive recycling strategy, proponents believe. Moreover, without its own beverage container recycling goals, PepsiCo and the beverage industry risk the imposition of legislative solutions, such as the bill recently proposed by Senator Jeffords to achieve 80% beverage container recovery rates.
Domini Social Investments manages more than $1.8 billion in assets for individual and institutional investors seeking to create positive change by integrating social and environmental values into their investment decisions. Its flagship fund, the Domini Social Equity Fund (Ticker: DSEFX), was the first socially and environmentally screened index fund and is the nation's largest socially responsible index fund. The Fund includes companies with positive records in community involvement, the environment, diversity and employee relations, and excludes companies deriving significant revenues from alcohol, tobacco, gambling, nuclear power and weapons contracting. In addition to the Domini Social Equity Fund, the company also offers the Domini Social Bond Fund (Ticker: DSBFX) and an FDIC-insured money market account (in partnership with ShoreBank), both of which focus on community economic development.