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Coke and Pepsi eye new sustainability goals after years of failed promises

June 22, 2021, 10:00 AM UTC

This story is part of The Path to Zero, a series of special reports on how business can lead the fight against climate change. This quarter’s stories go in-depth on sustainability in supply chains.

The latest global push for sustainable products is not the first time Coca-Cola has found itself reevaluating its supply chain. 

Back in 1969, the company performed its first environmental life cycle assessment of its products, looking at the impacts of its raw materials, fuels, and manufacturing process.

“The Coca-Cola Company has been involved in sustainable packaging design and innovation initiatives for decades,” said Ben Jordan, the senior director of environmental policy for Coca-Cola, in a written response. 

That path led to a long timeline of promises but often little substantial progress. Coca-Cola and other big bottlers like PepsiCo are still heavily focused on recycling plastic, despite decades of missed recycling targets. Now, increased pressure from investors and customers has led to more ambitious goals for reusable and refillable packaging, which environmentalists say are the true solution to the plastic pollution problem.

The big bottlers remain some of the world’s largest plastic polluters according to a 2020 report conducted by Break Free From Plastic, a global organization working to end plastic pollution. That’s in large part because the bottlers have focused on recycling plastics at the end of their supply chain, rather than shifting to more sustainable and reusable products at the outset.

“They haven’t touched the middle of their supply chain much, because that is set up to be really efficient the way it is right now,” said Vidya Mani, an associate professor of business administration at the University of Virginia Darden School of Business.

The middle of the supply chain includes the production, bottling, and distribution of beverage products—an integral part of the operations perfected over the years and where it’s challenging to find alternate suppliers. Industry experts don’t see many sustainability efforts focused on this portion of the supply chain.

PetStar is part of the Mexican Coca-Cola industry.
Courtesy of Coca-Cola

The impact speaks for itself: A 2020 report from Break Free From Plastic collected 13,834 pieces of Coca-Cola-branded waste across 51 countries—more than the collections from Pepsi and Nestlé products combined.

Instead of fundamentally restructuring manufacturing or bottling operations, these companies have mostly focused their sustainability efforts on recycling targets. While that may have been enough for consumers and investors in the past, this is changing as both demographics start to demand more aggressive goals and metrics to illustrate progress.

“There is more mainstream recognition that it’s not only the right thing to do from a social responsibility perspective, but it’s also the right thing to do from a bottom line perspective,” said Fionna Ross, senior responsible investing analyst at Aberdeen Standard Investments. Indeed, Jordan noted that reusing plastics and relying less on raw material extraction could reduce Coca-Cola’s overall costs. 

The pandemic, which highlighted the urgency of many global issues, has also raised the pressure on beverage producers to show investors and customers the metrics and progress behind their sustainability goals.

“[The pandemic has] been a big wake-up call for companies that maybe haven’t done enough,” Ross said.

While Coca-Cola and PepsiCo outline some of their most ambitious goals yet in the latest sustainability reports, environmentalists have reason to be skeptical about these targets. Both companies have struggled to meet their own sustainability goals in the past.

A recent analysis by the Changing Markets Foundation gave the example of Coca-Cola’s commitments on recycled plastic. In 1990, Coca-Cola committed to including 25% recycled plastic content in its bottles, but pushed back its deadline and reduced the target to 10%, which it also failed to meet by 2006. In 2008, it brought back the 25% recycled content commitment, with a goal to reach it by 2015; the company failed to meet that deadline. Then, in 2019, it rephrased the goal to include a wider range of packaging (like cartons and juice boxes) and in 2020 announced it achieved more than 20% recycled content in all packaging. The most recent target is to use at least 50% recycled material in all packaging by 2030.​

In response to those shortcomings, Jordan said Coca-Cola’s launch of the “World Without Waste” plan in 2018 represented a “major pivot” for the company. 

“There are previous targets that were set and that we did not meet. However, those past targets did not have the global focus or broader industry commitment that we see today,” Jordan said.

In a recent report, Coca-Cola said that COVID-19 prompted an increased “focus on refillable packaging in response to consumer affordability concerns and its potential to help us meet our sustainability goals.” The refillable products are now selling more than non-refillables in Germany and parts of Latin America, the company says.

Courtesy of Coca-Cola

PepsiCo has a similar track record, according to the Changing Markets report, but has historically set fewer targets. A 2010 commitment by the company to increase its recycling rate 50% by 2018 failed; it was replaced with a vague goal to “increase recycling rates.” Its other commitments have been made more recently, like one to achieve a 35% reduction of virgin plastic content across its beverage portfolio by 2025. In 2019, the company reported a 1% reduction.

Representatives from PepsiCo declined an interview, but the company said in a statement that it is working to make all of its packaging recyclable, compostable, or biodegradable; investing in “reuse models” such as SodaStream; and collaborating with “policymakers and innovators” to decrease packaging waste.

“It’s hard to find an example of a mature company that’s actually been able to meet or exceed their goals,” Mani said.

That’s because initial gains are easy: A company can focus on improving metrics in a single market and show early momentum, for example. But scaling up that change globally requires coordination with partners across and outside the supply chain. That makes it tricky to create accurate timelines for achieving sustainability targets. 

“A lot of these intangibles come into play that are just very hard to factor in,” Mani said.

Implementing significant changes across more than 200 markets is the most challenging part of achieving Coca-Cola’s current goals, Jordan said.

“We are building local and regional plans with our bottling partners and suppliers that ensure we are supporting collection infrastructure adequately, and that we can secure long-term supply of collected packaging material to turn into new packages,” he said.

Even so, Emma Priestland, global corporate campaigns coordinator for Break Free From Plastic, said the goals from the big bottlers are not aggressive enough.

“They are positioning recycling as the savior to the plastic pollution problem, and yet recycling is a broken system,” said Priestland. 

Jordan, the environmental policy director for Coca-Cola, pushes back on that characterization. 

“We have never said that recycling is the only answer,” Jordan said. He points to the company’s “World Without Waste” strategy, which includes “package-less” and refillable designs that push the company closer to a circular supply chain.

Priestland said the companies should put more weight behind ready-made solutions that have already seen success in Europe: implementing deposit return schemes that dramatically increase recycling rates and expanding the rollout of the glass, reusable “universal bottle” that Coca-Cola has already brought to Latin America. 

Indeed, achieving recycling goals alone would not be a total salve for the environment. Priestland pointed out that many countries don’t have adequate recycling infrastructure, and even ones that do (like the U.S.) ship their recycled content to poorer countries to be processed (or sometimes, simply burn it). The pandemic also upended the recycling chain in many countries, where some municipalities suspended collection temporarily, according to Coca-Cola’s 2020 report.

Activists are also pushing for something called “extended producer responsibility,” a federal policy that would hold beverage producers accountable for where their plastic bottles end up. The policy is also supported by industry leaders, including the major trade association American Beverage.

But until a regulator requires beverage producers to move in a certain direction, sustainability improvements will rest largely on the extent to which companies see this as a financial imperative and respond to customer expectations.

“At their heart, Coke and Pepsi are both consumer product companies, and what’s important to their customers is also important to them,” said John Boylan, a consumer equities analyst at Edward Jones.

He said that more sustainable products could help drive consumer demand, at a time when beverage sales at restaurants and sports arenas have taken a big hit during the pandemic.

“People want to see a purpose behind their products, and we think that this is a step in that direction,” Boylan said.

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