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Food & Drink

PepsiCo Promises Not to Buy Sugar Grown on Contested Land

Bottles of Pepsi are packaged for shipping on the production line at PepsiCo’s Sandora beverage plant in Mykolayiv, Ukraine, in September 2012

Photograph by Vincent Mundy/Bloomberg

Bottles of Pepsi are packaged for shipping on the production line at PepsiCo’s Sandora beverage plant in Mykolayiv, Ukraine, in September 2012

Five months ago, antipoverty group Oxfam called out some of the world’s largest food and beverage companies for buying sugar, palm oil, and soy from suppliers that kick people off their land to make way for plantations. On Tuesday, PepsiCo, one of the companies named by Oxfam, announced new rules for its suppliers (PDF) specifically prohibiting the practice.

In one example of a land grab from Oxfam (PDF), the Brazilian sugar refinery Usina Trapiche, a supplier to PepsiCo (PEP) and Coca-Cola (KO), removed 53 fishing families from their island home in a Sirinhaém River estuary in 2002 and relocated them to a town with electricity, water, sanitation, and schooling, but a higher cost of living.

“Poor communities across the globe are in dispute or even being kicked off their land, without consultation or compensation, to make way for huge sugar plantations,” according to the report, which questioned a number of sugar suppliers that sell to beverage companies around the world.

Usina Trapiche denies any wrongdoing. “We believe that Usina Trapiche has been the target of the most unfounded accusations, such as environmental crimes, social and land struggles, when in fact the company has promoted environmental conservation on Sirinhaém’s mangrove in an admirable way and is acting responsibly in line with the determinations of the Brazilian courts,” the company said in an e-mailed statement. “Our relationship with all our customers and partners remains intact and we continue to abide by the terms of the determinations of the Brazilian courts.”

PepsiCo spokeswoman Aurora Gonzalez said, “Each of the suppliers [Oxfam questioned in its report] has assured us the land they are farming on has been fairly and properly acquired.” Coca-Cola, which has issued its own rules (PDF), did not immediately respond to a call for comment.

Pepsi’s new policy includes zero tolerance for land displacements of people, requires fair and legal negotiations for land acquisitions, and establishes grievance mechanisms such as a hotline for dispute resolution. The company will conduct social and environmental assessments across its supply chain starting in Brazil, its top sugar-sourcing country, by the end of the year, followed by Mexico, Thailand, and the Philippines, according to an Oxfam release.

Gonzalez said PepsiCo would enforce the land policy through contracts and audits. In its release, the company said it’s aiming to use 100 percent sustainable cane sugar by 2020 and would enlist the help of Bonsucro, a U.K.-based nonprofit dedicated to reducing the environmental and social impacts of sugarcane production, to do so.

Oxfam declared victory. “Pepsi is now committing to take responsibility for how their ingredients are sourced and for setting clear standards that their suppliers must meet,” said spokesman Ben Grossman-Cohen. Now, proper enforcement by the manufacturers will be critical to making sure the change is real, especially as sugar production increases.

Wong is an associate editor for Bloomberg Businessweek. Follow her on Twitter @venessawwong.

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