WHEN: Today, Thursday, October 28th
WHERE: CNBC's ESG Impact Conference
Following is the unofficial transcript of a CNBC interview with PepsiCo Chief Sustainability Officer Jim Andrew, Procter & Gamble Chief Sustainability Officer Virginie Helias and Ingka Group CFO & Deputy CEO Juvencio Maeztu at CNBC's ESG Impact conference, which took place today, Thursday, October 28th. Video from the interview will be available at cnbc.com/esg-impact/.
All references must be sourced to CNBC's ESG Impact conference.
KRISTINA PARTSINEVELOS: Thank you, Tyler. So we got a star studded panel and I just want to remind the panelists, we have a really smart audience, so no need to break down the nitty gritty of the definitions, but I want to start with more of a high level macro question. And this is going to be directed at Juvencio. So for you Juvencio, given that COP26 is just around the corner, you have over 1,400 companies making promises towards net zero, now we're talking about phasing out coal. What do you want to see? What do you think are the most pressing actual items that need to be addressed?
JUVENCIO MAEZTU: Good morning and afternoon everybody. Sustainability is complex. Complexity in my opinion needs three things. First is holistic solutions then it is long term commitment and finally, it's about togetherness. And it is the togetherness we should expect more from at COP26. Because everybody has to play a part. Nobody can do everything. But everybody must do something. So when it comes to the businesses, we should ask all businesses what we ask ourselves. A. science-based targets – but not only for scope one and two, but also for scope three because this is normally the biggest part of the footprint. B. Then, you have to measure and follow up – if you do not measure and you do not follow up, you don't move. And finally, business should integrate sustainability in the decision making. What we will policy makers is to raise the ambitions. But also not only to punish the bad economy with taxes, but to also fast track and accelerate the transition into the green economy. So the next to three years are difficult and I want to finish by saying that the important thing is not setting the commitment – it's not the commitment that is the important thing, it's about taking action. We cannot procrastinate hoping that problems will solve itself by more advanced technology. We have to act now and the same goes for the coming years. We have developed goals for 2020 and we have achieved them. We have now set goals for 2021, 2025, and for 2030. So it's time to talk about actions, the clock is ticking.
PARTSINEVELOS: Right. That's a perfect segue to my next question. You raise a lot of good points especially trying to even scope three given how difficult that is to, you know, track and metrics and all of the above. But if I were to focus more on the how. You had mentioned everybody needs to do something. And so this leads into Virginie, my question for you. Often we'll put these climate proposals on the table and then we're not talking about the steps, the how are we going to do it. So with Procter and Gamble, can you break down the sustainable innovations that are involved with the company specifically, consumer packaging, and how that process has been to innovate and change your packaging, especially when you guys use a lot plastic?
VIRGINIE HELIAS: Absolutely, Kristina. And I very much agree with what was just said. I mean, innovation and collaboration are certainly part of the solution and we need to see more action. You know, the way we look at it at P&G is through three lenses. So impact first – inside then outside and then system wide. I mean inside because we believe that we need to start with the emission that we can control. You know, kind of get our own house in order and through that we've committed to net zero by 2040 including with the goal of being carbon neutral for a decade in operation by 2030. But then it's outside and outside basically means reducing our emissions through collaboration. And for us it's collaboration upstream. That means in our supply chain. And we've also committed to net zero by 2040. But it's also a reduction through our downstream usage you know. And that's basically our consumers. You know, we touch 5 million people around the world every day through our brands and 80% of P&G total footprint is basically in the use case. That means basically when people use heated water to shave, to do their laundry, wash their hair, do their dishes and clean the floor. And so we can enable them to reduce their own emission through innovation. And then the third part which is really important is what we call system wide. How can we leverage our scalar influence, our innovation capability to help drive system transformation. You know, and one project which is particularly near to my heart and at IKEA that I just joined, it's called a 15 liter home. And it's a good example of how innovation plus collaboration can drive system transformation. 15 liter home is basically how can you reduce the daily consumption of people in their home – gas emission – and the second sources in homes is basically heating the water. So how can you reduce the amount of water that people use every day in the home to 15 liter, they sustainable level? Today it is 150 liter per person, per day in Europe. It is up to 500 liter per person, per day in some parts of the U.S. So, you create innovation and you reinvent infrastructure so that you can recycle and repurpose and so forth. So that's really an example of system wide consolidation. So I think that's what we need. We need both, you know, inside, outside for supply chain downstream consumer and system wide innovation and collaboration.
PARTSINEVELOS: So keyword collaboration, which is – it doesn't come easy, that's for sure. And so it's a nice of course segue to the next question, which is directed at Jim. And I want to talk about water positivity. So water positivity is defined pretty much as replenishing more water than what a company uses. Unfortunately, though, the definition varies a little bit. I'll give you an example. You have Facebook that counts only the water that has evaporated on their premise as their water consumption. And then you have PepsiCo on the opposite side – well not opposite side, but counting all the water that is used in operations but in water stressed regions. So Jim, given Virginie just talked about the collaboration aspect in getting third party members involved, how has it been for you guys to involve your franchise bottlers, as well as your third party manufacturers to get on board with this water positivity goal?
JIM ANDREW: Right, well, thank you. And as the points been made, collaboration and looking across the entire value chain is essential. And we came out earlier this year with a water positive as you said, and the goal is really twofold. And as you rightly pointed out, we're looking at the entire value chain. It's really about how do we reduce across the whole system, the absolute amount of water that's used. Everywhere in that chain. And then second, how do we replenish more than we end up using? And you know, we've learned a lot on this journey already. And our bottlers that are very valued partners around the world, they know it's a journey, they understand the business case and the imperative. And so we're working very closely with bottlers on things like how do we share technology? What are best practices that we can lift and shift around the world? What are the lessons that we jointly learn? And to use Virginie's words – how do we collaborate on both efficiency initiatives and also on replenishment activities? And let me give you a great example. In Mexico, our Sabrita's halo plant, we worked – which is where we make food – we worked very closely with our franchise bottler to take the processing water that the bottler uses in their ingredient processing, we then took that water when they were done with it, treated it so that it became drinking quality water and then used that in one of our food plants to wash the potatoes before they were sliced and cooked. So we really looked system wide, collaborated with our bottlers and what we were able to do there is we reduced freshwater demand by 50%. And we were able to increase the reuse to 80%. And so this is the kind of example where we can work as a system, we can collaborate and we're looking to replicate that as many places as we can.
PARTSINEVELOS: Thank you, Jim. Virginie, I want to just go back to you because you brought up engaging the consumer. I think we often forget about that. We have these corporations that make promises, but really in the end, it's about you and I changing our ways and that's not always easy. You did briefly mention how you're engaging consumers. So if I could just get you to elaborate a little bit more on some campaigns that P&G is involved with to engage consumers. And then if you could just weigh in on just how important it is to have these incremental steps getting towards that goal. So it's not just you know, we're sticking this out here 10, 15 years from now, and we'll get to it somehow. So can you elaborate on some of those campaigns within your company, please?
HELIAS: Absolutely. And I just want to say that often, you know, people are saying, yeah, you are putting everything on the consumer. This is absolutely not the case. Actually, it's everything on us because we need to innovate to really enable them to embrace sustainable consumption. And two examples, leading brands in our detergent business. So Ariel in Europe and Tide in the U.S. We've been doing that for decades, you know, nudging people so that they can wash their clothes in cold water because – is actually the main source of greenhouse gas emission. And so you know, through the influence that we are doing on Tide and Ariel, we will reduce our emission by 13 million tons by 2030. So that's massive, you know. It's a small act has a big impact. But you can only do that if you develop formulation that for better in cold water. Otherwise people are afraid that the stains will not come out. So that this is why innovation comes first. And then you encourage people to wash in cold like Tide. You may have seen that they are teaming up with the NFL, you know, to inspire 80 million households of NFL fans to turn to cold. So you know that's a very concrete way to do it. Another example, which is very recently in the US is Cascade. Cascade Dishwasher. So in the US the penetration of dishwasher is very high but usage is very low. And you know why? Because people believe that this will show that is uses more time and energy. And the fact is that a running sink, use a four gallons of water every two minutes. And four gallons is exactly what a dishwasher load uses. So you do the math as of eight dishes is better actually to use your dishwasher if you want to save energy and water than doing the dishes by hand. But the key caveat here is that you need to trust your detergent that it will wash good enough so that you don't have to clean your dishes under the sink which is what many people do that. And cascade has developed combination that allows you to skip the rinse. And just to give you an idea of the impact. You know, we've been running this campaign for 18 months. And you know, heavy changes is really hard. But after 18 months, we are seeing an increase in dishwasher usage by 25% which is actually equivalent of saving 25 billion gallons of water across the U.S. And that's hidden water. So it's also saving energy. So you know, innovation and then engaging consumers with creativity as we do, you know, at P&G. That's kind of the recipe to ensure responsible consumption.
PARTSINEVELOS: Congratulations on achieving that. Juvencio, if I were to just speak about IKEA right now and the fact that within nine years IKEA plans to become a circular business. And from the website you're going to use only renewable and recycled materials with lower climate footprint. Given how accessible your furniture is, that must not be an easy task at all. Could you share with us how you plan to do that?
MAEZTU: Yeah, it's a good question. And it's not easy. That's why leadership is so important when it comes to sustainability. Sustainability should be integrated in the business because this is where this issue and dilemmas have to be solved. We have decided we can become climate positive by 2030 by reducing more greenhouse gas emissions than our value chain emits. And then as you rightly said, materials is a big part of that footprint. The good thing is that we started several years ago so this is not new for us. I mean in order to deliver the commitment we said not only 2030 set as a goal, but in between goals which is extremely important. For example, as of last year 60% of all the products in IKEA are either coming from the renewable or recycled materials. So, we are very proud of that. But we still have a gap to close. That is why we are working heavily on that. For example, as of last year 100%, no 98% sorry, of the wood that was used was FSC or – from 2015, 100% of the cotton in our products come from sustainable sources. And we are working really hard in the development of recycled and new solutions. For example, But, this is the circularity of the material. But then the second one is about the circularity of giving that second life. Extending the life by repairing, by promoting the second hand. We for example, we are now giving a second life to more than 30 million products. So, it is a very good thing. It is a complex thing. But we are fully committed. The good thing is that it is possible to decouple growth from greenhouse gases, for example, the last 4 years, we grew by 13.7% and we reduced Green House Gases by 14%. And the good thing is not only about looking at the planet, it's by doing that you've also created employment – and you're also paying taxes. And in our case, we can provide a better life at home and more affordable prices. But this message and idea of social impact is quite important. So, we are proud that we are at full blast and we are excited.
PARTSINEVELOS: Well, congratulations to hit all those goals including the 60% of products are recycled. I know I've accumulated quite a few Allen keys from IKEA, so I'm looking forward to recycling those. But I'm going to transition to the last question which is for Jim. Jim, PepsiCo aims to sustainably source 100% of key ingredients and this while extending regenerative farming practices. I know in your previous answer, you did touch upon this. But I would love for you just to elaborate just how that transition has been especially in less developed nations in terms of using those regenerative farming practices. And then if you could just how you've added some female empowerment in that mix. I know it's a loaded question right now and you're the last one, so please do feel free to share.
ANDREW: Right. Thank you. It's a terrific question and a really important one. We all know agriculture is one of the greatest opportunities both to reduce greenhouse gas emissions, but also to help feed the planet. And so in April, we launched our what we call positive agriculture as part of our overall PepsiCo positive. And as you said, 7 million acres which is basically our entire agricultural footprint and improve the livelihood— bringing regenerative practices to those acres, sustainably source 100% of our key ingredients and then also improve the livelihoods of 250,000 people with a particular emphasis on female empowerment as you said. If I talk about the regenerative agriculture piece and absolutely developing markets is a key part of that, there's really three things that are necessary. The first is technical assistance. The second is cultural acceptability. And the third is financial. And technical assistance is a great one that you know, there's lots of sexy technology and there's lots of technology – it's really boots on the ground. You know, we have 350 demo farms, where farmers are teaching farmers about new practices, about showing and understanding the benefit and really making that real because there's no better way for a farmer learn something than from another farmer. And 80% of those farms use regenerative practices or are in the process of really scaling those up. Cultural acceptability, you know, regenerative practices, to a large extent are sort of outside the mainstream today still, we need to make farmers comfortable. And then finally financial. We know that regenerative practices are more profitable. But and this is again, relevant in particular for some of the developing markets, the transition comes with upfront costs. And so as a company and as an industry, we need to provide incentives, we need to provide markets to help reduce risk because farmers are business people. This is how they feed their families, right. And a great example is of a technology that's very relevant in developing markets is one called drip and it's a gravity fed drip irrigation system. Our venture team partnered with them to pilot in places like India, and Vietnam. and what we've seen is 10% more yield and 50% less water usage than traditional flood irrigation. So that's technology directly impacting developing markets and farmers. And again, we are looking to scale that up. And it's going to take all of us private, entities, governments, UN, NGOs who work very closely with USAID for example, in India around female empowerment. And, you know, we know that if we get more females into farming, it's a huge driver of productivity and a huge driver of additional economic empowerment not only for them, but for the countries. So we have a set of programs again, partnership collaboration, working with them. So those are a couple of the things that we're doing at PepsiCo to help really drive both improve regenerative practices, but with a particular focus on female empowerment. In particular also in developing countries and economies. I'm optimistic that when we all get together, we're going to be able to really do something positive and you know, we'll look back with pride and also with a little bit of relief that we all did the right thing when we had the chance.
PARTSINEVELOS: Doing the right thing and I think the key word amongst all of you is collaboration, right? We got to work together and with that, unfortunately have to end this panel. It's been great chatting with all of you.