When Indra Nooyi assumed the role of CEO at PepsiCo in 2006, she says the company was in strong fiscal shape.
“It was a high-performing company, and you know it’s always difficult to take on a high-performing company because you’ve got to keep this engine going,” Nooyi said. “What I had to do was take stock of the company and look forward 10 to 15 years at the big megatrends that were going to impact the consumer products industry, food and beverage in particular, and PepsiCo even more specifically.”
Nooyi says she quickly identified a need for healthier beverages and snacks – in particular reducing salt, fat and sugar. Her team also identified environmental issues the company needed to consider like single-use plastics and a global water shortage. Nooyi says recruiting talent was also high on the list of trends as consumer goods was losing out to tech companies—and in particular companies that could demonstrate their values.
Nooyi launched Performance with Purpose (PwP) at PepsiCo—a strategic initiative that tied revenue goals to societal good. However, Nooyi says the focus was also on shareholders.
“Performance with Purpose didn’t start with stakeholder theory, didn’t start with ESG, nothing. It started with a simple idea that we wanted to keep delivering performance well into, you know, the next decade,” Nooyi told Dean Bill Boulding of Duke University’s School of Business in a conversation for the school’s Distinguished Speakers Series.
Nooyi says what started as a way to “future-proof” PepsiCo became the precursor for Environmental, Social and Governance (ESG) metrics that have become increasing common in companies. “It was a simple strategy to future-proof the company,” Nooyi said. “Fast forward to today where most of the ESG metrics are focused on this very topic and if you really dig deep into ESG metrics, they will say that ESG metrics should drive shareholder value.”
Nooyi believes ESG shouldn’t be viewed as separate from the value creation of the company. In fact, she says ESG should be central to a company’s strategy to manage risk. “I looked at it as future-proofing the company—future-proofing in a way is de-risking the company.”
Nooyi believes the key to making social good part of an organization’s strategy starts with the choice for the board leading the company. Nooyi advocates for a board that is “shaped” by the CEO to meet company needs, rather than “stacked” to promote a CEO’s agenda. “A board that has been shaped for the company can really play a great part –and that’s what I had at PepsiCo.”
Nooyi says when reviewing the trends that would shape PwP she spent four hours one-on-one with each PepsiCo board member. “Once they internalized it, there was not going back. If I did something to deviate from the megatrends and strategy, they challenged me on it.”
Nooyi was also intentional about not initially appointing a chief sustainability officer when PwP launched. She says she worried that if someone were designated as responsible, others wouldn’t take ownership. Instead, Nooyi wanted sustainability to be everyone’s job.
“I wanted everybody to understand the fundamentals of plastic use, greenhouse gases, renewables, water use,” Nooyi said. “I wanted them to dig deep into those issues.”
Nooyi did eventually designate a sustainability committee on her board – and now PepsiCo has a chief sustainability officer—but Nooyi says it was important that initially everyone embrace sustainability in their own role.
Similarly, Nooyi feels ensuring diversity, equity and inclusion in a company is a shared responsibility—even if the company has a chief diversity officer. “Diversity is every leader’s responsibility,” Nooyi said.
Although, she does believe chief diversity officers and chief sustainability officers play an important role in keeping the issues top of mind.
“Companies can be a force for good, if you come together and say I want to do something to improve society.”
Editor’s note: Read more about how Indra believes companies can support working families here.