Pepsico India: Evaluating Societal and Ethical Obligations

This case study analyzes Pepsico India's approach to societal and ethical responsibility. It examines the company's initiatives, including its shift towards healthier products and sustainable practices, and evaluates the extent of its obligations to society. The paper explores the challenges of balancing business performance with ethical considerations, including the tension between profit maximization and social responsibility. It discusses the company's efforts to achieve a compromise between different purposes, considering both long-term and short-term objectives. The case study also addresses the potential for 'ethical washing' and assesses the genuine commitment of Pepsico India to ethical conduct. The analysis covers the company's strategies, challenges, and the importance of stakeholder theory in navigating ethical dilemmas. It highlights the critical balance between philanthropic activities and profit pursuits, and the need for adaptability in a dynamic market environment.

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Societal and Ethical Responsibility 1
Table of Contents
Introduction.................................................................................................................................................2
The Extent of Obligation of the Company for the Societal and Ethical Responsibility.................................2
The Challenge of Resolving the Strategic Tension between Business Performance and Responsibility......4
The extent to which the Company can achieve a compromise between these different purposes............4
Finding a Balance between the long-term objectives and the short-term objectives.................................6
Pespsico India could be accused of “ethical washing” rather than a genuine commitment to do the right
things...........................................................................................................................................................8
Summary.....................................................................................................................................................9

Societal and Ethical Responsibility 2
Introduction
Pepsico is one of the largest Food and Beverage Company all across the globe and manufactures
different beverages and snack food to achieve the retail sales. In 2007, Indra Nooyi became the
CEO of Pepsico and since then it has achieved several accolades and prizes. The company has
been ranked in the top 25 best global brands and ranked number one for Green Award by the
Environmental Protection Agency. In the present paper, the case study of Pespsico India has
been evaluated. In the recent years, the company has realized its responsibility towards the
business environment and made several initiatives for the same. These changes have also
benefitted the company in terms of financial profitability. Pepsico has expanded the product
portfolio and included several healthy food products. It has also washed the image of the
company. Previously, the company was known for the carbonated drinks, which are not good for
health; however, the recent expansion in the product portfolio has successfully changed the
image of the organization. Along with it, the company has also shifted to the healthy ingredients
so that it can offer more healthy products to the customers. The present paper has discussed the
extent of obligations of the business organizations for the society. It has also evaluated how
much trade-off can be conducted to achieve the obligation towards the society.
The Extent of Obligation of the Company for the Societal and Ethical
Responsibility
Over the years, the company has established its brand by diversifying the product portfolio and
designing an effective branding strategy. Pepsico has evolved from a low price leader to a
lifestyle drink brand, which has established a substantial market share of the organization. Nooyi
adopted the strategy of the “performance with Purpose”, which states that the private
organizations have the responsibility to fulfill the environmental, social and the ethical

Societal and Ethical Responsibility 3
responsibilities. The performance is the ability of the organizations to deliver superior and
qualitative financial performance to the investors of the company (Ruggie, 2017). The ‘purpose’
refers to the company’s commitment to the human sustainability. The company takes initiatives
to manage the natural resources, establish sustainable talent and workplace safety and investment
in the operational areas of the organization.
It can be critiqued that it is the responsibility of the organization to address the social and the
environmental challenges. The business organizations are a part of the society. They conduct
business with different sections or the stakeholders of the society. The business organizations
make profit due to their interaction with the society. Therefore, it is important that they give
back, that they take from the society. It is also important for the long term sustenance of the
organizations. If there will be no natural resources or water, these organizations will diminish.
The existence of the business organizations is linked with the existence of the existence of the
society and the health of the environment (McWilliams & Siegel, 2001).
The environmental and the social concern make the organization a single unit as the employees
and the customers’ works as a single unit towards the welfare of the society. It is also essential in
creating a positive feeling towards the organization. The employees believe a sense of purpose
and that they are doing something for the welfare of the society. The organization has to develop
a positive bond with the customers too, and it can only be achieved with the help of social and
ethical initiatives. In the current environment of the intense competition, it is important for the
organizations to take some additional initiatives for making a profit (Tantalo & Priem, 2016).
The level of competition allows the organizations to take the purchase decision according to the
manner in which they are contributing the society.

Societal and Ethical Responsibility 4
The social and the ethical initiatives also allow the organizations to provide media visibility and
create a positive workplace environment for the employees. Today, most of the customers prefer
to be engaged with the brands, which have taken some social initiatives (Ioannou & Serafeim,
2015). Therefore, the companies are not only obliged to work for the social and the ethical
issues, but it is a preferable choice for the customers.
The Challenge of Resolving the Strategic Tension between Business
Performance and Responsibility
It can be stated that it is the preferred choice of the organizations to conduct business in an
ethical manner. However, there is an underlying tension as there is a conflict of interest between
the ethical and the economic interest of the business organizations. A business is developed and
grown with the pursuit of the self-interest and economic profitability; however, ethics is the
realization that the interest of other people is equally important. There are two sides of the debate
regarding the responsibility of the business, as some people argue that the only obligation of the
business is to make as much profit as possible; however, the other side of the debate states that
the companies have moral responsibilities along with the responsibility of turning up the profit.
Both the theories agree that the business organizations have certain responsibilities; however,
there is dispute over the extent of responsibilities. The ethical issues in the business
organizations refer to the dilemma which arises for the business managers regarding whether to
advance the personal interest or the interest of the society (Okpo, 2013).
The extent to which the Company can achieve a compromise between
these different purposes
In the context of large business organizations, the business managers regularly face ethical and
moral dilemma. A several number of managers will face ethical issues, in the operations of the

Societal and Ethical Responsibility 5
organization. If the moral code of the organization is dubious, it will affect the business
operations in the long run. Therefore, it is important for Pepsico to achieve a compromise
between the social concerns and the financial benefits. It is important for the organization to
understand that the Corporate Social Responsibility (CSR) initiatives and the social campaigns
can uplift the brand image of the organization (Bridoux & Stoelhorst, 2014). On the other hand,
immoral and illegal practices can damage the company’s reputation.
However, the socially responsible changes require significant amount of financial investment.
For instance, when Pepsico India switched to rice brand oil, the amount of profitability decreased
as it was costlier than the other types of oil. Therefore, there is compromise between the financial
profitability and the social initiatives of the organization.
However, there is significant difference between the for-profit and not-for-profit business
organizations. If Pepsico will not try to achieve the maximum profit from its operations, it will
not be justified with the shareholders or the investors of the organization. Milton Friedman has
given the famous shareholders theory, which states that it is the responsibility of the business
organizations to make the maximum profit. This theory does not agree that the business
enterprises should take the social responsibilities and invest in activities, which are that of social
interest. The only responsibility of the business organizations is to invest in the interest of the
shareholders (Antonelli, D'Alessio, & Cuomo, 2017). The sole responsibility of the business
organizations is to be concerned about the interest of their investors, while abiding the basic rules
of the society.

Societal and Ethical Responsibility 6
The corporate executives should work in the benefit of the investors and in their capacity as a
businessman; they should act in the interest of the employers’, even though some other action is
preferable for the interest of the community.
Along with it, it is challenging to exercise the social responsibility as the business managers have
to properly allocate the resources of employer for the social purpose. On the other hand, the
stakeholder theory emphasize that the business managers must be considerate of the ethical
rights of the different stakeholders and must not violate them. The stakeholders should be
focused on the legitimate rights of the different stakeholders. The stakeholder theory emphasize
on the moral values, idealism and the long term relationship base on the foundation of
organization, society and the community. It means that the business managers should be
considerate of the interest of the stakeholders, even if it reduces the profitability if the
organization. Therefore, the business organizations should try to maintain a firm balance
between the philanthropic activities and the profit pursuits (Carroll, 2015). The managers of the
company should not do anything to make a profit, and they should not bend to increase profits
through unethical means. Pespsico should try to make a specific budget for the CSR activities so
that it should not focus on philanthropic activities. The stakeholder’s theory ultimately aims for
the existence of the organization.
Finding a Balance between the long-term objectives and the short-term
objectives
In the present competitive world, it is a challenge for Pepsico to sustain the present competition
and make long-term plans for the growth of the organization. Another challenge in the
formulation of the long-term and short-term objective is to align them so that they result in the
growth of the organization.

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The long-term objectives are the strategic plan for the future growth in the upcoming ten to
twenty years. It encompasses the management of the natural resource and enhancing the
employee welfare in the organization. It creates a sustainable workforce, which is engaged with
the organization. It is the primary responsibility of the CEO or the management of the
organization. It is a major challenge to articulate the financial goals of the organization with the
mission and the strategy of the organization. The business goals, mission and objectives are
imposed by the shareholders of the organization. The business practices are also rooted in the
values and the philosophies of the top management.
However, despite the importance of the strategic objectives of the organization, the financial
objectives are so apparent and tangible, that these organizations make profitability the focal point
of tension and disputes at a higher level. It is important to gradually mature the principal product
line of the organizations and develop the market in the similar manner. The companies can
remain successful and maintain a sustainable position, only if develop strategies for the long-
term sustenance of a healthy share in the market (Tai & Chuang, 2014).
Therefore, in order to maintain harmony between the long-term and short-term objectives, it is
important that the company do not give maximum priority to the financial returns of the
organization (Flammer, 2015). Moreover, the company should be adaptable to the economic and
the competitive environment changes. Pepsico also changed to reinvent its image in India. It
introduced several products, which can appeal to the Indian taste buds.
The CEO of Pepsico has also understood that maintaining the financial objectives of the
organization is a never-ending process, in which the competing and the conflicting priorities of
the organization should be balanced. Currently, the corporate business environment is very

Societal and Ethical Responsibility 8
unstable and can rapidly change according to the shift in the power of the market forces. Pepsico
should also understand it and build its innovation capabilities. In the recent years, the customers
have become highly aware and want to be associated only with the companies, which are
concerned about the environment. Therefore, Pepsico is engaging in these activities and using it
to connect with the employees and the customers.
Pespsico India could be accused of “ethical washing” rather than a
genuine commitment to do the right things
With the analysis of the case study, it can be posited that Pepsico India has a genuine
commitment to engage in environmentally and socially responsible activities. The CEO and the
top-level management of the organization understand that the organization has the responsibility
towards the environment and; therefore, several actions have been taken for the same. A few
products in the newly introduced healthy product portfolio have not been successful; still the
company is continuing them. In addition to it, the company is also concerned about its supply
chain and believes that it is the responsibility of the organization to assure that the lower section
of the supply chain are treated in an effective manner.
If the company has been engaged in ethical washing, and was not genuinely concerned about the
welfare activities, it could have been identified from its CSR activities. Although these activities
have been crucial in developing a bond with the employees and the customers, the purpose of the
organization is not to use them in promotion and advertising campaigns. It has made huge
investment in adapting into sustainable operations so that different benefits can be passed to the
customers of the organization. Additionally, it has made the changes in the supply chain so that
the sustainable actions can be performed by the business organizations. The company has also
invested in establishing a dynamic and sustainable workforce. Several efforts have been taken to

Societal and Ethical Responsibility 9
recruit and select the talented workforce in the organization (Schwartz, 2017). They are also
provided training so that they can grow with the organization and develop themselves.
Summary
In the present, the case study of Pepsico India has been analyzed, which has recently taken
several ethical and socially responsible initiatives. It has been argued that these actions of the
company are genuine and not made to portray an excellent image. The company has made
several initiatives such as expanding the product portfolio, switching to healthy ingredients and
developing a sustainable workforce so that it can give back, what it has taken from the
community. It is argued that social and ethical initiatives are the responsibility of the
organization as they are the part of the society. The stakeholder’s theory also posits similar belief
and states the financial profitability should not be the sole aim of the organizations.

Societal and Ethical Responsibility 10
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