PepsiCo (PEP) — Shareholders push for human-rights effectiveness disclosure ahead of AGM

Rhea-AI Filing Summary

PepsiCo received a shareholder solicitation urging support for Proposal 5, asking the company to report on the effectiveness of its human rights policies and due diligence systems ahead of the May 6 annual meeting. The proponents request decision-useful outcomes reporting across direct operations, franchisees, and value-chain relationships rather than additional policy descriptions.

The letter cites peers that provide more granular supplier findings and corrective-action follow-up, notes PepsiCo’s public statements on policies and franchise assessments, and asks for disclosure on scope, findings, escalation, corrective actions, and remediation outcomes to evaluate whether systems are working in practice.

Insights

Corporate Governance Analyst

Proxy filing requests outcome-focused human-rights reporting to assess whether policies translate into measurable results.

The solicitation for Proposal 5 emphasizes effectiveness disclosure—metrics and outcomes across franchises and supply chains—rather than further policy narrative. This distinguishes descriptive governance reporting from verification of remediation, corrective actions, and Board-level evidence that risks are being reduced.

The submission references peers with more granular supplier and audit disclosures as examples and asks for reporting items such as scope, findings, escalation, corrective actions, verification, and remediation outcomes. Voting outcomes at the May 6 meeting will determine whether shareholders obtain this additional disclosure.

Key Terms

effectiveness disclosure, human rights due diligence, franchisee, remediation outcomes

4 terms

effectiveness disclosure regulatory

"asks the Company to report on the effectiveness of its human rights policies and due diligence"

human rights due diligence regulatory

"report on the effectiveness of its human rights policies and due diligence systems"

Human rights due diligence is a company’s process for identifying, assessing, preventing and addressing how its operations, suppliers and products might harm people’s rights, such as labor, safety or discrimination. Think of it as a regular safety check and rulebook that helps a business spot risks, fix problems, and show investors it is managing legal, reputational and operational exposure tied to human rights issues. Investors use it to judge long‑term risk and resilience.

franchisee other

"whether those systems are effective across franchise and value chain relationships"

A franchisee is an independent business owner who buys the right to operate under a larger brand’s name, systems and products in exchange for fees and following the brand’s rules—think of renting a proven recipe and shop setup instead of building your own from scratch. Investors care because franchisees drive much of a brand’s local sales, growth and reputation: well-run franchisees provide steady revenue and expansion, while weak operators can reduce profits and hurt the brand.

remediation outcomes regulatory

"scope, findings, corrective actions, escalation, or remediation outcomes of those assessments"

NAME OF REGISTRANT: PepsiCo, Inc.

NAME OF PERSON RELYING ON EXEMPTION: Friends Fiduciary Corporation

ADDRESS OF PERSON RELYING ON EXEMPTION: 1700 Market Street, Suite 1535, Philadelphia, PA 19103

Subject: PepsiCo Proposal 5: Please vote FOR effectiveness disclosure before May 6 AGM

Dear Colleagues,

Ahead of PepsiCo’s May 6 annual meeting, we urge you to vote FOR Proposal 5, which asks the Company to report on the effectiveness of its human rights policies and due diligence systems across direct operations, franchisees, and value chain relationships.

PepsiCo discloses substantial information about its human rights policies, governance, audits, trainings, and industry initiatives. The unresolved investor question is whether those systems are working in practice. The brief rationale below explains why Proposal 5 asks for decision-useful effectiveness reporting, not duplicative disclosure.

The information gap is outcomes. Current reporting does not provide sufficient disclosure on:

· The proportion of suppliers, franchisees, or high-risk operations covered by assessments or audits;

· The types and severity of human rights risks identified;

· Corrective action timelines and completion rates;

· Whether affected workers or communities receive remedy;

· Escalation procedures where risks are identified in franchise or value chain relationships;

· Trend data showing whether risks are decreasing over time.

This is different disclosure, not simply more disclosure. Policy and process disclosure tells investors what PepsiCo intends to do. Effectiveness disclosure tells investors whether those systems are identifying, mitigating, and remediating risks across high-risk commodities, franchise relationships, and conflict-affected or otherwise high-risk markets.

Direct sourcing does not define the risk. PepsiCo’s statement that it does not directly source cane sugar from Maharashtra does not address the proposal’s core concern: whether its human rights standards are effective across franchise and value chain relationships. PepsiCo has extended human rights expectations to franchisees¹ and established a process to assess franchisee human rights risk management², yet investors do not have disclosure on the scope, findings, corrective actions, escalation, or remediation outcomes³ of those assessments.

Board oversight cannot be evaluated on structure alone. PepsiCo's governance structures may indicate that human rights risk is assigned internally, but they do not show whether management and the board are receiving evidence that risks are being reduced, corrective actions are completed, or affected rightsholders receive remedy.

More decision-useful disclosure is feasible. Peers such as Nestlé⁴ and Unilever⁵ provide more granular reporting on salient human rights risks, progress indicators, supplier audit findings, escalation procedures, corrective action expectations, and follow-up verification. These examples show that large, complex multinationals can provide investors with more than policy and process descriptions alone.

Proposal 5 does not ask PepsiCo to adopt new standards, change its sourcing strategy, exit markets, or disclose competitively sensitive information. It asks for decision-useful reporting that would help investors evaluate whether PepsiCo's existing systems are effective in managing human rights risks across its business model.

_____________________________

¹ https://www.pepsico.com/docs/pepsico-5v9wci20/media/Files/esg-topics/2024-esg-performance-metrics.pdf

² https://pepsico.gcs-web.com/static-files/7154794a-0a82-49bd-b502-feaf920c9171

³ https://www.sec.gov/Archives/edgar/data/77476/000121465926004158/z41261px14a6g.htm

⁴ https://www.nestle.com/sustainability/human-rights

⁵ https://www.unilever.com/files/unilever-responsible-partner-policy-audit-update-2023.pdf

Given PepsiCo's exposure to high-risk agricultural supply chains, franchise relationships, and higher-risk jurisdictions including Russia, shareholders would benefit from clearer reporting on whether the Company's human rights due diligence systems are producing results.

Please see our exempt solicitation for the full rationale.

We urge you to review the attached solicitation and vote FOR Proposal 5 at PepsiCo's May 6 annual meeting.

Questions or want to discuss? Please contact Caroline Boden, Director of Shareholder Advocacy, Mercy Investment Services, at cboden@mercyinvestments.org.

The Shareholder Proposal was filed by Mercy Investment Services, Benedictine Sisters of Mount St. Scholastica, the Congregation of St. Joseph, The Domestic and Foreign Missionary Society of the Protestant Episcopal Church in the United States of America, Dominican Sisters of Grand Rapids, the Durocher Fund (Mission Fund/Sisters of the Holy Names of Jesus & Mary Canada), Friends Fiduciary Corporation, the Hyde Cragmont 205 Trust, Portico Benefit Services (ELCA), Proxy Impact, Sisters of the Humility of Mary, School Sisters of Notre Dame Central Pacific Province, School Sisters of Notre Dame Collective Investment Fund, United Church Funds, and UAW Retiree Medical Benefits Trust.

This is not a solicitation of authority to vote your proxy. Please do not send us your proxy card, as it will not be accepted.

FAQ

What does PepsiCo Proposal 5 request for the May 6 meeting (PEP)?

It requests an annual report on the effectiveness of PepsiCo's human-rights policies and due diligence systems. The proposal asks for outcome-focused reporting across direct operations, franchisees, and value-chain relationships to show whether risks are identified and remediated.

Who filed the solicitation supporting Proposal 5 for PepsiCo (PEP)?

The solicitation names Mercy Investment Services and Friends Fiduciary Corporation among multiple faith-based and institutional proponents. The letter lists several co-filers and directs questions to Mercy Investment Services' advocacy contact, Caroline Boden.

Does Proposal 5 require PepsiCo to change sourcing or adopt new standards?

No — the proposal asks only for enhanced effectiveness reporting, not new sourcing strategies or new standards. It explicitly requests decision-useful disclosure on outcomes, corrective actions, and remediation, not competitively sensitive operational changes.

What specific disclosure topics does the solicitation ask PepsiCo to include?

The letter asks for scope, assessment findings, corrective actions, escalation procedures, verification, and remediation outcomes. It seeks evidence that management and the board receive information showing risks are mitigated across franchises and high-risk supply chains.

Are examples of peer reporting cited in the solicitation?

Yes — the letter cites Nestlé and Unilever as examples of more granular human-rights reporting. Those examples are presented to show large multinationals can report salient risks, supplier audit findings, corrective actions, and follow-up verification.