Sustainability reporting must focus on materiality and trust

How PepsiCo harmonized sustainability reporting data

It's important to understand the context of what an organization needs to report on, said Anna Palazij, vice president of sustainability at PepsiCo.

Most people think of PepsiCo as a giant beverage company, but it's an even larger food company, Palazij said.

The multinational food and beverage behemoth generates more than $90 billion in annual revenue across more than 200 global markets. This makes it challenging to keep up with the "evolving landscape of reporting,", she said.

The need is to harmonize to avoid reporting multiple times in multiple formats, Palazij said.

"We want to see action, we want to see that transition and action plans," she said. "But unless [the reporting is] simplified, it's going to be a large resource drain taking away from some of that action, because there's not an endless supply of environmental, corporate or human resources."

The key for PepsiCo was to narrow the field of possible metrics to only the ones that matter most to the company, Palazij said.

Additionally, sustainability reporting is being more tightly aligned with financial reporting and legal teams to make sure they have the right governance and protocols in place, she said. It's also been important to involve various business and operations groups in the process, because they are the ones that hold the data for Scope 3 reporting.

For a company our size and our scale, you need business teams, supply chain, internal and external and your finance team at the table.

"For a company our size and our scale, you need business teams, supply chain, internal and external, and your finance team at the table," Palazij said. "They have a lot of data that helps drive an understanding of the sustainability metrics, and they've been using that rigor in financial reporting for a while."

Get the balance right with UMG

Global entertainment conglomerate Universal Music Group has different reporting metrics than PepsiCo, but faces similar issues trying to manage various jurisdictional challenges, said Kyra Ferber, vice president of ESG at UMG.

UMG is a Netherlands-owned company, so it's subject to CSRD regulations as a Wave 1 reporter, Freber said. Wave 1 reporters are large enterprises that were required to submit a CSRD by January 2025 (although the deadline for non-E.U. companies was extended to 2027), so UMG completed its first CSRD report in 2024 and is preparing for more rounds of auditing.

However, UMG is a global company and has faced significant challenges with its California operations, leading to its many competing jurisdictional challenges, she said. 

"We're subject to California rules and are going public in the United States, in addition to being publicly traded in the EU, so some of the things we disclose in one jurisdiction that are material to stakeholders in that jurisdiction are not in other jurisdictions," Ferber said. "Balancing that is a bit of a highwire act."

One way to manage that balance is to focus primarily on the material issues that matter most to the company, which include UMG's roster of artists, she said.

"Despite the shifting legislative winds around us, that's going to remain core to who we are for as long as we exist," Ferber said. "Not to oversimplify some of the challenges, but the more all of us can stay grounded and find exactly what's core to us from a materiality standpoint, the more equipped we are to roll with the political punches."

UMG is also working to be as transparent as possible and communicate sustainability reports in the best way for the various stakeholders, she said. For example, UMG artists likely won't read the company's annual sustainability reports, but investors certainly will.

"The information in there needs to be material to them, our investors in the United States and our investors in the EU," Ferber said. "How are we being as fine-tuned as possible and delivering the metrics that they actually care about, rather than just disclosure for disclosure's sake or concealment for concealment's sake?"

Transparency and trust

PepsiCo's Palazij echoed the idea that transparency and accountability build trust in the data within the company's sustainability reports.

"Clear, consistent reporting that tells [what] you're doing well and accounts for those things that you're not doing well -- and being transparent about that -- ultimately builds trust in the stakeholders that read your report," she said.

Building that trust also drives action, like fostering collaboration and embedding sustainability across the enterprise, Palazij said.

"We're translating the things that we're doing for sustainability into the language of finance and vice versa, embedding sustainability into our financial processes," she said. "Over the years, we've embedded sustainability in a very meaningful way in our capital approval process, including having our CSO as a signatory in our M&A process."

Organizations need to know what's material for their enterprise and what helps them meet sustainability goals, but they need transparency and an execution plan to get there, Lubber said.

"With massive institutions that have supply chains around the globe, it doesn't just happen," she said. "You can't just hope they're going to get it right. Goals are great, but execution plans are crucial, and they should be transparent."

When companies are not transparent or telling the full story, they'll start seeing attacks and negative campaigns, Lubber said.

"We need to move forward in a way that depoliticizes these issues and makes sure that they are about building your enterprise, not about just getting you to write down a lot of data points that you don't care about and nobody else cares about," she said.

Jim O'Donnell is a news director for Informa TechTarget who covers IT strategy and enterprise ESG.