Like many packaged goods brands, PepsiCo (NYSE: PEP) is making an effort to show that it's working on shifting to environmentally responsible packaging.
In October, the company released a long-term plan for how it intends to do that by 2025. In its sustainability agenda, PepsiCo laid out plans to "reduce greenhouse gas emissions across its value chain and design 100% of its packaging to be recoverable or recyclable," the company said in a press release.
To help make that happen, the company has partnered with biopolymer manufacturer Danimer Scientific. The partnership will allow Danimer Scientific to develop its "biodegradable film resins to meet the sustainable flexible packaging requirements of PepsiCo's global food and beverage business." PepsiCo expects the deal will lead to completely biodegradable packages for its snack food lineup as soon as its next generation of packaging.
The two companies have worked together for a long time. That relationship has, according to PepsiCo, included creating "bio-based compostable packaging" for its snack brands. This new, more formal agreement will allow Danimer to expand the plant that makes the necessary resins.
What does this mean for PepsiCo?
"From the start PepsiCo has taken a holistic approach to our sustainability work," said Chief Scientific Officer Mehmood Khan. "Our first objective is achieving long-term profitability and that requires sustainable solutions to grow our business while minimizing our environmental impact. Our plan to scale Danimer Scientific's technology is a step toward achieving both our greenhouse gas emission reduction and our recoverable and recyclable packaging goals."
This agreement helps the company meet a long-term goal, and also prevents the type of backlash that companies like Keurig have faced over the waste their products leave behind. With this partnership, PepsiCo has gone beyond saying what it intends to do, and actually taken steps to make it happen.
This likely won't impact the company's stock price in the short term, but it's a necessary long-term move to protect it -- and its shareholders. PepsiCo is doing the right thing here -- maybe only because it knows it has to, but that does not change the fact that it is the right thing to do.
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Daniel Kline has no position in any stocks mentioned.