How Do We Know PepsiCo Saved Huge Amounts of Water in India? It Told Us So

Last Updated May 28, 2010 6:30 AM EDT

PepsiCo's (PEP) announcement that in 2009 it put more water back into India's environment than it took out is good news. But it's not as good as you might think.

In a recent interview, Pepsi's CEO Indra Nooyi, who grew up in the coastal city of Chennai, said:

As the first business in our system and probably the entire beverage world to conserve and replenish more water than it consumes, PepsiCo India is a huge inspiration for all of us.
Yes, the inspiring beverage giant achieved what it calls "positive water balance" -- using just over 5 billion liters to make millions of bottles of Pepsi and Diet Pepsi and then recharging 6 billion liters. But most of that water replenishment isn't happening anywhere near the actual bottling plants, which critics have contended are responsible for depleting the groundwater for local residents. Environmental groups have also made similar charges against Coca-Cola (KO) and its bottling plants.

Instead of putting the 5 billion liters back where they found it (which admittedly would be quite difficult), Pepsi is cobbling together lots of different projects that together add up to 6 billion liters, at least according to its accountants at Deloitte Touche Tohmatsu, who did the math. These projects include the construction of small dams and recharge ponds, rain water collection on roofs and collaborations with rice farmers to do "direct seeding" instead of growing rice seedlings in a nursery, something that reduces water use by as much as 30 percent.

These are all good things, no question. The problem is that it's unclear -- as it always is with these environmental offset maneuvers -- how much of a role Pepsi played building the dams and rainwater harvesters, or whether these things would have happened anyway without Pepsi. The company also claims to have made its Indian manufacturing much more efficient, which has theoretically reduced water usage by more than 45 percent since 2005. If you believe Pepsi's numbers, that is.

The lesson for companies aiming to hit ambitious environmental milestones is that it's a good idea to go heavy on the details and background information and light on bombastic claims.

Water usage in India has been a big PR problem for both Pepsi and Coke for years. The World Bank estimates that, at the current rate of consumption, India's fresh water supplies could be depleted by 2050.

Pepsi clearly wants to be a leader in "sustainability" and is doing all kinds of things to try and get there, including the bizarre plan of recycling extracted water from potatoes and a commitment in the U.K. that by 2020 it will send nothing to landfill across its supply chain and make all of its product packaging from renewable sources. These are commendable efforts and it's a lot more than many other companies are doing.

But as the good news spills forth, it always pays to read the fine print.

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