Rethinking PepsiCo's Responsibility

Shares of PepsiCo (NASDAQ:PEP) have been in my Prosocial Portfolio -- which focuses on socially responsible investing -- since February 2011. However, the consumer giant has recently fallen a bit from my good graces, given its decision to throw in to defeat California's Prop 37, which would have required labeling for products including genetically modified, or "GM," ingredients.

In Tuesday's election, California voters narrowly defeated the proposition. However, let's just say some big wallets opened up to block the idea that American consumers should be informed about the presence of GM ingredients in food. And GM ingredients are commonly in our food: 70% of processed foods here in the U.S. contain GM ingredients, given the fact that corn and soybeans are commonly genetically modified.

It's no surprise that companies like Monsanto (NYSE:MON) and DuPont (NYSE:DD) spent big-time to challenge the labeling advocates. (Monsanto spent a whopping $8.1 million.) These companies develop and sell the seeds engineered to grow crops that are resistant to certain pests, increase yields, and even resist harsh environmental conditions like droughts.

About 80 big-pocketed corporate opponents poured $46 million into efforts to block any such labeling; the proposition's supporters had a mere $7.3 million on hand. However, bear in mind that even though Prop 37 was defeated, this was no landslide, even though opponents outspent their foes by a 5-to-1 ratio; 53% of California's voters voted against it, and 47% voted in favor of GM labeling.

Notably, companies like Whole Foods Market (NASDAQ:WFM) and Hain Celestial (NASDAQ:HAIN) supported the spirit of Prop 37: the consumer's right to know. Both businesses -- which are heavily concentrated in organic and natural goods -- are negative on GM ingredients in the first place. (Both stocks are also included in my Prosocial Portfolio.)

PepsiCo, on the other hand, joined rival Coca-Cola (NYSE:KO) in kicking in funds to defeat Prop 37. This besmirches Pepsi'Cos more noble sustainability efforts.

For example, PepsiCo uses copious amounts of water in its operations, but it's working hard to ensure it conserves and sometimes even replenishes water in stressed regions. The company has cited specific goals, vowing to improve water-use efficiency by 20% per unit of production by 2015, compared to the 2006 baseline. PepsiCo's been working to embed water conservation in its operations, too.

Interesting -- and water-saving -- operational improvements include water-related use of its Resource Conservation (ReCon) tool, which has helped it identify 2.2 billion liters of water savings, with a cost-saving opportunity of $2.7 million, to boot.

Along those lines, Forbes contributor Rahim Kanani recently detailed why PepsiCo is actually ahead of the curve in its water stewardship efforts.

When it comes to GM ingredients, though, many foods, including sodas, are chock-full of the stuff. Take the common use of sweetener high-fructose corn syrup. Although companies like PepsiCo and Coca-Cola are trying to engineer their formulas to rely on other sweeteners, they've got their hands full trying to deliver alternative sweeteners that are also cheap. These companies are not only beset by the GM food activists, but also by health advocates who point to additives like high-fructose corn syrup for Americans' increasing poundage.

Meanwhile, as much as labeling isn't the same as a regulation to reformulate products, companies claim not only that GM ingredients are safe, but that labeling would be onerous and expensive, and that they'd have to pass on costs to consumers.

I wish PepsiCo had simply stayed neutral on the issue. The ongoing debates on the science and safety of GM ingredients aside, it doesn't look responsible or even fair to try to block information that many people simply want disclosed. This newest development makes me question Pepsi'Cos social responsibility, and part of me wonders if it deserves to be jettisoned from the Prosocial Portfolio. Let me know what you think in the comments box below.