Ethical Sourcing

Although DPS operations are based in North America and the Caribbean, we have suppliers around the world who provide us with the materials, ingredients, resources and equipment we need to get our portfolio of flavors to consumers. To ensure that our products meet our own high standards of quality and safety, we must make certain that our suppliers are operating responsibly.

The business practices of the thousands of companies we work with worldwide also reflect on DPS’s reputation. From housekeeping, landscaping and courier services to international agribusiness, ingredient and flavor suppliers, the integrity of our partners influences the integrity of DPS. We expect our brands to be produced to high standards of quality and safety throughout our supply chain by people who are well-treated and compensated fairly for their work in accordance with all applicable governmental laws.

To achieve this expectation, our goal is to “Conduct a regular risk assessment of our supply base and audit any high-risk suppliers identified to ensure full compliance with our Ethical Sourcing Code of Conduct.”

This assessment process reflects a change to the goal as previously stated, as the processes we have established to ensure compliance were not accurately reflected in the goal as written. Based on our experience over the last few years, we have concluded that annual third-party assessments of all 20,000 of our direct and indirect suppliers are impractical and unnecessary. Our new approach allows for continuous monitoring of our entire supplier base while enabling us to better focus on high-risk suppliers.

The intent of the goal remains the same. We expect every company we do business with to agree to, and meet or exceed the standards set forth in our Ethical Sourcing Code of Conduct. And we continue to see strong progress toward ensuring that our suppliers are in full compliance with the code. This code is based largely on the Ethical Trading Initiative, which has established internationally recognized standards covering employee rights and working conditions.

Among other requirements, suppliers are expected to guarantee that employment is freely chosen with no forced, bonded or involuntary labor of any kind; that working conditions are safe, hygienic, and compliant with industry standards; that wages and benefits meet minimum national legal standards or industry benchmarks; that working hours comply with national laws and industry benchmarks; and that no discrimination of any kind is practiced in any employment-related decision.

The work we have done in segmenting and identifying our direct suppliers into low-, medium- and high-risk categories has served us well in ensuring compliance. As our total number of suppliers can fluctuate by the hundreds from quarter to quarter, we are now able to perform regular internal assessments based on industry and location data, as well as the use of third-party risk assessment tools.

To date, 64 percent of our high-risk suppliers have committed to our Ethical Sourcing Code of Conduct, an increase of 8 percentage points since last year. The majority of these suppliers verified compliance through signed acceptance of our Code of Conduct or through participation in the Supplier Ethical Data Exchange. In addition, our auditing process began in earnest in the fourth quarter of 2011, and we can now confirm compliance of 10 percent of our high-risk suppliers on the basis of audits conducted, a good first step to achieving our 2015 goal.

Our low- and medium-risk suppliers have seen a dramatic increase in compliance over the last year. Through the first quarter of 2012, 41 percent of our low-risk suppliers have committed to our Ethical Sourcing Code of Conduct, an increase of 19 percentage points since last year. Compliance among our medium-risk suppliers is up 20 percentage points to 66 percent. These numbers have increased despite a rise in the total number of suppliers we use, and we expect our compliance rates to continue to grow in the future.

All told, 51 percent of our direct suppliers have confirmed their compliance with our ethical trading standards. Grupo Peñafiel continues to set the bar high in our ethical sourcing efforts, with 96 percent of our Mexican suppliers in compliance, an increase of 1 percentage point over last year.

DPS does not conduct animal tests and does not directly fund any animal tests in relation to its beverages. Where tests are needed to demonstrate ingredient safety, we and many other companies using those ingredients rely on third-party testing. We encourage the use of alternative testing methods whenever and wherever possible.

While we do not have an explicit goal related to supplier diversity, DPS works with suppliers in our communities who reflect the markets we serve. We create opportunities for traditionally disadvantaged enterprises, including those owned by minorities, women, military veterans and the physically challenged, while seeking the best quality, value and service at the best cost, from all of our suppliers. It is our desire to select the supplier who delivers the best overall value – value that consists of competitive pricing, technological foresight, information management and customer support.

In 2011, we spent nearly $145 million with businesses that are either wholly or majority owned by women or minorities, and another $1.4 million with disadvantaged business enterprises. Collectively, these relationships accounted for nearly 4 percent of our direct and indirect supplier expenditures in 2011.