Quantitative metrics tracking the amount of pesticides used and avoided, along with the class of pesticides used, reported annually;

Overall goals to reduce pesticide use and/or toxicity; and

Measures including technical assistance and incentives provided to growers to avoid or minimize the use of pesticides.

Reputational risk and potential loss of market access: DPS fails to address rising consumer awareness and concern around pesticide use and exposure, or align with changing consumer preferences for healthier, safer foods. This misalignment could create reputational risk and lead to loss of market access as consumers shift purchasing habits to reflect preferences.

Supply chain risks: DPS’s failure to assess and reduce its pesticide use could result in supply chain disruption from loss of pollinators critical to producing essential crops. Further, DPS’s regulatory risk is heightened by the Company’s failure to disclose efforts that surpass regulatory compliance, potentially leaving its supply chain vulnerable in an evolving regulatory landscape.

Competitive risk: Several major companies in the food sector have begun assessing and mitigating pesticide risk by tracking and reducing pesticide use, surpassing DPS’s actions and disclosure, potentially creating competitive pressure.

Opposition statement and insufficient efforts and disclosure: DPS’s opposition statement fails to address its lack of reporting and transparency on pesticide use, which are insufficient to address risks and meet consumer and investor expectations.

REPUTATIONAL RISK AND POTENTIAL LOSS OF MARKET ACCESS

According to Consumer Reports, 89% of Americans think it is critical to protect the environment from chemicals such as pesticides, and 85% are concerned about pesticide exposure in food.¹

In a report to the United Nations Human Rights Council in March 2017, experts concluded that “excessive use of pesticides are very dangerous to human health, to the environment and it is misleading to claim they are vital to ensuring food security.”² The report stated that pesticides are responsible for about 200,000 deaths annually, and that chronic exposure to pesticides has been linked to cancer, Alzheimer’s, Parkinson’s, hormone disruption, developmental disorders, and sterility. ³

In July 2016, prominent health providers and scientists released a Consensus Statement as a national call to action to significantly reduce exposures to harmful chemicals. The group cited linkages between neurodevelopmental disorders in children and exposures to organophosphate pesticides used widely in fruit and vegetable production.⁴ Several of DPS’s products are geared toward children.

According to a 2014 survey, 83% of shoppers consider sustainability when making food purchasing decisions.⁵

Consumers are choosing more organic offerings, the certifications for which heavily restrict pesticide use. Total organic food sales grew 11% in 2015, and sales of organic “fresh juices and drinks” grew 33.5%, making it the fastest-growing of all organic subcategories.⁶

SUPPLY CHAIN RISKS

Honeybees have been dying at unprecedented rates in the U.S. since 2006. According to the USDA, between 2014 and 2015, annual losses of honeybee colonies were 42.1%.¹¹

Three-quarters of the world’s food crops rely at least in part on insect or animal pollination, valued between $235 and $577 billion.¹²

According to the U.S. Federal Government, “Pollinators contribute more than 24 billion dollars to the United States economy, of which honeybees account for more than 15 billion dollars through their vital role in keeping fruits, nuts, and vegetables in our diets.”¹³

In July 2014, a meta-analysis of 800 peer-review studies by the Task Force on Systemic Pesticides confirmed neonics as a key factor in bee declines.¹⁴ The Task Force noted that “In the case of acute effects alone, some neonics are at least 5,000 to 10,000 times more toxic to bees than DDT.”¹⁵

States in which DPS’s suppliers may operate, such as Maryland¹⁷, Connecticut¹⁸, and Minnesota¹⁹ have passed regulations restricting neonics. Bills to restrict neonics were also introduced in over ten states during the 2015-2016 legislative session.²⁰

In December 2013, the European Union enacted a ban on three neonics.²¹ Restrictions on these neonics remain in place until an evaluation is finalized in 2017, though draft regulations reveal the Commission’s intent to completely ban neonics for use in fields.²²

COMPETITVE RISK

Sysco, as part of its Integrated Pest Management (IPM) Program launched in 2004, encourages suppliers to reduce pesticide use and protect pollinators. The program requires participating suppliers to track pesticide use with the goal of reducing quantity or toxicity, and has specific standards that encourage protection and creation of pollinator habitats. The program quantifies the results of such efforts and reports the amounts of pesticides avoided. In the 2013 growing season, Sysco suppliers reported avoiding 4.6 million pounds of pesticides by implementing IPM practices and principles.²³

General Mills announced a project in coordination with USDA and the non-profit conservation group Xerces Society in November 2016 that will establish over 100,000 acres of pollinator habitat by 2021. The company dedicates several pages of its 2017 Global Responsibility Report to disclosing efforts to improve pollinator health, and is working to “consolidate and disseminate guidance to growers of key commodities such as corn and soy, on how to protect and minimize the impact of neonicotinoids and other pesticides on pollinators.”²⁴

As part of its 2020 sustainability vision to assure long-term access to necessary ingredients, ConAgra Foods works closely with its potato suppliers to encourage implementation of IPM programs, and collects qualitative and quantitative measures to benchmark performance between growers. ConAgra’s participation in the Potato Sustainability Initiative includes specific criteria to protect bee habitat and reduce pollinators’ exposure to harmful pesticides.²⁵

Unilever’s Sustainable Agriculture Code expects growers to implement IPM principles to reduce pesticide use.²⁶ In 2012, Unilever began collecting data from farmers including pesticide use metrics, and found that farms that implemented IPM programs reported using 1kg less pesticide per tonne of crop than those that did not, with no loss in crop yield.²⁷

Whole Foods’ pesticide policy, which went into effect January 1, 2017, prohibits and restricts certain pesticides for use in its produce and flowers, targeting those “which pose the greatest risks to consumers [and] pollinators.”²⁸

PepsiCo’s Global Sustainable Agriculture Policy states that the company “aims to optimize the use of pesticides, nutrients, and other agrochemicals,” and “supports sustainable practices that substitute natural controls for some agrochemicals.”²⁹ Coca-Cola’s Sustainable Agricultural Guiding Principles encourage the use of IPM techniques and the “maintenance of important ecosystem services such as natural pest and disease controls, pollination, and freshwater flows.”³⁰

DPS’S CURRENT EFFORTS FAIL TO ADDRESS RISK AND MEET EXPECTATIONS FOR TRANSPARENCY

The statement refers to its Supplier Code of Conduct, Requirement #8 of which states that suppliers must “Use environmentally sound practices,” and “Actively pursue operational improvements designed to improve environmental performance and reduce environmental impact.”³¹ This is the only requirement related to environmental sustainability in DPS’s Code of Conduct, and is extremely vague, providing suppliers no guidance on what environmental practices to target, what the Company considers “environmentally sound,” how impact is tracked or measured, or what mechanisms can be implemented to ensure compliance. The Code does not address pesticide risk specifically.

The statement focuses on legal compliance, even as regulatory developments lag consumer, expert, and competitor concern and action in this area, ignoring the disruptive effects continued use can have on the Company’s supply chain. The statement mentions data collection as part of the compliance process, but does not disclose whether this data is put toward efforts to reduce pesticide use or toxicity. The statement does not explicitly address crops besides apples.

The statement mentions that DPS encourages its suppliers to develop IPM programs. However, details, extent, progress, or impacts of these programs are not disclosed.

DPS’s 2015 Sustainability Report, which is referred to in the statement, is notably silent on pesticides, despite providing specific details on a range of other sustainability-related areas.³²