sudo su - does not honor /etc/environment

I have set a PATH variable in /etc/environment. When I log into my system as root, the path variable is correctly applied. However, when I log in as another user and then become root via

sudo su - 

/etc/environment doesn't seem to get honoured. Why is that? How can I change it?

output of grep readenv /etc/pam.d/su:

# parsing /etc/environment needs "readenv=1"
session       required   pam_env.so readenv=1
session       required   pam_env.so readenv=1 envfile=/etc/default/locale

cat /etc/lsbrelease:

DISTRIB_ID=Ubuntu
DISTRIB_RELEASE=16.04
DISTRIB_CODENAME=xenial
DISTRIB_DESCRIPTION="Ubuntu 16.04.6 LTS"

dpkg -S /bin/su:

login: /bin/su