Helping to Build a More
PepsiCo Sustainability Report 2018 SUSTAINABLE FOOD SYSTEM September 2019
AGRICULTURE WATER PACKAGING
PRODUCTS CLIMATE PEOPLE Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
INTRODUCTION IMPROVED CHOICES ACROSS OUR PORTFOLIO Welcome Page 01 Improved Choices Across Our 24 Our company connects people through some of Our Role in Helping to Build a 02 Portfolio More Sustainable Food System Improving Choices Across Our 25 the world’s greatest brands and most-loved foods About PepsiCo 04 Portfolio by Reducing Added Sugars and beverages. PepsiCo products are enjoyed Improving Choices Across 26 Our Portfolio by Reducing Sodium HELPING TO BUILD A MORE and Saturated Fat by consumers more than one billion times a SUSTAINABLE FOOD SYSTEM Expanding Our Portfolio Through 27 Our Sustainability Agenda 05 day in more than 200 countries and territories Innovation Our Goals 06 Helping Consumers To Make More 28 around the world. More than 260,000 passionate Using Our Scale for Good 07 Informed Decisions 2018 Sustainability 08 Purposeful Brands 29 associates around the world make this possible. Progress Highlights
We strive to use our global scale for good and CLIMATE CHANGE MITIGATION NEXT GENERATION AGRICULTURE to create our products in a way that benefits our Action on Climate 30 Next Generation Agriculture 09 Reducing Greenhouse Gas Emissions 31 consumers, our suppliers, our communities and Setting the Standard 10 Across Our Value Chain Spreading Next Generation Practices 11 our planet—part of our mission to Create More Growing Intelligence 12 PEOPLE & PROSPERITY Smiles with Every Sip and Every Bite. Empowering Women Farmers 13 Around the World People & Prosperity 32 Investing in People 33 Supporting the Communities Where 34 POSITIVE WATER IMPACT We Live and Work ABOUT OUR REPORTING SUITE Positive Water Impact 14 Our 2018 Sustainability Reporting Suite includes multiple resources available Replenishing Our Local Watersheds 15 MANAGING IMPACT online that explain our approach to sustainability and our progress to date: Improving Our Operational 16 Water Use Efficiency GRI Materiality Topics Assessment 35 • This 2018 PepsiCo Sustainability Report outlines our sustainability strategy, Safe Water Access 17 Stakeholder Engagement 36 our priorities, our goals and our progress toward meeting them Sustainability Governance 37 • Our Environmental, Social & Governance (ESG) Topics site outlines detailed information by topic on sustainability programs, progress, governance and CIRCULAR FUTURE FOR PACKAGING management Circular Future for Packaging 18 • Our 2018 Performance Metrics Sheet provides an accessible summary of our Less Plastic, More Alternative 19 Materials sustainability goals, metrics and progress Increasing Use of Recycled Content 20 • Our Global Reporting Initiative (GRI) Index links to PepsiCo online disclosures Boosting Recycling Rates 21 aligned to GRI reporting standards Going Beyond the Bottle 22 • For updates on our sustainability journey around the world, visit our Reinventing Packaging Materials 23 Sustainability Stories page
01 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Our Role in Helping to Build a Since becoming CEO last fall, I’ve workers, we undoubtedly have a role to play spent a lot of time thinking about the in addressing these challenges. responsibilities that come with leading Over the past decade, we have made significant an iconic global company. There’s the progress in changing both the products we responsibility to serve our customers make and how we make them. But while we are MORE SUSTAINABLE and consumers, to support our large extremely proud of our past achievements, I believe the future will require us to be even and diverse workforce, and to deliver more ambitious and purposeful, at both the returns for the shareholders who have brand and corporate level. entrusted us with their investment. That is why PepsiCo is embracing a new FOOD SYSTEM And at a time of such enormous purpose behind our sustainability agenda: challenges—from climate change and to help build a more sustainable food system. resource scarcity, to inequality and One that can meet human needs and malnutrition—I also believe that business continue to drive economic growth and social leadership in the 21st century must development, without exceeding the planet’s natural boundaries. include a responsibility to our planet, our communities and future generations. This ambition is part of our new vision for PepsiCo—to Be the Global Leader in Convenient Foods and Beverages by Winning The way the world produces, distributes with Purpose—as well as our aspirations to be and consumes food is at the heart of many of Faster, Stronger and Better. It is a key part of the challenges we face. To put it simply, the our plan to further integrate purpose into our modern food system is no longer fit for purpose. business strategy and our brands, including Rising demand from a growing population has LIFEWTR, Gatorade, Lay’s and Stacy’s (see contributed to the depletion of vital resources page 29 for more on our purposeful brands). and increased pressure on the natural world. And to help make this effort successful, we have Too many farmers and workers still face identified six priority areas where we believe poverty and discrimination. Single-use plastic PepsiCo can make the greatest contribution packaging is disposed of in ways that litter many to building a more sustainable food system. communities and pollute our oceans. And many people still struggle to access healthier diets. I’m proud to say that we’re already making progress in many of these areas, and in the In the past, these were problems exclusively pages that follow, you can read about some of for governments or NGOs. Today, stakeholders our efforts, as well as some of the long-term also expect companies to help lead the way. goals we’ve set, including: That’s a view we at PepsiCo share. As a food and beverage company whose products are Next Generation Agriculture – enjoyed by consumers more than one billion Advancing environmental, social and times a day in more than 200 countries and economic benefits to farmers and communities territories around the world, and operates through more sustainable agriculture. an agricultural supply chain that touches • On farms around the world, we’re working 60 nations and supports over 100,000 farm to raise standards for efficient resource use,
02 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
environmental consciousness and working to grow SodaStream, which • Women comprise 40 percent of our human rights. Through our Sustainable offers consumers the chance to prepare managers globally, and since 2016, WINNING WITH PURPOSE Farming Program (SFP), in 2018, over customized beverages at home without we’ve invested $27.3 million to support half our farmer-sourced agricultural the need for single-use plastic bottles. initiatives that benefit women in Our vision is to Be the Global raw materials, like potatoes, whole communities where we operate. Improved Choices Across corn, oranges and oats were verified Leader in Convenient Foods and Our Portfolio – Reducing added Let me be clear: these efforts are as sustainably sourced.1 Our aim is to Beverages by Winning with Purpose. sugars, sodium and saturated fats in only the beginning. I recognize that reach 100 percent by the end of 2020. To help us achieve this vision, we’ve many of our products. we still have a lot of work to do. But I Already, 100 percent of potatoes want all our stakeholders to know that defined three aspirations: used throughout our North America • In the U.S. alone, we have nearly 500 advancing sustainability and being a Frito-Lay portfolio, including Lay’s and beverage choices with 100 Calories or more purposeful company will play an Ruffles, have reached this standard. less per 12-ounce serving, and around essential role in PepsiCo’s future. the world zero-sugar Pepsi Black is Positive Water Impact – now available in over 80 countries. In the coming months, we will engage Improving water stewardship We’re also offering more snacks with experts from industry, government, FASTER across our business and in regions lower sodium and less saturated fat, nonprofits and communities to gather where we operate. from Lay’s Baked to Kurkure Multigrain. more views on what it will take to • We’re striving to improve water-use And we’re introducing more convenient help build a more sustainable food Winning in the marketplace, being more efficiency and aiming to replenish 100 foods with nutritious ingredients, like system and how best PepsiCo can consumer-centric and accelerating percent of the water we consume for Tropicana Whole Fruit and Sunbites contribute. It’s a long-term challenge investment for topline growth manufacturing in high water-risk areas Veggie Harvest, to complement that will require a broad coalition. by 2025. Because PepsiCo has long acquisitions like Bare Snacks. But we are committed to meeting our believed that water is a human right, responsibility to our planet and its Climate Change Mitigation – in 2018, we helped provide safe water communities, and we won’t rest until Curbing greenhouse gas (GHG) access to over six million people— we do. emissions across our value chain. boosting the total number to 22 million STRONGER people since 2006. • We have set a goal to reduce absolute GHG emissions across our value chain Circular Future for Packaging – by 20 percent by 2030, from a 2015 Delivering our vision of a world baseline. We will do this by continuing Transforming our capabilities, cost and where plastic packaging need never to drive down emissions throughout culture by operating as one PepsiCo, become waste. our value chain, from our fleet of leveraging technology, winning locally and • We recently unveiled a new target electric vehicles to using 100 percent globally enabled to reduce 35 percent of virgin plastic renewable energy in our manufacturing RAMON LAGUARTA content across our beverage brands operations in seven European nations. PepsiCo Chairman of the Board of by 2025, driven by increased use Directors and Chief Executive Officer People & Prosperity – of recycled content and alternative Advancing respect for human packaging materials. Beginning next rights, promoting diversity and BETTER year, LIFEWTR will be packaged in inclusion in our workplaces, and 100 percent recycled plastic in the increasing the earnings potential of U.S., and bubly will be packaged women in our communities. exclusively in aluminum. And we’re Integrating purpose into our business strategy continuing to advance our Beyond and our brands, and doing even more for the the Bottle strategy, most notably by planet and for our people
1 “Sustainably sourced” refers to meeting the independently-verified Social, Environmental and Economic principles of PepsiCo’s Sustainable Farming Program, designed to reflect best practices and achieve positive outcomes for farmers, communities and the planet. 03 CUMULATIVE TOTAL SHAREHOLDER RETURN The graph below matches PepsiCo, Inc.’s cumulative ve-year total shareholder return on common stock with the cumulative total returns of the S&P 500® index and the S&P® Average of Industry Groups index.* The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2013 to 12/31/2018. Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing PepsiCo, Inc. S&P 500 S&P AMorevg. of SustainableInd. Groups* Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System $200
$150 ABOUT PEPSICO Products sold in More than More than $100 PepsiCo has a portfolio that includes
CUMULATIVE TOTAL SHAREHOLDER RETURN The graph below matches PepsiCo, Inc.’s cumulative ve-year total shareholder return on common stock with the$5 cumulative0 total returns of the S&P 500® index and 200+ the S&P® Average of Industry Groups index.* The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of 260,000 $64 BILLION all dividends) from 12/31/2013 to 12/31/2018. countries and territories associates in net revenue in 2018 $0 BILLION- around the world PepsiCo, Inc. S&P 500 S&P Avg. of Ind. Groups* 12/13 12/14 12/15 12/16 12/17 12/18
$200 *The S&P Average of Industry Groups is derived by weighting the returns of two applicable S&P Industry Groups (Non-Alcoholic Beverages and Food) based on the relative contribution of PepsiCo’s sales in its beverage and food businesses. The returns on PepsiCo common stock, the S&P 500, and the S&P Average of Industry Groups are calculated through 12/31/2018 . DOLLAR CUMULATIVE TOTAL SHAREHOLDER RETURN $150 The graph below matches PepsiCo, Inc.’s cumulative ve-year total shareholder return on common stock with the cumulative total returns of the S&P 500® index and the S&P® Average of Industry Groups index.* The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of BRANDS all dividends) from 12/31/2013 to 12/31/2018. $100 PepsiCo, Inc. S&P 500 S&P Avg. of Ind. Groups* 22that generated more than $1 billion $200 each in estimated annual retail sales $50 in 2018. $150 $0 12/13 12/14 12/15 12/16 12/17 12/18 2018 DIVISION NET REVENUES
*The S&P Average of Industry Groups is derived by weighting the returns of two applicable S&P Industry Groups (Non-Alcoholic Beverages and Food) based on the relative $100 contribution of PepsiCo’s sales in its beverage and food businesses. The returns on PepsiCo common stock, the S&P 500, and the S&P Average of Industry Groups are calculated PepsiCo Beverages North America 33% through 12/31/2018 . Latin America 11% $50 Asia, Middle East and North Africa 9%
Quaker Foods North America 4% $0 12/13 12/14 12/15 12/16 12/1E7urope Sub-Saharan Africa 1812/1%8
*The S&P Average of Industry Groups is derived by weighting the returns of two applicable S&P Industry Groups (Non-Alcoholic Beverages and Food) basedFrito on-La they N orelativerth Ame rica 25% contribution of PepsiCo’s sales in its beverage and food businesses. The returns on PepsiCo common stock, the S&P 500, and the S&P Average of Industry Groups are calculated through 12/31/2018 .
2018 DIVISION NET REVENUES 2018 DIVISION OPERATING PROFIT
PepsiCo Beverages North America 20% PepsiCo Beverages North America 33% Latin America 9% Latin America 11% Asia, Middle East and North Africa 10% Asia, Middle East and North Africa 9% Quaker Foods North America 6% Quaker Foods North America 4% Europe Sub-Saharan Africa 12% Europe Sub-Saharan Africa 18% 2018 DIVISION NET REVENUES Frito-Lay North America 43% Frito-Lay North America 25% PepsiCo Beverages North America 33%
Latin America 11% 04 Asia, Middle East and North Africa 9% 2018 DIVISION OPERATING PROFIT Quaker Foods North America 4%
PepsiCo Beverages North America 20% Europe Sub-Saharan Africa 18%
Latin Amer ica 9% Frito-Lay North America 25%
Asia, Middle East and North Africa 10%
Quaker Foods North Amer ica 6%
Europe Sub-Saharan Af rica 12% 2018 DIVISION OPERATING PROFIT
Frito-Lay North America 43% PepsiCo Beverages North America 20%
Latin Amer ica 9%
Asia, Middle East and North Africa 10%
Quaker Foods North Amer ica 6%
Europe Sub-Saharan Af rica 12%
Frito-Lay North America 43% Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Our PEPSICO PRIORITIES
NEXT GENERATION IMPROVED CHOICES AGRICULTURE ACROSS OUR PORTFOLIO SUSTAINABILITY AGENDA POSITIVE CLIMATE CHANGE WATER IMPACT MITIGATION
CIRCULAR FUTURE PEOPLE & FOR PACKAGING PROSPERITY
OUR SHARED CHALLENGES produces, distributes, consumes and Today, the global food system brings disposes of foods and beverages in ON order to tackle the shared challenges we ATI nutrition, economic opportunity, IG face. So, as part of our vision to Be the IT convenience, and enjoyment to more E M G Global Leader in Convenient Foods and N people than ever before, but it faces A Beverages by Winning with Purpose, we H pressures that threaten its future ability C E are refocusing our Sustainability Agenda T to meet the needs of a growing global A M on Helping to Build a More Sustainable I population. L Food System; one that can meet human C • 70 percent of the world’s fresh water needs for nutrition and enjoyment and use is in agriculture alone, even as more continue to drive economic growth and communities experience water scarcity. social development without exceeding NEXT GENERATION POSITIVE WATER the planet’s natural boundaries. • A third of greenhouse gas emissions AGRICULTURE IMPACT originate in the food system. OUR PRIORITIES • More than half of fertile topsoil is classed To do this, we have sharpened PepsiCo’s as degraded. sustainability focus to six overlapping priorities within our food system. These • Only 14 percent of plastic packaging is priorities meet three important criteria: recycled for future use. i. They relate to the most pressing • Over 800 million people are sustainability challenges, risks and IMPROVED undernourished. CHOICES ACROSS CIRCULAR FUTURE opportunities facing PepsiCo and our OUR PORTFOLIO FOR PACKAGING • Almost 40 percent of adults food system. are overweight. ii. They matter most to PepsiCo’s key • 80 percent of the world’s extreme external stakeholders (see our GRI Materiality section beginning on page 35). poor live in rural areas and rely mainly on Y IT agriculture for their livelihood. ER iii. They offer the opportunity for PepsiCo SP RO OUR APPROACH to make a positive difference at a systems & P PLE level—i.e. both within and beyond our own PEO At PepsiCo, we believe that there is an value chain. opportunity to change how the world
05 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Our PRIORITY OUR GOAL TARGET METRICS Advance environmental, social and economic benefits to communities around the world ffAchieve 100% sustainably sourced* potato, whole corn, oats, oranges, palm oil and sugar by supporting practices and cane by 2020 NEXT GENERATION technologies that promote ffAchieve sustainably sourced priority raw materials based on business needs by 2025 GOALS AGRICULTURE improved farmer livelihoods and agricultural resiliency.
ffIn high water-risk areas, by 2025: Our refined sustainability ••Improve water-use efficiency by 15% in our agricultural supply chain (focused on corn goals are aligned with Drive water security to assure and potatoes) (2015 baseline) business continuity while ••Improve operational water-use efficiency by 25% (2015 baseline) our priority areas. Each POSITIVE positively contributing to ••Replenish 100% of the water we consume in manufacturing operations of our eight goals has a WATER IMPACT communities. series of target metrics ••Adopt the Alliance for Water Stewardship standard as our vehicle for water advocacy ffDeliver safe water access to 25 million people by 2025 against which our progress Fundamentally change the way can be assessed. ffDesign 100% of packaging to be recyclable, compostable or biodegradable by 2025 the world interacts with our ffIncrease recycled content in our plastics packaging to 25% by 2025 packaging to deliver our vision CIRCULAR FUTURE ffReduce 35% of virgin plastic content across our beverage portfolio by 2025 of a world where plastics need FOR PACKAGING ffInvest to increase recycling rates in key markets by 2025 never become waste.
ffReduce added sugars: ≥ 67% of beverage portfolio will have ≤100 Calories from added sugars per 12-ounce serving by 2025 OUR WORK IS ALIGNED WITH UN SUSTAINABLE Reduce added sugars, sodium ffReduce sodium: ≥ 75% of foods portfolio will not exceed 1.3 milligrams of sodium per IMPROVED and saturated fats. Calorie by 2025 DEVELOPMENT GOALS CHOICES ACROSS ffReduce saturated fat: ≥ 75% of foods portfolio will not exceed 1.1 grams of saturated fat In 2015, the United OUR PORTFOLIO per 100 Calories by 2025 Nations General Assembly announced 17 Sustainable Do our part to curb climate ff Development Goals (SDGs) change by reducing greenhouse Reduce absolute GHG emissions across PepsiCo’s value chain by 20% by 2030 (2015 baseline) to address global challenges CLIMATE CHANGE gas (GHG) emissions across our and set a blueprint for MITIGATION value chain. action to achieve the goals ffDrive fair and safe working conditions throughout our value chain by addressing our most by 2030. Our sustainability Human Rights: Advance respect salient human rights issues (i.e., Freedom of Association, Human Right to Water, Land priorities are aligned with for human rights by using Rights, Vulnerable Worker Groups, Working Hours and Wages, and Workplace Safety) the SDGs so that our actions PepsiCo’s capabilities and scale. ffExtend the principles of our Supplier Code of Conduct to all of our franchisees and joint ventures by 2025 can contribute to a greater collective impact. Diversity: Promote a diverse ffAchieve gender parity by 2025 in management roles PEOPLE & and inclusive workplace. ffSustain our pay equity program PROSPERITY Prosperity: Increase the earnings potential of women ffInvest $100 million by 2025 to provide 12.5 million women with essential resources for workforce readiness and in programs that empower women in the food system and to drive economic growth and farming increase food security.
*“Sustainably sourced” refers to meeting the independently verified Social, Environmental and Economic principles of PepsiCo’s Sustainable Farming Program, enabling best practices and positive outcomes for farmers, communities and the planet. 06 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Using Our Across our value chain (depicted PEPSICO PRIORITIES below), we aim to use our scale, NEXT GENERATION IMPROVED CHOICES reach and expertise in each AGRICULTURE ACROSS OUR PORTFOLIO priority area to help build a more POSITIVE CLIMATE CHANGE SCALE FOR GOOD sustainable food system. WATER IMPACT MITIGATION CIRCULAR FUTURE PEOPLE & FOR PACKAGING PROSPERITY SOURCING Each year, PepsiCo sources over $7 INGREDIENTS billion of crops from 60 countries, so the standards we apply and promote can 1. impact the environmental, social and economic impacts of agriculture around the world. 1 2 RESEARCH & With approximately 270 manufacturing DEVELOPMENT, facilities around the world managed by MANUFACTURING PepsiCo and our partners, we bring together 2. AND PACKAGING innovators and operation teams who work to use water, energy and ingredients efficiently to create our foods and beverages. 3
DISTRIBUTION PepsiCo products are distributed in over 200 AND RETAIL countries and territories around the world, including using our carbon-efficient fleets, 3. and sold through retailers ranging from giant supermarket chains to individual street vendors.
CONSUMPTION Around the world, PepsiCo products are enjoyed by consumers more than a billion times a day. We’re improving our foods 4. and beverages by reducing added sugars, 4 sodium and saturated fat and expanding our portfolio to offer consumers more choices.
POST-CONSUMER PepsiCo’s sustainable plastics vision is to help build a world where plastics need 5 never become waste by driving the shift from 5. a linear to a circular economy for packaging.
07 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
2018 Sustainability For more information visit the PROGRESS HIGHLIGHTS 2018 Performance Metrics Sheet AGRICULTURE WATER PACKAGING PRODUCTS As of 2018, 51% of our direct farmer- In 2018, we replenished more than In 2018, we set a new target to strive to In 2018, 44% of our beverage portfolio sourced, agricultural raw materials 1.1 billion liters of water through use 25% recycled content in our plastic had ≤100 Calories from added sugars are sustainably sourced through our watershed conservation projects packaging by 2025, another step per 12-ounce serving,** progress Sustainable Farming Program (SFP). locally, in high water-risk areas around toward building a world where plastics toward our target of ≥67% by 2025. the world. need never become waste. 2020 Goal
100% 2017 2018 2017 2025 Goal 40% 44% 2018 BILLION +4 pps* vs 2017 24% 51% 25% +27 pps* vs 2017 >1.1 LITERS
**Our global progress is based on our top 26 beverage markets, which represent 80% of our global beverage volume as of 2018.
CLIMATE MILLION PEOPLE In 2018, we reduced Scope 3 GHG As of 2018, 40% of our global 2025 Goal emissions by approximately 2.2 million METRIC manager positions were held 2018 metric tonnes (2015 baseline). This TONNES by women, progress toward our 50% represents approximately 7% progress 2.2 target of 50% by 2025. 40% toward our 2030 target to reduce absolute GHG emissions in our value chain.
*pp(s) = percentage point(s) 08 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
OUR GOAL
Advance environmental, social and economic benefits to communities around the world by supporting practices and Next Generation technologies that promote improved farmer livelihoods and agricultural resiliency. To learn more about how we’re tracking progress toward our goal, review target AGRICULTURE metrics on page 6.
Over the next 30 years, global demand for agricultural products will grow by as much as 50 percent. Yet, already, agriculture accounts for around 70 percent of the world’s fresh water consumption and about a quarter of global greenhouse gas emissions. It also contributes to deforestation, biodiversity loss and land and water pollution. While farming drives rural development, some agricultural regions are also impacted by poverty, inequality and human rights abuses. Agriculture is the foundation of the food system and the root of PepsiCo’s business. To make our foods and beverages, we use more than 25 crops sourced across 60 countries, and support over 100,000 jobs in and throughout our agricultural supply chain. This scale and reach means the standards and practices that we employ and promote can influence the environmental, social and economic impacts of agriculture around the world. Our Next Generation Agriculture strategy aims to drive progress in making agriculture more resilient, intelligent and inclusive.
To learn more about our progress toward our Next Generation Agriculture goals, visit our Agriculture ESG Topics page.
Our work is aligned with Sustainable Development Goals (SDGs)
PepsiCo agronomist, Christian Cereo, and PepsiCo potato supplier, Manuel Aries, reviewing insights from our i-Crop 2.0 technology in the potato fields in Salamanca, Spain.
09 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Setting THE STANDARD
Through our flagship Almost all (99 percent) of the Sustainable Farming producers of PepsiCo’s farmer- Program (SFP), PepsiCo sourced agricultural raw materials are now engaged through the advances positive social, 51% SFP, and we are striving for all environmental and to meet the SFP compliance economic outcomes in our standards by the end of 2020. direct agricultural supply As of 2018, 51% of our direct farmer- This will not be an end point. sourced, agricultural raw materials The SFP is about continuous chain. Implemented across are sustainably sourced through improvement in the agricultural Eric Halverson, CEO, Black Gold Farms 38 countries, the SFP has our SFP. This is progress toward our target of 100% by 2020. system, and leading up to and provided over 40,000 beyond 2020, PepsiCo will work SUSTAINABLY “With new practices and farmers around the world with suppliers and farmers to SOURCED POTATOES constant testing and with training and resources deliver sustainable outcomes Consumers can already taste data collection, we can to help them on the path that address salient risks and the progress we are making. make smart decisions to greater productivity, opportunities in our supply chain. In 2018, 100 percent of the for our business and the chips in our North American environment. PepsiCo resiliency and sustainability. with PepsiCo’s Supplier Code By the end of 2018, more than Frito-Lay portfolio, including has been a vital partner in of Conduct and commitment to half the palm oil (52 percent) Lay’s and Ruffles, were made helping us to become more zero deforestation, up-to-date Already, 51 percent of our direct and cane sugar (58 percent) that from sustainably sourced North sustainable. We’re proud employment and health and safety that consumers in the U.S. farmer-sourced agricultural raw we use were also sustainably American potatoes, produced by practices, optimization of nutrient and Canada can enjoy their materials—potatoes, whole corn, sourced. We use recognized third- farmers independently verified and water use and enhancement chips made from potatoes oats and oranges—are sustainably party sustainability standards, as meeting the SFP standards. of soil health and biodiversity. that were grown the right sourced through our SFP. This the Roundtable for Sustainable Black Gold Farms—a U.S. PepsiCo way.” means they are sourced from The SFP also promotes Integrated Palm Oil (RSPO) and Bonsucro, potato supplier for over 30 farms that are independently Pest Management (IPM), which for these supplier-sourced crops. Eric Halverson, CEO, Black Gold years—has worked with our SFP Farms, Live Oak, Florida verified as meeting the 114 Social, addresses agrochemical and Our target is for both to be 100 team to identify improvements Environmental and Economic pesticide use among other percent sustainably sourced by in sustainability performance. principles of PepsiCo’s Sustainable crop protection measures. the end of 2020. Together, we selected optimal Farming Program. These promote At the end of 2018, 66 percent Learn more about how seed varieties and refined potatoes used in Frito-Lay and enable best practices and of farmers engaged through For more information on the Social, Environmental and water and nutrient application products are sustainably positive outcomes for farmers, the SFP complied with our IPM farmed by the Halverson Economic indicators of the techniques to yield the best crops communities and the environment. requirement, including nearly 100 SFP, review the program’s family. in the most sustainable way. Indicators include compliance percent compliance in the U.S. Fundamental Principles.
10 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Spreading Next Generation The Demonstration Farm program began in 2017 in India. Today, the program includes 32 farms in the country, and they are PRACTICES producing outstanding results. On Demonstration Farms Agriculture is among the On each Demonstration Farm, we work with growing potatoes in India world’s most widespread innovative local farmers to find and implement (excluding West Bengal) in While most potato farmers in Thailand use and diverse economic the solutions that work best for them, from new 2018–2019: flood irrigation, which can damage yields irrigation and soil health management practices to and soil health and be wasteful with water • The average net yield rose sectors. To help us apply measures to enhance worker safety. We measure resources, as part of the Demonstration Farm by 8.2 percent the SFP effectively in the impact of our actions based on environmental program, we worked with Ms. Boonkerd diverse growing regions, and social criteria, and core business metrics like • Average income for farmers to install an efficient, solar-powered, drip we have built a global yield and quality. Each Demonstration Farm is then increased by $107 per acre irrigation system. network of over 100 opened to other local farmers to enable peer-to- peer learning and promote the wider adoption of • Average greenhouse gas In a single year, the yield on Ms. Boonkerd’s Demonstration Farms. sustainable farming practices. emissions per ton of potatoes farm increased by 45 percent while water use was reduced by 15 percent was reduced by 28 percent. Potato quality rose, and disease vulnerability eased. Earnings per acre grew by over U.S. $1,500 and she Read more from Nishchint was freed from many hours of strenuous and OUR GLOBAL DEMONSTRATION Bhatia, VP Agricultural repetitive physical work every week. Ms. FARMS FOOTPRINT Operations for PepsiCo in Asia, Middle East and North Africa, Boonkerd now helps other farmers in the region about the Demonstration Farms program’s success in India. to understand the benefits of drip irrigation for Number of demonstration farms currently in progress in the country their business, their land and their quality of life.
PAKISTAN U.S. 4 59 INDIA 32 MEXICO THAILAND
VIETNAM 1 9 PROGRAM REACH: 3 110 farms ~15,000 acres
BRAZIL ~4,500 farmers 2
11 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Growing INTELLIGENCE Data plays a major role REGENERATING SOIL AND in the transition to more PROTECTING OUR CLIMATE sustainable and resilient Healthy soil is an asset that can agriculture. Insights deliver income for farmers and their communities for generations. gathered through mobile, It also makes farms more resilient drone and in-field equipment to extreme weather and stores can help farmers make carbon from the atmosphere that more precise decisions about could otherwise contribute to how they grow their crops. climate change. Introducing cover crops and In Europe, PepsiCo developed a composting, managing crop new agriculture software i-crop rotations and using conservation 2.0, with Cambridge University. tillage are among the practices i-crop 2.0 produces data about that can enhance soil quality. how crops like potatoes, are We are currently rolling out growing. This helps our farmers the use of tools like FieldPrint better understand how to Calculator and the Cool Farm optimize yields and inputs like Tool, which enable PepsiCo to water and fertilizer—reducing work with our farmers around resource usage and greenhouse the world to quantify on-farm gas impacts. In Spain, by greenhouse gas emissions and combining i-crop with irrigation soil carbon sequestration. This scheduling, we applied the right data enables farmers to make amount of water where it was informed decisions about the needed to optimize growth actions that can improve the * 93 percent of the time, up from climate impact of their farm and, at 45pps 48 percent in the prior year. the same time, increase soil fertility and support local biodiversity. Technology like this helps us In Spain, by combining i-crop with better understand agricultural Over a quarter (26 percent) irrigation scheduling, we applied the right of PepsiCo’s greenhouse gas amount of water where it was needed water use. By 2025, we aim to to optimize growth 93% of the time, up improve water-use efficiency in emissions originate in our from 48% in the prior year—an increase our direct agricultural supply agricultural supply chains, so of 45 percentage points. chain in high water-risk regions actions like these are a vital by 15 percent. contributor to achieving our *pp(s) = percentage point(s) target to reduce absolute greenhouse gas emissions by 20 percent by 2030. 12 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Empowering Women Farmers AROUND THE WORLD
Transforming agriculture to support the growth of a more sustainable food system will require the talent 5 MILLION and energy of all farmers. Our grant to CARE’s She Feeds In developing countries, the World initiative will provide women represent 43 percent approximately five million women farmers and their families with of agricultural labor. Yet education and economic support. they largely work without training, land rights or equal pay. To begin addressing this, PepsiCo has committed to examine ways to boost women’s engagement Through this program, approxi- mately five million women farmers with our Sustainable and their families around the Farming Program. world will receive education and economic support to help them Supporting this goal, we kicked increase crop yields, income and off a partnership with USAID access to nutrition. In Egypt, focused on empowering women CLOSING THE CROP GAP we’re also partnering with USAID To watch the five films about extraordinary women potato farmers starting in West to expand microfinance lending PepsiCo and CARE also launched the Closing farmers, visit our Closing the Crop Gap page. Bengal, India. for women farmers. the Crop Gap campaign, which empowered five In March 2019, The PepsiCo women filmmakers from around the world to Foundation announced an To learn more about the capture the experiences of local women farmers. challenges facing women $18.2 million investment with the farmers, read the thoughts leading humanitarian organization, of The PepsiCo Foundation CARE, as part of their She Feeds President Jon Banner and CARE U.S. President and the World initiative. CEO Michelle Nunn.
13 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
OUR GOAL
Drive water security to ensure business continuity, while positively contributing Positive to communities. To learn more about how we’re tracking progress toward our goal, review target WATER IMPACT metrics on page 6.
Water is fundamental to our food system and to PepsiCo’s business. It nourishes the crops used to make our products, is the main ingredient in many of our beverages and an integral component of our manufacturing operations. But in some regions, water is scarce, and climate change is worsening pressures on water resources around the globe. Estimates indicate that by 2025, two-thirds of the world’s population will live in water-stressed regions. PepsiCo’s positive water impact strategy focuses on improving water stewardship across our business and in regions where we operate. Our ultimate goal is to support long-term, sustainable water security for all users, especially in high water-risk areas. As well as taking action in our own value chain, we aim to use our expertise and influence to advocate for the local policies and practices that can protect and replenish watersheds.
To learn more about our progress toward our Positive Water Impact goals, visit our Water ESG Topics page.
Our work is aligned with Sustainable Development Goals (SDGs)
We have set a goal to reach 15% improvement in water-use efficiency in high water risk areas where we source our potatoes and corn directly from our farmers by 2025. Pivot irrigation systems, like the one being used on this potato farm in Spain, help the farm to use water more efficiently while growing potatoes.
14 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Replenishing Our >1.1 BILLION LOCAL WATERSHEDS In 2018, we replenished more than 1.1 billion liters of water through watershed conservation projects in high water-risk areas around the world.
We’ve set an ambitious These sustainable, nature-based target: to replenish solutions introduce a wealth ALLIANCE FOR WATER STEWARDSHIP 100 percent of the of benefits in addition to water security, including notable water we consume for In 2018, PepsiCo joined improvements in agriculture, job the Alliance for Water manufacturing in high creation and climate resilience. Stewardship (AWS). We aim water-risk areas by GREATER CAPE TOWN to adopt the AWS Standard 2025. We are focusing our WATER FUND at our high water-risk facilities by 2025 to ensure efforts locally, replenishing In 2018, Cape Town, South our sites conform to globally the watersheds and Africa, faced the prospect of recognized best practice in water reserves going dry. In catchments we draw from water stewardship. to make sure the local response, we became a founding communities where we member of the Greater Cape We are piloting our Town Water Fund and made the implementation of the operate can benefit. This organization’s largest financial AWS Standard at four of is key to minimizing our commitment at that time. Our our manufacturing locations impact and supporting a investment supports tailored in high water-risk regions water-secure future. actions led by TNC, like the around the world: South removal of water-thirsty invasive Africa, Pakistan, Mexico
plant species; these actions are and the United States. COLLABORATION FOR CONSERVATION expected to add two months Through these pilot of water supply to seven sub- programs, we’re training We’ve partnered with The Nature catchments that supply 73 our Operations, Public Conservancy (TNC) for several percent of Greater Cape Town’s Policy and Government replenishment programs across water. Affairs, Environmental the United States, Latin America Health & Safety and Through this partnership, we are and South Africa. Supply Chain associates also supporting the development on the local-level watershed PepsiCo supports TNC’s of a women-led team with concerns and health work directly with farmers, specialized high-altitude training. implications impacting In partnership with TNC, we launched “Water for the Planet” to implement landowners, businesses, As well as providing skilled their communities. and support conservation projects, such as local reforestation programs, in governments and communities employment opportunities, this Latin America. In 2018, the program’s conservation efforts replenished over to restore degraded watersheds 220 million liters of water to the high water-risk watersheds in Guatemala will enable the clearing of rugged, City, São Paulo, Mexico City and Monterrey. and replenish the water we use. remote parts of the watersheds.
15 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Improving Our 5% In 2018, we improved our water-use OPERATIONAL efficiency rate per unit of production across all of our company-owned manufacturing locations by 5% WATER-USE EFFICIENCY compared to 2015. We aim to create a positive A SLICE OF GENIUS LEANER CLEANING water impact within our Across our manufacturing Potatoes that ultimately become manufacturing operations operations, we are developing Lay’s potato chips in India are by rethinking how we new solutions to improve our first washed in our Channo plant. use water every step of operational water-use efficiency. To maximize water-use efficiency the way. As part of our Aiming to reduce the amount for this process, PepsiCo of water used for potato slicing, engineers developed a robust continued efforts to be our Research & Development water treatment system. better stewards of water, and manufacturing teams took The system captures and treats we strive to improve matters into their own hands. water from different parts of the They designed, prototyped, water-use efficiency in potato manufacturing process, tested and successfully validated our direct operations in such as cleaning, peeling and a new patented component slicing, at each stage separately. high water-risk locations for our slicing lines. The new The new design treats water more by 25 percent by 2025 technology effectively distributes efficiently. This innovation has (2015 baseline). water around our potato slicers, not only supported expansion of making each drop go further, capacity within the plant, but has and enables us to use 64 percent also helped to lower the plant’s less water throughout our potato total water use by about 30 slicing process. percent over a one-year period. Deploying this innovation globally has the potential to save a massive 640 million liters of water per year.
To learn more about how this new technology will create water-use efficiency in our operations, watch our Splash Cone video.
16 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
Safe Water ACCESS Right now, around the REFRESHING CHANGES IN world, one in nine people SOUTHERN INDIA do not have access to safe We’ve partnered with WaterAid in southern India and clean drinking water. to bring clean water to over 200,000 people in communities facing extreme water shortages. Shortages have ripple effects threatening the health With a $4.2 million investment, our partnership has and safety of communities yielded several solutions already, including restoring wells, harvesting rainwater in schools and building Beneficiaries of AquaFund program collect and profoundly impacting piped water supply systems. To date, WaterAid has water in Piura, Peru. Photo Credit: Inter-American Development Bank hygiene, waterborne built 200 new water supply schemes and restored diseases, famine, migration more than 130 pieces of existing infrastructure. and violence. That’s why Increasing access to clean water improves the The PepsiCo Foundation health and security of residents, particularly EMPOWERING IMPROVEMENTS teams with nonprofit women. Often, women must walk long distances IN LATIN AMERICA groups and non-government for water, which is physically challenging and can We’re supporting the Inter-American Development organizations (NGOs) to hinder opportunities for education and employment. Bank’s (IDB) AquaFund to make water and sanitation support conservation, services universal, leaving no one behind, by distribution and purification advancing programs in hard to reach communities in Colombia, Honduras, Mexico and Peru, helping programs worldwide. people living in dispersed and distant areas have access to basic water and sanitation services. “With an emphasis on As the first private sector donor to contribute to capacity development and an IDB trust fund in 2011, The PepsiCo Foundation’s replicable models—coupled $7 million investment to the AquaFund, made with rigorous metrics and between 2011 and 2016, helped catalyze accountability—PepsiCo helps ensure its community 22 MILLION $547 million in total funding through April 2019 investments create the greatest and provided new or improved access to safe water good for the greatest number We brought safe water access to of people.” over six million people in 2018— and sanitation services to over 765,000 people. boosting the total number of Farron Levy, beneficiaries of The PepsiCo In addition, PepsiCo and the IDB teamed up to CEO of True Impact Foundation’s Safe Water Access address the mismatch between water supply and Program since 2006 to 22 million. demand with the Hydro-BID Technical support center, a groundbreaking water resource center where local water managers in cities across Latin America can A woman collects water from a new tap in Andhra Pradesh, India. seek help in managing their water resources. Photo Credit: WaterAid/Ashima Narain 17 Introduction Helping to Build a Next Generation Positive Water Circular Future Improved Choices Climate Change People & Managing More Sustainable Agriculture Impact for Packaging Across Our Portfolio Mitigation Prosperity Impact Food System
OUR GOAL
Fundamentally change the way the world interacts with our packaging to deliver our vision of a world where plastics need never Circular Future for become waste. To learn more about how we’re tracking progress toward our goal, review target PACKAGING metrics on page 6.
In an efficient food system, packaging helps make safe, high-quality products accessible to all, extending shelf life and helping to limit food waste. But, for it to have a role in a more sustainable food system, we must eliminate packaging waste. In 2018, plastic represented just under half of the total packaging material PepsiCo used, with aluminum, glass and fiber making up most of the balance. In that year, we used 2.2 million metric tonnes of virgin plastic to package products throughout our food and beverage portfolio. While plastic offers a highly effective, lightweight packaging material, producing petroleum-based plastic is a carbon-intensive process and, globally, only 14 percent of what is used is collected for recycling. The rest becomes waste. Where it is disposed of irresponsibly or where waste management is ineffective, it litters our communities and pollutes our oceans. We have set an ambitious target to reduce 35 percent of virgin plastic content across our beverage brands by 2025. Progress will be driven by the increased use of recycled content and alternative packaging materials. Across PepsiCo’s business and our brands, we’ve made it a business imperative to help build a circular future for packaging and a world where plastics need never become waste. In 2018, we launched a new sustainable plastics vision Simon Lowden, President, PepsiCo Global Foods, and Roberta Barbieri, Vice President, o i a or based on three inter-
PepsiCo Global Sustainability, discuss our new sustainable plastics vision. ere p astics