PepsiCo is committed to respect and responsibly use natural resources in our businesses and in the local communities we serve, including application of proven sustainable agricultural practices on our farmed land.

We work to preserve and improve soil fertility and nutrients, minimize soil loss through erosion and avoid soil damage due to disease and contamination. For example, at Perry Farms, Georgia, in the U.S., every potato acre is composted or in a manure program, which decreases dependence on synthetic fertilizer.

In Mexico, we have begun to use Zeolita as a fertilizer substitute on our potato crops. Zeolita is a volcanic rock that helps improve soil structure and water retention and reduce fertilizer costs. Our Sabritas business tested Zeolita on a 20-acre area of land and saw a 12 percent increase in yield compared with traditional farming methods.

In India, approximately 40 percent of the potato-growing area (two million acres out of five million) is water-scarce, so the use of drip irrigation provides an opportunity to improve productivity. It also provides sustainable incomes for these farmers and delivers huge positive balance on water sustainability. PepsiCo facilitated loans at favorable rates and provided financial assistance to help with needed equipment.

As a result of the program—affecting 850 farmers covering more than 1,000 acres in the state of Maharashtra—the average yield has increased from 5.5 metric tons to 7.2 metric tons per acre in drip irrigation fields, a 31 percent increase in productivity. The drip irrigation program has also delivered a 50 percent reduction in water usage in potato cultivation, resulting in a total water savings in 2010 of 200 million liters of water, versus flood irrigation.

Based on this success, the program is being replicated in other water-scarce Indian states with the goal of expanding drip irrigation acreages threefold in the next three years.

On-Farm Sustainability Model

In 2010, PepsiCo completed the framework and content of a comprehensive on-farm sustainability verification program, which incorporates the environmental objectives and metrics protocols contained in the Sustainable Agricultural Policy. Work will continue in 2011 and 2012 to incorporate social and economic objectives into the certification program. The framework includes nine environmental sustainability indicators with detailed criteria and global standards. The indicators cover water, soil, energy, GHG, air quality, biodiversity, waste, agrochemical and nutrient management.

In 2011, the on-farm certification program will be piloted across core commodities and provide important validation before it is applied commercially from 2012 at the farm level.

Soil Conservation and Preservation

PepsiCo understands the importance of soil conservation and the need to preserve topsoil in unstable erosion-prone areas of agricultural production. The inclusion of cover crops in a rotation has reduced soil erosion and maintained land viability.

In China, winter wheat was added into the rotation with potato to control sand erosion from frequent storms. Total area in 2010 increased to 1,100 hectares. In North America, Walther Farms increased the planting of cereal rye in the rotation with potato to reduce wind and water erosion between crops. Total area increased to 3,400 hectares, a 1.7-times increase over 2009. Also, in 2010, Gold Dust Potatoes planted 1,240 hectares of wheat during spring/summer to protect soils from wind erosion.

A longer-term solution to preserving and conserving soil is to use windbreaks against frequent storms, as well as reforestation projects that protect the viability of land for further use. PepsiCo is active in the promotion of windbreaks and forestation projects, directly donating trees or promoting this practice with farmers. In China, we promoted the planting of willow trees on 20 hectares of sand-prone erosion areas, both on PepsiCo farms and among farmers within the Baotou district.

Cultivation practices are also important in conserving soil. Solutions range from using global positioning system (GPS) technology to guide tractors to increase land utilization in Australia to using contour furrow technology in the high mountains of Ecuador to reduce the impact of water erosion in periods of excessive rain.

PepsiCo has also promoted "no till" (a system for planting crops without plowing, using herbicides to control weeds, to reduce soil erosion and preserve soil nutrients) as a cultivation practice in the production of oats for use in the Quaker business.

Agrochemicals and Nutrients

Through our life-cycle analysis, we determined that fertilizer manufacture and use have a significant impact on greenhouse gas (GHG) emissions as well as optimal crop performance.

As we identify new sustainable farming practices, technologies and products, PepsiCo actively supports the trial use of new fertilizers as an important sustainability initiative.

In 2010, trials in the U.K. and North America are investigating the GHG reduction opportunity using alternatively manufactured fertilizers. Trials will continue in 2011.

In Turkey, from the PepsiCo-owned anaerobic digester at the potato chip plant, we are running a trial to use the digestate as a source of organic fertilizer for potato crops.

PepsiCo is also actively using, and encouraging the use of, safer insecticides and the recycling of agrochemical containers and packaging in countries around the world, to minimize their negative impact on the environment.

Additionally, the company has directly invested in the development of new potato varieties and the introduction of latest breeding technologies to improve the quantity and quality of field yields. PepsiCo-bred potato varieties have global application and are grown successfully in diverse climates, within a range of pest and disease pressures, and are in commercial use in every continent of the world, including tropical, temperate, extreme heat and cold climates.

Energy Management

PepsiCo actively seeks alternate energy sources and new technology to reduce energy consumption on the farm.

In both China and the U.S., for example, electricity has replaced diesel units for farm operations, reducing energy consumption and costs. In the U.S., this has led to a 49 percent reduction in energy costs over three years.

Other global energy management initiatives include:

• The application of high-solar-reflective roof coating in Turkey to 4,000-ton potato storage facilities, which has reduced electricity consumption by 24 percent.
• Using combination tillage tools on tractors in the U.S., reducing by 50 percent the number of cultivation passes in a crop since 2003.

Farm Economics and Land Management

PepsiCo recognizes the value of third-party certification and supports the use of this recognition in particular markets to develop business opportunities for sustainable practices. Certifications for PepsiCo operations include:

• Rainforest certification was earned for 80 percent of potato producers for factory supply and 100 percent of seed producers in Chile. The certification of our first four producers adds up to 830 hectares with the Rainforest Alliance seal.
• In Brazil and Argentina, Global GAP certification has been introduced to PepsiCo suppliers. Three growers are now Global Good Agricultural Practice (GAP)-certified and five more growers are completing the process in Brazil, while eight growers achieved certification in Argentina.

Crop Productivity

Economic sustainability is a core pillar in the company's sustainability framework. Crop productivity is an important part of creating farm revenue and viability, and an area that PepsiCo directly contributes to globally.

PepsiCo's Sabritas business, for example, established a supply program with 300 small-scale farmers in the Jalisco area of Mexico who farm five hectares or less, working with them to improve crop yields by 80 percent and helping to increase their income by 400 percent. The company provided 30,000 hours of education and technical and crop funding support to help them achieve these significant improvements.

PepsiCo's investment in crop modeling systems in the U.K. is designed to optimize the yield of potatoes and significantly increase revenue for the growers. In trials during 2010, growers identified increased yield/revenue opportunities of up to 30 percent.

While PepsiCo uses palm oil in some products, we are making efforts in a number of regions to convert to oils that are lower in saturated fat, steps that will continue to make our products healthier.

In the U.K., our Walkers business transitioned to 100 percent high-oleic sunflower oil (Sunseed) to make their famous crisps. And Frito-Lay North America transitioned away from palm oils as its primary cooking oil in the 1980s. Since 2005, Frito-Lay North America primarily uses corn, canola and sunflower oils, because they are among oils lower in saturated fat and do not contain trans fats.

Nevertheless, in some parts of the world, palm oil, the world's predominant cooking oil, is often our only option. When we purchase palm oil, we seek suppliers that operate responsibly and in a sustainable manner. PepsiCo is a member of the Roundtable on Sustainable Palm Oil (RSPO) to help bring about a greater supply of sustainable palm oil. Cargill, our largest supplier of palm oil, is a founding member of the RSPO. Through the RSPO we have committed to purchasing only 100 percent certified sustainable palm oil for use in the production of our products by 2015.

Because the production of palm oil involves a wide variety of constituents, ranging from small independent growers to large multinational suppliers, it will take consumers, NGOs, governments and groups such as the RSPO to effect meaningful changes.

See PepsiCo's annual communication of progress (August 31, 2010) to the RSPO. (PDF)

Through our sustainable agriculture programs, we work to ensure that a healthy and balanced ecosystem is maintained and thus mitigate the risks of biodiversity loss. Biodiversity is also a key indicator for the SAg certification program.

As such, PepsiCo is engaging in industry- and farm-based initiatives to profile the importance of ecosystem services.

For example, as a member of SAI platform, PepsiCo is jointly working to define the scope and suitable metrics to measure and improve biodiversity in arable crops to a recognized global standard.

And in the U.S., we have improved waterfowl and wildlife habitat by placing select Gold Dust potato fields under a flood/fallow program.