Environmental Sustainability

At PepsiCo, we are committed to minimizing the impact our business has on the environment with methods that are socially responsible, scientifically based and economically sound. Foundationally, we expect compliance with environmental laws and regulations. In places where, in our judgment, the requirements are not stringent enough, we will apply a higher standard to drive environmental protection. We will audit our performance against these expectations to assure we are doing right. After more than a decade of action, we continue our energy efficiency, water conservation and responsible packaging innovation initiatives and take accomplishments that are pioneered in one part of our business to scale throughout our global network.

We continuously improve our environmental programs and explore inventive solutions to the world's challenges. We operate in a way that minimizes our environmental footprint. with the goal of reaching a net-neutral impact. We've focused our environmental sustainability efforts on water, energy and packaging - areas where we can make the biggest impact. And we're extending our outreach to our franchised bottlers and our supply chain, including our agricultural partners.

In 2007, PepsiCo agreed on rigorous, corporation-wide global metrics to help us better track and understand our environmental footprint. Our goal is to reduce water consumption by 20 percent, reduce electricity consumption 20 percent, and reduce fuel consumption by 25 percent per unit of production by 2015 as compared to our 2006 consumption.

We continue to make positive impact and have achieved significant results. In 2007, our beverage businesses reduced water consumption by 9 percent, electricity consumption by 8 percent and fuels consumption by 7 percent.  Our foods businesses reduced water consumption by 6 percent, electricity consumption by 3 percent and fuels consumption by 3 percent.

We have environmental scientists and technical experts who are knowledgeable of leading edge scientific research and discoveries so we can leverage our operational capabilities to help make a difference.

We have in place a global eco-efficiency strategy for resource conservation (RECON) within our operations that helps us optimize our water, energy and electricity use through improved methods and technologies. We extend this strategy to our bottlers and co-packers through workshops around the world.

We have formed a series of partnerships with key external stakeholders to provide us with additional insights, expertise and knowledge on multiple aspects of sustainability. We will continue to actively lead and engage in key private-public partnerships to spur action and solutions to address the urgency of the world's environmental issues.

Environmental performance leadership is the responsibility of PepsiCo's four executive supply chain heads of our operations: Frito-Lay North America, Quaker/Tropicana/Gatorade, Pepsi-Cola North America (including working with our bottlers) and PepsiCo International. These leaders head our Environmental Sustainability Leadership Team (ESLT), formed in 2007. The ESLT includes senior executives from all functions to make sure that environmental impacts are considered in all areas of the business.

The ESLT charter includes the following:

• Create and maintain PepsiCo's environmental sustainability strategy.
• Develop, administer and maintain PepsiCo-wide policies on matters of environmental sustainability.
• Develop goals and timelines for PepsiCo environmental performance.
• Assess the gaps and strengths of performance relative to our aspirations and external benchmarks.
• Provide support to divisions in improving PepsiCo's long-term environmental sustainability performance.
• Advise and inform the Chairman and CEO, the PepsiCo Executive Committee and the Board of Directors on matters of environmental sustainability.

The ESLT is supported by the Environmental Council (EC).  The EC is made up of environmental experts from all areas of our business, including resource conservation program managers and environmental compliance managers. The EC's mission is to provide subject matter expertise within and across the Divisions and supports the ESLT to ensure that we have a strategic environmental sustainability vision for PepsiCo, uniform system-wide metrics, standards and practices, sensible environmental goals and accurate reporting to internal and external stakeholders. In addition to driving greater efficiencies in our use of natural resources and identifying ways to address water scarcity issues, the EC is focused on transforming our business model to seize opportunities  to create a more climate change resistant supply chain.

 

In addition, Pepsi-Cola North America has a Bottler Sustainability Team.  Their mission is to advance environmental sustainability in Pepsi-Cola's Bottling operations through:

• Defined and consistent measures - Data collection, benchmarking, and reporting with PepsiCo
• Setting and achieving goals
• Driving continuous improvement
• Sharing best practices

Each division is held responsible for implementing environmental programs and for training associates, tracking, monitoring, correcting and improving environmental aspects of its business.

In 2005, the PepsiCo Environmental Management System (EMS) framework was first developed with the help of an independent third party. Since this time, we have reviewed our performance and strategy, and in 2008 we expanded the framework to encompass environment, health and safety. We call this 12-element framework the PepsiCo Environment, Health & Safety Management System framework (EHSMS). Read more about how PepsiCo provides a safe and healthy work environment.

Key features of the PepsiCo Environmental Health and Safety Management System (EHSMS) framework include:

• A risk-based management approach.
• Documented systems that capture and maintain institutional knowledge.
• Objectives and targets for continuous improvement.
• Integration of environment, health and safety considerations into core business processes.
• Routine performance monitoring and internal management reporting.

The EHSMS framework is built along the lines of ISO 14001 and OHSAS 18001. Twenty-six PepsiCo International facilities are ISO 14001 certified, including ten in the United Kingdom and 4 in China.

PepsiCo incorporated sustainability criteria into our Capital Expenditure Filter (CapEx Filter) and we are using it on all capital expenditure requests over $5 million. Each request must include a review of the sustainability issues and opportunities surrounding the request. The goal is to incorporate sustainability aspects in projects right from the start and track sustainability-related capital spend across PepsiCo. This is expected to help drive continued improvement.

PepsiCo's Environmental Policy applies to all our operations. PepsiCo monitors company-owned operations and joint ventures where we hold a majority share. We encourage our suppliers, service providers, bottlers and other partners to adhere to the policy.

View the PepsiCo Environmental Policy

We are committed to educating our associates on the importance of environmental sustainability. In addition to regular training of environmental personnel, we conduct special events, such as a Sustainability Summit, in which new ideas are shared.

In May 2008, PepsiCo introduced the Sustainable Engineering Guidelines, which are meant to support overall implementation of our environmental sustainability concept throughout the engineering process and to improve efficiency in the use of natural resources. The Sustainable Engineering Guidelines can be accessed through a website available to all PepsiCo employees and key partners worldwide. We also offer workshops on RECON, our global eco-efficiency strategy for resource conservation within our operations to our engineers, as well as to bottlers and co-packers around the world.

In 2008, U.S. employees were offered Chronos, an e-learning tutorial designed to help associates understand the landscape of sustainability and the business case for sustainable development. It was created through a partnership with the World Business Council on Sustainable Development (WBCSD) and the University of Cambridge, UK.

Environmental sustainability is shared with all our associates through holding special activities to mark events such as Earth Day and World Water Week. Environmental information is also included in our daily e-newsletter. Our Latin America Beverages business has a bi-monthly employee e-newsletter dedicated to sharing environmental sustainability initiatives and projects in the region as well as showcasing best practices.

Green Teams
Frito-Lay North America maintains a dedicated team of experts across our manufacturing facilities focused on reducing consumption of electricity, fuels and water. Through "Green Teams," made up of groups of volunteer employees, more than 12,000 manufacturing associates have been trained to improve their environmental awareness and to understand how they can do their jobs without adversely impacting the environment.

Quaker, Tropicana, and Gatorade have established "QTG Green," an overarching environmental sustainability initiative to raise employee awareness and create actionable tactics to improve the business and each associate's personal environmental footprint. The focus is to raise awareness, incite action and institutionalize sustainability improvement

Water is essential for all foods: for growing, washing, processing and cooking. It is the primary ingredient in our beverages. Reducing the amount of water we use is imperative and we're committed to minimizing our water footprint through greater efficiency across our operations. Where we source our water is just as critical since sourcing from stressed areas causes damage to local communities and eco-systems. Throughout our business, we work to reduce our water footprint and help avoid water conflicts with local communities. At the same time, we are engaged in improving access to clean water around the world through alliances with non-profit groups.

Conserving Water in Our Operations
In 2007, we saved nearly 5 billion liters of water across our operations as compared to 2006 through technological improvements in our global manufacturing operations and resource conservation programs.

In the United Kingdom, our total water use across all our operations was 1,564 million liters in 2007. Between 2001 and 2007, we reduced the water used to manufacture Walkers Crisps by 42 percent from 13l/kg of production to 7.6l/kg. This was achieved through a comprehensive analysis of all water usage and improved measurement systems. The Walkers team developed engineering solutions to reduce equipment water use and increase opportunities for recycled water use. Training and communication sessions were held for all employees to drive awareness of the need to reduce water use and how they could play a part. Performance was tracked between lines and shifts, with the best performing teams being rewarded and recognized. None of our facilities in the United Kingdom and Ireland is in a region that the Environment Agency identifies as under "serious water stress."

In Mexico, all of our Sabritas manufacturing facilities have secondary process water treatment systems, which will allow us to extend water recycling to more activities while eliminating the impact of waste water on the environment.

Frito-Lay, the US snack division of PepsiCo, continued to improve its water efficiency by conserving more than 300 million gallons (1 billion liters) of water in 2007 as compared to 2006; through its continued water conservation efforts known as the "Gallon per Pound Challenge," Frito-Lay won recognition from the Environmental Protection Agency as a Water Efficiency Leader in 2007. Efficiency methods include recovering the water used in making potato chips to wash away the starch that comes from the potato slices. Once the starch is removed, the water is cleaned and recycled for use in processing operations.

At Pepsi-Cola North America, concentrate produced by PepsiCo Concentrate Operations is sold to independent bottling companies, which finish mixing the product, bottle it and sell it to retailers. PepsiCo helps guide and monitor the bottler companies' environmental performance. The Pepsi Bottling Group (PBG) has installed reverse osmosis (RO) recovery systems or incorporated high recovery designs into their new installations that cumulatively save more than I billion liters of water annually as compared to traditional designs. Pepsi Bottling Ventures (PBV), another anchor bottler, saved more than 30 million liters of water in 2007 through conservation efforts and more than more than 11 million liters of water in production operations through water reuse and process improvements since 2005.

Water conservation is especially important in water stressed areas. In 2003, our India team embarked on an ambitious journey to achieve positive water balance by 2009 through a comprehensive program to conserve and optimize water usage, both in our own manufacturing processes and in the communities we serve. We have carried out a variety of innovative reuse and recycling initiatives. In the last five years in India, we have reduced our water use in manufacturing by more than 55 percent. In just the last three years, we have saved more than 2.5 billion liters of water through water conservation efforts in manufacturing plants. We have also prevented depletion of ground water aquifers by constructing rainwater harvesting systems in most of our plants. We've supplemented this by introducing community water projects in farms and comprehensive watershed management programs in diverse and challenging geographic locations. Similar projects are underway in China, Thailand and Mexico.

 Reducing Water Use in Agriculture
While using water responsibly throughout our business is a top priority, we also believe in our ability to address the broader problem of water scarcity. In India, for example, where agriculture accounts for over 80 percent of total fresh water consumption, PepsiCo is working with farmers to reduce water intensity in paddy cultivation by around 30 percent through direct seeding of paddy that avoids the traditional flood irrigation method currently practiced by paddy growers across the country. Paddy is India's largest grain crop, and consumes the bulk of fresh water used in Indian agriculture. In 2007, PepsiCo piloted this program on 100 acres, and this was scaled up to cover 1,000 acres in 2008. The significant impact of this change can be gauged from the fact that if only 6,000 acres of paddy cultivation were shifted to direct seeding, it would offset the entire water used in PepsiCo India's beverage plants.

PepsiCo Chairman and CEO Indra Nooyi publicly demonstrated PepsiCo's commitment to helping address the global water crisis by joining other partners as a signatory to the United Nations CEO Water Mandate. By signing the CEO Water Mandate, PepsiCo has committed to adhere to a holistic approach to water management in six areas: direct operations, supply chain and watershed management, collective action, public policy, community engagement and transparency.

In 2007, as in previous years, we were active supporters of World Water Day. Our most visible activity was with Ethos Water, which is a part of the PepsiCo water family. In 2006, Starbucks Coffee Company and PepsiCo, through our North American Coffee Partnership, signed an agreement to significantly increase distribution of Ethos Water, including co-packing, distribution and marketing. Ethos Water has a unique business model, which includes helping to raise awareness of the severity of the world water crisis. For each bottle of Ethos Water sold, Starbucks makes a $0.05 donation to water projects with the goal of contributing $10 million by the end of 2010 to help children and their communities around the world get access to clean drinking water.

In India, we have a partnership with The Energy and Resources Institute (TERI) for research and implementation to ensure long-term availability of water resources through interventions aimed at eco restoration through catchment treatment measures, artificial groundwater recharge and demand management measures and improvement in the quality of life of the community by undertaking interventions in areas of water supply, sanitation, hygiene, health and education through community involvement.

The PepsiCo Foundation's mission around the environment is to advance the knowledge and methods of water resource management that are sustainable and positively impact both quantity and quality of water supply. The Foundation has committed more than $16 million to organizations working to bring safe water to developing countries.

China Women's Development Foundation: The PepsiCo Foundation partnered with the China Women's Development Foundation (CWDF) to implement a research, development and intervention program designed to expand availability of safe drinking water for the people of Western and Central China. The grant is designed to provide safe drinking water using a watershed management solutions approach to expand CWDF's repertoire of rainwater harvesting techniques. Ultimately, it will help communities obtain water and teach them to improve the safety of this water through treatment.

The Earth Institute: In 2008, The Earth Institute at Columbia University, one of the world's premier institutions dedicated to global sustainable development, and the PepsiCo Foundation, entered into a $6 million three-year partnership. The program includes a series of high-impact, community-based activities and practical solutions across water, agriculture and climate.

Water Partners: The PepsiCo Foundation made a $4.1 million grant to WaterPartners to provide safe drinking water and sanitation to communities of the greatest need in India. This grant was the biggest single contribution to WaterPartner's WaterCredit Initiative, an innovative program that uses microfinance to increase access to safe water and improve sanitation for local communities in India.

Safe Water Network: Through a three-year partnership with Safe Water Network, the PepsiCo Foundation has pledged $3.5 million to implement safe water initiatives for village water systems in Ghana, India, and Bangladesh as well as rainwater harvesting systems in India.

Our facilities in the United States are primarily supplied by municipal water sources. As such, these municipal water purveyors comply with all applicable water quality requirements and provide Consumer Confidence Reports (CCR), which detail the water quality being provided to the consumer as it compares to compliance with EPA quality requirements. Our facilities in the United States are, in essence, consumers of this municipal drinking water just as are residential customers of the same supplies. As such, the quality data for the water that is purchased is available from the municipal water purveyors, whether the purchaser is PepsiCo, one of our franchise partners, or a home consumer.

Similarly outside the United States, many of our plants are supplied by water from municipal sources, and the same approach would apply - the governing national and local regulations for water resources and water quality would, and do, apply. In areas of the world where we develop our own water sources (for example, extraction from commercial wells) we do so in full compliance with applicable regulations concerning use of local resources. In these cases, we work with the local authorities to assure that the quantity of water needed to run our business and thereby to help support the local community and economy, is consistent with regulations and safe for the natural resource.

Where we develop our own wells to supply water from groundwater sources, every source is tested by an approved, external laboratory which is capable of reporting drinking water testing results. The test protocol is based on the most current revision of the World Health Organization (WHO) Guidelines for Drinking Water Quality, and also includes testing required by local authorities.

Every water source used for our beverages must first be analytically qualified, which includes using government-accredited/recognized laboratories to test for a harmonized list of roughly 100 parameters, covering many classes of raw water chemical/physical constituents. In addition, the microbial quality of the source is evaluated to help confirm that our products will be microbial and chemically safe. We also believe that protection of water at the source is important; accordingly, a formal training program is provided to all of our key beverage plant personnel, which covers areas such as water source selection, well construction, and source protection. At every plant, the incoming water is then further purified, using a variety of treatments depending on the raw water characterization, to meet the high standards of quality to be used in our products - whether these products are bottled water, carbonated beverages, or non-carbonated drinks.

In addition to source qualification, our plants monitor the raw, in-process, and treated water for a core list of parameters, and at frequencies ranging from hourly, to daily, to weekly (depending on the specific parameter and application). We have also established internal laboratories in the United States and Europe which monitor raw, treated, and bottled water quality worldwide.

Water Sources
For new sites, each of our businesses applies the elements of an environmental site assessment, similar to the EPA/ASTM Standard for Phase One Environmental Site Assessment.

With specific regard to water sources, in the United States, we utilize a mixture of municipal supplies, which may be from surface or groundwater sources, and private wells. The selection and management of municipal sources fall under the jurisdiction of the United States Environmental Protection Agency (USEPA) and any applicable corresponding state authority. These sources must comply with the EPA National Primary Drinking Water Regulations and any other applicable regulations and practices related to water resource selection and development (for example site selection, well construction, drought management plans, and many other elements). Sites are selected to assure ample water supply and minimal impact to the local watershed.

Climate change may adversely affect the raw materials and other supplies we use, including water and agricultural products. In 2007, we successfully reduced our use of fuels and electricity and continued work to transform our business model, including identifying opportunities to reduce energy use in our operations and use renewable energy, construct green buildings and work with suppliers to reduce their energy use.

Reducing Our Energy Use
We have set comprehensive electric and thermal energy reduction goals across our businesses to ensure that the energy intensity of our operations is continuously reduced. During 2007, our beverage businesses reduced electricity consumption by 8 percent and fuels consumption by 7 percent per unit of product. Our foods businesses reduced electricity consumption by 3 percent and fuels consumption by 5 percent.

2007 Greenhouse Gas (GHG) Emissions Intensity

	GHG/Kg or L Production
Snacks	0.529
Beverages	0.080

Per unit of production. Represents 95% of company-owned manufacturing facilities. Non-manufacturing facilities not included.

In the United Kingdom and Ireland, we reduced the amount of energy used per pack of Walkers Crisps production by 32 percent between 2000 and 2007.

We have also focused on the energy efficiency of our vehicle fleet. In the United Kingdom and Ireland, we improved our fleet fuel efficiency by 12 percent between 2001 and 2006. In 2007, we reduced our absolute distribution footprint by 4.3 percent despite shipping 10.3 percent more products. This was achieved by vehicle technology investments including lower friction tires and streamlining to reduce wind resistance, new journey-planning software, and a comprehensive training program combined with an in-cab system that tracks fuel efficiency on a weekly basis.

Sabritas, our Mexican snack food business, has 13,000 distribution vehicles, about 6,000 of which were converted over the past ten years to burn liquid propane gas. This reduces carbon and nitrogen emissions and generates fuel savings of between 15 and 22 percent (depending on geographic conditions and fuel costs).

Frito-Lay operates one of the largest fleets in the United States and is committed to reducing GHG and fuel consumption. Frito-Lay has placed over 3000 new Low Emission Vehicle (LEV)-certified route delivery trucks on the road since 2006, replacing 1996 and older pre-emissions diesel models, and has implemented several additional fuel-saving initiatives.  From 2006-2007, Frito-Lay installed over 4000 auxiliary heaters and idle shutdown devices in vehicles nationally, which saved in excess of 200,000 gallons fuel and 2000 metric tonnes GHG. Frito-Lay is heavily involved in advancing fuel-efficient fleet technology through partnerships with industry and government entities to further fuel-saving and emissions-reducing technology and real-world experience of hybrids  Partners include the Texas Commission on Environmental Quality(TCEQ),  National Renewable Energy Labs (NREL), The SouthWest Research Institute (SWRi), the California Air Resources Board (CARB), Purdue University, and the American Trucking Association (ATA). 

Both Frito-Lay and our bottlers use advanced routing technologies and have a "no-idle" policy to reduce miles and cut fuel consumption on delivery routes. Pepsi Bottling Group (PBG), our largest bottler, has verified the electronic settings on vehicles with electronic controls to ensure idling reduction and speed parameters are set efficiently.

PepsiCo and Frito Lay have joined SmartWay, a voluntary partnership between various freight industry sectors and the Environmental Protection Agency (EPA) that establishes incentives for fuel efficiency and greenhouse gas emissions reductions. By 2012, this initiative is expected to save up to 25 billion liters of fuel per year (equivalent to 150 million barrels of oil). 

PepsiCo UK will save around one million food transport miles from British roads each year through an innovative partnership with retailers and suppliers. By reviewing the activities of both supplier and retailer fleets and tracking mutual routes, it has been possible to eliminate empty running routes for both parties saving around 700,000 miles per year. PepsiCo has also integrated two thirds of its British potato cargo into its in-house fleet and has designed a trailer that combines both finished produce and bulk raw materials, resulting in a highly utilized fleet that can make customer deliveries en route to the farm, saving just under 300,000 miles per year.

PepsiCo's commitment to saving energy through green building worldwide continued in 2007.  Our new facilities constructed in 2007 were designed to meet the U.S. Green Building Council's (USGBC) Leadership in Energy and Environmental Design (LEED) standards - one of the most rigorous standards for "green building" in the world.   The USGBC awarded the prestigious LEED Gold certification to two of our facilities: Gatorade's Wytheville, Virginia manufacturing facility and Gatorade's Tolleson, Arizona distribution center.  At the time, the Wytheville facility was the largest LEED-Gold certified food and beverage manufacturing site in the world.

In May 2008, PepsiCo introduced the Sustainable Engineering Guidelines based on LEED standards.The guidelines support our environmental sustainability commitments throughout our engineering process, and apply to all new construction as well as major remodels of existing buildings globally. The Sustainable Engineering Guidelines can be accessed through a website available to all PepsiCo engineers and key partners worldwide.

This website provides guidelines for:

• Site selection
• Construction activity management
• Water use reduction
• Building materials
• Building systems
• Plant process management
• Indoor air quality
• Site stewardship
• Lighting systems

Refrigerants
Marketing Equipment (coolers/vending machines) affects the environment through the use of electricity and refrigerants. PepsiCo is committed to reducing the impact of our marketing equipment through design and process changes developed to reduce greenhouse gas (GHG) emissions. Since 2004, energy consumption has been reduced by 53 percent for coolers worldwide and 55 percent for vendors. In 2006, PepsiCo joined other companies and Greenpeace in a global initiative called "Refrigerants, Naturally!" Its goal is to address climate change and ozone layer depletion caused by HFC gases in refrigeration equipment. PepsiCo was the first in the industry to mandate HFC-free insulation, resulting in a 75 percent reduction in direct GHG emissions worldwide, 2008 vs. 2006 models. In addition, PepsiCo has begun field testing of coolers and venders with different green refrigerants.

We continue to develop external partnerships focused on strategies to reduce greenhouse gas emissions.  In 2007, PepsiCo joined the U.S. Environmental Protection Agency's Climate Leaders, a voluntary partnership program that works to develop comprehensive climate change strategies, including supporting reduction in greenhouse gases. We are the first consumer products company to join with other concerned companies and non-governmental organizations in the U.S. Climate Action Partnership to encourage the federal government to enact climate legislation.

Across PepsiCo, we are evolving to the use of more renewable energy in our operations with several initiatives at our manufacturing plants.

Our Frito-Lay plant in Modesto, California unveiled a solar concentrator field designed to drive the production of truly solar powered SunChips.The Modesto plant's 5-acre solar concentrator field includes 54,000 square feet of curved mirrors designed to absorb sunlight. The solar energy captured by the 192 solar collectors produce steam that generates nearly three quarters of the heat used in the SunChips manufacturing process.

In 2007, we announced plans for our first-ever "net zero" plant in Casa Grande, Arizona. With plans to run almost entirely on renewable fuels and recycled water, retrofits to this existing Frito-Lay facility are scheduled to be completed by 2011.

Tropicana's Ft. Pierce, Florida facility has partnered with St. Lucie County to burn landfill gas in its boiler. Landfill gas displaces the use of natural gas and reduces the amount of carbon dioxide emitted into the atmosphere. The landfill gas provides the equivalent environmental benefit of 3,600 acres of pine or fir forest or removing 1,000 cars from the road per year. These environmental benefits will increase as availability of landfill gas increases.

Solar concentrators in our Gamesa business in Mexico have provided lighting equal to conventional fixtures, saving 30,000 watts in a single distribution center. Many other plants have also had lighting upgrades, such as our Concentrate plants in the United States where high-efficiency lighting and translucent ceiling panels have been installed.

We are also proud of our recent purchase of over 1.1 billion kilowatt-hours of Green-e© certified Renewable Energy Certificates (RECs) annually to equal 100 percent of purchased electricity used by all U.S. facilities. The U.S. Environmental Protection Agency estimates the PepsiCo purchase is the same amount of electricity needed to power nearly 90,000 American homes annually.

We distribute our products in a variety of packages, each carefully designed to deliver convenience and appeal to our consumers while protecting the integrity of our products. Our team of engineers and packaging suppliers are dedicated to finding preferable designs, and are working continuously towards improving our packaging performance while reducing our packaging environmental footprint.

Our goal is to design and develop packaging systems that are environmentally responsible throughout their entire lifecycle and partner with leading organizations to promote sustainable packaging and recycling practices. We have launched a global sustainable packaging policy and formed a Sustainable Packaging Council, led by our Procurement and Packaging R&D organization, to develop a roadmap that will guide us toward this goal.

The objectives of this team are to develop sustainable packaging strategies, goals and targets and alternative packaging material technologies, as well as to support responsible disposal practices.

PepsiCo has taken an industry leadership position in packaging. Significant programs include:

• Sustainable Packaging Coalition: PepsiCo is a member of the Executive Committee for this industry-leading organization that provides lifecycle analysis and design guidelines for sustainable packaging.
• Grocery Manufacturers Association/Food Products Association (GMA/FPA): PepsiCo is the GMA/FPA chair for the Packaging Sustainability Working Group. This group's aim is to create an industry-wide public reporting process for consumers, investors and other stakeholders to understand packaging and environmental improvements in a consistent and transparent manner.
• The European Organization for Packaging and the Environment (EUROPEN): PepsiCo UK / Europe is a key member of EUROPEN, a packaging supply chain body that champions packaging and the environment, with representation at Board level.

Global Sustainable Packaging Policy

Activating Sustainable Packaging Programs

We follow five principles of sustainable packaging design:

• Reduce: using less material in our packaging, to conserve natural resources
• Reuse: increasing use of reusable packaging and increasing the amount of recycled material in our packaging
• Recycle: designing packaging for recycling and developing biodegradable and compostable packaging solutions
• Remove: eliminating environmentally sensitive materials and processes from our packaging
• Renew: increasing use of renewable material resources

Using Less Material in Our Packaging
Although beverage containers are the most recycled consumer packaging in the United States - and they are designed for recycling - we continue to look for ways to reduce the amount of packaging used for our products. And we are achieving success. PepsiCo scientists and packaging specialists have led the way in reducing packaging materials through cost-effective changes in design and production, known in the industry as "light-weighting." Light-weighting reduces the amount of raw materials and energy used to make our packages and generates less waste after our products are enjoyed.

In 2008, we introduced a new, half-liter bottle for our Aquafina flavored waters, Lipton Iced Teas, and Tropicana juice drinks. The new bottle contains 20 percent less plastic than the previous bottle and its label is 10 percent smaller than before. These innovations are taking nearly 6 million kilograms of packaging out of the system each year and reducing greenhouse gas emissions by 18,000 metric tonnes annually. That's equivalent to taking 3,350 cars off the road for a year.

We've trimmed the amount of plastic used in the bottles, caps and labels of our most popular Aquafina bottle - the half-liter (16.9 oz) bottle - by 35 percent since 2002. This saves more than 27 million kilograms of plastic a year and reduces greenhouse emissions by 78,000 metric tonnes annually. That's equivalent to taking 14 thousand cars off the road for a year.

Reducing and Recycling Our Waste
PepsiCo is committed to reducing the generation of all types of waste, reuse or recycle waste whenever feasible, and only if necessary dispose of waste in an environmentally responsible manner. PepsiCo has established global metrics for tracking and characterizing all types of waste in a uniform manner across all divisions.

At Frito-Lay, route sales employees return empty cartons from stores to our plants for reuse or recycling and delivery boxes are used an average of six to seven times - this saves nearly 5 million trees a year and keeps more than 25 million kilograms of cardboard away from landfills. For Frito-Lay's North American and International products, Frito-Lay recycles packaging film waste from our suppliers' sites for use in various other products such as park benches.

Our Quaker Oats facility in Cupar, Scotland has reduced the amount of corrugate used by 30 percent over the past 5 years by moving to cases with open tops and reduced sides. Over the last five years, PepsiCo U.K. has reduced the amount of plastic used to make Tropicana and Copella juice bottles by 18 percent.

Our Latin America Beverages business has optimized beverage packaging projects across Mexico, Peru, Columbia, Bolivia, Brazil, Argentina, Honduras and Guatemala, specifically reducing the need for PET resin for bottles, corrugate boxes, bottle-top closures and glass.

The average Pepsi bottle contains 10 percent recycled plastic, more than any other national soft drink brand. Pepsi-Cola's bottles and cans are among the most recycled packages made - since 1990, more than 150 billion Pepsi containers have been recycled.

Across all our U.S. divisions, initiatives conducted in 2007 to reduce packaging have resulted in more than 9 million kilograms of material reduction across PET bottles, paperboard and corrugated materials.

Removing Environmentally Sensitive Materials from the Waste Stream
Quaker Standard Oatmeal has eliminated the PVC band on the 18oz. tube and replaced it with biodegradable material, eliminating more than 87,000 kilograms of PVC a year.

Solid Waste
In the United States, Frito-Lay sends close to 9 million kilograms of potato and corn solids (potato pulp and peelings, cracked corn and corn husks) to America's livestock and dairy farms where it is used for feed. Chips that do not meet Frito-Lay strict quality control standards and chips not sold in stores by the Guaranteed Fresh date, can be used by livestock feeders and pet food manufacturers as a feed supplement. This process diverts 7 million kilograms of unusable snacks that otherwise might have been sent to landfill.

Tropicana minimizes landfill waste by using virtually every part of the orange, as well as its by-products after the juice is extracted. The by-products become scent extracts and animal feed.  Quaker optimizes the use of all oat hull by-products. Quaker delivers oat hulls to local animal feed markets and a nearby university that utilizes oat hulls for the generation of power.

Partnering for Change
PepsiCo teams with leading organizations to advance our understanding of environmental issues and to work together to promote sustainable packaging and recycling practices.

Keep America Beautiful, Inc. (KAB) is the largest nonprofit community improvement organization in the United States. Pepsi is a longtime, national sponsor of KAB's annual Great American Cleanup. For the past three years, Pepsi has brought together Sam's Club, KAB and the Aquafina water brand in a national, school-based recycling program. The program collected more than 70 million plastic bottles for recycling and gave away over 25,000 backpacks made from recycled PET in 2007.

PepsiCo and the American Beverage Association are founding members of the National Recycling Partnership, a national nonprofit organization dedicated to the advancement and improvement of recycling. Its more than 4,000 members include consumer product companies, manufacturers that use recycled content in their products, recycling processors, government regulators, and recycling advocates.

Pepsi supports comprehensive curbside programs as the most effective way to address solid waste in the United States. Working with our supplier partners - Can Manufacturers Institute, National Association of PET Container Resources (NAPCOR), Glass Packaging Institute and the Association for Post consumer Plastics Recycling (APR) - we help support such efforts as the Curbside Value Partnership, stadium and event recycling, technical support to communities in need, and efforts to increase public funding for recycling.

Extending Resource Conservation
Working with our supplier community on specific initiatives, PepsiCo is able to grow and extend our effective resource conservation programs. We're also focused on setting quantifiable goals for energy, greenhouse gases (GHG), water, agriculture and forestry resource conservation within the extended supply chain.

Some examples of our Supplier Outreach program in action include:

Our UK and Ireland business is one of 12 charter members of the Carbon Disclosure Project's Supply Chain Leadership Collaboration (SCLC). This group aims to dramatically increase to the thousands the number of its member-suppliers reporting on climate change mitigation efforts and adaptation strategies. Our membership demonstrates to our suppliers how important we feel climate change is to business decision-making along with our desire to work collaboratively.

We've joined other companies and Greenpeace in a global initiative called "Refrigerants, Naturally!" Its goal is to address climate change and ozone layer depletion caused by gases in refrigeration equipment by working with our suppliers to improve the environmental performance of our coolers and marketing equipment. Virtually all of our new purchases of refrigerated point-of-sale equipment in the United States use HFC-free insulation.

In 2008, PepsiCo implemented a Resource Conservation Outreach program designed to share resources, tools, and expertise in the area of energy conservation with key suppliers.  The initial phase of this effort involved reaching out to 12 contract manufacturing partners for Frito-Lay North America and Quaker Foods North America to assist them in developing energy management systems and projects. This program has been very successful and will be expanded to include additional contract manufacturers and other key suppliers in 2009.

We also work with suppliers to use more renewable energy sources in the production of materials. In North America, PepsiCo has increased the selection of suppliers certified in credible resource conservation initiatives. Examples include:

• Energy Star (EPA)
• Climate Leaders (EPA)
• Carbon Disclosure Project (CDP)
• Forest Stewardship Council (FSC)
• Sustainable Forestry Initiative (SFI)
• Refrigerants Naturally!
• Rainforest Alliance

Sustainable Agriculture

Instituting Our Global Sustainable Agriculture Policy
We're currently formalizing our Global Sustainable Agriculture Policy, which demonstrates our thoughtful approach to working across the agricultural supply chain. We continuously benchmark against our industry peers to understand best practices and approaches to sustainable agriculture, including water saving techniques, waste reuse, soil protection and chemical use.

PepsiCo has initiated a Sustainable Water and Nutrition Management program. This program enables sustainable, environmentally responsible water management of our potato crops by monitoring irrigation methods. Countries involved in the project include the United Kingdom, United States, Mexico, Australia, Egypt, China, Portugal, Republic of South Africa, Pakistan and Turkey.

Working with Our Growers
PepsiCo works with our growers to encourage sustainable agricultural practices.

Frito-Lay North America (FLNA)

• Has developed protocols to wash potatoes at the farm to reduce or eliminate the residual soil shipped to our plants, thereby allowing this soil to be redistributed at the farm rather than disposed of through the plants waste water discharge and reducing diesel fuel requirements.
• Practices low or no till soil preparation which results in lower irrigation requirements. Pivot irrigation practices are used (versus flood irrigation) which are more efficient in the use of water.
• Has developed potato varieties that store longer and are resistant to disease. This allows FLNA to grow its potatoes in the most efficient agronomic areas across the United States and results in higher production per acre. Higher production per acre minimizes the use of all farm inputs including, water, fertilizer, pesticides and herbicides.
• Continuously develops new growing areas closer to FLNA manufacturing plants reducing the diesel fuel used to transport inbound potatoes.
• Practices the use of cover crops to reduce soil erosion at our suppliers' farms.
• Requires an independent chemical use and agricultural practice audit of all our potato and corn growers in North America.
• Includes terms in its contracts with all corn and potato growers that require chemical application practices, quantities and timing to be in full compliance with the label instructions.
• Shares agricultural best practices with all its corn and potato growers.

Tropicana

• Uses virtually every part of the orange, including the peels which are sold as cattle feed. Before the peel is dried into cattle feed, Tropicana extracts valuable oils, essences and biodegradable solvents. These products are then sold or used by the company.
• Encourages its growers to follow various Best Management Practices (BMPs) published by the University of Florida, as well as several regional Grower Trade Associations, which include guidelines for water conservation.

Quaker and Convenience Foods - North America

• Has been a leader for decades in the oat industry, developing new oat varieties that deliver increased field yields and improved disease resistance.   Improving field performance through new oat varieties reduces fertilizers, fungicide and herbicide use.  Improved oat varieties generate more oats per acre - reducing the time, energy and resources required per crop.
• Supplies over 200 million pounds of oat hulls as raw material ingredients and as a renewable source of fuel for the generation of steam. One hundred percent of the oat hulls are utilized as either a raw material or fuel source, reducing dependence on less renewable sources of fuel.
• Sources corn locally, reducing the environmental impact of transportation and works with major suppliers and railroads to optimize oat rail freight throughout the year via the use of multi-car, unit trains.
• Encourages the use of established, low till practices on oats that conserve both water and fuel.

PepsiCo International

PepsiCo International agro-programs encourage the application of environmentally sound agricultural practices with our suppliers. We provide assistance to farmers and raw material suppliers where appropriate and assess their compliance against both regulations and PepsiCo agro-standards.

In China, through various collaborations, our foods team there is successfully growing potatoes under desert conditions by utilizing in-plant conservation approaches, coupled with the installation of pivot irrigation systems.

In Brazil, a soil conservation initiative for potatoes has been ongoing and involves minimal soil preparation to reduce soil degradation along with a fuel consumption analysis in order to decrease the use of fuel by reducing the use of the tractors and also by purchasing smaller machinery.  

In Mexico, our Sabritas Agro Team has activated "Campo Limpio," an outreach initiative to educate farmers about sustainable agricultural practices in production fields. The goal is to help farmers reduce chemical and microbiological agents in fields and in raw materials. We aim to further increase the commitment of our growers to the safe handling of our raw materials, in particular corn and potatoes, through a training and certificate program that focuses on good agricultural practices.

Investing in Research
In the United Kingdom, we are investing in a number of research projects by leading experts on sustainable farming and agriculture. We commissioned a Life-Cycle Assessment of potato and oat agricultural practices, and an energy audit of potato stores for our Walkers business. The audit will assess different types of stores (e.g. box, bulk, old and new) to identify where CO2e savings can be made. We have commissioned an assessment of the climate change risks and opportunities for European oats production to be carried out by the University of Bath. We are looking at how to reduce soil erosion from potato farming, and what varieties of potato would consume less water while growing.  Quaker was a charter member of Linking Environment and Farming (LEAF), which helps farmers make a positive environmental contribution by improving their growing and harvesting practices, and their use of water and fertilizer.

We have partnered with the Scottish Crop Research Institute to investigate new potato varieties that would require less water and we are investing in new research into irrigation optimization. The project aims to compare the effectiveness of various agricultural irrigation systems aimed at managing and conserving water resources from surface and borehole sources.

In China we share knowledge about potato farming with the Chinese Ministry of Agriculture and have established an advanced potato research laboratory.