Agriculture is central to global challenges and solutions related to nutrition, the environment, and economic well-being. It provides for nutritious diets around the world, and sustainable agricultural practices will be pivotal to meeting the increasing demand for food as the global population grows. At the same time, agriculture uses 70 percent of the world’s available freshwater, a limited natural resource.
Agriculture also provides jobs for more than 1 billion people around the world, serving as a backbone of many local economies.
For PepsiCo, sustainable agriculture practices are critical to the continued growth of our business, food safety, and crop resilience for continued and localized supply. From the oranges used for our Tropicana orange juice to the oats for our Quaker products to the potatoes for our Lay’s chips, our success depends on the success of the global network of farms and farmers.
As a corporation that has a global reach but operates locally in the communities where we do business, we provide relevant expertise to help advance the ways in which farming is carried out around the world. This benefits individual farmers and the communities that rely on them, while helping protect our license to operate.
PepsiCo sources dozens of agricultural ingredients from farmers around the world for our products, both directly and indirectly.
The primary crops that we source through a direct relationship with farmers are:
Many other agricultural ingredients are sourced indirectly from suppliers, which may involve several tiers between us and the farms where the crops are grown. Our key indirectly sourced crops include palm oil, cane sugar, wheat, and cornmeal.
 Noted as unprocessed corn to distinguish from cornmeal, a separate commodity we also source.
 Noted as unprocessed oats to distinguish from milled oats, a separate commodity we also source.
Our Sustainable Farming Initiative (SFI) is a program we use to engage with growers on farms of all sizes and types around the world in order to encourage continual improvement in sustainable agricultural practices, expand respect for workers' human rights, enhance growers' capabilities, and address risks.
The SFI program is comprised of two components:
- The SFI Code, which lists PepsiCo’s farm-level sustainable agriculture principles and practices. The Code draws from principles of externally recognized agricultural codes, such as those published by the Rainforest Alliance, GlobalG.A.P., Bonsucro, and the Roundtable on Sustainable Palm Oil (RSPO).
- The SFI Continuous Improvement Process, through which farmers are continually assessed and efforts are taken to drive improvement in sustainable agriculture.
Our SFI Scheme Rules provide full details of the SFI Framework.
We have initiated SFI with farmers from which we source directly, given our existing relationships with those farmers and the importance of directly sourced agricultural raw materials to the continuity of our business. By 2025, we intend to expand the SFI and other programs recognized by PepsiCo’s benchmarking protocol to 7 million acres, which accounts for approximately 75 percent of PepsiCo’s current agricultural-based spend.
Engagement with farmers through the SFI is the driving force behind our sustainable agriculture program. For our Performance with Purpose (PwP) 2025 agenda, we have set a series of goals with the shared objective of increasing the percentage of key agricultural raw materials that we sustainably source. These goals are bolded and detailed below.
Through the SFI, we strive to sustainably source virtually all of our direct agricultural raw materials that we purchase from PepsiCo long-term growers by 2020. This goal is intended to give us a target against which we will demonstrate:
- Engagement with farmers in our direct agricultural raw material supply chain as part of the SFI journey; and
- Compliance to PepsiCo’s definition for sustainable sourcing, as defined by the SFI Scheme Rules
To date, we have focused on engaging growers and bringing them into the SFI through Farm Management Groups (FMGs), which are groups of farmers that show consistency across geography, crop, farm size, and a variety of other factors. PepsiCo considers an FMG engaged when:
- An initial assessment against our SFI Principles and Practices has been completed;
- Sustainability opportunities have been identified and improvement programs developed; and
- Grower engagement in these improvement programs has been initiated
As of year-end 2016, 34 percent of the volume of the agricultural raw materials that we directly source has been supplied by FMGs engaged in the SFI. The percentage of FMGs engaged is one metric by which we are measuring progress.
The second metric – representing our ultimate objective – is the percentage of directly sourced agricultural raw materials that we have verified as sustainably sourced. PepsiCo considers an FMG verified sustainable when:
- A representative sample of self-assessments demonstrate that the farmers have implemented the Fundamental Principles of the SFI; and
- A certain proportion of random samples from the self-assessment results are verified by a third party. The details of this process are being piloted. Once finalized, the requirements will be listed in an appendix in the SFI Scheme Rules.
We expect to make significant progress on SFI engagement in 2017, and with that, make significant progress on sustainable sourcing of these agricultural raw materials in the years leading up to our target completion date of 2020.
In addition to the focus we are placing on the implementation of the SFI, we are strong believers that collaboration can be a powerful driver of change. That is why we actively participate in several organizations that foster insights and best practice sharing on agricultural practices within the global food and beverage and related industries. These include the Sustainable Agriculture Initiative (SAI) Platform, Cool Farm Alliance, and Field to Market Initiative.
The percentage of directly sourced agricultural raw materials will always be less than 100 percent due to the fluid nature of the mix of farmers we source from, with new growers anticipated to enter the market over time.
In addition to our core agricultural raw materials that we directly source, there are a number of others that we procure through shared supply chains, such as palm oil, cane sugar, wheat and cornmeal. We intend to sustainably source our major indirect agricultural raw materials by 2025, and cane sugar and palm oil by 2020. Because we source them indirectly, ensuring sustainable supply is a more challenging process, and will require collaboration with suppliers, and engagement on existing certification platforms.
Globally recognized certification schemes exist for palm oil, such as the Responsible Sourcing for Palm Oil (RSPO) and Bonsucro for cane sugar. We have leveraged these existing, collaborative platforms to help drive positive impact in the supply chain. Where no existing platforms are available, we plan to implement the SFI or agree upon a different program recognized by PepsiCo’s benchmarking protocol.
We have set distinct goals for palm oil and cane sugar. In 2016, PepsiCo launched its strategic approach to cane sugar and palm oil, with the goal of sustainably sourcing 100 percent of each by 2020. The strategy is intended to improve both environmental and social outcomes, encourage collaboration, and boost security of supply.
We intend to deliver 100 percent sustainable sourcing of cane sugar by 2020. Currently, we are building our capability to meet this goal in markets where there is a low level of knowledge of sustainability practices and certification.Having focused on capacity building in individual markets over the past two years, we expect to make significant progress on this goal in 2017. Specifically, we are focusing our efforts on capacity building in Thailand, India and Mexico.
In Thailand, we have already supported an independent assessment of cane sugar producers, which included a performance review on human rights and land rights to identify potential systemic issues in the supply chain.
In addition, a first-of-its-kind summit was held with suppliers and mills in Thailand, led by PepsiCo, through Bonsucro. The aim of this summit was to better understand the challenges and solutions required to address sustainability issues. The action plan implemented by PepsiCo resulted in the first-ever Bonsucro Certification in Thailand and increased suppliers’ understanding of the path and implementation of sustainable production of cane sugar.
Through our capacity building work in Thailand, we have increased awareness of sustainable cane sugar in the country, and have helped to build a growing market for sustainable production of this agricultural raw material.
In India, we supported a multi-stakeholder India Cane Sugar Summit in 2016 with the aim of better understanding the challenges that suppliers face in meeting certification standards, while communicating to them our commitment to sustainable sourcing. We also sponsored training for suppliers on the Bonsucro Production Standard and actively engaged with the Bonsucro End User Accelerator Group. This group is made up of PepsiCo and other peer companies, with the aim of catalyzing collaboration to drive scale of sustainable cane sugar.
In Mexico, Proforest, a nonprofit organization with expertise in sustainable management of natural resources, produced a report of potential land tenure and human rights issues in PepsiCo’s cane sugar and palm oil supply chain within the country. We have published an initial response and are continuing to review the findings and recommendations in the report. We are committed to working with stakeholders, including other companies, state and municipal governments, civil society, unions and producer associations, to address these issues.
For our work capacity building efforts in Thailand, India and Mexico, PepsiCo was recognized by Bonsucro in 2016 with a Buyer Award for “Supporting Transformational Change.”
Because of the scrutiny that we believe palm oil and certain other raw materials are under, and the complexity of our supply chain, we have developed a Grievance Mechanism for third parties to raise potential environmental and social concerns regarding agricultural commodities in our supply chain.
The Grievance Mechanism, which was launched in July 2017, is complementary to our existing Speak Up Process.
The Grievance Mechanism is open to anyone who has a concern that PepsiCo’s policies and expectations related to our agricultural supply chain are not being met. Each complaint will go through the following process:
Step 1: Receiving the complaint
Step 2: Is the complaint in scope?
The complaint is reviewed to establish that it is in scope: does it apply to PepsiCo’s supply chain and to our policies and commitments? If the complaint is out of scope, it will be closed. If it is in scope, the process will continue to Step 3.
Step 3: Investigating the complaint
If the complaint is about a direct supplier, PepsiCo will lead the investigation into the grievance, utilizing expertise from our Sustainable Sourcing Program.
If the complaint is about a supplier that does not directly supply PepsiCo, we will use our relationships with our direct suppliers that source from the company to develop the appropriate investigative steps where they are are not already being undertaken.
Step 4: Taking action
Step 5: Monitoring and implementation
An internal PepsiCo resource will oversee the process, and a grievance working group including representatives from our procurement, human rights, sustainable agriculture and public policy teams will advise regarding any substantive decisions during the process, including actions to be taken if suppliers refuse to engage with the issues raised in the complaint or do not complete the agreed steps. A Grievance Committee, comprising senior management from the departments represented at the working group level, will meet quarterly to review individual cases and the operation of the grievance mechanism, including the implementation of our policies.
In every case, we look to engage suppliers first and promote corrective actions that solve problems and build capability for sustainable palm oil and other agricultural commodities. In cases where engagement does not lead to progress, we will consider all appropriate steps including significant action where deemed necessary.
Further details of our grievance mechanism can be found here.
Our policies related to agriculture articulate the specific standards that we expect ourselves, our growers, and our suppliers to meet: