PepsiCo is contributing to a more sustainable agricultural supply chain by enabling next generation agriculture through the advancement of farming practices to optimize crop yields, respect human rights, improve farmer livelihoods, and secure supply. We do this because, simply put, without embracing positive agriculture, our ability to source the necessary ingredients for our products is in jeopardy, as is the world’s ability to reliably access safe and healthy foods. A key aspect of Positive Agriculture is extending regenerative farming practices — a set of techniques that improve and restore ecosystems with a focus on building soil health and fertility, reducing carbon emissions, enhancing watershed management, increasing biodiversity and improving farmer livelihoods.
Around half of the volume of our priority ingredients are bought directly from farmers through a grower group (‘grower-sourced’), while there are multiple tiers between the farmer and PepsiCo for the other half (‘supplier-sourced’).
Making our products requires a wide variety of crops and ingredients and we believe that sustainable agricultural practices will be pivotal in meeting the increasing demand for food, while also addressing some of the key risks that can be associated with agriculture, such as freshwater scarcity, deforestation, biodiversity loss, soil degradation, and human rights. At the end of 2020, we sourced less than 40 percent of our direct grower-sourced key ingredients – those considered the building blocks of our foods and beverages – from areas of high water-risk.
We have set standards for ourselves and our supply chain that match our ambition for a sustainable agricultural supply chain over the long term. In 2015, we publicly announced our goal to sustainably source potatoes, whole corn, oats, oranges, palm oil, and cane sugar for our business by 2020, and other priority crops that we don’t source directly from farmers by 2025. Building upon the progress made, in 2021 we announced a new, impact-driven Positive Agriculture ambition, setting 2030 goals to source crops and ingredients in a way that accelerates regenerative agriculture and strengthens farming communities. This 2030 agenda includes a specific focus on:
- Spreading the adoption of regenerative farming practices across 7 million acres – approximately equal to 100 percent of the land used around the world to grow key crops and ingredients for the company’s products. These efforts are estimated to lead to a net-reduction of at least 3 million tons of greenhouse gas (GHG) emissions by 2030. Furthering nearly a decade of progress with its Sustainable Farming Program (SFP), PepsiCo will continue to collaborate with farmers across 60 countries to adopt practices that build resilience and improve and restore ecosystems. Through efforts with industry-leading partners, the company will expand regenerative agriculture programs to more than 500,000 acres of U.S. farmland by the end of 2021.
- Improving the livelihoods of more than 250,000 people in its agricultural supply chain and communities, including economically empowering women. PepsiCo will focus its work on the most vulnerable farming communities linked to its global value chain, including smallholder farmers and farm workers, women and minority farmers. The company will continue to advance this goal through diverse partnerships, including U.S. Agency for International Development, Inter-American Development Bank, CARE, National FFA Organization, and the National Black Growers Council.
- Sustainably sourcing 100 percent of key ingredients, expanding to include not only its grower-sourced crops (potatoes, whole corn, oats, and oranges), but also key crops from third parties, such as vegetable oils and grains.
A dedicated team led by our Vice President of Global Sustainable Agriculture & Responsible Sourcing manages PepsiCo’s sustainable agriculture programs. This global team within PepsiCo's Sustainability Office, partners closely with many internal functions including Global Procurement, Public Policy & Government Affairs, Communications, and our Human Rights Operating Council. The team reports up to the PepsiCo Executive Committee through our Chief Sustainability Officer. Progress is reviewed by our PepsiCo Executive Committee as well as the Sustainability, Diversity and Public Policy Committee of our Board of Directors on an at least annual basis.
Sourcing directly from growers through our Sustainable Farming Program
Through our SFP, we champion and advance positive social, environmental, and economic outcomes among the farmers from which we directly source crops. The SFP is designed to help boost agricultural productivity and extend availability of sustainably-sourced crops today, while contributing to long-term transformation across the agricultural system. The program is based on self-assessment, capacity building, and verification. We work with farmers around the world to provide training for on-field agronomy, resource-efficient use of fertilizers and irrigation, plant protection techniques, workers’ rights, pest management and other issues. Once a farmer meets the independently verified Social, Environmental and Economic principles of our SFP, they will be classified as sustainable for three years from the date of the verification assessment results. For more detail on the SFP, including a comprehensive list of the specific principles we work with farmers to implement, see the SFP Scheme Rules and the SFP Fundamental Principles. To leverage the expertise and local influence of farmers, we’re growing a network of demonstration farms where locally-relevant best practices can be put into action and where local farmers can observe and learn from their peers.
Supplier-Sourced Priority Raw Materials
By 2030, we aim to sustainably source priority-supplier-sourced raw materials – those that we don’t source directly from farmers. Our priority supplier-sourced key ingredients include raw milk and others derived from crops such as corn, wheat, sugar beet, orange, banana, cocoa, sunflower, soya, and canola.
Our approach to sustainable sourcing of these supplier-sourced raw materials reflects our sourcing relationships, the risk profile of each raw material, and opportunities to drive meaningful impacts at the farm level. Through partnership and collaboration with suppliers, industry groups, and NGOs, we leverage two models to make progress toward our goal — verified volumes and continuous improvement:
- For crops on a verified volumes pathway, we use an equivalency framework to recognize crop volumes that are verified to a sustainability standard benchmarked by a third party, as equivalent to our SFP. For example, the Sustainable Agriculture Initiative (SAI) Platform’s Farm Sustainability Assessment (FSA) is recognized by our program. This equivalency approach is used for several priority raw materials, including our supplier-sourced orange juice, banana, beet sugar, high fructose corn syrup from Europe, and not-from-concentrate apple juice.
- Our other priority crops are considered sustainably-sourced when suppliers can credibly demonstrate continuous improvement on the crop’s most relevant risks. Where possible, we are aligning our sustainable sourcing work with our greenhouse gas emissions reduction goal, including investing in farm-level programs to advance soil health, promote regenerative agriculture, and reduce emissions.
Palm Oil and Cane Sugar
PepsiCo committed to sustainably sourcing 100 percent of the palm oil and cane sugar for our business by 2020 and this commitment will continue, going forward. These ingredients have long and complex supply chains, with farmers operating in challenging conditions. While these crops provide many benefits to people who enjoy our products, to growers and local communities, they are also sometimes associated with social and environmental challenges, such as deforestation, tenuous land rights, and labor issues. Our approach for high-risk commodities such as these is based on:
- Building traceability through our supply chain to the mill and farm level;
- Assessing risk to our business, to people, and the planet in order to focus our efforts;
- Verifying compliance through credible third- party standards (primarily the Roundtable on Sustainable Palm Oil (RSPO) and Bonsucro sugar cane standards);
- Engaging suppliers to build the capacity of our direct suppliers and those further down the supply chain;
- Investing and supporting on-the-ground projects to ensure farmers, including smallholders and communities, benefit from our actions; and
- Partnering and collaborating with peer companies, suppliers, civil society, and others to address long-term, systemic issues that cannot be tackled alone.
Sustainable Sourcing Program (SSP)
For many of the crops that we source, we purchase ingredients that have been milled, crushed, or refined at our supplier’s processing facilities. To realize our vision of a sustainable supply chain, we leverage our SSP to engage our most business-critical first-tier agricultural suppliers and business partners at the processing level. For more detail on the SSP, see Sustainable Sourcing.
While our policies and programs may not prevent all adverse impacts in our value chain, we aim to provide an effective remedy wherever possible. This may include using our influence to encourage our suppliers or partners to in turn provide an effective remedy where we find impacts directly linked to our business operations, goods, or services. We are committed to providing channels for affected stakeholders, their proxies, and civil society to raise concerns related to our social and environmental standards for our agricultural supply chain. In July 2017, we formalized a grievance mechanism for our agricultural supply chain. Our approach is set out here. Information about the grievances addressed through our mechanism and the review of our grievance process, which we are undertaking with the help of an expert third party organization, is set out in our Palm Oil page.
Our Speak Up hotline is an important component of our culture, ethics and integrity, and we encourage our suppliers and business partners to use their own effective grievance mechanisms and we also make the PepsiCo Speak Up hotline available for their use through our Global Supplier Code of Conduct (SCoC). In the spirit of transparency, we regularly publish information on the usage of our Speak Up hotline, including the number of reports and their categorical distribution. Our latest report can be viewed here. More information on our grievance mechanisms is available on our Human Rights page.
Our goals are supported by a set of policies and commitments that underpin our agricultural activities, many of which we expect our suppliers to adhere to as well.
Many of these policies and commitments are based on international conventions including the Universal Declaration of Human Rights; the International Covenant on Civil and Political Rights; the International Covenant on Economic, Social and Cultural Rights; and the ILO Declaration on Fundamental Principles and Rights at Work.
2020 was a significant year for PepsiCo’s sustainable agriculture journey. Amidst a global pandemic, we strove to achieve the goals we set for ourselves in 2015, and by the end of the year:
- 100 percent of PepsiCo’s (direct) grower-sourced crops (potatoes, whole corn, oats, and oranges) were sustainably sourced in 28 countries. Globally, nearly 87 percent of grower-sourced crops were sustainably sourced through our SFP, up from nearly 80 percent in 2019. For example, all the oranges purchased for Tropicana directly from Florida growers were sustainably sourced, as are the potatoes and oats for Lay’s and Quaker in North America, respectively.
- PepsiCo achieved its goal to source 100 percent Bonsucro certified sustainable cane sugar globally by 2020; and
- We achieved more than 99 percent physically-certified palm oil by the Roundtable on Sustainable Palm Oil (RSPO) standard, with the balance achieved through RSPO Independent Smallholder Credits.
- 13 percent of our priority supplier-sourced raw materials were sustainably sourced, up from 12 percent in 2019.
In the course of making significant progress toward our 2020 Agriculture goals, we encountered systemic barriers related to cultural norms, sociopolitical disruption, infrastructure deficiencies and, in some cases, lack of well-established legal systems. These systemic barriers prevented us from achieving 100 percent of our 2020 goal for direct-sourced crops. However, we will continue to strive to establish full sustainability through our continuous improvement process. As we continue our journey to establish sustainable sourcing of key ingredients under the new Positive Agriculture 2030 agenda, we are prioritizing crops and commodities that were in scope of the 2020 goal.
PepsiCo has a strict commitment to no deforestation, no development on peat, and no exploitation of indigenous people, workers and local communities, and recently published its strengthened Global Strategy on Sustainable Palm Oil, with an increased focus on landscape programs and transformation of the palm oil sector.
We continue to grow our network of demonstration farms, and by the end of 2020, more than 350 farms are a part of the program. We have worked with farmers to plant cover crops on over 85,000 acres and have seen up to a 38 percent net reduction in on-farm greenhouse gas emissions, including soil carbon sequestration.
The complexity of our global supply chains means making an impact in upstream farming communities, which requires partnership and collaboration with other stakeholders. With COVID-19 reshaping the way we run our business and impacting our ability to engage with farmers and suppliers, we will need to be more resourceful than ever to advance our sustainable agriculture objectives. We continue to work closely with our suppliers, NGOs, governments, agronomists, industry coalitions, and many other partners to make a positive impact in farming communities around the world.
PepsiCo will focus its work on the most vulnerable farming communities linked to its global value chain, including smallholder farmers and farm workers, women and minority farmers. The company will continue to advance this goal through diverse partnerships, including U.S. Agency for International Development, Inter-American Development Bank, CARE, and in the US, the National FFA Organization, and the National Black Growers Council.
We engage with key suppliers of our priority agricultural raw materials to develop joint action plans on sustainable agriculture and sustainable sourcing, and we actively participate and provide leadership to industry stakeholder groups and support various industry projects and collaborations to deliver our goals. Multi-stakeholder organizations in which we are actively engaged include:
- AIM Progress
- Consumer Goods Forum (CGF)
- Cool Farm Alliance
- Field to Market
- Roundtable on Sustainable Palm Oil (RSPO)
- Sustainable Agriculture Initiative (SAI) Platform
Through efforts with industry-leading partners, PepsiCo will expand regenerative agriculture programs to more than 500,000 acres of U.S. farmland by the end of 2021. We’re on the road to impact 7 million acres of farmland and reduce an estimated 3 million tons of greenhouse gas emissions by the end of the decade. PepsiCo also aims to improve the livelihoods of more than 250,000 people in its agricultural supply chain and sustainably source 100 percent of the company’s key ingredients by 2030.
For PepsiCo's corporate greenhouse gas footprint, the company follows the GHG Protocol framework where any sequestration is kept separate from the three scopes of emissions.