At PepsiCo, our strategy to address climate change is based on two pillars - mitigation and resilience. We are working to decarbonize our entire value chain, while assessing the impacts of climate change on our business and developing resiliency plans.
We believe industry and governments should commit to science-based action to keep global temperature increases to well-below 2°C or 1.5°C above pre-industrial levels, as described by the Special Report on Global Warming of 1.5°C of the Intergovernmental Panel on Climate Change. In January 2021, we more than doubled our science-based climate goal, targeting a reduction of GHG emissions across our value chain by more than 40 percent by 2030. In addition, we pledged to achieve net-zero emissions by 2040, one decade earlier than called for in the Paris Agreement. Specifically, we plan to reduce direct operational Scope 1 and 2 emissions by 75 percent and our indirect value chain emissions by 40 percent by 2030. Reaching these targets will enable the reduction of more than 26 million metric tons of GHG emissions, the equivalent of taking more than five million cars off the road for a full year. Our target aligns with the Business Ambition for 1.5°C pledge, which PepsiCo signed in 2020, joining other leading companies committing to set science-based emissions reduction targets in line with limiting global warming to 1.5°C above pre-industrial levels.
Our action plan is centered around both mitigation, reducing GHG emissions to decarbonize our operations and supply chain, and resilience, reducing vulnerabilities to the impacts of climate change by continuing to incorporate climate risk into business continuity plans.
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PepsiCo has identified climate change as a business risk through our Integrated Risk Management Framework, a process that identifies, assesses, prioritizes, manages, and monitors the risks affecting the Company across its operations. Long-term climate risks are considered by both the PepsiCo Board of Directors, including its Sustainability, Diversity and Public Policy Committee, and the PepsiCo Risk Committee. This means that specific actions are performed in order to identify the risk indicators and a mitigation plan is developed with the aim to protect the Company from the worst impacts.
In line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), we have completed our first climate scenario analysis to identify climate-related risks and opportunities. The analysis considered PepsiCo’s wholly-owned assets (such as manufacturing plants, warehouses, R&D centers, and offices), our third party manufacturing assets (under franchise and joint venture arrangements), as well as our agricultural supply chain locations.
The results of the analysis help us:
- View our business within various temperature (business as usual and 2ºC increase scenarios) and timeframe (2020-2100) scenarios; Additional temperature scenarios like a 1.5ºC increase are being incorporated in 2021;
- Identify our hotspot areas in terms of climate impacts - both physical and transitional; and
- Strengthen our resiliency planning.
Scope 1 and 2 emissions
The exercise of measuring our footprint has informed our strategy for emissions reductions across our value chain. Our current and future efforts to reduce Scope 1 and 2 emissions build on the groundwork we laid during our first generation of Performance with Purpose goals in 2006.
Our Resource Conservation (ReCon) program is a comprehensive, global platform of resources, tools, and programs designed to improve energy, water, and waste efficiencies in our manufacturing and warehousing operations. Through a combination of training and technology, ReCon identifies opportunities to reduce fuel and electricity consumption with a focus on deploying energy efficient lighting, heating and cooling systems, boilers, and motors, as well as driving behavioral improvements through operator training. Additionally, continued developments in fleet technology, including aerodynamics, more efficient powertrains, and GPS/telematics will further drive fleet fuel economy. We are further improving the GHG intensity of our manufacturing and fleet operations through the use of alternative and renewable fuels, such as renewable compressed natural gas (RNG) and biomass, as well as renewable electricity purchased or generated on-site.
Building on our history of energy efficiency improvements, we substantially increased our commitment to renewable energy in 2020, committing to 100 percent renewable electricity for U.S. direct operations which accounts for over half of our global electricity consumption. In 2020, we extended this commitment with a goal to transition to 100 percent renewable electricity globally. We will do this first across our company-owned operations by 2030, with an aim for our entire global operations, including franchisees, by 2040. For more on our approach and progress, see Renewable Energy.
Scope 3 emissions
Our efforts to reduce value chain emissions focus on our three largest emissions drivers: agriculture, packaging, and third-party transportation and distribution. Combined, these three sources accounted for 78 percent of our global GHG emissions in 2020 and meeting our net zero emissions goal requires that we move quickly and significantly on these.
Our agriculture climate strategy goes hand-in-hand with our sustainable agriculture goals, as practices that lead to better yields, improved soil health, lower deforestation and productivity for farmers also lead to GHG emission reductions. We are therefore focusing on sustainably sourcing key ingredients like palm oil and cane sugar, as well as partnering and collaborating with suppliers, peers, and other stakeholders to implement and influence better practices on-farm. For more on our approach to positive agriculture, see Agriculture.
Packaging is another aspect of our footprint with a clear link between climate and our other sustainability activities. In order to reduce emissions related to packaging, we are focusing on incorporating more recycled content into our packaging, making it recyclable, compostable, or biodegradable, reducing packaging material, introducing alternative materials, as well as exploring alternative business models that eliminate or significantly reduce packaging.
Within third-party transportation and distribution, we continue to improve the efficiency of our vending and cooling equipment. By mapping and quantifying our baseline emissions from third-party carriers and engaging with the U.S. EPA's Smartway program, we are identifying opportunities for improvement within our carrier base.
Underpinning these focus areas is supplier engagement. We continue to make progress in building internal alignment and a framework for engaging with our upstream suppliers. A portion of our Scope 3 emissions lie within our tier 1 suppliers’ operations. Within these, improvements in operational efficiencies and use of renewable energy will lead to a reduction in our Scope 3 emissions. We also partner closely with our tier 1 suppliers to address the further upstream emissions, whether on-farm or in raw material extraction. Such collaborations will lead to a reduction in Scope 3 emissions not only for PepsiCo, but also for our suppliers.
In addition to our focus areas, we are also trying to address emissions through additional initiatives:
- It is important to PepsiCo that we engage our third party manufacturers, bringing them along on our journey of climate action. Our third party manufacturers include our franchise bottlers, joint ventures, co-manufacturers, and co-packers. Improvements in operational efficiencies at these manufacturers will also have an impact on PepsiCo’s Scope 3 emissions.
- In 2019, we introduced Sustainable from the Start, an environmental sustainability impact assessment program for our product development process. The program includes a toolkit and business processes that help to build the capability within our various functions involved in product innovation to understand the environmental and climate impacts of product design, and to make sustainable choices. In doing so, they are supporting our strategic, long-term vision to decouple our business from fossil fuels. To learn more, see Sustainable Product Design.
Note on methodology
PepsiCo’s GHG footprint is subject to change as a result of major updates to our operational footprint, particularly when the company completes acquisitions or divestitures, or when improved data, methodologies, or emissions factors become available. Our acquisition of Pioneer Foods, completed in 2020, had the effect of increasing our Scope 1 and 2 GHG emissions by 7 percent in 2020, and we have adjusted our 2015 baseline measurement to include the business’s emissions. This has had the impact of increasing our Scope 1 and 2 baseline by 6 percent. We are in the process of integrating Pioneer Foods data within our Scope 3 emissions and will likely include the full impact of the acquisition for 2021 reporting.
In 2020, PepsiCo’s total GHG emissions across Scopes 1, 2 and 3 were approximately 59 million metric tons of carbon dioxide equivalent (CO2e) which represents a 3 percent improvement from 2019. This represents a 5 percent reduction from our 2015 baseline. As in previous years, the majority of our carbon footprint (93 percent) comes from our value chain, or Scope 3 emissions, particularly agriculture, packaging and third party transportation and distribution.
Scopes 1 & 2
In 2020, PepsiCo’s Scope 1 and 2 (market-based) emissions were 3.6 million metric tons and 0.9 million metric tons, respectively. As we pursue our goal, we are focused on investing in our capabilities and upgrading equipment to more efficient and low-carbon options. We transitioned our U.S. direct operations to 100 percent renewable energy in 2020, the same year we announced our goal to do so. This helped PepsiCo to deliver a 23 percent reduction in Scope 1 and 2 emissions against our 2015 baseline, exceeding our prior goal of 20 percent reductions by 2030 and representing approximately 31 percent of the way toward our new 2030 goal of 75 percent Scope 1 and 2 emissions reduction. This progress was delivered, in part, by investments in high efficiency lighting, building management systems, solar photovoltaics, and combined heat and power plants. For more information on this new goal, see our Renewable Energy page.
We have also made significant improvements in fleet GHG intensity over the years. This includes diversifying the types of fuels we use, improving fuel economy, and right-sizing vehicles. For more information, see our Fleet Efficiency page.
Our approach to reducing our operations emissions is two-fold: in addition to renewable electricity, we are also pursuing the use of renewable fuels and advanced thermal technologies. The technologies and fuel supplies required to deliver these solutions at scale are not readily available today. Our focus is therefore on pursuing industry-wide collaboration and local, application-specific progress. Our European and Asia-Pacific businesses have conducted in-depth studies to understand the local availability of technologies. In addition, we have conducted several internal efforts to understand emerging technologies and market trends, and pursue opportunities to scale-up certain promising solutions.
In 2020, our Scope 3 emissions were 56 million metric tons, down approximately 4 percent against our 2015 baseline. These reductions were driven by improvements in vending and cooler equipment in retail, in which we reduced GHG emissions by more than 50 percent in 2020 compared to 2015. This was achieved by replacing current models with more energy-efficient ones, and migrating into hydrofluorocarbon (HFC)-free refrigerants, all compliant with the latest standards of DOE2017 and e-star3. This saved approximately 3.6 billion kWh of energy compared to 2015. Transitioning to HFC-free equipment has been a major priority. All of our company-owned units in Europe and North America are now HFC-free, and we have set a goal of transitioning all units globally by 2025.
Our Scope 3 emissions associated with agriculture were positively impacted in 2020 by our efforts in sustainable agriculture, as well as by purchased volume fluctuations compared with 2019. As we reached our target year for sustainably sourcing 100 percent of our palm oil, we achieved more than 99 percent physically-certified palm oil by the Roundtable on Sustainable Palm Oil (RSPO) in 2020. To understand the climate impacts of this achievement, we developed custom emission factors for RSPO-certified palm oil compared with un-certified palm oil. This methodology will continue to evolve as new guidance becomes available, and in 2020, it confirmed that we achieved approximately half a million metric tons of emission reductions from palm oil sourcing since 2015. Our sustainable farming activities within our indirect supply chain in key commodities of high fructose corn syrup, cornmeal, whole corn and wheat have now expanded to cover 85,000 acres. In each of these projects, we work with our partners to carefully measure and monitor greenhouse gas emissions, collate data at the end of the growing season, and determine the change in emission factors related to the growing of these crops over time. Between 2018-2020, emissions factors related to these projects declined up to 24 percent as a result of the efforts of our Sustainable Sourcing Program (SSP).
Within our North America third-party carrier procurement process, we implemented an internal price on carbon in 2020 to influence future decision-making on carrier selection that could also be based on the cost of environmental externalities. This collaborative effort between PepsiCo’s sustainability and procurement teams has led to the integration of carrier carbon intensity data and cost of carbon data within business processes such that this information is now available to our supply chain teams selecting carriers for the coming year. PepsiCo is currently evaluating the influence of the internal carbon price, determining an appropriate price threshold and incorporating in decision-making moving forward.
Supplier engagement is a key enabler for climate action within PepsiCo’s value chain. Our framework for supplier engagement begins with segmentation. We have developed a simple internal tool for our procurement teams to gauge the maturity of their suppliers in order to tailor engagement activities. PepsiCo engages our highly mature suppliers one-on-one at the leadership level in order to align on priorities and collaborative initiatives. With our agricultural suppliers, we engage in development and implementation of on-farm projects as well as improvements in operational efficiencies and renewable electricity sourcing.
Emission reductions have also been achieved through reducing added sugar in our beverages and striving for virtually zero waste sent to landfill from our facilities.
In the latter half of 2020 and early 2021, our scenario modeling methodology was improved in several ways for metrics like temperature and storm damage metrics like tropical cyclone and fluvial flooding. Additional metrics have been added such as water stress. We plan to update our scenario analysis with updated internal information as well as the latest developments in methodologies every 2-3 years.
While we strive to reduce our own impact, we believe that effectively addressing climate change also requires a collective response. To this end, we engage regularly with industry, non-governmental organizations, and other stakeholders to promote actions that protect the climate, and we have a long record of supporting climate policy, for example, through our membership in the U.S. Climate Action Partnership, signing the American Business Act on Climate Pledge, and supporting the Paris Climate Agreement by signing the We Are Still In declaration. PepsiCo is an original founding member of the Climate Leadership Council, an international policy institute founded in collaboration with business, opinion and environmental leaders to promote a carbon dividends framework as a cost-effective, equitable climate solution. In 2019, we joined the Business For Social Responsibility (BSR) Value Chain Risk to Resilience collaborative initiative, a group dedicated to helping members assess climate risk, measure resilience and implement individual and collective responses across their value chains.
In 2020, we joined RE100 as part of our commitment to source 100 percent renewable electricity globally. In 2021, we also joined the Renewable Thermal Collaborative to collaborate with other companies, institutions, and governments committed to scaling renewable heating and cooling at their facilities to dramatically cut carbon emissions. We are members of the Gold Standard’s Value Change initiative, a collaboration with other companies and NGOs to develop practical guidance on implementing and accounting for Scope 3 interventions. PepsiCo is also a part of the MIT Climate & Sustainability consortium with the aim to vastly accelerate the implementation of large-scale, real-world solutions to meet the climate challenge, and to inspire transformative climate progress across industries and across the globe. We joined the Ecosystem Services Marketplace to advance a national market to sell credits for greenhouse gas reduction as well as water quality and quantity for the agriculture sector. We joined forces with Guidehouse and peers to launch the Supplier Leadership on Climate Transition (S-LoCT) program to engage and empower suppliers towards climate action. This program will enable our suppliers to not only measure their footprint but will also set them on a path to setting science-based climate targets for their organization.
As we continue to pursue our climate change goal, we expect to focus on the following priorities in the coming year:
- Renewable energy within our operations;
- The scale-up of regenerative practices across our agricultural supply chain;
- Supplier engagement and partnerships within our agricultural and packaging supply chains;
- Material reduction and recycled content in our packaging;
- Efficiency opportunities in transportation and distribution; and
- Engagement with third-party manufacturers on operational efficiencies and renewable energy.