Approach

Our world is already feeling the effects of climate change and faster, bolder action is needed. We not only have an interest in reducing greenhouse gas (GHG) emissions for the benefit of society—it’s also crucial to the viability of our business, as we are already experiencing the impacts of climate change directly within our own value chain.

PepsiCo's Climate Action Strategy

PepsiCo’s climate action strategy is centered around two pillars:

• Mitigation: Reducing GHG emissions to decarbonize our operations and supply chain; and
• Adaptation: Reducing vulnerabilities to the impacts of climate change by continuing to incorporate climate risk and adaptation in our business continuity plans and risk management processes.

Our strategy focuses on the areas in which we have the greatest impact — manufacturing, agriculture, packaging, transportation and vending and cooling equipment. It requires that we use scalable solutions that are available today, but also acknowledges that achieving net-zero emissions by 2040 will likely require new technologies and mechanisms. To this end, we continue to invest in promising solutions. Click here for PDF download of our strategy.

The challenges in this journey are significant and complex, and we have work to do to achieve our vision. But, we remain focused on driving change through our pep+ agenda and striving to reduce the linkage between our business and emissions growth.

Mitigation

As we work to reduce GHG emissions in our operations and supply chain, we are focusing on four key areas:

• Developing sustainable manufacturing, warehousing and distribution strategies;
• Further scaling sustainable agriculture and regenerative practices;
• Reducing the impact of our packaging; and
• Shifting to renewable electricity and fuels across our value chain.

In 2021, we announced goals in line with the latest science, more than doubling our previous science-based climate goal. We aim to reduce absolute GHG emissions across our value chain by more than 40% by 2030 against a 2015 baseline, including a 75% reduction in emissions from our direct operations (Scope 1 and 2) and a 40% reduction in indirect emissions from our value chain (Scope 3)¹. In addition, we pledged to achieve net-zero emissions by 2040, one decade earlier than called for in the Paris Agreement. 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 preindustrial levels.

Our strategy to achieve our 2030 emission reduction goal does not include the purchase of carbon offsets. We expect to achieve our 2040 net-zero goal by ensuring significant emission reductions within our value chain first, then balancing residual emissions with limited use of carbon removal offsets.

Our current and future efforts to reduce emissions build on the groundwork we laid during our first generation of Performance with Purpose goals in 2006, enhanced by a second series of goals in 2015 and culminating in our expanded goals introduced with pep+ in 2021.

Adaptation

Climate change is already producing significant impacts including temperature extremes, adverse weather events, droughts and coastal flooding, and without intervention, these are only expected to increase in severity and frequency. While climate change represents a risk to our business, there is also opportunity to drive resilience in the face of these events. In line with our Climate Action Strategy, we regularly assess the various risks and opportunities associated with climate change that our business faces. This helps PepsiCo to safeguard against vulnerabilities and to work toward driving systemic change.

As part of our Positive Agriculture strategy, we continue to partner with farmers to drive the adoption of regenerative agriculture. These practices, including planting cover crops and adopting low- or no-till techniques, help to reduce on-farm GHG emissions and improve the resilience and sustainability of our crop supply.

This work extends beyond our supply chain, as we recognize that the effects of climate change are often felt by the most vulnerable people and groups. As we work to build resilience for our business and supply chain, we also strive to support a Just Transition for these vulnerable groups, maximizing the social and economic opportunities stemming from our Climate Action Strategy, while minimizing and carefully managing the risks. Doing so is a business imperative and requires effective stakeholder engagement among impacted groups and respect for fundamental labor principles and rights. As an example, our water replenishment work in high water-risk watersheds helps to support a secure water supply for communities in areas where climate change puts water availability at risk. This includes projects in South Africa, India, Pakistan, Mexico and the Western U.S.

Governance

PepsiCo's Global Sustainability Office, led by the company’s Chief Sustainability Officer, is charged with coordinating and informing the company’s sustainability agenda across our value chain. Serving as the central connection point, the Sustainability Office works closely with leaders from across the business to drive continued progress against our climate change agenda and embed sustainability into our long-term strategic planning.

The Board plays an essential role in determining our strategic priorities and considers sustainability issues (e.g., climate change) as an integral part of its business oversight. To this end, the Board established a Sustainability, Diversity and Public Policy Committee to assist the Board in providing more focused oversight of key sustainability, diversity, equity and inclusion and public policy matters. One of the primary responsibilities of the Committee is to review PepsiCo’s key sustainability programs and related goals and monitor the Company’s progress toward achieving those goals, including progress against climate ambitions.

At one level below the Board, the PepsiCo Executive Committee (PEC), made up of the Chairman & CEO, the CFO, sector CEOs and functional heads, meets quarterly to review progress against goals; progress against broader environmental risk mitigation (such as our efforts to mitigate the impacts of climate change); and to ensure that we are adapting our sustainability strategy to changes in science, stakeholder expectations and marketplace conditions. In addition, the PepsiCo Sustainability Committee of the PEC takes further responsibility for sustainability matters and meets every month to discuss strategy and progress. For more information about our governance practices, see Sustainability governance.

Risk management and scenario analysis

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 and recently updated our 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 (e.g. franchise and joint venture arrangements), as well as our agricultural supply chain locations. The results help us to:

• View our business within various temperature (business as usual, 2ºC increase, and for company-owned manufacturing operations, 1.8°C increase) and timeframe (2020-2100) scenarios (currently 1.5°C scenario modeling is not available through our risk assessment vendors for transition risk but we will keep evaluating this option as modeling capabilities are enhanced)
• Identify our hotspot areas in terms of climate impacts—both physical (e.g., owned and third-party assets, wildfire, etc.) and transitional (e.g., carbon price, technological changes, etc.)
• Strengthen our resiliency planning (e.g., incorporating climate risk into our capital allocation decisions)

In 2023, we re-ran our scenario modeling for company-owned manufacturing facilities using latest modeling capabilities. We modeled three physical climate risk scenarios for a variety of risks such as flooding, heat stress, water stress, wildfire and high wind speed, among others. We plan to update our analysis with updated internal information and methodologies every 2-3 years.

Resource allocation

Meeting our climate ambitions will require investment, not only of employees' time and capability, but also of financial resources to support scalable solutions and catalyze new technologies. Among other mechanisms, two levers stand out in our effort to drive climate investment:

The first of these is our Sustainability Capital Expenditures (CapEx) Fund. Through the fund, we are able to invest in projects that support our sustainability ambitions but that may not meet our internal desired rate of return.

A second lever—our Green Bonds—is helping to fund these projects, and others, to advance critical steps in our sustainability journey. In 2019, PepsiCo issued its first Green Bond, a 30-year, $1 billion senior notes offering. Our eligible decarbonization expenditure through this bond has helped to increase our renewable energy generation capacity and put technology in place to avoid more than 230,000 metric tons of GHG emissions in our direct operations and supply chain annually.

In July 2022, having allocated 100% of net proceeds from its first Green Bond, PepsiCo issued its second Green Bond, a 10-year, $1.25 billion senior notes offering, based on an updated Green Bond Framework that reflects our pep+ strategy. This new framework outlines the categories where net proceeds can be allocated, including a new fourth category aimed at accelerating regenerative agriculture.

PepsiCo and climate policy advocacy

Climate change is one of the most important issues of our time and requires immediate, coordinated action.

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.

Industry needs effective and widely-adopted climate policy that creates clear price signals and incentives to accelerate sustainable technology, regenerative agriculture and needed innovation. PepsiCo has an extensive public record of supporting climate policy through actions including:

• Signing the American Business Act on Climate Pledge
• Signing the We Are Still In declaration in support of the Paris Agreement
• Becoming a founding member of the U.S. Climate Leadership Council
• Endorsing the World Economic Forum’s Alliance of CEO Climate Leaders statement on climate policy
• Endorsing the We Mean Business climate action letter to the G20
• Endorsing Glasgow Is Our Business statement in support of COP26
• Annual participation in Lawmaker Education and Advocacy Days (LEAD) on Capitol Hill organized by Ceres

We applaud the recent push at the U.S. federal level to bring forward a wide range of climate policies that would help transition the U.S. to a low-carbon economy, and we share in the urgency to enact these measures. Given our goals supporting renewable energy, regenerative agriculture, clean transportation and circular use of materials, we are especially encouraged by the measures that would spur clean electricity, expand programs for farmers to adopt regenerative practices, accelerate investment in electric vehicles and infrastructure and help finance closed-loop recycling systems, all of which will enable significant reductions in carbon emissions.

PepsiCo's vision is to build a sustainable environment and economy through meaningful climate action, and we call on governments around the world and all climate action advocates, including businesses and trade associations, to work constructively and with urgency to raise the bar on national climate policy.

Measuring our impact

We complete an annual corporate greenhouse gas inventory to calculate the global GHG footprint of our operations (Scopes 1 and 2) and value chains (Scope 3). Our inventory follows leading industry guidance established by the Greenhouse Gas Protocol. We use the inventory results to identify emissions hotspots and to develop and prioritize actions that aim to reduce emissions across our value chain. Emissions inventories have also been used to establish PepsiCo’s global climate ambitions.

Scope 1 and 2 emissions

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 from sustainable sources, as well as transitioning to zero-emissions vehicles supported by renewable electricity purchased or generated on-site. See Fleet decarbonization for more on those efforts.

We are working on transitioning to procuring 100% renewable electricity globally. We plan to do this first across our company-owned operations by 2030, with an aim for our entire global operations, including franchisees, by 2040. Reaching these goals will require a combination of tactics. Where feasible, we will install renewable energy on-site or purchase renewable energy through Power Purchase Agreements (PPAs) or with Energy Attribute Certificates (EACs). 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% of our global GHG emissions in 2022, and meeting our net-zero goal requires that we move quickly and significantly on these in collaboration with our upstream and downstream partners from whom these emissions originate.

Our agriculture climate strategy goes hand-in-hand with our sustainable agriculture goals. Our preferred practices are those that lead to better yields, improved soil health, lower deforestation and productivity for farmers and also lead to GHG emission reductions. We are therefore focusing on sustainably sourcing key ingredients like palm oil and cane sugar, as well as collaborating with suppliers, peers and other stakeholders to implement and influence better on-farm practices. Additionally, we are engaging our key agricultural suppliers to increase the use of renewable electricity and fuels to reduce the GHG footprint in agricultural processing.

Packaging is another aspect of our pep+ ambition with a clear link to our climate goals. To reduce packaging impact, we are focusing on incorporating more recycled content and striving to make our packaging recyclable, compostable, biodegradable or reusable. We are also reducing the weight of packaging material, introducing alternative material and exploring alternative business models that eliminate or significantly reduce packaging. We have established a new goal that 20% of all beverages servings will be sold through reusable models by 2030. Furthermore, we are engaging our key packaging suppliers to accelerate the adoption of clean energy solutions to reduce the GHG emissions of packaging materials.

Within third-party transportation and distribution, we aim to improve the efficiency and carbon intensity of the non-PepsiCo fleet that delivers our products to customers. By mapping and quantifying our baseline emissions from third-party carriers and engaging with our carriers, the U.S. EPA's Smartway program and industry alliances like the Smart Freight Buyers Alliance (SFBA), we are identifying opportunities for improvement within our carrier base. These include working with our carriers to adopt efficiency measures, use sustainable biofuels and transition to zero-emissions vehicles such as electric vans and trucks.

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 direct tier 1 suppliers’ operations. Within these, improvements in operational efficiencies and use of renewable energy are expected to 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 are expected to 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:

• Engaging our third-party manufacturers to bring them along on our climate action journey. Our third-party manufacturers include our franchise bottlers, non-controlled joint ventures, co-manufacturers and co-packers. Improving their operational efficiency will also have an impact on PepsiCo’s Scope 3 emissions.
• Continuing 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.

pep+ in context: Climate

Achieving our net zero ambition will require unlocks across key internal and external factors.

Progress

In 2022, PepsiCo’s total GHG emissions across Scopes 1, 2, and 3 were approximately 61 million metric tons, which represents a 4% increase from our 2015 baseline². It illustrates a common challenge for companies combating climate change: reducing emissions while maintaining business growth. We’re developing and supporting solutions designed to decarbonize operations across our value chain, including a range of initiatives to increase zero- and near-zero emissions delivery vehicles for our company-owned fleets, improve energy-use efficiency and scale renewable fuel solutions at manufacturing sites. However, delivering our products requires certain key inputs and activities whose emissions we cannot always control or even influence. This includes the crops that make up our products, the packaging that holds them and parts of the transportation system that delivers them to our customers. We know that turning the tide will take diligence and time, but we are laying the foundation by putting substantial influence and investment behind climate action and building resilience.

Consistent with previous years, the majority of our carbon footprint (93%) comes from our value chain, or Scope 3 emissions, particularly these three categories: agriculture (34%), packaging (26%) and third-party transportation and distribution (18%).

Our emissions intensity (calculated as million metric tons GHG emissions per $ billion net revenue) was 0.71 in 2022, compared to 0.94 in 2015, reflecting net revenue growth that outpaced our emissions increase. Accelerating this downward trend will be key to meeting our 2030 climate goals and ultimately achieving our 2040 net zero ambition.

PepsiCo continues to be recognized for its climate strategy. Since 2017, we have received an A- or better on our annual CDP Climate Change submission. In 2021, PepsiCo received the inaugural Terra Carta Seal from His Majesty King Charles III in his former role as The Prince of Wales, which recognizes organizations that have made a serious commitment to a future that is more sustainable. We received an A on As You Sow’s 2022 assessment of major corporations’ progress towards net-zero targets, one of only two companies to do so.

Scope 1

In 2022, PepsiCo’s Scope 1 GHG emissions were 3.5 million metric tons, down 3% from our 2015 baseline. We continued to focus on piloting new technologies like biomass, biogas, renewable natural gas, electrification and hydrogen opportunities, while investing in capability-building and knowledge-sharing internally to identify and deploy low-carbon solutions.

We have also made significant improvements in fleet GHG intensity over the years. This was achieved by diversifying the types of fuels we use, improving fuel economy, right-sizing vehicles and transitioning to zero-emissions vehicles. For more on our industry-leading efforts to reduce emissions from transportation and distribution, see Fleet decarbonization.

Scope 2

In 2022, PepsiCo’s Scope 2 (market-based) GHG emissions were approximately 800,000 metric tons, down 62% from our 2015 baseline. After transitioning our U.S. direct operations to sourcing 100% renewable electricity in 2020, we set our sights more broadly and by the end of 2022, 25 countries in PepsiCo’s operations sourced 100% renewable electricity for both manufacturing and non-manufacturing facilities. While this is progress from 13 countries in 2021, we were unable to continue to procure RECs for our facilities in Russia due to the deadly conflict in Ukraine, resulting in a small decrease in the overall proportion of renewable electricity procured during the year, and an increase in our Scope 2 emissions. For more information on our progress adopting renewable energy, see Renewable energy.

Between fuel consumption and electricity use in our company-owned operations, we used approximately 59 million gigajoules of energy in 2022³.

Combined, our 2022 Scope 1 and 2 emissions were down 23%¹ against our 2015 baseline.

Scope 3

In 2022, our Scope 3 emissions were approximately 57 million metric tons, up approximately 7%^1,4 against our 2015 baseline. Progress in 2022 was negatively impacted by increased packaging use, transportation, third-party manufacturing and other purchased goods due to business growth.

Despite these challenges, we continued our progress with vending and cooling equipment in retail, in which we reduced GHG emissions by over 40% in 2022 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. Transitioning to HFC-free equipment has been a major priority. Nearly all of our company-owned coolers purchased globally since 2020 use 100% HFC-free refrigerants, and we have set a goal of transitioning all units globally by 2025.

While our efforts in sustainable agriculture help to mitigate our Scope 3 emissions associated with agriculture, business growth in 2022 was accompanied by a growth in purchased goods. Overall, we have reduced GHG emissions from agriculture 1% compared to our 2015 baseline. We have helped to spread the adoption of regenerative agriculture in more than 900,000⁵ acres as of the end of 2022. In 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. While we are pursuing our ambitious goal of rolling out regenerative agriculture in our supply chain, sequestered carbon from these efforts are not currently accounted for in our Scope 3 results due to current methodology constraints of the GHG protocol.

In 2022, packaging represented 26% of our total GHG emissions, up from 22% in 2015. While we continue to strive to reduce absolute tonnage of virgin plastic derived from non-renewable sources, business growth in 2022 paired with consumer trend toward single-serve package sizes meant that our overall packaging footprint grew from the prior year. Unfortunately, that growth was accompanied by commensurate GHG emissions growth. Our sustainable packaging vision includes a focus on developing and deploying disruptive sustainable packaging materials and new models, including reusable packages, that will reduce our reliance on single-use plastics and packaging. We anticipate that progress made on this goal will have the additional benefit of reducing our Scope 3 emissions from packaging. For more information on our packaging journey, see Packaging.

Third-party logistics remain a key area of focus for GHG reductions. Within our North America third-party carrier procurement process, we implemented a shadow carbon price in 2020 to influence future decision-making on carrier selection that could also be based on the cost of environmental externalities.

Emission reductions in other areas of our value chain have been achieved through other efforts, including by reducing added sugar in our beverages and striving for virtually zero waste sent to landfill from our facilities.

We expect all our value chain partners—including suppliers, contract manufacturers and franchise bottlers—to set science-based climate targets, and we are supporting them in this transition. In 2022, we hosted our first value-chain-wide global pep+ Sustainability Summit, bringing together suppliers to contribute to climate targets with four expectations:

1. Report Scope 1 & 2 emissions to us by the end of 2023;
2. Set, or commit to setting, a Science-Based Target (SBT) by the end of 2023;
3. Convert PepsiCo’s portion of electrical load to renewable electricity, where available, by the end of 2023; and
4. For agricultural suppliers, collaborate with us to develop an action plan for sustainable ingredients and to build regenerative agriculture acres by the end 2023.

Internal carbon pricing

In 2021, we launched an internal carbon price through our Business Travel Inset Program (B-TIP), which is helping us balance out the carbon ‘cost’ of our business air travel. With B-TIP, we have added a carbon fee to the cost of each flight undertaken by employees for business travel. Collected fees, borne by the traveling employee’s sector, business unit or function, are then reinvested into regenerative agriculture projects that reduce carbon emissions. In addition, we have been continuously refining the tools and metrics that PepsiCo uses to evaluate and justify investments like our Green Bond and sustainable CAPEX—including a cost-of-carbon calculator.

As we pursue our climate ambition, we have made progress, yet face challenges along the way.

Strategic partnerships

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. Across all of our partnerships, we focus our work on designing, launching and scaling holistic solutions to complex challenges, investing alongside key stakeholders across all levels and leveraging external technical and financial resources to deliver outcomes that reduce climate risk, increase resilience and drive mitigation and long-term sustainability. For more detail on a selection of these partnerships, see Climate partnerships and engagement.

Supply chain engagement

Value chain engagement is a key enabler of climate action for PepsiCo. Our framework for engagement begins with segmentation. We have developed a simple internal tool for our teams to gauge the maturity of their value chain partners 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.

Our Sustainability Action Center, introduced in 2022, houses curated and publicly available resources and tools for our suppliers, bottlers and co-manufacturers to get started on their sustainability journey. It is focused on providing climate resources, including a quick maturity-level assessment and links to resources targeted to various levels of maturity.

We joined forces with Guidehouse and peers to launch the Supplier Leadership on Climate Transition (S-LoCT) program to engage and empower value chain partners towards climate action. This program will enable our partners to not only measure their footprint but will also set them on a path to setting science-based climate targets for their organization. At the end of 2022, many of our strategic partners had completed at least one season of the intense climate mitigation curriculum.

In 2022, PepsiCo launched pep+ REnew, an educational program to simplify the transition to renewable electricity for many businesses. Through a first-of-its-kind partnership for the food and beverage industry, PepsiCo has created pep+ REnew with Schneider Electric—an independent advisor on renewable energy purchasing. The goal: helping value chain partners, including suppliers, adopt renewable electricity in order to reduce their carbon footprints. PepsiCo partners globally who want to take part can register for free at the pep+ REnew site, schedule a call with Schneider Electric to discuss their electricity profile and access online education resources. Once participants complete the curriculum of curated webinars, they have the opportunity to work with the Schneider Electric team to explore their procurement options. More than 160 value chain partners have enrolled in the program since its launch.

For more on our strategy to engage suppliers, see Sustainable sourcing.

What's next?

Achieving our climate goals is a key priority under pep+. To this end, we expect to focus on the following priorities in the coming year:

• Renewable energy within our operations;
• Scaling up 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;
• Opportunities to decarbonize transportation and distribution; and
• Engagement with third-party manufacturers on operational efficiencies and renewable energy.