Agriculture is central to both global challenges and solutions related to nutrition, the environment and economic well-being. PepsiCo believes that sustainable agricultural practices will be pivotal in meeting the increasing demand for food as the global population grows, while also addressing the need to manage natural resources. These practices will be imperative toward overcoming challenges that can be associated with agriculture, such as use of the majority of the world’s available freshwater, and in some parts of the world, deforestation, biodiversity loss and soil degradation. At the same time, sustainable agricultural practices have demonstrated positive social and economic impacts, providing jobs for more than one billion people around the world and serving as the backbone of many local economies.
PepsiCo’s size and scale position us to be a leader in next generation agriculture and to catalyze change in collaboration with other businesses, governments and nongovernmental organizations (NGOs). By prioritizing sustainable agriculture, we are not only supporting positive social, environmental and economic outcomes throughout our supply chain, but we are also enabling PepsiCo’s continued business growth for the long term and its license to operate in the short term.
Sustainable Agriculture at PepsiCo
Our objective is to advance farming practices to optimize crop yields, respect human rights, improve farmer livelihoods, and secure supply as part of our aim to build a more sustainable food system. This means:
- Creating ambitious commitments, goals and standards for ourselves and our supply chain;
- Adopting processes that measure and manage performance against those standards, support farmers and suppliers, and support our business priorities;
- Maintaining robust and clear governance and management to oversee and deliver our commitment; and
- Engaging and collaborating with industry, NGOs, governments and others to find solutions to systemic issues.
Our Goals and Commitments
We have set standards for ourselves and our supply chain that match our ambition for a sustainable agricultural supply chain over the long term. We are publicly committed to sustainably source potatoes, oats, whole corn, 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. We continue to make progress, and in 2018:
- 99% of the agricultural raw materials we sourced directly were grown by farmers engaged in PepsiCo’s Sustainable Farming Program (SFP), an increase from 79% in 2017;
- 51% of the agricultural raw materials we sourced directly through the SFP were sustainably sourced, an increase from 24% in 2017;
- 23% of the traceable non-direct major agricultural raw materials we sourced were sustainably sourced based on SFP or equivalent programs, an increase from 15% in 2017 Prior period results for this metric have been adjusted to reflect currently available information.;
- 52% of the palm oil we sourced was Roundtable on Sustainable Palm Oil (RSPO) certified, an increase from 32% in 2017;
- 58% of the cane sugar we sourced was sustainably sourced as Bonsucro certified, an increase from 34% in 2017.
These goals are supported by overall policies and commitments that set out our aims and priorities for sourcing agriculture sustainably and meeting wider objectives, such as respecting human rights. Specifically:
- Our Sustainable Agriculture Policy sets out our overall objectives and principles in sourcing ingredients for our business, which are reflected in our Sustainable Farming Program;
- Our Global Supplier Code of Conduct sets out our expectations for suppliers (including agricultural raw materials), in the areas of business integrity and anti-corruption, labor practices, health and safety, and environmental management. Suppliers are also expected to communicate and apply the Supplier Code and relevant policies throughout their supply chain, including at the farm level;
- Our Global Human Rights Statement and Salient Issues Statement, our Land Use Policy and Forestry Stewardship Policy set out our expectations in those areas throughout our supply chain; and
- Our Global Policy on Sustainable Palm Oil includes our commitments to no deforestation, no development on peat, and no exploitation of the rights of indigenous peoples and local communities (“NDPE commitments”). It applies to all palm and palm kernel oil that we use globally and covers our global supply chain.
We are 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. In some instances, we buy directly from farmers through a grower group, while in other instances, there are multiple tiers between the farmer and PepsiCo. Challenges posed by the complexity of our supply chain requires that we use a variety of innovative approaches to meet our goals.
Sustainable Farming Program
Through our Sustainable Farming Program, we champion and advance positive social, environmental and economic outcomes among the farmers from which we directly source crops, which encompasses potatoes, unprocessed corn, unprocessed oats, and oranges. 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 are working with farmers around the world to provide training for on-field agronomy, resource-efficient use of fertilizers and irrigation, plant protection techniques, workers’ rights and other issues. The SFP also promotes Integrated Pest Management (IPM), which addresses agrochemical and pesticide use among other crop protection measures. At the end of 2018, 66 percent of farmers engaged through the SFP complied with our IPM requirement, including nearly 100 percent compliance in the U.S. 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 local farmers can observe and learn from their peers.
More information on the SFP can be found in our Scheme Rules, which detail the program's implementation framework, as well as the SFP Fundamental Principles, which provide a comprehensive listing of the specific principles we work with farmers to implement, within the pillars of Social, Economic and Environmental.
The SFP is focused on our main crops that we directly source, but we apply the principles throughout our agricultural sourcing. We have developed a benchmarking protocol to recognize other schemes that meet the standards set out in the SFP, such as the Sustainable Agriculture Initiative Platform, Farm Sustainability Assessment and the Global Good Agricultural Practice (G.A.P.) Risk Assessment on Social Practice (GRASP) program.
Sustainable Sourcing Program
For many of the crops that we source, there are several suppliers between ourselves and the farmer, which makes these suppliers critical partners in delivering our objectives for sustainable agriculture.
Our Sustainable Sourcing Program (SSP) reviews compliance against our Supplier Code of Conduct (SCoC) for business-critical direct suppliers, including agricultural commodities. Through the SSP, we engage suppliers on the SCoC and our standards through a self-assessment, third party audit and mitigation process leveraging the Sedex SMETA methodology aligned to international standards in the areas of business integrity, labor practices, health and safety, and environmental management. Further information on our overarching sustainable sourcing approach and the Sustainable Sourcing Program can be found here.
Palm Oil and Cane Sugar
PepsiCo is committed to sustainably sourcing palm oil and cane sugar for our business by 2020. 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 issues, 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 to the planet to focus our efforts;
- Verification through credible 3rd party standards (primarily the RSPO and Bonsucro sugar cane Standards);
- Supplier engagement to build capacity in our direct suppliers and further down the supply chain;
- Investment and support for on-the-ground projects to ensure farmers, including smallholders, and communities benefit from our actions; and
- Partnership and collaboration with peer companies, suppliers, civil society and others to address long-term, systemic issues that cannot be tackled alone.
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. Progress is set out in our Palm Oil Progress Report 2018. In 2019, we will review the running of our grievance process with the help of external experts to ensure it is meeting its objectives.
For more information on our approach to palm oil, see our Palm Oil page, and our Palm Oil Progress Report.
A dedicated team led by our Vice President for Sustainable Agriculture is responsible for managing our sustainable agriculture programs day-to-day. This global team, based within PepsiCo's Office of Sustainability, works in close partnership with associates across many internal functions including Global Procurement, Public Policy & Government Affairs, Communications and our Human Rights Operating Council. This Sustainable Agriculture team reports up to the PepsiCo Executive Committee through our Chief Science Officer. Progress is reviewed by our PepsiCo Executive Committee as well as the Public Policy and Sustainability Committee of our Board of Directors on an at least annual basis.
Performance and Impact
By working with growers and suppliers to source our agricultural ingredients responsibly and sustainably, and implementing key programs around the globe, we have made significant progress towards achieving our sustainability goals. Some examples of our programs in practice include:
Supporting sustainable citrus supply chains in Brazil
PepsiCo sources a significant volume of orange juice for our juice products in Europe from Brazil. There, we work with Citrosuco, one of our key suppliers, to provide us with sustainably sourced orange juice that meets our expectations for sustainable agriculture and aligns with our commitments to respect human rights across our value chain. Together with Citrosuco, we have developed best practices to address shared challenges, such as those related to the management of citrus greening, a plant disease which affects an estimated 15-20% of Brazilian citrus. Citrosuco has implemented an innovative disease management system that leverages bio-based controls and community engagement to combat greening. Through this approach, the greening level on Citrosuco’s orange groves is significantly lower than the average in Brazil’s citrus belt.
PepsiCo has also inspired Citrosuco to develop and implement robust policies and management systems to support human rights, including a code of conduct, responsible recruitment practices for migrant workers, and a grievance mechanism available to their employees and third-party suppliers. Citrosuco is also actively building the capability of its third-party growers to meet and exceed PepsiCo standards, through training on topics including farm business management, succession planning, and good agricultural management practices.
In 2019, we are continuing to partner with Citrosuco to sustainably source our Brazilian orange juice and exchange best agricultural practices in the face of challenges such as citrus greening.
Partnering to deliver sustainable growth for the potato industry in Egypt
PepsiCo is working with suppliers, the United States Agency for International Development (USAID) and NGOs to help deliver sustainable growth of potato farming in Egypt. The partnership aims to improve transparency from the trader to the farmer and provide agronomy support and technology solutions that improve resilience, consistency, and reliability through processes such as mobile soil testing, irrigation, and certified service providers in agro-chemicals. The multi-year program aims to reach thousands of farms and lead to more sustainable, secure supply chains based on an improved quality and productivity ratio with better smallholder agronomy and less waste. PepsiCo will work closely with USAID to incorporate the best practices from international development and rural empowerment into its supply chain.
Cane Sugar in India
PepsiCo is working in partnership with Landesa—a global organization that champions and works to secure land rights for millions of the world's poorest, mostly rural women and men to provide opportunity and promote social justice—to implement a social impact program in India. The first phase was to educate sugar mill operators and farmers that supply the mills on the concept of social impacts. The intent is to help them better understand the social impacts of growing sugarcane and the requirements that apply to PepsiCo and its suppliers related to social impact issues, including land tenure. The program has created training modules in three different languages and they will be conducted to train staff of three sugarcane supplier mills: one to train smallholders who supply the mills; one training module specifically for women farmers; and, one to train mill staff to conduct future farmer trainings.
In addition, to further support female sugarcane farmers in Maharashtra, India, we worked with the nongovernmental organization (NGO) Solidaridad and IFC (World Bank) to launch the first-ever female focused residential training program at the Sugarcane Institute in Pune for nearly 400 female farmers. There, they were able to learn about modern sustainable agricultural techniques. For some of these female farmers, it was the first time they had left their village or had the opportunity to participate in training.
We started our demonstration (demo) farm program in India and now have more than 100 farms globally across 8 countries, with further expansion underway. On these farms, a portion of land is set aside to introduce new farming practices and technologies, like new irrigation technology or better nutrient management practices, while the rest of the farm acts as a control. We measure important key performance indicators (KPIs), including both sustainability and core business metrics, such as yield and quality. Then, the demo farms are opened to other local farmers to learn from and see the benefits of sustainable farming practices. We engage with progressive and influential farmers to create demonstration farms, as we have found that peer-to-peer influencing is often the best means of creating change and advancing SFP practices and outcomes. We are co-creating the demonstration farms with the farmers from the bottom up and have already seen significant improvements in terms of social, environmental and economic impact.
One example is in Thailand, where PepsiCo’s Sustainable Farming Program supports female empowerment while delivering other social, environmental and economic benefits. Today, a majority of potato farmers in Thailand use furrow irrigation, which leads to low yields, plant disease risk, soil health decline and competition for water. PepsiCo has piloted a farm where we installed a solar-powered, drip irrigation system that is expected to result in various environmental and economic benefits. In particular, the change is expected to deliver an estimated yield increase of more than 20%. PepsiCo is also exploring partnership opportunities how we can evolve this demonstration farm into a community learning center providing training and economic opportunities for the broader community.
Driving resilience in our U.S. agricultural supply chain
PepsiCo is working in two regions of the U.S. to help prove a model for supporting soil health and farm resiliency in the face of heat, cold, drought and flood. We hope to demonstrate that there are ways to build the health of soils and help farmers to mitigate and adapt to climate change. We are helping to provide agronomic and financial support to de-risk farmers returning to practices that can benefit a farm’s long-term profitability and the entire system’s environmental footprint.
Specifically, In Iowa and Illinois, we are incentivizing farmers to plant a cover crop on their land between corn and soy or corn and corn rotations. Today, much of the land in the Midwest lays bare in the winter, allowing for nutrient runoff which can cause river pollution, significant erosion of the soils and a threat to the future of farming in these regions. Planting cover crops not only reduces environmental challenges, but also improves the ability of farms to continue to produce well in difficult weather years.
Building smallholder capability with coconut farmers in Brazil
Through PepsiCo’s partnership with SEBRAE—a non-profit private entity with the mission of promoting the sustainable and competitive development of small businesses in Brazil—we are helping to build capability among 93 smallholder coconut farmers near the city of Petrolina, Brazil. The SEBRAE consultants train smallholders on irrigation system calibration, field capacity maintenance, and water and nutrient application. Additionally, as participants in PepsiCo’s SFP, the farmers receive consultation on irrigation and water management, which are considered critical for maximizing yields (fruits and coconut water/hectare). PepsiCo’s owned coconut farm, KeroCoco, one of our Brazilian demonstration farms, plays an important role in sharing best practices with smallholders in the area, often performing field days for them.