Climate Change

PepsiCo's Sustainability Goals

Implementing solutions to address climate change is important to the future of our company, customers, consumers and our shared world. We have a strong interest in reducing greenhouse gas (GHG) emissions given the risks we believe climate change presents to our business and the communities where we operate. Climate change could have an impact on the quantity and quality of agricultural raw materials available for our products; create weather patterns that affect the operation of our facilities and supply chain; and affect the availability and quality of water.

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 Public Policy & Sustainability Committee, and the PepsiCo Risk Committee. In line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), we are working towards understanding climate-related risks and opportunities through the use of scenario analysis. We are also engaging external stakeholders on this issue and around building resiliency for our business over the long term from climate change impacts.

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 membership in the U.S. Climate Action Partnership, signing the American Business Act on Climate Pledge, and supporting the Paris Climate Agreement. 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.

We believe industry and governments should commit to science-based action to keep global temperature increases to well-below 2 degrees Celsius or 1.5 degrees Celsius above pre-industrial levels, as described by the Special Report on Global Warming of 1.50C of the Intergovernmental Panel on Climate Change. Our goal to reduce absolute GHG emissions across our value chain by at least 20 percent by 2030 was developed in line with what was science-based consensus at the time. With publication of the Intergovernmental Panel on Climate Change (IPCC)’s October 2018 special report on climate change, we are monitoring guidance from the Science Based Targets Initiative on what this may mean for our goal.

PepsiCo's global carbon footprint amounted to 69 million metric tonnes of carbon dioxide equivalents (CO2e) in our baseline year of 2015. A breakdown of our footprint reveals that agriculture, packaging, third party transportation and distribution, including our vending and cooling equipment, make up the majority of our emission drivers. Emissions from our operations make up 8% of our footprint while our value chain is 92% of our footprint.

PepsiCo Climate Change Emissions Footprint

This 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. Between 2006 and 2015, we implemented projects across our legacy operations that improved energy efficiency by nearly 18 percent. In the future, we plan to further reduce Scope 1 and 2 emissions by focusing our energy strategy on improving efficiency in our manufacturing and fleet operations. Our Resource Conservation (ReCon) program, a comprehensive, global platform of resources, tools and programs designed to improve energy, water and waste efficiencies in our manufacturing processes, leverages training and technology to identify further opportunities to reduce fuel and electricity consumption in our operations. Deployment of energy efficient lighting, heating and cooling systems, boilers, and motors, combined with operator training, are key to driving energy efficiency in our manufacturing and warehousing operations. Additionally, continued developments in fleet technology, including aerodynamics, more efficient powertrains, and GPS/telematics will further drive fleet fuel economy. In addition to improving energy efficiency, the GHG intensity of the energy we procure and use in manufacturing and fleet operations will be reduced 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.

Our value chain emissions focus areas are agriculture, packaging and third-party transportation and distribution given that these categories are our largest emissions drivers. Being one of the world's largest food and beverage companies, agriculture makes up the largest fraction of our footprint. Our climate strategy related to agriculture goes hand in hand with our sustainable sourcing goals, and we recognize that sustainability and conservation practices that lead to better yields, improved soil health, lower deforestation and productivity for farmers also lead to GHG emission reductions. Therefore, we are focusing on sustainably sourcing major commodities 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. Packaging is another aspect of our footprint where we see synergies between climate and our activities on sustainable packaging and circular economy. In order to reduce our packaging emissions, we are focusing on activities to incorporate more recycled content into our packaging, making our packaging recyclable, compostable or biodegradable, packaging material reduction, as well as alternative and biodegradable materials. Within the third-party transportation and distribution area, we have been and continue to work on improving the efficiency of our vending and cooling equipment. We are working towards mapping out and understanding our baseline emissions from third party carriers and engaging with the USEPA's Smartway program to identify opportunities for improvement within our carrier base.

In addition, we are working to embed an environmental sustainability impact assessment, including GHG impact assessment, within our new product development process. We have developed a toolkit and business processes that build the capability within our various functions that are involved in product innovation to understand the environmental and climate impacts of product design, and pave the way for making sustainable choices. This is a strategic long-term vision of the Company to transform our business towards becoming more sustainable and lowering our impact on the planet.

PepsiCo Goals for Climate Change

Scope 1&2: Progress and Performance

In these early years of our journey towards our goal, we are focusing on investing in capability and upgrading equipment to more efficient and low carbon options. This has enabled us to deliver a 6.4 percent decrease in emissions in 2018 against the 2015 baseline, which represents 32 percent progress towards our 2030 goal. For PepsiCo, Scope 1 and 2 emissions, which make up approximately 8 percent of our carbon footprint, come from sources that include on-site fuel used to generate heat and electricity, fleet fuel, and purchased electricity. We are investing in a variety of actions across our operations, including energy efficiency improvements driven by our Resource Conservation (ReCon) program.

PepsiCo Progress on Climate Change PepsiCo Energy Usage for 2018

In addition, we made key investments in high efficiency lighting, building management systems, solar photovoltaics, combined heat and power plants, and the conversion of our last coal boiler in the U.S. to fire on natural gas.

For a number of years, we also have made significant improvements in fleet GHG intensity. One way to improve fleet GHG intensity is to diversify the types of fuels we use. Our Frito-Lay North America Compressed Natural Gas (CNG) fleet drove 61 million miles and used 300,000 gallons (GGE) of Renewable Natural Gas (RNG) in 2018, while also establishing contracts to ensure all future fleet natural gas will be 100 percent RNG.

We have made significant improvements in fleet efficiency by improving fuel economy, right-sizing vehicles and diversifying the sources of energy used by our fleet. For example, we design new trucks and trailers with advanced aerodynamic devices. In 2018, we retrofitted nearly 800 PepsiCo North American Beverages trailers with aerodynamic devices to improve the fuel economy of our existing fleet.

Moving forward, we plan on continuing our investments in low carbon and renewable energy, with ongoing investments in fleet efficiency technology and alternative fuels, solar photovoltaics, equipment upgrades and replacement as well as looking for opportunities to purchase renewable electricity for our sites.

PepsiCo Efforts on Climate Change

Scope 3: Progress and Performance

While we continue to progress on reducing GHG emissions within our direct operations, we know that our greatest opportunity for progress lies in reductions outside of our direct operations – our Scope 3 emissions, which account for approximately 92 percent of our carbon footprint. For PepsiCo, these emissions originate from agriculture, packaging manufacture, and third-party transportation, among other sources.

In determining the methodology behind our Scope 3 emissions reduction tracking, we projected our Scope 3 emissions to 2030 based on the best available business as usual growth estimates. We also determined what our Scope 3 emissions should be in 2030 if we reduced 20 percent against our 2015 baseline. The difference between these two trajectories is our best estimate of our target reduction amount for Scope 3 emissions.

In 2018, we reduced Scope 3 emissions by approximately 2.2 million metric tonnes. This represents approximately 7 percent of our 2030 target reduction amount. These reductions were driven by improvements in our vending and cooler equipment in retailers, in which we reduced GHG emissions by 26 percent in 2018. We did so by replacing less energy efficient models with more efficient ones, all compliant with the latest standards of DOE2017 and e-star3, saving approximately 1.7 billion kWh of energy. Transitioning to hydrofluorocarbon (HFC)-free equipment has been a major focus for us, with all of our company-owned units in Europe now HFC-free, and a goal for those in North America to follow by 2020, and globally by 2025.

We continue to implement our strategy and align stakeholders around our main drivers of Scope 3 emissions in agriculture, packaging and third-party logistics. We are also focusing our efforts on adding a GHG lens to many of our existing initiatives in the areas of waste, upstream emissions and product transformation. In these initial years towards our goal, as we ramp up our strategy for Scope 3 in the key focus areas, we expect to see progress come from these existing initiatives. Therefore, in addition to our vending and cooler equipment, emission reductions have also been achieved through our progress towards sustainably sourcing palm oil, reducing sugar in our beverages, participation in industry efforts towards increasing recycling in the U.S., such as the Closed Loop Fund and The Recycling Partnership, and waste reduction from our facilities.

PepsiCo Scope 3 Progress on Climate Change