ESG Topics A-Z


We created our ESG Topics A-Z resource to address in detail the broad range of sustainability-related topics that matter to our business and our key stakeholders. Click on each of our topics in the index below for more information.

Focus Areas

At PepsiCo, we believe children are a special kind of audience. When communicating about our products, we take particular care to support the role of parents or others responsible for guiding children’s diet and lifestyle choices. For example, pursuant to our Global Policy on Responsible Advertising to Children, we advertise to children under age 12 only those products that meet PepsiCo’s Global Nutrition Criteria for Advertising to Children. We also restrict direct sales of certain foods and beverages to schools.

Global Policy on Responsible Advertising to Children

Our policy provides that on a global basis, we will advertise to children under age 12 only those products that meet PepsiCo’s Global Nutrition Criteria for Advertising to Children. These criteria are grounded in well-established and broadly recognized scientific principles in accordance with international and national nutrition authorities. We also adhere to all relevant laws and regulations within the countries in which we operate.

Our Global Policy on Responsible Advertising to Children Policy prohibits advertising products that do not meet certain nutritional requirements in television programs whose audience profile is made up of greater than 35 percent children who are under the age of 12. Additionally, PepsiCo does not advertise any products (regardless of nutritional profile) to children who are under the age of 6.

We have strengthened the policy several times over the years to include additional restrictions. In addition to certain marketing restrictions within school environments, it now covers any marketing communications primarily directed to children under 12 that use licensed characters (excluding company-owned, brand equity characters), celebrities (including influencers) and movie tie-ins. Media covered under the policy include TV, radio, print, cinema, online, DVD, direct marketing, product placement, interactive games, outdoor marketing, mobile and short message service marketing.

As social media continues to evolve, we are striving to update the ways in which we market our products while maintaining our responsible marketing practices. We face new challenges in applying our policy to emerging application technology and the availability of audience data. We are engaging with partners and external organizations, such as advertising agencies, media vendors, and organizations like the World Federation of Advertisers (WFA), to understand the continuously evolving marketing landscape and adapt accordingly. We have also been rolling out training programs so marketers understand the implications of applying our policy to the digital space and discuss with them how new technologies might help us to adapt our policies going forward.

Global, Regional, and National Pledge Programs

We have also signed on to industry-led voluntary initiatives through several global, regional, and national Pledge Programs. These programs are all based on the principle that signatories advertise only products that meet specific common nutrition criteria to children under the age of 12.

In 2016, the EU Pledge, which covers countries in the European Union, developed detailed Implementation Guidance which outlines how to apply the commitment in practice. In February 2020, the EU Pledge revised the Guidance to include a commitment not to use influencers whose primary audience is children under the age of 12 in relation to products which do not meet applicable nutrition criteria, along with advice on how to comply with this commitment. While this Implementation Guidance has only been adopted to date by participants for their European Union operations, PepsiCo often refers its teams outside of the EU to this document to support them in the development of marketing campaigns.

In the event there are conflicts between PepsiCo’s Global Policy on Responsible Advertising to Children, and any Pledge Program, and/or any relevant laws and regulations, PepsiCo will apply the strictest requirement.

Marketing to All Consumers

In addition to our Global Policy on Responsible Advertising to Children, our marketing practices and communications to all consumers are guided by the International Chamber of Commerce (ICC) Code of Advertising and Marketing Communication Practice (10th Revision 2018) and the ICC Framework for Responsible Food and Beverage Communications (2019). Together the ICC Code and Framework help ensure our marketing provides legal, honest, decent, and truthful information about our products. This includes:

  • Accurately representing our products and not misleading consumers about benefits of products;
  • Showing proper serving and portion sizes, as well as proper consumption; and
  • Taking special care when communicating with children so as to not create a sense of urgency, or inappropriate price minimization.

Compliance Monitoring & Reporting

Around the world, each division and region within PepsiCo has a process for reviewing and approving marketing campaign materials to, among other things, drive compliance with our Global Policy on Responsible Advertising to Children and Pledge Programs. While these processes may vary, they all typically require cross-functional review, consultation and approval prior to the release of any content. This review is aimed at ensuring our campaigns are in compliance with relevant laws and regulations, clear and truthful, not misleading, in line with our Values and Code of Conduct, and appropriately handle sensitive topics.

PepsiCo monitors and reports compliance with our Global Policy on Responsible Advertising to Children through many of our Pledge Programs around the globe. For example, consistently throughout the years, including the most recent reporting period of 2018, we were compliant with our United States and Canada Advertising to Children Pledges, as verified by the Children’s Food & Beverage Advertising Initiative in the U.S. and by Advertising Standards in Canada.

In the first quarter of 2019, as part of the EU Pledge monitoring program, we achieved 99 percent compliance for television ads, as verified by Accenture, with compliance measured in France, Germany, Hungary, Italy, Portugal, Spain. The EU Pledge used a new methodology to monitor digital compliance in the Czech Republic, France, Germany, Greece, Italy, The Netherlands, Spain, and Sweden, and found 100% of our company-owned websites were compliant and 92% of our social media profiles were compliant.

In addition, we have achieved 95 percent compliance with our Advertising to Children Policy in recent years in globally representative markets such as Colombia, India, New Zealand, Philippines, and South Africa.

Sales of our Products to Schools

In 2006, in the United States, PepsiCo was proud to take a leadership role as the only food and beverage company to sign voluntary agreements regarding sales of both snacks and beverages in schools with the Alliance for a Healthier Generation – at the time, a joint initiative of the William J. Clinton Foundation and the American Heart Association. These agreements represented break-through steps to adopt a practical policy in the U.S. that provided a sensible solution for students, parents, and educators. These agreements also served as a precursor to the current “Smart Snacks” national nutrition standards for foods and beverages sold in schools established by the U.S. Department of Agriculture.

Outside of the U.S., PepsiCo’s global policy for beverage sales in schools focuses on providing water, juice, milk, and low-calorie beverages for students. PepsiCo-owned bottling operations offer nutritious hydration options for students and work with schools to eliminate full-calorie soft drinks in primary and secondary schools. We work with our independent franchise bottlers, third-party vending companies, and other PepsiCo beverage distributors, as well as schools and local authorities, to apply this policy beyond PepsiCo's direct operations. It should be noted that because our policies alone cannot determine the actions of businesses outside our operational control, our products sometimes may be sold in schools by independent third parties. However, we view our policy as an opportunity to engage our industry peers and local authorities in adopting similar policies. It will ultimately take a collaborative, industry-wide effort to ensure consistently more nutritious options in schools.

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.

Animal Welfare

AS WE PURSUE Sustainable Agriculture, WE HAVE MADE PROGRESS BUT FACED CHALLENGES ALONG THE WAY.
Progress

With more work to do, over 80% of our committed commodities, palm oil and cane sugar, and nearly 80% of the agricultural crops we source directly were sustainably sourced in 2019;

We have activated a global network of demonstration farms to serve as beacons of locally relevant good practices and catalyze change at the local level;

Through collaboration with suppliers and other partners, we have established farm-level projects to support farmer resilience, incentivize and enable regenerative conservation agriculture, and engage women and youth in farming communities.

Challenges

The complexity of our global supply chains means making an impact in upstream farming communities 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, together with our partners we will need to be more resourceful than ever before 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.

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 Approach

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 require that we use a variety of innovative approaches to meet our goals.

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, 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. We continue to make progress, and in 2019:

  • Nearly 80% of the potatoes, corn, oats, and oranges we sourced directly through the Sustainable Farming Program (SFP) were sustainably sourced, an increase from 51% in 2018;
  • 82% of the palm oil we sourced was Roundtable on Sustainable Palm Oil (RSPO) certified, an increase from 52% in 2018;
  • 86% of the cane sugar we sourced was sustainably sourced as Bonsucro certified, an increase from 58% in 2018;
  • 12% of the other priority agricultural raw materials we sourced through suppliers were sustainably sourced through standards considered equivalent to SFP or through supplier continuous improvement programs. The scope of this goal was expanded in 2019 to include additional raw materials identified through a materiality assessment.

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 those that supply raw agricultural commodities), 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 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 peatlands, 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 and covers our global supply chain.

Sustainable Farming Program

PepsiCo sets goal to Sustainably Source Crops like Potatoes and Corn

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, corn, 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. We are in partnerships with groups driving change at the farm level with farmers primarily growing cover crops where cover crops were not grown before. This farm management change improves the soil health of the farm, reduces the usage of inputs on the farm, lessens soil erosion and nutrient runoff, creates habitat for wildlife, and – most importantly – captures carbon.

PepsiCo makes progress on Sustainable Crop Sourcing of Potatoes Corn Oats and Oranges

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 Economic, Social, and Environmental well-being.

Palm Oil and Cane Sugar

PepsiCo sets Goals for Sustainably Sourcing Palm Oil and Cane Sugar

PepsiCo is committed to sustainably sourcing 100 percent of the 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 the planet in order to focus our efforts;
  • Verifying compliance through credible 3rd party standards (primarily the 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.

PepsiCo works with Bonsucro and RSPO to achieve Sustainable Sourcing goals for Palm Oil and Cane Sugar

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.

Other Priority Raw Materials

By 2025, we are committed to sustainably sourcing priority-supplier-sourced raw materials – those that we don’t source directly from farmers – based on business need.

PepsiCo is committed to Sustainably Sourcing Raw Materials

In 2019, we established an expanded scope of priority raw materials based on the results of a supply chain materiality assessment. Our priority-supplier-sourced raw materials are: high fructose corn syrup, corn meal, wheat, sugar beet, apple juice, orange, banana, cocoa, raw milk dairy, and dairy seasonings.

We also updated our approach to sustainable sourcing of these supplier-sourced raw materials to better reflect 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 are leveraging two models to make progress toward our goal: verified volumes and continuous improvement.

For crops on a verified volumes pathway, we leverage an equivalency framework to recognize volumes that are verified to a sustainability standard benchmarked by a third party, as equivalent to our Sustainable Farming Program. For example, 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 as suppliers can credibly demonstrate continuous improvement on the crop’s material issues. 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.

PepsiCo provides Verified Volumes of Sustainably Sourced Crop

We are engaging with key suppliers of our priority agricultural raw materials to develop joint action plans on sustainable agriculture and sustainable sourcing, and we actively participate in industry projects through the SAI Platform to deliver our verified volume goals. In 2020, we will deepen these collaborations and launch several new workstreams in our supplier sourced priority raw materials.

Sustainable Sourcing Program

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 Sustainable Sourcing Program (SSP) to engage our agricultural suppliers at the processing level.

Our Sustainable Sourcing Program (SSP) builds supplier awareness and capabilities on the issues and expectations referenced in our Supplier Code of Conduct (SCoC). Through the SSP, we engage suppliers – including agricultural commodity suppliers – on the SCoC and our standards through a self-assessment, third party audit, and corrective action process. The SSP leverages 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.

Our Governance

A dedicated team led by our Vice President of Global Sustainable Agriculture & Responsible Sourcing 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 Sustainability 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.

Looking Ahead

In the coming year, our Sustainable Sourcing priorities include:

  • Increasing our ingredient supply from sustainable sources, with emphasis on our committed commodities, palm oil and cane sugar, and the crops we source directly from farmers – potatoes, corn, oats, and oranges;
  • Supporting adoption of regenerative farming practices across our agricultural supply chains to reduce our greenhouse gas footprint and improve farm resilience;
  • Continuing to leverage our global demonstration farms to catalyze local adoption of relevant sustainable agriculture practices;
  • Enabling direct farmers in high-water-risk locations to improve water use efficiency;
  • Deepening our work on farmer livelihoods through initiating women’s economic empowerment programs in key supply chains; and
  • Maintaining engagement and leadership roles in key industry groups, such as SAI Platform, Field to Market, Midwest Row Crop Collaborative, Cool Farm Alliance, Bonsucro, and RSPO.

PepsiCo shares concerns regarding the ethical and humane treatment of animals. As a major food and beverage company, we strive for sustainable practices in all of our business areas, including animal well-being. Among our broad, global portfolio of products, PepsiCo has a dairy business and other products that use animal ingredients, for example, cheese seasonings, eggs in baked items such as cookies and biscuits, and chicken broth in some of our food product seasonings. Apart from our dairy business, animal products are a relatively small aspect of our supply chain.

Working closely with our suppliers and other stakeholders is vitally important to improving animal welfare in our global supply chains. Many of the animal ingredients we purchase do not come directly from farmers, which makes suppliers key partners to driving improvements. All suppliers to PepsiCo are held to the standards set in our Supplier Code of Conduct and are urged to support the principles laid out in this policy as well as our Sustainable Agriculture Policy.

In early 2020, PepsiCo consolidated its work on animal welfare into its first ever Animal Welfare Policy. In it, we share our commitment and approach to managing relevant issues in our supply chain, including animal testing, broiler chickens, and cage-free eggs.

Five Freedoms of Animal Welfare

Good animal health and proper animal handling and care are essential elements of responsible food production. With all of our farmers, we emphasize responsible animal care and focus on continuous improvement. We understand the importance of the internationally-recognized Five Freedoms for animal well-being and we urge our farmers to strive for these fundamental principles, which include:

  1. Freedom from hunger and thirst;
  2. Freedom from discomfort;
  3. Freedom from pain, injury, or disease;
  4. Freedom to express normal behavior; and
  5. Freedom from fear and distress.

PepsiCo aims to ensure these five freedoms to support good physical and mental well-being for all animals within our direct supply chain. This in turn allows for the production of high-quality, safe ingredients for our products.

Broiler chickens

We support and encourage our suppliers’ efforts to transition to use nationally or internationally recognized standards for broiler chicken welfare, including criteria related to lighting, litter, stocking density, and humane processing techniques, among other factors.  

Cage-free Eggs

We are committed to working with our partners toward sourcing 100% cage-free eggs in the U.S. by the end of 2020 and global markets by the end of 2025. As of July 2019, 20% of the eggs we have purchased in the U.S. in 2019 were cage-free. We only source powdered eggs in the U.S.

Animal testing

PepsiCo does not conduct animal tests with respect to our food and beverage products or ingredients, except when required by law to demonstrate safety or efficacy. In these specific instances, our ingredient suppliers, PepsiCo, as well as trade associations use qualified third-party laboratories to conduct such tests following internationally accepted guideline protocols. PepsiCo may provide financial support for these studies on a case-by-case basis.

We encourage the use of validated alternative testing methods whenever feasible and have financially supported research to develop the appropriate use of these alternative methods.

PepsiCo is committed to producing great-tasting, high-quality food and beverages in every part of the world, while also ensuring that our products meet or exceed appropriate safety and quality standards.

We understand that some consumers and other stakeholders have questions about bioengineered food and ingredients, sometimes referred to as genetically modified organisms (GMO) or genetically engineered (GE). As new technologies have developed, concerns have arisen around potential impacts to human health or the environment.

The use of bioengineered food and ingredients is safe. Some of the most prominent regulatory agencies and organizations that study the safety of the food supply, including the U.S. Food & Drug Administration, the American Medical Association, the World Health Organization, Health Canada, the European Food Safety Authority, the U.S. Department of Agriculture, and the National Academy of Sciences, have found that bioengineered food and ingredients are safe, and no negative health effects associated with their use have been recorded.

Bioengineered technology has been widely used in agriculture for more than 20 years, and crops using this technology may require fewer pesticides and less water, generate more stable and often higher yields for farmers, and reduce carbon emissions. This technology, along with other tools, can help farmers be more resilient and adapt their practices to manage a changing climate.

PepsiCo’s Use of Bioengineered Ingredients

Government approval of the usage and labeling of bioengineered foods differs from market to market. PepsiCo complies with all relevant regulatory requirements where we operate.

Like other global food and beverage companies, PepsiCo recognizes that different regional markets can have different expectations and consumer preferences as well as varied raw material availability. Depending on local factors, individual business units may choose not to use bioengineered ingredients, even if approved by government for use. For example, we offer “Non-GMO” verified products in our Stacy’s Pita Chips, Quaker Organic Oatmeal, SIMPLY brand snacks, and Tropicana and Naked Juice product lines.

Labeling

PepsiCo ensures that products containing bioengineered materials comply with local regulations for their use, including any labeling requirements. We want consumers to have clear and helpful information about their foods and beverages and believe that any labeling standards established in this regard should be clear and consistent so that consumers can better understand the safety, prevalence, and benefits of bioengineered ingredients and can make informed choices for themselves and their families.

Our sustainability goals are aligned with our priority areas. Each of our eight goals has a series of target metrics against which our progress can be assessed.

To this end, we have defined a clear methodology for calculating each target metric, enabling us to measure performance accurately and consistently. We believe that transparency is an important driver of trust and accountability with our stakeholders, and in that spirit, we are publishing a summary of our calculation methodology.

This summary is available for download here. For detail on performance against our target metrics, see our latest Performance Metrics sheet, here.

The process of caramelization has been known since the early days of cooking. It was not until the 19th century, however, that caramel coloring gained commercial significance as an additive in the brewery industry; the soft drink industry followed later in the early 20th century. Today, caramel colorings are manufactured for a variety of purposes.

Extensive research conducted over decades and published in scientific literature has repeatedly established that caramel colorings, and the foods and beverages they are in, are safe. As a result, the use of caramel colorings in food and beverage products continues to be approved by regulatory authorities. For example, the U.S. Food and Drug Administration, the European Food Safety Authority and Health Canada, consider caramel colorings to be compliant with the required safety specifications for use in foods and beverages.

At PepsiCo, the safety of our products is a top priority and we abide by regulatory guidelines everywhere we do business. When regulations for 4-MEI, a common caramel coloring ingredient, were instituted in California, we moved immediately to reformulate our cola beverages with a caramel color that lowered the amount of 4-MEI in our products and these changes have been implemented around the world except where local regulations prohibit import of the caramel. Throughout this process, there was no change to the overall Pepsi-Cola product or the product’s great taste, which consumers know and love.

At PepsiCo, our strategy to address climate change is based on two pillars - mitigation and adaptation. We are looking for ways to decarbonize our entire value chain, while assessing the impacts of climate change on our business and developing resiliency plans. Our goal is to reduce our absolute greenhouse gas (GHG) emissions across our value chain by at least 20 percent by 2030 from a 2015 baseline. To achieve this, we are focusing on our company-owned and controlled emissions, as well as the three largest drivers of our value chain emissions: agriculture, packaging, and third party transportation and distribution.

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 GHG emissions given the risks we believe climate change presents to our business and the communities where we operate. These challenges and opportunities it poses are unique given the inter-connected nature of climate change and our other sustainability priorities. 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. At the same time, we recognize our pursuit of other sustainability priorities, such as packaging, can also impact our GHG emissions.

PepsiCo makes Sustainable Goals for Climate Change

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. This means that specific actions are performed in order to identify the risk indicators and a mitigation plan is developed 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 all of 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 result helps us:

  • View our business within various temperature (business as usual and 20C scenarios) and timeframe (2020-2100) scenarios;
  • Identify our hotspot areas in terms of climate impacts - both physical and transitional; and
  • Contribute towards our resiliency planning.

We are also engaging with external stakeholders on this issue and around building resiliency for our business over the long term from climate change impacts.

Working Collaboratively to Address Climate Change

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.

Our Commitment

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 current goal to reduce absolute GHG emissions across our value chain by at least 20 percent by 2030 is in line with a 20C pathway. PepsiCo has signed the Business Ambition for 1.5°C pledge, joining other leading companies in committing to set science-based emissions reduction targets — across our entire value chain — in line with limiting global warming to 1.5°C. We are also developing a long-term strategy for achieving net-zero emissions by 2050.

PepsiCo's global carbon footprint amounted to approximately 57 million metric tonnes of carbon dioxide equivalents (CO2e) in 2019. 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 made up 9% of our footprint in 2019 while our value chain represented 91%.

Our approach

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.

PepsiCo shows Carbon Emissions for Climate Change Sustainability

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, it uses training and technology to identify opportunities to reduce fuel and electricity consumption. ReCon’s efforts are twofold: focus on deploying energy efficient lighting, heating, and cooling systems, boilers, and motors, as well as driving 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% renewable electricity for US operations which accounts for over half of our global electrical load.

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.

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 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 with a clear link between climate and our other sustainability activities. In order to reduce packaging emissions, we are focusing on incorporating more recycled content into our packaging, making it recyclable, compostable, or biodegradable, reducing packaging material, as well as introducing alternative and biodegradable materials.

Within the third-party transportation and distribution area, we continue to improve the efficiency of our vending and cooling equipment. We have reduced our emissions from company-owned vending and cooling equipment by 39% from our base year of 2015. And, 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.

In 2019, we introduced Sustainable from the Start, an environmental sustainability impact assessment, including GHG impact assessment, into our new 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.

Note on Methodology

In 2019, we fundamentally shifted the way we measure our Scope 3 carbon emissions in order to improve accuracy while continuing to ensure conformance with the Greenhouse Gas Protocol Corporate Value Chain Standard. Whereas our methodology previously followed a top-down approach that extrapolated emissions based on sales data, our new approach quantifies emissions from the bottom up. It utilizes as much primary procurement or other activity data as possible to determine our Scope 3 emissions in each of the 15 categories specified by the GHG Protocol. We then apply activity-specific emissions factors that are either developed through internal measurement and analysis or obtained from credible externally-available sources. This effort represents 1.5 million data points and more than 75 data sources and is a significant improvement in data quality and in our ability to track progress over time. As a result, the 2015 baseline for our Climate goal has changed to 59 million metric tons.

Overall Performance

In 2019, we reduced our total GHG emissions 6% against our 2015 baseline, as outlined below.

Scope 1 and 2: Progress and Performance

As we pursue our goal, we are focused on investing in our capabilities and upgrading equipment to more efficient and low-carbon options. This has enabled us to deliver a 9% decrease in emissions in 2019 against the 2015 baseline.

This progress was delivered, in part, by investments in high efficiency lighting, building management systems, solar photovoltaics, and combined heat and power plants. In early 2020, PepsiCo announced a commitment to achieve 100% renewable electricity for its U.S. direct operations through a range of plans, joining its operations in nine other countries. This is expected to deliver a 20% reduction in company-wide direct operations (Scopes 1 and 2) GHG emissions relative to a 2015 baseline. For more information, 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.

Scope 3: Progress and performance

In 2019, we reduced Scope 3 emissions by approximately 5% against our 2015 baseline. These reductions were driven by improvements in vending and cooler equipment in retail, in which we reduced GHG emissions by 39 percent in 2019 compared to 2015. 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 3.2 billion kWh of energy compared to 2015. Transitioning to hydrofluorocarbon (HFC)-free equipment has been a major focus for us. All of our company-owned units in Europe are now HFC-free, and we have set a goal of transitioning those in North America this year, and all units globally by 2025.

In addition to reductions in our vending and cooler equipment footprints, emission reductions have also been achieved through our progress towards sustainably sourcing palm oil, reducing added sugar in our beverages, increasing recycled content in our packaging, establishing partnerships on soil health practices within our value chain, and eliminating waste went to landfill from our facilities.

Looking Ahead

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;
  • Supplier engagement and partnerships for soil health practices;
  • Material reduction and recycled content in our packaging;
  • Efficiency opportunities in transportation and distribution;
  • Engagement with third-party manufacturers on operational efficiencies and renewable energy.

 

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

Our early actions and investments in the areas of energy efficiency within company operations and our distribution equipment continue to enable our progress.

Our U.S. renewable electricity commitment has become an internal catalyst for other markets and partners to pursue similar actions.

Challenges

Our complex and vast supply chain necessitates a significant amount of activities and engagements in order to achieve our climate goal. This entails internal stakeholder alignment as well as collaborations with our suppliers, peers, and other industry partners.

Strong corporate governance is and has been a long-standing priority at PepsiCo. We believe strong corporate governance is the foundation for financial integrity, investor confidence, and sustainable performance. At PepsiCo, we are guided by the belief that acting ethically and responsibly is not only the right thing to do, but the right thing for our business.

PepsiCo has adopted comprehensive corporate standards and policies to govern its operations and to assist the Board of Directors and its Committees in performing their duties. We review these corporate standards and policies regularly to reflect changing regulatory requirements, evolving practices, and input from our shareholders and other stakeholders.

Get more information about our corporate governance practices, including our policies and Global Code of Conduct, on PepsiCo’s Corporate Governance and Global Code of Conduct pages, and most recent Proxy Statement.

A key role of the PepsiCo Sustainability Office is managing the integrity of the data on which we report. Data integrity is absolutely vital to maintaining the trust between PepsiCo and its stakeholders and is aligned with the high internal standards to which we hold ourselves.

Sustainability performance data is collected across our global operations. It covers numerous metrics, including data for reporting within our six core sustainability priority areas in our annual sustainability report as well as data that supports additional disclosure for other reports and frameworks including the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP). We report our sustainability data externally to inform stakeholders about our performance. It is critically important that the information we provide is accurate and comprehensive, as it is used by sustainability ratings and rankings groups, investors, non-governmental organizations (NGOs), customers and consumers as part of their decision-making process in areas of purchasing, partnerships and investments. In addition to using sustainability data to articulate our past performance, we also use it internally to inform our sustainability strategy and to prioritize tactics that help us meet our sustainability goals.

While our data management process has always been rigorous, in recent years we have re-evaluated processes, outlined improvements, and implemented enhancements to build on the strong foundation already in place.

Governance Process

In 2016, we undertook a refreshed and centralized approach to sustainability information governance, informed in part by a detailed gap analysis by an expert third party. A dedicated team within the Sustainability Office manages this robust data governance structure underpinning each of our sustainability goals, ensuring accuracy, consistency, and precision of the data, while driving accountability amongst our teams.

Data Governance includes documenting the processes and methodologies we use to gather and roll-up data to ensure that processes are followed consistently and that they are repeatable. This allows us to accumulate year-over-year metrics to identify trends and long-term progress. For more detail on how we calculate key performance metrics, see the Calculation methodology page. Before sustainability performance is communicated externally, it undergoes a robust review process:

  1. Sustainability Office review and validation: Data files are reviewed by the Sustainability Office to deliver trusted and accurate information in accordance with the documented sustainability data governance calculation method.
  2. Subject Matter Expert review and certification: Subject Matter Experts certify that data is accurate and complete. This occurs at multiple levels throughout the organization, from those who manage the primary data sources to executives who review at the regional and global levels. This review process drives consistent accountability across all sustainability goals.
  3. Corporate Controls review: As a part of the finance function, the Corporate Controls team reviews sustainability information to confirm that financial, sustainability-related, and other claims specific to PepsiCo are supportable, accurate, appropriately described, and consistent with other document materials reviewed by the Corporate Controls team.
  4. Legal review: The Global Legal team reviews the data and context to ensure disclosures are appropriately stated and in line with disclosure standards.
  5. Disclosure Committee review: PepsiCo's Disclosure Committee and relevant senior leaders review any publicly shared documents of high visibility and interest to external stakeholders. The Disclosure Committee is comprised of executive leadership and is the final approval before information becomes publicly available.

Data Governance Process

In addition to our internal review process, some focus areas - including water, climate, energy, and product portfolio metrics - are reviewed and verified by external third parties annually. 

New Advancements & Use of Technology

We continue to build capability to increase confidence in not only our internal data, but data collected throughout our supply chain, as we develop new tracking tools and methodologies in areas previously not measured. We believe this ongoing work is the critical foundation to driving confidence and continuing to enable more transparency in our reporting processes.

One example of how we're leveraging technology to improve our data integrity is through an automated controls framework to review, monitor and evaluate some of our sustainability data. By using technology to automate a formerly manual process, we have realized improved process efficiency, increased confidence in the data and have significantly reduced the time required to review sustainability information.

We have also deployed a digitized platform that enables internal global collaboration on our various sustainability reports. The platform simplifies our reporting processes, delivers increased security and accessibility, and ensures version control of our governance and certification documentation.

Looking ahead

Each year, PepsiCo’s Sustainability Office works with relevant executives and content specialists to review our accounting processes, estimation approaches, data collection procedures and associated controls. In the coming year, we will again undertake this review, and opportunities for improvement will be integrated into our Data Governance process for continuous improvement.

PepsiCo is committed to realizing zero net deforestation in our company-owned and -operated activities and global supply chains from direct supplier to source. PepsiCo’s most significant influence on the protection of forests is through our sourcing of paper- and wood-based products and raw agricultural materials, particularly palm oil. Other relevant raw materials that we source include soy, cocoa, and dairy.

Our Approach

We work with our supply chains, peer companies, civil society, and others -- directly and through multi-sectoral partnerships -- to shape our strategy and approach, help us deliver our commitments, and contribute to addressing systemic issues that cause deforestation.

Policy

All of our direct suppliers are required to adhere to the following principles as part of our Forestry Stewardship Policy and our Policy on Sustainable Palm Oil:

Compliance with applicable legal requirements of each country in which we operate and from which we source;
No conversion of High Carbon Stock (HCS) forests as defined by The HCS Approach;
No conversion of High Conservation Value (HCV) areas as defined by the HCV Resource Network;
No new conversion of any peatlands and the use of Best Management Practices for existing operations on peatlands as described in the Roundtable on Sustainable  Palm Oil (RSPO) Manual on Best Management Practices for Management and Rehabilitation of Natural Vegetation Associated with Oil Palm Cultivation on Peat; and
Compliance with our Land Use Policy.

We provide further details of our progress toward transparency in relevant supply chains and toward zero net deforestation in our CDP Forests response, for which we received an A- score in 2019.

Traceability in Supply Chains Linked to Deforestation

As we strive for zero net deforestation, it is important that we understand the source of the key commodities we buy. This visibility gives us assurance that the production of our raw materials was undertaken in a sustainable way. Traceability in certain supply chains can be challenging, however, as the suppliers we procure from may source the commodities from multiple other suppliers and producers.

Palm Oil

Details of our palm oil sourcing can be found on our Palm Oil page. This includes annually updated information on total volumes, countries of origin, and our direct supplier and mill lists.

In 2019, our global purchase of palm oil was approximately 485,000 metric tons (MT). Of this total, palm kernel oil comprised approximately 2,000 metric tons. PepsiCo uses refined palm oil, and 82% of our total palm oil volume in 2019 was RSPO-certified.

The top three countries from which PepsiCo sources palm oil are Indonesia, Malaysia, and Mexico. The full list of origin countries in 2019 includes the following:

 Brazil  Costa Rica  Honduras  Mexico  Peru
 Cambodia  Dominican Republic  India  Nicaragua  Phillipines
 Cameroon  Ecuador  Indonesia  Panama  Thailand
 Colombia  Guatemala  Malaysia  Papua New Guinea  

Paper/Fiber

Wood fiber products are used in a wide range of PepsiCo’s primary, secondary, and tertiary packing. PepsiCo’s main fiber need is corrugated cardboard for secondary packaging.

As of June 2019 we calculated our annual volume to be approximately 1,073,000 metric tons annually, with 83% of our total volume being certified to one of the following standards in 2018: CERFLOR, CSA, FSC, PEFC, or SFI. Since 2017, PepsiCo has increased its amount of certified fiber sourced from 5% to 80% in Russia, 19% to 44% in China, 0% to 100% in Thailand, and 10% to 100% in Brazil.

Our countries of origin in 2018 included the were:

 Australia  Colombia  Guatemala  Pakistan  South Korea
 Argentina  Costa Rica  Hungary  Peru  Spain
 Belgium  Czech Republic  India  Poland  Thailand
 Bosnia and Herzegovina  Dominican Republic  KSA  Portugal  Turkey
 Brazil  Ecuador  Luxembourg  Romania  United Kingdom
 Canada  France  Mexico  Russia  Ukraine
 Chile  Germany  Netherlands  Serbia  United States
 China  Greece  New Zealand  South Africa  Vietnam

Our Global Supplier Fiber List, as of June 2019, can be found here.  Updated information for 2019/2020 will follow later in 2020.

Other raw materials

  • All soybean oil is procured from Brazil through two direct suppliers, Bunge and Cargill, primarily for use in our Latin American food business.  PepsiCo procures approximately 18,500 metric tons of soybean oil annually.
  • Cocoa is primarily procured for use in our North America and Latin America food businesses. As of June 2019, PepsiCo procures approximately 34,000 metric tons of cocoa annually. The top four suppliers, which represent over 80% of our global cocoa procurement, are Barry Callebaut, Blommer, Cargill, and Olam, with top sourcing locations being Ivory Coast and Ghana.  Updated information for 2019/2020 will follow later in 2020.
  • PepsiCo procures milk primarily in support of our Russian dairy business, and it is sourced in-country from a broad network consisting of hundreds of dairy farmers. Outside Russia, PepsiCo procures dairy-derived ingredients primarily from the U.S. for seasonings in our foods business.

Our performance

Consumer Goods Forum

PepsiCo adopted the Consumer Goods Forum (CGF) Deforestation Resolution, which commits a wide range of food and beverage manufacturers and retailers to achieve zero net deforestation by 2020. While good progress has been made since it was issued in 2010, our industry has not fully realized the ambition set out in the resolution.

To accelerate progress, PepsiCo became an original signatory to the CGF Forest Positive Coalition of Action (the Coalition), comprised of ambitious member companies committed to moving efficiently and quickly towards a forest positive future and who understand the need to work collaboratively with multiple stakeholders.The previous strategy was rooted in remediating individual company supply chains often through certification. Going forward, the Coalition will focus on systemic change underpinned by two pillars of action – supply chain management and integrated land use approach – developed with significant input from both supply chain companies and other stakeholders.

The Forest Positive Coalition of Action will:

  • Accelerate efforts to remove commodity-driven deforestation from our individual supply chains;
  • Set higher expectations for traders to act across their entire supply base;
  • Drive more transformational change in these key commodity landscapes; and
  • Transparently report on progress to ensure accountability.
NDPE Implementation Reporting Framework

Since 2017, PepsiCo, working with Cargill and other companies throughout the industry, has convened the ‘Palm Oil Collaboration Group’ to discuss key sustainability issues and challenges in the topic (see Transparency and Stakeholder Engagement section for further information). The group has been able to develop and roll out the No Deforestation, No Peat, and No Exploitation Implementation Reporting Framework (NDPE IRF), an industry-wide reporting tool for companies.

The framework recognizes that RSPO certification is the strongest guarantee of delivery, and encourages and supports certification, but also allows companies to report on volumes that are at different stages of progressing towards delivery, where certification has not yet been achieved.

Ahead of the RSPO’s Roundtable 2018 RT meetings, the group agreed to develop an approach to monitoring and reporting on progress against NDPE commitments over three phases: Phase 1, Proof of Concept; Phase 2, Trialing at Scale; and Phase 3, Full Implementation.

During 2019, significant progress was made on the first two phases, and in November 2019, PepsiCo and Cargill hosted a meeting where the companies agreed to move forward with the IRF as a tool to comprehensively report on progress across the supply base. Tools were developed on the allocation process, including guidance on creating and communicating volume profiles.

We will be undertaking a global roll out of the IRF to suppliers in 2020, and the framework is now also available in Spanish. For more information, please visit the NPDE IRF website.

Looking ahead

We will continue to work with our suppliers, peers, civil society, and others directly and through partnerships by:

  • Delivering our palm oil strategy as we work towards our goal of zero net deforestation in our palm oil supply chain;
  • Increasing the amount of our pulp and paper sourcing covered by credible certification schemes;
  • Working in multi-sectoral collaborations including the CGF Forest Positive Coalition of Action, Tropical Forest Alliance (TFA), and Palm Oil Collaboration Group to tackle the systemic issues that drive deforestation across various commodities and geographies;
  • Updating our Forestry Stewardship Policy to reflect lessons learned and emerging best practice on the role of companies such as PepsiCo in contributing to halting deforestation;
  • Reviewing the traceability and transparency of relevant supply chains to inform our strategy, approach, and actions.

At PepsiCo, we recognize that supporting diversity and engagement is not only the right thing to do, it is the right thing to do for our business. This commitment is woven into our values and our belief that PepsiCo is strongest when we embrace the full spectrum of humanity, regardless of what we look like, where we come from or who we love. That means both building a more diverse, more inclusive workplace, and promoting what we call courageous engagement in our company and the communities we serve.

COVID-19 has disproportionately impacted Black and Latino communities. Given our long commitment to diversity, engagement and social justice, PepsiCo and The PepsiCo Foundation donated $7 million to provide increased medical and economic aid to these communities. For more information on our ongoing diversity and engagement efforts, please click here.

Read our 2018 Diversity Report to learn more about our commitments to diversity and engagement.

As part of our commitment and approach to broad and inclusive external engagement, PepsiCo supports a variety of charters and pledges that promote sustainability and allow us to support holistic solutions to systemic challenges that we cannot overcome alone. Among the multi-stakeholder principles and initiatives we have endorsed, some include:

  • American Business Act on Climate Pledge
  • Global Sullivan Principles of Social Responsibility
  • MacBride Principles
  • The Trillion Tonne Communiqué of the Prince of Wales’s Corporate Leaders Group
  • Universal Declaration of Human Rights
  • UN CEO Water Mandate
  • UN Global Compact
  • UN Guiding Principles on Business and Human Rights
  • UN Sustainable Development Goals
  • UN Sustainable Ocean Principles
  • UN Women’s Empowerment Principles

PepsiCo participates in a wide array of external partnerships and initiatives dedicated to specific topics in areas such as health and wellness, environmental sustainability, and more. Please refer to the relevant pages in our ESG reporting platform for additional information.

Protecting the safety, health, and well-being of our associates around the world is one of PepsiCo’s top priorities. Employees are the backbone of our business, and without them, we can’t operate. Not only do we want our employees to come to work and leave as safely as they arrived, PepsiCo also aims to create a positive-impact-culture. Having a large number of employees means that our footprint touches hundreds of communities around the world.

We are working in many ways to promote health and safety as a core value at PepsiCo and to drive continual improvement of our culture and performance. We aligned our Global Environment, Health, and Safety (EHS) function behind a single strategy, aiming to achieve the following vision:

BEYOND ZERO – PURSUE POSITIVE

Zero harm to our people and the environment today—
Pursue a positive impact culture for our future

Our EHS strategy provides the framework for our vision of ‘Beyond Zero’ whereby we strive to achieve an injury-free work environment, as well as working to create a culture of positive impact on the health and well-being of our employees and the environment.

PepsiCo establishes Pillars for Sustainable Environment Health and Safety practices

Governance

There are inherent risks in all business operations. At PepsiCo, we believe that formal structures and systems of risk management help prevent environmental incidents and occupational injuries/illnesses. Our EHS Policy formally establishes our focus on environmental protection and occupational health and safety at every level.

A key component of the overall risk management strategy is the implementation of a robust Global EHS Management System (GEHSMS), a thorough compilation of management and technical standards for key risk areas across our business.

In addition to our internal program, 72% of our sites are certified in ISO 14001 Environmental Management Systems and OHSAS 18001:2007 Occupational Health and Safety Management Systems. We are transitioning from OSHAS 18001 to ISO 45001 by 2021

Performance

Health and Safety

We aim to achieve world-class health and safety performance. In 2019, PepsiCo had 10 percent fewer lost time incidents (LTI) across the business, compared to 2018, reducing our lost time incident rate (LTIR) to 2.28 per million hours worked.

PepsiCo reduces Global Lost Time Incident Rate for Safety in Work Environment

We continue to invest in emerging technologies in our primary risk areas to reduce our risk and protect our employees from injuries. We are leveraging fleet telematics and distracted driving technology to reduce our fleet safety risk, resulting in reductions in road traffic accidents. PepsiCo also continues to collaborate with industry leading multi-national corporations to align private sector goals with the United Nations’ Decade of Action for Road Safety to improve road safety through our membership with Together for Safer Roads (TSR) Coalition. For machine safety, we have been leveraging virtual design reviews and augmented reality to conduct technical risk assessments and centerline our equipment. We have also invested in ergonomic wearables to address posture behaviors and reduce our ergonomic risk. Additionally, we are leveraging hands-free remote collaboration tools to conduct virtual audits and inspections. All of these new technologies are helping to provide new insights into the risks and allow our teams to respond in an agile manner.

Environmental Protection

PepsiCo proactively monitors current and emerging environmental protection legislation and other areas of concerns across our value chain. We follow an established risk-based approach leveraging our GEHSMS and focusing on the following key areas:

  • Prevention and control of spills
  • Elimination and management of waste
  • Reduction and control of air emissions
  • Minimization, control, and reuse of wastewater discharges
  • Access to safe sanitation and hygiene (WASH)
  • Safe chemical use, storage, and disposal
  • Environmental life cycle impact management
  • Understanding and managing emerging environmental legislation and aspects

Examples of our efforts to mitigate risks associated with wastewater and WASH are highlighted below.

Wastewater in Direct Operations

Responsible wastewater discharge from our manufacturing operations is a critical element of achieving positive water impact. For PepsiCo, adhering to this goal is vital to the continuity of our manufacturing operations, as it helps ensure that we maintain our license to operate in local communities.

Among PepsiCo's GEHSMS, one technical standard is the Discharge of Process Wastewater Standard, which is aligned with the World Bank’s International Finance Council and Business for Social Responsibility’s (BSR) Sustainable Water Group. Our global wastewater standard formalizes the expectation that wastewater discharged from facilities will:

  • Meet applicable regulatory requirements;
  • Be conducted in an efficient, safe and responsible manner; and
  • Maintain an effluent quality that does not cause degradation of water quality of the local environment.

In 2019, nearly 99 percent of wastewater from our operations met PepsiCo's high standards for protection of the environment, up from 98 percent in 2018.

WASH in Direct Operations

Our business depends on the thousands of dedicated employees in our manufacturing sites who ensure the safety and quality of our products, and we in turn, are committed to ensuring safe conditions for them. Critical to this is the provision of employees’ access to safe water, sanitation, and hygiene (WASH) for our employees.

We are committed to providing appropriate access to safe water, sanitation, and hygiene to our manufacturing employees. This is aligned with our participation in the World Business Council for Sustainable Development’s (WBCSD) WASH in the workplace pledge, the premier global standard related to WASH in the workplace, which PepsiCo signed in 2015. By the end of 2019, our manufacturing facilities' WASH conformance was at 97 percent, up from 92 percent in 2018.

Looking ahead

As the Coronavirus (COVID-19) continues to spread throughout the world, we are taking proactive steps grounded in science to protect the safety of our products, care for more than 260,000 associates and their families, and support our communities around the world.

We are practicing social distancing at all our facilities around the world and have asked all PepsiCo associates who have the option, to work from home, and those who do not are adhering to social distancing guidelines from local and federal governments.

Global health agencies have made clear the most effective thing we can do to fight COVID-19 is to practice good hygiene, and we are taking this advice very seriously. We have increased cleaning frequency at all facilities globally and re-emphasized the importance of proper handwashing. Additionally, we are expanding the availability of hand sanitizer in our facilities, separating workstations, and providing masks for all of our frontline employees. For more on our pandemic response, see PepsiCo’s dedicated COVID-19 page, here.

Our Global Compliance & Ethics mission is to promote an ethical business culture that drives Company results and to mitigate risk from potential Code of Conduct and certain legal violations by maintaining an effective compliance program. Following our Global Code of Conduct and Acting with Integrity is fundamental to doing business the right way.

Our approach

Our Global Code of Conduct

At PepsiCo, we believe acting ethically and responsibly is not only the right thing to do, but also the right thing for our business. In today’s hyper-connected and transparent world, how we do things is just as important as what we do. PepsiCo’s Global Code of Conduct (Code) provides specific guidance on how we make decisions, how we treat others and how we conduct business globally, with:

  • Respect in the workplace
  • Integrity in the marketplace
  • Ethics in our business activities
  • Responsibility to our shareholders

Operating in accordance with these principles creates sustainable growth by driving our ethical culture and building trust with our employees, consumers, investors and communities.

Our Code applies to all PepsiCo employees around the world (including employees of our subsidiaries), members of the PepsiCo Board of Directors when they act in their capacity as directors, and PepsiCo’s joint ventures over which PepsiCo has management control, and to every employee, officer and director of such joint ventures. It is reviewed each year to reflect changes in law and is available in 22 languages and dialects on our internal and external websites.

Exceptional instances of ethical conduct are recognized each year through peer-nominated ethical leadership awards. Alleged violations of the Code are investigated in accordance with an incident management process and escalation policy. Confirmed violations result in corrective action or discipline, as appropriate, up to and including termination.

PepsiCo’s Global Compliance & Ethics Department (GC&E), led by the Global Chief Compliance & Ethics officer, has primary responsibility for promoting, monitoring and enforcing the Code. GC&E accomplishes this through training, policies and processes designed to foster an ethical culture and protect against the risk of non-compliance. However, the ultimate responsibility for ethical excellence rests with each employee.

To learn more about our Global Code of Conduct and to download it in 22 languages and dialects, please visit our Global Code of Conduct page.

Compliance Training and Awareness

We require associates at all levels of the organization to participate in annual Code of Conduct training.

In addition to our annual training, the Code of Conduct is reinforced throughout the year with local and global communications including internal articles, digital signage, portal updates, tone at the top messaging and ethics campaigns. To help promote a culture of integrity, leaders at all levels across the organization incorporate the concept of culture of integrity into their speeches and other written and oral communications.

Subject-matter compliance training on key risks is also conducted on a global and targeted basis.

Reporting Mechanisms

Speaking up at PepsiCo

Speaking up is an integral part of our culture of ethics at PepsiCo. We encourage employees to raise issues and concerns. In addition, all employees have an obligation to report what they suspect or believe to be a violation of the Code of Conduct or applicable law.

Employees can raise concerns and report Code violations through any of the following channels:

  • Their supervisor, manager or next level manager
  • A Human Resource manager
  • The Global Compliance & Ethics Department or the PepsiCo Law Department
  • Speak Up hotline available by phone or by web

When contacting the Speak Up hotline, an employee may remain anonymous where permitted by law.

Speak Up Hotline

Our Speak Up hotline is operated by an independent third-party vendor to provide employees, consumers, business partners and community members with a 24/7 anonymous and confidential means of reporting alleged violations of our Code or applicable law. It is accessible anywhere in the world by phone or by web in languages spoken by PepsiCo employees. Speak Up is widely promoted at facilities and office locations, on Company internal and external websites, and in various training programs.

To learn more, please see our Speak Up page.

Handling Reports

All reports of suspected violations received through Speak Up are reviewed by the Global Compliance & Ethics team in accordance with an incident management process and our Global Code of Conduct Escalation Policy. Matters are either referred for handling or assigned to investigators within each Sector/Region. Global Compliance & Ethics provides guidance and oversight to investigators to foster consistency in the investigative process, discipline and appropriate corrective actions.

Non-Retaliation

PepsiCo is committed to protecting the rights of those individuals who report issues in good faith either through one of the reporting means described in our Code or to government authorities. Our company will not retaliate or permit retaliation against a person who in good faith:

  • Reports what he or she believes is a violation of our Code, our policies or the law
  • Raises a compliance question or seeks advice about a particular business practice, decision or action
  • Cooperates in an investigation of a potential Code violation

Retaliation against an employee for reporting an issue in good faith is itself a violation of our Code.

Anticorruption

Our Commitment

Reducing the risk of corruption in our business operations is a top priority at PepsiCo. Internal controls, systems and processes are in place to reduce the risk of corruption and bribery and to ensure our associates understand the criticality of conducting PepsiCo business in compliance with the laws and regulations of the countries in which we operate.

Our Policy

At the core of our anticorruption program is PepsiCo’s Global Anti-Bribery Compliance Policy. Our Anti-Bribery Policy prohibits any payment or any offer, promise or authorization to give anything of value to any government official or other person or entity in the private sector with intent to influence a decision to obtain an improper business advantage.

Monitoring Our Policy

We mitigate corruption risk and monitor compliance with our Global Anti-Bribery Compliance Policy through systems, procedures and controls that include the following:

  • Company-wide training initiatives on anti-bribery and anticorruption (ABAC)
  • Compliance & Ethics resources dedicated to continuous improvement of our Anti-Bribery Policies and ABAC agenda
  • Prohibition of facilitation payments
  • Prohibition on use of gifts and entertainment in order to improperly influence government officials. Under limited circumstances and with prior written consent from the Compliance & Ethics Department or the Law Department, a reasonable expense involving a government official may be approved
  • Widely communicated means of reporting suspected bribery and corruption to GC&E or through our Speak Up Reporting hotline (See Reporting Mechanisms) where employees have the option to remain anonymous where permitted by law
  • Investigation of all bribery and corruption allegations in connection with an incident management process and escalation policy
  • Assessment of compliance and corruption risks through proactive integrated risk assessments conducted periodically with Corporate Audit, GC&E and Enterprise Risk Management
  • Internal audits of control capabilities relating to Code of Conduct and ABAC risks conducted periodically in targeted geographic and/or functional areas
  • A proactive effort to catalog and evaluate ABAC controls and procedures worldwide to identify potential areas for improvement and to identify local controls that are already “best-in-class” and possibly capable of worldwide replication
  • Periodic reviews of PepsiCo’s ABAC program by outside counsel to identify weaknesses and areas for enhancement
  • Third party relationship management and due diligence as described below

Anticorruption Third Party Due Diligence

PepsiCo prohibits all forms of bribery and corruption in our operations, and we expect our third parties, including suppliers, service providers, agents and contractors to do the same. Many of our third parties are required through mandatory contract provisions to comply with our Supplier Code of Conduct which prohibits corruption and bribery and incorporates by reference PepsiCo's Global Anti-Bribery Compliance Policy. We also conduct anticorruption due diligence on third parties. No third party may be engaged by PepsiCo until required anticorruption due diligence processes have been completed and it has successfully gone through PepsiCo's Third Party Due Diligence (TPDD) program review.

Anticorruption Training

The importance we place on maintaining an effective anticorruption program is reflected in our annual online anti-bribery training. The course, available in 22 languages, focuses on proper dealings with government officials and our TPDD program. It also includes a means for employees to disclose contacts with government officials.

2019 Performance

PepsiCo reviews its Compliance & Ethics policies annually and makes updates as necessary to ensure they remain relevant and reflect the dynamics of our operating environment.

Compliance Training and Awareness

In 2019, over 68,000 employees worldwide completed an online Code of Conduct training course available in 22 languages and dialects, and certified compliance to the Code. Also in 2019, over 180,000 primarily frontline employees in our plants, warehouses and sales facilities received Code training, largely through in-person training workshops. Many of those workshops are manager-led and feature custom training videos.

In our 2019 training cycle, an online Ethical Leadership course was completed by over 61,000 employees. In addition, over 1,000 Contract Workers were trained on our Supplier Code of Conduct and over 5,600 newly hired employees completed an online Code of Conduct course.

Anticorruption Training

In 2019, over 68,000 employees worldwide completed an online training Anti-Bribery course and certified compliance with our Anti-Bribery Policy. In addition, as part of a two-year training cycle, over 4,600 employees in high-risk countries participated in live anti-bribery training sessions led by PepsiCo lawyers in 2019. This training is interactive and addresses the U.S. Foreign Corrupt Practices Act in addition to country-specific laws.

PepsiCo products reach shelves around the world through a complex network of fleet operations. Our distribution approach varies country-to-country, with the predominance of company-owned vehicles operating in North America. Powered by more than 76,000 fleet assets, our fleet is a critical component of our value chain as well as a significant component (36%) of our carbon footprint from direct operations in North America.

Our fleet operations adopt sustainability in their everyday practices and long-term business plans by reducing emissions through efficiency, new technology, cleaner fuels, and the development and sharing of best practices.

We have made significant progress in fleet efficiency by improving energy efficiency, right-sizing our vehicles, and diversifying the sources of energy used by our fleet vehicles. We also design and equip our new vehicles with advanced aerodynamic devices.

Technology and Equipment Advancements

PepsiCo improves the efficiency of new vehicles by implementing advanced aerodynamic devices, utilizing low rolling resistance tires, reducing weight, and improving powertrain performance on new equipment.

Fleet Efficiency Truck

In 2019, PepsiCo Beverages North America (PBNA) continued to optimize and right-size the specification for new service vehicles used to maintain our vending business. As a result, we transitioned from 14-bay trucks to smaller 4-6 bay trucks, improving fuel economy by over 25 percent. We also lightweighted the PBNA tractor and trailer specification and improved fuel economy by 12%, thereby increasing both the available payload per trip and overall efficiency.

PBNA is also accelerating deployment of its Geo Box delivery system, which replaces bay delivery trucks with specially designed trailers that are pre-loaded at the warehouse. This ensures the right quantity and assortment of product reaches the retail customer in a more efficient and timely manner, and reduces fuel use through optimized loads and routes, resulting in fewer miles driven and less frequent trips to the warehouse.

Additionally, PepsiCo Foods North America (PFNA) introduced more than 300 30’ box trucks which have a 25% increase in volume and 18% improvement in fuel economy when compared to the 24’ box trucks they are replacing, as well as approximately 350 additional e-van trailers that maximize the available volume in trailers, enabling us to reduce the total number of miles required to deliver the same amount of product.

Renewable Energy and Electrification

PepsiCo reduces Carbon Emission with Electric Fleet TrucksOur PFNA class 8 tractor fleet is approaching 50 percent Compressed Natural Gas (CNG) vehicles, and in 2019, the CNG fleet drove 58 million miles. We continue to increase the use of natural gas sourced from renewable sources, and we have established fueling contracts to ensure that all future fleet natural gas will be from renewable sources.

In addition to the vehicles that deliver our products, we also use forklifts, floor scrubbers, and other material handling equipment to keep our manufacturing and distribution system running optimally. Our PBNA pallet jack fleet is comprised of nearly 100 percent electric jacks. We will continue to deploy electric material handling equipment in the future.

In our effort to continuously explore emerging technologies that will position us for the future, we made an initial reservation for 100 all-electric class 8 tractors from Tesla. These will be deployed across both our snacks and beverage businesses to evaluate how best to leverage electric vehicles and technologies moving forward. In 2018, PFNA benefited from a grant awarded to the San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) by the California Air Resources Board (CARB) Zero- and Near-Zero Emission Freight Facility (ZANZEFF) program to deploy several innovative technologies in Modesto, CA. Since kicking off, the project titled Transforming Modesto, has deployed 38 near-zero NOx emission class 8 CNG tractors, 12 battery electric forklifts, and a nearby CNG station fueled by RNG, and will deploy more innovative technologies, including 15 class 8 battery electric tractors, 6 battery electric straight trucks, 3 battery electric yard trucks, on-site solar carports, electric vehicle charging infrastructure, and battery storage systems to reduce reliance on the electric grid. In total, these solutions are expected to reduce GHG emissions by nearly 5,000 metric tons CO2e.

Safety and Fuel Efficiency

We continue to make improvements in fleet efficiency through Advanced Driver Assist Systems (ADAS), safety technology, more efficient routing, and driver training that encourages fuel conservation. The training encourages gentler acceleration, avoiding unnecessary braking and eliminating idling. We have also gone above and beyond safety regulations to outfit new vehicles with features including: collision mitigation, lane keeping, blind spot detection, adaptive cruise control, LED headlights, backing cameras, anti lock brakes, traction control, and electronic stability control. Such features not only enhance safety but also help improve fuel economy.

Partnerships

We believe it is important to engage in and support larger multi-stakeholder initiatives that move businesses toward more efficient alternatives. For example, we are an original signatory of the Sustainable Fuel Buyers’ Principles, developed by the non-governmental organization Business for Social Responsibility (BSR). These Principles encourage accelerating the transition to sustainable, low-carbon fuel and related technologies. In the U.S., PepsiCo is a certified member of the U.S. Environmental Protection Agency’s (EPA) SmartWay initiative, whose purpose is to improve fuel efficiency and the environmental performance of goods-movement supply chains.

Looking Ahead

In the coming year, we expect to continue our transition to a cleaner, advanced, more efficient fleet increasingly powered by renewable sources. We will continue our investments and initiatives that focus on:

  • Safety: Leveraging advanced technologies that improve the safety performance of our fleet operations;
  • Connectivity: Utilizing data and technologies that improve efficiency; and
  • Electrification: Increasingly deploy electrified components and powertrains in our vehicles to reduce emissions

Gender parity is a cornerstone of our robust diversity and engagement agenda as well as our culture. PepsiCo leverages diversity and engagement as a competitive business advantage that fuels innovation, strengthens our reputation, and fosters engagement with employees and members of our communities. We strive to improve the attraction, retention, and advancement of global and diverse associates to ensure we sustain a high-caliber pipeline of talent.

PepsiCo makes Progress on Gender Parity of Woman in Manager Positions

For PepsiCo, maintaining a workforce that reflects the full breadth of our diverse consumers and shoppers enables us to continue to innovate and deliver the kinds of products that our consumers want. We must continue to create a work environment that engages people with diverse traits and different ways of thinking.

PepsiCo establishes Goal for Gender Parity

As part of our sustainability agenda, we have set a target to strive to achieve 50 percent women in management roles by 2025. PepsiCo’s global, holistic and data-driven strategy for achieving greater gender diversity not only positions us to achieve the goal, it also makes us a stronger company. In 2019, we made progress against this goal, moving to 41 percent of women in management roles, an improvement from 37 percent in 2015. Senior leadership roles held by women include our Latin America CEO, Executive Vice President of Global Operations, Controller, President of Global Foodservice, and Chief Global Diversity and Engagement Officer.

Career Development and Support for Working Caregivers 

Key to achieving our goal of 50 percent women in management roles, we aim to support employees in building successful and fulfilling careers, while doing our part to support them as working caregivers.

The strategy is supported by a series of initiatives, including:

  • Our framework of leadership competencies to support the development of all employees as leaders, providing employees with more clarity on how to succeed in challenging, strategic, and rewarding jobs. We also increased our investment in both classroom and online learning to support the growth and development of all employees. In 2019, over one million hours were again spent on online learning.
  • Our Transformational Leadership Program (TLP), a unique program designed to equip women with the tools they need to elevate their business impact and achieve career fulfillment. By providing participants with the knowledge and skills to navigate a global matrix organization and increase their effectiveness and influence, the TLP helps propel high-performing teams and innovation at PepsiCo. This program is active in the U.S., Europe, Asia, Middle East, and North Africa across multiple functions and levels.
  • On-site childcare at our New York headquarters and near-site childcare for our PepsiCo Foods North America headquarters in Texas, with care provided by highly trained and reputable third-party providers. We also currently offer access to on-site or near-site childcare at international locations, including Mexico, India, Egypt, and Pakistan, and we will continue to expand.
  • Facilities for nursing mothers. In more than half of our locations worldwide with 500 or more employees, we have either dedicated mother’s rooms, wellness rooms, or alternate space available for nursing mothers. We are actively working to expand the number of PepsiCo locations with facilities for nursing mothers in the coming years. Back-up child and elder care services are available through third party providers when a regular care provider is unavailable.
  • Ready to Return, a program launched in 2017, in New York for professionals who are re-entering the workforce after taking time off to care for a loved one. Ready to Return is a 10-week paid program designed for experienced professionals who have been out of the corporate workforce for more than two years and are looking to return. To help ease the transition, participants are provided with mentoring and coaching support, training to refresh skills and formal and informal networking opportunities with PepsiCo employees. In 2018, Ready to Return was expanded to Latin America, and now includes Brazil, Chile, and Mexico. This program is a demonstration of PepsiCo’s support for working caregivers in our communities around the world and a means to build the female talent pool at PepsiCo.
  • Parental leave. In the U.S., PepsiCo offers 6 weeks paid parental leave, plus 6-8 weeks maternity leave, totaling 12-14 weeks paid leave.

Initiatives Around the World

We have also empowered our local businesses to foster greater inclusion in their own ways.

We established the Global Coaching Circle program, a series of coaching events for women led by senior PepsiCo leaders. The Global Coaching Circle is designed to inspire and support women managers by offering insights into the career pathways of senior leaders and providing women managers with a network to share ideas and advice.

Gender Parity Workforce Readiness

The GM Aspire speaker-led series was created to inspire associates toward the General Manager career track. PepsiCo’s General Managers, Presidents, and CEOs speak about the different businesses they lead globally, the nuances of the different cultures, and share their perspectives on the leadership traits and attributes needed to lead through challenges and drive business growth.

PepsiCo's Pinnacle Group is another strong example of our efforts to grow the number of female leaders. The organization was created as a way to increase retention of PepsiCo female sales talent, and strengthen and diversify our future leadership pipeline. The program selects female sales associates with strong performance records and provides them with career development, leadership training, and mentoring opportunities with senior sales leaders.

In Saudi Arabia, where we had one female employee in 2009, we have successfully recruited, trained, and retained more than 150 female employees for their food operations in Riyadh. This was accomplished with the support of government authorities, through the development of physical infrastructure in our facilities designed to accommodate both the cultural change of having women in the workplace and compliance with local laws. We continue to work to empower women towards non-traditional jobs in the country, and after a law was passed to allow female drivers, the local team introduced a policy to cover the costs for female employees to obtain driver’s licenses, leading us to recruit our first female forklift driver in one of the local plants.

Looking ahead

In 2020, the Global Diversity and Engagement team launched Unconscious Bias Training, the first digital learning installment under the Global Diversity and Engagement Team’s Inclusive Leadership training suite, which will be built out further. The learning offers lessons about the science behind unconscious bias, bias awareness, as well as mitigation tips, strategies, and success stories.

Our list of Material Topics represents the issues that we plan to continue managing, measuring and reporting on. These are the sustainability-related topics that we believe are currently the most relevant to PepsiCo and our stakeholders.

Year-round engagement with diverse stakeholders informs our sustainability reporting and overarching sustainability strategy. We publicly report on topics that are priorities for both our business and our key stakeholders.

In 2017, we completed our most recent formal assessment, defined by the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. In late 2018, we conducted a refresh, as we streamlined our sustainability agenda further. This refresh reconfirmed the results of our 2017 assessment, identifying the most significant issues that “reflect an organization’s significant economic, environmental and social impacts; or that substantively influence the assessments and decisions of stakeholders,” as per the GRI definition. Our 2017 Material Topics assessment and late 2018 refresh included a three step process:

PepsiCo lays out Material Issues and Boundaries for Sustainability

Through our refresh in 2018, we organized our material topics as follows:

PepsiCo provides Organization for Matieral Boundaries

*In this communication and in our other sustainability reports and statements, when we use the terms “material,” “materiality” and similar terms, we are using such terms to refer to topics that reflect PepsiCo’s significant economic, environmental and social impacts or to topics that substantially influence the assessments and decisions of stakeholders in what the GRI Sustainability Reporting Guidelines define as “material topics.” We are not using these terms as they have been defined by or construed in accordance with the securities laws or any other laws of the U.S. or any other jurisdiction, or as these terms are used in the context of financial statements and financial reporting, and nothing in this communication or other sustainability reports and statements should be construed to indicate otherwise.

At PepsiCo, we believe acting ethically and responsibly is not only the right thing to do, but also the right thing to do for our business. This principle underpins the PepsiCo Way, seven leadership behaviors that define our shared culture, as well as our belief that our success can only be achieved when everyone is treated with dignity and respect. Human rights abuses of any kind are unacceptable and, as one of the world's leading food and beverage companies, we have a clear responsibility to respect human rights throughout our business and broader value chain. PepsiCo’s commitment to respecting the human rights of workers and local communities throughout our direct operations and broader value chain is articulated in our Human Rights and Salient Issues Statement, Global Human Rights Workplace Policy, Global Code of Conduct (Code), Global Supplier Code of Conduct (SCoC), and other related policies. For a full description of our approach, commitments, and progress, please see our 2019 Human Rights Report.

Our goal

We are committed to respecting all of the rights described in the International Bill of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work, and our aim is to ensure that all rights holders throughout our value chain can fully enjoy the rights described in these documents. This can be a challenge for a global company with a complex value chain that spans multiple tiers and hundreds of countries and territories. Nevertheless, we recognize there are a variety of ways that our business activities might directly or indirectly impact human rights. We have the ability to contribute to positive human rights impacts, such as through the creation of jobs or by providing access to clean water to local communities. We also have a responsibility to prevent and address adverse human rights impacts that we might cause or contribute to through our operations and, where we are directly linked to potential impacts, a responsibility to use our leverage to encourage our suppliers and business partners to respect human rights throughout our broader value chain.

In meeting our responsibility to respect human rights, we are committed to implementing the United Nations (UN) Guiding Principles on Business and Human Rights throughout our business and reporting on our progress in line with the UN Guiding Principles Reporting Framework. We also follow the OECD Guidelines for Multinational Enterprises and are a signatory to the UN Global Compact.

Our Approach

PepsiCo is committed to respecting the rights of all workers and local communities throughout our operations and value chain. To help ensure that we are in the best position to prevent, identify, and address potential impacts across our value chain, we have established a global human rights management approach that is guided by the UN Guiding Principles on Business and Human Rights (UNGPs).

PepsiCo supports Sustainable Human Rights

With this approach as our foundation, we prioritize our efforts by focusing on our salient human rights issues – the human rights at risk of the most severe negative impact through our company activities and business relationships. This process helps ensure that we have the appropriate policies and procedures in place to prevent and address potential human rights risks across our value chain. We also work on a variety of additional issues (e.g., Climate Change, Privacy, Nutrition, Added Sugar and Sodium Reduction) through our broader Sustainability Agenda. We closely monitor emerging issues and regularly review our salient issues to determine whether other human rights have become greater priorities over time.

PepsiCo lists Salient Issues in Human Rights

Our progress

We are committed to regularly reporting on our progress in line with the UN Guiding Principles Reporting Framework. The following reports contain the most recent information on our approach, initiatives, and progress in addressing our salient human rights issues.

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2019 PepsiCo Human Rights Report

We recently published our first stand-alone human rights report to provide a detailed update on our approach and progress. Please see our 2019 Human Rights Report for the full description and most recent information on our: 

  • Global Management Approach
  • Governance and Accountability Structure
  • Policy Framework
  • Training and Communication Programs
  • Due Diligence Process and Programs
  • Stakeholder Engagement 
  • Collaborative Action
  • Grievance Mechanisms 
  • Salient Human Rights Issues
  • Commitments and Next Steps
Annual Modern Slavery and Human Trafficking Statement

In line with the 2010 California Transparency in Supply Chain Act and 2015 UK Modern Slavery, we also publish an annual statement outlining the actions we are taking to prevent, identify, and address potential modern slavery risks throughout our business and supply chain.

Secure land rights are a vital component of economic prosperity, sustainable food production, and the responsible use of natural resources. This can be particularly true in developing countries and areas inhabited by indigenous communities, yet, current estimates indicate that only 30% of the occupied land around the world is legally documented. Land rights issues directly impact local communities and the daily lives of rights holders, through potential physical displacement or the loss of economic opportunity.

Policy and Commitments

As one of the world’s largest food and beverage companies, PepsiCo depends on significant volumes of safe, high quality, and affordable agricultural raw materials to meet business demands as well as the expectations of our consumers, customers, and other stakeholders. Since 2014, PepsiCo has been working with suppliers, civil society, and industry peers to implement our Land Rights Policy. Specifically, we are committed to:

  • Zero tolerance for land displacements of any peoples, in accordance with IFC Performance Standards, including Free, Prior, and Informed Consent (FPIC);
  • Requiring our operations and our suppliers to meet IFC Performance Standards, including FPIC, in land acquisitions (including leasing and utilization);
  • Fair and legal negotiations for land transfers and acquisitions; and
  • Use of appropriate grievance mechanisms, such as the PepsiCo Grievance Mechanism for our Agricultural Supply Chain, for dispute resolutions.

To support our Land Rights Policy, our commitments are embedded in our sustainability work including:

  • Our Supplier Code of Conduct, which restates our requirement that all land acquisitions by our suppliers (including leasing and utilization) meet IFC Performance Standards, including FPIC;
  • Our Human Rights and Salient Issues Statement, which identifies land rights as one of our salient human right issues, meaning that we are putting additional effort and resources into managing land rights beyond our standard due diligence and other human rights tools; and 
  • Our contribution to the development of external standards and criteria to align requirements on land rights with our policy and credible global criteria such as the IFC Performance Standards and the UN FAO Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries, and Forests in the Context of National Food Security (UN FAO Guidelines). These contributions include development of the NDPE Implementation Reporting Framework for commodities such as palm oil and review of the standards of certification schemes such as Bonsucro and RSPO.

Implementation

While land tenure-related risks can occur anywhere in our supply chain, our focus is on our agricultural supply chain where our own analysis and feedback from stakeholders suggest the greatest opportunity for impact. Challenges are often systemic to geographies and commodities and shared with others that source from the area in question. Our implementation approach therefore focuses on:

  • Developing tools and approaches to help us and our supply chain better apply due diligence to land rights and therefore understand and mange specific risks;
  • Working with our suppliers and others at a country level to identify challenges, raise awareness, and build capacity;
  • Managing grievances in our supply chain through our Agricultural Grievance Mechanism and by working with peers, suppliers, and civil society; and
  • Engaging in partnerships and collaborations with business, civil society, and others to share expertise, learn from each other, review and improve standards, and identify ways to work together to tackle systemic issues.

ACRE Framework

PepsiCo has collaborated with Landesa, a global organization that champions and works to secure land rights for millions of the world's poorest, to provide opportunity and promote social justice, to create the ACRE Framework to monitor our Land Policy globally, across crops and borders. The tool will better enable us to monitor progress on adopting responsible land practices in our supply chain, as well as to identify and respond to potential gaps in implementation. The framework outlines concrete practices we expect at different levels of our supply chain, integrating with our Sustainable Sourcing Program (SSP) and Sustainable Farming Program (SFP), as well as crop-specific certification standards.

ACRE is grounded in PepsiCo’s Land Policy and internationally recognized best practices for responsible land investments, including the IFC Performance Standards, UN FAO Guidelines, and leading industry certification standards. The ACRE Framework is currently being piloted in select commodities and geographies.

Country Level Engagement

Since 2014, we have been implementing a third-party assessment program on our sugar supply chain in Brazil and Thailand, on our palm oil supply chain in Mexico and on our coconut water supply chain in the Philippines. This program is conducted with the participation of affected communities and is based on available and accepted standards to audit the social, environmental, and human rights aspects of these supply chains, including impacts related to land rights. We are also applying these principles in other countries, such as India.

Our aim with these programs has been to understand whether the standards set out in our Land Policy and other policies and commitments relating to human rights are being upheld. How we address the findings of these assessments varies in each instance but our responses fall into two broad categories depending on the assessment outcomes:

  • No significant issues found: we will continue to monitor suppliers through our existing programs such as our SSP and SFP and will continue to engage with our suppliers and external stakeholders to understand any new issues that may arise and require action.
  • Issues found that are specific to PepsiCo and our value chain: in addition to the above, we will work with our value chain to understand the issues and develop an action plan to address these concerns.

We will continue to engage with cross-industry bodies and other external stakeholders to better understand industry-wide actions that can be taken to address systemic issues. In addition, we have continued to engage with a wide range of stakeholders in these industries such as mills, producers, certification bodies/certification firms, grower/industry organizations, and other end users, government, and civil society, including Oxfam, about how to conduct improved assessments on land rights and other human rights issues in line with best practice.

  • As a result of this engagement, we aim to ensure that future assessments of our supply chain in these industries:
  • Are developed with input from affected stakeholders and conducted by independent organizations with expertise in the salient issues being assessed;
  • Include either a publicly available version of the assessment or a summary of the context, process, and findings in line with good practice; and
  • Focus on areas and issues where these risks are greatest.
India

In West Bengal, India, PepsiCo is supporting efforts to promote women’s empowerment within its potato value chain in partnership with the U.S. Agency for International Development (USAID). PepsiCo funded an assessment of women’s economic empowerment and equality, land rights, and agricultural engagement in the potato supply chain and is now supporting, along with USAID, activities that provide resources and opportunities for women to engage in productive practices; substantive roles for women in agricultural leadership and decision making; and access to and control over agricultural products and income by women.

PepsiCo also worked in partnership with Landesa to implement a social impact program targeting the sugar cane industry in India. The project sought to educate sugar mill operators and farmers that supply the mills on the concept of social impacts. The intent was 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 created training modules in three different languages that were presented to 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.

Brazil

As of June 2020, we are finalizing a study of the land rights practices within our cane sugar supply chain in Brazil, undertaken by an external organization with expertise in land rights. By identifying both land tenure risks and good land practices in the supply chain, this work will inform our due diligence on land rights issues to strengthen our overall approach in Brazil and within other commodities and geographies. The findings of the study and resulting actions will be made public in 2020.

This study follows two sets of independent audits that were conducted in 2014 and 2015 to identify specific human rights and land rights issues that might exist at our primary sugarcane suppliers. No significant land rights or other human rights issues were found in these audits, but concerns were raised about the level of engagement with stakeholders,and the need for specific land rights expertise to conduct such assessments. The 2019-2020 study incorporated this feedback in the design and implementation of the methodology.

Thailand

In Thailand, we supported an independent assessment of Thailand’s sugarcane producers, which includes a review of performance on human rights and land rights to identify potential systemic issues in the supply chain in Thailand. This assessment was commissioned by Bonsucro, the global multi-stakeholder, non-profit industry change platform for sugarcane. The assessment was completed in August 2017 and is available on the Bonsucro website, as well as here. Our initial response and next steps can be found here. They include investment in a three-year program in partnership with
others to build capacity for small holder farmers to understand and address social and environmental challenges.

Mexico

In Mexico, Proforest, an organization with expertise in managing natural resources sustainably, conducted a two-tier assessment on potential land rights and other human rights issues in PepsiCo’s palm oil and sugarcane supply chain. The first phase, a desk-based study including consultation with external stakeholders to understand the issues, including the legal and policy framework, and evidence of existing conflicts, was completed in July 2017, and can be found here in English and here in Spanish. Our initial response to the report can be found here. The findings have influenced work in our own supply chain, as well as collaboration with peers, civil society and others to address the systemic actions found in the report.

Philippines

As part of our original commitment, an assessment of our coconut water supply chain in the Philippines was undertaken in partnership with Fairtrade USA. The assessment was conducted in and around facilities in Sorsogon and Candelaria with 143 farmers. Some issues related to environmental compliance were found, particularly the burning of household and farm waste. Working with our supplier, Fairtrade USA and the local government, training was held with the farmers who participated in the assessment. In addition, any farmers that were not compliant with the issues noted above acknowledged that they understood the respective policy. Finally, while no evidence of
land or human rights violations were identified, 12% of the farmers could not produce
documentation showing their rights to the land they were farming. Fairtrade USA is supporting farmers on this systemic issue across the Philippines to ensure they secure and maintain proper land documentation.

Grievance management

We recognize that our policies and programs may not prevent all adverse impacts in our value chain. In line with the UN Guiding Principles for Business and Human Rights (UNGPs), we aim to provide effective remedy where we have caused or contributed to those impacts and to using our leverage to encourage our suppliers and partners to help enable remedy where we find impacts directly linked to our business operations, goods or services.

In July 2017, we formalized a grievance mechanism for our agricultural supply chain to complement our existing programs and processes to prevent, identify and manage environmental and social concerns throughout our value chain. The mechanism allows third parties to raise concerns that our environmental and social goals and policies may not be upheld within our agricultural supply chain. Our approach is set out here. More information about our grievance management can be found in the Supplier Engagement section of our Palm Oil page.

Collaboration and Partnerships

Landesa

PepsiCo has been working with Landesa since 2018 to further improve our approach to respecting land rights in our value chain. Landesa is a global nonprofit organization working to develop sustainable and gender-sensitive laws, policies and programs that strengthen land rights for millions of the world’s poorest men and women. Landesa helps implement these laws, policies and best practices across countries, companies and communities, translating intentions into pragmatic actions. Landesa has supported PepsiCo in engagements in India and Brazil, as well as developing the ACRE Framework to improve our approach to monitoring the implementation of our Land Policy globally.

Interlaken Group

PepsiCo sits on the Steering Committee of the The Interlaken Group, an informal network of individual leaders from influential companies, investors, CSOs, government and international organizations. The purpose of the Group is to expand and leverage private sector action to secure community land rights. Together they develop, adopt and disseminate new tools and advance new “pre-competitive” mechanisms to accelerate private sector learning on responsible land rights practices. Feedback from the group informs our approach and actions on land rights.

NDPE Implementation Reporting Framework

Since 2017, PepsiCo, working with Cargill and other companies throughout the industry, has convened the ‘Palm Oil Collaboration Group’ to discuss key sustainability issues and challenges on the topic (see Palm Oil page for further information). The group has been able to develop and roll out the No Deforestation, No Peat, and No Exploitation Implementation Reporting Framework (NDPE IRF), an industry-wide reporting tool for companies. The group is incorporating principles from the ACRE Framework into its measurement of land rights to establish a credible industry baseline on the issue.

Looking ahead

We will continue to strengthen our policy and commitments and improve implementation so that land rights are respected in our value chain and local communities. This will include:

  • Reviewing and updating our Land Rights Policy to reflect best practice, and stakeholder feedback;
  • Completing pilots of the ACRE Framework in our supply chain to improve the framework and apply lessons learned to a wider rollout across our business;
  • Publishing an independent study of land rights and our sugar cane supply chain in Brazil, as well as our follow up actions; and   
  • Continuing to engage and collaborate with stakeholders to further progress respect for land rights and tackling the systemic issues that cause them.

Around the world, consumers enjoy PepsiCo products more than one billion times a day. With that global scale comes an enormous opportunity to provide our consumers with products that meet human needs for nutrition and enjoyment.

To help build a more sustainable food system, we are making it easier for consumers to choose foods and beverages that are good for themselves and good for the planet. We’re improving the nutritional profile of our products, working to provide simple, clear information on our packaging, rethinking packaging sizes and leveraging the scale of our brands to drive positive change.

Our product sustainability goals are to reduce added sugars in our beverages and sodium and saturated fats in our food products so that people can continue to enjoy our most-loved brands as part of a balanced diet.

PepsiCo is continuously expanding its portfolio to provide consumers with products that provide nutritional benefits. While we are improving the nutritional profile of many of our products by reducing added sugars, sodium and saturated fat, we are also building our portfolio of products that deliver important food groups and nutrients to encourage, accelerating a journey that we began before the turn of the 21st century.

Over the years, we have enhanced our portfolio through a combination of acquisitions and new product innovations, while working to ensure our existing portfolio also provides improved offerings through product reformulation.

  • Through acquisition, we have added a number of the world’s most trusted and loved positive nutrition brands to our business. With this range of brands, we deliver against a broad set of nutritional needs, including products with food groups and nutrients to encourage such as grains, fruits and vegetables, fiber, protein, and those that are complementary to our existing portfolio.
  • Product innovations help to further bolster our portfolio, meeting local consumer tastes and preferences while providing consumers with the nutrition they are looking for.
  • Through reformulations, we have improved the nutritional profile of many of our products by reducing added sugar, sodium and saturated fat.

Our move toward building a portfolio of more nutritious options is in line with the direction of consumers, a movement that shows no signs of slowing. This presents promising growth potential for PepsiCo.

We believe that we have an opportunity to positively influence the diets of people around the world through the delivery of great tasting products that also deliver important nutrients and food groups. With a global rise in urban living and “on-the-go” eating habits, consumers are demanding products that are at once nutritious, convenient, great tasting, and are trusted from quality and food safety perspectives. Developing and delivering products that deliver these attributes is a priority for PepsiCo.

While one company alone cannot solve the dual global public health challenges of obesity and undernutrition, we believe we are positioned to contribute to a better future for consumers through our enhanced portfolio.

Learn more about our approach to Nutrition Governance here, and how we manage Nutrition Risk here.

PepsiCo Nutrition Criteria

To help provide nutrition guidance during the development of our beverages and foods, and diversify our product portfolio in the process, we deploy the PepsiCo Nutrition Criteria (PNC). These science-based criteria are based on recommendations for diet and nutrient intake from leading global and national nutrition authorities including the World Health Organization (WHO), the U.S. Department of Agriculture (USDA), the National Academy of Medicine, and national public health authorities.

The PNC set standards for nutrients to limit as well as nutrients and food groups to encourage that are based on the latest science and country specific dietary guidelines.

  • Nutrients to Limit are nutrients that have been well-established as dietary factors that can contribute to the risk of certain non-communicable diseases, when consumed in excess. They include: saturated fat, industrially produced trans fat, sodium, and added sugars.
  • Nutrients to Encourage are nutrients that have been identified as being commonly under-consumed in the population. They are sometimes called “shortfall nutrients.” They typically include: fiber, specific vitamins and/or minerals such as iron, vitamin A and calcium.
  • Food Groups to Encourage are food groups that have been well-established as contributing to well-balanced diets. They include: fruits, vegetables, and whole grains, among others.

These standards are used by our product development teams both to reformulate existing products by improving their nutritional profile, and to guide the development of new product innovation. To apply the PepsiCo Nutrition Criteria in a relevant way to our portfolio, we have a tiered set of unique criteria for 20 food categories. Products are evaluated based on their nutrient profile as well as dietary consumption patterns to determine which criteria should apply.

Learn more about the PepsiCo Nutrition Criteria here.

Nutritious Options

With consumers around the world moving toward more nutritious options, we believe that our portfolio of nutritious options is vital to the strength of our business. Our portfolio includes products with food groups like grains, fruits and vegetables, or protein, plus those that are complementary, like water and unsweetened tea, which support hydration without adding calories or nutrients to limit.

In Russia, the apple pomace juice product under our J7 brand has given our business a unique advantage in the category. Pomace is the edible part of fruits that is rich in fiber but is not typically used in mainstream juices. The addition of pomace to the fruit juice is a unique way to narrow the nutritional gap between drinking fruit juice and eating the whole fruit. The Russian apple pomace product, produced via a process patented by PepsiCo, gives consumers the same amount of fiber per serving as a whole apple. Beyond the nutritional and taste advantages, apple pomace also reduces food waste by using more parts of the apple in the product itself.

In the US, we launched a new line of snacks in 2018 called Imag!ne, which is geared towards families, that provide good sources of nutrients like protein or calcium. Imag!ne Yogurt Crisps contain four grams of protein and eight grams of whole grains per serving, while Imag!ne Cheese Stars contain six grains of protein per serving. Both products contain no artificial colors or flavors.

Meeting Societal Nutritional Needs

In markets all over the world, we work to create products that are suited to local needs in terms of both taste and nutrition, with brands that consumers trust.

For example, in Mexico, a key part of our nutrition business is the Quaker 3 Minutos whole grains oat cereal, fortified with 7 vitamins and minerals. The product has low levels of nutrients to limit, with 0g of added sugars, 0.01mg/kcal of sodium, and only 0.28g/100kcal of saturated fat. 3 Minutos includes 10 percent of the daily recommended value of calcium and 11 percent of the daily recommended value of Vitamin A, both considered shortfall nutrients in the country. For the underserved population purchasing Quaker 3 Minutos - those who are considered to be at or below the poverty line - the price point of 10 pesos falls within the most affordable set of food products (20 pesos or less) for this population. While Quaker 3 Minutos is sold to a broad population, approximately 34 percent of its volume is sold to consumers in Mexico’s bottom three socioeconomic levels as determined by the country’s National Council for the Evaluation of Social Development Policy (CONEVAL).

In India, through a joint venture between PepsiCo and Tata called NourishCo, we sell products such as Tata Water Plus, fortified with bio-available copper and zinc, as well as Tata Gluco Plus, which serves as a source of iron, and glucose to provide energy.

In our Russia business, we sell dairy products such as milk, kefir, and yogurt, as well as purees and juices to the city of Moscow, which distributes these nutritious products to more than 200 infant-feeding centers. These products are then made available to citizens of Moscow, free of charge, to feed children 0-3 years of age, giving all children in the city the opportunity to receive good nutrition, regardless of background.

Meeting Nutritional Needs Through the PepsiCo Foundation

The PepsiCo Foundation is another vehicle for providing nutritious servings to the underserved. Through grants to, and collaborative partnerships with, selected nonprofit organizations, the PepsiCo Foundation and its partners provide nutritious servings to communities across the globe.

Hunger is often not a problem of food scarcity, but rather one of logistics. Food for Good, our signature nutrition operation, was created more than a decade ago by a group of enterprising employees who wanted to leverage the logistical know-how and technical expertise of PepsiCo—one of the world’s largest food and beverage companies in the world—to help get food to those in need. Over the years, the program has grown from providing summer meals in Dallas, Texas for children eligible for free or reduced-price lunch during the school year, to a year-round operation offering nutritious, pre-packed meals to underserved children in 20 U.S. cities, a number that is expected to expand in the coming years. In partnership with local nonprofit organizations and government agencies, the program delivers meals that all meet or exceed USDA standards, and include fresh fruits and vegetables, whole grains, low-fat milk and high-quality snacks. In doing so, Food for Good leveraged PepsiCo’s strength in distribution and logistics in order to successfully deliver nutritious meals to children who needed them the most. 

The program has supported disaster relief efforts since 2017 and we continue to create new and innovative nutrition solutions to needed to provide support to the unique circumstances of the communities we serve.

Beyond the U.S., the PepsiCo Foundation is partnering with highly respected organizations to address food security in markets around the world.

For more on our Food for Good program, including our response, impact and partners, see our website, here.

Looking Ahead

While the COVID-19 pandemic will undoubtedly impact the way we do business, PepsiCo anticipates that efforts will continue unabated within the food industry to improve the nutritional quality of products and hence the diets of consumers.

Nutrition Governance

In 2016, we reviewed our sustainability governance structure to identify opportunities to strengthen the integration of sustainability into our business agenda and processes. This includes our product-related sustainability goals, which focus on improving the nutritional profile of our product portfolio. Beginning in 2017, PepsiCo's senior leadership team, made up of the Chairman & CEO, Sector CEOs and top functional leaders, assumed direct oversight of the sustainability agenda, strategic decisions and performance management. This ensures that sustainability is a key accountability factor for every member of our senior leadership team. Placing sustainability accountability within the company’s most senior leaders reflects the emphasis we place on achieving our sustainability agenda.

Strategy and progress against our sustainability goals are discussed during meetings of the full senior leadership team on a regular basis, providing opportunities for our senior leadership to align on major strategic issues relating to sustainability. In between these meetings, senior leadership team members remain actively engaged in executing against our sustainability goals, inclusive of our product-related goals, driving the agenda with their teams.

In particular, our R&D team plays a critical role in the science and research supporting innovation. PepsiCo R&D supports progress on our nutrition strategy by delivering innovation built on groundbreaking science and technology. R&D undertakes research to create technical solutions for product development with platforms specifically focused on health and nutrition and provides tools to enable the development of products with improved nutrition profiles.

Innovation and reformulation efforts have been underway for some time and continue unabated  in our portfolio around the world. Our product reformulation efforts are global in order to make the greatest impact; an example of this is our roll out of new recipes of Mirinda and 7UP with 30% less sugar in more than 80 markets. To achieve our goals, each of these markets and, in some cases, regions have developed tailored strategies to take into account local taste preferences, challenges and cultural differences to enable a greater likelihood of consumer acceptance without compromising the improved nutritional profile.

Nutrition Risk Management

PepsiCo reviews nutrition-related risk through the PepsiCo Risk Committee (PRC). The PRC is chaired by our Chairman & CEO, and is comprised of a cross-functional, geographically diverse senior management group that meets regularly to identify, assess, prioritize and address our top strategic, financial, operating, business, compliance, safety, reputational and other risks.

The PRC is also responsible for reporting progress on our risk mitigation efforts to the PepsiCo Board of Directors. We are a global food and beverage company operating in highly competitive categories, and we rely on continued demand for our products. Our success depends on, among other things, our ability to anticipate and effectively respond to shifts in consumer trends, including increased demand for products that meet the needs of consumers who are concerned with nutrition and health & wellness.

The achievement of our strategic and operating objectives involves taking risks. To identify, assess, prioritize, address, manage, monitor and communicate these risks across the company’s operations, we leverage an integrated enterprise risk management framework, with direct involvement from our Board of Directors, which has oversight responsibility for this framework. One of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of our business, including risk assessment and risk mitigation of the company’s top risks. The Board receives updates on key risks throughout the year.

Our ability to broaden the range of our product portfolio, including expanding our offerings of more nutritious products to adapt to consumer tastes and preferences is reviewed regularly with the Board and the PepsiCo’s senior leadership as part of the risk management process. Risk assessments are updated at least annually, and action plans are developed across multiple stakeholders, including our R&D, Global Nutrition Science, Regulatory, and Public Policy & Government Affairs (PPGA) groups, as well as across our key markets.

As part of the product focus area of our sustainability agenda, specific steps are taken to mitigate this risk. For example, we will continue to:

  • Expand our offerings of more nutritious products in both developed and developing markets.
  • Reduce added sugars, sodium and saturated fat, while continuing to focus on the great taste consumers expect from our products.
  • Expand our Affordable Nutrition business, with a focus on markets within Latin America and Sub-Saharan Africa.

The Public Policy & Sustainability Committee of the Board has reviewed each of the product goals our sustainability agenda.

Progress/Challenges

As we pursue positive nutrition, we have made progress but faced challenges along the way.
Progress

Our focus on meeting consumer needs for taste, enjoyment and health and wellness enable us to make progress in both renovating our core products and to innovate to deliver more choice and address nutrient and food group gaps.

Challenges

The double burden of obesity and malnutrition continues to pose challenges for effective nutrition intervention on a global basis. The emergence of COVID-19 has re-emphasised the importance of overall good health in the body’s ability to both resist and cope with infectious disease. Our continued focus on responding to public health challenges with improved nutrition choices will enable consumers to better choose a healthy diet.

As a global company with brands that reach consumers more than a billion times every day, it is important for PepsiCo to provide fact-based, easy-to-understand nutrition information about our products to help consumers make informed choices for themselves and their families.

Our general policy is to provide a consistent approach to nutritional labeling
across the world, based on the following.

  • On the side or back of our packages, and taking account of local legislation,  PepsiCo provides nutrition information per serving, per portion, and/or per 100 grams of energy (as Calories, kilocalories, or kilojoules), and on key nutrients— protein, carbohydrates, total sugars, total fat, saturated fat, and sodium.
  • We also provide simplified nutrition information per portion on the front of our packaging (FOP).

In 2019, PepsiCo monitored compliance with our Global Labeling policy in most markets around the world, which represented approximately 94 percent of net revenue, and found that approximately 98 percent of PepsiCo products complied with our side- and back-of-package labeling policy and 86 percent complied with our FOP labeling policy.

Consumers, governments, and other stakeholders are increasingly recommending interpretative FOP labeling that would help consumers see nutrition information at a glance and enable quick purchasing and consumption decisions.

PepsiCo supports recommendations by some of our key stakeholders for one globally consistent FOP label. However, local legislation provides for a wide variety of FOP labels in different countries. These vary from labels calling out a positive nutritional profile, through color-coded traffic light labeling, to warning signs. This proliferation makes it challenging to achieve this recommendation.

PepsiCo supports FOP labeling that:

  • Is science-based;
  • Reflects ongoing reformulations by companies and rewards those that offer a range of options including reduced added sugars, saturated fats, and sodium;
  • Discourages or does not add to a proliferation of labeling schemes around the world; and
  • Ultimately, helps consumers make informed choices.

Please see our Global Labeling Policy for more information.

Our Approach

Packaging plays an essential role in safely delivering our products to customers and consumers. As a business, we design our packaging materials around several critical criteria, including compliance with food safety regulations, freshness and quality of the product, environmental sustainability, affordability, and consumer preferences, including convenience. At the beginning of every packaging design effort, we balance these criteria to arrive at a final packaging design.

We recognize that packaging is often disposed of improperly after a product has been consumed, and we share the concern that plastics and other wastes are accumulating in the marine environment and on land. These materials have value, and we are working on a broad set of solutions to ensure that they do not end up as litter or in a landfill. The following goals make up our 2025 packaging sustainability agenda:

  1. Strive to design 100 percent of our packaging to be recyclable, compostable or biodegradable,
  2. Strive to use 25 percent recycled content in our plastic packaging by collaborating with our suppliers, helping to increase consumer education, fostering cross-industry and public-private partnerships, and advocating for improved recycling infrastructure and regulatory reform, all of which are required to realize our ambition,
  3. By 2025, PepsiCo will reduce virgin plastic use across our beverage portfolio by 35%, equating to the elimination of 2.5 million metric tons of cumulative virgin plastic when taking into account business growth. On an absolute basis, this includes a 20% virgin plastic reduction vs a 2018 baseline. 
  4. In partnership with the PepsiCo Foundation, work to increase recycling rates.

The problem of waste and litter is a challenging issue that involves a complex system of actors, including many companies along the packaging value chain, retail and sales outlets, waste management and recycling industries, governments and consumers. As a result, PepsiCo engages in a variety of programs and initiatives that bring stakeholders together to create broad solutions in order to shift the whole system in a more sustainable direction.

We believe that recycling and composting industries should be viewed by governments as a vital opportunity for clean technology investment and growth. In addition to the investments that PepsiCo and other companies make in research and development, purchasing recycled content, consumer education, and financial contributions to improving recycling collection, we encourage policy makers to support the recycling industry in further ways. In particular, policy makers can support public funding and incentives that encourage collection and reuse of post-consumer material, expand and modernize processing capacity, use more recycled material in infrastructure projects, promote greater private-sector investment, and help inform consumers on effective recycling practices.

Our Progress

Since the start of our efforts on sustainable packaging, we have been working to collect and analyze global data to better understand how our packaging fits with local waste and recycling systems and where action is needed. We highlight the following areas of progress in 2019:

  • We estimate that approximately 88 percent of our packaging worldwide is fully recyclable based on 2019 data.
  • We are already among the largest users of food-grade rPET in the world, resulting in an average of approximately 6 percent rPET used across company-owned and franchise beverage operations globally.
  • Since 2010, the PepsiCo Recycling Program has helped to recycle over  908 million bottles and cans.
  • In the last year, we have reduced our virgin plastic footprint, compared to our 2018 baseline, by 1 percent.
  • PepsiCo became an investor in the Alliance to End Plastic Waste (AEPW), becoming the only food and beverage company to join the Alliance. AEPW aims to bring together major players from chemical companies to waste managers to invest $1.5 billion and catalyze efforts to eliminate plastic waste.
  • PepsiCo joined or initiated numerous recycling efforts around the world. For example:
    • In the United States, PepsiCo became a founding member and advisor for The Recycling Partnership’s Film and Flexibles Task Force to find recycling solutions for flexible films.
    • In Latin America, we launched Recycling with Purpose - an initiative that uses consumer incentives and a rewards program to increase recycling.
    • In Europe, PepsiCo became a signatory of the Circular Plastics Alliance (CPA), a multi-stakeholder initiative covering the entire plastics value chain, to boost supply and demand of recycled plastics across the European Union (EU). The CPA aims to boost the EU market for recycled plastics to 10 million tonnes by 2025.
    • In Asia, PepsiCo worked with peers to establish producer responsibility organizations (PROs) in several countries to improve collection infrastructure to recycle our packaging, including in Vietnam, Thailand and Malaysia.

As we pursue sustainable packaging, we have made progress but face challenges along the way.
Progress

PepsiCo has been able to design our packaging to be 88 percent recyclable, compostable, or biodegradable. We use an average of approximately 6 percent rPET across our beverage business and have successfully transitioned Tropicana bottles to contain 50% rPET in Western Europe and Lipton bottles to contain 100% rPET in Belgium and the Netherlands.

Across the packaging value chain, stakeholders are dedicated to working together towards a common goal to solve plastic pollution and create a circular economy for packaging.

Customer and consumer interest in sustainability gives PepsiCo more opportunity to try innovative solutions.

Challenges

Poor infrastructure (or lack thereof) makes collection and recycling of packaging difficult and increases the likelihood of packaging leaking into the environment.

Limited supply of high quality recycled materials makes it difficult to buy as much recycled materials as we would like.

Supply chain constraints have led to challenges scaling up innovative packaging materials such as bio-based material.

Our Sustainable Plastics Vision

Among our packaging material types, we recognize that plastic packaging in particular has caused significant concern. In 2019, PET plastic comprised 33 percent of the total packaging volume PepsiCo used, followed by fiber at 28 percent, glass at 14 percent, aluminum at 8 percent, with other packaging making up the remaining 17 percent. In that year, we used 2.3 million metric tons of plastic to package products throughout our food and beverage portfolio—this includes primary, secondary, and tertiary packaging. PepsiCo’s sustainable plastics vision is to build a world where plastics need never become waste. Our strategy to achieve that vision is based on three inter-connected pillars:

  1. Reduce: Reduce the plastic that we use.
  2. Recycle: Support a circular economy for plastics.
  3. Reinvent: Improve the packaging and plastic that we use.

Through each of these three pillars, PepsiCo will Partner: Lead change through active partnerships and stakeholder engagement.

Reduce the Plastic That We Use

We are working to minimize plastic used in our packaging while exploring alternative, low-impact, environmentally-friendly packaging materials.

PepsiCo sets Goal for Sustainable Plastic Vision

PepsiCo has done extensive work in reducing plastics across primary, secondary and tertiary packaging. We have light-weighted our bottles and cut down on shipping and other packaging materials to achieve the most efficient use of materials possible.  Where environmentally efficient, we are exploring the use of alternate packaging materials. For example, in 2019 we committed to phase out all plastic packaging for our bubly brand, to take effect in 2020.

We are also working to reduce plastic usage in our snacks portfolio. Our research and development team is currently undertaking an initiative to ensure ‘right size’ snack packages using an improved packaging technology. Part of this effort includes analyzing secondary and tertiary packaging used in shipping, to further reduce packaging materials used. Through these efforts, PepsiCo will be able to reduce packaging materials used for the same volume of product.

Recycle: Support a Circular Plastic Economy for Plastics

Increasing recycling rates supports a circular economy by ensuring an end use of each package put into the market, thus preventing waste and protecting the environment. We are working and partnering to increase consumer recycling by:

Designing packaging that is 100 percent recyclable, compostable or biodegradable

PepsiCo strives to Design Packaging to be Compostable Recyclable and Biodegradable

While much of our beverage packaging is recyclable, we recognize that there are components of our packaging that may inhibit recyclability. To address this, we are currently integrating design for recyclability into our ideation and design process for all new products through a business wide program. Some impediments such as non-recyclable labels, colorants, and PVC have already been phased out in some markets. For example, we recently converted non-recyclable labels on all 52 oz and 59 oz Tropicana bottles. Learnings from this project will be critical in our efforts to transition our global beverage portfolio to be 100 percent recyclable, compostable or biodegradable.

Investing in Recycling Infrastructure

While we work on designing sustainable packaging, we acknowledge that just as important is the infrastructure that enables recycling and promoting a culture that encourages it. Recovery and recycling rates throughout the world have significant opportunity for improvement and, while we cannot change those rates on our own, we have a role to play in supporting them through our own investments and partnerships with industry peers, non-governmental organizations, and governments.

In the United States, for example, PepsiCo Recycling works in local communities to implement various on-the-go programs and partnerships to improve recycling infrastructure and raise awareness. PepsiCo Recycling tests new approaches and expands relationships with recycling agencies through more than 1,000 programs with municipalities and commercial sites since 2010. Read more about PepsiCo’s work to improve recycling in the United States here.

The PepsiCo Foundation became the first investor in Circulate Capital, which aims to catalyse investment in solutions to reduce ocean plastic pollution in South and Southeast Asia. The fund, which announced the first close of the U.S. $106 million Circulate Capital Ocean Fund in 2019, was created with Closed Loop Partners and The Ocean Conservancy, among other partners.Circulate’s inaugural investments of US$6 million are in two companies, in India and Indonesia, that recycle local plastic waste into useful products.

In India, PepsiCo runs a recycling initiative in partnership with Gem Enviro Management using reverse vending machines (RVM), collection vans, electric rickshaws, collection centers and collection points across Delhi to enable collection and recycling of used PET bottles. One important aspect of this initiative is the training and development of participants in the informal recycling sector as they are an important contributor to the plastic waste management value chain. A similar program has also been set up for flexible films in India.

In Australia, PepsiCo partners with a recycling organization called REDCycle.This partnership allows consumers to drop off used flexible packaging at supermarket collection sites. The packaging is then made into recycled plastic products such as durable plastic benches or other outdoor furniture.

Increasing Use of Recycled Plastic Content in Our Packaging Materials

PepsiCo is currently one of the largest users of food grade recycled PET (rPET). We are working to qualify new rPET suppliers and technologies to further increase rPET in our packaging to reach 25 percent recycled content in our plastic packaging.

PepsiCo strives to Design Packaging with 25 percent Recycled Plastic

To further this goal, PepsiCo is working to increase recycled content across its brands. As of 2020, all Lipton beverage bottles in Belgium and the Netherlands have transitioned to 100% rPET. Additionally, in Western Europe, we have transitioned Tropicana bottles to contain 50 percent rPET and aim to meet 100 percent rPET in those containers by 2025. In the United States, LifeWTR will transition to 100 percent rPET in 2020.

PepsiCo is also investing in technologies to increase the supply of recycled plastics. In 2019, we entered a partnership with Carbios, a company pioneering new, bio-industrial solutions to reinvent the lifecycle of plastic and textile polymers. Carbios’ enzymatic recycling technology fully breaks down post-consumer PET plastics into their original building blocks (i.e., monomers) that can then be used to produce PET plastics equivalent to virgin ones, such as bottles and other packaging.

Investing in Consumer Education

As we work to increase the sustainability of our packaging, it is important for consumers to understand how and why to properly dispose of used packaging. We are engaged in many projects globally to improve communication and education around recycling for our consumers.

PepsiCo’s Recycle Rally is a free recycling program designed specifically for K-12 schools across the U.S. It provides exclusive access to resources and incentives to inspire students and their communities to recycle. Over 10,000 schools, including 7,000 currently enrolled, have participated in Recycle Rally over the past ten years (2010-2020) to collect more than 630 million plastic bottles and aluminum cans.

In 2019 PepsiCo launched Recycling with Purpose, a circular economy model that will promote recycling in Latin America and the Caribbean. One of Recycling with Purpose’s three main components is a consumer incentive approach that helps educate and involve consumers in recycling. Consumers are able to exchange their recyclable plastic materials for a virtual currency, which they can then use to earn discounts on a variety of products and services.

In order to encourage and educate consumers on how to recycle our beverages, PepsiCo also communicates these important messages through on-pack labels. For example, in France we are part of a consumer awareness initiative called Pensez au Tri. This is a labeling system designed to give on-pack recycling instructions for each product. We have successfully transitioned 100 percent of our packaging in France to include information on waste sorting.

Similarly, in the U.S., our Quaker brand uses the How2Recycle label. How2Recycle is a simple on pack logo indicating in a clear and concise way, how to recycle each component of a package, with additional information on its website about local recycling resources and consumer education videos.

Reinvent: Improve Packaging and Plastics

As a top producer of consumer packaged foods and beverages, we must continue to innovate and reinvent our packaging. We strive to be on the leading edge of sustainable packaging and will continue to reinvent our packaging.

To meet consumers’ individual needs while delivering high-quality beverages without single-use plastic bottles, we are working to expand our portfolio of options that go Beyond the Bottle. For example:

PepsiCo’s acquisition of SodaStream in early 2019 has brought into the PepsiCo family an alternative means of providing consumers with beverage options prepared at home using reusable bottles. Through the expansion of our SodaStream business, an estimated 67 billion plastic bottles will be avoided through 2025.
We are currently testing a new hydration platform, known as SodaStream Professional, which enables consumers to dispense customized water options, including flavors like peach or raspberry lime, sparkling or still water, into refillable personal containers. Through a pilot, in 2019 and early 2020, we placed 30 units in select workplaces, universities, and hospitality partners across the U.S., avoiding a total of nearly 160,000 bottles. We plan to expand this platform in 2020.  

In January 2019, PepsiCo announced a partnership with TerraCycle to launch a new initiative called Loop. The Loop initiative is a model that delivers products in refillable containers to consumers. The initiative launched in Paris, expanded to New York City, and is set to expand to London in 2020. This initiative exemplifies PepsiCo’s commitment to a circular economy and a shift towards innovative packaging models.

PepsiCo is a member of The NaturALL Bottle Alliance, a research consortium with consumer packaged goods industry leaders and a bio-based materials development company, Origin Materials, to accelerate the development of innovative packaging solutions made with sustainable and renewable resources, including post-consumer cardboard, thus creating additional end market demand for this material and offering packaging with a lower carbon impact.

While using renewable resources for packaging can be a more sustainable alternative to non-renewable resources, these bio-feedstocks must be sourced in a responsible and sustainable way, ensuring sufficient land use for food sources and being mindful of environmental impact. To this end, PepsiCo has joined the Bio-plastic Feedstock Alliance, a multi-stakeholder alliance convened by the World Wildlife Fund, which aims to improve awareness around the environmental and social impacts of sources for bio-plastics.

Developing Solutions to Flexible Films

Flexible films, the packaging used for our snacks, are a beneficial material for transporting our products to consumers. They are lightweight and ensure food reaches consumers in a safe and fresh condition. Flexible films are critical for our snacks packaging, yet across the industry these films are not yet widely recyclable or compostable. To address this challenge, PepsiCo is leveraging our research and development expertise to create innovative packaging and is working with partners to improve technology to recycle or compost flexible films.

PepsiCo has partnered with biotechnology firm Danimer Scientific to develop biodegradable film resins to be used for next-generation snacks packaging. In contrast with traditional plastic, Danimer’s Nodax™ PHA bioplastic, which is produced using renewable biomass, can be incorporated into this next-generation packaging, which is compostable under a variety of conditions. In 2019, Danimer expanded its pilot production capability and acquired a new facility in Kentucky to produce commercial scale PHA.

We are testing the acceptance of bio-based bags with consumers in Chile and India for select lines of our Lay’s potato chips as well as with certain food service accounts in the United States. These bags are made with renewable resources and are compostable in industrial composting facilities.

We are also collaborating with organizations such as the Materials Recovery for the Future Collaborative in the U.S. and Circular Economy for Flexible Packaging (CEFLEX) in Europe to find solutions for recovery of flexible snacks packaging, working to make it a part of the circular economy.

While a significant portion of our packaging portfolio is made of plastic and remains an area of priority and focus, we emphasize sustainability in all of our packaging - however comprised. For example, PepsiCo seeks to purchase only responsibly sourced wood fiber products and will not knowingly accept from its supply chain paper-based packaging that may contain wood fiber harvested illegally or sourced from protected forest areas.

Partner: Lead Change Through Active Partnerships and Stakeholder Engagement

PepsiCo Foundation work with Partners to improve Recycling rates

Underpinning the strategic pillars of our sustainable packaging strategy is broad engagement with partners and other stakeholders to collectively drive change. We develop partnerships within and across all three of our pillars: reduce, recycle and reinvent. These partnerships range from consumer awareness and education programs to research partnerships around innovative technologies and materials and a commitment to build infrastructure around the circular economy. Additionally, PepsiCo engages on this issue through industry coalitions, producer responsibility organizations, trade associations, community-based organizations and in dialogue with policy makers to advocate for and create a circular economy.

Our partners are key to driving sustainable change in the packaging waste value chain. Due to the breadth of our global, regional and local partnerships, we cannot list every initiative in all markets and focus here on a representative sample of our work and commitment to collaboration.

PepsiCo strives for Sustainable Packaging around the Globe

Looking Ahead

In 2020, PepsiCo is looking to further several key initiatives to achieve our 2025 packaging goals. We want to accelerate investments in recycling infrastructure especially in markets with poor recycling collection or high plastic leakage into the environment. With respect to bio-based, compostable material, we are continuing to develop the supply chain to bring these materials to scale. We are also continuing to build coalitions and collaborate in support of smart policies that enable the circular use of materials.

As one of the world’s leading food and beverage companies, a steady, sustainable supply of crops is central to our business. Sustainable agricultural practices are also critical to meeting the increasing demand for food as the global population grows. Our goal is for PepsiCo to be a catalyst for change, in the field, because we recognize that transforming how we grow food is an essential part of building a more sustainable food system. Palm oil, the most widely used edible oil in the world, is a key area of focus.

We provide a comprehensive disclosure of our progress on palm oil on an annual basis. This is our fifth year of reporting and builds on comprehensive reports in 2017 and 2018. For our latest report, we have moved to an online format to reduce duplication and allow for regular updates to our approach and programs.

Please click here to access our latest palm oil disclosure.

PepsiCo has robust, long-standing processes for managing pay programs that ensure pay equity across employee groups. Building on that history, we have increased the rigor of our pay equity review processes, as part of our sustainability agenda, with a goal to achieve pay equity by implementing a more comprehensive global pay equity review process.

As of 2019, we had implemented this process in 70 countries that collectively make up more than 99 percent of our salaried employee population. Our results show that in this population, women and men are paid within 1 percent of each other and in the U.S., people of color and non-minorities are paid within 1 percent of each other1, after controlling for legitimate drivers of pay such as job level, geographic location and performance ratings. This gives us confidence that our efforts to achieve pay equity are producing good results. Importantly, we are also gaining insights into how we can advance pay equity in every country in which we operate.

Our pay equity goal is in line with the statement we made in 2016, when we signed the White House Equal Pay Pledge. As part of this pledge, we set a goal to implement a comprehensive, global annual review process to support pay equity for women. As a Fortune 50 company, we felt it was important to add our voice to this conversation and take a leadership position in regards to pay equity.

1Based on base compensation

Sustainable agriculture is essential to feeding the world, protecting the environment, supporting the livelihoods of more than one billion people globally, and serving as the backbone of many local economies. Through our work to advance sustainable agriculture, PepsiCo is supporting positive social, environmental and economic outcomes across our supply chains, and we enable the continued growth and success of our business. We achieve these objectives by:

  • 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 commitments; and
  • Engaging and collaborating with industry, NGOs, governments and others to find solutions to systemic issues

With respect to pesticides and other agrochemicals used by farmers in our supply chains, PepsiCo seeks continuous improvement in agricultural practices to minimize chemical use and its potential impacts while protecting the crops that are vital to food production.

Pesticides are substances designed to control pests such as weeds and insects. They have many commercial and residential uses, but most are applied as crop protection products to control agricultural pests. Responsible use of pesticides is an important aspect of sustainable agriculture. By improving crop yield from farms and plantations, pesticides help ensure a reliable and productive food chain and reduce pressure to convert more land to agriculture, which helps to prevent deforestation. By protecting crops, pesticides also help to keep food affordable for consumers while supporting farmer incomes.

According to the UN Food and Agriculture Organization, global pesticide use has increased over the past decade, driven by factors such as population growth, climate change, increased demand for food and scarcity of good agricultural land. Much of the growth has occurred in emerging economies. In the United States, data provided by the US Department of Agriculture shows that pesticide use trended downward from the period of 1981 – 2008 while simultaneously contributing to substantial increases in crop yields over that time frame.

Pesticide use has led to concerns around the potential for unintended environmental and health impacts. These may include the potential for pesticide residues on the raw materials used in food manufacturing, impacts on the health of bees and other pollinators, and, if not handled and applied properly, potential health impacts on farm workers and communities. PepsiCo understands these concerns and takes pesticide issues seriously. We also believe that appropriate pesticide use is important for protecting crop yields and promoting agricultural sustainability more broadly. To manage the appropriate use of pesticides in our supply chains, PepsiCo has established a global, cross-functional team that monitors and evaluates pesticide issues as they evolve. We also participate in multi-stakeholder groups, such as Field to Market, The Sustainability Consortium, and the Honeybee Health Collaborative, to gain perspective and help drive industry-wide progress and solutions.

Our Actions on Responsible Use of Pesticides and Other Agrochemicals

PepsiCo’s approach begins with our Global Sustainable Agriculture Policy, which sets standards of performance and expectations for growers across our diverse, global supply chain, including compliance with governmental laws, regulations and industry standards,  and optimization of pesticide and nutrient management is part of our policy. Our aim is to support sustainable practices that substitute natural controls for some agrochemicals, foster ecosystem balance, reduce greenhouse gas emissions and mitigate crop losses. Our policy also recognizes the risk of water pollution from pesticides and the need to responsibly manage water runoff from farms.

To implement our policy, PepsiCo sets specific performance goals on sustainable agricultural sourcing of major agricultural raw material ingredients, backed by our global Sustainable Farming Program (SFP). PepsiCo developed SFP to be a comprehensive framework to gauge environmental, social and economic impacts associated with our agricultural supply chain. The SFP Fundamental Principles and Scheme Rules are available on our web site and provide information on the overall framework as well as specific practices that PepsiCo expects our farmers to adopt, including measures to support safe, legal and responsible use of pesticides and minimizing agrochemical application through practices such as Integrated Pest Management (IPM).

PepsiCo has worked closely with our growers for years, and we have a strong heritage of partnering with experienced farmers who are responsible stewards of natural resources. The SFP has been successfully implemented across 38 countries and with over 40,000 farmers, from large agribusinesses to smallholder farms. Crops addressed through the program include major direct materials such as corn, oats, potato and oranges, among others. The assessments completed on our direct supply chain alone represent over 50% of our total agricultural supply chain by volume. Additionally, PepsiCo has major initiatives on sustainable palm oil and sugarcane that utilize industry-leading sustainability certification standards, specifically the Roundtable on Sustainable Palm Oil (RSPO) and Bonsucro, respectively.

SFP’s framework contains nine environmental, four social and three economic sustainability topics, with detailed criteria and global standards for each. Under the environmental pillar, agrochemicals are one of the nine indicators, providing a platform through which PepsiCo gathers information on implementation of our principles of pesticide management. The agrochemical indicator includes seven principles[AA{2] , which we categorize in the following way:

PepsiCo provides Guidelines on Pesticides in Sustainable Farming Program

Sustainable protection of crops against pests includes prevention and monitoring of pest problems, using pesticide control methods only when necessary, and targeting only the pests that can harm crops. IPM is an important tool for advancing these practices. The UN's Food and Agriculture Organization defines IPM as "the careful consideration of all available pest control techniques and subsequent integration of appropriate measures that discourage the development of pest populations and keep pesticides and other interventions to levels that are economically justified and reduce or minimize risks to human health and the environment. IPM emphasizes the growth of a healthy crop with the least possible disruption to agro-ecosystems and encourages natural pest control mechanisms."

Since launching the SFP Code in 2015, the program has enabled PepsiCo to obtain data and improved visibility into our agricultural supply chains, including the use of IPM.  Comparing year-end 2019 performance with the baseline established from 2015-2018, farmers’ compliance with our IPM requirement has improved from less than 50% to nearly 90% globally. The remaining non-conformance is primarily attributed to smallholder farmers with whom we are continuing to support implementation of IPM practice. PepsiCo is in the process of engaging with our agriculture teams and growers to support the growers in developing and implementing IPM improvement programs, including training on what constitutes an acceptable IPM that is appropriate for the size/capability of the grower and also to build the business case to adopt IPM. Our goal is 100 percent compliance with our SFP Code globally, and we are using third-party verification to ensure that growers are employing the right practices, including IPM. While the impact of IPM on pesticide application will vary according to a complex set of factors, including crop type, region and climate, IPM helps reduce the amount of pesticides used.

Protecting Food Safety and Quality

PepsiCo is dedicated to producing the safest, highest-quality and best-tasting beverages and foods in every part of the world. Developing and maintaining robust food safety programs is how we work to assure safety for every package, every day, in every market. PepsiCo has detailed internal programs and procedures for food safety. A summary of our policies, programs and actions may be found here.

With respect to pesticides and other agrochemicals, PepsiCo’s growers and suppliers are required to follow all applicable rules and regulations. Pesticide management programs by growers and suppliers are assessed as part of the supplier selection process. PepsiCo also has a Global Raw Material Quality and Food Safety Policy that is included in the contracts with our suppliers. We require our ingredient suppliers and growers to manage pesticide residues through their programs and make pesticide testing and use data available to us upon request. Additionally, we also audit our suppliers on a regular basis to ensure quality and food safety practices broadly are in place at the supplier site.

The legal limits for pesticide residues in commodities and finished products are governed by local regulations, which cover products produced both conventionally as well as organically. These limits specify the allowable pesticide residue levels and involve significant margins of safety for consumer protection. Recent studies by the U.S. Food and Drug Administration (FDA) and the European Food Safety Authority concluded that the vast majority of food consumed within the US and the EU, respectively, is largely free of pesticide residues or contains residues that fall within legal limits1. For example, 98 percent of food produced in the US was compliant with federal pesticide residue limits, according to the FDA study.

PepsiCo is compliant with regulations in countries where ingredients are grown and where products are sold. We are aware that concerns exist around occupational exposure to glyphosate, an herbicide used by farmers, including its use as a drying agent prior to crop harvesting. Glyphosate has been used by farmers around the world for more than 40 years because of its ability to control weeds and its safety profile, which has been vigorously tested and affirmed by numerous risk assessment authorities and independent expert panels2. The U.S. Environmental Protection Agency (EPA) recently conducted a thorough review of the most up-to-date safety studies, and in January 2020 they reiterated their view that there are no risks of concern to human health when glyphosate is used in accordance with its current label3. With respect to any residual glyphosate that may be found in food products, the trace amounts present no food safety concerns according to the standards set by, for example, US, Canadian and European authorities. As safety remains a paramount concern to PepsiCo, we will continue to monitor the evolving science in this area and engage with stakeholders to understand the issues as they evolve.

Protecting Bees and Pollinators

We are aware of the potential impact of pesticides, among other environmental stressors, on beneficial pollinators as an important issue within PepsiCo’s supply chain. With respect to the group of pesticides called neonicotinoids (“neonics”), we understand that a significant amount of study is underway to evaluate their impact on pollinators, though significant gaps in scientific knowledge remain.

PepsiCo’s growers and suppliers are required to follow all applicable rules and regulations. Additionally, we implement policies and procedures, including the SFP discussed above, to address and optimize the use of pesticides in our supply chain and minimize any unintended impacts.

PepsiCo commits to broaden our engagement with external stakeholders on the issue of pollinator health specifically. Through this engagement and our ongoing review of available science, we will continue learning about the issues as they evolve while evaluating the feasibility of actions we can take to protect pollinators.

Food safety is a top priority for PepsiCo. Our products are sold in many countries around the world, and we have the responsibility to ensure the safety and quality of our products for our consumers to enjoy every day.

Our Approach and Performance

PepsiCo has strong global quality and food safety standards. We use only approved ingredients and suppliers, and follow all applicable regulations issued by regulatory authorities. Our products are traceable, which enables us to quickly investigate and address any potential concerns in the marketplace. We ensure that product design is rigorously vetted, and that ingredients and materials are procured, and products are made and sold in full compliance to our standards. Given our large, diverse and ever-changing portfolio we have implemented a smart compliance strategy to ensure compliance. This strategy is based on four key pillars:

  • Applying a risk-based approach to support innovation. Applying tools to assess project risk on an increased range of food safety & quality dimensions requirements and tailoring mitigation strategies. This has improved speed to market while enhancing diligence.
  • Implementing data and digital technologies: We are driving enhanced product traceability and efficiency by connecting ingredient and product specifications across our systems.
  • Leveraging external partnerships to align the supply chain and prevent duplication: Through external industry partnerships such as the Global Food Safety Initiative (GFSI) and AIB International certification, we have aligned food safety content, enhanced audit outputs and reduced the need for re-auditing.
  • Actively participating in discussions with authorities towards science-supported, risk-based and harmonized standards: Engagement has helped to define new and enhanced food safety regulations in line with a risk-based and data-driven approach. PepsiCo participates in various external organizations to make certain we are aware of the food industry requirements and provide scientific input for regulatory discussions. PepsiCo is committed to learning from the US Food Safety Modernization Act (FSMA) and EU Official Control requirements and we have incorporated these best practices into our global standards.

Governance & Management

PepsiCo has robust global compliance programs and systems that mitigate food safety risks. These programs and systems are housed within the Technical Insights, Data & Compliance Function (TDC). The Compliance team includes Food Safety, Quality Assurance, Scientific Affairs, and Regulatory Affairs, supported with input from many other functions within PepsiCo. Food safety performance is reviewed in sector and global PepsiCo Executive Product Integrity Council (EPIC) meetings on a quarterly and annual basis, respectively.

PepsiCo has instituted a new unified global system that stores key quality and food safety data, provides insights and enables data-driven decisions.

Our Compliance functions are leading efforts to address an increasingly challenging external environment, with increased regulatory expectations.

Looking Ahead

Continuing our digital journey is a key focus in 2020 to enable faster and more accurate traceability across the enterprise.

Further embedding our food safety and quality standards across the enterprise is a key priority for 2020 especially in some of our new acquisitions.

Progress/Challenges

In ensuring the safety and quality of our products, we celebrate our progress while remaining focused on overcoming the challenges we face.

Progress: 
  • We have made significant progress in defining and implementing harmonized standards while taking a risk-based approach.
  • We have also made good progress in capturing and digitizing data to enable consistent metrics and governance and this journey will continue. As examples we have aligned our product incident program and food safety policy globally and finalized critical food safety standards to assure the safety of incoming ingredients and manufacturing of our products applied for our company owned and third-party manufacturing sites.
Challenges:
  • The dynamic regulatory environment, acquisition of existing business, acceleration of innovative, regionally driven consumer products and increasing analytical techniques requires constant horizon scanning and proactive quality and food safety action. Technology such as blockchain will require even greater accuracy and speed of traceability and our enterprise wide systems investments must ensure we can anticipate and meet future requirements by our regulators and customers.

In each of the more than 200 countries and territories in which our products are made, manufactured, distributed or sold, we abide by the local laws and regulations governing interaction with government officials and political giving. In the democratic societies in which we operate, the health of those societies depends on citizens being responsibly engaged in the political process. PepsiCo’s policy engagement and political activities – including political giving and issue advocacy – must always comply with all applicable laws, our Global Code of Conduct and policies and conform to the approach set out in these guidelines.

Governance & Oversight

PepsiCo’s Board of Directors recognizes that the use of Company resources in the political process is an important issue for shareholders. PepsiCo’s Board of Directors oversees the Company’s public policy processes and activities with the assistance of its Public Policy and Sustainability Committee. This includes the periodic review of policies and practices regarding political contributions, as well as the review of PepsiCo’s political contributions and expenditures of both corporate and political action committee funds.

Public Policy Engagement and Issue Prioritization

PepsiCo’s business is affected by public policy at the local, state, national, regional and global levels. Our Public Policy and Government Affairs team works with senior management to set annual and long-term public policy priorities. We have a strong Global Code of Conduct and abide by local laws and regulations that govern interaction with public officials. Through public policy engagement, our goal is to promote a business environment that supports PepsiCo's ability to achieve sustainable growth in the years ahead.

Since 2015, we have witnessed the convergence of an international policy agenda with the adoption of the United Nations Sustainable Development Goals as well as the Paris Agreement on Climate Change. Governments, civil society and key business leaders have come together in pursuit of ambitious, long-term solutions to the world’s most significant environmental and social challenges. Companies continue to be called upon to develop creative, innovative solutions and products to better serve society’s needs. These historic agreements reflect future policy direction which will affect how we conduct business.

We therefore participate in public policy dialogues and share our expertise on key issues that support our business strategy and where we or others have identified that we can contribute ideas to solve policy issues. We aim to make constructive contributions that will lead to policies that help our business, our consumers and society thrive in a sustainable fashion. In 2019, our key issues included discriminatory taxation, trade, commodities, restrictions in the marketplace and environmental regulation.

Lobbying: Guidelines, Reporting and Expenses

PepsiCo monitors and abides by the changing laws and regulations governing lobbying activities, including the rules regarding national and sub-national lobbying registration and reporting obligations. In the U.S., PepsiCo associates who engage in and support lobbying efforts at the U.S. federal and state levels undergo annual ethics training by expert outside counsel. PepsiCo discloses all lobbying activities at the federal, state, and local level, as required by law.

The Lobbying Disclosure Act requires PepsiCo to file quarterly activity reports. The company’s reports can be found here. In 2019, PepsiCo spent approximately $3,490,000 on federal lobbying-related activities in the United States. PepsiCo and each of its individual federal lobbyist employees are also required to file semiannual contribution reports, which reflect a wide range of other payments relating to federal officials. These reports are available at this link.

In addition, under the Lobbying Disclosure Act, many PepsiCo consultants that support the company’s lobbying efforts must file reports regarding their activities on behalf of the company.

A list of PepsiCo 2019 Registered Lobbyists can be found here.

Political Contributions (PAC and corporate funds) – Governance, Criteria, Accountability

Political contributions by PepsiCo’s political action committee – the PepsiCo Inc. Concerned Citizens Fund (CCF) – and by the company, where permitted by law, provide an important opportunity for PepsiCo and its employees to participate in the democratic process. CCF receives voluntary employee contributions from eligible individuals to make political campaign contributions to U.S. federal and state candidates, political parties and other political committees. Management, supervisory and other eligible employees who are United States citizens or lawful permanent residents of the United States (i.e. green card holders) may voluntarily contribute to CCF. Except for administrative expenses, CCF is completely funded with voluntary contributions from eligible PepsiCo employees. Coercion of any employee to contribute to the CCF or to make any political contribution of any kind is unacceptable.

All CCF and corporate contributions must be approved by the Contributions Executive Committee comprised of PepsiCo executives. All such political contributions are distributed in a non-partisan manner to U.S. candidates, political parties, other political committees and ballot measure committees. Moreover, all such contributions must be made and reported in accordance with applicable federal, state and local campaign finance laws.

PepsiCo has developed processes designed to further promote corporate accountability:

  • PepsiCo employees must obtain approval from the Corporate Senior Vice President Public Policy & Government Affairs before making political contributions of corporate funds.
  • All contributions must be reviewed by expert outside counsel to ensure legal compliance.
  • All contributions must further reflect PepsiCo’s business or strategic interest and not those of its individual officers or directors.
  • No contribution will be given to influence, to reward or in exchange for an official act or for any other improper purpose.
  • Employees will not be reimbursed directly or through compensation increases for personal political contributions or expenses.
  • Details on all PepsiCo's political contributions will be posted on its website on an annual basis.

The following criteria will be used in connection with all contributions:

  • The candidate's or entity's commitment to improving the business climate.
  • The candidate's commitment to the long-term public policy goals of PepsiCo.
  • The location of PepsiCo facilities or employees within the candidate's district or state.
  • The candidate's position on key committees where legislation of importance to PepsiCo is considered or the candidate's demonstrated leadership - or potential for leadership - within the U.S. Congress or a State Legislature.

As a result of a 2010 U.S. Supreme Court decision, corporations may now directly or through other groups make independent political expenditures supporting or opposing federal and state candidates. Corporations are still prohibited from contributing directly to federal candidates.  Making contributions to independent political expenditure committees has not been a priority for PepsiCo’s political giving. However, if any such expenditures are made, they will be reported annually along with other corporate and political expenditures.

Finally, PepsiCo employees have the right to be engaged in the political process in their individual private capacity as they see fit, and make political contributions of their own time and money to the candidates or parties of their choice. Such private activities must not in any way suggest PepsiCo's involvement or support. In addition, an employee’s personal political affiliation or political activities shall not be the basis of adverse employment action so long as those affiliations and activities are both lawful and fully compliant with PepsiCo’s Code of Conduct.

PepsiCo’s Political Contributions Policy can be found here

Contribution Factors

PepsiCo seeks to support candidates who have responsible pro-business records and positions. In this way, PepsiCo seeks to improve the business climate, our quality of life and the society in which we live, enabling us to succeed as a company committed to integrity, innovation and value.

PepsiCo generally does not make contributions to candidates outside of the United States. Any exception to this policy would require a written recommendation by PepsiCo’s regional government affairs representative and approval by (1) the Corporate Senior Vice President of Public Policy & Government Affairs and (2) the corporate and regional law departments to ensure strict legal compliance.

Any such contribution would be posted on the PepsiCo website with other political contributions. 

Trade Associations

PepsiCo is a member of numerous industry and trade groups and partners with various nonprofit organizations and non-governmental organizations, including:

  • American Beverage Association
  • Business for Social Responsibility (BSR)
  • Ceres
  • Consumer Brands Association
  • Consumer Goods Forum
  • FoodDrinkEurope
  • Food Industry Asia
  • International Council of Beverage Associations
  • International Food & Beverage Alliance
  • Mexican Council of Consumer Goods Products (ConMexico)
  • SNAC International
  • UN Global Compact
  • U.S. Council for International Business
  • World Economic Forum

PepsiCo works with these groups because they represent the food and beverage industry and the business community on issues that are critical to PepsiCo’s business and its stakeholders. Importantly, such organizations help develop consensus among varied interests.

PepsiCo does not always share or agree with all of the views of each of our peers or associations. PepsiCo representatives on the boards and committees of such groups ensure that PepsiCo’s position about policy or related activities is voiced. As such, there may be times when PepsiCo chooses not to fund certain initiatives sponsored by such organizations.

PepsiCo annually reviews the benefits and challenges from membership in our major trade associations. In addition, our trade associations are required to obtain specific consent from PepsiCo to use PepsiCo’s dues or similar payments for the funding of exceptional political expenditures beyond regular dues and business matters. PepsiCo specifically directs in writing each of its primary trade associations to use PepsiCo dues for general operating expenses and other routine activities, which includes lobbying executive and legislative bodies, and not to apply PepsiCo dues to any political event or election related activity without a specific approval from PepsiCo.

PepsiCo currently does not belong to any organizations which have as a major focus the creation and promotion of model legislation.

For a list of Trade Associations and Policy Groups that PepsiCo made payments to in 2019, please see here

Lobbying Practices Related to the Issue of Climate Change

Climate change is one of the most important issues of our time and requires immediate, coordinated action. Building on our track record of action on climate change, PepsiCo has a goal to reduce absolute greenhouse gas emissions across our value chain by at least 20% by 2030. This goal has been independently recognized by leading NGOs as a science-based target.

Industry action must be supported by climate policy that creates clear price signals and incentives to accelerate clean technology and needed innovation. PepsiCo does not question the science behind climate change, and we have a record of supporting climate policy through membership in the US Climate Action Partnership, signing the American Business Act on Climate Pledge, supporting the Paris Climate Agreement,
and becoming a founding member of the US Climate Leadership Council, among other actions.

We believe that our goals and advocacy are consistent with the Paris Climate Agreement, and we ask our trade associations to adopt a similar stance as and when they engage on the issue. PepsiCo regularly reviews the climate change positions taken by our trade associations, and we have publicly reported information on trade association positions as part of our annual CDP Climate Change Report.

PepsiCo is a member of many trade associations and other business and civil society associations, and we do not always agree with all of the positions these associations may take on specific policy matters. We disclose our contributions to U.S. trade associations and policy groups of which PepsiCo is a member and which lobby in the U.S. at the state and federal level. The document may be downloaded here. PepsiCo is a member of the U.S. Chamber of Commerce, but we do not serve on the organization’s Board and we do not share its views on climate policy.

As part of our goal to reduce our absolute greenhouse gas (GHG) emissions by 20 percent by 2030, PepsiCo is increasingly shifting towards renewable energy.

In Europe, PepsiCo's support for renewable energy markets continues to expand. In 2018, we purchased renewable energy to cover 100% of our electricity needs in Spain, Belgium, Portugal, Italy, the United Kingdom and the Netherlands. Beginning in 2019, we purchased enough renewable energy to cover 100% of our electricity needs in Poland, as well.

In early 2020, we announced plans to achieve 100% renewable electricity for our U.S. direct operations from this year forward. The U.S. is our largest market and accounts for nearly half of our total global electricity consumption. PepsiCo's 2020 shift to renewable electricity in the U.S. is expected to deliver a 20% reduction in company-wide direct operations (Scopes 1 and 2) GHG emissions relative to a 2015 baseline. This represents a significant contribution to the company's goal of reducing absolute GHG emissions across its global value chain by 20% by 2030 against a 2015 baseline.

PepsiCo is Embracing Renewable Electricity around the Globe

To achieve our renewable energy commitment, PepsiCo plans to target a diversified portfolio of solutions. These include Power Purchase Agreements (PPAs) and Virtual Power Purchase Agreements (VPPAs), which finance the development of new renewable electricity projects such as solar and wind farms, as well as renewable energy certificates (RECs) from other projects, which are credits certified by independent third parties that support existing green electricity generation from renewable sources. In 2020, PepsiCo's portfolio will primarily feature RECs, then will gradually move toward PPAs and VPPAs by 2025.

Alongside these measures, we continue to expand our onsite renewable electricity. The company recently installed new solar panels at its global headquarters in Purchase, N.Y., complementing other solar energy installations throughout the country. These include Frito-Lay facilities in Modesto, CA and Casa Grande, AZ, as well as PepsiCo beverage facilities in Fresno, CA and Tolleson, AZ, among others.

In addition, PepsiCo has signed on to the Renewable Energy Buyers Principles, an initiative facilitated by the World Resources Institute and the World Wildlife Fund.

PepsiCo conducts clinical research in partnership with academic institutions or Contract Research Organizations (CROs) in order to answer key questions about our products and ingredients. Our research findings are published in peer-reviewed journals to advance science and knowledge.

In order to assure that PepsiCo research continues to be of the highest ethical quality, we have implemented a set of guiding principles and best practices that are based on recognized international and industry standards (e.g. Good Clinical Practices).  Additionally, the PepsiCo Conduct of Scientific Research is shared and agreed upon with all prospective external research partners prior to initiating any research agreement. PepsiCo does not conduct or fund research (including by third parties) that utilizes human tissue or cell lines derived from embryos or fetuses.

PepsiCo conducts clinical research in partnership with academic institutions or Contract Research Organizations (CROs) in order to answer key questions about our products and ingredients. Our research findings are published in peer-reviewed journals to advance science and knowledge.

In order to assure that PepsiCo research continues to be of the highest ethical quality, we have implemented a set of guiding principles and best practices that are based on recognized international and industry standards (e.g. Good Clinical Practices).  Additionally, the PepsiCo Conduct of Scientific Research is shared and agreed upon with all prospective external research partners prior to initiating any research agreement. PepsiCo does not conduct or fund research (including by third parties) that utilizes human tissue or cell lines derived from embryos or fetuses.

PepsiCo aims to Reduce Saturated Fats across Snacks Portfolio

Informed by these international guidelines and those of national health authorities, we have set a goal designed to help consumers reduce the amount of saturated fat in their diets. Our goal is that by 2025, at least three fourths of our global foods portfolio volume will not exceed 1.1 grams of saturated fat per 100 Calories.

Our goal is designed to shift a significant portion of our food portfolio towards lower saturated fat levels in order to make it easier for our consumers to follow WHO’s recommendation.

Approach

To better meet both consumer needs and policy & regulatory requirements, we are applying saturated fat reduction and reformulation strategies to our entire foods portfolio.

To reduce the amount of saturated fat in our products, we are changing the types of oil we use in production of our foods to those that are lower in saturated fat such as sunflower and canola oils.

In recent years, our Cheetos Brand in Mexico introduced canola into the oil blend, reducing saturated fat by 65%. In 2019, we completed significant saturated fat reduction projects across three of our key East Europe markets. This work impacted 30 recipes across our Lay’s Brand in Russia, 16 recipes across the Lay’s Brand in Ukraine, and 18 across multiple product types in Poland. This effort reduced the average saturated fat per 100g by approximately 17% across these three markets.

PepsiCo offers LAY’s Oven Baked Original Potato Chips, which have 50% less total fat than regular potato chips, in 23 markets around the world. We have also reduced saturated fat across our Australian and New Zealand product portfolio by up to 75% in brands like, Doritos, Twisties, and Bluebird.

In addition to reformulation of existing products, we are also introducing new products with less saturated fat to support our delivery against our global goal. We are continually exploring different oils to enable us to reduce the level of saturated fat, but will also allow us to maintain our products’ great taste and not compromise our product quality.

Performance & External Validation

By the end of 2019, 62 percent of our foods volume in our Top 23 markets (representing 90 percent of our global foods volume) was in line with our goal of saturated fat levels that do not exceed 1.1g/100 Calories, up from 61 percent in 2018.

We have also formed an agreement with Partnership for a Healthier America (PHA), an organization that works with the private sector to help improve the health of youth in the United States by addressing childhood obesity, to conduct an independent review of our progress against our saturated fat goal. The first year of this review was conducted in relation to 2016 data. Most recently, this review looked at 2017 SKU level data of products in our Top 23 global markets, and confirmed the accuracy of our calculations and the reliability of the methodology we use to make those calculations. Further detail about the review is published within PHA’s annual report. We plan to continue conducting independent reviews of the data and methodology, in order to continue to drive transparency around this important goal.

PepsiCo makes Progress towards Saturated Fats Reduction goal in Food Markets

Looking Ahead

While the COVID-19 pandemic will undoubtedly impact the way we do business, PepsiCo anticipates that efforts will continue unabated within the food industry to improve the nutritional quality of products and hence the diets of consumers. This is especially likely given that obesity and diet-related disease have been associated with a greater risk of poor outcome following COVID-19 infection.

As we strive to reduce saturated fat in our products, we have made progress, yet face challenges along the way.
Progress

In 2019, we completed significant saturated fat reduction projects across three of our key East Europe markets, reducing the average saturated fat per 100g by approximately 17% across the Russia, Poland and Ukraine markets.

Challenges

Covid-19 is likely to impact some of our planned renovations hitting the market and will launch in 2021 instead.

Sodium, which is an essential mineral that occurs naturally in food and beverages, can also be added to food during processing and at the table as a component of table salt. While obtaining enough sodium is critical to human health, excess consumption of sodium is associated with elevated risk for high blood pressure and cardiovascular disease. The current World Health Organization (WHO) guideline recommends that people limit their daily intake of sodium to a maximum of 2000mg.

PepsiCo aims to Reduce Sodium across Snack Portfolio

Informed by the guidelines on sodium intake provided by the WHO and other authorities, we have set a goal to help consumers reduce the amount of sodium in their diets. Our goal, as part of our sustainability agenda, is that by 2025, at least three-fourths of our global foods portfolio volume will not exceed 1.3 milligrams of sodium per Calorie.

While global dietary intake data show that snacks contribute a relatively small proportion of total sodium intake, we developed our goal so that it shifts a significant portion of our total foods portfolio towards lower sodium levels that make it easier for our consumers to follow the WHO’s recommendations.

Approach

To respond to global consumers’ nutritional needs and the policy and regulatory environment, we are applying sodium reduction and reformulation strategies to our entire foods portfolio. We are creating new recipes and ways to flavor foods using different ingredients from around the world and deploying new technologies where these are available.

In 2019, products across 14 countries around the world, including Brazil, India, United States, Canada and Poland, were reformulated to meet our sodium target. In line with local regulatory requirements, our South Africa R&D team embarked on a significant sodium reformulation project, reformulating 33 recipes across multiple product types including Potato Chips, Tortilla Chips, Popcorn, and Nuts & Seeds blends. As a result, sodium is down more than 7% compared to 2018 in our South African Foods business.

In addition to reformulation of existing products, we are introducing new products with less sodium to support our delivery against nutrition targets.

We are also exploring salt-reduction techniques that will allow us to maintain our products’ great taste while accommodating consumers’ changing palates. This includes using smaller salt particles to enhance taste while reducing a product’s overall sodium content.

Performance & External Validation

By the end of 2019, 61 percent of our foods volume in our Top 23 global markets, (representing 90 percent of our global foods volume), was in line with our goal to reach sodium levels that do not exceed 1.3 mg/Calorie. This was an improvement from 58 percent in our Top 23 global markets at the end of 2018.

PepsiCo makes Progress on Sodium Reduction goals in Food Markets

We have also formed an agreement with Partnership for a Healthier America (PHA), an organization that works with the private sector to help improve the health of youth in the United States by addressing childhood obesity, to conduct an independent review of our progress against our sodium goal. The first year of this review was conducted in relation to 2016 data. Most recently, this review looked at 2018 SKU-level data of products in our Top 23 global markets, and confirmed the accuracy of our calculations and the reliability of the methodology we use to make those calculations. Further detail about the review is published within PHA’s annual report. We plan to continue conducting independent reviews of the data and methodology, in order to drive transparency around this important goal.

Looking Ahead

While the COVID-19 pandemic will undoubtedly impact the way we do business, PepsiCo anticipates that efforts will continue unabated within the food industry to improve the nutritional quality of products and hence the diets of consumers. This is especially likely given that obesity and diet-related disease have been associated with a greater risk of poor outcome following COVID-19 infection.

As we strive to reduce sodium in our products, we have made progress, yet face challenges along the way.
Progress

Significant sodium renovations implemented in South Africa to meet regulatory requirements and deliver against our global target.

Brazil launched sodium-renovated products a year ahead of schedule for Cebolitos and Fandangos.

Challenges

We anticipate, and work towards, further voluntary and regulatory targets on sodium to support consumers in their desire to improve the nutritional quality of their diets.

Partnership for a Healthier America (PHA)

The input that we receive from customers, consumers, shareholders, employees, suppliers, governments, and civil society including non-governmental organizations (NGOs) is critical to how we develop, implement, and evolve our sustainability agenda. These engagements help us to identify emerging sustainability risks and opportunities, better inform our efforts, and create value for our company and society.

We solicit feedback from stakeholders through a variety of mechanisms, including bilateral meetings and participation in stakeholder networks, outreach programs, webinars and partnerships on a wide variety of topics. Engaging with a diverse array of stakeholders — even those critical of our actions — is important, because it gives us a broader perspective on our approach and programs.

Throughout 2019, members of our management team met with a significant number of diverse stakeholders to discuss our sustainability agenda, which establishes a dynamic framework to accommodate the demands of a rapidly changing business environment while remaining responsive to the needs of society. We solicited feedback on areas where PepsiCo can strive to have the greatest impact, as well as how to support this agenda through strong corporate governance and management practices. Although stakeholder perspectives varied in emphasis, some consistent themes emerged.

In particular, stakeholders reinforced their expectation that PepsiCo – as a leading global company – should use our strengths in collaboration with others to help improve social and environmental systems for the benefit of society as well as PepsiCo’s business. For additional information about our engagement with shareholders and other stakeholders, please sees page 33-34 of our 2020 Proxy Statement.

Our ESG topics pages include many examples of stakeholder engagement on specific sustainability topics, as well as more information on our activities, including governance and management approach, business risks and opportunities, and next steps. For example, we provide detailed information on our stakeholder engagement approach to health and wellness and packaging. These pages also highlight collaborations and partnerships. We believe we can have a greater impact on many of these issues by working with peers, suppliers, consumers, governments, nongovernmental organizations, communities and others to achieve progress.

In addition, the following chart summarizes stakeholder perspectives on how PepsiCo can contribute to addressing some of the leading societal and environmental challenges that intersect with our business. This chart is not exhaustive, but it represents the issues we are addressing that certain stakeholders identified as the highest priority.

Stakeholder Engagement Table

The U.S. Food and Drug Administration’s (FDA) guidelines on added sugars intake recommend adults and children limit their daily intake of added sugars to less than 10 percent of their total energy intake. This would equate to a maximum of 50g of added sugars per day based on a daily intake of approximately 2,000 Calories (where 1g sugar equals 4 Calories).

PepsiCo aims to Reduce Sugar across Beverage Portfolio

Informed by the guidelines on added sugars intake provided by the FDA, we have set a goal to help consumers reduce the amount of added sugars in their diets. This also fits within WHO and other authorities guidelines on “free sugars1.” Our goal, as part of our sustainability agenda, is that by 2025, at least two thirds of our global beverage portfolio volume will have 100 Calories or fewer from added sugars per 12 ounce serving.

Our goal is designed to shift a significant portion of our beverage portfolio towards lower calorie levels that make it easier for consumers to follow the FDA’s recommendations. We are doing this by expanding our portfolio of zero- and lower-calorie beverages and reducing added sugars in our overall beverage portfolio.

Approach

As we look across our total beverage portfolio, there are a number of ways we are working to make progress on our added sugars reduction goal – including reformulating our existing beverages and innovating to develop new products that meet the criteria we have established.

For some of our core global brands, we are actively looking to expand the scale of our zero- and lower calorie beverage options. Pepsi Zero Sugar (known as Pepsi Black or Pepsi MAX in international markets), with zero sugar and zero calories, was sold in 89 markets as of the end of 2019, up from 28 markets in 2015. In addition, we have rolled out 7UP, Mountain Dew, and Mirinda recipes with at least 30-50 percent less added sugars in an additional 15 markets (beyond the 80 new markets in 2018), replacing the full-sugar versions. And we are entering new markets with 7up Free.

In addition, new beverage products are being developed to conform to our added sugars goal, an effort that is evident in recent launches in the United States, including Bubly, a line of flavored sparking water with zero sugar. Our portfolio of zero- and lower-calorie beverage options stretches across product categories, and includes continued development of a lower sugars portfolio in Tea supported in 2020 with Pure Leaf Unsweetenend in US (cold brew and herbals), Lipton Zero expansion in Europe as well as the relaunch of Lipton Green in US with lower sugars; Starbucks Iced Coffees; LIFEWTR, our premium water, and KeVita, our probiotic-based beverage brand. In 2019, we acquired SodaStream and launched PepsiCo flavored soda mixes (Pepsi, Pepsi Max, 7up, 7up Free, and Mirinda) in Norway and Sweden; with expansion plans for other markets in 2020 and beyond.

The exact approach we take will vary from market-to-market and brand-to-brand. There is no one-size-fits-all approach, so we will tailor our strategy to meet the changing needs of local markets and local consumers.

Performance & External Validation

By the end of 2019, 47 percent of our beverages volume in our Top 26 global markets (representing 79 percent of our global beverages volume), was in line with our goal of 100 calories or fewer from added sugars per 12 ounce serving, an improvement from 44 percent at the end of 2018.

PepsiCo makes Progress toward Sugar Reduction goal across Beverage Portfolio

We have also formed an agreement with Partnership for a Healthier America (PHA), an organization that works with the private sector to help improve the health of youth in the United States by addressing childhood obesity, to conduct an independent review of our progress against our added sugars goal. The first year of this review was conducted in relation to 2016 data. Most recently, this review looked at 2017 SKU level data of products in our Top 26 global markets, and confirmed the accuracy of our calculations and the reliability of the methodology we use to make those calculations. Further detail about the review is published within PHA’s annual report. We plan to continue conducting independent reviews of the data and methodology, in order to continue to drive transparency around this important goal.

1The definitions of “free sugars” and “added sugars” are similar, but differ most significantly in how they treat the sugars in juices and juice concentrates.

Looking Ahead

As we continue to pursue our added sugars reduction goal, we expect to focus on the following priorities to further transform our portfolio:

  • Further reformulation of core carbonated soft drinks (e.g. Pepsi in Western Europe
  • Acceleration and expansion of our no- and low-sugar portfolio, including Pepsi Black/Max, 7up Free, and Lipton Zero
  • Further geographic expansion of PepsiCo flavored soda mixes

While the COVID-19 pandemic will undoubtedly impact the way we do business, PepsiCo anticipates that efforts will continue unabated within the food industry to improve the nutritional quality of products and hence the diets of consumers. This is especially likely given that obesity and diet-related disease have been associated with a greater risk of poor outcome following COVID-19 infection.

In pursuing our added sugars reduction goal, we have made progress, yet we also face challenges.
Progress

Since 2016, we’ve expanded Pepsi Zero Sugar, also known as Pepsi Max and Pepsi Black to nearly 100 markets around the world.

Challenges

The double burden of obesity and malnutrition continues to pose challenges for effective nutrition intervention on a global basis. The emergence of COVID-19 has reemphasized the importance of overall good health in the body’s ability to both resist and cope with infectious disease. Our continued focus on responding to public health challenges with improved nutrition choices will enable consumers to better choose a healthy diet.

PepsiCo is committed to purchasing from a supplier base representative of our employees, consumers, retail customers, and communities. Developing partnerships with diverse suppliers helps us build the world-class supplier base we need to succeed by creating mutually beneficial relationships that expand PepsiCo's sphere of activity. Our approach helps to build community infrastructure by providing employment and training while creating role models and promoting buying from other diverse-owned businesses.

In 2019, we spent approximately $1.4 billion USD with diverse suppliers in the United States1. This includes Tier 2 spend reported by non-diverse suppliers, which demonstrates PepsiCo's commitment to expanding engagement of diverse suppliers in our supply chain. Beginning in 2017, we broadened our supplier diversity program to include LGBT, Veteran, and Disabled-owned enterprises.

Since we started our Supplier Diversity program more than 35 years ago, we have spent upwards of $26.4 billion USD with diverse suppliers, and we are proud to say that we utilize diverse suppliers in virtually all areas of our company. To learn more, please visit www.pepsico.com/sdregistration.

1The PepsiCo Supplier Diversity program defines a diverse supplier as an entity that is at least 51% owned, operated, and managed by an individual or individuals from one or more of the following groups: ethnic minority, women, U.S. veterans/service-disabled veterans/veteran - disabled, LGBT+, and people with disabilities.

Governance as a Driver of Performance

We believe strong governance is the foundation for delivering on our sustainability agenda. At PepsiCo, our sustainability approach is integrated into, and not separate from, our business. In governing this approach, we maintain a similarly integrated structure that combines board and senior leadership and oversight with the subject-matter and localized expertise that informs our approach.

The Role of the Board of Directors

As stewards of PepsiCo, our Board plays an essential role in determining PepsiCo’s strategic priorities. The full Board considers sustainability issues an integral part of its business oversight, as sustainability topics are integrated into, and not separate from, our business strategy.

To align with our sustainability agenda, in 2017, our Board created a Public Policy and Sustainability Committee. The Committee assists the Board in providing more focused oversight over the Company’s policies, programs and related risks that concern key sustainability and public policy matters.

The Committee is comprised entirely of independent directors and reflects a mix of public policy, risk, international and science-related skills, qualifications and experience that are valuable to the Committee’s oversight over key sustainability and public policy matters.

The Role of PepsiCo’s Senior Leadership

Embedding sustainability within our core requires the commitment of our senior leadership, who drive the necessary mindset throughout their respective areas of oversight.

In 2016, we reviewed our sustainability governance structure to identify opportunities to strengthen the integration of sustainability into our business agenda and processes. Beginning in 2017, PepsiCo's senior leadership team, made up of the Chairman & CEO, his direct reports and top functional leaders, assumed direct oversight of the sustainability agenda, strategic decisions and performance management. This ensures that sustainability is a key accountability factor for every member of our senior leadership team and, in doing so, reflects the priority we place on achieving our sustainability agenda.

In October 2019, PepsiCo appointed its first Chief Sustainability Officer, elevating leadership of the company’s Sustainability Office, including the Global Sustainable Plastics team and Global Sustainable Operations team. This appointment also represents an acceleration of PepsiCo’s efforts to integrate purpose into the company’s business strategy and brands.

Strategy and progress against our sustainability goals are discussed during meetings of a sub-committee of the Executive Council on a regular basis and also reviewed as part of the expanded executive council agenda.  This provides opportunities for our senior leadership to align on major strategic issues relating to sustainability. In between these meetings, senior leadership team members remain actively engaged in executing against our sustainability goals, driving the agenda with their teams.

To help drive progress, we award our executive officers annual incentives for achieving key business and individual objectives against pre-approved targets. The business objectives reflect a combination of Company-wide performance or business-unit performance depending on the executive’s position and scope of responsibility. Individual objectives are based on an executive’s contribution to PepsiCo’s strategic business imperatives, such as:

  • Driving sustainable innovation;
  • Improving operating efficiencies;
  • Increasing customer satisfaction; and
  • Developing a diverse and talented workforce.

Leadership Across PepsiCo

PepsiCo's senior leadership team has empowered select leaders within the company to create and oversee global strategy and the execution for each of our sustainability goals. These leaders, who were selected for their deep knowledge of the goals they are directing, work with teams comprised of representatives from key functions and all geographic sectors to ensure successful implementation of processes across our businesses.

Sustainability Office

PepsiCo's Global Sustainability Office, now led by the company’s Chief Sustainability Officer, drives governance and delivery of the company’s sustainability agenda across the value chain. Serving as the key central connection point, the Sustainability Office works closely with leaders from across the business to ensure continued performance progress against our sustainability agenda. The Sustainability Office also plays a key role in bringing a sustainability lens to long-term corporate strategic planning and key business processes, ensuring that sustainability is always embedded into the fabric of what we do as a company.

Another key role of the Sustainability Office is managing the integrity of the data on which we report. Data integrity is absolutely vital to maintaining the trust between PepsiCo and our stakeholders, and is aligned with the high internal standards to which we hold ourselves. For more on our dedicated data governance team and how we ensure accuracy, consistency, and precision of our data, while driving accountability among our teams, see Data Governance.

PepsiCo is committed to respecting the human rights of all workers and local communities throughout our operations and value chain. Supporting the safety, wellness, and equality of the workforce across our value chain is important to our success as a company and to the success of our suppliers. Animal Welfare

We expect our suppliers to adhere to the same standards of integrity to which we hold ourselves. Therefore, all suppliers, vendors, contractors, consultants, agents and other providers of goods and services who do business with or on behalf of PepsiCo entities worldwide are expected to follow our Supplier Code of Conduct (SCoC) and all other relevant policies as a condition of doing business with us. These include:

Many of these standards 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.

Our approach to sustainable sourcing is operationalized through:

  • Our Sustainable Sourcing Program (SSP) - a supplier engagement program for our most business-critical first-tier suppliers and business partners that includes formal risk assessments, third-party audits, corrective action and capability building.
  • Our Sustainable Farming Program (SFP) - a farm-level continuous improvement program that helps us assess our direct growers, identify potential gaps relative to our policies, and implement plans to safeguard human rights and improve agricultural practices. (see also: Agriculture).
  • Our procurement practices - our supply contracts include our Supplier Code of Conduct, and we provide training on it through the SSP and on our website. In purchasing categories with time-bound commitments to sustainable sourcing, such as palm oil, our procurement teams use tools such as supplier scorecards to evaluate and compare performance of individual suppliers against our expectations.
  • Tailored programs - in cases where we identify potentially high risk or priority supply chain concerns, we deploy specific programs to improve knowledge, awareness, and outcomes. For example, in 2019 we further expanded the SSP to include our franchisees in select markets, adding to the 2018 expansion into third-party labor suppliers and promotional item suppliers in select markets.

Sustainable Sourcing Program Overview

Our Sustainable Sourcing Program (SSP) builds supplier awareness and capabilities on the issues and expectations referenced in our Supplier Code of Conduct (SCoC). The program supports our long-term sustainable supply goals by addressing known risks and building capability within our supplier operations. Our approach is informed by regular engagement and through our leadership positions with industry groups such as AIM-PROGRESS, Sedex, and the Consumer Goods Forum, as well as through engagement with expert non-governmental organizations (NGOs), such as Shift, to leverage best practices from across our industry and beyond. Internally, the SSP strategy is reviewed annually in consultation with leaders from our human rights, sustainable agriculture, procurement, and legal teams to support business integration.

The SSP includes assessment of risk and compliance with our SCoC as well as third-party auditing of business-critical direct suppliers, contract manufacturing, and co-packing locations. In 2019, we expanded our SSP to additional segments of our supply chain to  include third-party labor suppliers and franchisees in select markets, with a total of 92 countries included in the program. We will continue to expand this risk-based approach to other geographies and segments of our supply chain in the future as part of our commitment to advance respect for human rights throughout our broader value chain.

Supplier Code of Conduct

Our Supplier Code of Conduct (SCoC) is a cornerstone of the SSP. It sets out the expectations we have of our suppliers in the area of business integrity and anti-corruption, labor practices, health and safety, and environmental management. Suppliers are also expected to communicate and apply the SCoC and relevant policies throughout their supply chain. The SCoC is based on recognized international human rights standards and explicitly prohibits all forms of forced labor and child labor. Compliance with our SCoC is a part of PepsiCo’s supply contracts. The SCoC is available in 25 languages, and we provide open-access online training to help our suppliers further understand the principles of our SCoC in addition to more targeted trainings with our business-critical suppliers as part of our SSP.

In 2018, we revised our Supplier Code of Conduct to clarify our expectations around several key issues, including forced labor and migrant workers protections, confidentiality, land rights, anti-corruption and bribery, working hours and rest days, environmental protection, and grievance mechanisms. As part of this process, we also revised our SCoC training to strengthen our guidance to suppliers on key issues such as recruitment fees, freedom of movement, and clear worker contracts.

In 2019, 100% of our targeted business-critical direct suppliers completed this Supplier Code of Conduct training. 

Sustainable Sourcing Program Assessment: Process and Main Findings

Suppliers are responsible for demonstrating compliance through activities within the SSP, including an Initial Risk Assessment, completion of SCoC training, a graded site-level Self-Assessment Questionnaire (SAQ), and participation in on-site audits, as requested. Suppliers are expected to take action to correct any non-compliances identified through the on-site audits, with a focus on continuous improvement throughout their operations.

In 2019, we revised our SAQ to improve question clarity and enable better understanding of supplier practices, gaps, and risks. We also updated our SAQ grading matrix to align with PepsiCo’s salient Human Rights issues. This enables us to quickly gain insight into potential risk areas linked to our salient issues, and to reinforce the importance of these issues in our communications and engagement with suppliers and business partners.

In 2019, more than 860 on-site audits were conducted or recognized with first-tier suppliers using the industry standard SMETA 4-Pillar Audit Protocol or an equivalent assessment. Following the on-site audit, sites were scored from red to green based on the severity and number of instances of non-compliance found on-site.

The top noncompliance findings in 2019 were focused in:

  • Health, Safety & Hygiene
  • Working Hours
  • Wages
  • Environment
  • Regular Employment

Where instances of non-compliance are found during the on-site audit, a corrective action plan with a timeline for remediation is put in place by the supplier site and verification of closure conducted through follow-up review by an approved third-party auditing firm.

Building supplier capability is an important aspect of the SSP.  Among other program actions, in 2019 we updated our corrective action plan materials to include more robust guidance for suppliers on conducting root cause analysis of issues identified through the SSP.  Additionally, we  co-hosted a supplier training event on Responsible Sourcing in Brazil through AIM-PROGRESS focused on topics including health and safety, forced labor/child labor remediation and working hours and wages.

Since the SSP launched in 2015, we have seen strong improvement from sites as they learn from audit findings and demonstrate closure through a corrective action plan and subsequent follow-up audit. High-level results of this improvement are presented below, based on sites that have completed both initial and follow-up audits.

PepsiCo audits for Sustainable Sourcing Program

Grievance Mechanisms

While our policies and programs may not prevent all adverse impacts in our value chain, we aim to provide effective remedy where wherever possible, including using our influence to encourage our suppliers or partners to provide effective remedy where we find impacts directly linked to our business operations, goods, or services. We have established a variety of mechanisms that allow our employees, stakeholders, and other potentially affected individuals to raise grievances and seek remedy. More information on our grievance mechanisms is available on our Human Rights 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 make the PepsiCo Speak Up hotline available for their use through our SCoC.

In the spirit of transparency, we regularly publish information on the usage of our Speak Up program, including the number of reports and their categorical distribution. Our latest report can be viewed here.

Looking Ahead

We will continue to evolve and enhance our programs in line with our sustainable sourcing goals. Key areas of focus for 2020 include:

  • Expanding the scope of our program to support engagement with our business-critical and potentially high-risk areas within our supply chains by analyzing our multi-year supplier data set and continued engagement in the industry;
  • Deepening the specificity of our program tools to assess and address risks in upstream supply chains, such as waste collection practices and responsible recruitment;
  • Evaluating opportunities to test targeted assessment techniques - such as specific audits designed to detect modern slavery or to be used with contract labor brokers - as these methodologies become available;
  • Strengthening our data systems through investment in a robust, end-to-end program management and analytics platform;
  • Continuing to analyze our multi-year supplier data set to better understand trends in supplier challenges, root causes of recurring non-compliances, and to evaluate the effectiveness of our program;
  • Improving our ability to provide suppliers with targeted training and capability building opportunities based on the challenges identified through their assessments and audit results.

Global trends such as urbanization, demographic changes, and technology developments are changing the talent landscape. These trends are contributing to a shift in the supply of talent at a time when demand for skills is increasing sharply. In such an economic environment, we need to continuously reevaluate and reimagine every aspect of our business — pushing ourselves to out-innovate our competitors today so we can out-perform them tomorrow. We will also need to empower our associates to act as owners as they meet their own individual responsibilities while embracing a collective responsibility for the success or failure of our company as a whole.

One of the biggest challenges facing corporations today is attracting, developing and retaining highly talented leaders. PepsiCo aims to engage creative and innovative employees who can fuel short-term success, while simultaneously fostering new capabilities and the growth of the next generation of leaders whose skills, experiences and understanding of new technology will help drive our long-term success.

Learning and Development

PepsiCo’s workforce is bolstered by some of the best leaders and most effective associates in the industry, thanks in part to a global community of learning led by PepsiCo University. We encourage associates to embrace a “learn it all“ mentality, consistently striving to be our best at what we do each day. Our leaders are actively engaged in the teaching process, supporting learning in both formal and informal settings.

Effective learning experiences – whether they happen in a classroom or in the flow of work – require high-quality content, and in 2020 we have augmented our collection of videos, podcasts, articles, blogs, job aids and more. Our goal is to “mix the modalities” to keep engagement high and ensure learning retention over time and in the moment of need. For example, an outside perspective could give associates the insight to make a strategy adjustment, while a quick internal document might answer a process question. By equipping PepsiCo associates with the right learning resources at the right time, we aim to help them solve the business challenges they encounter in their roles.

PepsiCo’s internal global learning resource, PepsiCo University enables a culture of continuous learning and development. In consultation with PepsiCo leaders, PepsiCo University sets priorities for global classroom and online curriculum needs. Our curriculum is organized by topic across three categories:

  • Leadership and Management,
  • Future-Ready Workforce, and
  • Functional Skills

Learners can mix-and- match electronic and face-to-face content from these three areas to suit their learning styles and objectives. PepsiCo University leadership programs are rich, hands-on experiences in which leaders solve real business problems alongside global peers.  Our learners walk away empowered to work in new ways, engaged in our global strategy and better connected to great leaders from across the business.

In 2019, PepsiCo associates again completed more than 1 million hours of learning. In 2020, we expect this number to grow as we launch a new learner experience platform that leverages artificial intelligence and machine learning to deliver the right learning to the right person at the right time.

PepsiCo Associates complete Training through Programs

Freedom of Association

We respect the right of freedom of association, and this principle is embodied in our Global Code of Conduct, Human Rights Workplace Policy, and Supplier Code of Conduct. This means that, consistent with local laws, associates have the right to assemble, communicate, join associations of their choice.

PepsiCo fully complies with all laws regulating collective bargaining. In 2019, 52 percent1 of employees worldwide, eligible to be covered under collective bargaining agreements, were represented (2018: 55 percent). PepsiCo maintains positive working relationships with union representatives.

1Due to COVID-19 interruptions, this figure relies on 2018 data for our APAC Sector.  All other data is based on 2019 Sector data.

Talent Engagement and Growth

We continue to take a holistic approach to employee growth and engagement by deploying a variety of tools aimed at enhancing the employee experience, and seeking opportunities to improve employees’ engagement in their career at PepsiCo. We follow the 70-20-10 model for employee development, which suggests that growing one’s capabilities stems mostly from experiences, followed by coaching and mentoring, and lastly from formal training. Our career tools, learning maps, and development planning resources follow this framework. In addition, our leaders have performance objectives related to advancing our culture and developing talent, which helps to hold leaders accountable for increasing employee engagement and employee satisfaction and emphasize that how work gets done is just as important as what gets done.

We continuously listen to employees to ensure we are providing the best experience possible. Our internal Pulse survey results show that PepsiCo associates  feel high levels of pride in working for PepsiCo, are energized by their work and are confident in PepsiCo’s future success. As a result of the feedback we received from employees, we continue to leverage our strength in leadership to set future direction. We are equipping our leaders to engage in critical conversations about the kinds of growth and development opportunities and resources that are available at all levels of the Company, and to help employees navigate their careers as both PepsiCo and the world around us evolve.

Campus Recruiting

At PepsiCo, we are constantly connecting with students around the country in our effort to identify tomorrow’s leaders.  We value our partnerships with colleges across the US and in 2019, we held nearly 7,000 on-campus interviews. In addition, we continued to build upon our partnerships with external organizations focused on developing diverse undergraduate and graduate students, such as Management Leadership for Tomorrow, The Consortium for Graduate Study in Management, National Sales Network, Hispanic Alliance for Career Enhancement (HACE), the Society of Women Engineers, and The National Black MBA Association.

In 2019, these efforts yielded 2,523 student job offers with 1,800 acceptances, a 71% offer acceptance rate. Of the 1,800 total acceptances, approximately 40% were full-time hires and the remainder were intern or co-op hires.

Talent Attraction

To attract the best and brightest in a competitive talent landscape, we strive to maintain our reputation as a great place to work. Our employer brand showcases both our market successes and a collaborative, dynamic work environment through which our associates make impactful contributions and win with purpose. Through this platform, we are engaging with our current associates, and inspiring our teams to move faster, stronger and better with PepsiCo. In addition, we are focused on continuing to attract top talent and encouraging candidates to bring their unique skills and experiences to our global stage.

In addition to bolstering our attraction and engagement strategies, PepsiCo’s global Talent Acquisition team has continued to deploy a balance of both traditional and progressive recruitment methods in order to attract and retain a diverse and engaged workforce. We continue to grow our reach in traditional channels such as campus recruiting, while also pursuing proactive pipelining strategies tapping into alternative sources of talent to reach future prospects.

Attracting and retaining female leaders across global sectors remains a key component of our recruitment strategy, and we’ve partnered with leading female-focus platforms such as Fairygodboss in order to advance these efforts. In 2019, PepsiCo remained on the Fairygodboss "Best Companies for Women" list.

More broadly, we continue to embrace advancements in mobile technology and have made significant mobile and digital enhancements to our external careers site, pepsicojobs.com. In addition, we’ve sustained continued growth on social media platforms with an active presence on key channels including LinkedIn, Facebook, Instagram and Twitter. As of May 2020, our PepsiCoJobs Twitter handle held an 80 percent positive/neutral sentiment rating. We also have a strong overall culture rating on Comparably, receiving “Best CEOs for Diversity” in 2019. We are proud to see our highest marks coming from the gender diversity, retention, and compensation categories. Our LinkedIn followership has soared to more than 4.2 million since the start of 2019, while also landing the #11 and #47 spots for Brazil and the U.S., respectively, for the 2018 LinkedIn Top Employer list.

Finally, PepsiCo is proud to be named on Fortune’s 2020 “World’s Most Admired Companies” list for the 15th consecutive year.

In support of the efforts of the World Health Organization (WHO), governments and the public health community to reduce the global intake of industrially produced trans fats (iTFA), PepsiCo committed to not exceed 2 grams iTFA per 100 grams of fat/oil in our products by end of 2023. In 2019, as part of the International Food and Beverage Alliance, we adopted this iTFA goal that aligns with the WHO's overall objective of phasing out iTFA from the global food supply.

PepsiCo’s Frito-Lay US business led the industry in 2003, when it removed partially hydrogenated cooking oils (PHOs) from its core snacks and replaced them with better oils like corn, canola and sunflower. In addition the company included a trans-fat line on every nutrition facts panel more than two years in advance of the 2006 US Food & Drug Administration (FDA) regulation. Today, PepsiCo has completely removed PHOs from all product formulations globally.

Waste reduction, in all its forms, is a strategic imperative for PepsiCo, for the benefit it provides to our business in the form of cost savings and efficiencies gained. It is also inherent to being a good citizen of the communities where we operate.

We are committed to achieving virtually zero waste to landfill in our direct operations. Our commitment is a global one, but we approach each site with a tailored approach that takes into account local infrastructure and the greatest opportunities for improvement.

Our operational waste is comprised primarily of packaging from manufacturing inputs and the remnants or our manufacturing process.

Our offices generate a far smaller proportion of our waste, primarily from paper and other office supplies. We encourage associates to reduce and re-use as much as possible and are transitioning toward a paperless environment. Any remaining waste such as paper and ink cartridges is sorted and recycled as much as possible taking into account the local recycling infrastructure.

Strive to Achieve Virtually Zero Waste to Landfill in Our Direct Operations1

In every community where we operate, we are working to minimize the amount of waste that we send to landfill. PepsiCo has been on this journey for many years and is approaching virtually zero waste to landfill. In 2019, we recycled approximately 1.6 million metric tons of waste, or 97 percent of total waste, up from 96 percent in 2018.”

We will remain committed in the coming years to achieving virtually zero waste to landfill, particularly in the developing markets, where we are building recycling infrastructure in our operations and building a culture of recycling. Reducing waste helps PepsiCo to minimize costs, including fee payments to facilities that accept waste. At the same time, we make every effort to reuse materials in productive ways (see ‘Reduce Food Waste,’ below).

PepsiCo maintains partnerships with organizations that help us to reduce the waste we send to landfill. These include recycling, composting and waste-to-energy businesses. Building a strong local infrastructure for these activities helps us to meet our commitments while also strengthening local economies and reducing waste beyond our own operations.

Waste Landfill

Reduce Food Waste

As a global food and beverage company, we have a role to play in addressing the issue of food waste. Globally, approximately one-third of the food produced for human consumption is wasted each year, and that waste is a significant contributor to greenhouse gas (GHG) emissions. By reducing food waste within our direct operations, which we do as part of our virtually zero waste to landfill goal, we can also make a meaningful impact in reducing our GHG emissions. Our commitment to reducing food waste is in support of the Consumer Goods Forum and the larger UN Sustainable Development Goal (12.3) that aim to “halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains.”

Our efforts to reduce food waste focus on using agricultural inputs as efficiently as possible in our manufacturing processes. We are continuously improving our equipment and manufacturing processes to ensure an optimal use of the raw material.

We are also working hard with our partners to identify beneficial uses for the processing residue that remains. For example, we provide organic matter such as potato peels to farms, where they are used in animal feed. Our Quaker facility in Cedar Rapids, Iowa sells oat hulls to the University of Iowa, which converts the hulls into energy, replacing fossil fuels and supporting the University’s renewable energy program.

1Virtually zero waste to landfill means that an organization achieved a landfill diversion rate of 98% or greater. PepsiCo aims to reach a 99% diversion rate by 2025 in its direct operations.

Water Stewardship

At PepsiCo, we believe that water is a fundamental human right, indispensable to every community around the world. More than 785 million people globally lack access to safe water. Climate change and increased consumption are placing an increasing burden on water supply resulting in cities facing “day zero” crises, communities being displaced, and environmental systems being degraded. At the current rate of progress, it is projected that there will be a 40% gap between global water supply and demand by 2030. There is a strong imperative for companies like PepsiCo to deploy their expertise and resources to address this issue.

Water is also a critical resource for our business, at all points along our value chain—from the farms where we grow the fruits, vegetables and grains that make up our product portfolio, to our manufacturing processes where water is used to ensure we meet the highest quality food safety standards, and as one of the key ingredients in many of our products. PepsiCo’s business depends on water, and as such, we have a vested interest in conserving and protecting it.

Our Journey

Water stewardship has long been one of our top priorities. We understand that our ability to manage our water footprint is inextricably linked to the success of our business and of the local communities where we operate. We were one of the first companies of our size to acknowledge water as a human right.  In order to do our part to honor that right, we have adopted an integrated approach to watershed management that includes;

  • Improving water-use efficiency on farms and in manufacturing facilities
  • Replenishing local water in the regions that are most at risk and where we operate
  • Increasing safe water access for communities that face scarcity.
Our Commitments

As part of our sustainability agenda, we have set the following goals around water:

  • In high water-risk areas, by 2025 we aim to:
    • Improve water use efficiency by 15% in our agricultural supply chain (focused on corn and potatoes) (2015 baseline)
    • Improve operational water use efficiency by 25% (2015 baseline)
    • Replenish 100% of the water we use in manufacturing operations
    • Adopt the Alliance for Water Stewardship standard as our vehicle for water advocacy
  • Deliver safe water access to 25 million people by 2025

We learned from our early efforts and consulted with partners and independent experts to inform these water stewardship goals. As a result, we significantly raised the bar from our 2015 sustainability goals. Our 2025 sustainability goals are more comprehensive in their scope and focused on a holistic view of our value chain and the watersheds where we operate with an aim to contribute to our Positive Water Impact – meaning our efforts and partnerships will be designed to enable long-term, sustainable water security for our business and others who depend on water availability. This robust view of water stewardship is espoused by organizations such as The Nature Conservancy and the World Wildlife Fund, and aligns with a number of the United Nations Sustainable Development Goals.

Performance

Improve Water-Use Efficiency in Agriculture

Approximately 70 percent of the world’s freshwater being used for agriculture. As a company that depends on agricultural raw materials for our products, we understand how critical it is to improve our water-use efficiency in our agricultural operations. As a result, we place great importance on ensuring our agricultural partners are employing sustainable water management practices. For several years, PepsiCo has been working with growers through our global Sustainable Farming Program (SFP) (formerly the Sustainable Farming Initiative), and through local partnerships to drive efficient water usage in farmers’ fields around the world.

Under our 2025 sustainability agenda, we have set a global goal to improve water-use efficiency in high-water-risk areas of our direct agricultural supply chain by 15 percent by 2025. This goal was established through a preliminary baseline that was modeled on irrigation practices with growers in high-water-risk areas. While this goal is very ambitious, we will work hard to achieve it by 2025 and are already making progress. Our goal focuses on improving our water-use efficiency where the need is greatest, in high-water-risk locations, as defined by the World Resources Institute’s Aqueduct tool, a mapping device that helps institutions understand where and how water risks are developing globally.
PepsiCo aims to improve Water use Efficiency in high Water-Risk Areas

Between 2015 and 2017, we improved direct agriculture water use efficiency in our high-water risk regions by three percent. Measuring progress is a complex undertaking requiring the support of hundreds of farmers beyond the scope of our own operations. As a result, and to focus efforts on implementing sustainable practices, we collect and publish agricultural water use efficiency data every three years.

To date, we have worked with water experts to establish the required processes and protocols, and have developed individual roadmaps in specific locations. In collaboration with the World Resources Institute, we undertook a study to evaluate our high-water-risk crops and regions using their Aqueduct tool. In addition, we utilize the UN Food and Agriculture Organization’s (FAO) Cropwat 8 modelling tool to determine our water use efficiency. We have gathered the baseline data and progress through the 2017 crop year from all countries where we have direct crops in water-stressed regions. We then calculated the baseline water opportunity, identified local goals, and developed implementation plans for each farmer group in scope. We expect these plans will benefit the farmers and the local communities by supporting more efficient water-use throughout the watersheds where PepsiCo sources our crops. Many of these plans have the added benefits of improving local watershed health, improving crop productivity, and mitigating and adapting to climate changes.

Work on the ground to make improvements on our water-use has included identifying opportunities in targeted locations, developing phased plans against each of those opportunities, ensuring farmers have the correct equipment, and developing plans to train farmers on the skills needed to execute against the goal. Some of the concrete ways we are working with farmers include helping them access more efficient irrigation equipment, supporting best practices for scheduling and maintenance, and enabling them to move from flood irrigation to more efficient methods, such as drip irrigation. This conversion in turn changes the way farmers apply nutrients, improving soil health, yields, and crop quality. We have also created more than 100 demonstration farms around the world, many of which feature water-use efficiency best practices and provide an opportunity to engage large numbers of farmers in hands-on learning and understanding innovation. We are increasingly promoting the use of reduced tillage and cover crops, which improve soil health and water holding capacity. We will also explore new technologies and innovations that deliver improved water-use efficiency. Additionally, we have partnered with the University of Pretoria  in South Africa, to establish a globally applicable pivot irrigation audit protocol that is aiding us in improving our water efficiency.

Improve Water Use Efficiency in Direct Operations
PepsiCo aims to Improve Operational Water Use by 25 percent

We continue to be focused on improving our water-use efficiency in our manufacturing facilities, with a particular focus on high-water-risk locations. Our 2025 water operations goal is to  achieve a 25 percent efficiency improvement in high-water-risk areas. In 2019 PepsiCo had 71 high-water-risk manufacturing locations as defined by our internal water risk assessment process. These locations span five continents and 16 countries and account for more than a quarter of our company-owned production. Eight of our top 15 revenue markets have manufacturing operations in high-water-risk locations.

In 2019, we recorded a nine percent efficiency improvement in our water-use efficiency rate at our high-water-risk locations when compared to our 2015 baseline. This improvement builds on the work that we have been focused on for the last decade, in which we improved water-use efficiency per unit of production by 25 percent through 2015, against a baseline of 2006 in our legacy operations.

PepsiCo makes progress on goal to Improve Water Use

Our approach is multi-faceted and aims to capture efficiencies through initiatives like our Resource Conservation (ReCon) program, which identifies and shares operational efficiency best practices across our locations globally. Additionally, PepsiCo is developing and deploying design water efficiency improvements in our manufacturing processes and in downstream water recovery technology. These include enhanced wastewater treatment systems and recovery technology for water reuse. We have also deployed advanced technologies such as Minimal-Liquid Discharge (MLD) systems,  a low water splash cone for potato slicing, membrane bioreactor (MBR) systems, reverse osmosis (RO) systems and Closed Circuit Reverse Osmosis (CCRO) systems to drive further progress in water quality and efficiency. For example, in several of our snacks facilities in Mexico, we have installed membrane bioreactors coupled with reverse osmosis wastewater treatment technology to enable water reuse and deliver greater water use efficiency. At our Sabritas Vallejo manufacturing facility in Mexico, 68% of site process water is treated to potable water standard and reused. In addition to Mexico, we have applications of this process water recovery membrane technology in India, Belgium, Chile, Colombia, Brazil, Dominican Republic and the U.S., and are actively investing in more locations.

Water Replenishment

While we focus on improving water-use efficiency in our agricultural and manufacturing operations, creating a healthier watershed also requires that we give back water that we have used. This is critical to the continuity of our business, our license to operate, and the health of our communities. That is why we have set a goal to replenish 100 percent of the water we use in manufacturing operations located in high-water-risk areas by 2025, and ensure that such replenishment takes place in the same watershed where the extraction has occurred.

PepsiCo aims to Replenish Water in Manufacturing Operations

Our Replenishment goal is focused specifically on high-water-risk areas where we operate and where the need is greatest. In 2019, we updated our goal, committing ourselves to replenish the amount of water used (previously our goal related to the volume of water consumed, per the World Resources Institute’s differentiation between water use and consumption). This change has had the effect of more than doubling our target replenishment volume.

In 2019, we replenished more than 1.6 billion liters of water through projects across the globe. Staying true to our goal of replenishing water in the high-risk watersheds from which it is extracted, we have capped at 100 percent the reporting of benefits from projects that achieved more than 100 percent of their watershed targets. In 2019, we replenished 10 percent of the water we consumed in our company-owned manufacturing facilities in high-risk watersheds. This represents an increase from our restated 2018 performance (8%).

PepsiCo makes progress in Replenishing Water used in Manufacturing

Partnerships

In the arid western United States, our team has partnered with The Nature Conservancy and others as part of the Salt and Verde Alliance, a partnership that brings together companies, farmers, communities, and other organizations with an interest in the Salt and Verde watersheds. By supporting varied on-farm practices, more efficient irrigation, and water-efficient crop conversions, PepsiCo kept more than 200 million liters of water within the river system in 2019.

In 2019, our new water replenishment initiatives included projects in three locations - Peru, Pakistan, and the United States:

  • PepsiCo is working with The Nature Conservancy to restore traditional Incan canals in Peru that will redirect high water flows during the wet season and enhance groundwater recharge across mountain slopes.
  • In Utah, PepsiCo is supporting The Nature Conservancy’s work in the Price River to increase water for ecological uses, restoring wetlands and riparian habitats, and protecting threatened and endangered species in the river system.
  • PepsiCo signed a Memorandum of Understanding with the World Wildlife Fund in Pakistan to launch a new partnership aimed at improving water security near Lahore with rainwater harvesting and recharge interventions and constructed wetlands.

We plan to continue delivering against our goal by investing in projects in high-risk watersheds that improve the quantity and/or the quality of the water in the watershed. These include watershed protection projects like reforestation, wetlands rehabilitation, and aquifer recharge. We also support projects that enable water for productive use, such as rainwater harvesting, dam rehabilitation, and seasonal water storage. Our projects must reflect the input and support of the local community.

Access to Safe Water

As the world’s population continues to grow, there is an increasing need for safe water and sanitation facilities. According to The United Nations, 2.2 billion people lack access to safely managed drinking water and 4.2 billion lack safely managed sanitation services. Access to safe, clean water is becoming more important as the severity of climate change-driven droughts and floods increases and rainfall become less predictable. Without adequate water, it is expected that crop yields will sharply drop and hundreds of thousands of hectares of farmland will be unproductive. Climate change will disproportionately affect women and girls, who already bear the burden of family water collection—which UNICEF estimates at 200 million hours every day.

PepsiCo reaches Goal to provide Safe Water Access

In response to this and Sustainable Development Goal #6, PepsiCo is increasing the number of people it intends to reach with safe water access to 100 million by 2030. The company will fund on-the-ground programs focused on increasing safe water access for farming communities in high-water-risk areas and increasing its investment in water programs that specifically support health, safety and education, and employment opportunities among women and girls.

From the early days of our sustainability program, addressing safe water access has been a priority for PepsiCo. Since 2006, through partnerships funded by the PepsiCo Foundation, we have provided access to safe water to more than 44 million people as of the end of 2019.

PepsiCo provides Safe Water Access to 44 Million Underserved CommunitiesAccess to safe water is a multi-faceted issue, and we are focused on achieving it at the watershed, community and household levels. With our partners, we work to implement sustainable solutions on the ground that:

  • Make water more readily available, through market-based programs for household water connections and toilet installations, and/or renovation of pumps and pipes;
  • Better manage supply or volume of water, through water resource management, water basin restoration, and/or pollution reduction; and
  • Ensure quality through water treatment, improved hygiene, and community sanitation.

Co-creation is critical to impactful partnerships, and PepsiCo is an active collaborator with our water partners. Each partner shares with PepsiCo the common goal of sustainable access to safe water for millions of people. Collectively, we seek to leverage the individual and unique strengths of PepsiCo, our philanthropic arm, The PepsiCo Foundation, and our partners to drive innovative, sustainable and comprehensive solutions to the crisis of water insecurity.

We will continue to enable long-term, sustainable water security for our business and others who depend on water availability by investing in the essential elements of a sustainable food system - helping to alleviate hunger, manage water and waste responsibly, and supporting women as champions of nutrition from farm to family. By doing this, we feed potential - one community at a time.

Advocacy for Improved Water Security

Having a positive water impact means improving water security not just within our four walls, but out in the watersheds in which we operate. We know we can make a significant impact in water stewardship through the actions we take across our value chain, but we also have opportunities to help mitigate water insecurity on a broader level, through advocacy. We are supporting existing collaborative efforts to address water risk and mitigate water insecurity and creating new opportunities to collaborate where we see need. We do this in three ways:

  1. By advocating for the adoption of smart water policies and regulations;
  2. By sharing information and best practices with water stakeholders; and
  3. By providing public education and training for consumers and communities.

PepsiCo adopts the Alliance for Water Stewardship standard of Water Advocacy

PepsiCo is a member of the Alliance for Water Stewardship (AWS). We aim to adopt the AWS Standard at all of our high-water risk facilities by 2025, using it as a vehicle for advocacy and  to help ensure that freshwater resources in high-water-risk locations are available for all water stakeholders. In 2019 we launched pilot projects to adopt the Standard at high-water-risk facilities in South Africa, Pakistan and Mexico, with a fourth pilot launched in the United States in 2020. These pilots stood up cross-functional teams of PepsiCo associates who have come together to diagnose local water risks and opportunities for the facilities to be good water stewards.

PepsiCo is an active member of the 2030 Water Resources Group (WRG) and is represented on the Governing Council. The 2030 WRG is a public-private collaboration hosted by the World Bank that stimulates open dialogue about water management and develops proposals to help improve the management of water resources in the country. 2030 WRG is active in a number of key PepsiCo markets including India, Mexico, and South Africa.

Another collaborative effort is taking place across Latin America, through a public-private partnership between PepsiCo, the PepsiCo Foundation and the Inter-American Development Bank (IDB). This work includes installing water pumps and pipes for difficult-to-reach rural and dispersed communities in Peru, Mexico, Colombia and Honduras, which traditionally have received much less support for safe water access projects than more densely populated areas. IDB and PepsiCo have also launched a modeling tool called HydroBID to help local governments  estimate the availability of freshwater in water-scarce regions and aid in water budgeting and water-resource planning.

Looking Ahead

In the coming year, our water priorities include:

  • Water-use efficiency: Continually improving water-use efficiency towards our 2025 goal with a particular focus on our most severely high-water-risk growing regions (agriculture) and site performance at our 25 high-water-risk sites in the United States (direct operations);
  • Water replenishment: Scaling up replenishment projects in key watersheds to advance our progress against this goal;
  • Access to safe water: Implementing new programs and expanding existing partnerships to make progress on our safe water access goal benefiting a total of 100 million people by 2030;
  • Advocacy: Complete our four pilot AWS Standard adoptions in South Africa, Pakistan, Mexico, and the United States and scale up our efforts to start applying the Standard at other high water risk facilities.

In pursuing positive water impact, we have made progress, yet we also face challenges.
Progress

Organizational changes — including the acquisition of Pioneer Food Group, Ltd in South Africa — require that we continually re-evaluate and adjust our approach to achieving our water goals.

Challenges

In 2019, we achieved (and surpassed) our 2025 safe water access early, and are now poised to extend our commitment, reaching 100 million people by 2030.

PEPSICO SUSTAINABILITY RESOURCES


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