Approach

PepsiCo aims to realize deforestation-free sourcing in our company-owned and -operated activities and global supply chains by 2025 and conversion-free sourcing among the same activities by 2030.² This means:

• Avoiding ingredients produced on land that has been subject to deforestation or forest degradation after December 31, 2020; and
• Avoiding ingredients produced on land that has been converted from natural ecosystems after December 31, 2020.

We work with our supply chains, peer companies, civil society and others — directly and through multi-sectoral partnerships — in an effort to address the systemic issues that cause deforestation.

Policy

All of our direct suppliers are expected to adhere to the following principles as part of our PepsiCo Stewardship of Forests and Natural Ecosystems Policy and our Global Policy on Sustainable Palm Oil:

• Compliance with applicable legal and regulatory requirements;
• No conversion of forest or other natural ecosystems as from the earlier of existing sector-wide cutoff dates or December 2020.³ Tools that should be used where applicable to find areas not to be converted include:
  • 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 Peatlands; and
• Compliance with our Land Policy.

We provide further details of our progress toward transparency in relevant supply chains and toward no deforestation in our 2023 CDP Forest Submission, for which we received a B score on both palm oil and timber.

Traceability in supply chains with risk of deforestation and conversion

As we strive for no deforestation and conversion, it is important that we try to understand the source of the key commodities we buy. Traceability in certain supply chains can be challenging, since the suppliers we procure from may source the commodities from multiple other suppliers and producers. As part of our agenda aiming to increase traceability and transparency, we work with independent partners such as Proforest, Peterson and Earthworm Foundation to help strengthen procurement guidance, facilitate training and improve traceability templates and questionnaires along with analyzing results to monitor progress and plan future engagements.

Supplier engagement

PepsiCo endeavors to source from suppliers that strive to:

• Use sustainable forest and natural ecosystem management practices in lands they own, lease or manage to provide fiber, timber and other ingredients;
• Implement sustainable and regenerative agriculture practices, support resilient livelihoods and communities and support landscape approaches that enable sustainable agriculture production and thriving natural ecosystems to co-exist;
• Preserve biodiversity and cultural values and optimize the social, environmental and economic benefits of managed forests and other natural ecosystems; and
• Ensure that the PepsiCo Stewardship of Forests and Natural Ecosystems Policy is implemented in a way that supports the inclusion of smallholders in their supply chains.

Progress

Crops and Ingredients

Palm oil

Deforestation and the role of smallholder farmers are some of the key sustainability challenges facing the palm oil industry. In 2023, our global palm oil procurement was approximately 475,000 metric tons (MT), of which palm kernel oil comprised approximately 4,000 MT. Ninety nine percent of our total palm oil volume was physically certified (mass balance) by RSPO and the remaining 1% was covered by RSPO Independent Smallholder (ISH) credits to achieve 100% RSPO certification. We were able to support small farms by purchasing approximately 6,000 ISH credits.

Our top three countries of origin for RSPO mass balance certified material were Indonesia, Malaysia and Colombia. We are actively working to build capacity for additional RSPO volumes in Mexico to support our demand in that market. For more details on our palm oil sourcing, see Palm oil, which includes annually updated information on total volumes, countries of origin and our direct suppliers, refineries and mill lists.

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. We seek to purchase only responsibly sourced wood fiber products and will not knowingly purchase paper-based packaging that may contain wood fiber harvested illegally or sourced from protected forest areas. In 2023, we updated our Stewardship of Forests and Natural Ecosystems Policy to support our objective to realize deforestation- and conversion-free sourcing in our company-owned and operated activities and global supply chains.

We aim to optimize the use of post-consumer recycled fibers in our packaging materials wherever feasible. For virgin fiber, PepsiCo aims to achieve 100% sustainably certified fiber for our company-owned packaging by 2025. The countries of origin can be found in the Commodity Specific Reporting section of our 2022 Consumer Goods Forum (CGF) Annual Report.

Our annual fiber volume in 2023 was more than 1.4 million MT, with more than 70% of our virgin fiber supply certified to one of the following standards: Forest Stewardship Council, Programme for the Endorsement of Forest Certification or Sustainable Forestry Initiative. More than 65% of our paper volume was from recycled sources. Approximately 1% of our pulp and paper procurement for the year was traced to origins with high risk of deforestation or degradation, down from 25% in 2022.

Soybean oil

We support protection of forests and other natural ecosystems in our soybean oil supply chain. In 2020, we became a member of the Roundtable on Responsible Soy Association (RTRS) and have been working with our suppliers to certify the soy we source from Latin America to RTRS standards. 

In 2022, we started to engage our suppliers from non-negligible risk origins to align on evidence to provide in 2023 for Deforestation- and Conversion-Free (DCF) volumes. Suppliers from high-risk origins have traceability and DCF monitoring systems in place, and we are working to incorporate these insights into our own traceability and DCF verification processes going forward. In 2023, the full CGF Forest Positive Approach was communicated to our suppliers supplying from non-negligible risk origins and Supplier Scorecards were introduced.

Other raw materials

• Cocoa is primarily produced for use in our North America and Latin America food businesses.
• PepsiCo procures milk primarily in support of our Russian dairy business, sourced in-country from a broad network consisting of hundreds of dairy farmers. Outside Russia, PepsiCo procures dairy-derived ingredients for seasonings across our foods business.

What's next?

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

• Deliver our palm oil strategy as we work towards our vision of no deforestation, no peat and no exploitation in our palm oil supply chain;
• Increase the amount of our pulp and paper sourcing covered by credible certification schemes;
• Deliver on our ambition for no deforestation and no conversion across our supply chains;
• Work in multi-sectoral collaborations including the CGF Forest Positive Coalition of Action, Tropical Forest Alliance and Palm Oil Collaboration Group in an effort to tackle the systemic issues that drive deforestation across various commodities and regions;
• Review the traceability and transparency of relevant supply chains to inform our strategy, approach and actions; and
• Implement landscape-level initiatives to support conservation, sustainable livelihoods and sustainable production in ingredient supply chain origins where forest and conversion risk exists.

¹CDP, WWF, et al., Forest Declaration Assessment, 2023

²Getting to deforestation-free supply chains requires tackling systemic issues in specific geographies and commodities. This requires working in-depth with a wide range of stakeholders to identify and tackle those issues, which can take time. Key challenges include our ability to trace supply to individual farms, lack of availability of public sector initiatives to incentivize conservation of forests and other natural ecosystems, impediments to identifying areas at high-risk of deforestation and conversion to prioritize action, root causes of deforestation and conversion such as poverty, lack of credibly-certified commodities in certain markets and lack of universally accepted definitions and protocols resulting in varying certifications

³Accountability Framework. Deforestation- and conversion free supply chains and land use change emissions: A guide to aligning corporate targets, accounting, and disclosure, 2022