Sustainable sourcing

ESG Topics A-Z

To PepsiCo:

PepsiCo aims to respect the human rights of all workers and local communities and to reduce environmental impacts throughout our operations and supply chain. Supporting the safety, wellness and equality of the workforce and safeguarding the environment across our supply chain is important to our success as a company and to the success of our suppliers.

To the World:

Global sourcing strategies deliver benefits to consumers and businesses, but are associated with concerns about labor and environmental practices in the countries of origin. Multi-national companies like PepsiCo aspire to use their purchasing power to raise standards, working with suppliers in an effort to support best practices and comply with local regulations.

Approach

We expect our suppliers to adhere to the same standards of integrity to which we hold ourselves. Suppliers of goods and services who do business with 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 Human Rights Due Diligence Program: A global program that engages our most business-critical tier-1 suppliers¹ and 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, implement plans to safeguard human rights and embed regenerative agricultural practices. (see also: Agriculture).
Our procurement practices: Where possible, our supply contracts include our SCoC. In purchasing categories with specific 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 aim to deploy specific programs to improve knowledge, awareness and outcomes.

Global Human Rights Due Diligence Program

This program aims to help build supplier awareness and capabilities on the issues and expectations referenced in our SCoC. The program is targeted towards our strategic, tier-1 direct suppliers¹ who provide PepsiCo with a range of key inputs including ingredients, packaging and services or manufacture on our behalf. The program supports our long-term sustainable supply goals by working to address potential human rights risks and build capability within our supply chain.

Our approach is informed by regular engagement with our suppliers and through our leadership positions with industry groups such as AIM-Progress, Sedex and The Consumer Goods Forum. It is also strengthened through engagement with expert non-governmental organizations (NGOs) to leverage best practices within and beyond our industry. We engage and include worker input in monitoring our programs, including through worker interview data during third-party on-site audits. The program's strategy is reviewed annually in consultation with leaders from our human rights, sustainable procurement and legal teams to support ongoing business integration.

The program includes assessment of risk and compliance with our SCoC as well as third-party auditing of strategic, tier-1 direct suppliers,¹ contract manufacturing and co-packing locations.

Supplier Code of Conduct

Our SCoC is a cornerstone of our sustainable sourcing agenda. It sets out the expectations we have of our suppliers in the areas of business integrity and anti-corruption, labor practices, environmental management and health and safety. Suppliers are also expected to communicate and apply the SCoC and relevant policies throughout their supply chain. The human rights subsection of the SCoC is based on recognized international human rights standards and explicitly prohibits all forms of forced labor and child labor. The SCoC is available in 27 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 strategic, tier-1 direct suppliers.¹

Assessing Compliance

Suppliers included in scope of our Global Human Rights Due Diligence Program are responsible for demonstrating compliance with our SCoC through activities including an initial risk assessment, SCoC training, a graded site-level Self-Assessment Questionnaire and/or participation in independent third-party, on-site audits as requested. We leverage the Sedex Members Ethical Trade Audit (SMETA) methodology for on-site audits, which aligned to international standards in the areas of business integrity, labor practices and health and safety management. All SMETA audits incorporate on-site (or online in the case of virtual audits) worker interviews to ensure rightsholder feedback is integrated into the overall assessment.

Frequency of audit or assessment is conducted at each site based on risk, usually a minimum of once every three years, with greater frequency at sites with higher risk driven by geography and category risk and historic audit results. Where instances of non-compliance are found during audits, a corrective action plan with a timeline for remediation is put in place by the supplier, and follow-up audits are conducted by an approved third-party auditing firm to verify implementation.

Progress

In 2023, we provided open-access online training to help the strategic, tier-1 direct suppliers¹ in the scope of our program better understand the principles of our SCoC. We also deployed targeted trainings to our business-critical suppliers on priority topics such as forced labor and ethical recruitment. Initiatives included:

Deploying responsible recruitment training to more than 130 of our direct, business-critical suppliers in high-risk countries to help clarify our policies, expectations and supplier expectations.
Co-sponsoring the AIM-Progress Ganapati Project to help improve the implementation of responsible recruitment standards and practices by suppliers in Thailand and Malaysia through in-person training and coaching.
Co-sponsoring the AIM-Progress Tackling Forced Labor and Child Labor Initiative to strengthen the capability of our co-manufacturers, co-packers, suppliers, labor providers and service providers to adhere to applicable labor laws, recruit labor responsibly and minimize risks of forced and child labor in the U.S.

Based on the insights and feedback gathered from these trainings, we plan to continue focusing on building direct suppliers’ capabilities and management systems to proactively mitigate and address forced labor and child labor risks.

As we pursue our engagement with suppliers, we continue to explore new assessment innovations, but face challenges along the way.

Progress

In 2023, we enhanced our risk monitoring systems and began evolving our assessment methodology to a risk-based approach. We plan to continue progressing by, where possible, transitioning our audit program from an "announced" to "semi-announced" audit format and broadening the scope of our due diligence process to capture additional supply chain segments.

Challenges

Due to ongoing volatility in select markets, we continue to see sites managing rapid changes in production demands and worker shortages.

In 2023, we conducted or recognized 885 on-site audits or virtual assessments² with business-critical tier-1¹ suppliers across 70 countries and territories using the industry standard SMETA 4-Pillar Audit Protocol or an equivalent assessment.

2023 Top 5 non-compliance categories: Health, Safety, & Hygiene; Working Hours; Wages; Regular Employment; and Environment.

The Global Human Rights Due Diligence Program supports our strategic, direct suppliers in their development and implementation of corrective action plans through trainings and guidance materials that aim to help them identify and mitigate the root cause of identified non-compliances. We use an online platform to streamline corrective action management and to share training materials and other resources supporting suppliers’ continuous improvement.

Since 2015, we have seen strong improvement from sites as they learn from audit findings, strengthen their internal management systems and capabilities and resolve non-compliances. High-level results of this improvement are presented below, based on sites that have completed both initial and follow-up audits.

What's next?

As we pursue our pep+ (PepsiCo Positive) goals, we plan to continue to evolve and enhance our programs in line with our sustainable sourcing ambitions. Key areas of focus for 2024 include:

Strengthening our program tools to help assess and address risks in upstream supply chains, including responsible recruitment with temporary labor providers;
Improving our ability to provide suppliers with targeted training and capability building opportunities based on the challenges identified through their assessments and audit results;
Updating our supplier risk segmentation analysis to determine if other supply chain segments have become greater priorities over time due to the evolving external landscape; and
Advancing action plans to mitigate our salient human rights issues, deepening our engagement across key supply chain segments.

¹Tier-1 suppliers are the direct suppliers of PepsiCo

²Virtual audits are offered in limited circumstances

Last updated

January 13, 2025