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Image credit: PepsiCo

PepsiCo climate check-in: 345k out of 7m acres using regen ag, emissions reductions a mixed bag

August 11, 2022

After tracking agrifood corporate sustainability commitments for several months now — many of which were launched to much fanfare by the companies in question — I’ve been surprised about how few of them have been willing to put a representative on the phone to discuss their progress with me; typically they’ve pointed me to standard investor calls, ESG reports, or requested written questions (which every journalist knows is a sure-fire way to kill any nuance in an interview).

Fortunately, I’ve had one exception so far in PepsiCo, which recently jumped at the chance to discuss its recently-released Environmental, Social, and Governance (ESG) summary and talk in general about the company’s progress on regenerative agriculture, emissions reductions, and other sustainability initiatives.

PepsiCo climate and sustainability commitments at a high-level include reducing absolute emissions by “more than 40%” by 2030, and achieving net zero emissions by 2040.

Speaking to AFN, Rob Meyers, VP of sustainable agriculture, global sustainability at PepsiCo, makes it clear that achieving these goals, as well as many others along the way, is an enormous task — for his company and any other agrifood corporates.

“What [those goals] made us do as a company is think about how we make, move, and sell our products differently,” he says. “We’ve had to take some risks, we’ve had to innovate, and we’re continuing to have to do that.”

An ‘end-to-end’ overhaul

In 2021, the company announced “pep+,” which it calls “a strategic end-to-end transformation” of the entire business, with sustainability at the center. At its launch, PepsiCo chairman and CEO Ramon Laguarta gave the following example last year: Imagine Lay’s will start with a potato grown sustainably on a regenerative field, and then be cooked and delivered from a net zero and net water positive supply chain, sold in a bio-compostable bag, with the lowest sodium levels in the market,” 

It sounds great on paper. In reality, PepsiCo has 23 different brands — all of which have suppliers, agriculture partners, and other supply chain participants — to get on-board with, and start implementing this “transformation.” Besides the aforementioned Lay’s, the PepsiCo roster also includes SodaStream, Aquafina, Walkers, and many other high-profile food and beverage names. After generating more than $79 billion in net revenue in 2021, the stakes are high.

“We do try to work in partnership [with suppliers and farmers] and take a shared value approach,” Meyers tells AFN. “We don’t mandate or set out all of these expectations and sit back and wait for them to deliver. It’s very important to collaborate with our suppliers because of the challenges climate poses for all of us.”

One of the key areas where PepsiCo does this is with its farmers.

Regenerating ag for the next generation

In 2021, PepsiCo set a 2030 target goal of adopting regenerative agriculture practices across 7 million acres, which is about equal to all of the land PepsiCo uses globally to grow crops and ingredients for its products.

According to its ESG progress report, 345,000 acres of this farmland worldwide are using regenerative agriculture practices. By the end of 2021, the company had 72 regenerative “demonstration farms” and over 600 farmers transitioned from demonstration stage into broader “landscape” impact programs around regenerative farming. In the US, PepsiCo has so far helped farmers plant more than 85,000 acres of cover crops.

Meyers says that transitioning farmers to regen ag is as much about business risk mitigation as it is about meeting sustainability targets.

“When you look at some of the core practices of not disturbing the soil, diverse crop rotation, using inputs really efficiently, protecting the diversity on and around a farm, these are all really important practices that farmers would find important with an eye towards really being able to hand the farming operation off to the next generation.”

“Farmers have that long view,” he adds. “They’re not talking about the next quarter’s financial performance; they’re talking about the next generation.”

Meyers suggests PepsiCo has to address three “somewhat interdependent” areas when working with farmers on the transition to regenerative ag:

1.Financial risk. “Any time you make a change on the farm, it’s risky,” he says. “A lot of what [farmers] have done on the farm is tried and true.” Methods like cover cropping or no-till may greatly differ from how a farmer has previously worked and therefore represent risk that often has a real cost, such as investing in new equipment or seed for cover crops.

“Often when you make a change on the farm, the benefits to the farmer may not be realized right away,” Meyers says. “There may even be a drop in performance.”

PepsiCo has to factor all of this into its goal of farming 7 million acres regeneratively in a matter of years.

2. Technical assistance and agronomy advice. “We work intentionally with high-quality credible implementation farmers that know this space and have been doing it for a long time,” says Meyers.

For example, PepsiCo has partnered with the Practical Farmers of Iowa organization to better equip farmers with the information and tools they need for cover cropping and other practices that help build resilience.

3. Collaborative engagement. “We don’t believe we’ll be successful by mandating preferences,” says Meyers. “We really focus on the outcomes and we try to engage with farmers in our supply chain to understand and contextualize what that outcome is.”

In real life, that means PepsiCo goes out of its way to promote farmers making the switch to regenerative ag practices, getting them to talk about what they’ve learned and share that information in the larger community.

Along those lines, PepsiCo released its Positive Agriculture Playbook to help farmers set, achieve, and report regenerative farming goals. It does not dictate specific farming practices or mandate certain things for a farm, but is instead a set of suggestions.

Mixed bag for emissions reduction

It’s not a climate check-in without talking about emissions reductions.

As noted above, PepsiCo climate commitments include a target goal of achieving net zero emissions by 2050. Goals for 2030 include reducing Scope 1 and 2 emissions, or those controlled by the company, by 75% and reducing Scope 3 by 40%. (Both goals were measured versus a 2015 baseline.)

In 2021, PepsiCo reduced Scope 1 and 2 emissions by 25% (from a 2015 baseline), according to the ESG report.

Scope 3 emissions, which PepsiCo says account for 93% of its emissions, increased by 5% “due to largely unprecedented business growth” that increased packaging use, transportation, and third-party manufacturing.

Meyers says the biggest challenge around emissions reductions so far has been grappling with the risk that the consumer experience would be negatively impacted by changes made to reduce emissions.

Consider the potato chip-making process Laguarta described above: changing that process, from how the potatoes are grown to when and where they’re delivered, could impact areas that touch the consumer experience like overall taste, availability, or price point. That, in turn, could have a massive influence over brand loyalty and, eventually, PepsiCo’s overall reach and revenues. 

“What we probably hold most dear is that consumer experience with our products,” says Meyers. He adds, however, that PepsiCo and other agrifood corporates will “have to overcome that risk and that fear of doing something different” eventually, given the urgency of the climate crisis.

Working together as an industry

“One of the things we need to come together around, as an industry, is keeping benefits within the food system,” says Meyer. “For example, if we do carbon credits, we [should] try to keep the benefit of those outcomes in the food system.”

Moving forward, the industry will also need to think about sustainability data, claims, accounting, and governance. “We need to promote independent credible, fair systems around claims and accounting around the protection of data.”

Finally, Meyers says that equally important as emissions reductions is simultaneously helping farmers adapt to the impacts of climate change and build resilience to them.

“Both emissions [reduction] and this adaptation component are equally important under the heading of food security,” he says. “No one cares more for the farmers having a successful transition than those of us that rely on them.”

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