Summary
In the realm of corporations such as PepsiCo, the majority of their greenhouse gas (GHG) emissions stem from the intricate labyrinth known as the supply chain—an enigmatic puzzle to unravel. PepsiCo posits that triumvirate components—anticipations, fiscal dynamics, and empowerment—stand as quintessential pillars for efficacious engagement and action within this labyrinthine supply chain. Lucid anticipations serve as the North Star guiding supplier collaborators, while an astute grasp of economic verities fosters the genesis of lucrative GHG ameliorations. Lastly, the empowerment of suppliers through the provision of unwavering support and invaluable resources unfurls a smoother transition towards the mutual realization of net-zero objectives. PepsiCo’s blueprint meticulously embodies these principles, charting a course towards an enduringly sustainable and resilient future.
In the realm of corporate enterprises like PepsiCo, the intricate concept of greenhouse gas (GHG) emissions primarily finds its roots in the supply chain, a domain fraught with challenges. PepsiCo firmly believes that the triumvirate of expectations, economics, and enablement forms the bedrock of efficacious supply-chain involvement and proactive measures.
Initiating a quest for net-zero emissions represents merely the genesis of a comprehensive climate strategy. The onus now lies heavily on delivering substantial progress. For myriad companies, the lion’s share of GHG emissions exists beyond the precincts of their corporate walls, nestled within their supply chains – these are often referred to as “Scope 3” emissions. Gaining visibility into, quantifying, and ultimately orchestrating these emissions proves to be a formidable task. Despite these influences operating beyond a corporation’s direct purview, the expectations of stakeholders, reporting frameworks, and business imperatives mandate that large corporations mobilize their affiliates and make strides towards progress.
The potential rewards are immense if one can navigate this terrain skillfully. The endeavor transcends merely reducing our ecological footprint; it entails constructing a value chain that not only fosters our future growth but also exhibits resilience in the face of the looming specter of climate change. The global climate crisis catalyzed the launch of our PepsiCo Positive (pep+) transformation and instigated our commitment to achieve net-zero emissions by 2040. Since then, PepsiCo has elevated its supply-chain partnerships to unprecedented levels of collaboration and devised an array of strategies to enlist supplier cohorts in our voyage.
At its core, PepsiCo’s business is inexorably linked to agriculture. Climate change looms as a formidable force that will exert its influence on crops, farmers, and the yields they can yield. It is imperative that we chart a clear course for our business to concurrently manage our climate impact and fortify our company’s competitive and resilient posture moving forward.
Internally, we tirelessly endeavor to infuse the ethos of net-zero thinking into the very fabric of our teams. As an illustration, PepsiCo propels progress by incorporating reductions in Scope 1 and 2 emissions into the compensation evaluation process for the upper echelon of our corporate hierarchy. Moreover, we are diligently working towards attaining a more precise quantification of Scope 3 emissions, with the intention of integrating this metric into our future assessments.
Within our expansive value chain, replete with over 100,000 suppliers of diverse scales and competencies, a one-size-fits-all approach is ill-suited to achieve the requisite momentum towards net-zero emissions.
Diverse strategies may be pursued, and through our journey, we have gleaned invaluable lessons. However, we firmly hold that three pivotal pillars – expectations, economics, and enablement – must be meticulously erected to ensure not just the engagement but, more significantly, the proactive involvement of our supply-chain partners.
Expectations
The bedrock of triumph resides in the delineation of unambiguous and consistent expectations with our supply-chain partners. Corporations must convey the significance of emissions reductions to their suppliers, especially when these reductions are subject to scrutiny over time.
In our agricultural supply chain, for instance, farmers traverse a spectrum of comprehension concerning emissions. While some are acutely attuned to climate change and its ramifications, others remain oblivious. As stewards of leadership, it is our prerogative to furnish precise and unvarying directives to our suppliers and fellow supply-chain stakeholders, thereby elucidating their role in our ongoing journey. These expectations are unveiled at our annual Global Supplier Summit, and we beckon our partners to undertake four specific, near-term initiatives:
- Submit reports on Scope 1 & 2 emissions by the culmination of 2023.
- Commit to or establish a science-based target (SBT) by the close of 2023.
- Transition PepsiCo’s share of electrical consumption to renewable sources, wherever feasible, by the terminus of 2023.
- For our agricultural suppliers, engage in collaborative endeavors to forge an action plan for sustainable ingredients and cultivate regenerative agriculture acres by the end of 2023.
- The establishment of an SBT for emissions reductions furnishes a lucid framework and structure. The meticulous tracking of data across the value chain stands as a pivotal instrument in comprehending the expanse and velocity of progress.
This transition marks a profound transformation for certain suppliers. In several instances, this shift necessitates not just financial investment but also an overhaul in their operational paradigms. More than ever, supplier relationships must evolve from transactional to collaborative partnerships. This is where corporations, leveraging their scale and expertise, can play a pivotal role in aiding suppliers in their transition, serving as allies and extending comprehensive support throughout the journey.
Economics
In their engagement with supply-chain partners, companies often err by primarily relying on financial incentives (or disincentives). While economics undoubtedly play a pivotal role, they come into play only after the bedrock of expectations has been solidified.
One of the most potent courses of action lies in elucidating for suppliers the economic realities and trade-offs associated with GHG reductions. Decarbonization may entail costs, but it is an undeniable reality that it will not invariably translate into higher expenses. The reduction of inputs such as water and fertilizer, the minimization of plastic usage, and investments in renewable energy all have the potential to yield cost savings. Corporations can assist their suppliers in comprehending the financial calculus and discerning the tangible ways through which they can emerge as beneficiaries.
Companies must also contemplate innovative methods of structuring partnerships that steer them toward a sustainable transformation. Long-term agreements that incentivize and underpin sustainable metamorphosis can serve as potent catalysts. PepsiCo, for instance, inked a strategic commercial agreement spanning seven and a half years with ADM, aimed at sharing costs and resources and fostering close collaboration on projects geared towards expanding regenerative agriculture by up to 2 million acres by 2030 within our shared North American supply chains. The duration of this contract instills confidence, fostering investments in sustainable practices and facilitating the achievement of carbon reduction objectives.
Enablement
When confronting the labyrinthine challenge of achieving net-zero emissions, the intricacies and interconnections are too profound to be left to chance. As partners, we have extended guidance to empower our suppliers as they navigate the intricate web of strategies, thereby facilitating their progression toward our shared objectives.
For instance, we have instituted programs to offer insights into establishing SBTs and have furnished resources that outline diverse options for emissions reductions, particularly in the transition to renewable energy. This transition is highly contingent on the unique circumstances of each supplier.
Corporations, much like PepsiCo, can also serve as beacons in addressing sustainability challenges by harnessing their scale and extensive networks to invest in and amplify the growth of promising startups. Through these actions, they can enhance cost-efficiency and accessibility for our partners. In the realm of agricultural technologies, we are currently conducting trials of promising solutions on demonstration farms across the globe while investing in suppliers whom we believe can enact substantial change. For farmers, proven methodologies constitute the linchpin for securing their buy-in and swiftly implementing solutions. Our pep+ REnew program, in particular, strives to collaborate with supply-chain partners to aggregate renewable energy purchases, thereby creating scalability and cost efficiencies that individual suppliers cannot attain in isolation.
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The journey towards constructing a sustainable value chain is an arduous one, but with a well-considered approach, it emerges as a potent vehicle for attaining sustainability goals, establishing a more resilient corporate entity, and propelling enhanced business performance. At PepsiCo, this represents our ultimate objective, and it is our fervent belief that the triad of expectations, economics, and enablement shall not only chart our course but also that of our supply chain allies towards genuine sustainable growth.
