Why Scope 3 Emissions Matter for PepsiCo

Why Scope 3 Emissions Matter for PepsiCo

 

For a global food and beverage giant like PepsiCo, supply chain (Scope 3) emissions dominate its carbon footprint. In fact, about 94% of PepsiCo’s greenhouse gas (GHG) emissions come from Scope 3 sources that includes everything from farming ingredients and packaging production to third-party transportation and product use and disposal. Tackling these indirect emissions is essential if PepsiCo is to meet its climate goals. As PepsiCo’s Chief Sustainability Officer (CSO) Jim Andrew admitted, “What keeps me up at night is Scope 3,” underscoring that reducing value-chain emissions is central to PepsiCo’s climate strategy.

Scope 3 includes emissions from PepsiCo’s vast supplier network spanning agriculture (growing potatoes, corn, oats, sugar, etc.), packaging materials (plastics, aluminum, paper), third-party manufacturing and distribution, and even the refrigeration of beverages and end-of-life disposal of products. Because of this, engaging suppliers is critical. PepsiCo simply cannot hit its climate targets without broad supplier buy-in and action. The sheer scale of tens of thousands of suppliers in over 200 countries means PepsiCo’s climate impact hinges on collaborative effort well beyond its own factory walls.

 

Ambitious Targets and Scope 3 Goals

 

PepsiCo has publicly committed to aggressive climate targets, sending a strong signal to suppliers. The company aims to achieve net-zero emissions by 2050, aligning with the Paris Agreement’s 1.5°C trajectory. As part of this roadmap, PepsiCo updated its 2030 goals to be even more ambitious for supply chain emissions. By 2030 it is targeting:

• 42% reduction in Scope 3 “Energy & Industry” emissions (e.g. manufacturing, transportation, packaging) vs. 2022.
• 30% reduction in Scope 3 “Forests, Land and Agriculture (FLAG)” emissions (from farming, land use and raw ingredients) vs. 2022.

(These new targets were validated by the Science Based Targets initiative and bring PepsiCo’s entire climate plan in line with a 1.5°C pathway. Previously, PepsiCo’s Scope 3 goal had been aligned to a “well below 2°C” scenario for 2030 and net-zero by 2040, but the company refined its ambitions in 2025 to incorporate the latest science and realities.)

 

The Supplier Engagement Playbook: Expectations, Incentives, and Enablement

 

PepsiCo’s strategy for cutting Scope 3 emissions hinges on an extensive supplier engagement playbook which is essentially, a combination of setting clear expectations for suppliers, providing incentives and support, and tracking progress. Vice President of Global Sustainability, Roberta Barbieri describes three fundamental elements for successful value-chain engagement: “expectations, economics, and enablement.” In practice, PepsiCo’s supplier engagement playbook includes:

• Clear Expectations: PepsiCo sets firm climate-related requirements for its suppliers. This includes asking its top ~2,000 suppliers (who account for a large share of spend and emissions) to adopt science-based emissions targets and submit decarbonization plans. Suppliers are expected to measure and report their GHG. For example, if a packaging supplier or ingredient provider wants to continue doing business with PepsiCo, they are encouraged to align with PepsiCo’s climate goals by setting their own SBTi-approved targets and sharing progress. This transparency feeds into PepsiCo’s tracking systems (such as an internal Sustainability Action Center) to monitor supplier emissions and plans.
• Financial Incentives (“Economics”): Recognizing that cost can be a barrier, PepsiCo uses its purchasing power and partnerships to make low-carbon transitions more economically attractive for suppliers. One key program is a supplier financing initiative with Citi: participating suppliers can secure lower financing rates if they meet PepsiCo’s ESG benchmarks Launched in Brazil in 2022, this program is expanding globally. 
  Additionally, PepsiCo provides market incentives: in Latin America, it has offered faster access to credit and other benefits for suppliers that hit environmental goals. And in a major seven-year partnership with Archer Daniels Midland (ADM) – one of PepsiCo’s largest agricultural suppliers – the companies are co-investing in projects to cut emissions in the farming supply chain. Such collaborations help share the cost and risk of sustainable improvements, from regenerative agriculture to low-carbon fertilizer use.

• Enablement & Support: PepsiCo recognizes that many suppliers need tools and knowledge to decarbonize. Through its pep+ (PepsiCo Positive) Partners for Tomorrow – Sustainability Action Center, launched in 2022, PepsiCo offers a suite of resources and training for value-chain partners. This platform helps suppliers calculate emissions, learn best practices, and develop action plans. For instance, PepsiCo has helped suppliers adopt renewable energy via a program called pep+ REnew, which assists partners in procuring clean electricity for their operations.
  In the Asia-Pacific region, PepsiCo and the Clean Energy Buyers Association (CEBA) created a Clean Energy Procurement Academy to teach suppliers how to source renewable power and navigate local market barriers. The company is also working directly with farmers on regenerative agriculture – partnering with organizations like Yara (a crop nutrition firm) in Europe to promote low-carbon fertilizer and farming practices that reduce emissions on the farm.

 

Progress to Date: Early Wins in Emissions Reduction

 

PepsiCo’s multi-pronged supplier engagement is beginning to yield measurable results. Some notable progress and milestones include:

• Year-on-Year Emissions Cuts: Supply chain emissions have started to decline. PepsiCo achieved a 5% reduction in Scope 3 GHG emissions in 2023 compared to 2022, a meaningful drop for one year, given the company’s size. This suggests supplier initiatives (renewable energy adoption, regenerative ag, etc.) are gaining traction. However, total Scope 3 emissions in 2023 were still only 4% lower than in 2015, reflecting how much work remains to bend the curve faster.
• Supplier Participation: Hundreds of PepsiCo’s suppliers have engaged with its programs. For example, PepsiCo reports that its sustainable farming programs have reached over 1.8 million acres of agricultural land globally, up from just a few hundred thousand acres a couple years prior. This indicates many farmers in PepsiCo’s supply chain are now deploying regenerative practices (such as cover cropping, reduced tillage, and optimized fertilizer use) that cut emissions and improve soil carbon storage.
• Clean Energy Adoption: Through pep+ REnew and partnerships via the Clean Energy Buyers Alliance, PepsiCo has helped suppliers in multiple regions sign onto renewable electricity deals. A recent collaboration even facilitated renewable energy power purchase agreements (PPAs) in Vietnam for supply chain partners, accelerating clean power access in a challenging market.
• Innovation in Packaging & Logistics: PepsiCo has pushed suppliers on packaging sustainability (which also shrinks Scope 3 emissions). By 2023, it cut virgin fossil-based plastic use by 4% year-over-year, thanks in part to supplier initiatives in recycling, lightweighting, and alternative materials. On logistics, PepsiCo added 700 electric vehicles to its fleet in 2022 (including electric delivery trucks) and is working with haulage contractors on fleet electrification.
• Third-Party Recognition: PepsiCo’s efforts have not gone unnoticed. Its climate action plan including the supplier engagement model earned approval from SBTi and it has been included in sustainability indices. The company is also partnering with NGOs and funds (e.g. the Soil & Water Outcomes Fund) to validate and pay for verified carbon reductions achieved by farmers in its supply chain

 

Challenges and Ongoing Efforts

 

Despite making headway, PepsiCo faces significant challenges in reducing Scope 3 emissions. Executing a supplier engagement playbook at PepsiCo’s scale is complex and there are headwinds to navigate:

• Global Supply Chain Complexity: PepsiCo’s CSO Jim Andrew has emphasized that cutting Scope 3 requires “system changes literally across the world”. PepsiCo operates in over 200 countries with thousands of suppliers, and many climate solutions (like renewable energy or recycling infrastructure) depend on local conditions. For instance, something as basic as shifting to recycled plastic packaging faces regulatory and infrastructure barriers in key markets – until 2023 India banned, and China still bans, the use of recycled PET in food packaging, limiting suppliers’ ability to cut packaging emissions.
• Data and Accountability Gaps: Getting accurate emissions data from every supplier is challenging. Many smaller suppliers lack the tools or expertise to measure their carbon footprint. PepsiCo’s reporting frameworks and Sustainability Action Center help, but there is a learning curve in developing consistent measurement across thousands of partners. Ensuring suppliers not only set goals but also hit them year after year requires continuous follow-up.
• Balancing Growth with Emissions Cuts: PepsiCo is growing as a business launching new products, entering new markets which can increase absolute emissions even if efficiency is improving. The company acknowledges that business growth has introduced new challenges to emissions reduction. For example, higher production volume can mean more agricultural raw materials and more shipping, adding to Scope 3 emissions. This puts pressure on PepsiCo to find emissions savings that outpace its growth. It also explains why, despite many initiatives, the total Scope 3 reduction since 2015 is still modest.
• Supplier Readiness and Support: Not all suppliers can easily make changes. Some are in countries where renewable energy or low-carbon tech is hard to access. Others operate on thin margins and worry about the cost of new processes. PepsiCo must continue to educate and incentivize suppliers, especially in emerging markets, to invest in sustainability. The financing and academy programs help, but scaling them up is a task. There’s also the human element – PepsiCo’s team of procurement and sustainability professionals need to engage supplier executives and even provide on-the-ground technical assistance in some cases. Building that capacity internally and externally is a work in progress.
• External Scrutiny and Evolving Standards: PepsiCo’s sustainability commitments are under a microscope from investors, activists, and regulators. For instance, when PepsiCo revised some goals in 2025 (such as extending its net-zero deadline to 2050 and tweaking packaging targets), it faced criticism from advocacy groups like As You Sow and Oceana for perceived backtracking.

 

The Road Ahead: Collaboration for Systemic Change

 

PepsiCo’s experience so far makes one thing clear: addressing Scope 3 emissions is a long-term journey that requires systemic change. The company’s “Supplier Engagement Playbook” focused on setting expectations, incentivising progress, and enabling partners is laying the groundwork. Importantly, it has shown that a large company can begin to move the needle on supply chain emissions by treating suppliers as true partners in sustainability.

Moving forward, PepsiCo and its peers will likely double down on collaboration. Jim Andrew has described climate action as “the largest change management effort society has ever faced,” requiring coordination across industries and governments. For PepsiCo, this means scaling up joint initiatives: more co-investment projects like the ADM partnership, broader renewable energy access programs, and deeper engagement in coalitions that push entire sectors toward low-carbon norms. It also means staying agile so that adapting the playbook as new technologies (think synthetic fertilizers with lower emissions, or packaging breakthroughs) emerge that suppliers can adopt.

The challenge is formidable, but PepsiCo’s leadership remains vocal about their commitment. “By working together and setting consistent expectations for suppliers, we can create meaningful, long-term change,” noted one industry CSO in the coalition– a sentiment PepsiCo shares. In the coming years, sustainability professionals will be watching how PepsiCo’s supplier engagement model evolves and whether it delivers the Scope 3 reductions needed. The task is daunting, but with continued partnership, innovation, and persistence, PepsiCo is aiming to turn its Scope 3 emissions from a point of anxiety into an opportunity for sustainable transformation.

 

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