Environmental Sustainability

Every day, we rely on the earth's natural resources to run our businesses. Water is essential for all foods and our ability to enjoy them-from growing and washing to processing and cooking. It is the primary ingredient in our beverages. Fuels, electricity and, increasingly, other forms of energy are indispensable to making, moving and selling our products.

As a company that is expanding across many developed and emerging markets, we are committed to minimizing the impact our business has on the environment with methods that are socially responsible, scientifically based and economically sound.

Our environmental sustainability efforts are primarily focused on water, climate change, agriculture and packaging-areas that are critical to our business and where we can make the biggest impact. We continuously improve our environmental programs and explore inventive solutions to the world's challenges, in particular water scarcity and climate change. We look for ways to bring to scale the good ideas being implemented across our global business and to share this experience with our peers and supply chain. The following pages spotlight initiatives taking place around the world-in Mexico, India, the U.K., and the U.S.-and illustrate how we approach our commitment to sustainability.

Our ability to improve the effectiveness of our environmental sustainability initiatives has been strengthened by the creation of common, enterprise-wide metrics. This is helping us to better understand and track our comprehensive environmental footprint and to be more transparent in our reporting.

Our goal is to reduce water consumption by 20%, electricity consumption by 20%, and fuel consumption by 25% per unit of production by 2015 as compared to our 2006 consumption. We've made notable progress in all three areas. For the first time ever, Bureau Veritas issued a verification of our environmental data and we are reporting our results on the total business, rather than by operating division, as in the past.

We are also keen to address other areas of opportunities, including gathering consolidated bottler data and continuing to embed our global sustainability strategies and goals within all our businesses for greater consistency.

PepsiCo's sustainability efforts are guided by a dedicated Environmental Sustainability Leadership Team supported by an Environmental Council. Sustainability teams at our manufacturing facilities around the globe are at the front line of our efforts. Employee volunteer "Green Teams" operate at many U.S.-based businesses, including Quaker, Tropicana, Gatorade, and Frito-Lay.

An Environmental Management System framework, an Environmental Policy and external audits support our efforts, ensuring that we are continually reaching for more ambitious goals.

In addition to our own efforts, we consistently rely on partnerships that help us address the world's environmental challenges. These relationships with a range of external stakeholders provide us with additional insights, expertise, and knowledge on multiple aspects of sustainability. We will continue to actively lead and engage in key private-public partnerships to spur collaborative action and solutions that address the urgency of these issues.

Water: At PepsiCo, we are committed to minimizing our water use through greater efficiency across our operations and to ensuring that we source our water in ways that do not cause damage to local communities and ecosystems. Working closely with our suppliers, we are finding new ways to further reduce their water usage and to help avoid water conflict with local communities.

PepsiCo also collaborates with corporate peers to ensure that we are doing more, collectively, to reduce our impact on the environment. In 2008, Indra Nooyi, our chairman and chief executive officer, joined select global leaders as a signatory to the United Nations CEO Water Mandate and we are actively involved in supporting all elements of the mandate.

Through the work of The PepsiCo Foundation, we continue to invest in sustainable water resource management methods, which positively impact both quantity and quality of water supply. Since 2005, the Foundation and PepsiCo Corporate Contributions hasve committed more than $15 million to organizations working to bring safe water to developing countries.

Climate Change: We are working hard to reduce our use of energy and transform our businesses by replacing our existing use of oil, gas and fossil fuels in manufacturing with renewable energy sources.

We are actively moving towardss having all our new facilities meet the U.S. Green Building Council's (USGBC) Leadership in Energy and Environmental Design (LEED) standards-one of the world's most rigorous standards for green building. In an industry-leading move, we introduced our Sustainable Engineering Guidelines (SEG) based on LEED standards. These guidelines ensure our buildings are constructed to environmentally sustainable standards and apply to all new construction as well as major remodels of existing buildings globally, where practical.

By consistently making our manufacturing operations more environmentally responsible, we are also making them more economically efficient through our water and energy conservation processes and teams. For example, the Frito-Lay plant in Modesto, Calif., installed a solar energy generating system that powers the daily production of thousands of bags of SunChips multigrain snacks. In Casa Grande, Ariz., our teams are working toward the goal of taking the Frito-Lay plant there off the power grid, or nearly so, and running it almost entirely on renewable fuels and recycled water.

Agriculture: Guided by our Global Sustainable Agriculture Policy, PepsiCo is working across the agricultural supply chain to ensure our practices are efficient and sustainable. Continuous benchmarking against our industry peers ensures we are adopting best practices-including water savings techniques, waste reuse, soil protection and chemical use-throughout the diverse aspects of our business.

One of the most exciting developments in our environmental sustainability efforts has been on the packaging front. In 2008, we introduced a new half-liter bottle for our Aquafina flavored waters, Lipton Iced Teas, and Tropicana juice drinks. The new bottle contains 20% less plastic than the previous bottle and its label is 10% smaller than before. These innovations are taking nearly 6 million kilograms of packaging out of the system each year and reducing greenhouse gas emissions by 18,000 metric tons annually. That's equivalent to taking 3,350 cars off the road annually.

Our goal is to design and develop packaging systems that are environmentally responsible throughout their entire life cycle. We want to inspire consumers who are seeking ways to live more environmentally sustainable lives by promoting recycling. In addition, we want to partner with leading organizations to promote sustainable packaging and recycling practices. Most recently, we have launched a global sustainable packaging policy and formed a Sustainable Packaging Council to further our efforts in this area.

PepsiCo's commitment to environmental sustainability-a key plank of our Performance with Purpose mission-is part of how we do business every day. The steps we've taken to minimize our impact and institute more robust, enterprise-wide processes to better track, manage and understand our environmental footprint are helping us to do better each day. With the expert knowledge, world-class skills, and breakthrough technology that empower our environmental teams across the globe, I'm confident that this will lead to continuous progress.

PepsiCo's Environmental Policy applies to all our operations. PepsiCo monitors company-owned operations and joint ventures where we hold a majority share. We encourage our suppliers, service providers, bottlers and other partners to adhere to the policy.

View PepsiCo's Environmental Policy

PepsiCo's Corporate Environmental Policy is a statement of the company's commitment to being an environmentally responsible corporate citizen in all aspects of our business. The policy expresses principles that form the foundation of our commitment to environmental stewardship at all levels within PepsiCo. This includes the commitment to implement and maintain an Environmental Management System, identification and management of environmental risk, and application of formal governance and auditing processes to our environmental programs and systems to ascertain compliance with regulations and company standards. The policy also expresses our commitment: to implement resource conservation, environmental best practices, and use of technology and innovation to minimize the potential environmental impacts of our business; to set goals and establish metrics to monitor continuous improvement in environmental performance; to work with stakeholders up and down our supply chain to reduce environmental impacts of our products throughout their life cycle; and to review our performance in implementing our policy.

Environmental performance leadership is the responsibility of PepsiCo's executive supply-chain heads of our operations: Frito-Lay North America, Quaker, Tropicana, Gatorade, Pepsi-Cola North America (including working with our bottlers) and PepsiCo International. These leaders head our Environmental Sustainability Leadership Team (ESLT), formed in 2007. The ESLT includes senior executives from all functions to make sure that environmental impacts are considered in all areas of the business.

The ESLT charter includes the following:

• Create and maintain PepsiCo's environmental sustainability strategy.
• Develop, administer and maintain PepsiCo-wide policies on matters of environmental sustainability.
• Develop goals and timelines for PepsiCo environmental performance.
• Assess the gaps and strengths of performance relative to our aspirations and external benchmarks.
• Provide support to divisions in improving PepsiCo's long-term environmental sustainability performance.
• Advise and inform the Chairman and CEO, the PepsiCo Executive Committee and the Board of Directors on matters of environmental sustainability.

The ESLT is supported by the Environmental Council (EC). The EC is made up of environmental experts from all areas of our business, including resource conservation program managers and environmental compliance managers.

The EC's mission is to provide subject matter expertise within and across the divisions, and it supports the ESLT to ensure that we have a strategic environmental sustainability vision for PepsiCo; uniform system-wide metrics, standards, and practices;, sensible environmental goals; and accurate reporting to internal and external stakeholders. In addition to driving greater efficiencies in our use of natural resources and identifying ways to address water scarcity issues, the EC is focused on the implementation of a global Environmental Management Information System (EMIS) to standardize and consolidate our existing environmental management software into a single, enterprise-wide solution to provide common tools and processes for environmental data capture and reporting, and to ensure that key compliance and environmental performance metrics and parameters are effectively measured and managed within our Environmental Management System (EMS).

To leverage best practices across Environment and Health and Safety, the PepsiCo Health and Safety Leadership Council (HSLC) and the Environmental Council both report to the PepsiCo senior vice presidents of Supply Chain.

In addition, Pepsi Beverage North America has a Bottler Sustainability Team. Their mission is to advance environmental sustainability in Pepsi Cola's bottling operations through:

• Defined and consistent measures: data collection, benchmarking and reporting with PepsiCo
• Setting and achieving goals
• Driving continuous improvement
• Sharing best practices

Each division is held responsible for implementing environmental programs, training associates and tracking, monitoring, correcting and improving environmental aspects of its business.

Monitoring
In 2005, the PepsiCo Environmental Management System (EMS) framework was first developed with the help of an independent third party. Since this time, we have reviewed our performance and strategy, and in 2008 we expanded the framework to encompass the environment, health, and safety. We call this 12-element framework the PepsiCo Environmental, Health & Safety Management System (EHSMS).

Key features of the PepsiCo EHSMS framework include:

• A risk-based management approach
• Documented systems that capture and maintain institutional knowledge
• Objectives and targets for continuous improvement
• Integration of environmental, health and safety considerations into core business processes
• Routine performance monitoring and internal management reporting

The EHSMS framework is built along the lines of ISO 14001 and OHSAS 18001. Twenty-one PepsiCo International facilities are ISO 14001 certified, including nine in the United Kingdom.

Company-owned facilities or joint ventures with PepsiCo management control implement the PepsiCo EHSMS, which aligns with ISO 14001 and OHSAS 18001. We have a total of 39 facilities that have been externally accredited to ISO 14001. We estimate that more than 90% of PepsiCo International manufacturing facilities receive environmental management system audits by internal or external auditors.

Capital Expenditure Filter
PepsiCo incorporates sustainability criteria into our Capital Expenditure Filter (CapEx Filter), and we are using it on all capital expenditure requests over $5 million. Each request must include a review of the sustainability issues and opportunities surrounding the request. The goal is to incorporate sustainability aspects into projects right from the start and track sustainability-related capital spending across PepsiCo. This process is expected to help drive continued improvement.

Education and Awareness--Engaging Employees
We are committed to educating our associates on the importance of environmental sustainability. In addition to regular training of environmental personnel, we conduct special events at which new ideas are shared.

In May 2008, PepsiCo introduced the Sustainable Engineering Guidelines, which are meant to support overall implementation of our environmental sustainability design principles throughout the engineering process, and to improve efficiency in the use of natural resources. The Sustainable Engineering Guidelines can be accessed through a website available to all PepsiCo employees and key partners worldwide. We also offer workshops on ReCon, our global eco-efficiency strategy for resource conservation within our operations, to our engineers, facility operations teams, bottlers and co-packers around the world.

Environmental sustainability is shared with all our associates through special activities to mark events such as Earth Day and World Water Week. Environmental information is also included in our daily e-newsletter. Our PepsiCo Americas Beverages businesses have quarterly employee e-newsletters dedicated to sharing environmental sustainability initiatives and projects in the region as well as showcasing best practices.

In 2008, U.S. employees were offered Chronos, an e-learning tutorial designed to help associates understand the landscape of sustainability and the business case for sustainable development. It was created through a partnership with the World Business Council on Sustainable Development (WBCSD) and the University of Cambridge, U.K..

Green Teams
Frito-Lay North America maintains a dedicated team of experts across our manufacturing facilities focused on reducing consumption of electricity, fuels, and water. Through "GreenTeams" made up of groups of volunteer employees, more than 12,000 manufacturing associates have been trained to improve their environmental awareness and to understand how they can do their jobs without adversely impacting the environment.

Quaker, Tropicana, and Gatorade have established PepsiCo Green Chicago," an overarching environmental sustainability initiative to raise employee awareness and create actionable tactics to improve the business and each associate's personal environmental footprint. The focus is to raise awareness, incite action and institutionalize sustainability improvement efforts across PepsiCo. In September 2008, our headquarters building in Chicago opened a company-first Sustainability Center, dedicated to Performance with Purpose. The Center, designed to Platinum LEED Commercial Interior standards, is used to educate and inform employees about PepsiCo sustainability initiatives, business progress and personal actions they can take at home to reduce their footprint.

Water is required to make our products, so that we maintain the highest quality standards for consumers--and water is required to ensure a clean and safe workplace for our employees and our suppliers. In turn, efficient use of water across our operations is nothing short of imperative. We are committed to minimizing our global water use through greater efficiency, innovative processes and new technologies.

In 2008, we conserved more than 7.5 billion liters of water as a result of gains in water efficiency from the 2006 baseline. And while using water responsibly is a top priority, we also believe in our ability to help address the broader challenge of water scarcity and to help avoid water conflicts in local communities.

In India, all industry accounts for about 6% of total water use. Within that 6%, the soft drinks and bottled water industry accounts for about four-hundredths of 1%. In comparison, agriculture accounts for over 80% of total fresh water use in the country. To have significant impact on total water conservation, farming must use water more efficiently. We believe we can play an important role in providing solutions.

In 2003, our India team embarked on an ambitious journey to achieve positive water balance--giving back as much as we take. Through a comprehensive program to conserve and optimize water usage, we have pioneered major initiatives by partnering with farmers, working with numerous rural communities and establishing private-public partnerships with Punjab Agriculture University and The Energy Resources Institute (TERI). We have carried out a variety of innovative reuse and recycling initiatives within our own operations; raised farm productivity, which increased farmers' incomes; and improved the quality of life in many communities. These initiatives, among others, will help us make significant progress toward positive water balance in 2009.

In the last five years, our India manufacturing team has reduced water use by more than 55% and in the last three years, we have saved more than 2.5 billion liters of water through conservation efforts. We have also prevented depletion of ground water aquifers by constructing rainwater harvesting systems in most of our plants.

One of the most effective initiatives is our work with farmers to reduce water intensity in rice cultivation through a method called direct seeding. Our India team has become a leading proponent of direct seeding of rice (versus transplanting seedlings from nurseries to paddies that are then flooded). While direct seeding of rice is done in some countries, it is not widely practiced in India.

In India, PepsiCo has been experimenting with direct seeding for four years--testing methods to improve yield and reduce weed growth and even developing a tractor-mounted direct seeding machine, adjustable for seed variety, planting depth and plant-to-plant spacing.

After carrying out initial direct seeding trials at our own model farms, pilot tests have been run in farmers' fields to confirm the results. In 2008, direct seeding was extended to more than 1,000 acres in five states and the initiative saved close to 1 billion liters of water. In addition to saving water, it also reduced costs by 1,400 rupees per acre for farmers.

Direct seeding will go a long way in enabling our India team to achieve positive water balance for our beverage business by 2009. More important, it has the potential to dramatically reduce water usage in a country where water is an increasingly precious commodity.

This single initiative is an example of both climate change mitigation and adaptation. We are mitigating our impacts on climate change by using significantly less resources, and helping our farm communities adapt to the changing environment.

Learn more about how PepsiCo India is saving water

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One of the most important elements of sustainable water conservation is in-plant water conservation. To formalize this in our manufacturing facilities and embed conservation practices into the day-to-day operations of the plant, we have developed the water component of our successful Energy Resource Conservation (ReCon) tool. Like the energy tool, the water tool includes a PC- or web-based diagnostic, with audit guidance and solution sets. With this tool, the manufacturing facility can conduct a self-audit of its water management practices. To complement the Water ReCon tool, we have developed a Water Profiler, which will map and quantify all major water uses within the facility, identify relative local costs of these applications, and identify a "hot list" of water conservation measures that can be implemented both short and long term. We estimate that, in general, application of the Water ReCon Tool in a plant will result in a 10- to 20% reduction in water use. The tool is now being expanded to our franchise bottler network and our co-packer partners.

We've instituted a number of other technological improvements in our global manufacturing operations to save water:

In the U.K., our total water use across all our foods and snacks operations was 1.4 billion liters in 2008. Between 2001 and 2008, we reduced the water used to manufacture Walkers Crisps by nearly 60%, from 13 L/KG of production to 5.4 L/KG. The Walkers team developed engineering solutions to reduce equipment water use and created sources for recycled water.

Frito-Lay, the U.S. snack division of PepsiCo, continued to improve its water efficiency by conserving over 380 million gallons (1 billion liters) of water in 2008 as compared to 2006; through its continued water conservation efforts known as the "Gallon per Pound Challenge," Frito-Lay won recognition from the Environmental Protection Agency as a Water Efficiency Leader in 2007.

In 2008, our Latin American operations participated in the Inter-American Water Day, an awareness campaign aimed at raising awareness of the growing scarcity of potable water in the region and the importance of water conservation. The program also had a volunteering component where PepsiCo employees visited schools to teach children about water conservation.

In addition, in 2008, Latin American Beverages manufacturing operations saved 28 million liters of water, both in company-owned and franchise business. As part of the same initiative, we also saved 31,415 MWhr of electricity in our Latin America Beverage manufacturing operations.

In 2008, PepsiCo reinforced its commitment to science and the environment through water conservation by using waterless rinsing technology at Gatorade's U.S. plants. Using air rinsing on all of our Gatorade and Propel lines, the water savings are more than 5 million liters of water per year.

Pepsi-Cola franchise bottlers in North America are also doing their part. Pepsi Bottling Group has installed reverse osmosis recovery systems or incorporated high recovery designs into their new manufacturing lines that cumulatively save more than 1 billion liters of water annually as compared to traditional designs.

Across PepsiCo, we have a variety of standardized processes and procedures to assure the safety of our consumers, integrity of our products and respect for the environment and community around us. For new sites, each of our businesses applies the elements of an environmental site assessment, similar to the American Society for Testing and Materials (ASTM) Standards for Environmental Site Assessments.

With specific regard to water sources, we utilize a mixture of municipal supplies, which may be from surface or groundwater sources and private wells. In addition, water resource selection at new sites is included in a PepsiCo-wide, web-based tool called the PepsiCo Sustainable Engineering Guidelines. This pan-enterprise effort captures all critical areas of new facility construction and provides solution sets for the user who encounters water-related or other risks. In addition, the tTool provides a "fast-track" path to LEED certification.

PepsiCo was a full supporter and advisory board member in the development of a Water Resource Assessment Tool by the World Business Council for Sustainable Development (WBCSD) in conjunction with a globally recognized environmental consulting firm. This tool was launched to global acclaim in Stockholm in 2007 and updated in 2009. This risk mapping and management tool provides an assessment of relative water availability (abundance, stress, scarcity) for any physical location coordinates entered, in addition to a wealth of other water-related information.

To the best of our knowledge, this was the first comprehensive tool of its kind that was entered into the public domain completely free of charge--for use by any and all business sectors, governments, NGOs, and other stakeholders. We are currently mapping all PepsiCo facilities across the world, and both current and projected risk of water stress are being identified and evaluated by a doctoral level, dedicated senior manager of water stewardship. In addition, this high-level assessment will be cascaded to our field operations for the next level of watershed risk assessment at the local level.

Our U.S. facilities are primarily supplied by municipal water sources. As such, these sources comply with all applicable water quality requirements and provide Consumer Confidence Reports (CCR), which detail the water quality being provided to the consumer as it compares to compliance with EPA quality requirements. The water quality data is available from the municipal water purveyors whether the purchaser is PepsiCo, one of our franchise partners, or a home consumer.

Similarly, outside the United States many of our plants are supplied by water from municipal sources, and the same approach would apply. In areas of the world where we develop our own water sources (for example, extraction from commercial wells), we do so in full compliance with applicable regulations concerning use of local resources. In these cases, we work with the local authorities to assure that the quantity of water needed to run our business, and thereby help support the local community and economy, is consistent with regulations and safe for the natural resource.

Where we develop our own wells to supply water from groundwater sources, every source is tested by an approved, external laboratory that is capable of reporting drinking water testing results. The test protocol is based on the most current revision of the World Health Organization Guidelines for Drinking Water Quality, and also includes testing required by local authorities.

Worldwide, every water source used for our beverages must first be analytically qualified, which includes using government-accredited, recognized laboratories to test for a harmonized list of over 100 parameters, covering many classes of raw water chemical/physical constituents. In addition, the microbial quality of the source is evaluated to help confirm that our products will be safe. We also believe that protection of water at the source is important; accordingly, a formal training program is provided to all of our key beverage plant personnel, which covers areas such as water source selection, well construction and source protection. At every plant, the incoming water is then further purified, using a variety of treatments depending on the raw water characterization, to meet the high standards of quality to be used in our products -- whether these products are bottled water, carbonated beverages or non-carbonated drinks.

In addition to source qualification, our plants monitor the raw, in-process and treated water for a core list of parameters and at frequencies ranging from hourly to daily to weekly (depending on the specific parameter and application). We have also established internal laboratories in the United States and Europe which routinely monitor raw, treated, and bottled water quality worldwide.

Once the water source is adequately identified for capacity and tested for quality, conserving the amount of water used in our plants becomes a critical component of stewardship. We seek to minimize our impact through traditional efforts to protect what we use. We follow the U.S. EPA guidelines (common to other governments as well) to reduce, reuse and recycle water whenever possible.

At Discharge
PepsiCo recognizes that regulations vary considerably across the globe and that some may not be adequate from the perspective of responsible water stewardship. Consequently, we have developed and implemented the PepsiCo-wide Responsible Standards for Effluent, which ensure environmentally safe, responsible treatment and discharge of our process water waste streams across the world. In addition to including and complying with local regulations, these internal PepsiCo standards are also included in the twelve-element system-wide Environmental, Health & Safety Management System Framework (EHSMS). This combined EHSMS framework is compatible with ISO 14001 for Environmental Management Systems, and OHSAS 18001 for Occupational Health and Safety Management Systems. More than 30 PepsiCo facilities have achieved formal ISO 14001 certification, and five have received formal certification to OHSAS 18001.

Water is unique in that it sits squarely at the nexus of climate change, food security, gender empowerment/education and global health. Consequently, PepsiCo believes that we have an obligation to positively impact the water crisis -- in its many elements -- on several levels. The in-plant and supply chain efforts of our global businesses must be complemented by high-level policy advocacy, and broad-scale social investment through "smart philanthropy" partnerships.

United Nations
PepsiCo Chairman and CEO Indra Nooyi publicly demonstrated PepsiCo's commitment to helping address the global water crisis by joining other partners as a signatory to the United Nations CEO Water Mandate. By signing the CEO Water Mandate, PepsiCo has committed to adhering to a holistic approach to water management in six areas: direct operations, supply chain and watershed management, collective action, public policy, community engagement and transparency.

Center for Strategic International Studies
Through the Center for Strategic International Studies, PepsiCo's Chairman and CEO, Indra Nooyi, endorsed the Declaration on U.S. Policy and the Global Challenge of Water. This critical document urges U.S. policy makers to publicly recognize the role that the U.S. plays in helping to mitigate the worldwide water crises.

World Economic Forum (WEF) Water Advisory Group
The WEF's Annual Meeting in Davos, Switzerland, is consistently a venue of global focus and represents a formidable backdrop against which awareness can be raised and influential audiences can be educated. Toward the end of 2007, PepsiCo engaged in the WEF Water Advisory Group to develop a technical white paper on the topic of water use in agriculture, industry and global health. The intent was to use this as a vehicle, targeted at the 1,000+-CEO audience, to place the global water crisis squarely at the center of attention and debate.

World Business Council for Sustainable Development (WBCSD)
PepsiCo plays an active role in the WBCSD's Water Core Working Group, which developed the WBCSD Water Resource Risk Tool and which was launched at World Water Week in Stockholm in August of 2007, and re-launched with a more robust watershed database in 2009. PepsiCo subject matter experts played a significant role in the development of the white paper "Agricultural Ecosystems: Facts and Trends," which highlights the myriad environmental issues where agriculture is connected.

Beverage Industry Environmental Roundtable (BIER)
Acknowledging that conservation and stewardship efforts within our facilities are foundational to engagement in the environmental sustainability space, leading companies like PepsiCo have an obligation to help inform and positively influence broader industry efforts as well. BIER is an example of this broader leadership. BIER was formed in 2006 with the mission of defining -- both qualitatively and quantitatively -- what "environmental stewardship" entails. BIER consists of peer and competitor companies across soft drink, bottled water, brewery and distilled spirits sectors of the industry that have aligned specific tangible deliverables to help advance the collective industry.

World Water Day
In 2008, as in previous years, we were active supporters of World Water Day. Our most visible activity was with Ethos Water, which is a part of the PepsiCo water family. Ethos Water has a unique business model, which includes helping to raise awareness of the severity of the world water crisis. PepsiCo is helping to increase the distribution of Ethos Water. For each bottle of Ethos Water sold in the U.S. Starbucks makes a $0.05 donation, and for each bottle sold in Canada a C$0.10 donation, to water projects, with the goal of contributing $10 million by the end of 2010 to help children and their communities around the world get clean drinking water.

The Energy and Resources Institute (TERI)
In India, we have a partnership with TERI for research and implementation to ensure long-term availability of water resources through interventions aimed at eco- restoration through surface water treatment measures, artificial groundwater recharge and demand management measures, and improvement in the quality of life of the community by undertaking interventions in areas of water supply, sanitation, hygiene, health, and education through community involvement.

Millions of people around the globe face a growing water crisis. In order to help minimize the impact of this crisis, the PepsiCo Foundation supports programs that protect water sources and create better use for existing water. In the environment portfolio, the strategic focus is on water security, sustainable agriculture and adaptive approaches to our changing climate. Since 2005, The PepsiCo Foundation and PepsiCo Corporate Contributions have committed more than $15 million to organizations working to bring safe water to developing countries.

The Earth Institute: In 2008, The Earth Institute at Columbia University, one of the world's premier institutions dedicated to global sustainable development, and the PepsiCo Foundation entered into a $6 million, three-year partnership. The program includes a series of high-impact, community-based activities and practical solutions across water, agriculture and climate.

Water.org: In 2008, the PepsiCo Foundation made a $4.1 million grant to WaterPartners to provide safe drinking water and sanitation to communities of the greatest need in India. This grant was the biggest single contribution to Water.org's WaterCredit Initiative, an innovative program that uses microfinance to increase access to safe water and improve sanitation for local communities in India. The project will directly impact a minimum of 120,000 lives. Approximately 60,000 people will be served through traditional grants, while an additional 60,000 people will be served through WaterCredit. Women and children comprise an estimated 68 % of this total. It is anticipated that there will be a natural "multiplier effect" that will widen the impact of this commitment to a larger number of beneficiaries throughout the recipient communities.

Safe Water Network: Through a three-year partnership with Safe Water Network, the PepsiCo Foundation pledged $3.5 million to implement safe water initiatives for village water systems in Ghana, India and Bangladesh, as well as rainwater harvesting systems in India.

Climate change may adversely affect the raw materials and other supplies we use to make our products, including water and various crops from potato, oats, and corn to oranges and apples.

Throughout our business, an important part of our greenhouse gas (GHG) emissions results from the energy used in our manufacturing and related processes. We are reducing our emissions through more efficient use of non-renewable fuels and increased use of renewable energy. We also partner with non-governmental organizations to examine how our business impacts climate change and how we can change the way we work to further reduce our footprint.

*The 2008 GHG data presented in the chart above has gone through 3rd party verification and represents nearly 85% of total Scope 1 and Scope 2 emissions for PepsiCo. This data is comparable to the 2006 and 2007 data reported for trending. Scope 1 and Scope 2 emissions include the following for company-owned operations:

• Fuel combusted during manufacturing, calculated by standard emissions factors according to each fuel
• Fuel combusted for building heat
• Emissions from fleet vehicles, based on vehicle type, fuel type and volume of fuel used
• Fugitive emissions from refrigeration units at manufacturing sites based on leak rates and refrigerant purchases.
• Purchased Electricity for Manufacturing, Distribution Centers and Offices
• Purchased Steam for Manufacturing Operations

The data shown above excludes additional greenhouse gas data that has been estimated for the first time in 2008, including:

• Company-owned International Fleet and Fugitive Operations; 490,600,000 metric tons CO2e
• Company-owned Coolers and Vending Machines**; 761,000,000 metric tons CO2e

**Note: PepsiCo has reported emissions from these company-owned coolers and vending machines as Scope 3 to be consistent with how these types of emissions sources have historically been reported by the beverage sector. However, based on careful review of the World Resources Institute Greenhouse Gas Protocol, in our opinion it is not clear that Scope 3 is the most appropriate designation. In 2009, PepsiCo will work with relevant third-party experts and stakeholders in the beverage sector to develop formal guidance for designation of these source types.

 Statement from Bureau Veritas

In 2003, we began working with the Carbon Trust, an independent, not-for-profit company set up by the U.K. government to help businesses address the growing threat of global climate change and to pioneer carbon footprinting methodology and standards. The Carbon Trust believes that in order to effectively reduce a company's carbon footprint, they must first know how to accurately measure it.

We began the work with our leading crisp brand in the U.K., Walkers Crisps. Following months of intense research, Walkers became the first consumer brand to pilot the original method for assessing product carbon footprints and the first major food brand to display a carbon footprint/reduction label on its packs. Since 2000, Walkers has reduced its energy use per pack by one-third and its water use by 42%, and it is committed to reducing the carbon footprint of its products even further.

The collaborative work continued and, most recently, Tropicana Pure Premium Orange Juice became the first consumer brand in North America to be independently certified by the Carbon Trust. The process included working with an academic research partner, The Earth Institute at Columbia University, to determine the mapping process. The Carbon Trust then conducted a review of scientific life cycle data and certified the carbon footprint of a standard 64-ounce carton by:

• Mapping the product life cycle, from growing and squeezing oranges and getting the container on the shelves, to finally disposing or recycling the packaging.
• Looking at the energy consumption directly involved in each of these life cycle stages and converting this into equivalent carbon dioxide emissions (CO2e).
• Adding the equivalent carbon dioxide emissions (CO2e) from each stage to estimate the total product greenhouse gas footprint of the product.

Using this process, the estimated carbon footprint for a 64-ounce carton was determined to be 1.7 kilograms. The Carbon Trust has certified the footprint, giving PepsiCo a verifiable benchmark against which the company can measure GHG reduction progress going forward.

In coming years, additional products, including Pepsi, Diet Pepsi, Aquafina, and Gatorade, will be assessed. Today, more than 10 products that represent a true market basket of our consumer offerings are currently being evaluated for a carbon footprint.

This science-based information is helping our businesses target operational improvements and achieve their energy efficiency goals, while striving for even more ambitious, yet realistic, targets.

Uncovering information about where and why carbon is generated in the manufacturing, distribution and disposal of products will also help drive collaboration with partners and suppliers on carbon reduction initiatives and elevate consumer awareness.

Watch the Carbon Trust Interview

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Learn more about Tropicana's Commitment to Sustainability

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Each division of PepsiCo is committed to achieving the 2015 reduction targets and has developed customized tactics to ensure their achievement: continued energy efficiency improvements to minimize energy intensity of our products, development of additional renewable energy generation at our own facilities, support for renewable energy generation outside our facilities through the purchase of Renewable Energy Certificates, and working cooperatively with our supply chain partners to share best practices in energy efficiency and sustainability improvement.

Large reductions in the use of non-renewable energy in the future will require innovative technologies. Hastening the development and application of these technologies will take bold steps, such as the one Frito-Lay has begun in an attempt to transform their Casa Grande, Ariz., facility to a "net zero" manufacturing facility. The goal of this project is to dramatically reduce the use of nonrenewable energy and water at an existing plant through implementation of transformational technology. The first stage will involve installation of a water recovery and reuse process that is expected to reduce water consumption by over 80 %. This project is under way, with planned start-up in 2010. The water recovery system allows for a section of the existing wastewater land-application area to be repurposed for use in a future solar and biomass system that will reduce the use of nonrenewable energy at the plant by 80% to 90%.

A 4.6 megawattcombined heat and power (CHP) plant was constructed at the Frito-Lay facility in Killingly, Conn. The CHP plant generates enough electricity to offset the total electrical demand of the plant at an efficiency exceeding twice that of electricity currently pulled from the grid. As part of the project, an upgrade to the existing steam system at the plant was completed, and we expect to prevent the loss of approximately 10,000 MMBTU per year of flash steam and save the plant $100,000 per year in energy costs.

PepsiCo India Beverages made the decision to focus on renewable energy sources to provide cleaner energy for its manufacturing sites across the country. The switch took place quickly, and the changes have already delivered significant cost savings and emissions reductions.

In 2007 and 2008, 17 oil-fired boilers were converted to use biomass briquettes at plants owned by PepsiCo India. PepsiCo India also launched our first remote wind turbine, harnessing one of the most efficient, clean and renewable sources of energy. This turbine is connected to the public electricity grid with sufficient power to meet more than two-thirds of the electricity needs of the company's local Mamandur plant, and it directly offset up to 5% of our company-owned bottling operations' power requirements for 2008. In 2008, this initiative also reduced carbon emissions by about 3,000 tons, with the potential to offset more than $200,000 per year. India is also converting company-owned manufacturing sites to biomass boiler capability. With our wind energy program and investments in solar lighting and biomass boilers, more than 16% of the energy PepsiCo India used in company-owned plants during 2008 was derived from renewable sources.

Our business in the U.K. is working to radically transform its business model and has committed to increase total share of electricity from renewable sources from 8% to 14% within three years. All energy used in manufacturing and distribution is to be from renewable sources within 15 years. In 2008, PepsiCo U.K. reduced its energy use by 11.8% and doubled its renewable electricity use from 8% to 16%.

 More information about PepsiCo UK's environmental commitments and progress

At our snacks operation in Turkey, projects varying from small to very large scale have been implemented, such as Solar Tube Lighting, Stack Heat Recovery, Boiler Management, Heat Exchanger Bundle Replacement, and Online Energy & Water Consumption Monitoring Database. At our facility in Tarsus, the installation of the first industrial-scaled solar power system at PepsiCo International was completed in 2008. This pioneering project is not only a milestone for environmental sustainability, but also a global model for all companies.

At the Gatorade distribution facility in Tolleson, Ariz., the facility installed the largest rooftop solar array in the state, a 500-kilowatt system that will supply 40% of its annual energy needs--enough electricity to power 50 Arizona houses for a year. The system is capable of producing more than 760,000 kilowatt hours per year. A solar thermal energy system was also installed on the roof top of the Tolleson Gatorade manufacturing plant, located across the street from the warehouse. The solar thermal system is capable of generating 5.2 billion BTUs per year and is one of the largest rooftop solar thermal concentrators in the United States.

At our Sabritas facility in Toluca, Mexico, we installed an anaerobic wastewater treatment plant that produces biogas with 60% methane content. The gas will be used to produce electricity through a microturbine with the intention to reduce fuel consumption at the plant.

With the help of these projects, 10.000 MWh of fossil fuel energy has been saved; these savings helped to reduce 13,000 tons of CO2 emission, which is equal to the amount of carbon dioxide absorbed by 40,000 trees.

Green Building and Design
PepsiCo's commitment to saving energy through green building worldwide continued in 2008. Our newly constructed facilities were designed to meet the U.S. Green Building Council's (USGBC) Leadership in Energy and Environmental Design (LEED) standards--one of the most rigorous standards for green building in the world.

PepsiCo Americas Beverages (PAB) has implemented a policy whereby all new construction will be certified through the USGBC LEED program. During 2008, PepsiCo Chicago continued its green building construction initiatives by certifying two additional facilities under the USGBC LEED program. In April 2008, the new Gatorade manufacturing plant in Pryor, Okla., achieved LEED Gold certification, and in October 2008 the Chicago headquarters building was awarded LEED Silver certification as an existing building.

The Pryor Gatorade manufacturing plant, now the largest LEED-Gold-certified food and beverage manufacturing facility in the world, achieved its certification in part by reducing energy intensity by approximately 40% and water use intensity by 50% when compared to an average facility. To achieve LEED-Silver certification, the Chicago Plaza reduced energy use by 10% in less than a year, cut water to 37% below the Energy Policy Act performance standards, and eliminated almost 226 metric tons of greenhouse gas emissions through energy-saving programs. The Chicago headquarters building also installed combined solar and wind generation systems to provide a portion of the electrical power needs for the recently constructed Sustainability Center. The wind power generating system at the Plaza is the first functioning wind-to- electricity generating system in the downtown Chicago area.

The Sustainable Engineering Guidelines support a transformation of the company infrastructure through green design.

In May 2008, PepsiCo introduced the Sustainable Engineering Guidelines based on LEED standards. The guidelines support our environmental sustainability commitments throughout our engineering process, and apply to all new construction as well as major remodels of existing buildings globally. The Sustainable Engineering Guidelines can be accessed through a website available to all PepsiCo engineers and key partners worldwide.

This website provides guidelines for:

• Site selection
• Construction activity management
• Water use reduction
• Building materials
• Building systems
• Plant process management
• Indoor air quality
• Site stewardship
• Lighting systems

In addition to evaluating the feasibility of LEED certification for new buildings, we apply PepsiCo's Sustainable Engineering Guidelines to ensure that every project manager in the world has a common set of guidelines and approved solution sets to ensure that they design and build in an environmentally responsible way.

The Resource Conservation (ReCon) tool was developed to facilitate the rapid transfer of best practices around the world. The tool includes Energy and Water User Profilers and a customizable online site audit or diagnostic. ReCon is now in its third year of deployment and is rapidly spreading to PepsiCo operations around the globe.

Beverage Coolers and Vending Machines
Marketing equipment (coolers/vending machines) affects the environment through the use of electricity and refrigerants. PepsiCo is committed to reducing the impact of our marketing equipment through design and process changes developed to reduce greenhouse gas (GHG) emissions.

PepsiCo has a long track record of improving the energy efficiency of its vending machines and coolers. On average, 2008 model vending machines, which all meet EPA Energy Star requirements, use 51 percent % less energy than 2003 models, and 2008 coolers consume 44 percent% less energy than their 2004 counterparts. In addition, PepsiCo was also the first in the industry to mandate that the foam used to insulate its vending machines and coolers be free of HFCs. Through these improvements, PepsiCo has reduced GHG emissions from its refrigeration equipment by 598,000 metric tons, an average of 282,000 metric tons per year --the equivalent of removing 52,000 cars from the road or planting 125,000 trees annually.

PepsiCo is testing thousands of machines around the world that rely on other green refrigerants--specifically isobutane and propane--that also have a lower climate impact than current HFC refrigerants.

Fleet
Sabritas, our snack food business in Mexico, has 13,000 distribution vehicles, about 6,000 of which were converted over the past 10 years to burn liquid propane gas. This reduces carbon and nitrogen emissions and generates fuel savings of between 15% and 22% (depending on geographic conditions and fuel costs).

In the U.S., both Frito-Lay and our bottlers use advanced routing technologies and have a "no-idle" policy to reduce miles and cut fuel consumption on delivery routes. Pepsi Bottling Group (PBG), our largest bottler, has verified the electronic settings on vehicles with electronic controls to ensure that idling reduction and speed parameters are set efficiently.

PepsiCo and Frito- Lay have joined SmartWay, a voluntary partnership between various freight industry sectors and the Environmental Protection Agency (EPA) that establishes incentives for fuel efficiency and GHG emissions reductions. By 2012, this initiative is expected to save up to 25 billion liters of fuel per year (equivalent to 150 million barrels of oil).

The Frito-Lay Fleet Team is also hard at work to reduce its carbon intensity. Through active partnership with the EPA SmartWay program, the Fleet Team is investigating ways to improve miles per gallon (MPG) and reduce the environmental footprint of our delivery fleet. In 2009, 1,200 high-MPG sprinter delivery trucks were ordered and placed into service. These sprinter vehicles almost double the fuel efficiency of our current vehicles, taking MPG from the 8-10 range up to 18. Other fuel savings initiatives such as GPS Route Optimization, Idle Shut-Downs, Tractor and Trailer Aerodynamics, and improved fleet maintenance practices have also been executed to further improve fuel efficiency and reduce the fleet's environmental footprint.

In 2008, our U.K. operation was able to reduce food miles and associated CO2 emissions for two major products. For Walkers Crisps, we continued to transition from a blend of U.K.- and European-sourced potatoes to focus on sourcing 100% raw British potatoes. Local potato production has reduced potato miles into U.K. plants. In 2008, total raw potato into Walkers plants was 385,000 metric tons. By sourcing from local British farmers, a savings of 800 metric tons of CO2 was achieved through mileage reduction vs. 2007. Additionally, a further savings on these deliveries of 340.03 metric tons of CO2 was achieved through bio-diesel vs. 2007.

We continue to develop external partnerships focused on strategies to reduce greenhouse gas emissions.

In 2008 PepsiCo strengthened its partnership with the U.S. EPA's Climate Leaders program. Frito-Lay joined Climate Leaders in 2002 and PepsiCo joined in 2007, setting a goal to reduce greenhouse emissions in the United States 25% by 2015 from a baseline year of 2006. In announcing the goal last Fall, PepsiCo stressed the critical role energy conservation will play in achieving the target.

PepsiCo participates actively in various organizations that provide thought leadership to governments and regulators throughout the world. These organizations include U.S. CAP in the U.S., the WBCSD, the WRI, the Carbon Trust, and others. PepsiCo believes that its active participation in these respected organizations allows us to be competitively positioned relative to other companies to adapt to changes in the climate change regulatory environment.

By working with the Carbon Trust and the Earth Institute at Columbia, PepsiCo has gained unique insight into the carbon footprint of our product portfolio. This insight enables us to communicate more effectively with customers, consumers and regulatory organizations about our carbon footprint and the best strategies to reduce it.

PepsiCo has joined with other multinational corporations and Greenpeace in a global initiative called "Refrigerants Naturally!" Its goal is to address climate change and ozone layer depletion caused by Hydrofluorocarbons (HFCs) in refrigeration equipment. We are working together to eliminate use of HFCs in refrigerated point-of-sale equipment. We are also experimenting and testing natural refrigerants, which may be required in the future.

In 2008, PepsiCo gained significant insight into the risks and opportunities it has relative to climate change, first through a comprehensive study of future risks and secondly through an aggressive and broad-based effort to understand the full carbon footprint of our products. Specifically in 2008, PepsiCo joined with the U.K. not-for-profit organization Forum for the Future in a project called Global Scenarios and Strategies for 2030. In this effort, PepsiCo and Forum for the Future combined to analyze critical risks and opportunities associated with climate change and other environmental and social factors.

Across the world, we continue to deliver innovative new designs, reducing the amount of packaging material used. Since 2003, our packaging team's efforts in the U.S. have eliminated more than 36 million kilograms of plastic, reducing greenhouse gas emissions by some 150,000 metric tons.

North America Beverages:

• In 2008, we introduced a new, half-liter bottle for our Aquafina flavored waters, Lipton Iced Teas, and Tropicana juice drinks. The new bottle contains 20% less plastic than the previous bottle and its label is 10% smaller than before. These innovations are taking nearly 6 million kilograms of packaging out of the system each year and reducing greenhouse gas emissions by 18,000 metric tons annually. That's equivalent to taking 3,350 cars off the road for a year.
• In 2008 we also trimmed the amount of plastic used in the bottles, caps, and labels of our most popular Aquafina bottle, the half-liter (16.9-oz) bottle. This initiative saves more than 27 million kilograms of plastic a year and reduces greenhouse emissions by 78,000 metric tons annually. That's equivalent to taking 14,000 cars off the road for a year.
• Our Tropicana team reduced corrugate use by 4%, cutting greenhouse gas emissions by 4,000 metric tons.

European Beverage: Gatorade Europe reduced their 500ml bottles by 12%

India Beverages: Carbonated soft drink crown lining was converted to a PVC-free compound, removing resin and cost.

Globally: Returnable case programs have been implemented in areas of the world where appropriate infrastructure exists, notably Greece, Spain, Turkey and South Africa.

North America Snacks: Optimized the collection of manufacturing waste involving corrugated materials to promote the recovery of nearly 30 billion kilograms of material across Frito-Lay plant operations.

PepsiCo beverage and food packaging has significant recycling potential throughout the world, especially with bottles, cans, paperboard and corrugated materials. While dependent upon the local infrastructure to facilitate recycling, a significant amount of our packaging is eligible for recycling. Over 95 % of our packaging can be recycled or is used in a returnable bottle system. The remaining percentage is being addressed by our "renewable-sourced packaging" objectives.

North America Beverages: PET recycled content of 10% has been achieved for carbonated soft drink bottles in 2008 as well as in the past two years.

• In 2008, Tropicana teamed up with Waste Management, the largest residential recycler in the U.S., to launch a national initiative that will increase the number of juice and milk cartons for recycling. The initiative kicked off the long-term goal of increasing beverage carton recycling to every community across the nation, and will be promoted through the Carton Council. Waste Management is accepting juice and milk beverage cartons at all of its recycling processing facilities across the country.
• To continue our efforts to use more recycled material, we are leveraging next-generation recycling technologies to ramp up usage of post-consumer recycled material in our packages. Our Naked Juice division in the U.S. will be launching packages made from 100% post-consumer recycled (PCR) content in 2009; in the U.K., we will be producing our Copella juice brand with 100% PCR packaging. We are also launching packages in other markets such as Mexico, Brazil and Germany with postconsumer recycled PET content ranging from 15% to 50% by weight.
• Brazil Snacks: Salty Snacks bags are transformed into plastic vases, pencil cases, CD and DVD cases saving more than 200,000 kilograms of plastic per year.
• Australia Snacks: In Australia, we are able to use 100% recycled paper board in the manufacture of corrugated packaging cartons.
• Globally: Our aluminum beverage cans typically contain about 40-50% post consumer recycled content.

PepsiCo focuses its innovation teams to develop and discover creative packaging solutions, which include the investigation of cutting-edge technologies that promote environmentally responsible packaging and the potential use of plant-based packaging. This will allow our packaging to have a biodegradable end-of-life scenario.

• North America Beverages: We strive to source fiber for paperboard and corrugated from suppliers who have certification from either Sustainable Forestry Initiatives (SFI) or Forest Stewardship Council (FSC). The aim is to ensure sourcing from suppliers who use responsible forestry management practices. Many of our packages, such as Tropicana's cartons, are SFI certified.
• North America Snacks & Beverages: PepsiCo has increased selection of suppliers certified in credible resource conservation initiatives (e.g., Sustainable Forestry Initiatives and Energy Star). This results in significant amounts of recycled materials within our paperboard and corrugated materials and drives continuous improvement.

PepsiCo is implementing programs globally to address the removal of heavy metals (lead and cadmium) from all applied ceramic labeling (ACL) ink formulations on decorated glass bottles.

• North America: Quaker Foods replaced PVC tamper bands with PLA/biodegradable shrink tamper bands for Quaker tubes. Naked Juice eliminated PVC shrink labels, removing over 100,000 kilograms of PVC from the supply chain. Tropicana eliminated white colorant on 10 oz. PET bottles, eliminating over 13,000 kilograms of colorant and significantly improving the recyclability of nearly 500,000 kilograms of PET.
• Americas: In Brazil, we eliminated PVC in all products and promotional items.

Having a strong understanding of our packaging footprint allows PepsiCo to evaluate and drive sustainable packaging improvements, such as increasing the use of recyclable materials. Over 95% of our packaging can be recycled. However, PepsiCo recognizes the need to support increased recycling rates and works with consumers and other organizations to help get these materials back into a viable recycling stream.

The data provided is global and represents packaging where PepsiCo is directly involved in acquisition of materials, whether for company-owned operations or strategic bottlers.

In the United States, Frito-Lay sends nearly 7 million kilograms of potato and corn solids (potato pulp and peelings, cracked corn, and corn husks) to America's livestock and dairy farms, where it is used for feed. Chips that do not meet Frito-Lay's strict quality control standards and chips not sold in stores by the guaranteed fresh date can be used by livestock feeders and pet food manufacturers as a feed supplement. This process diverts over 6 million kilograms of unusable snacks that otherwise might have been sent to landfill.

Tropicana minimizes landfill waste by using virtually every part of the orange, as well as its by-products after the juice is extracted. The by-products become scent extracts and animal feed. Quaker optimizes the use of all oat hull by-products. Quaker delivers oat hulls to local animal feed markets and a nearby university that utilizes oat hulls for the generation of power.

PepsiCo India continues to strengthen its solid waste management initiatives in partnership with Exnora, an environmental NGO. This award-winning, income-generating partnership currently impacts more than 100,000 people in Tamil Nadu, Andhra Pradesh, and Haryana and reached out to more than 200,000 people in 2008. In partnership with the government, NGOs and community members, PepsiCo India continues to implement waste management projects in various districts in the country. The program has been recognized as a model project by UNICEF.

PepsiCo teams with leading organizations to advance our understanding of environmental issues and to work together to promote sustainable packaging and recycling practices.

PepsiCo has taken an industry leadership position in packaging. Significant programs include:

• Sustainable Packaging Coalition: PepsiCo is a member of the executive committee for this industry-leading organization that provides life-cycle analysis and design guidelines for sustainable packaging.
• Grocery Manufacturers Association/Food Products Association (GMA/FPA): PepsiCo plays a leadership role in the industry development of common reporting protocols and procedures for reporting packaging improvements. These procedures aim to create an industry-wide public reporting process for consumers, investors, and other stakeholders to understand packaging and environmental improvements in a consistent and transparent manner.
• The European Organization for Packaging and the Environment (EUROPEN): PepsiCo U.K./Europe is a key member of EUROPEN, a packaging supply chain body that champions packaging and the environment, with representation at board level.
• Our Australian business unit has been a signatory member to the National Packaging Covenant, whose charter is to focus on reduction of waste to landfill through reuse, recycling, or reduction through product redesign. These efforts have been formally monitored and reported since 2001.
• In early 2008, YHS Singapore, a Pepsi-Cola bottler, was a signatory with Singapore's National Environment Agency Agreement on packaging to reduce, recycle and reuse on packaging.

American Beverage Association
PepsiCo and the American Beverage Association are founding members of the National Recycling Partnership, a national nonprofit organization dedicated to the advancement and improvement of recycling. Its more than 4,000 members include consumer product companies, manufacturers that use recycled content in their products, recycling processors, government regulators, and recycling advocates.

Keep America Beautiful
PepsiCo has also supported Keep America Beautiful's (KAB) Great American Cleanup, the nation's largest annual community improvement program. In 2008, Aquafina teamed up with Sam's Club to encourage recycling with the Return the Warmth program. Return the Warmth challenged local communities and schools to recycle 80 million plastic (PET) bottles during the 2008 Great American Cleanup, which took place nationwide from March 1 through May 31. The actual results, 189 million recycled bottles, far exceeded that goal. A total of 25,000 fleece jackets made from recycled plastic bottle material were distributed to the 100 schools that collected the most bottles.

 More information about our recycling efforts in North America

Ciudad Saludable and the Multilateral Investment Fund
Ciudad Saludable and the Multilateral Investment Fund (MIF), with the support of PepsiCo Beverages Latin America and the Asociación Atocongo of Cementos Lima, announced a partnership program: Developing the Market for Comprehensive Recycling Management.

The program is aimed at supporting 300 professional recyclers in four Peruvian districts: Villa El Salvador, San Juan de Miraflores, Villa María del Triunfo, and Callao. The primary objective is to improve economic opportunities and quality of work for the recyclers. The program will provide stability to local recyclers and strengthen their professional organizations, as well as improve the capabilities of micro and small enterprises that provide recycling services for large corporations and municipalities. PepsiCo Beverages Latin America's contribution will help to train recyclers, strengthen recyclers' professional organizations, and provide micro-credits that will be awarded to recycling micro enterprises.

As a food and beverage company, agriculture is perhaps the largest element of our eco-footprint, so we work hard to continually improve our agricultural processes.

This year, we developed and published our Global Sustainable Agriculture Policy, which demonstrates our approach to sustainable development across our entire agriculture supply chain, including water savings, waste reuse, soil protection and chemical use.

Our Policy addresses six broad objectives within the agriculture supply chain:

• Water Management
• Soil Conservation and Preservation
• Agrochemical Management
• Energy Management
• Farm Economics and Land Management
• Social and Community Improvement

To support the implementation of the Policy, we established a PepsiCo-wide governance structure called the Sustainable Agriculture Council (SAg Council). This council is staffed by agro-scientists, engineers and sustainability professionals from across all of our PepsiCo businesses. The purpose of the SAg Council is to provide leadership and subject matter expertise within and across PepsiCo's Global Operations to assure:

• A strategic global sustainable agriculture vision for PepsiCo
• Uniform, accurate, and system-wide metrics, standards, and practices in accordance with PepsiCo's SAg policy
• Development of long- and short-term global SAg goals
• Accurate messaging to internal and external stakeholders
• Development and maintenance of strategic partnerships with suppliers, advisory board members and external SAg organizations
• A reduction in the environmental and social impacts of agricultural operations that support our business

In addition to the agriculture policies, the PepsiCo Worldwide Code of Conduct and Supplier Code of Conduct include standards highlighting how we expect our people and our suppliers to conduct business aligned with our environmental sustainability values.

 Download our Sustainable Agriculture Policy

PepsiCo has implemented numerous strategies at the regional and brand levels to support and drive our agricultural and environmental policies; several more are highlighted below as they relate to each of the six objectives:

1. WATER MANAGEMENT: PepsiCo aims to optimize the applied water footprint to crops and to reduce water waste during irrigation, as well as responsibly manage runoff risks of pollution or contamination of ground or surface water with pesticides, nutrients or soil.
   • In China, PepsiCo invested in a potato farm in the inner Mongolian desert. We installed the necessary infrastructure (roads, electric supply), water-conserving pivot irrigators, and soil-conserving crops (sea willows, trees) to protect from erosion due to sandstorms. By partnering with the local farmers, we established a rotation of commercially viable crops (winter wheat, potato, sorghum, and corn) with an initial water savings of 50% by moving from traditional flood irrigation to pivot. We are continuing this evolution from pivot to drip irrigation with the aim of conserving 70% of the water needed over traditional farming methods--the equivalent of avoiding additional water consumption of nearly 0.25 billion liters per year for the operation. A critical component of the community engagement portion of this project--besides the farmer interest--is the installation of local libraries to promote literacy and education in the communities.
2. SOIL CONSERVATION AND PRESERVATION: PepsiCo aims to preserve and improve soil fertility and nutrients, minimize soil loss through erosion, and avoid soil damage due to disease and contamination.
   • Frito-Lay North America has developed and implemented protocols to wash potatoes at the farm to reduce/eliminate the residual soil shipped to our plants, thereby allowing this soil to be redistributed at the farm rather than disposed of through the plants' waste water discharge, and also reducing diesel fuel requirements.
   • In China, through various collaborations, our foods team is successfully growing potatoes under desert conditions. PepsiCo installed the infrastructure needed for transportation, planted erosion-protective crops, and replaced the traditional practice of flood irrigation with water-sparing pivots. By utilizing in-plant conservation approaches, coupled with the installation of pivot irrigation systems, in 2006 our China team saved over a billion liters of water compared to the prior year. The China team is also evolving further from pivot to drip irrigation in 2008, with the aim of reaching 70 % water conservation for these systems. As part of this collaborative effort with the communities, our local business is also building libraries for local children to improve their education and literacy.
     
     
     

     Learn More About PepsiCo China's Commitment to Performance with Purpose

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   • In Brazil, a soil conservation initiative for potatoes has been ongoing and involves minimal soil preparation to reduce soil degradation, along with a fuel consumption analysis to decrease fuel use by reducing tractor use and machinery size. Sustainability benefits: reduced soil erosion, water use, and diesel consumption, along with reduced potato losses due to soilborne diseases, resulting in a 5% water reduction and 20% savings on irrigation costs.
3. AGROCHEMICAL MANAGEMENT: PepsiCo aims to reduce the use of pesticides, nutrients, and other agrochemicals by optimizing agricultural operations. PepsiCo supports sustainable practices that substitute natural controls for agrochemicals, foster ecosystem balance, reduce direct and indirect greenhouse gas emissions, and reduce crop losses.
   • Frito-Lay North America initiated an organic line of snacks including Tostitos Organic Blue Corn Tortilla Chips, Cheetos Natural White Cheddar Puffs, and Lay's Natural Country BBQ Potato Chips. The company will follow the U.S. Department of Agriculture's standards in labeling organic products.
   • Frito-Lay has also developed potato varieties that store longer and are resistant to disease and better adapted to adverse climatic conditions, allowing Frito-Lay North America to grow its potatoes in the most efficient agronomic areas in the U.S. This results in higher production per acre, which minimizes the use of all farm inputs, including energy, water, fertilizer, pesticides and herbicides.
   • In Saudi Arabia and Egypt, climate and soil moisture measurement and recording systems were implemented to potato crop fields to forecast blight disease, with a view toward more optimized use of chemicals. This has resulted in fewer chemicals being used and greater disease control. These systems are now also installed in Pakistan.
4. ENERGY MANAGEMENT: PepsiCo aims to optimize the use of energy in crop production and management of agricultural waste to improve economics for the farm and reduce both direct and indirect greenhouse gas emissions.
   • Quaker supplies over 200 million pounds of oat hulls as raw material ingredients and as a renewable source of fuel for the generation of steam at the University of Iowa. One hundred percent of the oat hulls are utilized as either a raw material or fuel source, reducing dependence on less renewable sources of fuel. Generation of steam through use of oat hulls as fuel source reduces dependence and use of non-renewable fuel sources.
5. FARM ECONOMICS AND LAND MANAGEMENT: PepsiCo supports sustainable agriculture practices that enable farmers to improve product value by maximizing the desired outputs of an agricultural system while minimizing the required inputs and avoiding any negative impacts to the farm and surrounding environment. PepsiCo works with farmers who develop long-term economic plans of efficient and responsible farm production.
   • Frito-Lay North America practices optimal crop rotation policies that result in improved soil fertility. Frito-Lay continuously develops new growing areas closer to their manufacturing plants, reducing the diesel fuel used to transport inbound potatoes. They also share agricultural best practices with all of their corn and potato growers. The practices include crop rotation, low- and no-till soil preparation, cover crops, and irrigation using efficient pivots.
   • Quaker has been a leader for decades in the oat industry, developing new oat varieties that deliver increased field yields and improved disease resistance. Improving field performance through new oat varieties reduces producer inputs of fertilizers, fungicides, and herbicides. Quaker encourages the use of low-till practices on oats that conserve both water and fuel.
   • Tropicana utilizes virtually every part of the orange, including the peels, which are sold as cattle feed. Before the peel is dried into cattle feed, Tropicana extracts valuable oils, essences, and biodegradable solvents.
6. SOCIAL AND COMMUNITY IMPROVEMENT: PepsiCo invests in new knowledge and innovation in farming practices, which can improve both social and human capital of the local economies. Sustainable agriculture practices can help to make the best use of local and available resources to improve the welfare of communities supporting our agriculture supply chain.

   In Mexico, our snack food business Sabritas actively participates in a program that contributes to the overall development of low-income farming families in corn-producing communities. In partnership with the Mexican Foundation for Rural Development (FUNDAR), Sabritas contributes to technical and business training for farmers, transfers relevant technology to the communities and initiates farming contracts. Sabritas and FUNDAR intend to incrementally bring about profound cultural change in these communities that will lead to the creation of small, sustainable agribusinesses.

   At the onset, the program began in the state of Jalisco, located near Sabritas' facility in Guadalajara, and now spans six municipalities in Mexico. Sabritas pledged 9.1 million pesos to fund several initiatives, including:

   • The organization of corn producers to use their collective bargaining power to better negotiate competitive contract prices for corn crops
   • The launch of a social education program focused on training farmers
   • The purchase of contracts with corn producers
   • The increased use of technology to produce higher yields.

   Sabritas' participation to date has helped more than 300 low-income corn producers receive funding, technical support and training, which has resulted in an estimated 9,300 tons of corn production across 2,000 hectares. The three-year program is expected to provide farmers with resources for a 300% increase in income, an 80% improvement in land productivity, and 37,000 hours of education.

   Throughout the program, Sabritas works toward an improved understanding of the farmers' needs to become independent business partners. The program also benefits our business. Strengthening the capabilities of our suppliers located near our manufacturing facilities means saving warehouse and transportation costs as well. We know that engagement with rural farming communities and private-public partners is integral to delivering the positive social, environmental and economic impacts of this program.

   By contributing to the overall development of low-income farming communities, Sabritas is helping reduce poverty while improving productivity, profitability, and sustainability of small-scale farming.

Watch how Sabritas is Supporting farmers in Mexico

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PepsiCo currently uses palm oil in some of our products around the world. We are making efforts in a number of regions to convert to oils that are lower in saturated fat. These are steps in the right direction to continue to make our product offerings healthier. However, in some parts of the world, supply is largely limited to palm oil, which is the world's predominant cooking oil. When we purchase palm oil, we seek supply partners who operate responsibly and in a sustainable manner. PepsiCo is joining the Roundtable for Sustainable Palm Oil (RSPO) to help bring about a greater supply of sustainable palm oil.

• Cargill, our largest supplier of palm oil, is a founding member of the RSPO, and has recently announced that one of their plantations has been certified by the RSPO.
• In the U.K., our Walkers business switched from palm oil to 100% high oleic sunflower oil (Sunseed) to make their famous crisps.
• Frito-Lay North America moved out of palm oils as its primary cooking oil in the 1980s. As of 2005, Frito-Lay North America primarily uses corn and sunflower oils, as they are among oils lower in saturated fat, and do not contain trans fats.

We are working every day within the PepsiCo system to operate in a more sustainable fashion. In particular, we are focusing on reducing our environmental footprint--including energy, water, and packaging. As a customer, we seek supply partners who will take responsible actions to address these issues. The production of palm oil involves a wide variety of constituents, ranging from small independent growers to large multinational suppliers; thus, it will take the efforts of consumers, NGOs, governments and groups like tThe RSPO to effect meaningful changes.

Agriculture is one of the leading causes of biodiversity loss, and it is in our interest to make sure that our supply chains are environmentally sustainable. As the climate changes, food and water supplies will be increasingly vulnerable and prone to disruption. We can minimize these risks by helping to promote healthy ecosystems and sustainable agriculture at the origins of our supply chains.

PepsiCo believes that protecting and enhancing biodiversity is vital to the sustainability of our planet and ecosystems, and we have begun to explore improvements we can make with pilot projects in key places like India and China. In the coming years, we have an opportunity to take a leadership position in our industry by scaling up this work and becoming a force for biodiversity conservation across all of the regions where we operate. We will accomplish this by:

• Investing directly in the conservation of key landscapes and marine areas.
• Continuing the development of clearer environmental standards, metrics, and scorecards in our supply chains.
• Engaging our consumers and employees by helping them to understand the nature of the biodiversity problem and how they can make a difference by consuming responsibly and supporting conservation themselves.

In addition to these initiatives, PepsiCo developed enterprise-wide responsible standards for effluent to protect ecosystems into which we discharge effluent from our manufacturing locations.