Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner. Facebook Messenger An icon of the facebook messenger app logo. Facebook An icon of a facebook f logo. Facebook Messenger An icon of the Twitter app logo. LinkedIn An icon of the LinkedIn logo. WhatsApp Messenger An icon of the Whatsapp messenger app logo. Email An icon of an mail envelope. Copy link A decentered black square over a white square.

Is PepsiCo exposed to $4.4bn in climate risk?

© Shutterstock / 8ED8Post Thumbnail

Financial think tank Planet Tracker has done an analysis of PepsiCo’s (NASDAQ: PEP) public statements, warning that, on its current emissions trajectory, the company could be exposed to $4.4 billion of climate-related risk each year by the end of the decade.

  • According to the research, PepsiCo is exposed to a potential financial risk of $4.4 billion per year, by the end of the decade, or 42% of its three-year annual operating profit.
  • Current emissions trajectory and sparse data reporting align the company with a 2°C warming scenario by 2030.
  • PepsiCo is on a path to miss crucial targets set by the Science-Based Targets initiative by 58%

Despite its membership of the CA100+, the food and beverage giant has failed to disclose the material financial impact associated with potential carbon pricing mechanisms (CPMs) linked to its Scope 3 emissions, despite these account for more than 90% of the company’s overall emissions by 2030.

The point of the analysis is to highlight what is being missed by the failure to disclose such risk. Potential CPMs could have a direct impact on the company’s operating profit over the next few years, and that risk has not been made clear to stakeholders.

The Climate Transition Analysis of PepsiCo is the fourth in a series examining the climate transition plans of the Consumer Goods companies in the Climate Action 100+ list. Planet Tracker’s research into PepsiCo follows analysis of rival Coca-Cola, whose emissions trajectory was also found to be at odds with a 1.5°C pathway.

PepsiCo on course to miss its emissions targets by nearly 60%

PlanetTracker’s report also reveals that unless future emissions are mitigated, PepsiCo will miss its Science-Based targets (SBTs) by 58%. Under the SBTs initiative’s framework, the company is committed to ambitious goals including reaching net zero by 2040, a decade before the Paris Agreement deadline, and aligning with a 1.5°C pathway by 2030.

Despite an STBi target, Pepsico absolute emissions continue to rise

The company’s greenhouse gas emissions, according to Planet Tracker’s research, grew historically (2019 to 2021) at an average annual rate of 7.2%, while the company’s revenue increased at a compound annual growth rate of 8. 8%.

Taking this efficiency improvement into consideration and assuming a long term revenue growth of 4.8%, Scope 1, 2 and 3 emissions would decline by 14% compared to their 2021 level, while the SBT recommends a 45% reduction versus the 2021 baseline. This implies that the company aligns with a 2°C pathway by 2030.

It’s important to note that to be in alignment with SBTi best practice, it is not enough to reduce emissions intensity (equivalent to increasing efficiency) but to deliver absolute emissions reduction.

Carbon pricing alone constitutes a significant risk

Ion Visinovschi, research analyst at Planet Tracker said:The potential climate-related financial risk PepsiCo is exposed to is too high to ignore. Expected CPMs could reduce its annual operating profit by 26% by the end of the decade, with an additional 16% reduction coming from Physical Risk.

“Investors and lenders should demand a credible Climate Transition Plan where the risk of its main source of emissions is publicly quantified and the expected mitigation quantities and required investment for the mitigation is fully disclosed.” 

PepsiCo seems to be missing an effective transition plan or roadmap

Despite its ambitions to reach net zero by 2040, PepsiCo lacks a Net Zero Roadmap and its disclosed investment only covers a quarter of the gap between its trend of emissions and the SBTs’ recommended level. This makes it unclear whether the company will achieve its targets on time.

PepsiCo launched Pep+ in October 2021 in order to ‘fundamentally change’ how it does business for the betterment of people and planet but without a clear company-wide plan it is unclear how this is to be achieved. There is no question that addressing Scope 3 emissions is a challenge and that there are trade-offs to be made in addressing carbon emissions, resource management and commodity sourcing but given that PepsiCo has ‘form’ with regard to greenwash, its imperative that the company is transparent to in how it is going to address the challenge of transformation.

It is not enough to make a commitment, it is necessary to have a plan.

More from SG Voice

Latest Posts