Drive supplier action on thermal decarbonization

PepsiCo aims to accelerate and support thermal decarbonization in their supply chain given the significant portion of their overall emissions that supplier thermal energy use represents [1]. Value chain engagement is therefore an integral part of PepsiCo’s decarbonization effort.

At the same time, PepsiCo’s suppliers, co-manufacturers and franchise bottlers are all facing challenges and complexities to advancing thermal decarbonization similar to what PepsiCo is facing in their own operations. These include cost, feasibility, local market dynamics, space considerations and more.

Despite these challenges, the scope of available solutions in this space is limited:

• There are no “off the shelf” education materials or thought leadership that are adequate for the needs of the industry

• Most companies, including PepsiCo, have not yet identified suitable solutions for all their challenges

• Openly communicating and sharing with peers and value chain partners (VCPs) about common challenges and solutions is still a relatively rare practice within the food & beverages industry, and consumer goods more generally

• Solutions have regional specificities

PepsiCo recognized the opportunity to help change this, spurred on by the fact that one of the top asks that PepsiCo’s suppliers voiced during the 2024 PepsiCo Supplier summit was continued support to facilitate the ecosystem necessary for the energy transition.

PepsiCo’s Clean Heat Community brings together high-emitting suppliers in Europe and North America to accelerate thermal decarbonization. Through expert-led workshops on specific thermal decarbonization levers, the program aims to foster peer collaboration and provide access to the latest know-how as well as industry-leading solution providers, and funding opportunities. In this way, the program aims to help suppliers learn, connect, and accelerate action on thermal decarbonization in a pre-competitive environment.

Figure 1: Objectives of the clean heat community program

Supplier selection

PepsiCo has identified their highest-emitting direct suppliers within the target geographies (Europe and North America) through a 2-step process. The first step was to identify the highest-emitting supplier categories (e.g., corrugate, oils, etc.). Then, top emitting suppliers were identified within those categories, and any additional strategic suppliers were added to the list where necessary.

Key internal functions such as procurement validated this supplier list, and suppliers were invited to the pilot cohorts, with no obligation to join. The intent and content of the program was presented to suppliers in a “teaser meeting” before they made their decision on whether to join the cohorts or not.

Over 80% of invited suppliers chose to join the program, representing 36 suppliers across the two cohorts (as of October 2025).

Program structure and content

The program is centered around 4 virtual workshops for each cohort (8 workshops in total) and one in-person event, each bearing on a specific sub-topic within thermal decarbonization. The workshop topics are common across the European and the North American cohort, but the content is tailored to each region.

The workshop topics retained for this program are:

1. Energy efficiency

2. Biomethane sourcing

3. Electrification

4. Enablers, including: as a service vs. capital models, public funding opportunities, business case solutions

Figure 2: Program structure - The program is structured around 4 virtual workshops, each bearing on a specific sub-topic within thermal decarbonization

Each workshop’s agenda has been drafted with the input from the experts within the project team as well as PepsiCo’s Scope 1 team. As the above example illustrates, each workshop draws on a mixture of different “voices” within the thermal decarbonization space including solution providers, knowledge partners, and Clean Heat Community members.

It is ensured that every workshop remains a pre-competitive environment, and an antitrust/competition law statement is read at the start of every meeting.

Figure 3: Example of workshop agenda

Sustainability impact

Climate

The initiative addresses emissions from supplier operations and manufacturing processes, which represent a substantial part of PepsiCo’s E&I emissions. Scope 2 emissions have mostly already been addressed (see the ReNew program[1]), and this program addresses the next frontier – heat.

In turn, these emissions constitute Scope 3 emissions (Category 1 – Purchased Goods and Services) of PepsiCo and peers with similar supplier base.

The expected impact includes significant reductions in supplier thermal emissions through adoption of cleaner technologies and practices.

The Clean Heat Community program is expected to achieve this impact by equipping its members with the tools and resources necessary to accelerate their thermal decarbonization efforts, including:

• Introducing members to new / emerging technologies or innovative ways to implement existing technologies – equipping participants with the technical knowledge to accelerate their thermal decarbonization

• Linking members with solution providers – removing the need for extensive partner research & comparison and thereby enabling faster action

• Providing support and resources to identify possible sources of funding – a key business case enabler to bolster the viability of thermal decarbonization projects

• Providing business case help through case studies and expert insights – enabling members to accelerate the speed of adoption of thermal decarbonization technologies

Nature

By enabling member companies to reduce their reliance on fossil fuels, the initiative helps mitigate negative impacts on ecosystems and biodiversity associated with thermal energy production and use.

Social

Collaboration and transparency among members are at the heart of the Clean Heat Community initiative. This promotes shared learning and equitable access to decarbonization resources. It also supports long-term sustainability goals that benefit communities.

Business impact

Benefits

Benefit to PepsiCo (founding company)

Beyond sustainability, the Clean Heat Community of Practice (CoP) initiative delivers strategic business value by strengthening supplier relationships and reinforcing PepsiCo’s position as a climate leader. By proactively investing in supplier capability-building, PepsiCo positions itself as the customer of choice—the first go-to partner for suppliers seeking to propose climate solutions. This leadership fosters trust and collaboration, encouraging suppliers to engage more openly and actively in joint sustainability efforts.

The initiative also supports progress against PepsiCo’s decarbonization goals by creating a feedback loop for learning and innovation. Insights gained from supplier workshops and peer exchanges contribute directly to PepsiCo’s own Scope 1 journey, helping internal teams identify scalable solutions and synergies. Additionally, the Clean Heat Community enables PepsiCo to identify cost-saving opportunities, such as shared infrastructure, funding mechanisms, and collaborative procurement strategies, which can reduce implementation costs and accelerate emissions reductions across the value chain.

By aligning supplier support with their sustainability asks—such as decarbonization roadmaps—PepsiCo demonstrates a balanced approach of “we ask and we support”, reinforcing their partnership-driven climate action efforts.

Potential Benefits to peers

In the future, the Clean Heat Community could expand to encompass PepsiCo peer companies, especially those that share similar supply chains and decarbonization challenges, and respective additional suppliers. In this way, peer companies could benefit from the program by gaining access to shared learnings that they could apply to their own Scope 1 efforts, as well as benefit from the collective action across overlapping suppliers, hence accelerating their Scope 3 decarbonization. More generally, peers and additional suppliers joining into the program would ultimately benefit the entire industry by helping to accelerate progress, reduce duplication of effort, and unlock cost efficiencies through coordinated support and engagement.

Value proposition to suppliers

The value to suppliers is threefold: to learn, to connect, and to act.

The aim of this community of practice is for every member to learn something new, however advanced they are in their thermal decarbonization journey. For some members, that may mean learning about the latest cutting-edge thermal decarbonization solutions, while others may be more interested in best practices from and beyond their industry or even creative business case inspiration to maximize affordability. The Clean Heat Community brings together all these different types of content into one program.

But the Clean Heat Community goes beyond providing a series of lectures to its members. Instead, the aim is to build a true community where members can contribute to and benefit from exchanges of information in equal parts. One of the specificities of the Clean Heat Community, which makes it a first-of-its-kind effort in the industry, is that it gives engineers and Scope 1 experts the opportunity to connect with peers and with leading experts on thermal solutions in a pre-competitive environment. It also provides members access to a curated network of knowledge partners, solution providers, energy suppliers, and policy makers.

Finally, the Clean Heat Community strives to serve as a catalyst for action, equipping members to find synergies with non-traditional peers and other players to accelerate action and increase the affordability of solutions, as well as get help identifying relevant funding opportunities.

Costs

Membership for supplier members is completely free.

The costs associated with setting up an initiative like the Clean Heat Community are mainly associated with the need to allocate at least 1 resource to the management of the community full-time (including suppliers selection, drafting workshop content along with external contributors, driving engagement), as well as whether the founding company chooses to use external help (e.g. consultants and external legal advisors), and the organization of any physical touchpoints. The final cost will depend on the local cost of such resources in the location of launch and vary greatly based on this.

Key factors that would influence the cost of a similar program include:

• Whether the program is run 100% online or if physical meetings are built in, and how many there are

• Whether the program is founded in conjunction with consultants or other solution providers that would require payment on a project basis or retainer

• The size, scale and number of the cohorts, and scope of the program, which in turn dictates the number of full time employees required to dedicate to the project

Typical business profile

Companies operating in industries where similar programs do not yet exist can explore the possibility of launching an initiative similar to the Clean Heat Community. Companies seeking to launch such an initiative should first conduct some research to establish whether any similar programs already exist within their own value chain (among peers, suppliers, etc.), and if the answer is yes, they can join or build on the existing programs rather than seeking to create a new one. The main reason for this prerogative is that the first aim of these initiatives is to foster cross-industry collaboration and open sharing of best practices and common pitfalls across an industry so that others in that industry and its value chain can benefit from this knowledge. A multiplication of similar workstreams would likely undermine this goal. Another reason is that value chain partner’s time is very limited, and they must carefully choose where to allocate that time. A value chain partner will therefore be less likely to join a new program that replicates an initiative that they are already part of and only choose to be part of one, which would again undermine the goal of building a unique platform for best practice sharing.

If no similar programs exist within a company’s industry or adjacent industries, this type of initiative is relevant to any business that interacts with several partners in their value chain.

It is most appropriate for companies that have already engaged in their decarbonization journey, which have identified key challenges within their industry as well as some best practices that could be shared across the industry. Such an initiative will be best received by value chain partners that have also already embarked to some extent on their decarbonization journey and that have identified key challenges where they would like help to accelerate.

Approach

The specific initiative described in this case study was designed to tackle Scope 1 emissions of the founding company’s upstream supply chain (top-emitting suppliers)

However, a similar community of practice could be put in place to enable progress or acceleration in different areas as well, e.g. downstream supply chain, or to tackle entirely different sustainability challenges, e.g., packaging circularity.

Below is a brief step-by-step overview of the project implementation:

1. Define the scope of the pilot program.

   1. Geographical focus: it is best to focus on regions where the program will be most actionable, e.g., with viable technical solutions and a favorable policy environment.

   2. Value chain portion focus: Focus on the portion of the value chain with the highest emissions (in this case, thermal), prioritizing value chain partners who are both high emitters and open to collaboration.

2. Secure leadership buy-in and funding at the relevant level (global, regional, local) depending on the focus of the program, and align with cross-functional stakeholders, e.g., procurement

3. Cohort selection and segmentation: Identify key supply categories with significant thermal energy footprints. PepsiCo identified top-emitting supply categories and top-emitting suppliers as well as strategic suppliers within those categories. The selected suppliers were then invited to join the program as pilot cohort members.

4. Establish rules and ensure the cohorts are aware of them, e.g., antitrust guardrails and related statements

5. Workshop design: Conduct a short survey or consultation with suppliers and internal experts to understand their needs and challenges. Use this input to shape workshop topics that are both technically relevant and business oriented.

6. Establish feedback loop: Continuously solicit feedback from members to continue improving on the program.

7. Build community: use engagement tools such as virtual collaboration platforms to accelerate knowledge-sharing and enable members to contribute freely to the conversation.

Stakeholders involved

Project leads: Sustainability manager(s) / senior manager(s) x2-3

Company functions: sustainability (Scope 3 and Scope 1), procurement

Main providers: Consultants: experts in the subject matter and in cross-industry collaboration

Other: participating members (i.e., value chain partners)

Project team

PepsiCo has teamed up with third parties who are experts in this field – SupplierLOCT, the Renewable Thermal Collaborative (RTC), and Oliver Hurrey. SupplierLOCT (Leadership on Climate Transition) is a collaborative initiative designed to help companies reduce greenhouse gas (GHG) emissions across their supply chains and is managed by Guidehouse. RTC are leaders in thermal decarbonization communities and have an extensive network with renewable energy expertise. Oliver Hurrey is the founder of the Scope 3 peer group and has extensive experience in facilitating cross-industry forums to foster pre-competitive collaboration.

Key parameters to consider

Key parameters to consider include:

• Whether any programs with similar vocation exist in the industry or adjacent industry – could these be expanded or built upon rather than attempting to replicate them?

• Which partners might benefit from a program like this?

• On which topics?

• Any other founding members (e.g., peers, solution providers) that could co-found the program?

Implementation and Operation tips

One challenge in setting up a community of practice with different founding members is determining IP rights over the different outputs of the program across several founding members, especially when these are of a different nature (e.g., FMCG vs. consultant vs. solution provider, etc.). One solution can be to carefully define the different outputs /deliverables of the program, their potential use cases and proposed IP rights.

Another challenge that has surfaced in the Clean Heat Community is that some members showed some reticence to sharing their decarbonization journey given that some of their direct competitors are also members. These challenges can be mitigated by continuing to reiterate Chatham House Rules at every touchpoint and in every deliverable and reminding members what type of information can and what type cannot be shared under antitrust and/or competition law. Organizers should also clearly state that they should and will intervene should they realize or suspect that any undue information is being shared. One-on-one conversations can also help. These allow members to identify which parts of their experience are most useful to others and decide whether they feel comfortable sharing selected parts of it

A third challenge is that depending on the different members’ own interests, other commitments, workload and even communication style, disparate levels of engagement may be observed across members. One way to rebalance levels of engagement among members is to proactively identify and engage those members that demonstrate low engagement but are known to be valuable and informally ask them to commit to sharing their experiences in the different touchpoints.