It can take a lot of water [PDF] to grow potatoes, as much as 396 gallons to grow about 2.2 pounds. Purchase, N.Y.-based PepsiCo uses a lot of potatoes for its Frito-Lay Snacks. It also grows a lot of oats for its Quaker Food products and fruits and vegetables for its Tropicana and other juice brands.

And the company does a lot of its growing in China, where today it announced that it had signed a Memorandum of Understanding with the country's Ministry of Agriculture to promote sustainable agriculture projects and accelerate the development of the Chinese countryside. The move marks Pepsi's latest initiative in its ongoing efforts to shrink its global impacts, especially around water use.

Under the new agreement, PepsiCo says it will build and operate demonstration farms using "the most advanced irrigation, fertilization and crop management techniques," in partnership with the Chinese government. They will also collaborate to promote best practices across China's farming system to improve yields, increase income levels and raise living standards for farmers throughout the country, the company said in a statement.

PepsiCo's move could have a significant impact: Every year it grows and uses more than four million tons of potatoes, 600,000 tons of oats and three million tons of oranges and other fruits and vegetables, it says. In addition to employing more than 20,000 people in China, Pepsi also did $6.6 billion in sales in the Asia, Middle East and Africa combined markets, according to the company's 2010 Annual Report.

Although the two parties just signed the MOU, PepsiCo has been working since 2008 to make its agricultural and other operations in China more sustainable. [PDF], the company says. Since 2008, it's spent $3.5 billion in China, and claims more than $31 million of investment in local agricultural development alone.

Water use is one of the company's main targets for increased efficiency. Earlier this year PepsiCo pledged to work with farmers around the world to reduce the water impact of crops by 50 percent by 2016 and improve water use efficiency by 20 percent per unit of production by 2015 compared to 2006.

Part of its efforts to achieve these goals in China include switching from flood irrigation to drip and pivot irrigation. These technologies have the potential to cut water use by as much as 50 percent, according to PepsiCo China's Sustainability Report 2011.

Increasing crop yield while reducing water use is another goal in China. Part of the $31 million it poured into Chinese agriculture went to a demonstration farm in Inner Mongolia. Using "advanced irrigation technologies," the desert area was turned into "fertile potato farmland," according to PepsiCo.

PepsiCo's Chinese-water management activities are not limited to its farming operations. Wastewater from a number of its bottling plants is treated and re-used for landscaping and road cleaning and all its new Chinese plants are expected to meet LEED specifications. These measures and improvements in bottling and packaging operations contributed to 15.6 million tons of water and more than 600 million kwh of energy saved over five years, the company reported.

PepsiCo already has a track record of successful water-use reduction initiatives around the world. In India it helped develop a direct-seeding technology for rice that reduces the water needed to grow a crop by about 30 percent. The effort saved about 1.4 billion gallons of water by 2009.

PepsiCo isn't the only multi-national company with sustainable ag goals in China. Last year Walmart announced that it would aim to reduce produce waste by 15 percent by the end of 2015. In addition, it will require sustainably sourced palm oil in its private brand products, and 15 percent of the company's Direct Farm products will be upgraded from Green to Organic certified by the end of 2015.