Forward-looking Metrics Needed to Minimise Plastics Risks

CDP disclosure expansion aims to provide more visibility on plastics for investors. 

Investors are being left in the dark about the plastics risks in their portfolios by companies which typically have limited knowledge of their own exposures. Improved visibility of the role of plastics in business processes and supply chains will help, according to environmental disclosure platform CDP, but forward-looking metrics will also be needed to guide future investments.  

“Many companies still have a limited understanding, and disclosure, of how they contribute to plastic pollution and their exposure to commercial, legal, and reputational risks linked to plastic pollution,” Cate Lamb, CDP’s Global Director for Water Security, told ESG Investor. 

“As a result, decision-makers – including investors – lack clear, comprehensive and comparable data on the production, use and disposal of plastics across the global economy, as well as forward-looking indicators that tell them whether or not a company is likely to increase its dependence on plastics in the future.” 

This week, a group of lawyers and NGOs sent formal notice letters to nine French food and beverage companies, challenging them to identify and mitigate plastic pollution within their business operations within the next three months, or risk legal action.  

They noted that France’s ‘Duty of Vigilance’ law requires companies to assess and mitigate the impacts their business operations have on the environment and human rights through published ‘vigilance plans’. However, the plans published by these companies have “incomplete or unsatisfactory measures on plastic”, the group said. 

CDP has expanded its corporate disclosure system to provide investors with access to data across the full plastic value chain, including how plastic is produced, used and disposed of. 

Eighty-eight percent of companies responding to a CDP consultation earlier this year said that plastic is a relevant environmental issue, but 32.5% said they have not yet set any plastic-related targets. However, if companies don’t take action to reduce single-use plastic production, it is estimated to account for 5-10% of global emissions by 2050. 

With support from The Pew Charitable Trusts, Minderoo Foundation and the Ellen MacArthur Foundation, CDP is now in the process of finalising new plastic-related questions to be included in its disclosure requirements from next year.  

Although subject to change, Lamb said it is likely CDP will ask companies to disclose whether they have mapped their exposure to plastics across their supply chain, identified the impacts of their plastic production and usage on the environment and society, measured their exposure to plastics-related risks, and set plastic-related targets. The latter could include a commitment to reducing and eliminating fossil-based content in the plastics the business produces or uses. 

These plastic-related disclosures will also be informed by existing frameworks, such as the New Plastics Economy Global Commitment, which was first launched in 2018 by the Ellen MacArthur Foundation and UN Environment Programme. 

“Forward looking indicators are critical: CDP will also develop a series of forward-looking indicators that will help the market identify where such risks exist and provide an opportunity to pivot to more sustainable methods, products and processes,” Lamb added.  

Slow to act 

If investee companies fail to address plastic pollution, then investors are exposed to financial and reputational risks as the environmental impacts spur responses by policymakers and consumers. 

A report published by think tank Planet Tracker noted that €678 billion of investor capital is at risk because of the European plastic industry’s current business model. Eighty-seven companies are responsible for 75% of plastic production across the EU, the report said, and they are being financed by 40 banks, brokers, insurers and investment managers.  

Planet Tracker has also previously called out the Alliance to End Plastic Waste (AEPW), arguing that it has “undermined” its own objectives to end plastic waste.  

Its analysis noted that, in the first three years of the alliance’s five-year target, AEPW achieved 0.04% of its goal to divert and recycle nine million tonnes of plastic. Further, 68% of its founding members – including Chevron Phillips and TotalEnergies – are members of the American Chemistry Council (ACC), which campaigned against a US tax on plastics and opposes the Break Free from Plastics Pollution Act.  

Planet Tracker has recommended that AEPW sets meaningful targets for the removal and recovery of plastic waste, as well as additional targets for investment levels for members which will support “meaningful plastic waste solutions, rather than diverting cashflow to continued facility expansion”.

Last week, 85 global businesses, financial institutions and NGOs announced plans to launch a Business Coalition for a Global Plastics Treaty. It aims to accelerate progress towards a circular economy and end plastic pollution by developing policy recommendations, engaging with treaty negotiators, and build confidence in the business community on the benefits of an ambitious global plastics treaty. 

“We know that investors want information [on companies’ exposure to and mitigation of plastic pollution]. We advise companies to learn, quickly,” Lamb said. 

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