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The ESG Interview: Circular Argument

Juliette Goulet, Project Manager in the Global Commitment team at the Ellen MacArthur Foundation, explains why investors and policymakers must accelerate efforts against plastic pollution.

“Climate change and plastics exist in an interconnected parallel. They share a common carbon origin, and they contribute to each other.”

Despite this assessment from environmental NGO Client Earth, the urgency to manage plastic pollution was not reflected in content at last year’s COP26 summit.

Glasgow’s global gathering largely overlooked plastic’s contribution to climate change; a surprising omission given its production and incineration is on track to emit 2.8 gigatons of CO2e per year by 2050—as much as 615 coal plants—and burn through up to 13% of the ever-shrinking global 1.5C carbon budget.

Plastic pollution is, however, about to face significant scrutiny by the United Nations Environment Assembly (UNEA) which will meet next month to “take the first steps toward the creation of a landmark treaty to control plastic pollution worldwide”.

The Nairobi convention will see negotiators debate proposals for legally binding rules on the use and disposal of plastic to curb their relentless disposal into the ocean which UNEA says is feeding “a garbage patch that’s bigger than France”.

The UNEA’s attention on plastic could not come soon enough for one individual with extensive experience of the world’s oceans and the devastating consequence of plastic pollution on them.

Dame Ellen MacArthur, one of the UK’s most successful sailors, who navigated the world solo at age 24, saw first-hand the impact of plastic pollution. This eventually led her to abandon sailing in favour of raising awareness of marine protection through the Ellen MacArthur Foundation.

Circular economy

If UNEA attendees reach agreement, the treaty will supersede the Basel Convention which in 2019 regulated the movement of waste and committed countries limiting pollution.

A new treaty would go much further, banning certain products and forcing states to report on their contribution and management of plastic pollution.

Such an approach complements the Foundation’s Plastics Pact Network which brings together key stakeholders to implement solutions towards a circular economy for plastic, tailored to each geography.

The network includes national plastic pacts in the UK, France, Chile, the Netherlands, South Africa, Portugal, the US, Poland and Canada. Regional pacts include the European Plastics Pact and the Australia, New Zealand and Pacific Islands (ANZPAC) Plastics Pact.

Under the scheme, each country has a set of targets to eliminate problematic plastics and increase recycling, much of which can be realised through a move to a circular economy.

The foundation claims that migration to a circular economy by 2040 has the potential to reduce the annual volume of plastics entering the oceans by 80%; lower greenhouse gas emissions by 25%; generate savings of US$200 billion per year; and create 700,000 net additional jobs.

Juliette Goulet, Project Manager in the Foundation’s Global Commitment team, says it has made meaningful progress on pushing the plastic industry towards a circular economy.

Companies representing 20% of all plastic packaging produced globally – including L’Oréal, MARS, Nestlé, PepsiCo, Coca-Cola, Unilever and Walmart – are among 500 signatories of the foundation’s Global Commitment, signalling their backing for creation of circular economy for plastic.

Dirty thirty

However, the standard linear economy is still very much evident leaving investors exposed to climate change risk and the impact of ever-increasing regulation on companies designed to curb their polluting processes.

UK sustainability think-tank Planet Tracker has identified 30 companies that are the biggest contributors to plastic pollution. Known as the ‘Dirty Thirty’ these multinationals produced 58% of single-use plastic in 2019, and the top 10 – ExxonMobil, Dow, Indorama, Sinopec, LyondellBasell, PetroChina, Alpek, Aramco, Reliance and Braskem – were responsible for 39%.

Investors are heavily exposed to these companies, often largely through passively managed funds. Planet Tracker reports that the top 10 equity and top 10 fixed income investors own 76% and 43% of the Dirty Thirty’s equity and debt respectively. BlackRock, Vanguard and Capital Group are on both lists.

Goulet says investors must engage with these plastic polluting companies if they are to minimise the risk to their investments.

“It is really important to support these investors in their engagement on plastic. The UN Principles for Responsible Investment has been quite involved in helping investors take action by issuing a set of engagement guidelines,” she says.

And such engagements work.

This month, food and beverage behemoth Kraft Heinz agreed to reduce total virgin plastic in response to a shareholder proposal filed by As You Sow.

The proposal asked Kraft Heinz to report on its reduction of plastic packaging, including planned reduction strategies or goals, materials redesign, substitution, or reductions in use of virgin plastic.

The company intends to set a substantial virgin plastic packaging reduction goal later this year or by early 2023. In response, As You Sow agreed to withdraw its shareholder proposal.

An earlier, less successful resolution from As You Sow, demanding Amazon issue a report quantifying its use of single-use plastics, received support from 35.5% of the company’s shareholders. While this represented a defeat for the resolution, As You Sow described the level of support as a “win for the oceans”.

Taking responsibility

The current direction of regulatory travel supports the foundation’s goal to reduce plastic pollution and move to a circular economy.

This April the UK government will bring in a Plastic Packaging Tax that will apply to products manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic.

Meanwhile the EU’s Single Use Plastics Directive, introduced in 2019, outlaws certain products including cotton buds, straws and drinks stirrers. From 2024, lids must be ‘tethered’ to bottles and the vessels themselves must comprise 30% recycled material by 2030.

Importantly, the directive transfers accountability for plastic waste management to manufacturers though extended producer responsibility (EPR) schemes that force producers of single-use plastic products to cover the costs of their disposal and clean up.

This is important since EPR is critical to the circular economy.

Goulet says: “Regulation is going in the right direction in terms of EPR. Our EPR position paper has been supported by more than a hundred leading businesses, which is good because there has been a history of companies lobbying against the system. Companies need to recognise that they are responsible for eliminating single use plastic.”

However, Goulet would like to see more governments following the EU’s lead on single use plastics legislation.

“We need to have more countries setting reduction targets, telling companies to reduce plastics and to put the infrastructure in pace to manage plastic pollution. There is always more that policymakers can achieve.”

Those policymakers will be critical to the Ellen MacArthur Foundation’s cause as assemble in Kenya next week.

Goulet’s colleague, Senior Policy Manager Carsten Wachholz, notes that problem gets bigger every day the plastic pollution crisis is not tackled at the scale needed.

“As ministers meet in Nairobi, they do so knowing that around the world more than two million people, 1,000 civil society organisations, 100 global companies and financial institutions, and over 150 governments have called for a UN Treaty on plastic pollution,” he says.

“We know from preliminary discussions that there are reasons to be optimistic, but it is now vital that they build on the momentum behind a global treaty for a circular economy and agree at the UNEA to turn the tide on plastic pollution. There’s no time to waste.”

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