Investors encouraged to support policy advocacy as well as engage with investee companies to reduce plastic use and transition to circular economy.
At the recent AGM of US grocery chain Kroger, 45% of shareholders – representing shares worth US$10.2 billion – supported a proposal challenging the company on plastics and strategies for reducing their use. A few weeks earlier, 35% of Amazon shareholders supported an identical proposal brought by shareholder advocacy group As You Sow.
Five other global consumer goods companies who received the As You Sow proposal agreed to reduce use of virgin, or single-use, plastic: Target and Keurig Dr Pepper will cut such plastic 20% by 2025; Mondelez committed to a 5% absolute reduction; and PepsiCo and Walmart agreed to cuts that are being finalised and will be disclosed later this year.
“The results at Kroger demonstrate yet another strong show of support by investors challenging companies to elevate the issue of single use plastic pollution and develop credible solutions to the global plastic pollution crisis now,” said Conrad MacKerron, Senior Vice-president of As You Sow.
“Kroger has not taken basic corporate accountability actions such as disclosing the amount of plastic it uses, or made recent commitments to cut plastic. It should act swiftly to disclose plastic usage and devise a plan to significantly reduce its reliance on single use plastics.”
Following in the wake of climate activism
The anti-plastics movement is taking a page out of climate change advocacy work, says Judith Enck, Founder of Beyond Plastics, a US-based policy and advocacy non-profit organisation.
“Plastics and climate change are intimately linked,” she says. “The anti-plastics movement is about ten years behind the climate movement and we have not yet seen a huge amount of shareholder action. Investors may not yet realise it, but the issue of plastics will be on their desks pretty soon.”
In the US, the Break Free From Plastic Pollution Act builds on state-wide laws and outlines practical plastic reduction strategies to realise a “healthier, more sustainable, and more equitable future”. Introduced to Congress in November 2020, when the Act passes, says Enck, it will be “a good time for divesting from plastic production”.
Across the Atlantic, plastics were on the doorstep of No 10 Downing Street in the UK on 13 July as Greenpeace dumped 625kg of waste to highlight the issue of plastic waste exports. More than 250,000 people have signed a related Greenpeace petition, and 38 MPs from across the political spectrum pledged to call on the UK Government to introduce effective plastic reduction.
At a global level, the UN Environment Assembly (UNEA) is expected to discuss a treaty on plastic pollution at its in-person meeting next year. In a joint report, ‘The Business Case for a UN Treaty on Plastic Pollution’, WWF, the Ellen MacArthur Foundation and Boston Consulting Group have set out the opportunity for such a treaty.
“A UN treaty on plastic pollution can create the enabling conditions to eliminate plastic leakage into the ocean,” states the report. “Defining the overarching objectives, including a time-bound goal with a specific date, is in itself a critical first step, as illustrated by progress made in adopting the 1.5°C target in the climate change space.”
It argues that momentum toward a UN treaty on plastic pollution is “already building”, asserting that such a treaty should aim to address four key barriers: fragmentation and lack of scale in voluntary initiatives, misalignment of regulations, lack of data and structural capability gaps.
Gerald Naber, Programme Manager, New Plastics Economy at the Ellen MacArthur Foundation, believes tackling plastic use is rapidly becoming a political priority. “The climate debate has set the scene for 20 years and it has taken many COP meetings to get the world to agree on a way forward,” he says. “The plastics problem has only been on the agenda for a few years, but it is promising to see more than 100 UN member states agree to take steps towards a global Paris-type agreement on plastic pollution for next year.”
While activists like Greenpeace and Extinction Rebellion might grab the headlines, “there is only so much they can do” to push public policy on plastic pollution, says Enck. “There is a lot that investors can do, particularly if they care about the oceans, environmental justice and climate change.”
Naber says the Foundation recognises the need to “add the investor voice” behind calls for a global treaty on plastic pollution to ensure support from all governments. Its New Plastics Economy Global Commitment and Plastics Pact network are working to accelerate progress towards a circular economy for plastic, based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems. A common structure would set a clear direction and conditions, giving governments and businesses the impetus to move forward more decisively, says the Foundation.
“Signatories to our voluntary New Plastics Economy Global Commitment represent about 25% of the plastic packaging used globally, which means there are 75% who are not on board,” says Naber. “To eliminate plastic waste and pollution, we need a truly global response beyond voluntary initiatives, and this requires the engagement of public policy makers.”
For meaningful progress to be achieved, governments need to clarify their requirements regarding plastic pollution, he adds. “Some organisations have anticipated regulatory action and are taking a lead. Others need the uncertainty to be removed, which will drive investment in recycling and collections solutions. A systemic approach is needed and this is why governments need to step in.”
Julia Koskella, Associate at advisory and investment firm Systemiq, says investors should push for policy changes on single-use plastics and plastic recycling, to help level the playing field between all plastic producers and drive sustainable change faster. Investors can make their positions known via the Ellen MacArthur Foundation’s formal statement and position paper on Extended Producer Responsibility, already endorsed by over 100 companies, she notes.
Institutional investors can also play a key role in ensuring plastic pollution and production rates come down over time in line with the System Change Scenario laid out in the Breaking the Plastic Wave report, Koskella adds. “This is the only scenario that is able to significantly reduce plastic pollution globally by 2040, and involves reducing plastic production 30%, improving recyclability, and expanding waste collection and treatment.”
Shareholders can also encourage companies to publish transparent data and baselining on plastic usage so that investors can understand and track any company’s plastic risk exposures, she says. Finally, by encouraging companies to join Plastic Pacts, investors can help drive accountability and change.
The UK Plastic Pact’s 100+ members each have to commit to conducting reusable packaging trials by 2022. Each of the Plastic Pacts within the Foundation’s network is led by a local organisation and unites businesses, government institutions, NGOs and citizens behind a common vision. They have an ambitious set of local targets that include eliminating unnecessary and problematic plastic packaging, move from single use to reuse and ensure all plastic packaging is reusable, recyclable or compostable.
The Network includes national plastic pacts in the UK, France, Chile, the Netherlands, South Africa, Portugal, the US, Poland and Canada. The European Plastics Pact is the first regional initiative to join.
Toward a circular economy
My-Linh Ngo, Head of ESG Investing and Portfolio Manager at fixed income specialist BlueBay Asset Management (US$75.2 billion AUM), says there is an increasing focus by the investment community on promoting more sustainable consumption.
“The concept of a circular economy embodies the principles of how we need to reframe our thinking and approach to break out of our current destructive practices,” she says. “It is a systematic approach to economic development designed to benefit businesses, society and the environment. In contrast to a ‘take-make-waste’ linear model, a circular economy is regenerative by design and aims to gradually decouple economic growth from the consumption of finite resources, which can degrade the natural environment.”
Taking such an approach means looking at the products being produced, as well as the operational processes which result in their production and the investment community has been addressing both these aspects, she adds.
“In the past few years, there has been a focus on waste management, with the use of single use plastics in consumer goods and packaging getting a lot of attention. Increasingly, efforts have expanded to considering management of natural capital in terms of how we are managing forests or fish in our oceans. Improving process efficiency has also been a theme (doing more with less), for instance, promoting energy efficiency.”
Greenwashing on plastic warning
Law firm Linklaters warned about the prospects of greenwashing with regards to plastics and recycling in a paper published in July. As businesses seek to attract environmentally-minded and sustainability-focused consumers and investors, many are increasingly finding themselves the targets of complaints alleging “greenwashing”, it states.
In the US, for example, attention of consumers has been focused on the ‘recyclable’ label on many plastic consumer goods. But reports suggest that less than 10% of all waste plastic is recycled. This is partly due to the cost and logistical challenges to collecting, sorting and melting down used plastic, as well as the limited reuse potential through degradation.
“Another challenge for recycling plastics are regulatory changes in countries that have historically accepted the import of recycled post-consumer plastics but in the future may ban or greatly reduce the volume of plastic being imported,” says the paper.
Suits targeting products labelled as recyclable, ‘compostable’ or ‘biodegradable’ have been brought by regulators, consumers and other private plaintiffs in numerous US states (often in California and under California state law), including against several major US companies.
Advice for investors
At the end of July, the Ellen MacArthur Foundation will release a series of guides for institutional investors to engage on plastic packaging to tackle pollution. Developed in collaboration with the UN’s Principles for Responsible Investment (PRI), the guides will include questions investors should ask of their investee companies about their use of plastics and will provide a framework to enable investors to assess how companies are performing.
Beyond Plastics’ Enck is hopeful that investors will increasingly encourage investee companies to back away from plastic production. “I have met climate change deniers, but I have never met a plastic pollution denier,” she says. While there are many alternatives to single use plastic, there need to be comprehensive laws to encourage their adoption. “Many companies are worried about their affiliation with plastic pollution, but there are also fears about greenwashing and products that don’t really get to the root of the problem.”