Investor coalition warns FMCG giants and retailers: Beat plastic pollution or pay the price

05 May 2023 --- Investors with combined assets worth US$10 trillion have written to over 35 companies in the fast-moving consumer goods (FMCG) and grocery retail sectors, including Beiersdorf, Kerry Group, Kellogg, Coca-Cola, Nestlé and Danone, urging quick action to reduce plastic consumption and pollution.

The 185-strong investor group is reportedly the largest-ever coalition to pressure companies over plastics, and includes investors like Axa Investment Managers, Achmea Investment Management, Rockefeller Asset Management and ASN Bank.

The group, coordinated by the Dutch Association of Investors for Sustainable Development (VBDO), warns that the failure to address the impacts of plastic pollution exposes companies to financial risks. These risks could threaten value creation, brand appeal and investment returns, given the wave of action to tighten legislation around the world and the increasing number of lawsuits against companies failing to establish and achieve sustainability targets.

The three precise demands in the joint statement focus on supporting ambitious plastics policy for effective outcomes, committing and delivering an absolute reduction of single-use plastic packaging, including implementing reuse systems, and addressing toxicity in the value chain. 

“We, investors and their representatives, believe that companies must set their sights higher and act more swiftly to address the plastics crisis through reducing their dependence on single-use plastic packaging, working to bring production and consumption of plastics within the limits of the planetary boundaries and alignment with the Paris Agreement and the Kunming-Montreal Global Biodiversity Framework,” the joint letter reads.

Over 3,000 potentially harmful chemicals have been identified in food packaging.Financial burden of plastics
The coalition details that plastics impose an estimated externality cost on society of US$350 billion per year from GHG emissions, ocean pollution and collection costs. Furthermore, with the increasing regulatory pressure and societal demand, they say companies are exposed to significant and mounting plastic-related risks.

“It’s worrying to see most companies in the FMCG and grocery retail sectors are taking limited action to mitigate the financial risks posed by plastics. Today investors are sending a clear signal to these companies they will face ever-increasing pressure if they don’t act soon to substantially reduce their plastic footprint,” says VBDO executive director Angélique Laskewitz.

The signatories argue intensive production and use of plastics are causing untold damage to the health of people and the planet, with scientists affirming that “clean-up is futile” if production continues at current rates.

Moreover, they are asking plastic polluters to step up their efforts to deal with the plastics crisis, noting that the Ellen MacArthur Foundation’s 2022 Progress Report found companies will miss key 2025 targets while returning to a virgin plastic usage comparable to 2018.

“We expect companies to make a real and scalable change by setting more ambitious targets and taking stronger actions. Companies must set a clear vision to drastically reduce consumption of single-use plastic packaging in absolute terms, phase out hazardous chemicals and, crucially, advocate for – not against – the policy framework needed to support these actions,” the coalition argues.

For policy, not against
The investors also raise concerns about companies’ lobbying efforts against ambitious policies, including the Global Plastics Treaty and the EU’s Packaging and Packaging Waste Regulation (PPWR). A recent study commissioned by McDonald’s projected that 2030 mandatory reuse targets set by PPWR will increase plastic packaging waste by “up to 300%” for dine-in consumption and “up to 1500%” for takeaway.The coalition details that plastics impose an estimated externality cost on society of US$350 billion annualy.

“A recent analysis of European consumer product sector engagement on the PPWR revision identified that the sector’s ‘industry associations are engaged overwhelmingly negatively with the PPWR,’ noting that lobbying efforts had already succeeded in lowering the targets and weakening the measures considered by the European Commission,” they highlight in the letter.

Arthur van Mansvelt, senior engagement specialist at Achmea Investment Management, remarks: “Most companies are not acting fast enough in the face of the unfolding plastics crisis. The Global Plastics Treaty offers a unique and historic opportunity to tackle the problem at the source – we need companies supporting its ambition on prevention and reuse, not lobbying against it. It’s their chance to be part of the solution.”

The group sees benefits in upscaling reuse systems for reducing resource use, energy, toxic substances, water use and preventing pollution. Henceforth, they expect companies to establish a clear plan of action to minimize material consumption, prioritizing the elimination of single-use packaging.

A recent report by Minderoo Foundation found that single-use plastic is at an all-time high, with an additional six million metric tons of single-use plastics produced from 2019 to 2021.

ExxonMobil, Sinopec and Dow were named as the top petrochemical companies producing virgin polymers bound for single-use plastic. At the same time, Sinopec, Indorama Ventures and ExxonMobil are reportedly the leading contributors to total cradle-to-grave (Scope 1, 2 and 3) GHG emissions from single-use plastic waste, according to Minderoo.

The 185-strong investor group is reportedly the largest-ever coalition to pressure companies over plastics.Ingesting toxic chemicals
The coalition demands a radical approach to the plastic problem, including the issues arising from using hazardous chemicals. They highlight that over 3,000 potentially harmful chemicals have been identified in food packaging, both intentionally and unintentionally added chemicals.

According to the investors, failure to address the use of these chemicals is contributing to a chemical pollution crisis, with hazardous chemicals ubiquitous in the environment and accumulating in materials and products posing a significant threat to human health. 

“As intensive users of plastic packaging, food retail and consumer goods companies have a key role to play to make a scalable change and increase financial resilience of their business models by tackling the plastics crisis,” underscores Axa Investment Managers.

“With increasing concerns and rising awareness of biodiversity loss and nature degradation, the food industry must transition to more [environmentally] sustainable production and consumption. An important element of this transition is reducing the industry’s reliance on plastics.”

By Radhika Sikaria