Big brands targeted for plastic reduction and refill commitments in 2022 proxy season

Because the noisy battle over plastics continues to accentuate in legislative and public debate, the behind-the-scenes tactic of shareholder advocacy has seen quite a few developments this yr.

Shareholder resolutions are non-binding within the U.S., however they will nonetheless yield key agreements when a proposal is withdrawn or if it goes by way of a profitable vote. In prior years, these efforts have led main public firms to announce commitments for phasing out particular varieties of plastic packaging, setting broader plastic discount objectives and publishing reviews on plastic recycling infrastructure.

This yr, resolutions backed by teams such because the nonprofit As You Sow and funding advisor Inexperienced Century Capital Administration have resulted in high-profile commitments on refillable beverage containers and one of many first absolute plastic discount objectives by a significant firm. A number of essential votes are nonetheless pending within the weeks forward.

Discount and reuse

Whereas many classes of fabric can contribute to packaging waste, plastics are as soon as once more the prime focus of this yr’s shareholder advocacy efforts. Conrad MacKerron, senior vice chairman at As You Sow, stated his group used to pursue proposals specializing in all supplies however deliberately made a shift lately. 

“Plastic is such a bellwether materials. It will get folks so indignant that you simply concentrate on that to get their consideration,” he stated, including that different supplies have higher recycling charges and plastic additionally takes on an even bigger position due to its many alternative codecs in packaging.

One other shift has been to concentrate on general plastic discount targets, relatively than increased recycling charges or quantities of recycled content material. Particularly, MacKerron cites a 2020 report from the Pew Charitable Trusts concerning the want for larger emphasis on plastic discount as a turning level for his method to those points.

Annalisa Tarizzo, a shareholder advocate at Inexperienced Century, highlighted this yr’s dedication to an absolute plastic discount aim by the corporate that owns Workplace Depot and OfficeMax as particularly notable on this class. Whereas the workplace provide retailer will not be high of thoughts for some working within the plastics area, Tarizzo stated her work particularly focuses on firms in Inexperienced Century’s mutual fund portfolio and he or she intends to systematically undergo that checklist.

“I would like each single firm in our portfolio that makes use of single-use plastics to have no less than a virgin discount aim within the subsequent few years,” she stated.

Tarizzo additionally highlighted a uncommon degree of help for one more decision filed with fast-food chain Jack within the Field, which referred to as for a report on a sustainable packaging coverage. Regardless of a suggestion by the corporate’s board of administrators to vote towards it, that cited pandemic results and ongoing packaging efforts, the proposal garnered 95% help from shareholders in March.

Not all proposals have seen success. After shareholder Inexperienced Century Capital requested Tyson Meals to difficulty a report on how it will cut back its use of plastic packaging, the proposal solely obtained 13% help amongst all shareholders. However 59% of impartial shareholders voted in favor of the proposal.

But the highest-profile outcomes to this point got here from two of the world’s largest beverage firms.

In February, Coca-Cola pledged to have no less than 25% of its drinks bought in refillable/returnable glass or plastic bottles, or in refillable containers by way of fountain dispensers, by 2030. Though As You Sow filed a proposal in November requesting a plan for refillable bottles, MacKerron stated this had already been partially within the works at Coke. A associated pledge by PepsiCo to set its personal goal this yr might have been extra influenced by a proposed shareholder decision.

Based on reviews submitted to the Ellen MacArthur Basis, an estimated 1.7% of Coke’s plastic packaging was reusable (down from the prior yr), although MacKerron notes the corporate has sizable infrastructure it will probably broaden in sure worldwide markets. Pepsi reported its fee as 0%, although the corporate now owns SodaStream and MacKerron expects it to be exploring this space additional. Pepsi didn’t reply to a request for remark to make clear details about its present share of reusable plastic packaging.

Whereas curiosity and funding in reuse/refill techniques has expanded considerably lately — throughout classes comparable to takeout, groceries and e-commerce — Closed Loop Companions say that is nonetheless a nascent however fast-growing space. It stays to be seen precisely what quantity of an organization or sector’s portfolio might be feasibly transformed to this mannequin within the U.S., however shareholder advocates aren’t thought-about those who have to determine that out.

“They know their ways work in pushing and so they’re not the technical authorities on the way to make this occur,” stated Bridget Croke, a managing director on the funding agency. “In the event that they waited till they actually understood how firms had been going to get there I don’t assume they’d be efficient in pushing these firms.”

This emphasis on reuse and refill comes as various kinds of advocates, together with environmental organizations, are more and more fed up with plastic recycling. That stress is not misplaced on entities comparable to Closed Loop and The Recycling Partnership that work to direct more cash to recycling infrastructure — with donations and investments from lots of the main manufacturers being focused by shareholder proposals — however they nonetheless see a transparent position for recycling to play.

“We are able to’t recycle every little thing, so I believe it’s actually thrilling to see that this has helped generate refill objectives,” stated Sarah Dearman, vice chairman of round ventures on the Partnership, noting investments in recycling infrastructure are nonetheless thought-about important partly as a result of “even these reusable packages could have an finish of life and we want these to be recycled.”

Trying forward

The approaching weeks will see votes on a number of pending proposals, together with requests for ExxonMobil and Phillips 66 to offer info on the potential results of shifting away from virgin plastic manufacturing, in addition to proposals calling for plastic discount plans at main family names.

Amazon is at present against a decision calling for it to scale back plastic packaging utilization by one-third, saying it has already taken steps to scale back packaging weight and put money into recycling infrastructure. McDonald’s has an identical place towards its personal pending proposal. Kroger cited related causes for its personal opposition, although MacKerron is optimistic after an identical proposal obtained 45% help on the firm’s 2021 annual assembly.

Regardless of rising funding and dialogue round sustainability by sure firms, this ongoing push and pull dynamic is anticipated to persist going ahead. Croke famous that whereas some firm leaders have seen success by embracing sustainability (Unilever) others have been ousted in consequence (Danone).

“A CEO has to stroll a high-quality line as a result of there’s activist traders on each side,” she stated. “How do they push sufficient in a approach that permits them to maneuver the needle and get to their objectives with out scaring their older faculty traders?”

Additional complicating the image for model leaders is the elevated quantity of client curiosity on this space that may affect company repute.

Dearman stated current analysis from The Recycling Partnership discovered an amazing majority of customers count on packaging to be readily recyclable and firms that do not reply might fall behind.

“Every time you will have firms stepping as much as be leaders like that then it actually exhibits the businesses that aren’t stepping up,” she stated. “A sustainable packaging technique is de facto one thing that each firm ought to have, that’s actually a superb place to start out.”

A protracted checklist of formidable sustainability targets are additionally looming within the horizon, lots of them for 2025. On the shareholder advocacy facet, MacKerron stated his group might be focusing extra on versatile packaging heading into 2023 as one of many “very robust decisions” firms might want to make.

“Will we spend billions of {dollars} within the subsequent three years to ramp up some sort of precise round path for pouches and sachets and flexibles that frankly doesn’t exist now?” he requested. “I believe loads of them need to face this, throughout the subsequent yr, what they’re going to do.”

One potential path for this materials — if firms select to maintain it of their portfolios, relatively than part it out — is chemical recycling. Dearman stated it is nonetheless too early to inform whether or not the entire promised investments and capability in that space will come to fruition, and he or she stated the actual check might be when amenities are operating at scale and shopping for curbside materials from MRFs.

Croke agreed that the 2025 targets might be a tall order — partly as a result of they’re nonetheless far sufficient away that among the executives at present main these firms will not be round by that time — and sees an essential position for outdoor teams centered on accountability. 

On the similar time, Closed Loop has seen extra engagement from high-level executives on these points lately and a larger willingness to discover reuse/refill ideas amid the rising consideration on environmental, social and governance points. Main recycling firms have additionally famous an identical uptick in discussions with manufacturers recently, which Croke stated is essential as a result of “they want these firms to be making the best design selections.”

And whereas these boardroom debates might really feel far faraway from the waste and recycling trade’s every day work of assortment and processing, shareholder advocates hope their efforts may also have tangible outcomes on the bottom.

“The work we’re doing will hopefully assist them,” stated Tarizzo. “They’re clearly coping with loads of contamination, loads of non-recyclables ending up within the waste stream.”

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