MSCI suggests that firms’ use of plastic is coming under greater scrutiny, amid broader and growing investor scrutiny of companies’ ESG performance.
The mention of plastic waste in earnings calls increased by 340 percent in 2018, compared to the previous year, according to MSCI research. The index provider predicts that 2019 will see many organizations forced to deal with the reality that their investors view excessive use of plastic as a business risk.
The disruption stems largely from a changing regulatory landscape that is pushing companies to deal with waste reduction. China pulled out of the thriving global trade in waste in early 2018, then the European Parliament voted in the same year to ban single-use plastic by 2021, including a requirement to recycle more than 90 percent of beverage bottles by 2025.
California was the first state to introduce a ban on single-use plastic bags at large retail stores in 2014. According to the United Nations, plastic has caused $8 billion worth of damage to the world’s marine ecosystem.
Conrad MacKerron, senior vice president of As You Sow, a non-profit foundation chartered to promote CSR through shareholder advocacy, notes that no organization is immune to investment and reputational risk. He tells Corporate Secretary sister publication IR Magazine: ‘Firms with ESG investors understand that [plastic] presents a risk to their brand.’
REPUTATIONAL HAZARD
But MacKerron adds that not all investors are up to speed with the focus on plastic. ‘It’s a wasteful throwaway [business] culture where we have single-use plastic that’s used for just a few minutes or seconds and thrown away,’ he says. ‘And some investors are behind on some of these concerns.’
Tatiana Luján, wildlife conservation lawyer at ClientEarth, a non-profit environmental law organization, predicts that the use of plastic will be ‘more and more’ regulated and companies will not have enough time to adapt and change their ways of production and distribution.
‘To overcome these risks, businesses should involve the public because if this isn’t managed, they will face reputational risks,’ she notes. ‘The way companies differentiate themselves is in their branding, which is a very large part of their capital. If their brand is found to be associated with plastic pollution or with chemicals that leak from plastic, their corporate value is going to be at risk. So they should engage with the public and be more transparent.’
She says a lot of organizations are thinking about investments in the long-term to deal with the plastic shutdown. The Coca-Cola Company, for example, tells IR Magazine that it is looking into how it can make a positive impact on the plastics problem within oceans and landfills.
The firm’s senior investor relations manager Nick Johnson says that in addition to the company launching its World Without Waste initiative, which plans on collecting and recycling a bottle or can for each one it sells by 2030, it has identified that non-ESG investors are taking the issue seriously.
Johnson says investors are now looking through an environmental lens at how they go about investments. ‘Investors want a culture change because they understand that plastic pollution is not just a Coke problem but a global issue,’ he explains. ‘The conversation on plastic went from not coming up in meetings with equity and debt investors to it probably coming up 30 percent of the time. That’s a pretty big increase.’
Research by UK retailer Marks & Spencer Group finds that a large number of the questions it receives on plastic and ESG are consumer-led. The firm made clear to IR Magazine that plastic has always been on its agenda but the issue has now accelerated because of what is happening externally.
‘Our investor base is becoming a lot more engaged in broader corporate sustainability responsibility and governance goals, of which plastic is one,’ says Rebecca Edelman, M&S’ investor relations manager. The retailer plans to be a zero-waste business by 2025. ‘We want to use plastic only where there is a clear and demonstrable need,’ Edelman adds. ‘We are aiming to remove 1,000 tons of plastic packaging by spring this year.’
