Plastics report proposal gains traction at Dow AGM

Almost a third of the votes cast at Dow’s AGM backed a shareholder proposal seeking disclosure about the impact of efforts to cut plastic pollution.

According to an SEC filing, 30 percent of the votes backed a resolution from As You Sow asking that Dow’s board issue ‘an audited report addressing whether and how a significant reduction in virgin plastic demand, as set forth in the Breaking the Plastic Wave report's System Change Scenario to reduce ocean plastic pollution, would affect the company’s financial position and assumptions underlying its financial statements.’

In its supporting statement, the shareholder advocacy group notes that The Pew Charitable Trust’s Breaking the Plastic Wave report describes a path under its System Change Scenario for cutting plastic pollution by 80 percent by 2040 through initiatives such as lowering virgin single-use plastics (SUP) demand.

As You Sow recommends that, at the board’s discretion, the report include:

• Quantification – in tons and/or as a percentage of total – of the Dow’s polymer production for SUP markets
• A summary or list of the company’s existing and planned investments that may be materially impacted by the System Change Scenario
• Plans or goals to shift the company’s business model from virgin to recycled plastics and use recycling technologies that are cost-effective, process and energy efficient and environmentally sound.

‘Plastics, with a lifecycle social cost at least 10 times higher than its market price, actively threaten the world’s oceans, wildlife and public health,’ the proponent writes. ‘Concern about the growing scale and impact of global plastic pollution has elevated the issue to crisis levels. Of particular concern are [SUPs], which make up the largest component of the 11 mn metric tons of plastic ending up in waterways annually. Without drastic action, this amount could triple by 2040.’

As You Sow writes that, in response to this plastic pollution, countries and major consumer companies are starting to move away from the use of virgin plastic.

‘The future under the [System Change Scenario] – one built on recycled plastics and circular business models – looks drastically different than today’s linear take-make-waste production model,’ the group states. ‘Several implications of the [System Change Scenario], including a one-third absolute demand reduction (mostly of virgin SUPs) and immediate reduction of new investment in virgin production, are at odds with Dow’s planned investments.’

As You Sow adds: ‘While Dow states a commitment ‘to stop the waste and close the loop,’ it fails to meaningfully address the potential for regulatory restrictions and/or significant disruption in demand for virgin plastic, both of which could result in stranded assets.’


SIGNFICANT SUPPORT
Governance professionals generally regard gaining 30 percent support for a proposal – particularly the first time it appears on a company’s proxy statement – as a significant result.

‘We are pleased that a strong contingent of shareholders agree that Dow should assess its reliance on virgin [SUP],’ Conrad MacKerron, senior vice president of As You Sow, says in a statement. ‘This analysis will help it manage the growing risks and provide transparency on its commitment to use recycled post-consumer plastic as feedstock for new products.’

Reducing ocean plastic pollution is one of As You Sow’s core initiatives. Danielle Fugere, president and chief counsel of the group, told Corporate Secretary last year: ‘We are focusing on ocean plastics and petrochemical risk – those two go together in the sense that oil and gas companies are becoming more reliant on producing plastics as the world transitions away from fossil fuels at the same time as the world moves away from [SUPs].’
 

BOARD’S ARGUMENT
The Dow board had recommended that shareholders vote against the proposal. It writes in the company’s 2023 proxy statement: ‘While we agree that the company should continue to focus on recycling and circularity, including the increased use of recycled plastics, the board has considered this proposal and deems it unnecessary and not in the best interest of the company or its stockholders given [Dow’s] extensive investments in transforming waste into usable materials and closing the loop as part of a circular economy, all of which have already been disclosed and squarely address the intent of this proposal. In addition, [SUP] bans would not materially impact the company.’

The board states that SUP products being targeted at present by bans account for 3.5 percent or less of total plastics demand for those countries considering or adopting such bans: ‘Given that Dow’s packaging and specialty plastics business will only be partially impacted, and otherwise would not be disproportionately impacted by such bans, even if all the plastics bans under consideration were hypothetically to come into effect, the estimated result would be less than 2 percent of Dow’s total sales based on 2022 revenue.’

Dow argues that it is taking ‘appropriate actions’ to respond to issues raised in the proposal, including through its reporting on sustainability performance and the oversight of sustainability policies and commitments by the board. ‘As such, an audited report on reduction of [SUP] as requested by the proposal is unnecessary and would consume time and resources that are best spent on executing the programs, processes and systems that are already in place to achieve practical and tangible solutions,’ the company states.

A request for comment on the vote was not returned immediately.