To tackle the increasing plastic pollution, companies in the consumer sector should take a leading role in reducing, re-using and recycling of plastics. First, companies must report transparently on their use of plastics. And subsequently, they must set ambitious strategies and targets to reduce, re-use and recycle plastic packaging. Click right to read more about the plastics challenges.
Engaging on plastic pollution
When we invest, we engage with companies on a wide range of sustainability topics, including plastics pollution, both directly and in collaboration with like-minded investors. Together with 185 investors with USD 10 trillion in combined assets under management and coordinated by the Dutch Association of Investors for Sustainable Development (VBDO), we have signed a statement demanding that companies adopt a more radical approach to reduce their reliance on plastics.
We launched an engagement programme to gather information, identify best practices, and to draw up questions to raise with the companies we invest in through our Impact Equities and Bonds strategy. Click right to read more about our assessment set-up.
The main focus of this engagement initiative is on consumer staples companies, as this sector are major users of plastic packaging.
- Every company we engaged with acknowledges that plastic pollution is a critical issue. But addressing plastic pollution is beyond the capacity of a single company; it needs collective action from stakeholders across the entire value chain, both public and private. Companies are not only seeking solutions but are also collaborating with fellow industry players. Japanese household and personal care companies Lion and Kao began a partnership in 2020 to collect and recycle used refill containers and toothbrushes. In May 2023, they successfully launched a concentrated liquid detergent with packaging made from recycled materials, demonstrating the feasibility of producing similar packaging by recycling used refill packs. Collaborations are evident across various markets. For instance, Nomad Foods' Birds Eye brand is a founding signatory of the UK Plastics Pact.
- Many companies aim to increase the recyclability of their product packaging, referring to the ability to collect and separate or recover for use or reuse in another product. In 2022, Danone achieved a milestone with 84% of its packaging becoming reusable, recyclable and compostable. Recycling of dairy cups remains challenging due to inadequate collection and recycling infrastructure, regardless of the production material of the cups. Danone aims to produce 100% recyclable cups by adjusting its material choices based on the recyclability prospects in different areas. While this seems an easy objective for companies as it does not involve the actual recycling or the recycled content of packaging, it is a very important step to increase the plastic recycling rate. Most packaging contains different materials and/or different types of plastic. This makes it harder to separate and use them as raw material for new (packaging) products. Simplifying the packaging, for example by decreasing the number of different materials, makes it easier for waste companies to separate the materials for use as raw material. Acomo’s packaging consists almost exclusively of mono materials, so it is easier to recycle.
- Many companies have broad or non-specific reduction targets. The primary goal is mostly to reduce packaging weight and to enhance its design. ITO EN collaborates with packaging company Toyo Seikan to develop the Non-Sterilant (NS) System. This system enables room temperature sterile bottling without sterilising agents, thereby reducing water usage and producing lighter-weight bottles. This innovation not only cuts down on material usage and CO2 emissions during transport but also promotes environmentally responsible beverage production and logistics.
- Setting specific targets on plastic use or recycling is not always straightforward. While increasing the rate of recycled content seems a logical objective to reduce the production of virgin plastics, there are assessments (e.g. Lego) that products made of fully recycled materials contribute more to carbon emissions over their full lifecycle than products made of virgin materials. Bioplastic also seems a logical alternative to regular plastic given it is made from renewable resources. Yet it faces similar environmental challenges as plastics and may require a large number of resources that could otherwise be used for food production.
- Only a few of the companies we assessed have set specific targets on recycled content. Food companies cannot always use recycled content for primary packaging—the packaging directly in contact with the product—due to potential contamination risks. Exceptions are the deposit return schemes from Danone and ITO EN, although the latter currently has a recovery rate of only 14%. Essity stands out as the sole company in our review with a recycled content target for plastic packaging, aiming for 25% by 2025. In 2022, the company achieved a 12% rate, comparable to P&G's 13%. Although P&G lacks a company-wide goal, its individual brands have their own targets regarding recycled content.
- When it comes to eliminating hazardous chemicals in packaging products, most companies offer rather vague and anecdotal disclosure. Henkel and Danone commit to phasing out polyvinyl chloride (PVC). Since 2018, Danone has reduced its PVC usage by over 90%. Meanwhile, Henkel only uses PVC in a few exceptional cases due to the absence of viable alternatives, accounting for 0.05% of their global packaging volumes.
- The outlook for paper packaging seems to be more positive. Most companies prioritise sourcing primarily from recycled fibres, and if not available, they turn to certified sustainably managed forests (virgin sources such as FSC, PEFC or SFI). FSC is often the preferred certified choice. We also assessed some paper packaging companies. These companies are helping to reduce the amount of plastic packaging by developing paper alternatives.
Keeping up the pressure
The insights we have gained from the challenges around plastic pollution and effective strategies to fight plastic pollution will inform our future conversations with our investee companies. Disclosure on plastic usage remains low, with companies not uniformly reporting on the same data points. Moreover, there are numerous data points missing which are necessary to fully assess the companies' use of plastics and their corresponding strategies. We actively encourage companies to improve reporting, including contributing to the new CDP plastic questionnaire under CDP's water risk section, promoting standardised reporting practices. Our overarching goal is for these companies to eliminate single-use plastics, to drastically reduce material usage, and to develop packaging reuse systems.
Of our holdings, Danone, Procter & Gamble and Henkel have the most significant exposure to plastic pollution, which is expected given their large sizes. Notably, the plastic use by Danone and P&G is nearly twice that of Henkel. Given their substantial plastic footprint, our future engagement will primarily focus on these three companies.
To end on a positive note, our conversations with these three companies have shown that they have an awareness of and commitment to addressing the adverse consequences of plastic packaging.