Plastics

THE LIABILITIES OF A BUSINESS MODEL BASED ON SINGLE-USE PLASTIC ARE ABOUT TO BECOME PAINFULLY CLEAR

We expect Big Plastic – Coca-Cola, PepsiCo, Nestle, Unilever…. – to face a wave of legal challenges that will last for perhaps a decade and leave their reputations tarnished and their market valuations substantially reduced. 

Core elements of the case against Big Plastic will be:

1. The harm their products do
2. Their deceit in promoting plastic as recyclable when they knew it wasn’t

Here’s a quick look at each.

The Case For Harm

A full accounting of the harm plastics causes —and will continue to cause — is slowly emerging. 

A first and well-established point is the scale of the problem. In 2018 National Geographic summarized findings of a study that found 8.3 billion metric tons of plastic had been produced, of which 6.3 billion metric tons has become plastic waste, and of which just 9% has been recycled and 12% incinerated.

Since it’s a more likely vector to human harm, the amount of plastic in the marine environment is significant. This is estimated at 150 million metric tons with another 8 million to 20 million tons of plastic entering oceans annually. 

Today, microplastics are abundant in human water supplies and many food sources. The average person is thought to ingest about 5 grams of plastic a week —roughly the equivalent of a credit card.

Scientific evidence of harm to humans is currently unclear but concern is widespread. For example, an article entitled 'Microplastic pollution ‘number one threat’ to humankind' pointed out that:

“…chemicals in plastic have triggered rising levels of abnormal development and illnesses over the past five decades, ranging from stunted fertility and male/female sex malformations to obesity, diabetes, cancer, heart attacks and cognitive, behavioural and other brain-related problems such as Attention Deficit Hyperactivity (ADH).”

While evidence is currently lacking, it seems a pretty good bet that it’s only a matter of time before harm is established. Proof of even a small impairment to human health could create a massive liability given the scale and scope of the pollution. 

One critical point is that plastics will endure for hundreds and perhaps thousands of years: this damage comes as an annuity. 

Harm beyond human health is currently clearer to establish. For example, plastic pollution threatens tourism, recreation, and fishing industries. Earth Island Institute alleges ‘global losses from all industries afflicted by marine pollution’ are about $13 billion annually. 

The Case For Deceit 

The essence of the deceit case is that CPGs are fully aware that for the most part its plastic packaging does not get recycled, yet persists in labelling it ‘Recyclable’.  

A February 2020 report by Greenpeace looked into the recycling infrastructure in the US. Based on a comprehensive survey of plastic product waste collection, sortation and reprocessing in the country, it found that only some PET #1 and HDPE #2 plastic bottles and jugs can be legitimately labeled as 'recyclable' in the US today. Similar situations exist in other countries. 

In the US, there is a near absence of recycling capability for #3-7, making fallacious any claim these plastics are recyclable.
Plastic #3-7 waste collected in municipal systems across the country is being sent to landfills or incinerated.

Greenpeace says “Companies that make “recyclable” claims in marketing materials or on products may face liability from consumers as well as from the FTC for misrepresentation and need to ensure that the claims are accurate and not deceptive or misleading.”

For plastic #1 and #2 the situation is better but not sufficient to make a full recyclable claim. Capacity of all US based recycling facilities is only 22.5% of the PET#1 plastic waste generated and the domestic processing capacity for HDPE#2 plastic waste is only 12% of the waste generated.

A compounding problem for the reputation of CPGs is the very low rates of recycled plastic in its packaging. For Unilever, for example, 99% of its plastic packaging comes from virgin plastic.

It is, choose your verb, deceitful, unethical, shameful, that companies will tout its packaging as recyclable or encourage consumers to “Check locally’ for recycling options when there is no prospect of the plastic going anywhere other than landfill or the ocean. 

Consumers will not react well when they learn the extent to which they’ve been duped. 

Lawsuits Are Here

Its early days but the lawsuits against Big Plastic are already starting to mount. Here are a couple:

Keurig Green Mountain
A class action lawsuit on recyclable claims on single use plastic products is currently pending against Keurig Green Mountain in US Federal District Court. The plaintiff, Kathleen Smith, alleges that Keurig’s:

“recyclable” single-serve plastic coffee pods were mislabeled as such because they are not in fact recyclable, due to their size, composition, and a lack of a market to reuse the pods.

In June 2019, the District Court denied Keurig’s motion to dismiss the case and in October 2019 the case moved to Discovery phase.

In a possible early indication, the judge rejected Keurig's argument that it followed Federal Trade Commission requirements for such labels, saying:

"if a product is rendered non-recyclable because of its size or its components -- even if the product's composite materials are recyclable -- then labeling the product as recyclable would constitute deceptive marketing."

Earth Island
In a lawsuit filed February 26, 2020, Earth Island seeks to hold major food, beverage, and consumer goods companies accountable for plastic pollution. The lawsuit cites Crystal Geyser Water Company, The Clorox Company, The Coca-Cola Company, PepsiCo Inc., Mars, Incorporated, Danone North America, Mondelez International, INC., Colgate-Palmolive Company, The Procter & Gamble Company and Doe defendants 1 through 25, which will be named later (see image).

The lawsuit includes public nuisance, breach of warranty, and negligence claims, among others. It argues these companies are responsible for their knowing contribution to public harms and simultaneous effort to obscure those harms and deflect blame. 

More Lawsuits Coming: Big Plastic Will Join Big Tobacco

A comparison to Big Tobacco felt a little ridiculous a year or so ago but today it looks informative. The harm tobacco caused emerged only slowly and was initially denied, then downplayed. The industry used a range of tactics from misdirection, misinformation and plain falsehoods to evade culpability, and for many years it worked.

It’s similar for plastics. It was once seen as an unsightly nuisance but slowly the harm it causes is getting clear. Each piece of plastic may be insignificant but taken together and over the years its impact is widespread and massive. Earth Island Institute says “The gravity of the potential harms caused by plastic packaging is extreme.” 

It’s far from clear what legal culpability and financial liability Big Plastic will ultimately face, if any. 

But it seems certain the reputations of these consumer-facing companies will be severely damaged. It may well be that they emerge as too tarnished to thrive. These consumer-focused companies will face an awkward challenge in lawyering-up against cases the public vehemently supports. 

We have been arguing for some time that the best defense and opportunity for these companies is to assertively move to sustainable solutions. Opportunities exist but thus far corporate action has been slow and disappointing.[Image Credit: © Earth Island Institute]

Coca-Cola European Partners (CCEP) is launching a promotional campaign to let consumers know that its Glacéau Smartwater bottles are now made from 100 percent recycled plastic (rPET) and are still 100 percent recyclable. The campaign will kick-off at the end of the month and run for three weeks across out-of-home advertising spots such as poster sites and digital screens. The move to 100 percent rPET, which includes all 600 ml and 850 ml plastic bottles, will remove 3,100 tons of virgin plastic from circulation each year.[Image Credit: © THE COCA-COLA COMPANY]

Coca-Cola Beverages Philippines Inc. (CCBPI) has partnered with Thailand-based Indorama Ventures to build a PETValue bottle-to-bottle recycling facility in the Philippines that will be able to recycle plastic bottles made from polyethylene terephthalate (PET) material. When completed and commissioned in 2021, the $19.7 million facility will be the largest recycling facility in the country, capable of processing 30,000 metric tons of plastic bottles annually, the equivalent of two billion bottles.[Image Credit: © The Coca-Cola Company]

Danone Waters UK in April is rolling out 100 percent recycled PET bottles for all formats of its Evian water brand. The move will bring the use of recycled plastic content to 70 percent across the Evian range, according to the company, which said it is committed to using no virgin plastic across its Evian and Volvic bottles by 2025.[Image Credit: © Société Anonyme des Eaux Minérales d’Evian]

Loop Industries, Inc. announced a multi-year agreement under which it would supply L'Oréal with PET resin made of 100% recycled materials. Resin will be supplied from a facility in Spartanburg, South Carolina, which is a joint venture between Loop Industries and Indorama Ventures. Seeing growing demand for recycled PET resin, the JV increased the facility's production capacity to 40 KT per year. Loop Industries says it is using the increased capacity to supply more brands with resin made from waste PET plastic and polyester fiber. The company says its technology means waste PET plastic and polyester fiber can be “depolymerized into its base building blocks, purified and polymerized into virgin-quality Loop™ PET resin”.[Image Credit: © L'Oréal ]

Starbucks announced that it would start trials of a new, more recyclable and compostable coffee cup from NextGen at its stores in London, Seattle, New York, San Francisco and Vancouver. The NextGen cups look almost identical to the core cups but instead feature a BioPBS-lining on the interior rather than the usual – and hard to recycle – polyethylene. Starbucks, which developed the cup in partnership with the NextGen Consortium and Closed Loop Partners, invested $10 million in the project.[Image Credit: © Starbucks]

Unilever believes there’s a future in refill solutions to the plastic waste issue after conducting a pilot “refillery” at its Singapore office employee shop. Although there are as yet no plans to roll it out to its other offices around the world, it is a possibility. The trial builds on its 2019 All Things Hair Refillery Station in the Philippines, which allows consumers to bring hair care bottles for refills at a discounted price. Unilever admits that although the approach has potential, consumer education remains a challenge, and also said there are clear differences in how different markets and generations will take up the idea. Unilever also points to its partnership with Loop on its delivery and refill model being tested in a small number of markets as another example of the approach. [Image Credit: © Unilever plc]

British soft drinks maker Britvic has entered into a long-term agreement with a U.K. manufacturer of PET bottles for the supply of recycled plastic (rPET), as part of its sustainability program. Britvic will invest $6.5 million to support the construction of Esterform Packaging’s new rPET manufacturing facility in North Yorkshire, making the company Britvic’s preferred rPET supplier in Great Britain and Ireland. Britvic’s sustainable packaging strategy aims to create an effective circular economy by reducing use of virgin PET and increasing use of rPET. Esterform’s new manufacturing facility will be powered by 100 percent renewable energy sources and is expected to be operating by Q4 2020.[Image Credit: © Britvic PLC.]

Brazilian beverages company Ambev SA (Sao Paulo) has committed to eliminating all plastic packaging by 2025, a move that could generate as much as $239 million in business, according to one exec. The company, Latin America’s largest brewer, will work with suppliers, recycling cooperatives, startups, and universities to shift all beverage packaging to either returnable or 100 percent recyclable materials. The new target, is part of a broad strategy by parent company Anheuser Busch InBev to step up recycling and phase out plastic containers as consumers seek greener alternatives. In October, Ambev announced its first water in aluminum cans, AMA, likely to be distributed in February. Ambev invested $4.1 billion between 2014 and 2018 to adopt eco-friendly practices, including projects to have all operations run by renewable energy sources by 2025.[Image Credit: © AmBev]

In its March budget, the UK government announced that a Plastic Packaging Tax will apply at a rate of £200 per tonne of plastic packaging which does not contain at least 30% recycled plastic. This will apply to plastic packaging that has been manufactured in, or imported into, the UK. 

Businesses that manufacture or import less than 10 tonnes of plastic packaging in a 12 month period are exempt.

The tax will go some way to remove the cost advantage enjoyed by virgin plastics. Chancellor of the Exchequer Rishi Sunak said the tax “will increase the use of recycled plastic in packaging by 40% – equal to carbon savings of nearly 200,000 tonnes.”

The policy had a mix reception. Recyclers such as SUEZ and Veolia welcomed the tax. Some green campaigners expressed disappointment that recycling rates for upcoming years were not detailed and the Food and Drink Federation criticized the plastic tax saying it would penalize food and beverage producers, adding that it did not do enough to address inadequate recycling capacity.

The government will keep the rate of the tax and the 30% recycled plastic threshold under review to ensure that the tax remains effective in increasing the use of recycled plastic.

In a review of global packaging trends, Mintel says it sees an ongoing move to develop recyclable packaging as well as growth in reusable/refillable solutions.

We agree that refilling will emerge as a core solution. Mintel says that “Brands should look to offer memorable experiences through refill in order to create brand engagement, with those bringing some theatre to the refill moment most likely to succeed.” Maybe. Our sense is that convenience, price and ease of use will be the primary drivers, but perhaps some theatricality would help.

On recyclable packaging, however, we think Mintel misses the point. It argues that companies should push to develop recyclable packaging even though it will be years before the recycling industry can process the waste. It says “The ultimate solution is brands, manufacturers, packaging industry bodies, governments, and environmental non-profits working in harmony to better inform consumers, develop more easily recyclable packaging, and establish better collection systems and recycling processes.”

Perhaps. But we suspect brands that win will be those that move to truly sustainable solutions – reusability, natural composability, alternative packaging. Brands that wait for the recycling industry before they can meet sustainability goals will be waiting for many years. They will frustrate consumers in the process and may still be waiting long after better solutions have overtaken them.[Image Credit: © Mintel]

In an attempt to get consumers to change their habits surrounding bottled water, FloWater, which makes refill stations for US gyms, schools and other public locations, is offering a reusable aluminum bottle alongside its equipment, for about the same price as premium bottled water in a plastic bottle. It can be reused up to 20 times and then recycled, but FlowWater sees the move as only a ”pathway” to helping people change from single-use plastic. The multi-use bottles include printed messaging advising consumers to reuse them, but the company hope at some stage the consumer will switch to a normal reusable bottle. The water at the refill stations comes from tap water supplies, which it filters for contaminants. Brands including Coke and Pepsi have been exploring the feasibility of reusable bottles and refill stations, and Coca-Cola’s Dasani water and Pepsi’s Aquafina are being sold in aluminum cans and bottles in select markets. [Image Credit: © Flowater]