Global plastics rules are tightening. A new agreement on plastics aimed at curbing production and eliminating pollution is nearly in place. The Global Plastics Treaty should concentrate the minds of companies that fail to make the transition towards more sustainable alternatives.
Action is needed now. Global plastic pollution could treble by 2040 without immediate action, according to the World Wide Fund for Nature. “Binding and specific design requirements for plastic products that lead to a decrease in plastic consumption” are needed, the WWF says.
Companies and investors that fail to act on plastics are exposed to new rules. But regulation can move slowly, and investors need to get ahead of the game. Some asset managers are already driving change.
Regulation expands:
This year should finally see the adoption of the Global Plastics Treaty. In 2022, the United Nations Environmental Assembly adopted a resolution committing to “end plastic pollution”. Fossil fuel companies including ExxonMobil and countries such as Russia and Saudi Arabia have voiced their opposition. But a joint statement from 66 countries last year backed the proposed agreement.
The US has been lukewarm towards the treaty, although it did back limits on plastics production last year. At a state level, California’s Senate Bill (SB) 54 introduces ambitious packaging regulations, including bans on non-recyclable materials. Experts at Systemiq predict state level regulation to progress.
The European Union, meanwhile, has taken an aggressive stance towards plastics. It has banned specific single-use plastics, imposed targets for recycled content in packaging, and promoted the separate collection of plastic waste. The bloc wants to increase the use of recycled plastic in packaging, with targets for minimum recycled content in PET bottles by 2025 and 2030.
These new rules and agreements will have significant impacts for supply chains. Asset managers and owners need to proactively engage to avoid being hit by the fallout from regulation.
Time to engage:
Triodos Investment Management is a good example of an asset manager that has taken a proactive approach to plastics. The manager launched a plastics engagement project in 2023. Triodos engaged with 12 listed companies in a bid to reduce their plastics use.
In 2024, Triodos met with Danone, Henkel and Procter & Gamble to discuss plastics. These are the three companies in its Impact Equities and Bond portfolios with the biggest exposure to plastic pollution. The parties discussed transparency and disclosure. They also considered plastic reduction, recycled content, reusable packaging, and circular economy principles.
The engagement “revealed varying levels of progress toward sustainable packaging, with clear areas for improvement across all three companies”, Triodos said. “While each company is making progress, significant gaps remain,” the manager observed. There are issues “in aligning actions with measurable outcomes and overcoming systemic barriers to sustainability”.
Triodos added that “another notable gap is the lack of consistent and comparable disclosures and definitions”.
Technology is required:
As companies race to adapt to new plastics rules, inconsistencies are likely to occur across the reporting landscape. Technology will therefore be an essential tool in tracking disclosures.
Stewardship teams are pivoting from filling Excel spreadsheets with inconsistent data points. The old ways breed mistakes and even more inconsistencies.
Technology such as the Maanch Engagement Tracker is helping asset owners to decode shifts in trends. Engagement is being increasingly automated, and outcomes are easier to track than ever before. This helps stewardship experts to secure buy-in from senior management, who can see the fruits of their labour.
Plastic is becoming obsolete. So is the traditional way to engage with businesses. While rulemakers take their time to sign global agreements, asset owners can leverage technology at a micro level to make real change.
If you would like a demonstration of the Maanch Engagement Tracker, please book an introduction with our founder and chief executive officer Darshita Gillies via this link.
