How should businesses tackle risks posed by the shift away from plastics?
Much is made — not least on this very website — of the crucial importance of measuring, disclosing and addressing the increasingly pressing risks posed to businesses and their supply chains from climate change and the ongoing shift towards a low carbon global economy. And rightly so.
Yet it would be naïve to paint climate change as the only major environmental business risk companies face. After all, as many businesses are now acutely aware, plastic pollution, the issue throw into the glare of global consumer attention by Sir David Attenborough on the BBC's "Blue Planet 2" documentary series last year, presents a huge, pressing problem for companies to grapple with.
Over the past six months, there has been an endless slew of plastic straw, cup and bottle commitments from corporates, spurred in part by policy pledges and regulatory consultations from both the U.K. government and Brussels.
Just last week, for example, Coca-Cola GB announced a partnership with Merlin Entertainments to offer half-price tickets to the latter's U.K. theme parks in exchange for punters handing in used plastic drink bottles for recycling. The summer trial will see on-site reverse vending machines installed at the entrances to Alton Towers, Thorpe Park, Chessington World of Adventures and Legoland Windsor in which people can deposit empty 500ml bottles and receive a 50 percent discount on their tickets in return.
Another corporate, EY, also announced plans to stop providing single-use plastic and paper cups across all of its U.K. offices, switching instead to reusable alternatives. Alongside previously announced plans to phase out plastic cutlery and catering utensils, it forms part of the professional services giant's goal to shift all of its offices away from single-use plastic by the end of 2018. Achieving the overall goal is expected to reduce consumption of single-use plastic items by 7.7 million pieces or 57 tons each year.
It also follows U.S. food service giant Aramak's pledge July 24 to reduce its use of plastic straws by 60 percent by 2020, accounting for a cut of around 100 million plastic straws a year.
Despite these and many more high profile commitments from corporates, though, far from all businesses recognize the importance of the trend and are taking decisive action.
Yet as a new report from environmental law group ClientEarth makes clear, businesses face serious material business risks from their involvement in creating plastic waste, and should therefore take action to guard against potential legal, reputational, transitional and physical fallouts.
"With the amount of plastic waste literally choking our marine environment, there are serious risks for companies that don't move fast enough in responding to the business risk associated with plastic waste," warned the report's author, ClientEarth wildlife lawyer Tatiana Lujan. "Governments are acting really quickly on regulation and companies in general are unprepared. Within the space of a few months, we've already seen outright bans on single-use products and higher recycling targets as well as proposals for new taxes and expensive 'polluter pays' type schemes."
As a result, regulatory changes arising from the transition to a more circular economy are set to hit unresponsive companies with new laws that will have major impact on demand for plastic products and materials, potentially ramping up business costs. This is not a hypothetical concern. Earlier this year, the share price of European packaging producer RPC fell 15 percent amid fears of potential packaging regulations. As more companies follow the lead of the likes of EY, Aramak and Marriott and actively slash demand for single-use plastics, manufacturers of such products are seeing once-reliable revenue streams disappear.
Physical risks also dovetail with an environmental incentive to tackle plastic waste, as polluted environments can disrupt supply chains, infrastructure and productivity. This potentially can have knock on impacts on major industries, as illustrated, the report noted, by the potential impact of plastic pollution on fishing and tourism industries.
That's before even considering the reputational damage to companies which fail to take strong enough action on plastic pollution in the eyes of their customers, a situation which can put off investors, hit share prices and even result in a company losing its license to operate. Moreover, as the rise in litigation against companies over climate change has shown — much like legal wrangles over the health impacts of tobacco in the past — corporates increasingly could face legal challenges from parties which have suffered loss or damage from plastic pollution.
Yet even for those companies which do take action, in their rush to make headline-grabbing pledges to ban single-use plastics, there is also a danger of giving too short shrift to the details of how plastic waste policies should be enacted in practice and what their wider impacts might be. In switching from plastic to biomass-based straws and bags, some firms have faced questions about whether their well-intentioned moves actually could have a worse impact on climate change.
All in all, although potential solutions are undoubtedly complex, the sudden rise to prominence of the plastic waste crisis should increase pressure on businesses to work with their suppliers to develop strategies that are as low risk as possible, ClientEarth argued. And given the green NGO has been such a major thorn in the side of governments around the world in the courtroom — most famously in the U.K. on air pollution — it is perhaps a warning worth heeding.
So how should businesses address the myriad risks they face from plastic waste? As a first step, companies should seek to measure their plastic footprint, assess the associated risks they face and develop a template for accurately reporting and disclosing them. Then, of course, action plans should be set out to reduce the use of avoidable plastic in business practices and supply chains in order to guard against future shocks down the line.
Just as Lord Stern's 2006 report explained how the global economy had failed price in the cost of greenhouse gas pollution, Lujan argued the world also has failed to adequately price in the economic cost of plastic pollution.
"Currently, plastic waste is an externality for most companies, with society and the natural world bearing the burden of plastic pollution," she said. "Little thought is given to things like packaging once the product it contained has been consumed and profits generated for its creator. However, this is changing and plastic-intensive companies need to be prepared for transitional, reputational, physical and legal risks from their involvement in the plastic pollution crisis."
It remains to be seen quite when a future deluge of plastic pollution cases winds up in courtrooms, but prudent businesses already will be working to ensure it is not their brands which end up in the dock, with their reputations all washed up as a result.