New unexpected threats for investors
2023.01.13 10:17
New unexpected threats for investors
By Kristina Sobol
Budrigannews.com – A rising tide of plastic should concern investors. Money managers have paid close attention to supply chain disruptions and energy security threats as a result of the pandemic and Ukraine’s war. However, as the world continues to drown in packaging waste, major users like Mars, Coca-Cola, and PepsiCo (PEP.O) may be targeted by the public and private sectors.
Progress is disappointing four years after the consumer goods giants agreed to voluntary reduction targets under the New Plastics Economy Global Commitment. According to data from the Ellen MacArthur Foundation, between 2019 and 2021, the packaging used by companies like PepsiCo, Mars, and Coca-Cola used more virgin plastic made from fossil fuels than recycled plastic. Because of this, it seems unlikely that they will be able to keep their promises to reduce its use by 5%, 20%, and 25% by 2025.
In addition, big plastic users are not using recycled materials enough. Only 10% of the plastic packaging that pact signatories use is the latter. In 2021, reusable containers, the most eco-friendly type of packaging, made up only 1.2% of the total, and that percentage is going down.
According to the Organization for Economic Co-operation and Development, despite citizens’ efforts to sort used plastic for collection, especially in Europe, only 9% actually gets recycled each year. 73% of plastic waste in the United States ends up in landfills, where it can take up to 500 years for it to break down. The remainder is either burned or washes up on the shores of developing nations. As annual demand is anticipated to triple by 2060, this situation will only get worse.
The problem with plastic is hard to solve and expensive. Plastic comes in a variety of forms that cannot be combined. Recycling is difficult for some materials or additives. Biodegradable materials can be more expensive than plastic. Even though producing virgin plastic requires less energy, recycling plastic can cost more overall.
However, despite their promise to act, large corporations are in a vulnerable position. Due to its use of plastic, Danone (DANO.PA) is the subject of a legal challenge. By the end of 2024, 175 governments agreed to draft legally binding laws to end plastic pollution. In 34 countries, approximately 70% of respondents to a survey last year support new regulations to combat plastic.
Due to their greater emphasis on sustainability, European investors are more likely to confront domestic laggards. However, rival U.S. late-starters would suffer the most from mandatory recycling quotas if governments decide to implement them. According to the PEW Charitable Trusts, if lawmakers ask businesses to pay for waste management in full, they could face a collective $100 billion annual bill.
In March, a landmark resolution calling for the creation of international, legally binding instruments to eradicate plastic pollution was endorsed by representatives of 175 nations. On November 28, negotiations on the new legal instruments began with the goal of concluding a legally binding agreement by 2024.
From 2025, Germany will require manufacturers of products containing single-use plastic to contribute to the cost of collecting litter in parks and streets through a government-managed central fund. The Netherlands implemented a tax on packaging waste management in 2008.
PepsiCo, the Coca-Cola Company, Nestlé, Danone, and Unilever are among the corporate signatories of the New Plastics Economy Global Commitment, which was launched in 2018 by the Ellen MacArthur Foundation and the U.N. Environment Programme. These companies are likely to fall short of some, if not all, of their targets for addressing plastic pollution. That’s according to the Ellen MacArthur Foundation’s progress report, which was released in November.
The anti-plastic pact’s signatories will use 11.9 million metric tons of virgin plastic together in 2021, which is the same as in 2018. This is an increase of 2.5 percent year-over-year. The report also demonstrated that the proportion of reusable plastic in packaging has decreased to an average of 1.2 percent.
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