ExxonMobil investors reject plastic risk study

Shareholders at ExxonMobil Corp. voted down a proposal from environmental investment groups on May 29 calling for the company to examine how global efforts to cut plastics use will impact its bottom line, with the company saying it does not see significant risk.

But the green groups, including United Church Funds and As You Sow, said investors need more details on economic risks to ExxonMobil, as global brands look to reduce single-use plastics and as political pressure mounts from the plastics treaty and other legislation.

As one example, they pointed to calls from major consumer product makers within the treaty to have that agreement create a path toward less plastic production.

About 21 percent of ExxonMobil shareholders voted for the UCF proposal at the company's annual meeting, and the company noted in a statement that was down from about 25 percent last year.

Support was even higher in 2022, when a little more than one-third of ExxonMobil investors backed a similar proposal.

But the plastics proposal also had the most support of any shareholder resolution this year at the company. The green groups called it solid backing.

A similar proposal only got 11.7 percent support at Phillips 66 Co. in a shareholder vote in mid-May, down from 50 percent two years ago.

Shareholders at Chevron Corp. also voted down a proposal for a plastics demand reduction study at their May 29 annual meeting, with only 7.6 percent supporting the As You Sow resolution.

At ExxonMobil, the opposition to the plastics resolution is part of a larger pushback the company is mounting against such environmental and social shareholder resolutions.

Ahead of the stockholder meeting, the company took the unusual step of suing in federal court to try to block a separate climate related disclosure resolution.

And in its proxy report before the annual meeting, it called As You Sow part of a "professional activist consortium" pushing ideology-driven policies that will keep the company from growing to benefit investors.

ExxonMobil Chairman and CEO Darren Woods sharply suggested at the annual meeting that the plastics resolution is part of a larger anti fossil fuel agenda.

"This proposal highlights As You Sow's well-documented anti oil and gas agenda that drives their serial attacks on our company and others," Woods said. "For the third consecutive year, the proponent is asking us to waste our investors' time and resources on a narrow, outdated and overly prescriptive report tied to an unrealistic future scenario."

As You Sow and UCF want the company, which some reports say is the world's largest maker of plastics sold into single-use applications, to use a widely cited report from the Pew Charitable Trust that estimates that cutting plastic pollution 80 percent by 2040 will reduce plastics demand by 30 percent.

ExxonMobil, however, said in its proxy report that in the Pew scenario global plastics demand would only fall by 5 percent, representing only a 1 percent hit to earnings, and that would not pose a significant financial risk to the company.

"There's an unwarranted level of attention to a handful of actual and proposed bans that are primarily focused on things like plastic straws, cutlery and takeaway containers," Woods said. "Current bans are location specific and don't represent a significant impact on our business, and it wouldn't even if bans were enacted more broadly."

Woods pointed to challenges with the availability and scalability of alternatives to plastic like paper or compostable feedstocks like seaweed, saying they could cost up to 185 percent more and that there isn't enough composting infrastructure to manage them.

"Properly managing plastic waste is the solution, not banning plastics," Woods said. "Plastics are critical to many of the products we all use, like the medical equipment that saves lives or the packaging that preserves food."

He said the green investors ignored that the company is investing in chemical recycling of plastics, advocating for more recycling infrastructure and is a founder of the Alliance to End Plastic Waste.

But the green investors said in a presentation at the shareholder meeting that ExxonMobil faces direct financial risk from other global companies looking to reduce plastics use as a way to cut pollution.

Matthew Illian, director of responsible investing at UCF, pointed to global brands like Coca-Cola Co., Unilever plc and Walmart Inc. that are advocating within the plastics treaty talks for signals to reduce plastic production, particularly virgin fossil-fuel based plastics.

He said those companies and others are part of the Business Coalition for a Global Plastics Treaty.

"Coke and Unilever have already committed to reduce their single-use plastics," Illian said. "The action of this coalition alone provides sufficient impetus for Exxon to further assess its dependence on growth in virgin and single-use plastics."

He argued that increasing recycling will not be enough to control plastic pollution and said ExxonMobil should assess risks from market scenarios with less plastic demand.

"The waste being generated by single-use plastics is at the heart of the plastic pollution crisis," he said. "The problem is not simply mismanaged plastic waste. There is simply too much plastic being produced that cannot be properly managed."

In a statement after the vote, As You Sow Senior Vice President Conrad MacKerron said the company should take the twenty percent support from shareholders as a message to "face the reality" of production limits for single-use plastics.

He said the decline in shareholder support is part of a broader pushback from "conservative political forces" against such shareholder resolutions, rather than factors at any particular company.

"The solid vote at ExxonMobil asking it to prepare for a future with less plastic production aligns with calls from scores of countries negotiating a global plastics treaty, and major brands using plastic packaging, all asking plastics producers to curtail production," MacKerron said.

"One-fifth of investors supporting our proposal sends a strong message that the company has not taken sufficient action and should face the reality that production cuts for resins involved in single use plastics will be necessary and show investors how it will manage these growing risks," he said.