Green investors see growing anti-ESG mood in plastics votes

Plastic pollution shareholder resolutions got less support this year at major public companies like Amazon and ExxonMobil, a development that green investors say reflects rising anti-ESG sentiment around plastics issues.

Those same green investment advocates, however, also argue that the picture is nuanced. They say there are plenty of signs shareholders remain concerned about risks companies face from regulations, litigation or moves away from single-use plastics.

But amid congressional hearings and more public questioning of environmental, social and governance initiatives broadly, support for plastics ESG proposals fell this year.

A resolution at Amazon, for example, asking the company to set a plastics packaging reduction goal was supported by 32 percent of shareholders at its annual meeting in May, down from 49 percent last year.

As well, a shareholder proposal asking ExxonMobil to report on the financial impact of less long-term global demand for single-use plastics, along the lines of the Pew Breaking the Plastic Wave report, got 25 percent support this year, down from 36 percent last year.

And a similar proposal this year asking Phillips 66 to study the impact of less virgin plastic demand received only 11.8 percent support.

That's well off the 50.4 percent support in 2022 for a related resolution that asked Phillips 66, which owns part of resin maker Chevron Phillips Chemical, to study shifting to a business model based on more recycled plastic production.

"The ESG pushback definitely had an impact suppressing plastics votes but also votes in most other ESG topic areas," said Conrad MacKerron, senior vice president at shareholder advocacy group As You Sow, which pushed plastics resolutions at each of those firms.

A June report from the Sustainable Investments Institute said shareholder votes for ESG resolutions fell sharply from a 2021 peak and were at their lowest level since 2017.

ESG critics in business and Congress say they're not good for financial bottom lines and are a backdoor way to put political agendas into boardrooms.

Green investment groups, however, argue ESG can help companies identify and respond to emerging concerns, reduce risk and make operations more sustainable.

Even with the ESG backlash, MacKerron said plastics proposals got more support than climate-related resolutions, and he pointed to success with plastics votes at Dow Chemical and some major fast food and consumer brands.

"Support for resolutions were down across many issues this year, including plastics related proposals, likely due to retrenchment by large money managers under pressure from conservative politicians fomenting broad anti-ESG sentiment," he said. "Given that sobering context, we were pleased overall with the results as the drop in support was less than for some climate-related proposals, perhaps because climate was a primary focus of attacks on ESG."

He called the 25 percent support at ExxonMobil "still a solid result."

And he noted more than 36 percent support for reusable packaging resolutions at both Yum Brands Inc., which owns KFC and Pizza Hut, and Restaurant Brands International, the parent company of Burger King and Popeyes.

"[It's] evidence that investors continue to strongly support proposals seeking actions that will curb plastic pollution," MacKerron said. "Our first-year proposal at Dow asking the company to report on the impact of reduced global demand for virgin plastic also did well with 30 percent support."

Last year, Dow successfully fought to remove a similar AYS proposal from the company's annual meeting.

As You Sow and others say it's not necessary to win a shareholder vote and that support above 10 or 20 percent often leads to dialogue and some changes.

Green shareholder groups pointed to other wins.

They took partial credit for Kraft Heinz and Church & Dwight announcing they would cut virgin plastics use by 20 percent and 30 percent, respectively. Environmental investors filed resolutions, started negotiations and then withdrew those proposals after the companies made their commitments.

MacKerron said with those two, seven global brands have now made specific commitments to AYS to cut virgin plastics use.

Similar to the Yum and RBI resolutions, another green investment group said it's also seeing more interest this year in reusables.

Colgate Palmolive and Keurig Dr Pepper both announced general commitments to expand reusable packaging, following negotiations with Green Century Funds, said Douglass Guernsey, shareholder advocate at GCF.

GCF had filed resolutions calling for plastics reductions at both firms but withdrew them when the two companies made the reusables announcements.

"Plastics refillable and reusable commitments are a growing method for addressing plastic reduction," Guernsey said. "Innovators are searching for other ways to address plastic pollution besides absolute reductions, virgin reductions and designing for circularity."

He pointed to a goal set last year by Coca-Cola Co. to have 25 percent of its beverages sold in reusable or refillable packaging globally by 2030, which came after shareholder engagement.

"I suspect we will see more commitments like this in the coming years," he said.

But there are also signs progress can be difficult.

The environmental group Oceana said in an Aug. 3 news release that PepsiCo Inc. was reporting its use of virgin plastics increased 11 percent from 2020.

And it called on the company to step up efforts around reusable packaging, after Pepsi's latest sustainability report, released in June, said it was having data problems reporting on reuse.

Last year, PepsiCo said it would increase reusable beverage packaging globally from 10 percent to 20 percent by 2030, after As You Sow filed shareholder resolutions.

"PepsiCo needs to stop delaying and take its reusable goal seriously," said Dana Miller, Oceana's director of strategic initiatives.

Even with the falling vote totals this year and ESG pushback, both As You Sow and Green Century said there are signs investors remain concerned over plastics.

Guernsey pointed to an open letter in May from 185 investors managing $10 trillion in assets calling on consumer goods companies and retailers to act more swiftly to reduce their reliance on single-use plastic packaging.

The letter, organized by the Dutch Association of Investors for Sustainable Development, said companies in the plastics chain are "exposed to significant and mounting plastic-related risks" from bans, taxes, extended producer responsibility legislation and plastics-related litigation.

The 185 investors had three primary asks of companies: support ambitious policy efforts like the global plastics treaty, move away from single-use plastics and address potential chemical toxicity in packaging and recycled plastics.

"I think it does highlight the level of risk companies are facing on plastics pollution at a regulatory level," Guernsey said. "This will influence how directors are thinking about exposure to plastic pollution."

Similarly, MacKerron argued that this year's vote results show continued concern about plastics, even if it's too soon to say if lower support is a permanent shift or temporary blip.

"Overall, plastics votes were similar to 2021 vote results, which were still impressive," he said. "The big bump provided last year by money managers who expanded the areas in which they supported proposals may have been a singular event, or just a temporary pullback due to enhanced anti-ESG scrutiny."

He predicted political opposition to ESG will start to fade.

"My sense is that it's a temporary political ploy by conservative politicians and they will lose interest in it and move on to other targets next year and votes will gradually increase again. But it's really too soon to tell," he said.

Guernsey said investors increasingly see ESG as a valid tool for assessing risks, even if some fund managers want to keep their heads down amid ESG political debates.

"I think that large asset managers are less likely to vote or make public statements because they are concerned about political pushback," he said. "But internally, asset managers and companies have more data and have higher expectations than they did only a few years ago."

Guernsey said the anti-ESG sentiment is in some ways a response to the gains ESG has made.

"I think that after the past few years of record votes, some pushback is expected," he said.

As You Sow plans to press consumer brands to start voluntary extended producer responsibility programs to provide "greatly increased financial support" for recycling programs until packaging EPR laws are more established in the U.S., MacKerron said.

Four states passed EPR packaging laws in 2021 and 2022, but the effort seemed to stall out somewhat in state legislatures this year.

"It is great that four states have adopted EPR but it could easily take a decade to have a national EPR law or a majority of states with formal EPR," MacKerron said. "In the interim, we want companies to step up big time and provide needed financial support in areas without EPR."

He pointed to a study from The Recycling Partnership that said modernizing recycling infrastructure in the U.S. would cost $17 billion, as well as TRP's Plastic IQ data tool that estimated that companies should be contributing $88 to waste management costs for every metric ton of plastic they use.

"Lagging U.S. recycling rates are clearly a huge problem, cited by many brands as a reason they struggle to meet recycled-content goals," MacKerron said. "Our proposal encourages companies to also support formal EPR legislation that would level the playing field for corporate monetary contributions to bolster recycling rates."