Keurig Dr Pepper Inc. has agreed to pay a $1.5 million fine to settle a Securities and Exchange Commission probe into whether it misled investors about the recyclability of its K-Cup single-use beverage pods.
The company neither admitted nor denied the findings in the order, announced Sept. 10 by the SEC, but the agency said the beverage maker erred in not disclosing relevant information casting doubt on K-Cup recycling in its 2019 and 2020 annual reports.
The SEC said the company claimed in those annual reports that recycling facilities "[validated] that [K-Cup pods] can be effectively recycled," without telling investors information it found that questioned the recyclability of the popular single-use pods.
"Keurig did not disclose that two of the largest recycling companies in the United States had expressed significant concerns to Keurig regarding the commercial feasibility of curbside recycling of K-Cup pods at that time and indicated that they did not presently intend to accept them for recycling," the SEC said.
The agency said that Keurig Dr Pepper research showed that environmental concerns were a significant factor in consumer decisions about buying a Keurig brewing system.
"Public companies must ensure that the reports they file with the SEC are complete and accurate," said John Dugan, associate director of its Boston regional office. "When a company speaks to an issue in its annual report, they are required to provide information necessary for investors to get the full picture on that issue so that investors can make educated investment decisions."
The SEC said the company, which has one of its two headquarters in Burlington, Mass., also agreed to a cease-and-desist order. It paid the $1.5 million civil penalty to settle the SEC's charges.
Keurig Dr Pepper did not respond to a request for comment but told CBS News that it encourages consumers to check whether their local recycling programs accept the pods.
"Our K-Cup pods are made from recyclable polypropylene plastic, ... which is widely accepted in curbside recycling systems across North America," a company spokesperson told CBS.
"We continue to encourage consumers to check with their local recycling program to verify acceptance of pods, as they are not recycled in many communities," the company said. "We remain committed to a better, more standardized U.S. recycling system for all packaging materials through KDP actions, collaboration and smart policy solutions."
An environmental group that has been active in plastics recyclability claims said the case shows that the SEC considers false recycling claims material to a company's business, with implications for publicly traded plastics firms.
"The SEC effectively claimed that Keurig was inflating their share price by falsely claiming that their products are recyclable," said Jan Dell, founder of the Last Beach Cleanup. "I think that the same argument [can] be made on ExxonMobil and other plastics in a very big way since recycling claims on their plastic products are critical to sales of plastics. Many consumer surveys prove that consumers purchase products based on recyclability."
Dell pointed to surveys in 2020 and 2022, conducted by Greenpeace, that showed that only one of 375 material recovery facilities for processing curbside recycling in the U.S. explicitly said it accepted the polypropylene K-Cups for recycling.
She said the Federal Trace Commission's Green Guides require that 60 percent of the U.S. population have access to recycling for a company to claim recyclability, and that it must have 20 percent acceptance for a company to tell consumers to check locally for recyclability.
Dell said that she believes California's SB 343 ramped up recycling labeling law, which goes into effect in 2025, will not allow KDP to make "check locally" recyclability claims on the K-Cups.
Dell said that 29 percent of the U.S. population has access to recycling PP dairy tubs.