Plastics companies and investors are not fully considering long-term financial risks from reputational damage and regulations impacting the sector, including new rules that could come from a global plastics treaty, according to a new report.
The report from Planet Tracker said a few companies are being more forthcoming to shareholders, naming Unilever plc, Borealis, Berry Global and Uflex. In contrast, it listed Ineos Styrolution, PetroChina, Jindal Poly Films and Tysons Foods on the bottom of its disclosure rankings.
The group, which focuses on environmental and climate issues through a financial lens, said publicly traded firms in the plastics chain are generally not giving investors enough information about long-term financial liabilities they could face as plastics attract increasing regulatory and public scrutiny.
"The plastics industry today faces one of the longest lists of risks of any sector, which should be on the mind of every executive and every financier," said Thalia Bofiliou, senior investment analyst for plastic at Planet Tracker, in a statement. "Plastic companies across the value chain are displaying a dangerous complacency to very real, and very material, risks."
She said companies should disclose more information on their business exposure from CO2 emissions, toxic discharges, chemical additives and land, sea and air pollution from plastic.
The report, Exposing Plastic Risk, looked at 8,200 documents, transcripts and filings from 59 plastic resin companies, packaging makers and consumer goods firms using plastics, and found that 83 percent of the documents did not discuss risks.
It did find some changes over time.
Overall disclosures have increased five-fold in the last five years, from 2,600 in 2018 to 12,000 in 2022, which it called a positive trend and growing recognition of risk.
But Planet Tracker also said risk statements in the transcripts of management calls with stock analysts went in the opposite direction, declining since 2020, which "suggests management rarely discussed plastic related risks, and/ or participants expressed little interest in probing this line of questioning."
The group urged investors to ask companies about plans to transition away from fossil fuel-based feedstocks and how they are "reducing their toxic footprint."
And it called out companies for what it said was underplaying risks in areas like broad pollution concerns, microplastics and feedstock sourcing.
It said 73 percent of all plastic risk disclosures focused on circularity, while feedstock and pollution appeared in only about 6 percent of disclosures. Mentions of risk to business models from toxics issues, microplastics and refillable packaging were below that.
"Our analysis shows that throughout the plastic value chain the main focus of disclosures is on circularity," the report said. "Unfortunately, throughout the supply chain, little risk is attached to pollution, feedstock and product characteristics — perhaps of more immediate concern to investors."
The new report follows a June study from the group that looked at financial risk to 150 companies. It found they faced between $20 billion and $100 billion in liability and litigation-related risks in the United States for plastics concerns by 2030.
Those costs are starting to show up in some state laws. California's new extended producer responsibility law, for example, requires consumer product companies and plastics firms to collectively pay $500 million a year for 10 years, starting in 2027, to clean up legacy plastic pollution.
The report said companies face financial risk from more regulations, and it noted the ongoing global plastics treaty talks.
"As these risks become more widely recognized, there has been an increase in new regulations focused on tackling various forms of plastic pollution," the report said. "If the ongoing Global Plastic Pollution Treaty negotiations are successful in limiting plastic pollution, expect more regulation and controls."
One plastics industry analyst said the report "makes a good point" about risks companies face but said the level of risk also depends on where a firm sits in the supply chain and on geography.
"Planet Tracker's suggested goal of moving away from fossil-based feedstocks to reduce risk sits mainly with plastic resin producers, though plastic processors and users can certainly play a role by requesting alternative feedstock resins in much the way that they have been pushing for more post-consumer and recycled content," said Phil Karig, managing director of Mathelin Bay Associates LLC.
He also said risk reporting could be strengthened by being included in voluntary measures like the Ellen MacArthur Foundation's Global Commitment and the World Wildlife Fund's plastics initiatives, while the plastics treaty is being negotiated.
"Enhanced risk reporting could be added to these voluntary efforts while the global treaty is being crafted," Karig said. "Another, perhaps more powerful way to encourage additional reporting is by appealing to the large investment firms and private equity companies that already include various ESG variables in their announced investment criteria."
Another packaging and plastics industry consultant, Peter Schmitt, said the report is part of a "sea change" of stakeholders seeking data about environmental risks, regulatory compliance, litigation, reputation damage and shifts in market demand or plastics use.
"It reinforces a larger problem: the narrative about plastics is extremely negative," said Schmitt, managing director of Montesino Associates LLC. "'John and Jane Public' hear, almost daily, about microplastics killing the oceans, or PFAS in their blood. The industry cannot afford to have stakeholders join in that downward spiral of perception as to what plastics do to the world.
"It needs to speak credibly to the public, a huge but critical undertaking that is seriously overdue," he said.
In the resin sector, the firms that ranked highest for disclosure were Borealis, LyondellBasell, Dow, Braskem and Reliance, while Formosa Plastics, Saudi Aramco, Sinopec, PetroChina and Ineos Styrolution ranked lowest.
Among packaging converters and processors, Berry, Uflex, Huhtamaki, FP Corp. and Guala Closures ranked highest for disclosure. Winpak, Taiwan Hon Chuan, Intertape Polymer Group, Rengo and Jindal ranked lowest.