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Chelsea Robinson

2nd March 2021

Plastic as a business risk

The risky business of plastic

When we think about the plastics crisis, most of us probably imagine huge mounds of waste destined for landfill or a sea creature entangled in a carrier bag. But how often do we think about the other end of the plastics flow, the source of the metaphorical river? It has to start somewhere, and that somewhere is a deep pocket.

The flood of plastic production today is enabled by vast amounts of investment in the sector. These financial flows can also be a force for good and we see them as a key pressure point for turning the tide on plastics. Public money and ambitious government policies will only take us so far, we need companies and industries to make changes too. The future green and circular economy we are striving for will only be possible by using the influence of investment to leverage change.

Risky business

Many investors are already transitioning toward sustainable investment, and the movement is growing. Financial actors are becoming increasingly aware that fossil fuels are no longer a viable investment opportunity. The risks are all too clear in a world that is waking up to the climate crisis.

As the demand for fossil fuel declines, the industry is looking to plastic as its ‘Plan B’ – but plastics pose a similar investment risk. From production to disposal, plastics have huge environmental and climate impacts.  New laws and policies aimed at reducing plastic waste and carbon emissions mean any company with a big plastic footprint has an uncertain future. The single use model has a sell-by date, and changes in the law are making it more expensive for companies to pollute the planet. Not to mention the reputational risk: if the last few years have taught us anything, it is that plastic is a public enemy. Any investor trying to avoid these risks should beware of investing in plastic-intensive companies.

Knowledge is power

Some of the biggest plastic pollution culprits are fast moving consumer goods (FMCG) companies who are not doing enough to stem the flow of single-use plastics. These huge transnational companies (behind many of our household brands) are slow in adopting alternative models like reusables, or redesigning for better recyclability. They are also not disclosing the environmental impacts of their reliance on plastic, or the associated risks – something they are legally required to do.

The wilful ignorance of businesses to the risks posed by plastic has created a ‘knowledge gap’. This is a problem for banks and other financial institutions who have a huge amount of leverage with companies. Without this information, they cannot use their strategies to create shifts in the market. Banks could demand better performance from businesses on their plastic strategies, or decide to invest elsewhere to avoid plastic-related business risks. Better disclosure by companies will lead to better practice by the actors with influence. This positive feedback loop is ClientEarth’s vision for a future less reliant on plastic.

Taking action

We were ahead of the curve on these issues and in 2018 we developed a framework describing the business risks associated with plastics. Since then we have been working on disseminating this concept and taking opportunities to put it into practice.

We have created partnerships with other NGOs – building their capacity to engage with investors and businesses on plastic risk. We have influenced the reform of key legislation relating to plastics and company reporting. We are also carrying out research into both EU and UK law to see how disclosure obligations related to plastic apply in their context.

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