Institutional investors are front-running legislative efforts to eradicate ubiquitous single-use plastic packaging, one company at a time.
Shareholder engagements concerning plastic pollution and waste are few and far between but rank among the highest performing shareholder proposals in recent proxy seasons.
The six shareholder proposals seeking industrial waste/pollution reporting that were subject to a vote at U.S.-listed companies in the year-to July 31, 2022, won 52.3% average support, with three exceeding 50%. Proposals of this kind won 29.9% and 39.7% average support, respectively, throughout 2020 and 2021, according to Insightia’s Voting module.
Plastic pollution and right-to-repair proposals have also scored multiple withdrawal agreements. Mattel, Dell Technologies, CVS Health, and Choice Hotels are among the companies this year to commit to plastic and waste reduction targets following investor engagement. In 2021, Target, Keurig Dr. Pepper, PepsiCo, and Mondelez International made similar commitments in response to investor pressure.
Looming legislation
With legislation pending for both plastic reduction and third-party product repair, investors have eagerly lent their support to proposals to ensure companies are one step ahead of regulatory reforms.
In March 2021, the Break Free from Plastic Pollution Act was introduced to the Senate, setting forth requirements for producers of plastic to be “fiscally responsible” for recycling products after consumer use. On June 3, 2022, California Governor Gavin Newsom signed the state’s own Plastic Pollution Producer Responsibility Act, which adopted similar requirements on corporate entities being responsible for waste processing and recycling.
Looming right-to-repair legislation also poses a significant risk to issuers. Since the first bill of its kind in 2014, right-to-repair has been introduced in 34 states and the U.S. Congress. In July 2021, U.S. President Joe Biden signed an executive order directing the Federal Trade Commission (FTC) to develop rules on “unfair anti-competitive restrictions on third-party repair.”
Green leaders
As You Sow and Green Century Capital Management have been spearheading engagement with issuers on both topics, which are proving particularly successful in the food, technology, and utilities sectors.
Green Century’s proposal asking Jack in the Box to report on efforts to produce sustainable packaging won 95.4% support at its March 4 annual meeting, despite management claiming that its environmental legislation team is taking sufficient action to address sustainability. Similar proposals won 59% support from independent Tyson Foods shareholders and 50.4% support at Phillips 66 earlier this year.
“Engaging on plastics pollution is an increasingly important topic for BlackRock Investment Stewardship (BIS),” the world’s largest fund manager said, after supporting a plastic pollution proposal at Amazon’s May annual meeting. “We appreciate when companies who produce or rely heavily on plastics disclose information on product design and lifecycle management.”
Even more impressive is the fact that no right-to-repair proposals have made it onto proxy ballots, since all but one company targeted by As You Sow and Green Century have reached withdrawal agreements to address waste.
In October, Microsoft committed to increasing consumers’ options to repair their devices, in response to a proposal urging the technology giant to reduce its electronic waste. One month later, Apple revealed that it will make parts and repair manuals publicly available, and Dell Technologies soon followed suit.
“This is an encouraging step to respond to the upswell of federal and state activity in the right-to-repair movement,” Kelly McBee, waste program coordinator at As You Sow, said in a press release.