The corporate world is facing mounting pressure to report on and reduce its role in the twin crises of climate change and biodiversity loss. The influence of plastics on these crises has largely evaded this pressure so far, but that’s about to change, and the large, multinational oil and gas companies responsible for producing plastic (a group known as ‘Big Plastic’) will face a rude shock.
The pervasiveness of plastics across the global economy is a special subset of corporate systemic financial risk that has been bubbling under the surface, and that risk is threatening to boil over on multiple fronts. By not taking plastics seriously, corporate finance is under threat.
The Taskforce on Climate-related Financial Risks (TCFD) Taskforce on Nature-related Financial Risks (TNFD) have set expectations globally for the disclosure and management of climate- and nature-related financial risks. Now, a new global taskforce is emerging, which will combine inequality-related and social-related financial risks to reduce inequality and other social issues created by the private sector. These frameworks, and the disclosures made by organisations under them, help investors price and value assets and allocate capital, and companies that do not address these risks sufficiently are facing increasing financial, legal, and reputational ramifications. Plastics uniquely intersect with all three of these financial risk types (climate, nature and social inequality), which means that the way an organisation responds to the plastic crises could make or break its financial sustainability.
Plastic is a material that we all interact with on a daily basis – it is in our kitchens, clothes, furniture, and we are also increasingly likely to find it on our beaches and in our waterways. The ways in which plastics are visible to, and influence us, in our daily lives are just the tip of the iceberg.
Microplastics, the result of plastic waste breaking down in the environment into pieces less than 5mm in length, have now been found even in the most isolated locations on Earth, including Antarctic sea ice, remote uninhabited islands, and our deepest ocean trenches. This, paired with their presence in fresh food, drinking water, and even the air we breathe, has resulted in alarming concentrations of microplastics in the digestive systems of a variety of species, including, and especially, humans. We now know that normal household practices, like microwaving food in plastic containers, is introducing microplastics into our bodies with potentially frightening results. One study has found that 80% of humans tested had microplastics in their blood, which likely damages human cells and puts pressure on vital organs, and microplastics have even been found in human placentas.
While we can make assumptions about what the health impacts of plastics might be, it is difficult to be exact because of the ethics involved in deliberately introducing plastics into peoples’ bodies to study their effect, as well as the complexities around attribution and causation. What we already know is mostly based on animal studies, but as our scientific methods mature and our ability to link plastics with health issues increases, what we are finding is increasingly disturbing. A study published in March, led by the Boston College Global Observatory on Planetary Health in partnership with Australia’s Minderoo Foundation and the Centre Scientifique de Monaco, found that “current patterns of plastic production, use, and disposal are not sustainable and are responsible for significant harms to human health … as well as for deep societal injustices”, and that plastics are responsible for health issues ranging from cancer to lung disease, and even birth defects.
This fast-growing field of research builds on the existing knowledge of the environmental impacts of plastics, and presents a real, high-stakes legal threat to Big Plastic. The persistence of microplastics and their associated chemicals in animals leads to bioaccumulation in the food web – they linger in digestive systems, and as a result, predatory species often build an excess of plastic from prey. The physical and chemical impacts of plastics in the digestive systems of marine animals make them more susceptible to disease, and also impact growth and reproduction. While most of us know about the impact of plastic on animals like turtles and seabirds, filter feeders like blue whales, manta rays, mussels and oysters, are particularly susceptible, and can act as indicator species for environmental contamination.
One study found that over 94% of the world’s oysters contain microplastics – an alarming indicator of the persistence of plastic in our oceans. Coral reefs are a marine ecosystem that is particularly vulnerable. Reef systems already face pressures from climate change-linked marine warming, industry runoff, and overfishing, and plastics are impacting everything from the physical structure of reefs to disease transmission. A recent study published in Nature found that 77 out of 84 global reefs surveyed, which included some of the planet’s most remote and deepest reefs, contain alarming concentrations of plastic.
Plastic pollution also makes a significant contribution to climate change. The plastics industry is now the fastest-growing source of industrial greenhouse gases in the world. In a recent Australian report commissioned by the Australian Marine Conservation Society and WWF Australia, Australia’s plastic use (taking into account emissions from both production and waste management) was revealed to have produced more than 16 million metric tons of greenhouse gas emissions in 2020, which is ‘equal to the emissions of around 5.7 million cars on the road every year’.
If no action is taken, greenhouse gas emissions from the production, recycling and incineration of plastics could account for 19 per cent of the Paris Agreement’s total allowable emissions in 2040 to limit warming to 1.5 degrees Celsius. By this fact alone we can no longer afford to ignore the consequences of our deep reliance on plastics.
In response to the increasing awareness of the impacts of plastics, in March 2022, an historic agreement was reached in Nairobi by the United Nations Environment Assembly to develop an international, legally binding instrument on plastic pollution, including the marine environment. This instrument, which has since been dubbed the ‘plastic treaty’, was widely recognised as the most ‘significant environmental multilateral agreement since the Paris accord’. Since the plastic treaty was first proposed, the appointed Intergovernmental Negotiating Committee has met twice to develop the instrument, the most recent session concluding in Paris in June. The 175 countries represented have now agreed on the building blocks of the treaty, which will be discussed in the next round of talks in Kenya in November. A legally binding agreement on plastic pollution will need to be developed and signed by 2024. As this first draft is being developed for November talks, the UN Environmental Programme is welcoming written submissions from observer organisations (deadline 15 August 2023) and members of the committee (deadline 15 September).
While a plastic treaty is a step towards protecting our natural environments from the impact of plastic, the increasing awareness and pressure for companies reliant on plastic is presenting a new, very real financial risk.
A Minderoo Foundation report, The Price of Plastic Pollution: Social Costs and Corporate Liabilities, published last year, attempts to quantify the social costs and corporate liabilities emerging from all forms of plastic pollution. The report estimates that corporate liabilities from plastics litigation triggered in the period of 2022-30 will exceed US$20 billion in the United States alone, while social costs are estimated to be hundreds of billions of dollars per year. The discrepancy between these two estimates is expected to decrease in time as systems of justice catch up, and the science of attributing specific causes to complex outcomes becomes more sophisticated. The report identifies five pathways across which corporate liabilities are likely to occur: plastic-related chemicals and bodily injury; micro and nano plastics (MNP) and bodily injury; MNP and property damage; environmental damage; and misleading behaviour, or greenwashing. “The exposures occurring now and in the near future could significantly affect the plastics industry, and their insurers, and therefore require the immediate attention of both,” it says.
Some companies are already facing billions of dollars’ worth of legal claims over the damage caused by Big Plastic. Companies sued in recent years over plastic-related matters include Coca-Cola, Walmart, 7-Eleven, and French food company Danone. Even government bodies aren’t immune – a US community group has filed a lawsuit over the Environmental Protection Agency’s approval of a cancer-causing fuel made by Chevron out of discarded plastic waste.
Big Plastic, and those reliant on it for business, will eventually be held accountable – some companies sooner than others. When companies don’t take plastic seriously, and don’t make meaningful attempts to measure, report and take action on their plastic consumption and waste, it won’t just be the planet and the people who suffer, it will be the companies themselves, as the financial, legal and reputational risks continue to bubble to the surface.
