This webcast provided more background on the business topics that have the ability to cripple business continuity and pose significant regulatory and reputational risk. Due to the continuously increasing growth of plastic packaging and the unsustainable linear ‘take-make-waste’ economy, the importance of packaging is growing.
Therefore, S&P Global updated all questions within the Packaging criterion in the CSA assessment in 2020 to more accurately reflect the financially material topics. A new question devoted to plastics was introduced, and disclosure metrics across all materials expanded to include targets, as well as production volumes and data coverage details. The total number of companies assessed for this criterion increased to 12 in 2020. S&P Global anticipates that the criterion will become even more important in the future.
The use of packaging and especially plastic packaging is expected to double, while at the same time the volume of plastics ending up in the ocean will triple and the total stock of plastic in the ocean will quadruple by 2040. Consequently, plastic soups evolve within our oceans, threatening marine and terrestrial ecosystems. With the contentious growth of plastic production and associated pollution, the negative impacts evolving from plastic is increasing and goes beyond the environment.
Those negative effects are currently expressed in reputational and regulatory risks (existing risks) for companies, which can also transform into future risks, such as missed business opportunities deriving from circular economy as an innovation opportunity. Moreover, not challenging the status quo and continuing doing business-as-usual will lead to threats like externalities (costs). It was estimated that with a business-as-usual scenario, by 2040, businesses will face an annual financial risk of $ 100 billion.
Therefore, reducing plastic packaging, increasing recyclable packaging and finding sustainable solutions is essential. With increasing importance, governments have also turned their attention to the topic of packaging, especially plastic packaging. To solve packaging problems, several countries implemented regulations on single-use plastics and both the European Union, and the US have realized legislations, such as 25% minimum recycled content thresholds and a European plastic tax.
S&P Global splits the Packaging criterion into three questions. Firstly, Packaging Commitment, where S&P looks for a company’s packaging strategy. This should include a group-wide commitment and associated programs in place. Secondly, the question Packaging Materials and thirdly Plastic Packaging replaced in the 2021 assessment the former question “Packaging Targets”. The question on non-plastic packaging materials requires a disclosure of the different packaging materials (wood, metal and glass) and plastic packaging is broken down into content types, like the percentage of compostable packaging.
Furthermore, S&P Global clarified the definitions used for recyclable and compostable packaging, which were aligned with the Ellen MacArthur Foundation’s glossary. Recyclable packaging cannot just be seen from a technical property perspective, but also within the geographies, meaning where the packaging or component is recyclable.
Therefore, a packaging or packaging component is recyclable if it is successful post-consumer collection, sorting, and recycling is proven to work in practice and at scale. Consequently, this differentiates between what is technically recyclable and what recycling infrastructure is in place, in order to avoid classing packaging as recyclable in geographies where this recycling system is currently non-existing. Moving from technical to in practice and at scale is still a big challenge on recyclability, especially on flexible, also called multi-level packaging.
The same accounts for compostable packaging, as compostable packaging relies on an appropriate infrastructure as well as cross-industry alignment to be in place to ensure that recycling is actually happening. Reusable packaging is to be included within the inclusion of recycled content row. Companies that do not sell the products but offer them on a complementary basis to their customers, like airlines, casinos or hotels are requested to fill in the percentage of costs of procurement instead of of goods sold.
Please find the highlighted developments and performance norms in more detail in the downloadable summary on top of the page.
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