Investing sustainably is not an easy task. Environmental, social and governance (ESG) factors incorporate a vast array of issues for institutional asset owners to address. Some commentators are pushing for a simpler approach focusing on the most urgent environmental priorities such as carbon reduction. However, given the link between climate change and other sustainability challenges such as biodiversity loss and plastic waste, increased complexity in sustainability strategies seems inevitable. In the case of plastics, digging down into a typical global equity portfolio can reveal all sorts of problems.
One symbol of the need for a more forensic approach to building sustainability-focused portfolios is the ubiquitous Pringles tube. The brand was bought by the Kellogg Company from Procter & Gamble back in 2012. Figures published at the time showed total annual sales of the salty snack of USD 1.5 billion in 14 countries. Kellogg boasts an impressive range of sustainability credentials. The firm is listed in the S&P Sustainability Yearbook and is a component of the Dow Jones Sustainability World, FTSE4Good, MSCI ESG and ECPI World ESG Equity indices. It is also rated prime for corporate ESG performance by ISS ESG.
Pringles are sold in a tube that is considered iconic of the brand, but which has also been flagged as practically unrecyclable. The packaging consists of a tube constructed from a sandwich of cardboard and plastic with a metal base. There is also a tear-off lid made of a composite of metal foil and paper. Finally, the tube is capped by a separate solid plastic lid. Pringles have instigated various recycling schemes in some of the markets in which they operate. In the UK, they have a partnership with specialist waste management company Terracycle. This involves consumers bringing the empty Pringles tubes to one of only 330 national collection points, from where they are delivered to a single recycling facility in West Yorkshire that has the capability to process laminated fibre products. Given the extra onus on the consumer to transport the waste packaging one can safely assume that recycling rates remain very low. A quick look at typical UK local authority waste collection guidelines shows that apart from the plastic lid consumers are encouraged to throw the Pringles packaging away. Pringles claim to have recycled over 377,000 tubes since the scheme began in 2019. However product sales figures would indicate that over 100 million Pringles tubes are sold in the UK each year, giving an idea of how many end up in landfill, incineration or simply as litter.
The company states that it is working on their “Next Generation tube of the future”, which is hoped will be “100% reusable, recyclable or compostable by 2025.” In October 2018 the Kellogg Company also signed up to the New Plastics Economy Global Commitment set up by the Ellen MacArthur Foundation. Their 2021 signatory report accurately reflects the unsustainable nature of their value chain, with 99.91% of virgin fossil-based materials used. While the transparency is welcome, there is little indication of progress over the three years covered by the report. Kellogg and Pringles are by no means the only company or product with recycling schemes that do not currently stand up to scrutiny.
The only solution for ESG-focused investors is to look beyond the sustainability commitments and credentials published at corporate level and take the time to dig down into the practicalities of these firms’ value chains. This forensic approach can inform and strengthen effective engagement efforts with portfolio companies. The Principles for Responsible Investment (PRI) has published a detailed guide to investor engagement on plastic packaging. This can help support what can be a very time-consuming process, but one which is worth pursuing to help stem the overwhelming tide of waste produced globally each day while identifying and challenging ESG laggards.
