Embracing ESG To Counter Plastic Pollution

ESG (Environmental, Social, and Governance) has become a very familiar word with companies and investors these days. There is a huge increase in ESG assets. According to a Bloomberg study, sustainable investing has now gone mainstream, with an estimated $37.8 trillion in assets under management in FY2022.

According to the same study, global ESG assets are on track to exceed $53 trillion by FY2025. Companies are also striving to improve their ESG performance to attract investors and meet regulatory requirements and cater to demands of their customers.

Whenever ESG is mentioned, and the discussion moves to ‘E’ the primary focus is on global warming which is a major issue in today’s world. The focus centres around what steps companies are taking to curb emissions, carbon and greenhouse gases.  While it is important for companies to address the climate issue which is critical, it is also necessary to address the issue of plastic pollution racking the world today.

The petrochemical sector is regarded as the backbone of plastic production and a critical sector of any economy. A key output of the petrochemical industry is the production of plastics such as polyethylene, polystyrene, and polypropylene.    

The growing production and consumption of plastic is resulting in a growing amount of plastic waste being generated every day. India is estimated to generate about 3.4 million tonnes of plastic waste every year and it is estimated that only 30 per cent is recycled (as per a report from Marico Innovation Foundation). As per the Central Pollution Control Board (CPCB) reports, plastic contributes to 8 per cent of the total solid waste, with Delhi producing the maximum quantity followed by Kolkata and Ahmedabad. The major challenge, however, is segregation and re-aggregation of plastic waste streams. Recycling is a preferred way to deal with plastic waste but a key worry is the unsegregated waste that lies untreated in the environment.  The major components of plastic waste (in terms of tonnage) are:
•    Polyethylene terephthalate (PET) water and soft drink bottles, food jar
•    Polyvinyl chloride (PVC) cables, plumbing pipes
•    High-density polyethylene (HDPE) shampoo bottles, packaging
•    Low-density polyethylene (LDPE) grocery bags, packaging
•    Polypropylene (PP) bottle caps, medicine bottles, chips packs
•    Polystyrene (PS) disposal cups, cutlery, packaging foam
•    Polycarbonate (PC) food packaging, electronic goods, and defence gadgets
•    Nylon fishing nets, clothing, ropes

Plastic waste that is not recovered and recycled leads to major issues for the environment. Plastic takes thousands of years to degrade due to its complex polymer structure which is not easily decomposable. Plastic waste impacts all of us in many ways. Some of which are
a.    One of the main reasons for flooding we see in most cities and towns is due to clogging of drains by plastic waste.
b.    A lot of plastic waste ends up in the bellies of animals causing serious hazards to them and to the consumers of animal products.
c.     Plastic waste entering oceans harms marine life and damages habitats. It directly impacts many species of marine life materially.
d.    Substantial quantity of plastics has accumulated in the natural environment and in landfills where it is buried. In the process of  breaking down, it releases toxic chemicals which make their way into our food chain and water bodies.

Why should businesses care about plastic pollution?

Businesses especially those who are contributing actively to plastic pollution need to address this issue actively and not just wait for regulations to force them. Embracing sustainable practices and reducing plastic waste can lead to various benefits, including:

1.    Enhanced Reputation: Companies that actively work towards reducing plastic pollution and adopting sustainable practices earn goodwill and enhance their reputation among consumers, investors, and communities.
2.    Risk Mitigation: By addressing plastic pollution, businesses can mitigate regulatory risks, potential fines, and reputational damage associated with unsustainable practices.
3.    Cost Savings: Adopting measures such as waste reduction, recycling, and using alternative packaging materials can lead to significant cost savings in the long run, improving overall operational efficiency.
4.    Innovation Opportunities: Addressing plastic pollution challenges stimulates innovation and provides opportunities for companies to develop sustainable alternatives and gain a competitive edge.

Companies need to publicly announce their goals for reduction and monitor and report them regularly along with their other ESG efforts.    It will also help influence regulation to higher standards they set giving even more competitive advantage and gain traction with ESG focussed investors.

The Road To Becoming ESG-Friendly

1.    Assess and Measure Plastic Footprint: Companies should conduct a thorough assessment of their plastic usage and waste generation across the value chain. This analysis will help identify hotspots and set targets for reduction.
2.    Implement Waste Reduction Strategies: Businesses can adopt strategies such as reducing packaging, optimizing product design to minimize plastic use, and implementing circular economy principles to minimize waste generation.
3.    Promote Recycling and Circular Economy: Companies should encourage recycling by implementing recycling programs within their operations and collaborating with recycling partners. Embracing circular economy models, which emphasize reuse and recycling, can significantly reduce plastic waste.
4.    Engage in Product Innovation: Companies can invest in research and development to find sustainable alternatives to plastic, such as biodegradable or compostable materials. Encouraging customers to use reusable products can also contribute to reducing plastic waste.
5.    Collaborate and Advocate: Engaging in industry collaborations, partnerships, and multi-stakeholder initiatives can amplify the impact of efforts to address plastic pollution. Companies should also advocate for policy changes that support sustainable practices and incentivise plastic waste reduction.

There are also opportunities to build businesses around plastic collection, monitoring, disposal and  recycling.  Several startups have gone back to roots to come up with innovative material for packaging using plantain leaves, bamboo, paper and biodegradable plastic. Natural material is being used to replace plastic furniture etc.

Addressing plastic pollution is no longer an option for companies seeking to be ESG-friendly. The imperative to tackle this environmental crisis is increasingly shaping consumer preferences, investor decisions, and regulatory frameworks. By taking concrete steps to reduce plastic waste, companies can enhance their reputation, reduce risks, and unlock innovation opportunities.

Embracing sustainable practices and actively working towards a plastic-free future will not only benefit the environment but also contribute to long-term business success in the evolving ESG landscape.

(Harish H V is Managing Director, ECube Investment Advisors Pvt Ltd. The views expressed are personal. The author has relied on several public sources for information to put together this article.)