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New accounting rules on plastic use: what boards need to know

By Jessica Tasman-Jones

This article is brought to you by Agenda, an FT Specialist publication that focuses on corporate boards

Rules that could force companies worldwide to record their plastic use have been proposed by the global organisation that sets environmental accounting standards.

This year, the Sustainability Accounting Standards Board, which is based in California, put forward five new metrics associated with single-use plastics. The aim is to quantify regulatory risks for shareholders.

The SASB has since become part of the IFRS Foundation’s International Sustainability Standards Board, although the SASB rules will remain.

The proposals anticipate that governments will soon introduce regulations to reduce plastic waste, and that this could affect shareholders’ investments in companies that produce or use lots of plastic.

Under the SASB proposals, companies would have to report on total revenues from the manufacture of single-use plastics. Spending on research and development plus capital expenditure on efforts to reduce the environmental effects of plastics, together with revenues from those efforts, would also have to be reported.

Companies would be required to explain to investors the consequences arising from efforts to reduce plastic use, such as greater food waste if that was a possible result of a change to food packaging.

No information has been given on when a decision on the final set of standards will be reached.

Global plastic waste is expected to almost triple by 2060 unless there is action to “curb demand, increase product lifespans and improve waste management and recyclability”, says the OECD.

Retailers are among companies to have reduced plastic waste, says John Willis, director of research at Planet Tracker, a nonprofit organisation that examines the risks and opportunities for investors as companies increase sustainability.

Two examples are the UK grocery chains Waitrose, which no longer uses plastic wrapping on some products, and Tesco, which has removed plastic sleeves from selected greetings cards. These efforts are limited, however.

Regulatory change could mean that all companies have to consider their entire plastic footprints.

In March, governments at a UN meeting agreed to negotiate an internationally legal binding instrument by 2024 to end plastic pollution and to establish a science policy panel on chemicals and waste.

“This has signposted to the capital markets that regulation of plastics, notably [single-use plastics], may well rise in the future,” says Willis. Boards should ensure that their employees are prepared for changes to regulations, he says.

Some companies in the S&P 500 have faced shareholder resolutions over their plastic footprints.

This year, Exxon Mobil, McDonald’s and Phillips 66 were each subjected to shareholder votes that called for their boards to produce a report on plastic use and examine where reductions could be made.

None of those votes passed but they were backed by between 35 per cent and 50 per cent of shareholders, according to MyLogIQ, the public company intelligence provider.

This article is based on a story written by Frederic Lee for Agenda.

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