EnvironmentalCorner
IAPD CEO
he topic of sustainability is not something new for the performance plastics industry or within IAPD. We have focused on it for the last 14+ years when IAPD first launched its Environmental Committee. The industry has evolved over the years, and technological advancements in the recycling of plastics has helped our industry improve the amount of materials that we divert from landfills.
When IAPD first started its Environmental Committee and initiatives, we sought to benchmark where the performance plastics industry was on recycling its internally generated scrap material. Additionally, we sought to capture other environmental initiatives that our member companies were executing and measure their progress over time. 13 years later, IAPD is still having difficulty collecting and measuring this basic data from our industry.
While our industry is still working on dealing with the internally generated scrap that we produce, the rest of the world has moved on and not only expects more from us, but needs more from us.
Where your customers are headed — environmental, social and governance
ESG stands for Environmental, Social and Governance. It represents a comprehensive framework for evaluating a company’s performance and societal impact beyond financial metrics.
Environmental: This dimension assesses a company’s impact on the planet, including its carbon footprint, resource use and sustainable practices.
Social: The social component examines how a company treats its employees, engages with communities and impacts society at large.
Governance: Governance relates to a company’s internal structures and how it manages itself, including issues like board diversity, executive compensation and ethical practices.
The Evolution of ESG
The ESG movement has its roots in corporate social responsibility (CSR), which began to gain prominence in the mid-20th century. However, ESG takes CSR to a more structured and quantifiable level. Over the past few decades, several significant factors have propelled the ESG movement:
Global environmental challenges: Climate change, resource depletion and environmental degradation have created a sense of urgency for businesses to reduce their negative environmental impacts.
Social unrest: Issues like income inequality, labor rights and diversity and inclusion have led to increased scrutiny of a company’s social practices.
Corporate scandals: High-profile corporate scandals and financial crises highlighted the need for better corporate governance.
Investor and consumer demand: Investors and consumers are increasingly seeking out companies that align with their values, pushing corporations to adopt ESG practices to remain competitive.
Why ESG matters for companies?
Mitigating risk: One of the key reasons why companies should proactively comply with ESG principles is risk mitigation. By addressing environmental and social issues and adopting good governance practices, companies can reduce the likelihood of costly legal disputes, regulatory fines and reputational damage. Proactive compliance ensures that businesses are better prepared for the changing regulatory landscape.
Enhancing reputation: A strong ESG framework can significantly improve a company’s reputation. Customers, investors and employees are increasingly looking for businesses that demonstrate a commitment to sustainable and ethical practices. A positive reputation can lead to increased brand loyalty and trust, which, in turn, can translate into higher revenues and market capitalization.
Attracting capital: Investors are increasingly incorporating ESG factors into their investment decisions. Companies that align with ESG principles are more likely to attract investment capital as they are seen as less risky and more sustainable in the long run. Additionally, numerous ESG-focused funds and indexes have been developed to cater to investors seeking responsible investments.
Access to new markets
By complying with ESG principles, companies can gain access to new markets and business opportunities. Governments and organizations worldwide are providing incentives, subsidies and preferential treatment to companies that embrace sustainability and ethical practices. This opens the door to potential new revenue streams.
The business case for ESG compliance
There is increasing evidence that ESG-conscious companies tend to perform better financially in the long term. Various studies have shown a positive correlation between strong ESG performance and improved financial results. For instance, companies with lower environmental risks may be better positioned to weather environmental regulations and market shifts, resulting in increased profitability.
Cost savings
ESG compliance often leads to cost savings. Companies that adopt sustainable practices can reduce their energy consumption, waste production and resource use, which not only benefits the environment but also reduces operational costs. Furthermore, a focus on employee welfare and diversity can enhance employee productivity and reduce turnover. While there may be an initial investment required to implement sustainable practices, IAPD member companies who have already been doing the work have found that these investments are already making up the cost.
Innovation and competitive advantage
Companies that embrace ESG principles are more likely to foster innovation. By investing in research and development related to sustainability and social responsibility, they can gain a competitive edge. Additionally, ESG-driven innovation can lead to the development of new products and services, tapping into growing markets for sustainable goods and technologies.
The challenges of ESG compliance
The IAPD members who spend their days completing ESG questionnaires can tell you that one of the primary challenges in ESG compliance is the lack of standardized reporting and metrics. Companies face the difficulty of accurately measuring and reporting their ESG performance, making it challenging to compare and benchmark against peers.
Integration into business strategy
Integrating ESG principles into a company’s core business strategy can be complex. It often requires a cultural shift within the organization and a commitment from top management to make ESG considerations a part of decision-making at every level.
Strategies for ESG compliance
To successfully comply with ESG principles, companies should appoint ESG leaders who are responsible for overseeing ESG initiatives and integrating them into the company’s strategy. This includes setting clear targets and accountability mechanisms.
Engaging stakeholders
Companies should actively engage with key stakeholders, including senior leadership, employees, customers and the community, to gain insights into their ESG priorities and to build trust.
Investing in ESG education and training
Training and educating employees about the importance of ESG compliance is crucial. Ensuring that the entire workforce understands and embraces ESG principles can help drive change from within the organization.
The ESG movement is not just a trend; it is a fundamental shift in how businesses operate. Companies that proactively comply with ESG principles stand to benefit not only in terms of risk mitigation and enhanced reputation, but also in financial performance, cost savings and access to new markets.
In a world where sustainability, social responsibility and good governance are increasingly becoming expected standards, companies have a moral obligation and a business imperative to align with the ESG movement. By doing so, they position themselves for long-term success in an evolving global landscape, where the triple bottom line — people, planet and profit — is integral to corporate survival and prosperity.
Why all this matters to IAPD members and the performance plastics industry?
As mentioned in the beginning of the article, IAPD members are already experiencing customer requests to comply with ESG requirements.
Many think that only public companies are affected by ESG, but it is simply not true. Your customers may choose to only do business with companies who comply with those who complete their ESG questionnaires and have successfully built ESG frameworks. If you have not received an ESG questionnaire yet, it is just a matter of time.
According to members of the IAPD Environmental Committee, one of the biggest hurdles is documenting your company’s metrics. These metrics are the basis for responding to the ESG questionnaires that you receive from your customers.
ESG metrics
Environmental Metrics
Greenhouse gas (GHG) emissions: An organization should measure GHG emissions at three levels for accurate results: direct emissions from company-owned sources; indirect GHG emissions linked to purchased energy, like use of electricity from coal-fired power plants; and GHG emissions along the company’s value chain.
Air and water pollution: Measures the type and amount of pollutants a company releases into the atmosphere and water sources during a particular period.
Deforestation: Refers to a company’s activities that contribute to the clearing of forests.
Recycling and waste management: Measures the total waste a company generates against the total amount it recycles.
Water security: Shows the total amount of water a company uses, including the water used by employees in the workplace and during the manufacturing process.
Carbon footprint: A company’s total direct and indirect greenhouse emissions in energy usage, transportation and waste production.
Social metrics
Diversity, equity, inclusion and belonging (DEI+B): Measures the company’s composition, as well as diversity and inclusion initiatives.
Labor standards: Refers to fair and equitable wages, safe work environment and other factors that affect employee well-being.
Data protection and security: Measures a company’s effectiveness in protecting its intellectual assets, private information and stakeholders’ personal data.
Supply chain management: Shows how effectively a company manages supply chain activities like product development, raw material sourcing and logistics.
Governance metrics
Board composition: Shows the board’s constituents in terms of members’ skills and qualifications. The metric also measures the board’s diversity and independence ratio. A board should have an independent majority that is more likely to better represent shareholders.
Shareholder rights: Measures corporate takeover defenses and shows how well shareholders’ rights protect them from attempts to buy a controlling stake without management’s consent.
Investor relations: Measures a company’s communication flow between investors and stakeholders.
Conflict of interest (COI) policy: Measures the effectiveness of pre-existing policies to manage a possible conflict between board members’ personal interests and the company’s interests. This metric helps an organization optimize COI policies to better manage ongoing, perceived and potential conflicts of interest on the board.
Compensation: Measures how effective a board’s compensation policies and practices are and reveals what it can do to improve them.
So, we know that customers are moving towards asking their suppliers to have an ESG framework, but what is the government going to require?
Where your government is headed – sustainability and legislation
The issue can be viewed from two perspectives, either the targeting of all petroleum-based plastics (which includes performance plastics) or waste management (which also includes post-use performance plastics that end up in the municipal waste streams). Either way, we will no longer be viewed as separate from the problems that single-use plastics have already been facing.
IAPD’s new government relations firm, Ogilvy Government Relations, shares that there are three different “anti-plastics camps.”
- Those who would seek to ban all plastics.
- Those who would seek to substitute petroleum-based plastics with bioplastics (no fossil fuels) or other substitute materials.
- Those who would seek to charge a fee (a resin tax or a form of an Extended Producer Responsibility bill) to whoever uses, distributes or produces plastics.
The REDUCE Act of 2023
There was legislation filed in September 2023 that Senator Sheldon Whitehouse (D-RI), and Congressman Lloyd Doggett (D-TX), introduced. The REDUCE Act of 2023 would establish an excise tax on virgin plastic resin. Although this bill is largely focused on virgin resin used to make single-use products, including plastic packaging, beverage containers, bags and food service products, most anti-plastic legislation starts with a focus on single-use plastics. This bill is just one example of hundreds of bills we have seen before that target petroleum-based plastics. They will never stop coming. As an industry, we can only play defense for so long without also having a proactive strategy.
IAPD’s Sustainability and Legislative Agenda
Over the coming weeks and months, you will hear from the IAPD leadership about the updated Three Pillar Strategy, Priorities and Key Initiatives. IAPD’s 2023-2024 President Peter DelGado presented the findings of the IAPD Board Strategy Task Force and the feedback received from key industry leaders on the most pressing issues of the performance plastics industry. The top three issues were found to be sustainability, legislative advocacy and workforce development (attracting, recruiting and retaining talent in the industry).
Tied together are IAPD’s sustainability and legislative advocacy agendas. Washington, D.C. is focused on our industry’s ability to manage its waste and move towards a circular economy.
The performance plastics industry are leaders in mechanical recycling, but we need to do more.
We learned over the past two years through the work of IAPD’s Recycling Task Force, and its launch of its Recycling Database, how lacking the U.S. mechanical recycling infrastructure is. Even when our members overcome their volume, contamination and logistical challenges, they still have issues finding mechanical recyclers to take their materials.
During the 67th IAPD Annual Convention, IAPD members convened to discuss the proposed legislative agenda put forth by IAPD’s Government Relations Committee. The legislative agenda includes supporting both mechanical and advanced recycling (chemical recycling), including supporting proposed legislation that is to be introduced in the coming weeks. (Note: Soon, there will be a webinar and specific member communications with details on the legislative agenda including an opportunity for discussion and questions.)
Members of the IAPD Board engaged in this discussion in the board meeting at convention. The Government Relations Committee had a similar discussion. Finally, later in the week, convention attendees had a discussion in an educational session on the same subject. All meetings came to the same conclusion. We need a proactive legislative agenda for our allies in Washington, D.C. to support while they continue to battle and fight off the bans on, substitutions of and taxes on plastics.
Our proactive legislative agenda needs to be asking for more support of and funding for the mechanical recycling infrastructure, as well as support for the recycling bill proposed by Representative Larry Bucshon (R-IN) that supports advanced recycling as a manufacturing process, versus a waste management process, making the permitting process easier. It will also help accelerate the expansion of new infrastructure for advanced recycling.
Conclusion
The performance plastics industry’s sustainability journey is just starting. Your customer requirements on ESG will demand that you embrace a new way of doing business. Learn from those that are already doing it.
The government has both opponents and champions of our industry. IAPD is investing in helping you build your relationships and voice with the champions. But it requires your participation in the process. IAPD needs your recycling data, the most basic stuff. Then we need you in D.C., with us, to tell your stories.
Most importantly, know that the leaders of IAPD are paying attention to what is going on in the world around you to help you understand where to direct your attention to keep your business thriving and competitive. Your committees and staff are hard at work to bring you the resources that you need. We just need your engagement. Take the first step.