Beverage and Snack Giants Defend Sustainable-Packaging Plans Amid Investor Pressure — WSJ

By Clara Hudson

Beverage and snack companies say they are making progress on sustainable packaging, but environmentally focused shareholder activists have expressed skepticism and are pushing for more details on their plans to cut their use of plastic.

In annual meetings over the past week, Coca-Cola, Pepsi and Kraft Heinz have stressed that they're still working to lessen plastic pollution. Meanwhile, the beverage giants are navigating regulatory and economic constraints, including new tariffs, that could complicate their efforts. Coca-Cola, which recently dialed back ambitious plastic-reduction promises it made in recent years, said the issue is still a priority.

"While we may not have a formal goal specifically for refillables, they remain a key part of our strategy," said James Quincey, Coca-Cola's CEO, speaking at the company's annual meeting on April 30 following an investor question seeking specifics about its packaging goals. Refillable or reusable packaging includes glass bottles that consumers can return.

But some activist investors say lowering sustainable packaging targets is a worrisome sign that beverage giants are backing off efforts needed to keep worldwide plastic waste from tripling by 2060.

Pressure has grown on Coca-Cola since December, when the company walked back its environmental goals. Some have criticized the company for quietly unwinding a commitment to make 25% of its products in reusable packaging by 2030. Another pledge, made several years ago, to use at least 50% recycled material in its packaging by 2030, was watered down to 35% to 40% of recycled material by 2035.

More broadly, the beverage industry is wading through a series of economic and regulatory pressures on plastic: Coca-Cola recently said it may be more reliant on plastic following President Trump's tariffs on aluminum, and countries including India — as well as certain U.S. states — are pushing beverage companies to reduce, or take responsibility for, their plastic waste.

On a global scale, the United Nations is still in the midst of negotiating a plastics treaty. The talks began two years ago, with an upcoming session in August in Geneva. Efforts to reduce plastic waste are moving far quicker in Europe than in the U.S.: companies are gearing up to comply with a packaging waste directive that's looking to make all packaging in the EU recyclable by 2030, among other requirements. On Tuesday, the European Commission announced that Coca-Cola agreed to change some of its labeling practices in Europe after the commission disputed recycling claims on its plastic bottles.

Since the 1950s, 9.2 billion tons of plastic have been produced, more than three quarters of which ended up in landfills, dumps and the ocean, according to the U.N. environment program's website. Every year, somewhere between 19 million and 23 million tons of plastic waste pollutes lakes, rivers and seas, the program says.

The problem is set to grow: plastic waste could triple by 2060, according to the Organization for Economic Cooperation and Development. The material is problematic from its inception as plastic production releases greenhouse gas emissions, chemicals from plastic can harm human health, and plastic waste ultimately wreaks havoc on biodiversity.

In the U.S., beverage and snack food companies have also fought recent greenwashing allegations in court. Los Angeles County sued Coca-Cola and Pepsi in October for allegedly misleading consumers about the recyclability of their plastic bottles.

Dozens of companies including Coca-Cola and Kraft Heinz launched the U.S. Plastics Pact in 2020 in a cross-industry effort to address plastic waste. But the coalition last year pushed back some targets from 2025 to 2030.

Pepsi and Kraft Heinz both faced calls this week on plastic packaging from shareholder advocacy group, As You Sow. The organization is one of the leading groups calling for environmental progress at U.S.-listed companies through proposals at annual investor meetings. While the bids rarely secure enough backing to pass shareholder votes, enough support can induce companies to rejig their priorities.

Kelly McBee, a plastic pollution prevention specialist at As You Sow, said the group is targeting beverage and snack companies because "most of these companies produce goods that are designed to be consumed on the go or in small quantities, so the scale of their packaging is some of the greatest."

McBee said the organization is asking for more corporate transparency because it's hard for customers and investors to fully comprehend the scope of plastic waste at businesses like Pepsi and Kraft Heinz. "Companies aren't doing their stakeholders any favors by not communicating the scale of the crisis alongside the scale of their goals."

Activist shareholders at the companies' annual meetings said plastic packaging reduction is critical in part because of looming international regulations, including a French law that requires 10% of packaging to be reusable by 2027 and a rule in Portugal that mandates 30% reusable packaging by 2030.

Pepsi said in an investor filing ahead of its annual meeting that it used recycled plastic in at least one PepsiCo product in about 60 countries last year. The company also said it replaced the outer packaging for Walkers chips with "a flexible paper solution" in the U.K.

Ramon Laguarta, Pepsi's CEO, said at the meeting on Wednesday that some paper-based packaging options are "still nascent and unable to deliver our food products without risk of rancidity, food waste or eroded consumer experience."

Kraft Heinz said in a similar filing ahead of its investor meeting that it has a goal to reduce the use of virgin plastic by 20% globally by 2030. As an example, the company cited its move to make Miracle Whip in 100% recycled containers in the U.S. last year.

If businesses are shifting their environmental goals, they need to be more upfront about revising their plans as their voluntary deadlines near, said Angeli Patel, who focuses in part on corporate environmental issues as executive director of the law and business center at the University of California, Berkeley.

"Companies have to be a little bit more honest about those priority shifts," Patel said, adding they shouldn't veil their financial motives. "Single-use plastics are cheap, that's ultimately the reason," she said.

Refillable bottles made of aluminum and glass, for example, can be heavy to transport, and therefore expensive, said Jay Singh, a packaging specialist at California Polytechnic State University. The practical reality for a business is that "plastic provides too many advantages that cannot be countered with a replacement," he said.

If global beverage and bottling companies increased reusable packaging by 10% each by 2030, they could cut back on over 1 trillion single-use plastic bottles and cups, according to a 2023 report from Oceana.

But consumers are heavily reliant on the convenience of plastic, and aren't accustomed to figuring out how to return bottles for impromptu purchases, Singh said.

"It's a spur of a moment purchase: I'm driving, I'm at a gas station, and I want a bottle of Coke — nobody plans for these beverages," he said.

Write to Clara Hudson at clara.hudson@wsj.com