The production of plastic polymers is a major component of global petrochemical demand. It is forecast that the use of plastics could almost triple by 2060¹ and that petrochemicals will become the main driver of growth in oil demand.² Under a business-as-usual (BAU) scenario, in 2060, fossil fuel-based plastics will continue to dominate, while recycled plastics will be only 12% of total production, and as a result lifecycle greenhouse gas (GHG) emissions from plastics, will more than double, growing to 4.5% of global emissions.³

Under the BAU scenario, plastic leakage to the terrestrial environment is forecasted to double, while build-up of plastics in aquatic environments will more than triple⁴, causing well documented harms to biodiversity. Furthermore, plastics leaking into the environment degrade into micro- and nano-plastics with potential to harm human health⁵, as well as leaching a diverse array of plastic-associated chemicals.

There are over 16,000 chemicals used or present in plastics – including the monomers that are bonded together to form the polymer, and various additives and processing aids – of which only 44% have information indicating they have been evaluated for toxicity or other hazards⁶. Amongst the around 5,800 chemicals which have been tested, around 4,200 (73%) are identified as being hazardous⁷. At the same time, there is growing scientific evidence of the negative impacts of hazardous chemicals on human and ecosystem health⁸. Human health costs in the USA alone in 2015 resulting from exposure to just three chemicals commonly used in plastic have been estimated at $US675 bn⁹.

Growing plastic polymer production is therefore a significant threat to the plastic pollution crisis, climate change, biodiversity and human health.

Financial risks to petrochemical companies and investors

As outlined above, the burden imposed on society by plastics is significant. As such, policymakers are accelerating their efforts to address the growing pollution problem, evidenced by negotiations for a legally binding Global Plastics Treaty. Society, too, is gradually shifting their sentiment towards more sustainable products and demanding companies across the value chain are held accountable.

This poses significant plastic-related risks to petrochemical companies producing plastic polymers. These risks include regulatory risks (e.g. tighter emission controls, bans, taxation, and extended producer responsibility costs), reputational risks, plastic-related litigation, and increased consumer demand for safe and more sustainable products. These risks could be financially material for corporates and their funders¹⁰.

As responsible investors, we are concerned that petrochemical companies are not proactively addressing their plastic-related risks with actions aimed at reducing their dependence on fossil fuel feedstocks and eliminating hazardous chemicals and additives from their products, and as a result, face higher costs and miss out on business opportunities, ultimately diminishing investment returns and long-term value creation. We therefore urge companies to act and align their business practices with a clearly defined transition plan to a safe and circular plastics economy, as outlined below.

Our expectations for accelerated corporate action on plastics

We expect petrochemical companies that produce plastic polymers to take stronger actions towards plastics circularity. To this end, we expect petrochemical companies that produce plastic polymers to:

1. Transparently disclose, define strategies and set clear targets – we expect companies to transparently disclose their plastic impacts (e.g., CDP’s plastics disclosure), establish a clear strategy and timebound roadmap to reduce fossil fuel feedstock in polymer production and transition to production of safe, environmentally sound and sustainable plastics.

2. Address polymers and chemicals of concern in their products – we expect companies to commit to identifying and eliminating the production and use of hazardous chemicals and additives in polymers and to publicly report their progress in doing so.

3. Build suitable infrastructure – we expect companies to support their transition to sustainable feedstocks with well-defined capital expenditure plans to develop technology and build suitable infrastructure.

4. Establish dedicated governance – we expect companies to have clear oversight and responsibility for their commitments on plastics sustainability at Board level – for example, by establishing a dedicated committee on circularity, and linking a share of management compensation to circularity commitments.

5. Publicly support an ambitious international legally binding instrument for ending plastic pollution – we expect companies to support international efforts for an ambitious plastics treaty by advocating for common legally binding measures across the full plastics life cycle, designed to reduce production and consumption, and refrain from lobbying and obstructing ambitious outcomes. 

This envisioned acceleration towards a circular plastics industry supports the UN plastic treaty goals, but is also in line with the Paris Climate agreement and the Kunming Montreal GBF.