Business risks and opportunity from UN Global Plastics Treaty

The UN Global Plastics Treaty is expected to take effect in 2025. It could set out a legally-binding commitment to eliminate plastic pollution, especially in oceans, and spur the transition towards a circular plastics economy.

In response, governments are expected to introduce rules to make plastics producers and users financially responsible for their plastic pollution.

Similar to high carbon emitters, plastics polluters should anticipate increased costs to comply with upcoming regulations. Policies like extended producer responsibility (ERP) already aim to make virgin plastics more expensive by shifting the responsibility of waste disposal and clean-up to producers. Manufacturing guidelines, such as design-for-recycling principles or recycled content targets, would also call for more capital outlays towards R&D, capacity building and supply chain transformations. 

The UN Global Plastics Treaty will also likely trigger an additional layer of corporate reporting. As ESG disclosures become more comprehensive and mandatory, companies will have to account for their plastic footprint and the associated material risks—reputational, regulatory, financial and legal—of plastics on their balance sheets, and make adjustments.  

Those risks are already being felt by big consumer brands like Coca-Cola and Nestle who are under fire for not doing enough to reduce plastic pollution. French manufacturer Danone is facing court in France over its use of plastic.

The Minderoo Foundation estimates the potential liability risks associated with legal action against companies failing to reduce or remediate their plastic waste in the United States could be as high as US$20bn by 2030. Over time, as the demand for virgin plastic diminishes, companies and investors may also have to deal with the transition risk of stranded assets linked to plastic production.

More transparency and disclosure can highlight areas in need of resources and innovation, and long-term opportunities for investment. But it can also lead to the naming and shaming of investors who promote their green funds whilst bankrolling plastic polluters, as is the case with financiers whose sustainable funds and investment portfolios include high carbon-emitting businesses.

The solutions for a plastic-dependent world have not yet matured. The market for recycled plastics remains fragmented and volatile compared to its well-oiled virgin plastic counterpart. But market dynamics are shifting and a global plastics treaty could help accelerate the transition.

To read more about the economic and financial implications of recalibrating the plastic industry, read the key takeaways from an essay The Action Exchange authored for Back-to-Blue.