Companies face mini-wave of plastic pollution proposals

Apr 05, 2019
As You Sow targets pellet-spill disclosure

Petrochemical companies are facing pressure to disclose incidents where they have spilled plastic into the ocean, which leads to what is said to be a major source of pollution.

As You Sow, a non-profit organization that promotes environmental and social corporate responsibility via engagement, investor pressure and other legal strategies, has filed proposals seeking such reports with four major companies this proxy season.

If approved, the proposals would request that the board issue an annual report on trends in the amount of pellets, powder or granules released into the environment by the company each year, and assessing the effectiveness of the company’s policies and actions to reduce the volume of its plastic materials contaminating the environment.

ExxonMobil, one of the companies targeted with such a proposal, had sought SEC approval to exclude the measure from its proxy materials. Instead, it reached an agreement with As You Sow last month under which it will report on plastic pellet spills and remediation, according to an SEC filing. The group then withdrew its proposal.

The report, As You Sow says in a statement, will ‘provide details about where, how and when it monitors for pellet spills, describe pellet-management systems it has in place and report on spills that occurred’, although it says there were none in 2018. It will also describe how the company assesses the effectiveness of pellet-loss prevention measures.

The agreement followed constructive discussions with ExxonMobil’s investor relations team, As You Sow senior vice president Conrad MacKerron tells Corporate Secretary. The new disclosure will be part of ExxonMobil’s annual sustainability report, starting with an initial section in June before a more formal effort in later years, MacKerron says.

The company’s ExxonMobil Chemical Co unit operates facilities that produce plastic pellets, which As You Sow notes are thought to be a major source of plastic pollution in the oceans.

‘Most plastic products originate from plastic pellets,’ As You Sow says in its statement. ‘Due to spills and poor handling procedures, billions of pellets are swept into waterways during production or transport annually, and are increasingly found on beaches and shorelines, adding to harmful levels of plastic pollution in the environment. Plastic pellets are estimated to be the second-largest direct source of microplastic pollution to the ocean by weight.’

As You Sow welcomed ExxonMobil’s agreement to provide reporting. MacKerron noted that having companies self-report on pollution would help make the problem more visible.

A request for comment from ExxonMobil was not returned immediately.

Proxy proposals 
Meanwhile, As You Sow has filed similar proposals with Chevron, DowDuPont and Phillips 66. Chevron and Phillips 66 both unsuccessfully sought SEC permission to exclude the proposals from their proxies. In this case, the proposals are aimed at Chevron Phillips Chemical (CPChem), a joint venture equally owned by Phillips 66 and Chevron.

In its request for permission to exclude the measure, Chevron states that ‘the company lacks the power or authority to implement the proposal in the manner the proposal requests,’ pointing to the joint-venture nature of CPChem.

It adds: ‘The company believes the proposal is excludable under Rule 14a-8(i)(6) because[:] (1) the company does not own or operate any petrochemical facilities that produce pellets[;] and (2) with respect to the company’s only equity investment that does operate such facilities… the company does not have the power or authority to unilaterally cause the entity to act.’

A spokesperson for Chevron did not have an immediate comment. However, CPChem yesterday announced that it will start reporting pellet spills that ‘are currently only provided to state regulatory agencies.’ It added that the company ‘will also report on the success of recycling efforts related to the recovery of spilled pellets.’ According to the company, this information will be made available each year in its sustainability report. This year’s sustainability report will be the first to provide such data and is expected to be published on the company’s website later this year, according to CPChem’s announcement.

The company also announced it is becoming a member of industry initiative Operation Clean Sweep Blue, which it said would boosting its efforts to eliminate plastic pellet spills.

In response to CPChem's announcement, MacKerron issued a statement saying: 'We are pleased with announcement by Chevron Phillips Chemical to commit to public reporting on pellets spills. While not mentioned in the company’s release, their action was directly connected to our filing of shareholder proposals with their corporate parents Chevron Corp and Phillips 66. We hope to be able to withdraw the proposal soon and issue a release with more information and reaction, but we need to first clarify with the company several questions we have about the nature and scope of reporting the company can commit to.'

In its proxy statement, Phillips 66 urges shareholders to vote against the proposal at its AGM on May 8 in Houston, Texas. It argues in part that the plastic pollution report is ‘unnecessary given the robust sustainability policies and programs that both CPChem and Phillips 66 follow, which include waste management programs.’

The board also points to the joint venture. ‘CPChem is not operated by Phillips 66, and Phillips 66 does not unilaterally control CPChem’s business. However, like Phillips 66, CPChem is committed to driving sustainable business practices and believes in transparency. CPChem reports on its sustainability practices on its website,’ it states. ‘CPChem drives sustainable practices throughout all its businesses. Reducing plastic waste, including plastics in the ocean, is a key component of CPChem’s sustainability strategy.’

A request for comment from Phillips 66 was not returned immediately.

DowDuPont did not contest the proposal and it is due to be included in the company’s proxy, according to MacKerron. The SEC’s website does not appear to include correspondence indicating that DowDuPont raised any concern. The company did not respond immediately to a request for comment.

The proposals come at a time when companies are facing growing shareholder pressure to report on a range of ESG-related issues. ExxonMobil shareholders in 2017 passed a resolution asking the company to report on how its business model will be affected by global efforts to limit the average rise in temperatures to below 2°C. Similar proposals were passed that year at PPL Corporation and Occidental Petroleum, raising the profile of such initiatives.

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