Proposals about environmental management that go beyond direct climate impacts long have asked about mitigating various types of pollution and waste; they also address different aspects of the industrial agricultural system, including food animals, antibiotics in feed, pesticides and water. Until this year many have asked about recycling, but this year the focus is almost entirely on plastics. There are 24 proposals in all, with 14 in the first category and 10 in the latter. Notable this year is that only two of the resolutions are resubmissions, which may be a first.

Pollution and Waste

Plastics: As You Sow and Green Century are the
main proponents on plastics and as of mid-February, they had withdrawn just two proposals, leaving a dozen pending (see table for list). The shareholder campaign for companies to increase reporting and ensure better management of plastics production started in earnest three years ago and was featured in a 2019 Wall Street Journal article entitled, “Revenge of the Nurdles,” referring to the plastic production pellets under scrutiny. There are four versions of the proposals this year, focused on makers and users:

Still pending at DuPont de Nemours is a request for annual reports starting this year about “trends in the amount of plastic in various forms released to the environment by the company annually, and concisely assess the effectiveness of the company’s policies and actions to reduce the volume of the company’s plastic materials contaminating the environment.”

The other resolution at eight food purveyors and restauranteurs—pending at Keurig Dr Pepper, Kraft Heinz, Kroger, McDonald’s, Mondelez International, PepsiCo and Walmart—asks for a report by the end of 2021, “estimating the amount of plastics released to the environment by our use of plastic packaging, from the manufacture of plastic source materials, through disposal or recycling, and describing any company strategies or goals to reduce the use of plastic packaging to reduce these impacts.” One more, at Amazon.com, is the same except it specifies the estimate should be for the “amount of plastics released to the environment due to plastic packaging attributable to all Amazon operations.”

PLASTIC POLLUTION – THE TRANSITION FROM RECYCLING TO USING LESS

SANFORD LEWIS
Director, Shareholder Rights Group

For 2021, As You Sow’s work on plastic pollution shifts focus from pressing companies to make plastic packaging more recyclable to using less plastic. Scores of companies have pledged to make their packaging recyclable by 2025; it is time to turn up the temperature and press for more impactful actions like commitments to stop using so much plastic.

Green Century filed two further proposals in the same vein, also asking for a reduction in plastics use. Pending at Target is a proposal for a report “disclosing quantitative metrics that demonstrate how the Company is reducing plastic use in its owned brand packaging over time.” Another was withdrawn, as noted below.

Withdrawals—There have been two agreements so far:

• Green Century withdrew a request for report at Coca-Cola “discussing if and how it can further mitigate its environmental impacts by reducing the overall use of plastic packaging across its portfolio,” since the company has set a new goal to reduce its virgin plastic use. This will cut its cumulative use of virgin plastic by 3 million metric tons by 2025.

• Eastman Chemical, which got the same proposal as Du Pont from As You Sow, agreed to start reporting on its plastic pellet spills in its 2021 sustainability report, due out by the end of 2021.

SEC action—Kraft Heinz and McDonald’s both have challenged As You Sow’s proof of stock ownership. As You Sow also had filed its plastics proposal at Target but withdrew after the company argued at the SEC that it duplicated the Green Century version, which was filed first.

MCDONALD’S TO GET “FOREVER CHEMICALS” OUT OF FOOD PACKAGING

CHRISTY SPEES
Environmental Health Program Manager,
As You Sow

PFAS—per- and polyfluoroalkyl substances—are a family of man-made chemicals with known connections to myriad health impacts, including cancer, hormone disruption, and reproductive and developmental harm, and they’re in our food. The compounds do not break down in the environment and can build up in our bodies as we are gradually exposed, earning them the nickname “forever chemicals.” Chemicals in this class are used in a variety of consumer goods, from weather- resistant clothing to furniture and carpeting and even dental floss, making exposure inevitable. PFAS are ubiquitous, with biomonitoring showing they are present in nearly all tested Americans.

Risky food containers: As You Sow and First Affirmative Financial Network has a proposal about a new concern relating to food containers, filed at McDonald’s. It seeks a report “on the potential public health and/or environmental impacts of toxic materials used in food contact settings.” The concern is about potentially harmful chemical exposure from poly and perfluoroalkyl substances (PFAs), which are in the same class of chemicals as perfluorooctanoic acid (PFOA)—the ingredient used to make Teflon and Kevlar that has been phased out given concerns about hormone disruption. The resolution says PFAs have been found in some McDonald’s take-out containers. It also notes new and proposed state laws that will phase PFAs out, as well as moves by peer companies to end its use. As You Sow contends a report that explains how the company manages its chemical use could allay investor and public concerns, and could include:

• existing chemical management practices;

• any metrics by which chemical risk is currently being, or will be, measured and disclosed;

• the relative benefits and drawbacks of phasing out the use of food packaging treated with PFAS or other controversial chemicals.

Food waste: The final waste proposal is about food itself. Mercy Investments withdrew a resolution newly filed at Dine Brands (owner of Applebee’s and IHOP) that sought a report “on the feasibility of reducing the environmental and social impacts of food waste generated by the company’s operations given the significant impact that food waste has on societal risk from climate change and hunger.” Mercy Investments withdrew but the company agreed to two dialogues in 2021 to discuss way to cut food waste in its operations, including for franchisees, and in the supply chain. It also will work on more specific disclosure of these efforts.

Industrial Agriculture

Proponents have long expressed concern about problems in the way food is produced. This year nine resolutions raise a range of issues and six are still pending, two have been withdrawn and one omitted.

Pesticides: In the last five years, proponents have withdrawn about half the 20 proposals filed about pesticides in food production and household products, and earned more than 30 percent three times on proposals that went to votes. Proponents also have notched several agreements about pesticide use in food production. This year, As You Sow and Green Century are the proponents and two of four proposals are pending.

At Home Depot and Tractor Supply, the request is that the board

conduct an assessment of any environmental and health risks, as well as reputational, regulatory, legal and financial risks to the Company, posed by the Company’s current policies on pesticides. The assessment should include any recommendations for changes to policy and practice that the board deems appropriate.

The resolution [also] expresses concern about glyphosate, the main ingredient in the popular Roundup pesticide, noting controversy about its carcinogenicity. It says these concerns could damage the companies’ reputation and cites consumer support for a ban on glyphosate products, which are regulated by a patchwork of laws in half the U.S. states. In addition, Bayer (the new owner of Roundup’s maker, Monsanto), faces “125,000 legal claims as of November 2020, most of which allege that the consistent use of Roundup has led to cancers such as non-Hodgkin’s Lymphoma,” the proposal says, with billions due in damages. Since peer companies Costco and British retailer B&Q have stopped or soon will stop selling glyphosate products, the proponents urge a re-think by each of the target companies’ chemical strategies, and more disclosure to shareholders.

The other proposal is to snack companies. It asks Kraft Heinz and PepsiCo each to explain “if and how the company is measuring the use in its agricultural supply chains of pesticides that cause harm to human health and the environment.” At Kraft Heinz it also asks if the company will disclose this information. As with the home improvement firms, the body of the proposal outlines problems with pesticide use in the food system, including threats to “farmer resiliency and productivity due to proliferation of pesticide-resistant weeds and insects, loss of top soil, and soil degradation,” among other concerns. But the proposal decries the lack of information for investors and the public about how each company “tracks, reports, or reduces the use of synthetic pesticides in its agricultural supply chain,” which it says is “an important blind spot” that peer firms address. It calls for the possible use of these metrics:

• Type and amount of pesticides avoided annually through targeted strategies like regenerative agriculture programs, IPM, or other methods;

• Priority pesticides for reduction or elimination;

• Targets and timelines, if any, for pesticide reduction.

SEC action and withdrawals—Kraft Heinz said As You Sow failed to prove stock ownership and it withdrew with no agreement. Tractor Supply’s challenge was more substantive, contending the proposal raised ordinary business since it is about specific products, that it is not significantly related to the company’s business and also that it is moot. Green Century withdrew before any SEC response, indicating the company would continue discussions on the issue.

Antibiotics: Just three proposals are about antibiotics, with two taking a new approach.

Progress reporting—With a familiar tack, As You Sow asks Dine Brands to report on antibiotic use in feed for food animals in its supply chain. It points out that medically important drugs for humans that also are used in animal agriculture are driving antibiotic resistance, with most of the antibiotics sold domestically going to food animals. Given consumer preferences for antibiotic-free meat, and a 2018 request from Dine Brands to its chicken and pork suppliers for a phaseout, the resolution calls for a progress report. It asserts the company lags peers such as Denny’s and McDonald’s, Taco Bell and Wendy’s. Finally, the proposal points to guidelines from the Sustainable Accounting Standards Board (SASB) that suggest reporting on “the percentage of animal protein sold, by animal protein type, produced without use of medically important antibiotics at any stage of its life.”

Social purpose—A new approach connects action on antibiotic resistance to the assertion by CEOs at McDonald’s and Yum Brands that they support the sort of stakeholder capitalism outlined in the Business Roundtable’s Statement of the Purpose of a Corporation. The proposal asks each to

commission and disclose a study on the external environmental and public health costs created by the use of antibiotics in the supply chain of our company...and the manner in which such costs affect the vast majority of its shareholders who rely on a healthy stock market.

In arguing for their proposals, Paul Rissman and Amundi Asset Management say support for the BRT statement means the companies have a broad obligation to combat antibiotic resistance. Rissman and Amundi cite several studies outlining the challenges of antibiotic resistance and criticize each company’s lack of reporting on related “external costs and consequent economic harm to its supply chain.” Indeed, while calling for a report on antibiotics, they also suggest reconsideration of the company’s formal organization, saying that becoming a public benefit corporation is the solution. The resolution is part of a set of similar proposals being coordinated by The Shareholder Commons (TSC) a new group promoting for universal stock owners the idea of benefit corporations, which are organized to achieve not only profit but also social and environmental aims. (Other proposals from TSC are discussed on p. 39, 50, 64 and 69.)

Water: Only one proposal this year is about water. From Mercy Investments, it asks chicken producer Pilgrim’s Pride for a report by December 1st, “assessing if and how the company plans to increase the scale, pace, and rigor of its efforts to reduce water pollution from its supply chain.” The heavily footnoted resolution outlines a wide array of water pollution problems connected to chicken production, a tightening regulatory environment, the company’s relative lack of disclosure and customers’ preferences for action on stream pollution. The proponents think the company’s reporting needs to be more detailed and suggest it could include information on:

• requirements for manure management practices intended to prevent water pollution

• requirements for leading practices for nutrient management and pollutant limits throughout contract farms and feed suppliers, with a focus on verifiably reducing nitrate contamination

• plans to verify suppliers’ compliance with Pilgrim’s policies

The company has challenged the proposal at the SEC, arguing it concerns ordinary business. Investors have faced proposals every year for the last five years at Pilgrim’s, giving them 15.2 percent last year, the highest support yet. Given the new SEC rules, the proposal this year will have to receive at least 25 percent support to qualify for resubmission.

Farm animal welfare: The Humane Society of the United States asked Hormel Foods and Tyson Foods to report on the impact of a new California law on animal welfare. Proposition 12 in California dealt with pork production standards that both companies had opposed on the grounds they would prove too costly—a law supported by the proponent. The proposal asked for confirmation that

the company faces no material losses from compliance or noncompliance with [California] Proposition 12. If the company cannot so confirm, then shareholders request a risk analysis of any decision to comply or not to comply with Proposition 12, including the risks inherent in the company’s failure to disclose such risks in its 10-K and 10-Q reports. These disclosures should be made within three months of the 2021 annual meeting...

The SEC agreed with Tyson’s challenge that argued this was an ordinary business issue, a challenge also lodged by Hormel— which also said this resolution was moot.