The plastic waste crisis has reached a critical point, with oceans overflowing, ecosystems under severe strain and communities grappling with the fallout of plastics pollution. Recognising the urgency, we launched our plastics and packaging engagement project in 2023. We engage with 12 listed companies from the consumer staples sector to drive their progress on reducing plastic use. At the same time, the EU has adopted the Packaging and Packaging Waste Regulation (PPWR), which replaces outdated packaging rules, to tackle these challenges head-on. In this article, we share the latest update on our engagement efforts and their impact.

In brief

  • Engagement and regulation: Our 2023 plastics and packaging engagement project targets 12 consumer staples companies to reduce plastic use, aligned with the EU's Packaging and Packaging Waste Regulation (PPWR), which aims to significantly reduce waste and its environmental impact and promote circularity of packaging.
  • Company efforts: In 2024, we met with Danone, Henkel and Procter & Gamble (P&G), the three companies in our Impact Equities and Bond portfolios with the most significant exposure to plastic pollution. Focusing on driving measurable outcomes in key areas, we discussed transparency and comparability of disclosure, plastic reduction, recycled content, reusable packaging, and circular economy principles.Danone leads in transparency and recycled content, Henkel excels in packaging redesign, and P&G focuses on recycling infrastructure. All three face challenges with material scarcity, recycling infrastructure, and inconsistent disclosures.
  • Circular economy and solutions: Deposit return systems and technologies like reverse vending machines play vital roles in advancing circular economy principles and reducing plastic waste, though systemic improvements are still needed to meet ambitious 2040 sustainability goals.

Our plastics and packaging engagement project targets key players in the consumer staples sector, focusing on 12 companies included in our Impact Equities and Bond portfolios. By conducting in-depth assessments and engaging directly with these companies, we’ve worked to evaluate their progress in reducing plastic use and promoting sustainability.

While investor engagement plays an important role in encouraging corporate responsibility, it has its limits, however. Regulatory changes like the EU Packaging and Packaging Waste Regulation (PPWR) are essential because they create enforceable standards, level the playing field across industries, and drive long-term, systemic change. We welcome these transformative measures, which provide the robust framework needed to tackle the plastic waste crisis at its core.

EU Packaging and Packaging Waste Regulation

The PPWR is the most ambitious regulation related to packaging to date, aiming to significantly reduce waste and its environmental impact and promote circularity of packaging. The current framework, the Packaging and Packaging Waste Directive (PPWD), was first introduced in the 1990s but has proven inadequate in reducing packaging waste and its environmental impact. To address this, the EU aims to replace the directive with the PPWR, a regulation that will apply directly and uniformly across all member states, ensuring stronger and more immediate impact.

The PPWR establishes ambitious goals: eliminating problematic plastics, promoting reuse, reducing virgin plastic use, increasing recycled content, and ensuring that all packaging is reusable, recyclable, or compostable (Figure 1). The key differences between reusable, recyclable, and compostable products lie in their end-of-life processes: reusable products are designed for multiple uses, extending their lifespan; recyclable materials are transformed into raw materials for new products; and compostable items break down into natural, non-toxic elements. PPWR was formally adopted by the EU Parliament on December 16, 2024, concluding a legislative process that began in 2022. It is expected to be published in the EU Official Journal during the first quarter of 2025. Twenty days after publication, the PPWR will officially enter into force, with its provisions becoming applicable 18 months later.

Project objectives

After the first round of engagements and assessments in 2023, we established a set of objectives serving as a pathway for our ongoing efforts. Several of these objectives align with the PPWR, and we have adopted the regulation’s definitions, such as those for recyclability. We expect most companies to align their definitions with PPWR standards and to begin disclosing the specific indicators outlined in the regulation. Currently, this is a challenge, as companies often report on different indicators or use varying definitions. Key differences in recyclability definitions among consumer staples companies lie in the standards they use (e.g., Ellen MacArthur Foundation, RecyClass or local regulations), their emphasis on potential versus practical recyclability and their focus on specific materials like food-grade plastics or packaging redesign.

Progress evaluation in sustainable packaging

After having engaged with 12 companies from the consumer staples industry, we identified Danone, Henkel and Procter & Gamble (P&G) as the companies in our portfolios with the most significant exposure to plastic pollution (see the article How Do Companies Deal with Plastic Pollution?). Our engagement with these companies focused on driving measurable outcomes in key areas: transparency and comparability of disclosure, plastic reduction, recycled content, reusable packaging and circular economy principles. Given their substantial plastic footprint, we assessed each of the three companies' progress toward adopting a more circular packaging model, aligned with the objectives outlined in table 1.

Table 1. Plastics and Packaging Engagement Project Objectives

The following case studies showcase the outcomes of our engagement and the advancements each company has made in implementing sustainable packaging practices.

Danone

A global leader in dairy, food and water products, the company heavily relies on plastic packaging, primarily using PET, HDPE, PS, PP, and LDPE (see Table 2) for various product lines and transport. In its fiscal year (FY) 2023 Danone used 693,156 tonnes of plastic (FY 2022: 762,519 tons; FY 2021: 750,994 tons), hence the company has succeeded in lowering the absolute amount of plastics used, but also the year-on-year (yoy) intensity rate, which decreased by 9% (calculated as the change in reported plastics in tonnage per revenue, yoy). As a signatory of the 2018 Global Commitment on Plastics, Danone has committed to ambitious goals to reduce, reuse and recycle its plastic packaging.

Engagement outcomes

Objective 1: Enhance transparency

Danone has made significant progress in transparency, becoming the most open among its peers in disclosing its plastic usage, reduction metrics and sustainability goals. The company has integrated detailed reporting into its CDP water questionnaire and sustainability reports. Improved transparency has allowed to more accurately track Danone’s progress, holding the company accountable for its sustainability commitments. It has significantly reduced PVC use and decided to stop using PS due to recycling challenges and to switch to PET in the UK, France, Belgium and Spain, and to also introduce paper-based alternatives.

Objective 2: Set plastic reduction targets

Danone has committed to 100% reusable, recyclable, or compostable packaging by 2030 and aims to reduce virgin fossil-based plastic use by 30% by the same year. Initially targeted for 2025, the recyclability goal was extended to 2030 due to challenges with recycling infrastructure and supplier engagement. Despite this, Danone has achieved an 8% reduction in overall plastic packaging and a 16% cut in virgin plastic use since 2018. The focus of our engagement going forward is to ensure that the company’s 2030 recyclability target aligns with PPWR. We will also continue to advocate reduced material usage.

Objective 3: Increase recycled content

Aiming for 50% recycled PET content by 2025, Danone on average reached nearly 24% in 2023 and even more than 31% in geographic markets with a better recycling infrastructure. Although barriers such as limited recycling infrastructure and scarcity of recycled materials exist, Danone has exceeded the regulatory target for food packaging other than PET of 10% recovered plastics by achieving almost 15% in 2023. The company also managed to recover 58% of the plastics it put on the market and aims for 100% recovery by 2040, underscoring its commitment to circularity.

Objective 4: Adopt reusable packaging

In the last three years, Danone maintained 74% of its packaging (primary, secondary and tertiary) as reusable or recyclable. Primary packaging refers to packaging that directly contains the product for consumer use, secondary packaging groups products for retail or bulk handling and tertiary packaging ensures safe transport and storage of large quantities. Primary and secondary packaging stands at 84% with a target to reach 100% by 2025. We aim to ensure that Danone's definition of “recyclable” aligns with PPWR once defined (currently, it follows the Ellen MacArthur Foundation's definition). The same goes for reusability.

Objective 5: Implement circular economy principles

Danone is proactively collaborating with stakeholders across its value chains to enhance circular business models. Notably, Danone’s partnership with CITEO in France aims to establish a unified national reuse system for food packaging, demonstrating its leadership in building sustainable packaging infrastructure. This initiative showcases Danone’s dedication to circular economy principles, particularly in markets where government and industry collaboration can drive systemic change.

Table 2. Types of resin and their uses

Henkel

The company is a global manufacturer operating in two key business units: Adhesive Technologies and Consumer Brands. The company produces a range of products packaged in plastics, spanning both B2B and B2C markets. In 2023, Henkel used 281,485 tons of plastic (FY 2022: 306,222 tons; FY 2021: 304,420 tons). Thus, Henkel, too, has managed to lower the absolute amount of plastics used and managed to reduce the year-on-year intensity, which decreased by 9%. In line with its commitment to a circular economy, Henkel has adopted a three-pillar packaging strategy focused on sustainable design, material use and recycling.

Engagement outcomes

Objective 1: Improved transparency

Henkel provides disclosure on its plastic usage, including a response in the plastics section of the CDP report, although less detailed than Danone. The company does not disclose its progress on certain targets, which limits our ability to fully evaluate its achievements - an issue that remains a focus in our engagement. However, Henkel is more transparent about its definitions for terms like "recyclable" and "reusable", which supports its efforts to avoid problematic packaging materials. While we do not yet have the exact EU definition of "recyclable" under PPWR, we expect Henkel’s approach to align with PPWR.

Objective 2: Set plastic reduction targets

Henkel aims to reduce fossil-based virgin plastics in all its consumer goods products by 50% and to achieve 100% reusable or recyclable packaging by 2025. To reach these goals, the company collaborates with partners across the value chain, including raw material suppliers, packaging manufacturers, waste disposal companies and recyclers. Additionally, Henkel is developing tools to improve data collection and usage. While the company does not have a specific target to reduce its plastic footprint, it has achieved an 8% year-on-year reduction in total plastic usage. The company has not disclosed its progress on reducing fossil-based virgin plastics.

Objective 3: Increase recycled content

Aiming for a 30% share of recycled plastics by 2025, Henkel currently stands at 19%. Whereas the 100% reusable target refers to packaging that could still be made from virgin plastics, the 30% target specifically refers to the packaging containing recycled plastics. We expect that the share of recycled plastics will continue to rise, as the company is continuously developing tools to improve the collection and usage of data.

Objective 4: Adopt reusable packaging

For the past three years, approximately 86-87% of Henkel’s packaging has been designed for recycling and reusability. The company provides examples of packaging redesign to improve recyclability, such as converting the packaging for its European Persil portfolio from PP to HDPE, which is easier to recycle.

Objective 5: Implement circular economy principles

Henkel remains committed to circular economy principles, even if some initiatives, such as the refill packaging and deposit return systems, have faced adoption and operational challenges. For example, Henkel offered deposit return systems for an extended period but found them challenging to maintain due to the labour-intensive processes required to ensure product safety and hygiene. Through Extended Producer Responsibility (EPR), Henkel aims to prevent unregulated disposal by supporting transparent recycling systems that provide accessible collection solutions, promote secondary material use and include informal sectors in regions with limited recycling infrastructure. In 2023, Henkel refined its tendering process in countries with multiple recycling options and assessed recycling initiatives for effectiveness and availability of post-consumer recycled (PCR) materials. The company supports 56 collection and recycling systems globally, partnering with retailers and recyclers to encourage proper recycling practices through packaging symbols.

Procter & Gamble

Procter & Gamble (P&G) is a US multinational consumer goods corporation. Its main product categories are laundry and cleaning, paper, beauty care, food and beverages, and health care segments. All these product categories underlie safety and hygiene requirements, so packaging plays a cardinal role in P&G’s activities. In 2023, P&G used 712,000 tons of plastic, mainly PE, PET and PP (FY 2022: 776,220 tons). P&G also managed to lower plastic usage, by 8% yoy, although part of that can be attributed to the 3% decline in units sold.

Engagement outcomes

Objective 1: Improved transparency

P&G has improved some of its reporting, such as disclosing the average recycled content but there is room for improvement when comparing the company to Henkel and Danone. This predominantly applies to target setting for overall packaging and paper reduction ambitions. P&G’s definition of “recyclable” includes the availability of at-scale collection, sorting, processing markets for materials in at least one geography.

Unlike Danone and Henkel, P&G has not responded to the plastics section of the Water CDP questionnaire.

Objective 2: Set plastic reduction targets

P&G aims to reduce virgin petroleum plastic in its consumer packaging by 50% per unit of production by 2030, with 2017 as baseline. In 2023, the company reached a 13% reduction, comparable to Danone. P&G follows the waste management hierarchy (reduce, reuse,and recycle), which, for instance led to a 45% reduction in plastic use in Head & Shoulders shampoo bottles.

Objective 3: Increase recycled content

P&G developed two major recycling initiatives. VersoVita™ is a proprietary process that purifies recycled PP and PE to near-virgin quality. The partnership with PureCycle Technologies resulted in a P&G-patented method to restore used PP to a similar quality standard. In 2023, P&G sourced 14% of its resins, about 101,000 metric -tonnes, from recycled materials, demonstrating its commitment to increasing the availability and quality of recycled plastics across its products.

Objective 4: Adopt reusable packaging

P&G aims to use 100% reusable or recyclable packaging by 2030. In 2023, 78% of its consumer packaging was designed to be recyclable or reusable.P&G designs packaging based on life cycle principles, recognising the “need to look at lifecycle impacts of material choices”. The company has established multiple partnerships to advance the scaling of necessary infrastructure and data collection. One example is the ReSource Footprint tracker tool by WWF, which helps companies to take measurable and targeted action for reaching their plastic recycling targets.

Objective 5: Implement circular economy principles

P&G follows circular economy principles with a focus on three impact areas. These are reducing the company’s waste footprint, enabling consumers to reduce their footprint and helping the industry to reduce its footprint through solutions that are scalable and sustainable (See P&G’s Actions).Like Henkel, P&G applies EPR principles to consumer goods, advocating a system in which companies are responsible for funding the collection, sorting, and recycling of packaging material after its use-phase.

P&G is not a member of the Ellen MacArthur Global Commitment, as the foundation’s goals are currently challenging for P&G to achieve. This is mainly due to limited recycling infrastructure for sachets and other hard-to-recycle plastics. To tackle this issue, P&G has made a joint development agreement with Dow to create a new recycling technology, VersoVita™ (see Objective 3).

Conclusions

Our engagement with Danone, Henkel and P&G has revealed varying levels of progress toward sustainable packaging, with clear areas for improvement across all three companies.

Danone has made the most notable advancements in transparency, recycled content and reuse goals, showing alignment with circular economy principles. However, challenges persist, particularly with material scarcity and infrastructure limitations, which may hinder its ability to fully implement a sustainable packaging model.

Henkel has taken proactive steps in packaging redesign and setting recycled content targets, but greater transparency and measurable progress is required to demonstrate its commitment on a global scale.

P&G has increased its efforts toward recyclability and reusability, supported by partnerships to improve recycling infrastructure. While there are examples of initiatives to reduce and replace materials, further steps are needed to address scalability and consistency in implementation.

Overall, while each company is making progress, significant gaps remain, particularly in aligning actions with measurable outcomes and overcoming systemic barriers to sustainability. Another notable gap is the lack of consistent and comparable disclosures and definitions. The CSRD could potentially improve disclosure practices, making it worth considering for inclusion.

Regarding the requirements of the PPWR, we believe all three companies are on track to comply with the 2030 targets. Some objectives, such as the recycled content of plastic packaging other than PET, have already been achieved. However, the 2040 objectives are significantly more ambitious, and these companies will need to step up their efforts to meet the increased requirements.

Crucial role for waste collection systems

 

The companies we examined provide essential consumer products. They are all making progress towards more sustainable packaging solutions, despite current challenges with plastic waste. To complement these efforts, we also invest in companies that specialise in waste collection and deposit return systems, as these play a vital role in creating a circular economy and reducing environmental impact.

Globally, 78 million tons of plastic packaging are produced each year, but only 14% is collected for recycling, leaving 86% to end up in landfills or incinerators. Alarmingly, only 2% of this packaging is recycled in a closed loop, where materials can be reused for the same or similar types of packaging. A significant contributor to this waste is the production of 500 billion plastic beverage bottles annually. While these bottles are predominantly made from PET and HDPE - highly recyclable materials - they are among the most common waste items found in the environment. With proper collection systems, these materials could be recycled multiple times, significantly reducing their impact.

One solution to this is a deposit return system. Such systems work by adding a deposit to the price of a beverage, which is refunded upon returning the empty bottle or can for recycling. Plastic bottles are often seen as a symbol of a throw-away society; putting financial value to (empty) bottles signals they also have a value for society as a resource. This improves the collection rate of plastic beverage containers and enables the proper recycling of PET and HPDE materials. While the European average collection rate for PET plastic beverage containers in a curb-side system is 47%, for deposit return systems the average collection rate is 94%. In countries with a deposit return system, beverage container litter is 66% less than in countries without such systems.

The key component of deposit return systems are reverse vending machines. These machines collect, sort and handle the return of beverage containers and provide consumers the refunding of their deposit. They scan container barcodes, materials or shapes, to identify the packaging type and give the correct refund. The machine then sorts the containers into different types, such as moving refillable containers to one storage area and compacting (crushing) non-refillable containers.

With its advanced sensors and technology, Tomra is the global market leader of such reverse vending machines and collects and handles 45 billion beverage containers annually through 80,000 machines in more than 60 countries. Even though this is a considerable amount of avoided plastic pollution, it nevertheless only represents 3% of beverage containers sold each year. Companies like Tomra make an important contribution to a more circular economy and to avoiding plastic waste, but it is clear that a lot more needs to be done to tackle plastic pollution.