Authors: Emer McEntaggart, Michael Twomey, Bella Chan, Caoimhe Clarkin, Maggie Craig and Stefanie Fogel
In recent weeks, the New York State issued a lawsuit against PepsiCo. The lawsuit claims that PepsiCo should be responsible for the number of PepsiCo plastic bottles and wrappers ending up in rivers supplying residents of Buffalo, New York with drinking water.
The proceedings are based on claims that the plastic packaging creates a public nuisance and is causing harm to the environment and public health.
What’s different about the PepsiCo claim?
These kinds of lawsuits previously focused on challenging recyclability claims, arguing they were false and misleading and caused greater pollution. So far, they have been largely unsuccessful. However, the new complaint is much broader. It argues that PepsiCo’s use of plastic packaging itself substantially contributes to plastic pollution.
The complaint also includes a focus on microplastics, detailing their potential harm to humans, fish and wildlife. While microplastics have long been a concern, linking them to any given entity has been notoriously difficult. The new complaint is among the first to attempt this, and those allegations substantially broaden the risk for other companies.
In addition to seeking financial penalties, and compensation, the claim also requests that the NY Supreme Court require PepsiCo to develop a strategy to decrease its use of plastic and avoid its packaging polluting the Buffalo River.
Increase of climate related litigation
Cases like this are not unusual.
Climate litigation has more than doubled in the last five years. Historically, governments and State bodies were the ones being sued. Now the focus has squarely turned to companies. Global organisations are under heightened scrutiny to advance what they are doing to combat climate change and reduce the impact global business has on the environment.
Increasingly, those selling products in the consumer goods, food and retail sector are a target. Consumers are becoming increasingly conscious of the impact that their purchases have on the environment and society. As a result, to attract and retain customers, companies are under pressure to demonstrate their commitment to sustainability and social responsibility.
The New York District Attorney responsible for commencing the action against PepsiCo warned that no company, no matter how big, can avoid ensuring that their products do not harm public health or the environment. We believe there is a risk that other plaintiff organizations and environmental groups will follow suit and sue other companies under the right circumstances.
Against this background, most global businesses are moving to incorporate sustainability and other ESG considerations into their business strategies and operating models. Putting the environment and society at the core of their medium and long term strategies. In fact, the PepsiCo suit details specific failures by PepsiCo to meet its professed sustainability goals.
The importance of doing so cannot be understated. And if litigation risk can be avoided why wouldn’t you? When sustainability and ESG is not factored into a how a company produces its products, class actions and other lawsuits will, if they haven’t already, become a daily threat. As will regulatory inquiries and investigations.
How Europe is tackling plastic bottles and containers
In the European Union and in the UK, initiatives are underway to tackle this challenging waste phenomenon that has gotten PepsiCo into trouble.
In Ireland, the Deposit Return Scheme is due to commence in February 2024. The scheme is designed to encourage greater recycling of plastic bottles and cans. The protection of the environment is one of the key objectives of the scheme.
By placing a monetary value on in-scope products, businesses that produce these potentially harmful plastics hope that consumers will be incentivised to recycle and return plastic waste.
In-scope products include the exact plastic bottles that have resulted in PepsiCo’s litigation in the US. Namely, PET plastic drinks containers, steel and aluminium cans with holding volumes of between 150ml and 3 litres.
Producers and retailers, including online retailers, will fall within the scope of the Deposit Return Scheme if they are producing or selling in-scope products.
How do you avoid a PepsiCo scenario?
Outside of the fines and penalties that exist for failing to comply with the Deposit Return Scheme, there are other fundamental reasons to embrace these types of circular economy initiatives which are becoming more common across Ireland and the EU.
Companies that fail to comply with the Deposit Return Scheme or other policies and regulations aimed at encouraging sustainable and responsible business risk significant damage to their reputation in addition to legal liability.
By integrating ESG considerations into their business operations, companies can better manage these risks. If a company embodies sustainability in its supply chain, it also minimises the risk of climate related litigation and other environmental and public health claims.
Implementing robust and effective sustainability and ESG strategies attracts investment, creates value in the long-term and charms potential talent in a world where not only consumers expect sustainability to be high on an organisation’s agenda. What else should you be looking out for?
While the likelihood of the New York Attorney General succeeding with its claims remains to be seen, the complaint represents a fresh take on this type of litigation. And although this suit is the first of its kind, it will not be the last.
Increase in environmental crime offences
At the same time the PepsiCo suit was commenced, the Council Presidency and European Parliament negotiators reached a provisional agreement on a proposed EU law that would improve the investigation and prosecution of environmental crime offences.
The new directive defines environmental crime more precisely and adds new types of environmental criminal offences. The Council and European Parliament agreed to increase the number of offences that currently exist under EU criminal law from 9 to 18, broadening the type of conduct that is prohibited because it harms the environment.
Green Claims Directive
- Provisional agreement has recently been reached on new rules governing the substantiation and communication of environmental claims by companies following the Commission's proposal for a Green Claims Directive. If approved, regulators can impose fines of up to 4% of a company's total annual revenue in the affected Member State(s) for widespread infringements.
These are only some of a number of crackdowns the European Union is planning to tackle the footprint European and international businesses are leaving on the environment.
Our firm has an organized plastics task force to support our clients in the rapidly evolving area of plastics-related litigation and liability risks, and we are following the PepsiCo action and others like it closely. We are also working and engaging with clients as they move to reinforce sustainable business models; from treating people fairly, supply chain due diligence, climate and nature-positive transition to disclosure and reporting.
At the same time we are advising domestic and international clients on the impact the Deposit Return Scheme and similar circular economy initiatives will have on their operations in Ireland and across the EU.