Oil and gas companies switching to plastics production to boost sales are adding to climate change problems and creating more risks for investors, according to As You Sow, a shareholder environmental advocacy organization.
Oil and gas companies have made the switch to plastics to make up for depressed demand in fossil fuels, demand lost because of consumers’ concerns about oil production and use adding to the climate change crisis, As You Sow said in a report, “Plastics: The Last Straw for Big Oil?” released Thursday.
The report advises shareholders and potential investors to be wary of investments in big oil companies that are touting the switch to petrochemicals for plastic production as a way to mitigate climate change.
“In the face of crises like climate change and global plastic pollution, shareholders must scrutinize whether investments in the production of plastics and other petrochemicals will live up to inflated expectations” of growth in the companies, said Lila Holzman, co-author of the report and senior energy program manager at As You Sow, in a statement. “Investors are likely to find that companies’ reliance on plastics to recoup lost demand for fossil-based energy is problematic.”
As the world transitions to cleaner sources of energy in response to the climate crisis, the energy sector is facing much less demand for fossil fuel products, according to the report. To hedge against shrinking demand for oil from the power and transportation sectors, oil and gas companies are allocating significant resources to boost petrochemical operations and the infrastructure construction that comes with it. Proposed investments in expanded petrochemical infrastructure, however, require enhanced scrutiny by investors, the report said.
Joshua Baca, vice president of plastics at the American Chemistry Council, responded in an email, “Plastics are a vital part of sustainable living. Today’s plastics help to dramatically reduce greenhouse gas emissions by significantly lowering energy use in our homes and vehicles; efficiently delivering clean drinking water; and helping keep our food fresh and medicine and medical supplies sanitary.”
“As our standards for sustainability and the world’s population grow, we’ll need more plastics to live better and with a lower carbon footprint – not less. The U.S. is positioned to be a leader in plastics production, with high standards for environmental protection, efficient sources of raw materials, and good paying jobs for people in our communities,” he added.
“Everyone deserves clean air and water. America’s plastic makers have a long-standing commitment to the health, safety and security of communities in which we operate. We work proactively to address community concerns through open communication and meaningful engagement. And plastic makers are leading the effort to end plastic waste by advancing technologies and expanding systems to significantly increase our ability to reuse our plastic resources in American manufacturing,” Baca said.
However, Conrad MacKerron, senior vice president, senior vice president of As You Sow, said, “Plastic waste flowing into oceans is a global environmental crisis. Major users of single-use plastic realize their use of plastic must decline substantially. Some large consumer goods companies like Unilever and Procter & Gamble already have agreed to reduce use of virgin plastic by hundreds of thousands of tons. Pressure to reduce the use of virgin plastics may deflate overly optimistic demand growth assumptions for the sector.”
“Given the multitude of ESG issues associated with plastics, investors must be vigilant in seeking information about the viability of further investment in plastic production,” Holzman added.
“New solutions are required from energy companies that seek to be well-positioned in a net-zero, circular [recycling] economy. Increasing fossil-plastic production is not one of them,” said Joshua Romo, an energy and plastics fellow at As You Sow, in a statement. “Companies that fail to innovate and continue to invest in new plastic production face a landscape of growing risks and opposition.”