Plastics proposal gains support at owner of KFC and Pizza Hut

More than a third of votes at the recent AGM of Yum! Brands – whose portfolio includes KFC, Pizza Hut and Taco Bell – supported a shareholder proposal seeking a report on efforts to reduce plastics use.

According to an SEC filing, 36.9 percent of votes cast at the May 18 meeting backed a proposal filed by As You Sow asking that Yum! Brands’ board issue a report ‘describing how the company will reduce its plastics use by shifting away from single-use packaging in alignment with the findings of the Pew Report, or other authoritative sources, to feasibly reduce ocean pollution.’

According to As You Sow’s filing, based on the board’s discretion the report should:

• Assess the reputational, financial and operational risks associated with ‘continuing to use substantial amounts of single-use plastic packaging while plastic pollution grows’
• ‘Evaluate dramatically reducing the amount of plastic used in our packaging through transitioning to reusables’
• Describe how the company ‘can further reduce single-use packaging, including any planned reduction strategies or goals, materials redesign, substitution or reductions in use of virgin plastic.’

The vote came a few weeks after a coalition of 185 investors urged companies to take a more ‘radical approach’ to lowering their use of plastics given the growing financial and reputational risks. The investors wrote to companies in the fast-moving consumer goods and grocery retail sectors, such as Britvic, Danone and Target Corp, calling for them to ‘act more swiftly to address the plastics crisis’.

The signatories, which collectively manage $10 tn in assets, include names such as Amundi Asset Management, Nordea Asset Management, EOS at Federated Hermes and Legal & General Investment Management.

In its supporting materials for the Yum! Brands proposal, As You Sow writes: ‘The growing plastic pollution crisis poses increasing risks to our company. Corporations could face an annual financial risk of approximately $100 bn should governments require them to cover the waste management costs of the packaging they produce, a policy increasingly adopted around the globe.’

The shareholder activism group cites the Pew Charitable Trusts’ Breaking the Plastic Wave report as stating that better recycling must be added to lower use, materials redesign and substitution. ‘Yum! Brands is part of a wasteful ‘to go’ packaging culture, contributing to plastic pollution of land and water,’ As You Sow writes. ‘Our company does not report on the number of packaging items it distributes, but as one of the world’s largest quick-service restaurants, millions of packaging units with our brand logos enter the environment or landfills every year.’

As You Sow has made ocean plastic pollution one of its main focus areas. ‘We are focusing on ocean plastics and petrochemical risk – those two go together in the sense that oil and gas companies are becoming more reliant on producing plastics as the world transitions away from fossil fuels [and] moves away from single-use plastics,’ Danielle Fugere, president and chief counsel of As You Sow, told Corporate Secretary last year.
 

BOARD OPPOSITION
The Yum! Brands board had urged shareholders to vote against the proposal. In the company’s 2023 proxy statement, it writes that the resolution ‘would divert time and resources that the company has determined would be better used to support our global citizenship and sustainability strategy and the execution of existing goals and commitments that will provide the most meaningful impact.

‘Yum has a long history of focusing on the sustainability of its packaging as a key business initiative, evidenced by our shift to more sustainable materials, designing packaging to reduce waste and managing the impact of waste on communities and the planet.’

The board cites a July 2022 harmonized packaging policy, based on Taco Bell’s and KFC’s packaging goals and focusing on issues including:

• Removing styrofoam and expanded polystyrene across all of the company’s brands
• Eliminating unnecessary plastics by 2025 across all of those brands
• Reducing virgin plastic content by 10 percent by 2025
• Expanding pilots that focus on reusable packaging systems
• Conducting assessments to ‘better understand areas where more recycled content can be included to inform goal setting across all brands by 2023. Disclosure to show progress will begin in 2024’
• Testing and integrating ‘more recoverable paper and paperboard packaging solutions’.

A request for comment from Yum! Brands was not returned immediately.