ESG Accountability in Practice: A Coca-Cola Case Study

Coca-Cola joins a growing group of major corporations to go back on climate pledges, having announced a watering down of their recycling targets alongside a roll back their net zero pledge. This will impact tens of billions of bottles a year being reused and recycled.

The Change:

Original Claims

• 50% recycled material in primary packaging (e.g.: plastic, glass and aluminium) by 2030

• Collect and recycle one bottle/can for each one sold by 2030.

• Cut emissions by 25 per cent by 2030, from a baseline of 2015 emissions.

Watered-Down Targets

• 35-40% recycled material in primary packaging (such as plastic, glass and aluminum) by 2035

• “Help ensure the collection” of 70-75% of bottles and cans entering the market by 2035.

• Cut emissions from a 2019 baseline in accordance with a 1.5C trajectory by 2035. It did not set out a percentage reduction

What does this mean:

Coca-Cola had looked to set itself as an industry leader through its initial targets but by going back on these claims it has further highlighted the distance that exists between current rhetoric and genuine action. Whilst Coco-Cola is not the first company to roll back on its environmental pledges (see: Volkswagen’s changes to its CO2 pledges as one of many examples), the lack of meaningful litigation in holding corporations to their climate pledges means this issue is likely to persist.

The litigation risks are growing in regard to plastic output for the beverage industry, with this issue not being limited to Coca-Cola. In October, Coca-Cola and Pepsi were sued for allegedly claiming plastic containers “are ‘recyclable’ despite knowing that plastics cannot be readily disposed of without associated environmental impacts”. This shows that the current legal framework is not proving sufficient to deter environmental back-tracking or misleading information dissemination.

The backdrop to this announcement from Coca-Cola was the failure of talks in Busan, South Korea regarding the creation of the worlds first legally binding UN treaty on plastic pollution. The inability of global powers to agree on how to combat the growth in plastic pollution allows corporations to continue making lofty claims without taking real action to meet them.

Legal and Commercial Implications:

Coca-Cola’s actions present a case study in the intersection of corporate governance, litigation risk, and ESG strategy. The beverage industry has seen a surge in litigation related to plastic output and misleading sustainability claims. For instance:

• Coca-Cola and Pepsi were recently sued over allegations that their plastic containers were falsely marketed as recyclable, despite the significant environmental impacts of plastic waste.

• Such cases reveal vulnerabilities in the current regulatory landscape, where ambiguous or under-enforced laws fail to deter environmental backtracking.

Understanding these risks is essential for advising corporate clients on ESG compliance. Key considerations include:

1. Identifying Greenwashing Risks: Lawyers must scrutinize whether a company’s public claims align with its actions, ensuring compliance with advertising and consumer protection laws.

2. Mitigating Litigation Exposure: By fostering transparent communication and setting realistic targets, companies can reduce the risk of reputational damage and legal challenges.

3. Navigating Global ESG Frameworks: The absence of a legally binding international treaty on plastic pollution—evidenced by the recent failure of UN negotiations in Busan, South Korea—leaves a patchwork of national and regional regulations. Lawyers must help clients navigate this complex landscape to maintain compliance and competitive advantage.

Broader ESG Challenges and Opportunities:

Coca-Cola’s rollback reflects broader systemic issues:

• A lack of binding international agreements or stringent national laws allows corporations to modify ESG commitments with minimal consequence.

• Weak enforcement mechanisms undermine the credibility of voluntary pledges, contributing to stakeholder scepticism.

However, these gaps also create opportunities:

• Advising on ESG Governance: Lawyers can guide corporations in crafting robust ESG strategies that balance ambition with accountability.

• Driving Policy Development: As advisors to corporate or government clients, lawyers can advocate for stronger regulatory frameworks and enforcement mechanisms that level the playing field.