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Multinational behemoths boosting ESG credentials

By Paul Hemsley
3 minute read

Walk past any rubbish bin outside local fast-food outlets, and the scene is the same – overstuffed trash containers full of used plastics and other environmentally unfriendly nasties, which create an impression that companies are falling way behind on their green credentials.

It’s a persistent sore-spot in corporate sectors with a significant output of highly visible waste products that aren’t always easy to dispose of – and the load is often shifted to local government waste management services whose resources are generally already overstretched.

But according to Magellan Financial Group (MFG) Core ESG Fund’s portfolio manager Elisa Di Marco, some of the world’s most iconic companies are maneuvering to change that public perception.

Citing Amazon and Starbucks as two examples of major multinationals that share a burden in formulating ESG policies that significantly reduce their carbon output and their potentially damaging environmental footprint, Ms Di Marco shared in a recent InvestorDaily podcast that there’s often a “really negative perception around larger companies and how they incorporate ESG”.

According to Ms Di Marco, that public perception is “rightfully” earned, as their multinational status makes them far more visible than smaller competitors and other companies, basically forcing them to set an example to others.

But, she lamented that media coverage of large companies and their execution of environmental policies tends to focus on the negative rather than the positive aspects of how they’re using their large footprints and their scale for “good”.

Her claim is that most large companies care “to varying degrees” and are “typically socially responsible”.

“These companies have significant resources that they deploy into improving certain sustainability elements of their businesses and it's that investment that they can then scale, which means that they can have [a] really meaningful impact,” Ms Di Marco said.

And with MFG being a leading investment firm with stakes in Starbucks, risk is an important benchmark in how outcomes are assessed, and according to Ms Di Marco, ESG risks are like any other risk and can have a “material impact to earnings and cash flows”.

She highlighted a significant environmental and manufacturing initiative from Starbucks that integrates sip lids into the lids of all their cold drinks in the United States, which the company intends to roll out globally.

Acknowledging the project might be “a bit small”, Ms Di Marco said that’s a lot of saved plastic resulting from a change that puts a straw into a lid, given Starbucks’ daily sale of 400 million drinks.

The benefits extend beyond Starbucks’ bottom line and environmental care, Ms Di Marco said this investment “trickles down” into the packaging industry, because it will enable independent corner coffee shops to easily access the same eco-friendly packaging.

And of course, the consumer becomes more alert to these corporate environmental strategies, which then improves public perception of the company’s proactive green policies.

Lending support to her argument for Starbucks, Ms Di Marco also referred to Amazon as a company focused on reducing its use of packaging – an important factor in being one of the world’s largest eCommerce businesses.

“Over the last seven years, they have reduced their outbound packaging weight by almost 40 per cent and that saves a million tonnes of packaging,” Ms Di Marco said.

The manufacturing impact from a corporate policy such as this is enormous, as it reduces the use of raw materials in the initial packaging, cuts the requirement for the recycling of the waste of that packaging, and finally the transportation of that packaging – a major factor potentially improving the bottom line of many stakeholders given the gargantuan hikes in fuel and energy.

“Large companies, they might not be perfect, but they really can have an impact if they're investing for a change and for good,” Ms Di Marco said.