Anticipate Financial Penalties: Brace for Plastic Regulation Enactment to Avoid Financial Setbacks
Rewritten Article:
Grab the Wheel: Time's Up for Delay in Handling Plastic Regulations
It's said, "Good things come to those who wait," but sometimes, it's better not to linger—especially when what's at stake could make or break business risks or provide a competitive edge. Case in point: the looming global plastics regulations.
After representatives from 175 nations agreed on a mandate to create a legally binding instrument to curb plastic pollution in 2022, we've been waiting for a global plastics treaty. However, negotiations have yet to bear fruit, and conversations will carry on. Ahead of the upcoming rounds, SAP has teamed up with Earth Action to roll out the "Time's Up" report, urging companies not to sit on their hands but to gear up now to meet the ever-evolving global plastics legislation.
Plastic Regulation: More Than Just Checking the Box
Plastic regulations are nothing new. They've been spreading across the globe at a rapid clip, driven by the imperative to lighten our dependence on fossil fuels and curb waste that's drowning ecosystems. Companies are now grappling with an increasing tide of extended producer responsibility (EPR) regulations and plastic taxes in certain regions. By 2030, global corporate liabilities linked to plastic usage are projected to soar past $20 billion.
In this shifting landscape, SAP and Earth Action believe that plastic and data management are no longer mere reporting niceties, but fundamental business necessities. Companies that shy away from managing these matters may find themselves floundering under the weight of financial obligations, while those who take action, comply with regulations, and leverage digital solutions will ride the wave, poised to claim an edge against the competition.
Navigating the Labyrinth of EPR Regulations with Ease and Efficiency
Originally designed to fund waste management, EPR regulations have evolved to focus on eco-design and recyclability. The complexities facing corporations stem from the sheer variety of different EPR regulations across various territories. One consumer goods company operating in over 180 countries, for instance, could encounter a minefield of 30 to 50 distinct EPR policies, entailing potential costs in the range of 0.5%-1% of final product revenue. For multinational corporations, this can add up to tens of millions of euros of risk—or opportunity.
Avoidance isn't an option. Evading EPR regulations comes with substantial financial risks, including fines, litigation, and costs of cleaning up messes. Beyond financial repercussions, reputational risk linked to violations in consumer protection, false advertising, and environmental damage could erode revenue and erode investor confidence.
United, We Stand: Industry Alignment on Packaging Data
SAP is working with the World Business Council for Sustainable Development (WBCSD) and the Ellen MacArthur Foundation, championing the need for industry alignment on packaging data. As a pioneer, we're spearheading a project to enable standardized data to be shared throughout supply chains, allowing businesses to access and analyze materials from various suppliers, fostering the design of sustainable and recyclable packaging.
Negotiations to finalize the global plastics treaty are slated to resume with delegates gathering for INC 5.2 in 2025.
Don't Delay: Take Action Now
The report leaves no doubt: Companies must not put off acting on anticipated regulations. With a multitude of national and regional regulations already in place, including the EU's Packaging and Packaging Waste Regulation (PPWR) and the Corporate Sustainability Reporting Directive (CSRD), there's work to be done. Delaying action could leave companies behind, struggling to meet existing and incoming regulations, resulting in financial and reputational risks.
Under the PPWR, for example, the consequences of non-compliance aren't theoretical—they're real. Each EU member state is empowered to impose sanctions that are effective, proportionate, and dissuasive, ranging from hefty fines to sales bans or mandatory product recalls due to non-compliant packaging. In short, the clock is ticking, and the consequences of inaction may be harsher than expected.
Early adopters stand to benefit from their experiences and will be better prepared for the shifting regulatory landscape when the treaty comes into force. By implementing robust data management solutions and streamlining their reporting processes, they can start to make green strides, minimizing waste, and reducing their risk profiles.
Data Management: The Backbone of the Plastic Regulation Era
Contrary to common opinion, the required data for compliance already exists and can be sourced from existing enterprise systems. Companies should turn to their enterprise resource planning (ERP) systems and financial reporting platforms, which are veritable treasure troves filled with procurement records, supplier data, and waste management information, key assets for reporting purposes.
Businesses should also collaborate with their suppliers and customers, focusing on data sharing that fuels resource optimization and enables scalable efficiencies.
Data management systems like SAP Responsible Design and Production help companies collect and utilize data by aggregating it from third-party systems. These solutions not only empower sustainability managers to accurately calculate fees and taxes but also provide them with a lifecycle view of indirect taxation costs, allowing informed decisions that consider the environmental impact of design choices. Furthermore, the solution enables exploration of altering materials, products, and supply chains, granting users the information they need for agile decision-making.
Prepare for an Ambitious Treaty
Companies must invest in their enterprise systems to leverage data and join hands with their supply chain to meet upcoming legislation and sidestep financial and penalty risks of non-compliance. The sooner they act, the greater their competitive advantage. By utilizing data management systems to collect robust data and coordinate with supply chains, they will be ready to excel in the era of plastic regulation, limiting their costs, achieving sustainability targets, and complying with evolving regulations.
Learn more about SAP Responsible Design and Production here.
Enrichment Data:
Overall:
- After setbacks in the United Nations' efforts to establish a legally binding global plastics treaty, the fifth session, INC-5.1, concluded in December 2024 without reaching a binding agreement[1][5]. However, the structure of the treaty was outlined, and a Chair’s Text agreed upon to serve as the basis for further negotiations[1]. The next session, INC-5.2, is scheduled for August 2025 in Geneva, Switzerland[1][5].
- Despite the challenges, there is momentum for a strong treaty, with several countries advocating for ambitious provisions. Key areas requiring focus include the technical and legal work on the treaty text, establishing a procedural strategy for its adoption, and political groundwork to secure ministerial support[3].
- To minimize financial and reputational risks, companies should prepare for anticipated regulations by adapting to Extended Producer Responsibility (EPR) laws, reducing plastic usage, embracing sustainable practices, monitoring regulatory developments, and developing product safety and compliance programs[1][4].
- Delays in forming the global plastics treaty have prompted companies to proactively address micro plastic and plastic legislation, as indicated in SAP's "Time's Up" report with Earth Action.
- As sustainability concerns rise, the importance of adhering to the forthcoming global plastics treaty is amplified, as it will likely include provisions for sap (single-use plastics) and extended producer responsibility (EPR).
- In the context of the upcoming treaty rounds, cooperative initiatives, such as the industry alignment on packaging data led by SAP, the World Business Council for Sustainable Development (WBCSD), and the Ellen MacArthur Foundation, may aid corporations in navigating complex EPR regulations.
