What companies can learn from Keurig’s SEC case over K-Cup recycling claims
The government slapped Keurig Dr Pepper on the wrist for claiming its coffee pods are recyclable. Here's what others risk by making claims about plastic. Read More
Keurig Dr Pepper has landed in hot water for plastics recyclability claims, raising questions about the legal and reputational risks of sustainability disclosures and green marketing language. The company was charged Sept. 10 by the U.S. Securities and Exchange Commision (SEC) that alleged it called its single-use coffee pods recyclable in its 2019 and 2020 sustainability reports. On the same day, Keurig agreed to a settle the civil charges for $1.5 million.
“Keurig did not disclose that two of the largest recycling companies in the United States had expressed significant concerns to Keurig regarding the commercial feasibility of curbside recycling of K-Cup pods at that time and indicated that they did not presently intend to accept them for recycling,” according to the SEC. Keurig Dr Pepper is traded on Nasdaq under the symbol KDP.
Keurig Dr Pepper’s 2020 Corporate Responsibility report described reaching a longtime goal: “100% of our K-Cup pods recyclable.” The polypropylene plastic could technically be recycled. In practice, however, coffee pods often disappear into the nation’s patchwork recycling system and end up in landfills, according to watchdog groups.
“We are pleased to have reached an agreement that fully resolves this matter,” a Keurig Dr Pepper spokeswoman said. Even before the SEC charges, the company offered a new caveat over its recyclability claims, saying K-Cups are not recycled in many communities.
Experts in law, marketing and corporate sustainability strategy agree the settlement, although small, brings repercussions for how businesses share information with the public and investors — particularly about single-use plastics.
“There will be an impact on the brand from an investor perspective because it undermines trust in the business,” said David Wilans, a sustainability director at Bladonmore, a London communications advisory firm. “Financial disclosures are supposed to enable investors to make informed decisions; by not disclosing key information, their ability to do that is hampered.”
For 2023, KDP reported $14.8 billion in sales, with sales of K-Cups down by 3.6 percent. However, the market for single-serve coffee makers, and their disposable pods, is set to grow from $834 million last year to $1,668 million in 2032, according to Credence Research.
“My hope is that the SEC fine will set an example for other corporations so that they will stop using these deceptive tactics,” said Lisa Ramsden, a Greenpeace USA senior oceans campaigner in Durham, North Carolina. “Corporations should no longer be able to slap the recycling symbol on their products and wash their hands of the wasteful packaging that they are pushing out into the world.”
The ubiquity of coffee pods
- Plano, Texas-based KDP corners 80 percent of the market share for coffee pods. Green Mountain, which six years ago merged into what is now KDP, introduced them to the market in 1998.
- Since then, 40 percent of American households have come to use single-use coffee machines, according to a Statista poll in 2020 of more than 2,800 adults. They are the second most popular type of home coffee appliance behind drip coffee makers, Statista found.
- Some 100 billion beverage pods have been sold since the late 1990s. That’s enough to wrap around the world 12 times, according to an activist campaign by the Story of Stuff. The environmental impact has been so large that the K-Cup inventor regrets his creation.
Recyclable or not recyclable?
To increase recyclability, KDP in 2020 adopted polypropylene (PP) plastic, known by the resin code No. 5 for its popular K-Cups. The pods package some 500 types of coffee and teas under numerous brand names. KDP moved away from plastics with the No. 7 resin code, a mixed lot that’s rarely recycled, and which includes polycarbonate, used in Nalgene water bottles, and acrylonitrile butadiene styrene (ABS), used in Legos.
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Today, a KDP webpage states, “100% of K-Cup Pods are Recyclable.” Yet an asterisk directs readers to “Check locally — not recycled in many communities.”
That’s because the recycling rate for polypropylene coffee pods is dismal, according to a 2022 Greenpeace USA report, “Circular Claims Fall Flat Again”:
- Only one of 375 material recycling facilities in the United States accepted polypropylene coffee pods.
- Less than 2 percent of all polypropylene post-consumer waste, including K-Cups, is recycled.
- Even though some municipal curbside recycling trucks accept coffee pods, the overwhelming majority pile into landfills.
Beware of legal risks
“Right now, there is really no such thing as a risk-free green marketing claim,” said Katie Bond, a partner at the Washington, D.C. law firm Keller & Heckman.
“The SEC has become just one more threat in addition to the Federal Trade Commission, states like California, plaintiffs’ firms filing class actions, NGOs, which are also filing cases, competitors, and self-regulatory bodies like the National Advertising Division which is closely watching the marketplace and filing challenges.”
As the Federal Trade Commission (FTC) is updating its Green Guides for marketing claims, companies are watching closely to see what it will newly consider greenwashing. Terms including “recyclability” and “circular” are increasingly in the headlights.
“Class actions are really where the big risk is right now, though,” Bond said. “Plaintiffs’ firms are using long-standing (FTC) Green Guides standards to bring cases challenging claims like ‘recyclable,’ and they are using entirely novel theories to challenge claims based on the news cycle.”
Cases have alleged that bottled water can’t be “all natural” if trace microplastics are in it, for instance, but courts have challenged such novel theories. “That hasn’t stopped demand letters and filings though,” Bond said.
“Competitor, state regulatory and self-regulatory risk is also palpable,” she added. For example, established consumer brands often scrutinize advertising to lob challenges against emerging “green” competitors, Bond added.
Beware of reputational risks
“Consumers do not differentiate between what is technically recyclable and what actually gets recycled,” Suzanne Shelton, partner at ERM Shelton Group, said. “Another way to put it: if a claim on a package says it’s recyclable, consumers expect that it’s actually recyclable in today’s recycling system.”
“Implying a benefit that consumers care about, such as recyclability, without knowing the benefit is manipulation,” Shelton added. “And it’s one of the reasons faith in the recycling system has plummeted – the number of people who no longer believe that what they put in the recycling bin actually gets recycled has doubled in the last four years.”
Keurig has compromised its relationship with consumers, according to Nick Arbuckle, founder and CEO of Viro, a sustainable lifestyle app for consumers. Users of the app rack up points, for example, by using refillable coffee pods. “People today see the brands they support as a reflection of their own values — an extension of who they are and how they present themselves to the world. When that trust is broken, it feels personal.”
“You really have to understand who you are targeting in order to understand how important sustainable packaging is for your brand,” said Christy Lebor, partner at SmashBrand, a brand development company focusing on consumer packaged good brands, based in Boulder, Colorado. “The conscious consumer — and in particular the high-end conscious consumer — will not only pay more for sustainable packaging, but will switch brands if your brand isn’t at least recyclable.” Those consumers are more likely to turn to Nespresso, which offers more readily recyclable aluminum coffee pods, or podless coffee systems such as Terra Kaffe, she added.
KDP already appears to be hip to such trends. It’s poised to start beta testing a compostable, seaweed-based coffee pod this fall that, if effective, might begin to close the chapter on the polypropylene ones.
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