Kraft Heinz Faces Shareholder Vote On Its ‘Deceptive’ Recycling Labels

California chemical engineer Jan Dell knows from her own research when packages lie. She has seen too many containers stamped with “the chasing arrow” crest—a curvy three-arrow stamp meant to indicate an item can be recycled—tossed or refused by reliable recycling centers. 

She’s used electronic trackers to challenge a Houston recycling program, document how plastic waste dropped in recycling bins ends up in landfills overseas, and she has sued companies for false recycling claims.

Now, Dell is attempting to force the Kraft Heinz Company, a major U.S.-based prepared food manufacturer, to be more honest about the recycling labels it uses on everything from plastic bags containing marshmallows to tubs of cream cheese.

Dell, as an individual investor, has filed a shareholder resolution with Kraft Heinz, the multibillion-dollar multinational food company based in Chicago and Pittsburgh, to improve its recycling labels. Shareholders are voting now in advance of the company’s annual meeting May 2 on whether the company should conduct a review to make sure its packaging labels are “truthful” and “legal.”

The goal, according to Dell’s proposal, is to reduce the company’s risk against lawsuits over its labels and for Kraft Heinz, which recorded $26.6 billion in revenue in 2023, to redesign its packaging to ensure proper recycling.

Dell’s effort is the latest example of activist-minded investors pushing public companies toward more environmentally sustainable business practices, and hers is perhaps the first to address plastic recycling claims.

For decades, consumers have relied on what is known as the “chasing arrows” symbol on plastic containers to decide when and how to recycle. But there’s a growing recognition that labeling of plastics is problematic. For recycling to succeed, there should be collection systems, effective recycling technology and commercially viable recycling factories that turn plastic waste into usable material.

Kraft Heinz is “greenwashing their products to be recyclable when they’re really not,” Dell said in an interview with Inside Climate News. “I’m holding them to truth and accountability. As a shareholder, I’m worried the company’s brand value, which directly affects sales and the stock price, could be hit hard by lawsuits on false advertising.”

Kraft Heinz did not respond to three written requests for comment from Inside Climate News on Dell’s action. But in its written response to shareholders in the company’s 2024 Proxy Statement and Notice of Annual Meeting, the company said it was “committed to recycling and to providing consumers with clear information to help increase recycling rates as much as possible.”

The company said it recognized a “dynamic and rapidly evolving” recycling landscape and that it believes its “current efforts are designed to meet the objectives of the proposal and to have a significant impact on improving and reducing our packaging while reducing risk for the company.”

In the Kraft Heinz most current environmental social governance (ESG) report, the company said that the “majority” of its packaging was paper-based, glass or made of metal materials that are recyclable. Among the actions the company said it had taken to reduce plastic was eliminating plastic shaker bags in its Shake ’N Bake products, which it said saved almost a million pounds of plastic a year.

Kraft Heinz said it was “aiming to make 100 percent recyclable, reusable or compostable packaging by 2025.”

Report Cites “Shareholder Proposal Fatigue”

Commercial production of plastics started in the 1950s. Today, companies produce about 400 million metric tons a year, according to the United Nations. The Organization for Economic Co-operation and Development, a group that represents developed nations, has said plastics production could triple by 2060. Single-use plastics constitute about 40 percent of all plastic waste.

In recent years, shareholder proposals of all kinds—ranging from investor interest in executive compensation to climate change—have increased to record levels, according to The Conference Board, a New York-based nonprofit think tank and business membership group that tracks shareholder proposal activity.

Hundreds of proposals are filed each spring during what’s called the proxy season. In a report published in January by the Harvard Law School Forum on Corporate Governance, The Conference Board found declining support for shareholder proposals among Russell 3,000 Index companies, or the largest 3,000 publicly traded U.S. companies.

The report cited what it called “shareholder proposal fatigue among companies and institutional investors” and described a backlash to corporate ESG policies. Such policies have also sparked political animus. Republican Gov. Ron DeSantis in Florida has described them as examples of “woke capitalism.”

Shareholder support for environmental proposals declined from 34 percent to 20 percent from 2022 to 2023, according to The Conference Board.

Plastics Crisis Sparks New Approach 

Green Century Capital Management Inc., an environmentally and socially responsible investment firm not involved with Dell’s proposal to Kraft Heinz shareholders, has seen support fluctuate since it began filing proposals on environmental issues three decades ago, said Douglas Guernsey, a shareholder advocate with the firm.

Overall, “we are still seeing significant growth in support,” he said. “At the same time, companies have dramatically increased their capacity to address sustainability, so there is a balance.”

In May 2023, Green Century was among 185 investment firms that signed a statement demanding that companies adopt a more radical approach to reducing plastics. The firms, which manage a total of $10 trillion in assets, urged consumer goods companies and grocery retailers, “to drastically reduce single-use plastic packaging, implement packaging reuse systems, phase out hazardous chemicals in plastics, and advocate for policies supporting these actions.” 

Green Century also last year praised Costco Wholesale for agreeing to increase transparency around plastic use and to develop a five-year plastic action plan to reduce plastic packaging for its Kirkland Signature brand and to report on its yearly progress.

Shareholder proposals on environmental topics have targeted a wide range of concerns, including deforestation, loss of biodiversity, clean energy and climate change. Plastic packaging has emerged as a relatively new focus of activist investors.

“This is going to be a serious issue in the next number of years, and you need to figure out some solution. You can’t wait for regulations.”

Shareholder proposals related to plastic packaging have increased amid a sharp rise in the production of single-use plastic packaging, a growing awareness of how plastic waste harms the environment and human health and how recycling has failed to some degree, Guernsey said.

“Recycling is obviously fantastic in concept,” he said. “But the devil is very much in the details. And the understanding, for consumers, that the plastic that they see labeled with chasing arrows, as recyclable, doesn’t actually get recycled, is starting to dawn on consumers,” he added. There is also growing concern about potential health risk from plastic that breaks down into microscopic particles that are being found inside human bodies, he said.

Raising these issues now puts the companies on notice, he said. “This is going to be a serious issue in the next number of years, and you need to figure out some solution. You can’t wait for regulations,” Guernsey said.

Activist Shareholders Try Negotiations First

Many shareholder proposals never progress to a vote. 

Organizations like Green Century or As You Sow, a California-based nonprofit shareholder advocacy organization, often first try to resolve issues with a company before seeking shareholder backing.

“Our first interest is in dialogue,” said Kelly McBee, a senior coordinator at As You Sow. “Often we have a productive dialogue with the companies. We move to file (a proposal) if we don’t think they have the right resolution to mitigate the risk.”

As You Sow announced last year that McDonald’s, the fast-food chain, pledged to evaluate and report on opportunities and risks posed by switching to reusable packaging, including impacts related to single-use plastics on the environment, after the nonprofit filed a shareholder proposal asking for a vote on such a study. Then, As You Sow withdrew its proposal.

Shareholder proposal votes are nonbinding but if matters proceed to a vote, that can be fruitful, both Guernsey and McBee said. A show of support from 20 to 30 percent of shareholders can prompt some companies into action.

Plastic waste reduction is important, but so is “truth in labeling” with recycling claims, McBee said. “Almost every consumer wants to do the right thing, to do their part, and wants to know their package is actually being recycled.”

Dell Details Her Challenge

Dell filed the Kraft Heinz shareholder as individual stockholder because federal security law allows for that, but her efforts align with those of the nonprofit environmental organization she founded in 2019. The Last Beach Cleanup, based in California, has sought to debunk most plastic recyclable labels as “a hoax,” as Dell has said, in an effort to reduce single use plastics and end plastic pollution. The group is an all-volunteer organization.

Before launching The Last Beach Cleanup, Dell worked inside various industries—including oil and gas, chemical, manufacturing, food, beverage, footwear and clothing—as a consultant on sustainable business practices and climate resiliency, in more than 45 countries. She was a lead author of a chapter on energy supply and use in the U.S. government’s Third National Climate Assessment, and from 2020 to 2022 served on California’s now-disbanded Statewide Commission on Recycling Markets and Curbside Recycling.

With Kraft Heinz, Dell said she first raised her concerns directly with the company last year and filed the shareholder proposal after the company would not agree to review its plastic packaging.

“Kraft should be truthful with consumers and not mislabel products that could contribute to plastic contamination in curbside recycling systems and incur potential legal liability due to deceptive advertising,” according to her proposal. 

Across the country, seven categories of plastics may carry the chasing arrows symbol plus a number—1 through 7—indicating that a container is made of a particular kind of plastic and is recyclable. But the symbols are confusing and can be misleading.

Plastic bottles and jugs numbered 1 and 2 are made of polyethylene terephthalate (PET) and high-density polyethylene (HDPE) and are the most commonly recycled plastics, according to a 2022 Greenpeace report that Dell worked on and cites in her research. Numbers 3 through 7—polyvinyl chloride, or PVC; low-density polyethylene, or LDPE; polypropylene, or PP; polystyrene, or PS; and mixtures of various plastics—are rarely, if ever, recycled, according to Dell. 

In her proposal to Kraft Heinz, Dell included photographs of various kinds of recyclability labels on Kraft Heinz packaging and an analysis that revealed a lack of recycling services for them. 

Included are labels on Kraft or Velveeta Shells and Cheese bowls or cups made of PP#5, and Kraft Kool-Aid Burst bottles made from LDPE#4 plastic. Those bottles come wrapped in plastic shrink sleeves, which she said also cannot be recycled. 

As for PP#5 plastic, Dell said she knows of only one recycling plant in the country that recycles it. That plant is in Alabama and too far from California to be a financially viable option, she said.

Other Kraft Heinz products with misleading labels, according to Dell, include plastic bags containing Jet-Puffed Marshmallows and Philadelphia brand whipped cream cheese tubs.

In an interview and with documentation supporting her proposal, Dell said labels that guide consumers to return plastic bags to stores for recycling are misleading. Electronic tracking by Dell and media outlets including ABC News revealed that some store drop-off programs routinely send such waste to landfills.

Other companies including ConAgra, Target and Aldi have begun to modify or remove recyclability labels, Dell said in supporting documentation she submitted to Kraft Heinz. She noted a growing threat of lawsuits and regulatory action, including requirements in California’s “Truth in Labeling” recycling law. She also cited an increasingly hostile legal environment for companies over plastics packaging. 

In 2022, California Attorney General Rob Bonta announced an investigation into recyclability claims of plastic bags, part of a larger investigation into the oil and gas industry’s role in plastic pollution. In 2023, Minnesota Attorney General Keith Ellison sued Reynolds Consumer Products, a leading provider of household wraps, bags and disposable tableware, and Walmart Inc., the Arkansas-based multinational retailer, for falsely advertising that some of their plastic waste bags are recyclable. 

Lawyers representing consumers in 2022 filed a class-action lawsuit in U.S. District Court for the Northern District of California against Walgreen Co., of the Walgreens Boots Alliance retails group, claiming it sells non-recyclable plastic bags despite a California state ban. A trial is scheduled for early next year.

New York Attorney General Letitia James filed a lawsuit in November against New York-based PepsiCo, which makes 85 different beverages and 25 snack foods brands, claiming the company has “misled the public about its efforts to combat plastic pollution, while increasing its production and sale of single-use plastic packaging.”

Over the last five years, The Last Brach Cleanup has filed three lawsuits related to recyclability claims, winning two of them with the third still making its way through the courts.

The first lawsuit, filed and won in 2021, involved the New Jersey-based recycler TerraCycle, which works with business in 20 countries to recycle hard to recycle plastics, and eight major product companies, including The Coca-Cola Co., a global beverage company based in Atlanta, and Procter & Gamble Co., the Cincinnati-based consumer goods multinational, that agreed to change their recycling labels for some products.

Two cases involved allegations of stores offering or selling nonrecyclable plastic shopping bags—which has been illegal since 2016—and making false recycling claims in California. One retailer, Gelson’s Markets with 28 stores in Southern California, settled last year and has stopped offering plastic shopping bags. The other case involving the retailer Stater Bros. Markets, with 128 grocery stores in southern California, remains unresolved.

“I’m really hoping that (Kraft Heinz) shareholders will see my proposal not as an ESG proposal, but as an anti-ESG greenwashing proposal,” Dell said in an interview with Inside Climate News. “My proposal is about basic corporate legal compliance to advertising laws and maintaining consumer trust. I’m trying to stop the ESG nonsense that companies use to create a false green impression.”