SEC charges Keurig: Inaccurate statements about the recyclability of K-Cup pods
On September 10, 2024, the US Securities and Exchange Commission (SEC) charged the US coffee maker Keurig Dr Pepper Inc. who agreed to pay a penalty of 1.5 million US dollars. Keurig is alleged to have made inaccurate statements about the recyclability of its K-Cup single use beverage pods.
The accusation in detail:
In its 2019 and 2020 annual reports, Keurig stated that tests had shown that K-Cup pods “can be effectively recycled”. However, what Keurig failed to mention was that two of the largest US recycling companies had already expressed significant concerns about the commercial feasibility of recycling and even indicated that they would not accept the pods for recycling. In 2019, the sale of K-Cup pods represented a significant number of net sales in Keurig’s coffee business segment. It is particularly noteworthy that, according to research by a Keurig subsidiary, it was known that environmental concerns played an important role in consumers’ purchasing decisions.
In this context, the SEC once again emphasizes the responsibility of companies to provide complete and accurate information in order to enable investors to make educated investment decisions based on complete information.
It should be noted here that consumers expect that when recycling is indicated, recycling actually takes place and that the recycling is not merely a technical possibility that cannot (currently) be implemented in a marketable way.
The consequence:
Keurig, without admitting or denying the allegations, agreed to pay a civil penalty of 1.5 million US dollars to settle the matter. Keurig has also agreed to sign a corresponding cease-and-desist order.
A look across the Atlantic:
In Europe, too, the Corporate Sustainibility Directive 2023 has created a requirement for comprehensive sustainability reporting and for information on the environmental impact of the company’s activities to be included in the management report. In this context, companies are carefully considering whether recycling rates can be disclosed in order to avoid accusations of greenwashing. The harmonized ESRS standards are also of particular importance in this context.
Findings:
- The case shows that companies have to be extremely careful and transparent in their reporting and sustainability communication, whether it is to consumers or investors, especially when it comes to environmental issues.
- Risk-free sustainability communication practically no longer exists.
- Environmental protection issues are becoming increasingly important for investors and consumers, and there is a particular interest in providing information in the case of environmentally related advertising.
- To avoid legal and reputational risks, companies should carefully assess the information they provide on environmental issues and communicate it accordingly.