Why we need whistleblowers in the plastic industry

by Carly Fabian, Research Associate
Why we need whistleblowers in the plastic industry

Across the world, new social movements and plastic bans are making a meaningful dent in projections for future waste. As the plastic industry struggles to adapt to these new challenges, whistleblowers could play an essential role in global efforts to reduce plastic waste by protecting consumers, taxpayers, and investors from fraudulent attempts to boost a struggling industry and revealing whether the industry is once again undermining these efforts through extraordinary deception.

When plastic producers first met public backlash in the 1970s, the industry responded with coordinated campaigns to mislead the public. As politicians sought to curb mounting plastic waste, an alliance of companies including Mobil, Chevron, Shell, and Dow crafted a clever campaign to blame “litterbug consumers,” while championing recycling programs and making grand claims about the future of recycling technology.

While consumers have dutifully sorted their plastic waste following this coordinated campaign, the ugly truth is that only 9% of plastic has ever been recycled; most waste has gone to landfills or incinerators in developing countries or simply dumped into the environment. Thanks to former industry executives who blew the whistle this year, we now know that the these companies spent millions to sell the public on an idea that they knew wouldn’t work, a cheap price for billions in profits.

The plastic industry now faces coordinated public pressure once again. Dozens of countries have introduced bans on single-use plastics, and countries who once accepted most plastic waste have banned waste imports, leaving the industry scrambling for alternatives. Oil and gas companies will feel particular pressure, as virtually all plastic is produced from oil and gas and their byproducts, and integrated oil and gas companies are some of the largest plastic producers.  Several oil majors, struggling to adapt to the energy transition, made a “life or death bet” that rising demand for plastic would fuel demand for oil, an assumption which now appears unrealistic.

Aggressive lobbying campaigns from industry trade groups show that the industry is already feeling the pressure. As pandemic began, the Plastics Industry Association pushed a narrative of reusable grocery bags as a source for spreading COVID-19, despite evidence that the virus lasts longer on plastic than other surfaces. In August, the New York Times revealed that the American Chemistry Council was demanding a trade deal with Kenya that would weaken rules on plastic waste imports, as part of a larger strategy to send plastic waste to Africa.

As pressure mounts, the industry could turn to new deceptive strategies, and, as the gap between the industry’s expectations and reality grows, this gap could open the door for financial fraud. Research on financial fraud shows that motivation to commit fraud is highest when employees face pressure to meet unrealistic expectations or to hide steadily weakening performance. As pressure builds for executives to meet unrealistic projections concerning plastic demand, some executives could be tempted to get creative in covering for the industry’s bad bet.

The risk that pressure will turn into fraud is higher in environments where there is a pre-existing ability to rationalize fraud. While the majority of the industry’s deceptive tactics will be legal, the industry has not limited itself exclusively to legal deception in the past. The companies who bet big on the plastics boom, including ExxonChevronShellTotal and Dow have established long track records of legal violations, which include tax violationsaccounting fraud, economic sanctions violationsmarket manipulation, and bribery.

If the industry’s attempts to evade new regulations or hide financial losses cross the line into fraud, whistleblowers could be the key to detecting fraudulent strategies. Using powerful U.S. laws with sweeping transnational applications, whistleblowers around the world can confidentially report fraud and receive awards for contributing to successful prosecutions of wrongdoers.

Whistleblowers have already used the False Claims Act to report companies who mislead the government in connection with recycling research grants, recovering millions for taxpayers. Whistleblowers can also use the SEC whistleblower program to report securities fraud, including misleading claims made to investors about the viability of new recycling technology, the quality of plastic products, or the value of petrochemical assets. If companies attempt to evade new plastic waste regulations by bribing foreign officials, whistleblowers can also use the Foreign Corrupt Practices Act to provide evidence confidentially.

Given the complexity of the industry’s recycling deception and the clandestine nature of corporate fraud, regulators, law enforcement, and the public may struggle to identify fraudulent attempts to undermine new plastic regulations. Faced with this challenge, whistleblowers could play a key role in revealing fraud and protecting investors, taxpayers and consumers. Thanks to these existing laws, whistleblowers around the world are well-suited to help detect and prosecute attempts to fraudulently extend the life of the plastics industry, while protecting their identity and qualifying for rewards.

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