Financial regulators on Tuesday charged Keurig Dr Pepper, the maker of popular K-Cup single-use coffee pods, with making inaccurate claims about the recyclability of the plastic pods.
The fine, $1.5 million, is small for one of the world’s largest beverage companies. Keurig Dr Pepper has a market capitalization of more than $50 billion. Still, experts said the action signaled a willingness by financial regulators to challenge recycling claims based on the principle that they could be inflating a company’s shareholder value.
“Public companies must ensure that the reports they file with the S.E.C. are complete and accurate,” said John T. Dugan, an associate director at the Securities and Exchange Commission.
Jan Dell, who runs the environmental nonprofit the Last Beach Cleanup, said it was notable that shareholder concerns had driven the enforcement action, rather than charges of consumer deception and marketing, which are overseen by the Federal Trade Commission. “The S.E.C. has stepped up to be the federal sheriff” on misleading recycling claims, she said.
To settle the regulators’ charges, Keurig agreed to pay the $1.5 million civil penalty.
Keurig has for years said in both its marketing and financial reports that its beverage pods, which millions of Americans rely on for their caffeine fix, “can be effectively recycled.” But the company did not disclose that two major recycling companies had raised concerns over whether curbside recycling programs could recycle the pods, and said they would not accept them, the S.E.C. said in its order.
Keurig Dr Pepper said it was “pleased to have reached an agreement that fully resolves this matter.” It has neither admitted or denied the S.E.C.’s findings, and maintains that its pods are made from “recyclable” plastic.
First sold by Nespresso in the 1980s, single-use beverage pods have become a staple in hotel rooms and corporate offices as well as kitchen counters across the country. K-Cups come in more than 500 varieties of coffee, tea and hot chocolate, as well as a line of blends made to be brewed over ice.
In a recent survey, nearly half of Americans said they used capsule coffee-brewing machines.
The S.E.C. noted that sales of coffee pods had come to make up a significant percentage of Keurig’s business. The company’s own consumer research in 2016 found that consumers cited environmental concerns as a significant factor in deciding to buy a Keurig brewing machine, the agency said.
But there has long been debate over the pods’ environmental effects. Critics have said that disposable, single-use coffee pods are wasteful. Some researchers, however, have found that single-use coffee pods can also avoid the overuse of coffee and water by coffee drinkers who might otherwise brew an entire pot of coffee and waste much of it.
Keurig’s pods are made of polypropylene, or #5 plastic, which is accepted by some, but not all, recycling facilities. Capsules used by its rival Nespresso are made of aluminum, making them more easily recyclable.
Regulators have started to scrutinize recycling claims in recent years. The Federal Trade Commission, which directly oversees marketing claims, is currently updating its so-called Green Guides for companies making claims about the environmental effects of their products.
Some states like California are also cracking down on misleading recycling claims, including limiting the use of the triangular “chasing arrows” recycling symbol on products that aren’t widely recyclable.
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