Securities Regulation Daily Wrap Up, LAW FIRM PERPSECTIVES—SEC settles charges with Keurig over ESG disclosures, (Sep 17, 2024)

Organizations Mentioned:Jones Day, LLP | Keurig Dr Pepper Inc.

By Giles Elliott, Henry Klehm III, Howard Sidman, Jayant W. Tambe, Seth E. Engel, Hannah E. Fregolle, Ashley Heintz, Linda Hesse, Ferrell Keel, Joel May, Amy Pandit, David Peavler, Alexis Désiré and Olga Gidalevitz Ph.D. of Jones Day.

Litigation and regulatory enforcement actions related to ESG disclosures are on the rise, while the regulatory landscape governing ESG disclosures is in flux. For one, the SEC's climate disclosure rules have been stayed in response to numerous challenges to the rules. Notably, the SEC also recently disbanded the Climate and ESG Task Force within the Division of Enforcement, with an SEC spokesperson citing that the Task Force's expertise now resides across the Division. Meanwhile, the SEC continues to pursue enforcement actions related to other ESG disclosures, including the latest proceedings against Keurig Dr Pepper Inc. ("Keurig") for inaccurate claims related to the recyclability of its K-Cup pods ("pods").

On September 10, 2024, the SEC instituted cease-and-desist proceedings against Keurig for "incomplete and inaccurate" disclosures in violation of Section 13(a) of the Exchange Act and its accompanying Rule 13a-1. The Commission found Keurig's statements in its 2019 and 2020 Form 10-Ks that its pods could be "effectively recycled" were "incomplete and inaccurate," because although Keurig's testing around the recyclability of pods showed that, generally, pods could be successfully sorted for recycling, Keurig failed to disclose that it had received feedback from two large recycling companies involved in the testing that they would not accept the pods. Notably, Keurig's 2022 Form 10-K did not contain any disclosures related to the recyclability of the pods.

The SEC and Keurig agreed to settle the charges for $1.5 million.

Following the settlement, Commissioner Peirce released a statement in opposition to the Commission's position, characterizing it as "pedantic parsing of Keurig's recyclability [disclosures]" and contending that Keurig's statements were accurate given that Keurig used recyclable plastic and its testing showed that the pods could be recycled. She further noted that even if Keurig's statements were inaccurate, the SEC failed to allege that recyclability of the pods was material to investors in 2019.

The SEC remains focused on ESG-related disclosures. Public companies should continue to evaluate the accuracy and completeness of their ESG-related disclosures as a general matter, and with an eye toward what the Commission views as material to investors.

Giles Elliott, Henry Klehm III, Howard Sidman, Jayant W. Tambe, Seth E. Engel, Hannah E. Fregolle, Ashley Heintz, Linda Hesse, Ferrell Keel, Joel May, Amy Pandit, David Peavler, Alexis Désiré and Olga Gidalevitz Ph.D.

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