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Microplastics in the EU: Exploring the Future

The rise of the use of microplastics has sparked worldwide environmental concern, prompting stricter regulations and heightened scrutiny for businesses that contribute to pollution with them.

The rise of the use of microplastics^* has sparked worldwide environmental concern, prompting stricter regulations and heightened scrutiny for businesses that contribute to pollution with them. As a result of the health and environmental risks these tiny particles create, they also have the potential to bring about reputational and legal challenges for businesses engaged in their production or inadvertent disposal.

However, the scarcity of effective methods to track and remove microplastics poses a major challenge for regulators and businesses alike. As research uncovers the mounting hazards associated with microplastics, businesses may encounter increasing pressure to confront these risks directly.

In this evolving landscape, staying informed and ensuring compliance with developing regulatory frameworks is important for helping businesses to avoid penalties and safeguard their reputation. Taking proactive measures, such as adopting sustainable manufacturing practices and exploring alternative materials, is becoming principal in mitigating risks.

The European Union has enacted regulations to combat microplastics, notably Commission Regulation (EU) 2023/2055, effective October 17, 2023, which restricts synthetic polymer microparticles in products to minimize environmental impact. This regulation complements the REACH (Registration, Evaluation, Authorization, and Restriction of Chemicals) framework, which mandates the registration of microplastics produced or imported in quantities of one ton or more annually, allowing for risk assessments and potential authorization of substances of very high concern. Additionally, the EU's actions align with the Green Deal’s Zero Pollution Action Plan, aiming for a 30% reduction in microplastic releases, and encompass various policy areas, such as Nature and Biodiversity, Waste and Recycling, and Marine Strategy. Internationally, efforts to address plastic waste culminated in a non-legally binding agreement in September 2023, with the UN Environment Assembly initiating negotiations for a legally binding treaty against plastic pollution through 2025.

Businesses must be prepared to understand and adapt to the changes in this new regulatory landscape. The value chains of various industries, from upstream to downstream operations and product end-of-life, will be affected. Staying informed and proactively adjusting practices to align with evolving regulations is crucial for businesses.

The regulatory framework introduces various risks, such as compliance, operational, financial, reputational, competitive, and strategic risks. Multiple stakeholders across the microplastics value chain, such as raw material producers, polymer producers, plastic processors, consumers as well as waste managers and wastewater treatment system operators are expected to be affected by these regulatory shifts, leading to financial pressure. The groups highlighted above should be aware of the evolving EU regulatory framework, despite the potential for delays, uncertainties, and challenges.

Environmental Impairment Liability (EIL) insurance is particularly relevant for organizations facing pollution liabilities and can be an instrument to support them in adapting to the new regulations. Its coverage is continuously evolving to address emerging risks, including new hazardous substances, like microplastics and their incremental impacts on biodiversity.

It is important to remember that insurers in the EIL market, as well as in many other areas of insurance, typically exclude coverage for claims arising from willful non-compliance with the law by responsible parties, which include directors, officers, and managers overseeing environmental matters. Additionally, in this emerging space given the complexities and the uncertainties of changing regulations, some insurers are particularly promoting early prevention and risk mitigation strategies. This is with the aim of strengthening clients' resilience against both frequent and catastrophic risks while ensuring compliance with evolving regulations.

The new regulations are likely to impact organizations' risk management processes. To seamlessly incorporate the effects of the evolving regulatory framework into risk management best practices, follow these steps:

Stay agile and monitor EU regulations and industry updates on microplastics changes.
Identify and assess risks associated with changing regulations, including compliance, operational, financial, reputational, and strategic risks; consider impacts on supply chains, product availability, and market dynamics.
Evaluate how regulatory changes may affect your global business operations, including microplastic use and disposal; identify specific risks across your supply chain, operations, and product end-of-life.
Develop strategies to mitigate identified risks, such as diversifying suppliers, exploring substitutes, investing in sustainable alternatives, and implementing compliance best practices.
Consider both conventional and alternative insurance solutions to mitigate potential financial losses and reputational damage from regulatory changes.
Collaborate with regulatory authorities, industry associations, suppliers, and customers to understand perspectives and find solutions aligned with regulations and business imperatives.
Continuously monitor regulatory and market landscapes and adapt risk management strategies accordingly.

The regulatory landscape for microplastics is growing more complex. To ensure future insurability, businesses must anticipate the impacts of their activities on health, nature, and climate, while implementing preventive measures. Our expert team works closely with businesses to assess, manage, and mitigate climate and nature-related risks. This approach enhances confidence in risk management, risk transfer, and sustainability reporting, allowing clients to showcase their commitment to sustainable practices in a rapidly evolving environment.

^*Microplastics are tiny plastic particles that can result from both commercial product development and the breakdown of larger plastics.

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