SEC charges Keurig Dr Pepper over misleading recycling claims

That giant mound of Keurig cups in your “recycling” bin just got a stern talking-to.

Keurig Dr Pepper (KDP) will pay a $1.5 million civil penalty to settle charges from the Securities and Exchange Commission alleging the company made inaccurate claims about the recyclability of its K-Cup pods, the agency said Tuesday.

Per the SEC’s order, in annual reports for fiscal years 2019 and 2020, Keurig said its K-Cup pods “can be effectively recycled,” yet failed to disclose that two of the largest recycling companies in the US “expressed significant concerns to Keurig regarding the commercial feasibility” of recycling K-Cup pods, adding “that they did not presently intend to accept them for recycling.”

The SEC was concerned that the misleading claims may have influenced consumer behavior.

K-Cup pods made up “a significant percentage of net sales of Keurig’s coffee systems business segment” in fiscal year 2019, the SEC noted, while prior research from a Keurig subsidiary “indicated that environmental concerns were a significant factor that certain consumers considered, among others, when deciding whether to purchase a Keurig brewing system.”

In a statement it shared with CNBC and other outlets, Keurig said its “K-Cup pods are made from recyclable polypropylene plastic (also known as #5 plastic), which is widely accepted in curbside recycling systems across North America.”

The spokesperson continued: “We continue to encourage consumers to check with their local recycling program to verify acceptance of pods, as they are not recycled in many communities. We remain committed to a better, more standardized recycling system for all packaging materials through KDP actions, collaboration and smart policy solutions.”

In agreeing to the settlement, Keurig neither admitted to nor denied the findings of the ruling. In addition to the civil penalty, Keurig agreed to a cease and desist order, “which states the company must adhere to rules about accurate disclosures in annual reports,” according to CBS News.

“Public companies must ensure that the reports they file with the SEC are complete and accurate,” John T. Dugan, associate director of the SEC’s Boston regional office, said in a statement. “When a company speaks to an issue in its annual report, they are required to provide information necessary for investors to get the full picture on that issue so that investors can make educated investment decisions.”