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A 'circular economy' will be central to tackling our global plastics crisis

05 June 2019

Phoebe Stone, Head of Sustainable MPS, LGT Vestra LLP

There has been a recent wave of bans of single-use plastic items including places like Kenya, India, Europe, Japan, Britain and New York State. Decisive government action such as this will reduce the level of thoughtless plastic consumption by consumers, but wider change needs to happen to tackle our global plastic crisis.

Unilever has committed to ensuring that by 2025 100% of their plastic packaging will be fully reusable, recyclable or compostable. By the same date, the company wants their plastic to be made from 25% recycled material.[1] Reusing existing plastic in an ongoing cycle such as this, the concept of a 'circular economy', looks to minimise waste and use our depleting resources more effectively and efficiently. This closed-loop system is being adopted at a micro and macro level across the world. Many acknowledge that widespread adoption of this system will need to play a pivotal role in tackling the plastic crisis that our world is currently facing.

You would have been hard-pushed to have missed the recent and sudden public outcry against single-use plastic following awareness around the state of our oceans. However, it is not just these obvious negative externalities that can be tackled by the adoption of a circular plastics economy. A recent report from the World Economic Forum and the Ellen McArthur Foundation found that the majority of plastic packaging is used only once and therefore 95% of the value of plastic packaging worth $80 - $120bn annually is lost to the economy.[2] 

Government commitment to the circular economy is growing.

The European Commission has published a European Strategy for Plastics in a Circular Economy[3] that lays out a vision of a more prosperous and sustainable plastics economy. It aims to have a smart, innovative plastics industry that sees all plastic packaging being recycled in a cost-effective manner or resuable by 2030.

The UK Government's new waste strategy, announced at the end of last year, makes it clear that it also looks to embrace the concept of the circular economy[4]. The strategy will result in businesses having to pay the full cost of recycling and disposing of packaging waste, the so-called 'polluter pays' principle. In 2018, the UK government announced the introduction of a world-leading tax on plastic packaging containing less than 30% recycled plastic, which will be introduced in April 2022. In 2016, the city of Ontario in Canada passed legislation to lay the responsibility for recycling waste on the manufacturers. Currently recycling systems are in place for tyres, batteries and electronic waste, but eventually all waste will require recycling or composting, and must be paid for by the producers. Decisive legislation will drive the move towards a plastics circular economy, particularly if increasing numbers of countries adopt similar models. Although it is likely to be decades before virgin plastics are excluded entirely from the plastics eco-system, governments are looking to push the agenda forward by changing the economics of industry.

Corporate adoption of the plastics circular economy is happening.

A potent combination of more stringent government policy and increased awareness by the public of the damage that plastic is causing our environment means that corporate adoption of a progressive plastics policy may be key to long-term business success. The New Plastics Economy Global Commitment, led by the Ellen MacArthur Foundation, has united over 350 companies on a common vision of a circular economy for plastics. Businesses jointly representing 20% of all plastic packaging have signed up along with 16 governments across five continents and 26 financial institutions representing $4.2trillion. Commitments include elimination of PVC, problematic plastics and significant reduction of single-use carrier bags.[5] Companies such as Unilever have already incorporated plastic recycling initiatives into their manufacturing process. Unilever recently held a 'Rethink Plastic' Hackathon, which created a plastic-free packaging solution for single laundry tablets that Unilever has now invested $100,000 into[6]. Coca Cola has introduced a bottle which is made of up to 30% plant based packaging[7], Adidas has committed to using only recycled polyester in their products by 2024[8] and 75% of Nike shoes and apparel are already made from recycled materials[9]. Although these facts make good headlines, these companies are far from perfect. Greenpeace has estimated that Coca Cola only currently uses 7% recycled plastics in its bottles globally, however the company is ambitiously targeting 50% recycled plastic content in bottles across major product lines globally by 2030. The company has also recently extended its investment in a Dutch clean-tech company as it looks to incorporated higher quality PET in its bottles.

If businesses are going to have to pay for the cost of plastic collection, sorting and reprocessing, there will need to be a considerable increase in recycling capacity from current levels. Tomra, a Norwegian recycling business has its systems installed in 80 countries worldwide looks set to benefit from this trend. Tomra's highly sophisticated product range includes machines that can identify fine molecular differences in materials on recycling conveyor belts in order to facilitate final product purity levels not previously attainable.[10] This allows for superior recycling functionality, which will be crucial as the scale of recycling ramps up.

Investors can use markets to influence behaviour.

By allocating capital to companies such as Unilever and Tomra, investors are lowering the cost of capital to these businesses. Individuals are increasingly looking to use their investable assets as a financial vote for businesses that incorporate and integrate sustainability into their strategy and operations. Businesses that are incorporating the concept of a circular economy into their corporate ecosystem and those that are providing solutions for the plastics crisis are likely to demonstrate long-term investment potential. The LGT Vestra Sustainable Model Portfolio Service looks to invest in funds that are identifying investment opportunities such as these, and at time of writing, have exposure to both Unilever and Tomra amongst others.

There is of course a long way to go to find a way to meaningfully tackle the global plastics crisis we face, but moves such as China and Malaysia's recent decision to stop importing waste has forced many global participants to wake up it. Governments are starting to force the hand of corporates to build a closed loop plastic system into their manufacturing process, and consumers are starting to reject those companies that are not adopting a lower, or no-plastics approach. For now, plastic is still one of the most affordable and effective materials available. In order for the global community to tackle the current crisis, a seismic overhaul needs to happen to redesign the way it is used and re-used.

 

[1] Unilever press report, 16 January 2017 https://www.unilever.com/news/news-and-features/Feature-article/2017/Unilever-commits-to-100-percent-recyclable-plastic-packaging-by-2025.html

[2] New Plastics Economy: Rethinking the future of plastics

[3] https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1516265440535&uri=COM:2018:28:FIN

[4] HM Government report: Our waste, our resources: a strategy for England 2018

[5] https://newplasticseconomy.org/assets/doc/GC-Spring-Report-Summary.pdf

[6] https://www.unilever.com/news/press-releases/2018/Unilever-to-invest-100000-in-a-crowdsourced-solution-as-part-of-its-drive-to-rethink-plastic-packaging.html

[7] https://www.coca-colacompany.com/plantbottle-technology

[8] https://www.adidas-group.com/en/media/news-archive/press-releases/2019/adidas-to-produce-more-shoes-using-recycled-plastic-waste/

[9] https://news.nike.com/news/sustainability-football-kits

[10] Tomra Circular Economy E-Book 'The viability of using 100% recycled plastics'