Solving the global plastic packaging problem

  • Investment Insight
  • 8 minute read

If you've been watching the BBC television programme War on Plastics, you'll know that the build-up of plastic packaging is one of the most pressing environmental issues of our time. The programme has highlighted some truly alarming statistics about plastics and plastic waste. These include:

Push against plastic

The scale of the global plastic packaging problem is vast. To date, only 9% of all plastic ever created has been recycled. Almost four-fifths (79%) of it is in landfills. Furthermore, by 2050 it is predicted that oceans will contain more plastic than fish (by weight)[1]. Overall, this mountain of plastic waste represents an $80-$120 billion loss to the global economy every year[2].

There has been global awareness around the plastic packaging problem for some time, leading many countries, jurisdictions and international bodies to create long-term plastic waste targets. In 2018, the EU amended its packaging and packaging waste directive to include some ambitious targets. By 2025, at least 65% by weight of all packaging should be recycled, with that percentage climbing to 70% by 2030.

At the end of 2018, a Global Commitment to eradicate plastic waste and pollution was signed by 250 organisations, including many of the world’s largest packaging producers, brands, retailers and recyclers, as well as governments and non-governmental organisations. The Global Commitment, which is led by the Ellen MacArthur Foundation, has been endorsed by more than 15 financial institutions. Between them these institutions have in excess of $2.5 trillion in assets under management. Targets will be reviewed every 18 months and become increasingly ambitious. Furthermore, businesses that sign the commitment will publish annual data on their progress to help drive momentum and ensure transparency. The targets of the Global Commitment include:

  • Elimination of problematic or unnecessary plastic packaging and a shift from single-use to reuse packaging models
  • Innovation to ensure that 100% of plastic packaging can be easily and safely reused, recycled, or composted by 2025
  • Circulation of plastic that has already been produced, by significantly increasing the amount of plastics that are reused, recycled and made into new packaging or products

Goals and targets relating to the management of plastic waste are also being written into law. In the UK, the government already taxes companies that generate more than 30% of their waste from plastic. It is also planning to force businesses and manufacturers to cover 100% of the cost of recycling or disposing of their packaging waste. In 2019, the EU adopted a directive on the reduction of the impact of certain plastic products on the environment. The directive requires member states to introduce recycling legislation by 2021 in order to achieve the following targets:

  • Single-use plastic bottles should be made of 25% recycled content by 2025; and
  • 90% of plastic bottles should be collected for recycling by 2030

Reducing, reusing and recycling: our approach to Socially Responsible Investing

The United Nations' Sustainable Development Goals form the framework of our Socially Responsible Investment Service. One of those goals targets sustainable consumption and production. So how are we using our Socially Responsible Investment (SRI) portfolios to join in the war against plastics?

We pay careful attention to all the major legislative and policy developments that relate to global plastics and plastic waste, as well as to the specific targets that have been set. We then use this insight as a basis for making investments into companies that are playing an active part in meeting these ambitious targets by reducing, reusing and recycling. As more companies turn their attention to these three components, and innovate to create solutions to the problem, our goal is to identify those companies and invest in them.

Reducing

Fast-moving consumer goods company Unilever has committed to increasing its use of recycled plastic content in its packaging to at least 25% by 2025. It has already introduced individual product lines that are entirely made from recycled plastic material, such as its Love Beauty and Planet product lines. Additionally, it has made a commitment to reduce its production of single-use plastic products. In 2018, Unilever invested in a low-cost, plastic-free alternative to single-use laundry sachets that dissolve in water.

Packaging and paper group Mondi offers alternative packaging methods to plastic, such as fibre packaging (paper and cardboard), which will help to reduce the overall amount of plastic that is produced. It has also committed to making future packaging 100% reusable, recyclable, or compostable by 2025. Finally, Mondi has set out 10 sustainability action areas in line with the United Nations’ Sustainable Goals – an action that helped it to attain “Advanced Reporter” status from the United Nations.

Reusing

Some well-known companies are taking up the challenge of reusing recycled material to create new products. Coats Group, the world’s largest manufacturer and distributor of sewing thread, has committed to manufacturing 100% recycled premium polyester threads by 2024. In 2018, it released an entirely recycled thread, EcoVerde. While thread is only a small part of an overall fashion garment, it is nevertheless an important part. The fashion industry also uses plastics in the form of polyvinyl chloride (pvc), polyester, nylon and organza. It expects significant future use of such technologies, as the fashion industry is forced to rethink its sustainability credentials while clothing and footwear companies face further regulatory constraints.

Recycling

Companies are also involved with entirely new methods of recycling. In some countries, governments have introduced deposit schemes where a small charge is added to the cost of plastic bottles and aluminium cans, but the charge is refunded to the purchaser if the beverage container is returned to a collection point. Finland, Germany, Norway and Sweden are among the countries that already have deposit schemes in place. In 2018, the UK government announced it would introduce a deposit return scheme for England, which could begin as early as 2021.

This new method of recycling is heavily reliant on reverse vending machines (RVMs), which manage the sorting, handling and return of used beverage containers. The machines have the ability to achieve recycling rates of 70-100% - a dramatic improvement on the current rate of 40-50%. With over 82,000 machines already installed across more than 60 markets TOMRA, is able to collect 35 billion beverage containers every year.

Waste management services company Biffa has a polymer recycling facility that enables its customers to ensure their plastic waste is diverted from landfill. Plastic materials are recovered, cleaned and re-engineered to produce plastic compounds that can be re-used for different purposes such as in the manufacturing of milk bottles. The UK dairy sector is targeting milk bottles to consist of 50% recycled materials in 2020; currently this figure stands at 15-20%.

What’s next?

As an issue, plastic waste is now topping agendas for many governments and international bodies. It is also increasingly being written into legislation. To meet new regulatory targets, companies are reducing, reusing and recycling their plastic waste by applying a variety of strategies. These strategies range from deploying RVMs, through to creating innovative new products that are made from recycled plastic, or even replacing plastic in their products entirely. Regardless of how companies choose to solve the global plastic packaging problem, we will inevitably see huge changes in the future. As a result, there will be many investment opportunities in forward-thinking, innovative businesses. We will ensure that we incorporate these opportunities into our SRI portfolios.

 

[1] SMSCI Plastics in a Circular Economy (May 2019) UN Environment Programme, Geyer et al. 2017
[2] The New Plastics Economy – Rethinking the future of plastics (January 2016)

Important information
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