Pushing Back on Plastic

Key Points

• July has been designated ‘Plastic Free July’ to turn the spotlight on the issue of plastic and packaging pollution.
• It is estimated that around 80% of all marine debris is made up of plastic waste.
• Some 32% of globally produced plastics escape collection, while only 14% of plastic packaging is recycled for future use.
• There is growing evidence that consumers are willing to pay a premium for bioplastics.
• Governments are increasingly implementing regulation to encourage more sustainable solutions for plastic production and disposal.

July has been designated ‘Plastic Free July’ by global not-for-profit group Plastic Free Foundation,[1] so it seems an appropriate time to examine the impact of plastics upon our world, and the steps that are being taken to combat this serious environmental problem.

Plastics and packaging have become a poster child for environmental pollution and neglect over the last few years which has led to a consumer backlash against plastic and packaging excess. This, in turn, has led to consumer goods companies redoubling their efforts to find ways to ensure that plastics can be recycled, reused, or composted.

In the UK alone, packaging accounts for around 30% of plastic demand, and plastic packaging makes up around 70% of all plastic waste. Plastic’s durable nature results in the production of microplastics, which often build up in waterways, and subsequently enter the food chain, harming local ecosystems and biodiversity. The stark scale of the problem is highlighted by the fact that an estimated 80% of all marine debris is made up of plastic waste.[2]

Growing Regulation

Other than the obvious damaging environmental consequences, companies that rely heavily on plastic remain exposed to reputational risk, reduced consumer engagement with their products, and the threat of regulatory fines.

In Europe, the European Union’s Circular Economy Plan has created specific proposals to tackle plastics and packaging, which focus on reducing waste, improving recyclability, and addressing the issue of microplastics. Moreover, regulation is increasingly coming into play, with extended producer responsibility laws being introduced, thus creating liability for producers over the use of plastic items and encouraging an increase in recycled content.

Changing habits are happening at the personal level too. Global consultancy Toluna conducted research on 5,900 European consumers last year, which revealed that 70% are actively taking steps to reduce their use of plastic packaging.

Bioplastic Resurgence

Moreover, there is growing evidence that consumers are willing to pay a premium for bioplastics, as biodegradability is seen as one important way to reduce plastic waste. Bioplastics can be broken down into two types: the first is produced from agricultural feedstock as opposed to oil, while the second type is designed to be biodegradable after use. The former, known as bio-based plastics, may help to reduce life-cycle carbon emissions, while the latter, biodegradable plastic, can address the ever-growing issue of plastic waste.

Investment Opportunities

There is no one solution to addressing the extent of plastic and packaging waste, nor to reaching net-zero carbon emissions. As such, we look at a range of potential solutions to reducing plastic and packaging waste for investment opportunities:

• Recycling: Some 32% of globally produced plastics escape collection, while only 14% of plastic packaging is recycled for future use. It is important to note that there is no ‘silver bullet’ here, as at least 38% of plastic must be made from new rather than recirculated feedstock.
• Paper: Paper is suitable for replacing plastic across several key items: film and wraps; rigid plastic packaging; sachets and multilayer film; pots, tubs, and trays; and disposable food containers.
• Bio-based Plastics: Around 6% of fossil-fuel demand is for plastic production, and on current estimates, that is set to grow to 20% by 2050. The growth of bioplastics offers a potential alternative and may also offer lower life-cycle carbon emissions over time.
• Biodegradable Plastics: These are a suitable solution for food packaging, so that leftovers and packaging can be composted together. In 2019, 59% of biodegradable plastic demand was for packaging.

Challenges to be Overcome

As investors, we are mindful that there are technical challenges associated with plastic recycling, and that there are limits to the amount of times that plastic can be recycled. Despite a multitude of commitments and pledges, relatively few companies have yet disclosed how much they will invest in packaging innovation and the shift from virgin to recycled plastic. Many biodegradable plastics also require industrial composting, which can create challenges around collection, but we are hopeful that the increased consumer focus on this area, combined with technological innovation and helpful regulation, will ultimately help to reduce the impact of plastic and packaging pollution on our planet.