investment viewpoints
Plastic wrap: combating data gaps and pollution
Welcome to Plastic wrap, our bimonthly review of the science, policy and corporate activity pivotal in creating a circular plastics value chain.
Highlights from this issue include: a roadmap to a better understanding of ocean pollution, evidence of reusable packaging’s economic viability compared with single-use packaging, new regulations governing plastic packaging, and new rules to make producers responsible for the full lifecycle of textile products in the UK.
Our private-equity Plastic Circularity strategy is dedicated to reducing plastic waste and greenhouse gas emissions in the plastic value chain while aiming to deliver returns. The developments we cover below are drivers of progress, showing that governments and companies are delivering or adopting innovative materials, new usage models and improved collection, as well as sorting and recycling techniques.
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Science
There are significant gaps in scientific knowledge about marine pollution. Back to Blue – an initiative by Economist Impact and The Nippon Foundation – has developed a roadmap to a better understanding of the effect of pollution on ocean health, identify the scale of the problem and the means to reduce the impact through data analysis.
The findings of the initiative show that understanding the scope and impact of marine pollution is a difficult task, given the prevalence of naturally occurring and manufactured pollutants that interact with the environment and each other. These pollutants are difficult to track and measure in large and deep marine habitats.
Back to Blue is calling for marine pollution to be adopted as a central issue at the 2025 UN Ocean Conference and other key meetings. Filling the data gaps will require the use of digital solutions such as artificial intelligence and physical technologies such as autonomous underwater vehicles. High-quality, standardised data can provide decision-makers in government, business and civil society with compelling evidence of the need to address marine pollution. This, in turn, should lead to better policymaking and support business transformation.
The widespread adoption of reusable plastic packaging has significant potential to reduce pollution, second only to the elimination of single-use plastics. However, this transition has been hindered by doubts over environmental credibility, customer acceptance, whether the required behavioural change will happen, and the necessity of heavy investments and operational costs.
A study by Searious Business and Zero Waste Europe examined three packaging categories and argues that reusable packaging will only become even more economically viable in the next few years and provide faster return on investments. The findings suggest that, even in isolation, the break-even point for takeaway food containers, bin bags and beverage containers is only a few years.
In a follow up study, “The Economics of Reuse”, the researchers assert that reusable packaging can be a viable and a more economically favourable alternative to single-use packaging, even when dropped into systems originally designed for single-use. In light of these finding, the report recommends sector-specific reuse targets are achieved through 'systems for reuse', and waste prevention targets set at a minimum of 15% by 2030, 20% by 2035 and 25% by 2040.
According to a report by the Pew Charitable Trusts and Systemiq,1 there is a USD 1.2 trillion opportunity to tackle plastic pollution and reduce the present value of global investments in the plastic industry through systems change. However, a lack of access to baseline data makes it challenging to quantify and assess how impactful an investment is. The Circulate Initiative’s Plastics Circularity Investment Tracker for emerging markets has been created to address this gap. The tracker has revealed that USD 4.1 billion was invested in plastics circularity solutions in emerging markets between 1 January 2018 and 30 September 2022.
Polyethylene terephthalate (PET) is used extensively in consumer packaging and textiles in particular, where it is known as polyester. A new report from Systemiq explores circular economy pathways for PET packaging and polyester textiles in Europe. These pathways rely on further scale-up and development of mechanical recycling alongside new solutions such as chemical PET recycling; advanced waste sortation; re-commerce and rental models in the fashion sector; and packaging reuse or new delivery models for products with no or low packaging.
Policy, regulation and disclosure
The European Commission is proposing rules to make producers responsible for the full lifecycle of textile products and to support the sustainable management of textile waste across the European Union (EU). This initiative has been designed to accelerate the development of the separate collection, sorting, reuse and recycling sector for textiles, in line with the EU Strategy for Sustainable and Circular Textiles. Increasing the availability of used textiles is expected to create local jobs and save money for consumers, while alleviating the impacts of textile production on natural resources.
The Commission is proposing to introduce mandatory and harmonised Extended Producer Responsibility (EPR) schemes for textiles in all EU Member States. Under the proposals, producers would be expected to cover the costs of management of textile waste. How much producers will pay to the EPR scheme will be adjusted based on the environmental performance of textiles, a principle known as ‘eco-modulation’.
The UK Government has announced that emissions from waste incineration will be included in the UK Emissions Trading Scheme (ETS) from 2028. The scheme sets a limit on the total volume of greenhouse gases that certain industries can emit. The aim is to encourage industries to move away from fossil fuels, reduce their carbon footprint, and invest in cleaner, renewable technologies.
The Netherlands is set to introduce new regulations governing plastic packaging from July, in a bid to reduce the use of single-use plastics and encourage sustainable alternatives. Packaging covered by the regulations includes containers, food and drinks cups, disposable cutlery and plates. Businesses will be required to use sustainable alternatives, such as those made from biodegradable or compostable materials. Authorities will enforce penalties on businesses found to be in violation of the laws.
The launch of Scotland’s deposit return scheme (DRS) has been delayed until at least October 2025, which will bring it in line with the launch of a UK-wide scheme. The return scheme means that consumers pay a 20p deposit when they buy a drink in a single-use container, which is refunded on the return of the container.
The EU has warned that many member states are set to miss recycling targets for municipal waste and packaging waste. By 2025, the rules states that 55% of municipal waste and 65% of packaging waste must be prepared for re-use or recycled. However, member states have been warned that a majority need to significantly step-up efforts to meet these targets. For example, 10 member states are at risk of missing both targets in 2025.
Corporate activity2
Funding for advanced recycling facilities, biodegradable packaging and reuse models were highlights we have identified among recent announcements aligned with the themes of innovative materials, new usage models and improved collection, sortation and recycling.
Temi e soluzioni
Sources
[1] Lombard Odier is a capital partner in Systemiq and recently announced a new partnership to build holistiQ Investment Partners (“holistiQ”), a platform within LOIM solely dedicated to sustainable investing
[2] Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document
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