rethink sustainability
Capturing plastic waste – opportunity not landfill
Every year up to USD 120 billion of value is lost to the economy in the form of plastic waste, with millions of tonnes of this potentially valuable resource ending in landfill, being incinerated, or leaking into the environment. The ecological cost of plastic waste, in particular the impact on our marine life, is well understood, but often missed from the conversation are the myriad possibilities plastic waste offers, and how building a circular plastics system could give retail businesses the means to grow their brands and create longer term relationships with consumers.
Finance has a central role to play in making the industry sustainable, and while innovations in plastic production and recycling often grab the headlines, investment must be focussed too on infrastructure. The sums required will be large, but for investors the opportunity is larger still, and it’s this opportunity, estimated to be worth USD 1.2 trillion between now and 2030, that makes the plastic waste problem ideal for market-based solutions.
The search for perfect sorting
Even the world’s most successful recycling nations recycle barely more than half of their plastic waste. Germany, named world recycling champions by the World Economic Forum, recycles 52.6% of its plastic waste, while the EU bloc as a whole, home to some of the most effective recycling schemes, achieves just 32.5%.
Often the problem is in the sorting, a complex and expensive process in which waste is separated into streams according to the plastic grade and use-cases of each item. Numerous sorting technologies have been developed and deployed, but sufficient accuracy and speed of operation have been difficult to achieve. Now the Singapore based Alliance to End Plastic Waste, a global alliance funded by a wide range of corporations, may be nearing a solution. Their system, called Holy Grail 2.0, passes waste along a conveyor belt while cameras above scan for digital watermarks printed onto each item. With the marks containing information on plastic grade and chemical properties, high speed air jets then direct items into their appropriate streams.
The system has been demonstrated to achieve both accuracy and speed – recent semi-industrial testing achieved a 99% detection rate when tested in real-world conditions, working at a higher throughput rate than rival sorting systems. Digital watermarks also allow for more granular sorting which could create new recycling streams not available using current technology, and with the marks visible to smartphones the system even offers potential for finer initial sorting in the home. The commercial case is clear – less wastage in the system means more material available for recycling or reuse, and for outlets looking to get ahead of the regulation curve digital watermarks could provide a rich source of evidence that their waste has been brought into a circular system.
Chemical versus mechanical
Majority of plastic recycling today is mechanically processed, during which plastic waste is shredded and heated, degrades the polymers that make up plastic’s chemical structure, often weakening and reducing the flexibility of the final product. With each pass through the recycling process plastic degrades further, becoming suitable only for lower and lower grade products, until it reaches a final iteration in unrecyclable form. Closed loop recycling systems and better sorting can extend the number of cycles, but neither can promise zero waste in the long-term. For this, new recycling technology will be needed.
In April this year, an article in the journal Nature outlined the creation of a new enzyme, FAST-PETase, which can fully break down waste plastic in just one week. In addition to the speed advantage over other plastic digesting enzymes, FAST-PETase requires significantly less energy input, giving it both an environmental and commercial advantage. Through “de-polymerisation” FAST-PETase returns the chemical components of plastic to its initial monomers, individual molecules which can then be used to make new plastic from scratch, avoiding the degradation and linear endpoint that occurs with traditional mechanical recycling.
UK-based Plastic Energy and US start-up Novoloop are further along the chemical recycling road. With two processing plants running 24 hours a day, 365 days a year, Plastic Energy takes mixed and contaminated plastic waste that can’t be recycled mechanically and breaks it down into their proprietary TACOIL, a feedstock that can be used in place of fossil fuel in the manufacture of new plastic. Meanwhile advanced-stage start-up Novoloop promises the world’s first upcycling of end-of-life polyethylene into higher value thermoplastic polyurethane, which can be used in high-performance applications such as running shoes and automotive or electronics components.
The degradation that occurs with mechanical recycling often necessitates the addition of virgin plastic to the manufacture of recycled products. By breaking waste plastic down into its simplest building blocks chemical recycling could offer 100% circularity – virgin plastic created entirely from old, without introducing new petroleum-based resources.
Read also: What are our top tips to reduce plastic pollution?
Less waste in the first place
For retail firms the shift to a leaner plastics system could bring numerous benefits. Reducing waste now could lower manufacturing costs and minimise the tax implications of a changing regulatory environment, while also helping brands to strengthen relationships with their customers.
Companies like Chilean start-up Algramo and UK-based Loop are helping producers take advantage of this shift by building out the infrastructure needed for a “refill revolution,” getting a wide array of products to consumers via branded refillable containers. For the end user, Algramo’s “packaging for life” offers the advantage of reduced rates, with the cost of the container subtracted from the refill price, while for producers brand-restricted refills give the opportunity to increase conversion from first-time buyers to repeat customers. Currently operating in five countries, with trial stations in major supermarket chains, Loop employs a deposit-based container return system, where containers are cleaned and re-deployed, rather than recycled. With plans for further expansion this year, Loop offers early adopters the chance to take advantage of a growing consumer shift towards environmentally friendly spending.
In the UK, sustainable packaging innovators Bockatech are addressing an obstacle to the refill revolution – the cost of the containers. Multi-use containers are typically more expensive to manufacture than single-use equivalents, but Bockatech’s EcoCore moulding system is shifting the economics, enabling the manufacture of reusable containers at a similar cost while cutting materials usage by up to 70%.
Read also: How China is addressing its waste problem
Investing in change
Plastic is cheap to make and cheap to throw away, and for producers and retail users of plastic packaging the linear take-make-waste model is often cheaper than using recycled materials. But for plastic value chain the risk is growing that they will need to consider their products’ externalities, and that the environmental cost of the plastic waste for which they are responsible will be added to their bottom line.
In May, we announced a partnership with the Alliance to End Plastic Waste where we aim to accelerate this transition. This opportunity will “raise USD 500 million from institutional and other accredited investors for scalable solutions to remove plastic waste from the environment, increase recycling, and drive the global transition towards a circular economy for the plastic value chain.”
Speaking at the launch Jean-Pascal Porcherot, Co-Head of LOIM and Managing Partner of Lombard Odier Group, said the strategy will “target…those active in collection, sorting and recycling infrastructures – but also those proposing innovations in the production of plastics, in order to improve their sustainability, reusability and recyclability.”
This partnership reflects Lombard Odier’s position as a global leader in sustainable finance, gained through our commitment to supporting and working with sustainability experts, and from our conviction that sustainability will be a major driver of returns in the years ahead. With consumer demand shifting and governments anxious to be seen to play their part in minimising the environmental impact of plastic, the industry is coming under growing scrutiny. We believe that first-movers will benefit from an era-defining opportunity, and that investors have a fundamental role to play in this necessary change.
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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