rethink sustainability
New possibilities with plastics: opening up opportunities in the circular economy
Article published on rethinkeverything.ilsole24ore.com in partnership with Il Sole 24 Ore
There’s a view of economic growth that has had its day – it’s that of the linear economy, based on the depletion of resources. It’s a contradiction in terms: unlimited growth fuelled by limited resources. Contrasting with this is the sustainable growth that is becoming possible today and is emerging in the form of the circular economy. It reuses and transforms materials instead of condemning them to become waste.
Change is clearly needed. The extraction and production of raw materials accounts not only for almost a quarter of all greenhouse gas emissions, but also for about 90% of biodiversity loss, according to a 2020 report from the United Nations Environment Programme (UNEP)1.
The plastics problem
Talking about materials means talking about plastics. These synthetic products are largely produced from fossil fuels such as crude oil, coal and natural gas, and have been widely used in our daily lives since the 1950s. You can find them in bottles, bags, toys, packaging, furnishings, clothes and innumerable other items. Their ubiquity is a result of their versatility, lightweight nature, robustness and relatively low cost. But the way they break down and end up becoming dispersed through the environment over hundreds years seriously threatens the future of biodiversity, as well as our health.
Global plastic production amounts to around 460 million tonnes a year, according to the OECD2. Over two-thirds of this is short-life products that rapidly become waste, and an increasing amount – 139 million tonnes in 20213 – is disposed of after just one use. This plastic often ends up in the sea and other parts of the natural world; an estimate published in scientific journal Plos One in March 2023 says there is 2.3 million tonnes of it floating in our oceans4.
Microplastics are among the main concerns. These particles are tiny, less than 5 mm wide, but they can have a huge impact on the balance of marine ecosystems. They can also end up in the human food chain if they are eaten by fish. Primary microplastics are mainly shed by items of clothing made from synthetic fabrics – today’s fashion industry, fast fashion in particular, is a bigger polluter than air transport, being responsible for about 10% of greenhouse gas emissions5. Other leading sources include tyres and, to a much lesser extent, bodycare products.
Read also: Rethinking our toxic relationship with plastic
Putting an end to plastic pollution
Between 15 trillion and 51 trillion plastic particles are floating on surface waters around the world, according to a report published in the journal Nature in 20216. Many plastics contain harmful chemical substances such as phthalates and bisphenols that can migrate into the food and drinks they come into contact with. Using plastic containers means these substances could be ingested, which can have harmful consequences for human health.
The United Nations passed a resolution in 2022 to put an end to plastic pollution and promote much more sustainable production and consumption. A binding agreement on this matter is due for approval by the end of 2024. “Only an integrated, systemic shift from a linear to a circular economy can keep plastics out of our ecosystems, bodies and the economy,” UNEP Executive Director Inger Andersen said7. The agreement could reduce plastic pollution by three-quarters by 2040, while simultaneously creating thousands of jobs and saving trillions of dollars. Plastic pollution leaves the planet facing social and environmental costs of USD 300 billion to USD 600 billion a year, according to preliminary estimates in a UNEP report. Some estimates say the total bill actually exceeds USD 1,500 billion8.
Read also: Eliminating plastic pollution: an investor perspective
Rapid reductions in plastic pollution can happen, but they will require three market shifts in the immediate future: reusing certain plastic products, which could lead to a 30% cut in pollution; recycling, which could drive a 20% reduction; and the use of sustainable alternatives, which could prompt a further 17% drop9.
Cultivating a circular economy
History’s largest instances of resource extraction have involved petroleum, gas and coal. This means enormous environmental advantages – as well as economic benefits – will emerge with the exponential growth of renewable resources and the electrification of energy consumption in the decades ahead. However, this growth will also generate a 400% increase in demand for a number of minerals by 204010, the International Energy Agency estimates, with clean energy relying on a long list of raw materials, including metals and alloys with highly diverse characteristics.
The first piece of good news about this new phase of material extraction is that it will enable the construction of renewable power plants fuelled by potentially inexhaustible resources such as the sun, wind, water and natural heat stored in the Earth’s crust. The second is that the circular economy is enabling the materials involved in these technologies to be used over and over again, reducing the need for further resource extraction. The European Union currently imports about half of the raw materials it consumes and produces about 2.5 billion tonnes of waste each year11, according to Eurostat data. Its decision to adopt a circularity strategy will change this by promoting the sharing, lending and recycling of existing materials and products, as well as their reuse and repair for as long as possible.
Design changes are helping enable this side of the circular economy. Digitalisation is also playing a part by supporting business models that are service-based rather than product-based. Car sharing and online streaming are two examples that are spreading fast, but there are opportunities in a huge number of sectors that could make it unnecessary to own certain goods and reduce the need for raw materials.
All of this will help create a sustainable economy.
Read also: Supporting the transition towards a nature-based economy
The CLIC® economy
We at Lombard Odier firmly believe that sustainability is profoundly changing the risk-reward profile of investments in financial markets. We believe that the global economy is moving towards a model that is circular, lean, inclusive and clean: the CLIC® economy. It will be a significant change affecting energy, the materials sector, agriculture, food and land use.
Carbon emissions markets can play a key role in incentivising the transition in these sectors. Including the price of climate-changing emissions in business costs encourages companies to adopt low-emission technologies. At the same time, this shows consumers that prices are shifting in favour of an economic model that reuses and recycles more and emits and discards less. Markets of this kind, particularly in the EU and the US, have led to emissions reductions in recent years that have not compromised economic growth.
1 Emissions Gap Report 2020 (unep.org)
2 La pollution plastique ne cesse de croître tandis que la gestion et le recyclage des déchets sont à la traîne, selon l’OCDE (oecd.org)
3 Plastic_pollution.pdf (unep.org)
4 Plastic in the Ocean Reaches 2.3 Million Tonnes, Could Triple by 2040: Study | Earth.Org
5 UN Helps Fashion Industry Shift to Low Carbon | UNFCCC
6 Microplastics are everywhere — but are they harmful? (nature.com)
7 New Plastics Economy Global Commitment | One Planet Summit
8 Global movement against plastic pollution: Millions seek solutions this World Environment Day (unep.org)
9 United Nations Says Cutting Plastic Waste by 80% by 2040 is Doable (waste360.com)
10 Mineral requirements for clean energy transitions – The Role of Critical Minerals in Clean Energy Transitions – Analysis - IEA
11 Waste statistics - Statistics Explained (europa.eu)
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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