The Plastics Circular Economy

All the measures associated with climate change – investing in clean energy infrastructure, developing a carbon market, requiring large businesses to track their carbon footprint, changing to electric vehicles and more – all of these were part of a shift to a sustainable economy.

The term ‘circular economy’ describes a strategy which, in the interests of sustainability, decouples economic growth from detrimental environmental impacts - tackling climate change is just one aspect of this. Another which is growing in prominence is tackling plastic pollution and, like climate change, this is going to have far reaching impacts.

It is probably not unreasonable to expect that businesses, governments and communities are going to roll out a similar swathe of measures for plastic pollution (subsidized innovation and operational changes, development of new infrastructures, regulated measurement requirements, pollution penalties, etc.) as were and are being applied to greenhouse gas emissions.

In just the past few months I have:

1. Noticed EU government resolutions to get businesses to track their plastic footprint;
2. Been in discussions with British manufacturers who made clear that this is one of the focuses of their efforts to make their operations increasingly more environmentally friendly;
3. Become aware of initiatives to bring together investment firms and young companies in the ‘circular economy community’.

There are many ways in which tackling plastic pollution can affect businesses, consumers, governments and the economy in general and the finance, accounting and IT professions will all be affected so I launched a review of my own into this subject (access our eBook on this topic).

Here are just a few main features of what I have learned:

Plastics are a wonder material, a big factor of why we are able to enjoy our current standard of living and rate of economic growth and technological progress. They are lightweight, strong, flexible, chemically and biologically inert, electrically insulating and easily molded into any shape.

They are also cheap, which has meant that businesses have developed single use, disposable plastic products which consumers have been all too ready to throw away this kind of plastic. There is a lot of plastic waste in landfills and the air, sea and tissues of living organisms – over 5 billion tons.

There is a big and largely avoidable drive to produce plastic from primary sources such as naphtha from crude oil, or even by growing crops (sugar cane, soya or palm trees for palm oil) where a large part of the margin is derived from producing the source chemicals of plastics.

The drive to do this is derived from the large demand for plastics and the relative margin advantages of producing these plastic-originating chemicals (ethylene and propylene in the case of crude oil) both compared to alternative products possible from these sources, and also in comparison to margins possible from recycling waste plastic.

So, the net effect is that instead of reducing the amount of waste plastic, the world is producing more of it, and recycling is a long way from catching up.

Problems with recycling plastic include:

1. Recovery – mining landfill sites, and removing plastic from rivers, lakes and the oceans (especially microplastics);
2. Separation – removing metal, glass and other waste and then sorting leftover plastic into specific types so as not to jam up the recycling machinery;
3. Reconstitution – reworking some plastics changes them so they cannot be made into the same type of product as before (closed loop recycling e.g. a bottle becomes another bottle) but become a different product (open loop recycling e.g. toys become a park bench);
4. Energy consumption – recycling is endothermic and requires heat input.

Developed nations use a lot of plastic compared to undeveloped nations (92 kg p.a. per capita in Europe vs a global 35 kg p.a. per capita in 2015). So, undeveloped nations could argue that they are playing catchup and developed nations should carry the brunt of recycling efforts.

However, developed nations are generally far better at restricting plastic from entering the broader environment (because more is collected and sent to better-managed landfill sites), and at recycling or incinerating plastic. Significant investment is required to build recycling facilities that can handle all seven main types of plastic products, or to build incinerators that have a secondary chamber that reduces toxic gaseous outputs. Developing nations cannot easily afford such facilities.

Similarly, developing nations will not easily afford investment into R&D to develop plastic alternatives, or plastic reclamation projects (remember, the waste has value), new plastic recycling technologies.

There are strong similarities between the carrot and stick approach that might be required to advance the circular economy for plastic and that which was used to introduce a more circular economy for energy.

For the energy sector, firms were required to develop a carbon footprint and to move from dependence on fossil fuel energy, with penalties on gas guzzling automobiles and coal and oil dependency but subsidies for clean and renewable energy sources.

So, too, for the plastic sector, firms will have to develop a plastic footprint and move from a dependence on plastic sourced from primary sources to plastic sourced from recycled or biodegradable sources.

As with energy, where some economies persisted with fossil fuel power, underinvested in clean energy technologies and did not implement carbon footprint tracking, we can expect that some economies will continue to use primary resource-sourced plastic, will not reduce plastic use, and will not invest in plastic recovery, recycling or clean incineration facilities.

But the evolution of our economy and society to meet the climate crisis has shown that innovative and canny firms were able to secure big and long lasting profits by developing new technologies and implementing them, taking advantage of government subsidies along the way. It is very likely that the same holds true for our plastic pollution crisis, and firms who strike out swiftly with good ideas and strategies may do well for themselves as well as for our environment.