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Sustainability: a critical plastics market driver

12 November 2018 Nick Vafiadis

Spurred by images of the Great Pacific garbage patch - a growing accumulation of f loating ocean plastic waste estimated to be larger than France and weighing more than 593 million pounds - many global consumers have become increasingly outspoken on plastics use and recycling. Some consumers are pushing for bans on plastics, particularly single-use plastics, others choose to substitute products to minimize plastics waste, and still others are doing both.

Data shared by both the Ellen MacArthur Foundation and the World Economic Forum estimate that there will be more plastic than fish in the ocean by 2050. The Ocean Cleanup, an environmental technology organization, estimates that 8 million metric tons of plastic waste are added to the world's oceans annually, much of it from rivers and mismanaged plastic and municipal waste from Asia. The non-profit agency estimates the amount of plastic waste added to the world's oceans will nearly double by 2025.

While recycling is expected to play a central role in resolving the plastics waste issue, initiatives have thus far been largely ineffective. It is estimated that only about 4% of the plastic packaging used globally is ultimately delivered to recycling plants, while a third is left in various ecosystems, and 40% ends up in landfill.

Evolving approaches to sustainability

A clear shift is developing in the approach toward sustainability, as the movement transitions from reactive to proactive mode. In the reactive phase, the target was preventing litter and focusing on plastics waste. Thereafter, the focus moved to managed disposal of plastic waste through incineration, landfill, export, and recycling. Now, the emphasis is swinging to circularity, often described as a circular economy, in which the producer becomes a stakeholder in the careful management and reuse of plastic and the reduction of end-waste.

Extended Producer Responsibility (EPR) is a clear example of producer participation in the sustainability movement. EPR essentially levies fees on packaging and certain plastics products that are paid by manufacturers. These fees are used to develop recycling infrastructure and encourage the recycling of content. EPR policies are currently either in effect or targeted for near-term implementation in Europe, North America, China, and India. Presently there are no packaging EPR programs in effect in the US, although we expect to see programs adopted by 2025.

Europe uses a multi-pronged approach to circularity by setting targets for plastic recycling and enabling compliance through EPR. Recent initiatives include a legislative framework to mandate compliance, including taxation, and a certification mechanism for eco-design. A new standard will encourage product designs that are not based solely on functionality, performance, or cost, but on circularity. With this standard, products will be 100% recyclable.

Aggressive policies designed to limit single-use plastic packaging and define specific targets relative to plastics recycling are being implemented globally. For example, the European Union has set a common target for the recycling of 50% of plastic packaging by 2025 and 55% by 2030. In India, the government announced an initiative to eliminate all single-use packaging by 2022. Further, the city of Mumbai implemented an outright ban on single-use plastics. Residents caught using plastic bags, cups, or bottles face penalties of up to 25,000 rupees (£276) and three months in jail.

Impact on today's - and tomorrow's - investments

We expect the trend toward greater sustainability in the industry to continue, which is certainly a positive development. But the pace of change, the prospect of greater regulations, including bans, and consumer deselection of certain plastic end-use products is creating significant investment risk and market uncertainly. This is especially significant for plastics producers, processors, and consumer packaging companies, who must invest now for the future. Additionally, municipalities and governments are also tasked with investing for growth. They must ensure they have a comprehensive recycling infrastructure that is optimal, meets constituent expectations, and is adequately funded. This requires tremendous planning and a multi-layered view.

In an effort to improve understanding of this rapidly developing multi-faceted movement, IHS Markit has developed a multi-client study entitled "Plastics Sustainability: A Sea Change - Plastics Pathway to Sustainability." The study offers a base case (trend line) and alternative case (maximum viable threshold) analysis of the plastics demand growth for six key plastics markets. The study provides a granular view of the impact of sustainability on specific end-use segments for key plastic resins as well as analysis of the implications for upstream base chemicals and feedstocks for the years 2018 to 2030.

Also included in the study is a review of current and evolving government regulations, including consumer product companies' policies for plastics sustainability initiatives in major geographies. The study offers an in-depth review of the infrastructure disconnect between post-consumer recycle demand and supply. It also profiles the major technologies for plastics recycling and recovery, addressing the gaps in the context of a circular economy. The research includes insight and analysis from two leading sources: More Recycling, a research and consultancy focused on the recycling of post-consumer materials, specifically plastics; and Environmental Packaging International, a consultancy specializing in environmental compliance, product stewardship and sustainability related to packaging and products.

Posted 12 November 2018 by Nick Vafiadis, Vice President, Plastics, IHS Markit

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