ESG Focus | Jun 13 2019
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Plastic – Not So Fantastic But Pretty Elastic
This article (part 1 & 2) is the first in a three-part series. It examines the global plastics context, the regulatory and tax landscape, the consumer and the ESG situation. The second article examines the core economic, technological and digital changes transforming the industry, such as recycling and competition from other substances. The third examines the plastics value chain, and which sectors and stocks will be hardest hit, and which are best placed to profit.
• Profound disruption is about to hit the plastic sector
• Plastic is problematic from both a pollution and carbon perspective and falls foul of Sustainable Development Goals (SDG) 6, 12, 11, 13 and 14
• There are many plastics, and not all plastics are equal under ESG investing
• Global regulations are mounting with single-use plastics in the spotlight
By Sarah Mills
Plastic has been rated public enemy No.2, second only to coal, by most of the world’s governments. While single-use plastics are the prime targets, the world is being forced to rapidly rethink its approach to the material, and the industry is preparing for a period of profound disruption within a very short timeframe.
It is estimated that single-use plastics could be banned within five years. At least 50% of plastics worldwide will be re-used or recycled by 2030, and all problematic plastics will be phased out.
Yet, unlike coal, which is to be eliminated, plastics are still perceived to have a future – it will be a matter of which plastics and which industries. So the imminent disruption represents both a risk and an opportunity for investors.
Plastic falls foul of the United Nations’ Sustainable Development Goals (SDGs): 6, clean water and sanitation; 12, responsible consumption and production; 11 sustainable cities and communities; 13, climate action; and 14, life below water.
But it is also has the potential to contribute to the achievement of many SDGs, such as: 7, affordable and clean energy; 9, industry innovation and infrastructure; and 11, sustainable cities and communities.
Change will come from many quarters, ranging from regulation to innovation, and every move is likely to have a sizeable impact on companies in service to the product. Some analysts estimate that a shift from disposable to durable plastics for products such as water bottles will result in a -65% reduction in polymer volume alone. That’s a lot of dollars.
The scale and complexity of the world’s plastic problem is confronting and confounding, and its solutions are varied and often complex.
The problems with plastic
Plastic is the most prolific material on the planet, and boasts an extremely stable molecular composition. It is designed to be indestructible yet only 10% of global production is recycled. As a result, the world is literally choking in plastic: single-use plastics, micro-plastics, bio-plastics, industrial plastics and other plastics with distinct chemical compositions used for distinct purposes.
Mountains of plastic waste are building in the West after China stopped importing the world’s waste for recycling. Much of this is now being illegally dumped on foreign shores, thanks to rogue operators, and is becoming a point of conflict between nations.