Reducing waste, protecting value

Images of contaminated ocean habitats and stricken marine life have shocked consumers. In response, a growing number of government and business initiatives are aiming to encourage a shift away from linear ‘take-make-dispose’ business models towards more circular examples of production and consumption. But what role can investors play in accelerating this change?

Kate Elliot, Senior Ethical Researcher, Rathbone Greenbank Investments

Plastic waste is a problem that will impact our environment for generations to come. Research published by the journal Science Advances in July 2017 calculated that, of the 8.3 billion tonnes of synthetic plastic produced from the early 1950s to 2015, around 6.3 billion tonnes of highly durable plastic waste had been generated. Plastic bottles are a testament to that durability, taking at least 450 years to degrade: UK consumers alone discard around 35 million of these each year.

Ethical and environmental concerns aside, investors increasingly recognise the long-term financial consequences of unchecked plastic pollution. At a basic level, better resource stewardship makes good business sense, but how companies think about plastic will also determine who benefits most from future changes in regulation and consumer preferences

Investors need to encourage more companies to recognise and respond to the issue of plastic pollution as part of their broader sustainability frameworks.

At Rathbone Greenbank, our first step is to understand where we may have exposure to plastics across the portfolios we manage and what risks and opportunities this creates.

It’s not simply a case of screening out companies with any kind of exposure to plastic — not only because investors would be left with a restricted universe of investable companies, but also because plastic use is a complex issue and focusing too narrowly on the product could simply replace one problem with another.

Plastic is cheap, lightweight and durable, serving a wide range of important functions. As an example, plastic wrapping on a cucumber extends product life from three days to 14. Removing plastic in this scenario would therefore generate an associated increase in food waste.

There are nevertheless many cases where we can identify and challenge unnecessary or excessive packaging. Single-use plastics — straws, disposable coffee cups and plastic cutlery — are all common sources of waste. We can encourage companies to eliminate the unnecessary use of plastic and ensure that reusable, recyclable, or compostable alternatives are used wherever possible.

“I believe we can turn the tide on plastic pollution and end this age of plastic...We are

operating in an 11th hour zone where the stakes could not be higher, and still taking a long time to learn that we must let the planet set the limits. However, within this zone there are clear opportunities. It’s confusing yet energising, terrifying yet filled with opportunity.”

 

Lucy Siegle, Journalist and broadcaster

Investors need to encourage more companies to recognise and respond to the issue of plastic pollution as part of their broader sustainability frameworks. To do this, it’s important to understand how companies are positioned regarding resource efficiency, design for the environment and innovation in materials or recycling practices across the whole value chain.

We can look at the different types of plastic being produced by chemical companies, or how logistics groups are managing the risk of plastic resin pellets — the most common form of raw material from which plastic products are made — escaping into the natural environment during transportation. We can ask companies using plastics how they are integrating recyclability into product or package design by not mixing different types of plastic or by avoiding adhesives and decorative coatings.

Where a lot of technically recyclable material is sold into markets where the collection, sorting and processing facilities needed to recycle it aren’t widespread, we can also identify which companies are working to improve recycling and repurposing techniques to ensure the economic value of plastic isn’t lost.

Most importantly, we need to look at how all these different agents are interacting to promote or obstruct a more circular economy for plastic. We encourage companies to think more holistically about their inputs and outputs, embrace innovation in business models and resource management, and support regulation that promotes better outcomes for the environment, society and, ultimately, for business.

Regulating plastic waste

In October 2018, the UK government announced measures to tackle plastic waste, including a tax on any plastic packaging containing less than 30% recycled content and incentives for developing more sustainable packaging. Further details were published in December as part of the government’s long-term resources and waste strategy for England. This proposes introducing a plastic packaging tax from April 2022, extending the producer responsibility requirements for packaging to help incentivise sustainable design, and funding research into bio-based and biodegradable plastics.

A proposal to ban a range of single-use plastic products within the European Union also made significant progress in October 2018 when the European Parliament voted in its favour. From 2021, a ban will be placed on plastic products where affordable, biodegradable alternatives are available, including cotton buds, cutlery, plates, straws and drink stirrers.

Globally, a range of policy interventions have been made to tackle plastic pollution. Restrictions, taxes or bans on single-use plastic bags have been introduced in almost 40 countries; bans on other single-use plastic products have also been implemented in some countries or by individual states and cities.