Europe’s plastics industry is under major threat from the growing legislative and consumer backlash against plastic packaging.
As with the global industry, its licence to operate is increasingly challenged by images of plastic rubbish polluting the world’s oceans, alongside photos of baby fish dying because their parents mistakenly fed them plastic instead of food.
EU legislation on plastic packaging is already in place to respond to this concern and promote the arrival of the circular economy. The industry therefore now needs to urgently reinvent itself by developing solutions to tackle these problems and help reduce carbon footprint.
History, luckily, is on its side. There was a similar turning point in the 1960s, when it implemented the far-sighted decision to switch from coal to oil-based feedstocks. As a result, it transformed itself into a world-leading source of the products that have now become embedded in our daily lives. And it maintained this lead for more than fifty years, until finally China’s growth allowed Asia to overtake it.
But over the past twenty years, however, it has stagnated as China became the manufacturing capital of the world since joining the World Trade Organisation in 2001. Its newest steam cracker, a core technology for the production of chemicals and plastics, started up more than twenty years ago in 1994. And over the past decade, the North American industry has seen a $200bn renaissance due to the arrival of low-cost shale based feedstocks.
This decline matters as chemicals and plastics are central to the European economy, and a key enabler for a vast range of products from autos through to personal care. The industry directly employs 1.5 million people, and a much larger number indirectly in downstream manufacturing and service roles.
Plastics are also key to tackling a number of the challenges facing our society, as the EU has highlighted in its new Circular Economy strategy:
“Light and innovative materials in cars or planes save fuel and cut CO2 emissions. High-performance insulation materials help us save on energy bills. In packaging, plastics help ensure food safety and reduce food waste.”
But at the same time, the legislation highlights the urgent need to rethink the production, use and consumption of plastics in order to avoid the environmental damage currently being created.
The problem is that reuse and recycling of end-of-use plastics remains very low by comparison with other materials such as paper, glass or metals:
- The Commission estimates that more than 2/3rds of plastics waste currently goes into landfill or incineration
- As a result, 95% of the value of plastic packaging material, between €70bn – €105bn annually, is lost after a very short first-use cycle
- It also estimates that recycling all global plastic waste could save the equivalent of 3.5bn barrels of oil each year, and help curb CO2 emissions
The European plastics industry is therefore now at a crossroads, as continuing with a business as usual strategy makes little sense. After all, the new EU legislation requires all plastics packaging to be reusable or cost-effectively recyclable by 2030. And the Ellen MacArthur Foundation is successfully encouraging the world’s major brand owners and retailers to make similar commitments with an even tighter deadline of 2025.
This paradigm shift gives the European plastics industry the opportunity to stage its own renaissance. It urgently needs to start the technical development programmes that will allow it to adopt the circular economy agenda, and start substituting recycled feedstock for oil.
China, after all, is already moving down this track, with Hainan planning to ban the production, sale and use of the 120kt single-use plastics currently used each year in the province by 2025. And the government is starting to build dozens of local “comprehensive resource utilisation” centres to boost recycling, whilst at the same time restricting the use of single-use plastics by courier and food delivery firms.
Obviously there will be costs involved. But in principle the industry’s assets are ageing and often below world-scale. The scale of the write-offs required is therefore manageable. And by beginning the transition today via the use of chemical and mechanical recycling technologies, these costs could be amortised over a longer timeframe.
The industry has a remarkable record of generating revenue and profit growth from innovation. Reinvention to become a more service-based industry, focused initially on making a major contribution to reducing marine pollution, would enable it to regain its global leadership in an area where long-term growth is assured.
And who knows, if Hollywood were ever to issue a remake of 1967’s The Graduate, maybe Mr McGuire’s famous advice to a young Dustin Hoffman would become “There’s a great future in recycled plastics”.
The Stone Age didn’t end because we ran out of stones. Similarly, coal is being left in the ground because we no longer need it any more. And the same is happening to oil, as Saudi Arabia recognised last year in its Vision 2030:
“Within 20 years, we will be an economy that doesn’t depend mainly on oil“.
And so now the debate is moving on, to products such as plastics that are made from oil.
The move began several years ago with the growing concern over plastic bags. Consumers decided they no longer wanted to live in a world filled with waste bags. Now, in a landmark new Study*, the debate is evolving to focus on the question of ‘What happens to plastic after we have used it?’ As the chart shows:
The world has produced 8.3bn tonnes of plastic over the past 60 years
Almost all of it, 91% in fact, has since been thrown away, never to be used again
But it hasn’t simply disappeared, as plastic takes around 400 years to degrade
Instead, the Study finds, 79% is filling up landfills or littering the environment and “at some point, much of it ends up in the oceans, the final sink”
Nobody is claiming that this waste was created deliberately. Nobody is claiming that plastics aren’t incredibly useful – they are, and they have saved millions of lives via their use in food packaging and other critical applications. The problem is simply, ‘What happens next?’ As one of the Study authors warns:
“We weren’t aware of the implications for plastic ending up in our environment until it was already there. Now we have a situation where we have to come from behind to catch up.”
The good news is that potential solutions are being developed. As the video shows, Recycling Technologies, for example (where I am a director), is now trialling technology that will recycle end-of-life plastic into virgin plastic, wax and oils. Other companies are also hard at work on different solutions. And more and more effort is focused on finding ways of removing plastic from the sea, as I noted last year:
“95% of plastic packaging material value is currently lost after just a short first-use cycle
By 2050, there will be more plastics in the ocean than fish by weight, if current policies continue
Clearly, this state of affairs cannot be allowed to continue.”
SUSTAINABILITY IS REPLACING GLOBALISATION AS A KEY DRIVER FOR THE ECONOMY
But there is another side to this debate that is just about to move into the headlines. That is the simple question of “How do we stop putting more and more plastic into the environment?” Cleaning up the current mess is clearly critically important. But the world is also starting to realise that it needs to stop creating the problem in the first place.
As always, there are a number of potential solutions potentially available:
The arrival of 3D printing dramatically reduces the volume of plastic needed to make a finished product. It operates on a very efficient “additive basis”, only using the volume that is needed, and producing very little waste
Digitalisation offers the opportunity to avoid the use of plastics – with music, for example, most people today listen via streaming services and no longer buy CDs made of plastic
The ‘sharing economy’ also reduces demand for plastic – new business models such as car-sharing, ride hailing and autonomous cars enable people to be mobile without needing to own a car
The key issue is that the world is moving to adopt the principles of the circular economy as the Ellen MacArthur Foundation notes:
“Underpinned by a transition to renewable energy sources, the circular model builds economic, natural and social capital.”
This paradigm shift clearly creates major challenges for those countries and companies wedded to producing ever-increasing volumes of plastic. OPEC has an unpleasant shock ahead of it, for example, as its demand forecasts are based on a belief that:
“Over one-third of the total demand increase between 2015 and 2040 comes from the road transportation sector (6.2 mb/d). Strong growth is also foreseen in the petrochemicals sector (3.4 mb/d)”
They are forgetting the basic principle that, “What cannot continue forever, won’t continue“. After all, it took just 25 years for cars to replace horses a century ago. More recently, countries such as China and India went straight to mobile phones, and didn’t bother with landlines. And as I noted last year, underlying demand patterns are also now changing as a result of today’s ageing populations:
In the BabyBoomer-led SuperCycle, the growing population of young people needed globalisation in order to supply their needs. And they were not too worried about possible side-effects, due to the confidence of youth
But today’s globally ageing populations do not require vast new quantities of everything to be produced. And being older, they are naturally more suspicious of change, and tend to see more downside than upside
Of course, change is always difficult because it creates winners and losers. That is why “business as usual” is such a popular strategy. It is therefore critically important that companies begin to prepare today to be among the winners in the world of the circular economy. As we all know:
There is no such thing as a mature industry, only mature firms. And industries inhabited by mature firms often present great opportunities for the innovative”.
As the 3rd chart shows, the winners in the field of plastics will be those companies and countries that focus on using their skills and expertise to develop service-based businesses. These will aim at providing sustainable solutions for people’s needs in the fields of mobility, packaging and other essential areas. The losers will be those who bury their heads in the sand, and hope that nothing will ever change.
* The detailed paper is in Science Advances, ‘Production, use, and fate of all plastics ever made‘