Plastics recycling starts to take off, and potential Winners & Losers emerge

It’s been a long time coming. But finally, the move to recycle plastics is starting to accelerate. As the chart shows, Bloomberg’s latest Circular Economy ranking “reveals the companies that are leading the charge to develop more sustainable packaging and those that are falling behind“.

It’s also still early days. And many will want to debate the leaderboard. But that debate will itself be a good way to encourage progress, as companies compete to show an improved position.

One key issue is the way the survey highlights the difference between the brand owners and the producers:

  • Brand owners have to score 72.2% to gain Leader recognition. 69.5% makes them a Follower, whilst 50% makes them a Laggard
  • But the best producer only scores 73.6%, and the Leader range goes down to 63.3%. Followers range down to 39.7% – which would make them clear Laggards if they were brand owners

The debate matters. In reality, moving forward on recycling means companies have to work together across the value chains.

As the brand owners are discovering, the fact that they are ‘ready to buy’ recycled plastic, doesn’t mean that they are ‘able to buy’. The key players in the separate value chains have not yet sat down together and worked out how they are going to meet their targets.

The chart highlights the range of issues that have to be tackled, and the major new opportunities that moving to a circular economy will create. Effectively, we are moving:

  • From a world where even in Europe, only 10% of plastic waste (mainly PET) is actually recycled back into plastic
  • To a world where around half of all of today’s ‘waste plastic’ could be recycled, and a further 30% avoided

This New Normal world will have a major impact on all the key players. Plastics producers face the biggest transformation. 2/3rds of polyethylene (PE), the world’s major plastic, currently goes into single-use plastic. And the market is already facing major over-capacity as my colleague John Richardson has recently highlighted:

  •  The major new US and Chinese capacity is far ahead of any possible increase in demand
  • And so “global operating rates will slip to 79% from the 2000-2022 average of 86%”

The ‘positive news’ (although not from a producer viewpoint), is that closures are therefore inevitable. And once these closures start, and investors begin to ask questions, it will become easier to kickstart the move to recycling.

Until now, producers have been wary of the potential pushback from accepting that single-use plastic packaging is no longer required. And they have hoped that something might “turn up” to make it unnecessary.

But in reality, events have moved in the other direction. Net Zero needs were already meaning that single-use plastic packaging had to disappear. And public concern over marine waste has added to the pressure from legislators to move to a circular economy. Next year’s planned UN Treaty is yet another sign of the direction of travel.

As suggested here last March, Russia’s invasion then dramatically accelerated the need to transition from fossil fuels to renewables, and from single-use plastics to recycled product. In turn, this will create Winners & Losers. Some companies will decide to take advantage of the new opportunity. Others will continue to hope the issue will go away.