- Plastics play an important role in our everyday lives, yet poor management of plastic waste, particularly low-value packaging, poses serious environmental and health risks
- Companies are increasingly focusing their efforts on reducing usage of plastic packaging and sourcing recyclable materials in their products
- We have a critical role as asset owners to increase awareness of plastic waste among companies and regulatory organisations through engagement and proxy voting to help contribute to long-term solutions
The Ubiquity of Plastic
Plastic surrounds us in our everyday lives from drinks bottles and carrier bags to CD covers and children’s toys. A typical modern car is made up of around 50% of plastics by volume.
While plastic has many benefits in terms of cost, durability and efficiency, the sheer volume of plastic products and poor management of plastic waste pose serious environmental and social risks.
Globally, 95% of the value of plastic packaging is lost after first use, costing $80 to $120 billion each year (Exhibit 1). The Ellen MacArthur Foundation estimates that without profound changes in the way plastic waste is managed, about 30% of plastic packaging will never be reused or recycled.
However, we should not be overly pessimistic. Most plastic waste comes from low-value consumer products that only constitute around 10% of global plastic production. The remainder goes into high value, durable products. So the solution is not to eliminate all plastics, but to encourage companies to focus on recyclability and collection.
Plastic packaging waste is a particularly serious issue. While cheap plastic packaging has greatly increased access to affordable food, beverages and personal care products, plastic waste has poses increasingly serious environmental risks.
Many companies have made efforts to recycle more of their plastic packaging, which is a positive step. However, efficiently recycling packaging materials can often be challenging due to poor consumer compliance, limited recycling infrastructure in many markets and the current low pricing of recycled goods, which makes recycling costlier for stretched public budgets. According to an Ellen MacArthur Foundation report, globally, only about 14% of plastic packaging is collected for recycling, and more than 75% ends up as litter or in a landfill.
Consumer Giants Leading By Example
At ClearBridge, we continually engage with companies on these issues. Here are some examples of how some of the largest companies in the world are tacking the plastic pollution head on:
Last year, we invited Coca-Cola to present in front of a large group of investors, where it discussed its packaging plans and ideas to mitigate the impact of packaging waste. The company is increasing the proportion of packages which are 100% recyclable and has taken several steps to reduce the impact of packaging waste and increase recycling and reuse.
This includes working with local communities and organisations to encourage consumer recycling compliance, investing in recycling infrastructure in markets where such infrastructure is limited, and redesigning packaging to include more plant-based materials and using less plastic per bottle to reduce the overall carbon impact of the packaging process.
These efforts have are having a big impact. In South Africa, for example, Coke’s awareness campaign has helped boost recycling rates from less than 10% in 2000 to 55% in 2016.
Unilever, the British and Dutch consumer goods company is also leading the way in the sustainable use of plastics, committing to 100% of its packaging material being fully recyclable, reusable, or compostable by 2025. Unilever has also committed to increasing the proportion of recycled plastic content in its own packaging to 25% by 2025.
Such initiatives increase demand for recycled plastic, which will help support recycled plastic prices and make the economics of recycling more attractive. Unilever is also building support for more systemic changes across the entire industry, including a Global Plastics Protocol which would simplify the recycling process by enabling coordination among industry participants over what materials go into packaging.
Amazon.com, the world’s largest internet retailer by revenue and market capitalisation, has been reducing its reliance on hard plastic, plastic ties and plastic wrap for e-commerce shipments with its Frustration-Free Packaging program. Amazon uses 100% recyclable packaging materials and estimates it has eliminated 215,000 tons of packaging material and 360 million shipping boxes in the program’s 10 years. The company also partners with manufacturers globally to reduce packaging waste across its supply chain.
Other companies we hold in our portfolios are taking innovative approaches to increasing the lifecycle of plastic in the products they develop, which eliminates the need for new plastic production (Exhibit 2):
• Nike is taking a unique approach to plastic waste by recycling it into yarns for athletic apparel. Polyester accounts for 92% of historical plastic production and Nike is the largest user of recycled polyester in the industry, converting plastic drinking bottles into pellets and yarns to make its Fast Fit Vaporknit line of soccer kits worn by most World Cup teams. These kits deliver a high level of performance with a lower impact on the environment. Since 2012, Nike has reused over 5 billion plastic water bottles for its footwear and apparel.
• US furniture producer, Herman Miller has long considered the environmental impact of its sourcing and production process. The company plans to use sustainable materials and then construct products to be almost fully recyclable.
• Trex is the leading manufacturer of composite decking made from recycled wood, plastic film and disposable plastic bags. The company is also one of the largest recyclers of plastic in the U.S., a position that grows in importance as China stops accepting scrap plastics.
Obstacles on the Road to Sustainable Plastic Management
Despite encouraging progress, and the best efforts of corporations, municipalities and governments, most plastic waste continues to be burned, buried, dumped across landfills or leaked into oceans. Eight million tons of plastic enter the world’s oceans every year, adding to the estimated 5.2 trillion pieces of plastic floating in debris patches on the ocean surface, according to the non-profit 5 Gyres Institute.
Even worse is when sunlight and wave action breaks down larger plastic debris into microplastics – rice-sized bits that have turned the world’s oceans into a “plastic soup”. In a 2015 study, the number of these particles in the world’s oceans was estimated to be between 15 to 51 trillion pieces. Some 700 species now mistakenly eat plastic, and approximately 100 species of fish – many of which are consumed by humans.
Technology will be critical to reducing plastic packaging. Any new packaging formats and materials need to be able to match the existing formats in terms of shelf life otherwise additional food waste is created. This is another serious global problem that contributes 5% of global greenhouse emissions and results in an annual financial, social and environmental cost of $2.6 trillion, according to Bank of America Merrill Lynch.
Plastic alternatives also need to be affordable. Berry Global has developed biodegradable cups made of a material called versalite, but their higher cost means consumer products companies have less incentive to switch. We believe continued engagement with companies in the sector will help encourage them to invest more of their R&D budgets into this area and come up with cost-competitive, more environmentally friendly packaging options.
Sometimes the sustainable disposal of plastic waste is not possible. During an engagement with medical products supplier Becton Dickinson, we discussed the manufacture and one-time use of its plastic needles. Like other companies in the healthcare sector, it is prohibited from recycling such products due to the medical risk of contamination. However, Becton Dickinson had discussed with us how it is optimising packaging, removing plastics from its products without trading off form and function, and looking for petrochemical alternatives for resins.
Credit and debit cards are made of PVC, a plastic polymer that is a known carcinogen, making them difficult to recycle and dangerous to incinerate, creating security concerns around recycling without shredding. According to the International Card Manufacturing Association, there were 35.4 billion chip cards produced globally in 2016, with the majority being produced for the Asia-Pacific region.
We Have a Part to Play
ClearBridge can promote responsible management of plastic waste through company engagements and proxy voting. We have been encouraged by efforts of organisations like ‘As You Sow’ that are raising the visibility of plastic pollution issues. For example, in 2017, ClearBridge voted its proxies in favour of proposals by shareholders of Mondeléz International and Starbucks to acknowledge the environmental impacts of non-recyclable packaging and scale up efforts to develop sustainable alternatives.
Starbucks responded in early July by announcing it plans to phase out single-use plastic straws from its more than 28,000 company-operated and licensed stores by 2020. The coffee chain will switch to a strawless lid or alternative-material straw in place of plastic straws. Starbucks has already designed and developed a strawless lid it expects to become standard for its iced coffee, tea and espresso beverages.
We are partnering with our portfolio companies to increase awareness of plastic waste and discuss effective solutions. Nevertheless, meaningful progress will require broad public-private partnerships.
Through global collaboration, reducing plastic waste can also make strides toward fulfilling several United Nations Sustainable Development Goals: Good Health and Well-being (SDG 3), Sustainable Cities and Communities (SDG 11), Responsible Consumption and Production (SDG 12), Life Below Water (SDG 14) and Life on Land (SDG 15):
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