Circular economy setback
Covid-19 pandemic and low oil prices shrink the recycled plastic supply chain and undermine the circular economy in Asia and beyond.
Prior to the emergence of the novel coronavirus outbreak, the recycled plastics industry had been making significant progress in its journey to end plastic waste. It was seeing positive results from high consumer and regulatory pressure on brands worldwide to improve their commitments to sustainability.
Private companies, non-profit organisations and non-governmental organisations (NGOs) were all campaigning actively to increase consumer awareness of recycling and sustainability across the value chain.
The message was finally getting through at a basic level, setting the stage for a fundamental shift in public attitudes. For example, consumers began rejecting single-use plastics such as drinking cups, straws and cutlery when they purchased take-away food; some vendors even offered incentives to customers who brought their own cups.
But once the pandemic struck, anything reusable that might have been touched by another person was off the menu once again. People locked down for weeks and reliant on food deliveries watched the plastic pile up in their homes.
The protracted global pandemic has now raised a big question about the level of disruption and negative impact on recyclers, waste management businesses and the overall circular economy. Industry leaders and experts on recycling are pondering how to revive the recycled polymers value chain so that it will be sustainable over the longer term.
According to Independent Commodity Intelligence Service (ICIS), the world's largest petrochemical market information provider, like many industries, recycled plastics has been hit hard by two major factors -- the pandemic and the crude oil price crash.
Undoubtedly, the commitment to sustainability has faltered under pressure. Oil prices that have plunged this year amid low global demand have led to a 30% reduction in the prices of virgin plastic. This has reduced recycled plastic consumption and increased virgin plastic consumption, said Helen McGeough, a senior analyst with ICIS.
"Players across recycled polymers have shifted back to virgin plastic, with lower prices having been a major driver of this shift in consumption, particularly for non-packaging applications," she said at a recent virtual event on recycling and sustainability hosted by ICIS.
The fall in virgin plastic prices has forced recyclers to slash the prices by an average of 21% across the four key resins of polyethylene terephthalate (PET), high-density polyethylene (HDPE), low-density polyethylene (LDPE) and polypropylene (PP).
Although some global brands and retailers have made voluntary pledges to increase the use of recycled contents and materials, they have been distracted by the spike in demand for packaged foods and plentiful supply of lower-priced virgin polymer.
The question is how quickly they will return to the use of recycled feedstocks, said Ms McGeough.
Over 400 million tonnes of plastic are produced each year. Packaging accounts for one third of that total and most of it is single-use plastic. The scale of the problem is massive as 40% of global plastic waste ends up in the environment.
An estimated 5.25 billion pieces of plastic are floating today in the world's oceans. Of the total, 40% is accumulating in the Pacific Ocean. The size of the Great Pacific garbage patch is as large as 1.6 million square kilometres.
And according to a report by the World Wildlife Fund (WWF), China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam together contributed as much as 60% of the roughly 8 million tonnes of plastic that enters the world's oceans each year.
Because it is not easy to replace virgin plastics with recycled materials, it is important for the industry to learn about "eco-conception", regarded as the key factor to help close the loop through waste management.
The closer waste separation is to the source, the higher its quality and therefore its value. However, as more and more actors become involved in the collection chain, the less efficient the system becomes, and the more precarious conditions become for the workers involved. Without a significant quantity of homogeneous wastes, a recycling loop is not economically viable.
To increase the value chain of the waste, an efficient collection system is essential. The will to replace virgin material with recycled material is also a must.
Research and innovation in recycled plastic formulation and production processes is also needed to ensure that the recycled plastic is of good quality, particularly packaging for food and fast-moving consumer goods (FMCG), said Thirach Rungruangkanokkul, executive director of the Agriculture and Food Marketing Association for Asia and the Pacific (AFMA).
A circular economy is a regenerative system in which resource inputs and waste, emissions and energy leakage are minimised by slowing, closing and narrowing energy and material loops. This can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, recycling and upcycling.
This economic concept can solve natural resource problems and improve the environment and social sustainability in Asia.
Kian Hoe Seah, a committee member of the Malaysian Plastics Manufacturers Association (MPMA), said Covid-19 might have reversed some of the trends seen in recycling markets in the short term. However, it will have served to entrench them further in the long term. Investment and commitment are required for long-term supply to be adequate for industry targets.
His Malaysia-based Heng Hiap Industries is one of the top Southeast Asian plastics recycling companies, processing about 40,000 tonnes of waste per year from both domestic and overseas suppliers, and employing 350 people. As marine pollution is becoming a problem, the company also works with environmentalists to collect and remove plastics from the ocean.
Another challenge facing the industry is that brand commitments to sustainability targets of up to 50% recycled content by 2025 have outpaced the volume of packaging-suitable materials now available in the market.
This has caused a two-tier market to develop between grades suitable for packaging applications -- where the need to meet sustainability targets has typically taken precedence over the competitive price of virgin plastic. This is most clearly seen with recycled polyethylene terephthalate (rPET), where food-grade pellet prices are now almost double those of virgin plastic counterparts, leaving many smaller recycling plants in a precarious position.
Economic incentives and political leadership will be keys to ensuring the development of a sustainable circular industry.
The uncertain global situation, and price competition from virgin materials, together with debts and limited cash flow could cause many small-scale recyclers to go bankrupt. If true circularity of resources is to be achieved, a swift return to support for the supply chain is critical.
Governments and international organisations must take the lead in coming up with consistent policies on extended producer responsibility (EPR) to encourage reuse, buybacks or recycling.
EPR is a policy approach under which producers are given a significant responsibility, financially and physically, for the treatment or disposal of post-consumer products. Assigning such responsibility could, in theory, provide incentives to prevent waste at the source, promote product design for the environment and support the achievement of public recycling and materials management goals.
A carbon credits policy can also help promote saving carbon dioxide equivalent, regarded as a standard unit for counting greenhouse gas (GHG) emissions. Obligations to use recycled materials in new products can also have a positive impact on collection and recycling rates, based on case studies in hundreds of small and medium enterprises and consumer products makers in the European Union.
"Implementation is the key. Talking about commitment in 2030 is a wrong thing and doesn't lead us anywhere. More action, more of a legal framework to support the industry is needed," said Tim Glaz, head of corporate and public affairs at Werner & Mertz, a Germany-based holding company and a major manufacturer of cleaning, care and conservation products for bulk and private consumers.
David Bourge, general manager of circular polymers at Suez -- a global expert in the water and waste sectors -- said plastic pollution in the interim could fall out of sight as end-consumers' primary concern amid the Covid-19 pandemic is the impact on their lives and loved ones.
However, awareness of ethical consumption and changes in people's habits can still help protect the environment and create value in the recycled plastic supply chain and circular economy. Logistics costs should also be improved through closed circular loops such as drop points, in his view.
"Waste management is not only the business of waste management companies. Everybody in the chain has to take a part of the responsibility. It's down to the consumer," he said.
"Recycling is just one way to solve the problem. If you can reuse plastic, if we can avoid using single-use plastic, it will also have a positive impact on waste management and will make the recycling business sustainable."