- A rapid increase in plastic-waste regulations may increase costs and liabilities, or limit market access for companies that are slow to align with them.
- Only half of the containers and packaging industry peer set have set circular economy targets, and many of these companies are not aligned to regulatory targets in key geographies.
- In general, most companies’ guidance lags regulatory targets. For instance, Japan has targeted 60% recycled-content use by 2030 but several Japan-based companies have not disclosed strategies to achieve this target.
The hygienic benefits of masks, gloves and other plastics in combating COVID-19 may have deflected regulatory focus on their environmental risks, and temporarily obscured the impact on business models. However, plastic-waste regulations appear on the verge of an aggressive rebound, which could have an impact on companies and investors.
During the pandemic, many jurisdictions delayed the implementation of previously-enacted bans on single-use plastic products, including the U.K., Portugal, New York state and the Canadian province of Newfoundland. At the extreme end of the spectrum, some regulated markets, such as Massachusetts, went so far as to ban the use of reusable bags outright during the height of the pandemic. Overall, the enactment of new plastics regulations plummeted in 2020 and 2021 (as shown below).1
A pandemic-era decline of global plastic-related regulations
Source: Plastic Pollution Coalition, Duke Nicholas Institute for Environment Policy Solutions, MSCI ESG Research
Call it a comeback
In March 2022, however, 175 countries agreed to establish an enforceable global treaty under the United Nations Environment Assembly to tackle plastic pollution by 2024.2 UN representatives described the deal as the most significant green deal since the 2015 Paris Climate Accords.3
The U.S., which supported the UN treaty,4 has lagged other developed markets such as the U.K., EU and Japan in implementing plastic regulations.5 More than half of the containers and packaging industry constituents of the MSCI ACWI Investable Market Index (IMI) generated at least 20% of their 2020 revenues in the U.S. Thus, many companies in this industry could be impacted if U.S. plastic waste-related legislation passed. New regulations targeted at plastic packaging may lead to producers bearing liability for end-of-life product management, meeting design requirements such as recycled plastic content or product recyclability and eliminating hazardous and difficult-to-recycle plastic materials.
Most packaging companies behind regulatory targets
The various laws drafted to help countries push markets towards waste reduction and circular economy (reusing, recycling and recirculating recycled content) targets may result in repercussions for the packaging market, in particular. An example would be a U.K. plastic-packaging tax that went live on April 1, 2022, that imposes a tax of GPB 200 per ton on manufacturers and importers of specific plastic-packaging products containing less than 30% recycled plastic.6
Yet, companies’ use of post-consumer recycled (PCR) plastic has remained low. Among the containers and packaging industry constituents of the MSCI ACWI IMI with 20% or more revenues from plastic products, only Groupe Guillin SA had PCR plastic that made up more than 10% of its material use. In fact, only seven of the 20 constituents that met this criteria have even set time-bound, targeted commitments to increase the use of recycled plastic in their products. And the targets set by four of these companies were not aggressive enough to align with the proposed goals of their highest-revenue markets. We illustrate the targets for recycled plastic content use disclosed by companies, a comparison against regulations and the percentage of revenues from the various geographies below.
Recycled plastic content use: Targets, regulations and revenues
Includes companies with at least 20% of revenue from plastic products and 40% or more estimated revenue from the indicated geographies. Feb. 18, 2022. Source: MSCI ESG Research
Circular economy: Potential opportunities
The acceleration of global regulations targeting plastic-packaging waste may increase risks for the plastic-packaging producers. These risks could range from taxes on product sales to financial liabilities, as well as market-share losses for companies that cannot meet requirements. However, the regulatory pressure may also offer opportunities for companies that are well positioned for a circular economy transition. Other alternative packaging materials with higher rates of recycling such as aluminum, glass, and paper may gain higher market share as stakeholder pressure push companies towards recyclable packaging made of recycled content. When paper does not enter waste management streams, such as recycling or landfills, it should biodegrade within a couple of months (versus hundreds or even a thousand years for plastics). Recycling plays a large role in the circular economy and opportunities may be plentiful as demand for post-consumer recycled material grows.
1Silver, Anna L. Patrício, Prata, Joanna C., Walker, Tony R., Campos, Diana, Duarte, Armando C., Soares, Amadeu M.V.M., Barcelò, Damià, and Rocha-Santos, Theresa.2020. “Rethinking and Optimising Plastic Waste Management under COVID-19 Pandemic: Policy Solutions based on Redesign and Reduction of Single-use Plastics and Personal Protective Equipment.” The Science of the Total Environment; 742; 140565.
2UN News. “Nations sign up to end global scourge of plastic pollution.” March 2, 2022.
3Brock, Joe, and Geddie, John. Reuters. “Biggest green deal since Paris’: UN to approve plastic treaty roadmap.” March 2, 2022.
4Wheeler, Perry.2021. “United States announces support for global treaty to tackle plastic pollution.” Greenpeace, November 18, 2021.
5Seo, Hannah.2021. “The US falls behind most of the world in plastic pollution legislation.” Environmental Health News, October 4, 2021.
6Government of the U.K., “Introduction of Plastic Packaging Tax from April 2022.” July 20, 2021.