By Mark Porter, Global Head of Bain & Company’s Chemicals Practice and Raja Atoui, Partner, Bain & Company
As attention has focused on the problem of plastic pollution in the environment, governments and the private sector have taken steps to promote recycling and reduce plastic waste. These measures include phasing out certain single-use plastics and setting specific goals on plastics recycling. Targets vary by region. But countries in the Middle East are taking significant action towards reducing plastic consumption. For example, in the United Arab Emirates, the government has banned single-use plastic bags to encourage utilizing reusable products.
In the region’s private sector, companies that make and use plastics are making new commitments to expand the use of recycled and bio-based plastics, reducing the amount of plastic used, and increasing recycling through better design and new investments in infrastructure. There are also many new recycling initiatives and partnerships, along with innovations in new plastic types such as low-carbon plastics made from biomaterials.
Our clients tell us they understand that more needs to be done to improve the sustainability and circularity of plastic products, that is, the ability to put materials back into the supply chain, rather than depositing them as waste. In many cases, improving plastic circularity will also reduce emissions, making it essential for delivering on the industry’s decarbonization goals and ensuring the license to operate among growing concerns about plastic waste.
Plastic producers and users know that if concerns aren’t addressed, they risk facing more stringent regulation and more pressure from customers.
Circularity efforts fall short
There’s a lot of activity underway on recycling and circularity, but it’s still not enough to provide the amount of recycled material that the industry will need. Our recycling scenarios, based on current industry efforts and trajectories, suggest that by 2030, between 50 million and 70 million metric tons of plastics will be recycled annually, or 10% to 14% of total plastic consumption, well below the global targets set by companies and governments.
This misalignment between what companies want to buy and what will be available could inflate prices for recycled plastics, as competition heats up for the limited supply. Also, as the feedstock required for producing recycled plastics becomes bottlenecked, plastics producers will need to secure supplies to remain competitive as the market scales. These dynamics add to the uncertainty of the prospects for recycled plastics growth and will hinder investment.
Accelerating plastics circularity
As we talk with our clients, we’re seeing three types of actions aimed at accelerating the momentum behind plastics recycling.
- Innovation and new technology. One reason that recycling rates are so low is that the technologies involved aren’t well-developed. Recycling rates are higher in categories where technology, infrastructure, and public and consumer engagement are more mature. Scaling up recycling also comes with challenges, though, as it gets increasingly difficult and costly to increase collection rates while also capturing smaller and less-efficient volumes of used plastic.
Most plastic recycling today is mechanical processing the material but keeping the molecule intact. Chemical processing, changing the chemical structure of polymeric waste, can recycle more plastic. But chemical recycling remains mostly at R&D levels (1 kiloton or less) or pilot-program scale (10 to 30 kilotons), focused mostly on polyolefins. Pilots help overcome technical challenges, demonstrate scalability and commercial viability, and provide experience that improves process stability and yield. We expect some of these efforts to scale to commercial levels over the next five years.
Recycling advances aren’t limited to technology, but also extend to collection, sorting, and processing to improve the quality of waste streams—a necessary step to boost recycling rates. Some companies are building up these capabilities. Several material innovations have also been pushed by resin producers to improve circularity, which is now being adopted by plastic converters.
- Partnerships and new business models. Scale, sustainable solutions will require partnerships that ensure a steady supply of renewable materials and a market for recycled materials. Supply chain partnerships can help ensure a consistent flow of renewable inputs, which is essential to develop a market. These partnerships need to extend beyond the local initiatives that have emerged in some regions. Plastic users are also forming partnerships.
Offtake agreements are critical to ensure demand for recycled materials as production scales up. These agreements, which ensure delivery of the recycled materials produced, give producers a runway to gain experience, become more efficient, and reduce costs. We typically find that early offtake agreements are with customers willing to pay a premium for better ESG performance, whether because of individual commitments or local regulations.
- Legislation and standards. Plastic producers, recyclers, and consumers will need to work together to build support for change. They’ll need to develop better policies for collecting and managing plastic waste, supported by better consumer education and behavior on waste sorting. They’ll need to encourage investments and funding for new technologies. They’ll need to agree on taxonomy as well as standards.
Support is also developing around the world. In March 2022, the UN agreed to develop a treaty designed to end plastic pollution. Details are still to be ironed out, but the specific resolution is likely to address the full life cycle of plastic, including production, design, and disposal. The outcome, with internationally binding commitments, could be an important step in creating a global environment with investments channeled toward building up recycling infrastructure. Companies and associations, such as the International Council of Chemical Associations, have endorsed the treaty as an important step to address plastic pollution.
Although current efforts aren’t yet at the scale required, plastics recycling, the use of recycled content, and the use of low-carbon plastics are sure to increase. Companies that prepare now to scale up, connect to high-quality waste streams, and ensure a long-term supply of feedstock can put themselves in a stronger position in sustainable plastics.