While it’s a bit too early to tell direct impact on long-term sustainability goals, it’s worthwhile to examine what is happening in the markets that impact goal strategies and how retailers can take this time to identify areas of risk and opportunity. We sat down with Catherine Sheehy, global lead of sustainability partnerships at UL’s environment and sustainability group to ask a few questions about the recycling industry and how disruption is affecting waste diversion sustainability goals. She provided insights into how retailers can examine their supply chains and ensure waste strategies contribute to long-term resilience.
How much do we know about how bad the recycling markets are going to get?
There are challenges in the waste diversion and recycling marketplace overall, but there is reason to feel more positive about the future of recycling than the news cycle might make us feel.
First, there is no doubt that the recycling and waste diversion ecosystem is suffering the compound effects of the recent pandemic on top of the market disruption from China’s import ban on contaminated recyclables that began in 2018. The markets for certain materials dried up when China implemented import restrictions, which meant that the costs to retailers to recycle materials like glass, and certain plastics and fiber grades increased, in many cases becoming an overall cost center versus the revenue generator it once was. Regarding recycled content commitments, even before the pandemic, the cost of recycled plastic soared above virgin plastic when demand for quality recycled content exceeded supply – at a cost of an extra $72 a metric ton compared with virgin plastic as of October 2019.
Once the pandemic hit, the markets were disrupted in different ways – with commercial waste sources declining steeply and residential waste streams increasing, the quality of recycled content collected declined. At the same time, some materials recycling facilities (MRFs) were forced to reduce operations to align with distancing guidelines, and some states temporarily suspended proposed extended producer responsibility legislation or bottle and glass redemption programs – all further limiting the supply of quality recyclate and exacerbating this demand / supply curve challenge that emerged in 2019.
Still, the issues with plastic pollution and overall waste that inspired many corporate commitments to landfill waste reduction and to incorporate recycled content in product and packaging have not gone away, and there is evidence that the markets are prepping to resume progress to solve for problems in the recycling systems. Here are three signs of that change:
1) The waste / recycling industry is cautiously optimistic.Q1 2020 reports from publicly-traded waste companies indicate that they experienced volume declines in all areas of business except residential – which increased in the same period. Yet, all of these companies expressed some optimism as commercial and industrial service levels begin to improve as the markets open. This by itself will not address the rising costs to recycle that we saw in 2019, but it is a fundamental precursor to market stabilization.
We have seen some temporary holds on use of reusables, and a resurgence in the use of single-use plastics. Nonetheless, while we are living through an unfamiliar reality and future uncertainties, we have not seen and do not anticipate mass rescaling of commitments to waste diversion or recycled content goals. Many companies recognize that the imperatives that drove them to make their previous commitments are still there. At the same time, there is increasing recognition that stakeholders across the value chain need to work together to solve for these issues, which has resulted in growth in membership in organizations such as the Ellen MacArthur Foundation (founder of the New Plastics Economy) and The Alliance to End Plastic Waste.
2) Most companies are maintaining their established goals.
3) Investment in commitments continues.While some of the implementation efforts launched in 2019 were paused or are moving forward at a slower pace, about $4.2 billion in new investments in mechanical and advanced (chemical) recycling has been made since 2017 – and some of those new services are coming online this year. For instance, the Closed Loop Partners invested $2 million in Reterra, an advanced recycling (i.e., chemical recycling) company whose objective is to lower the cost of PET recycling by capturing even the smallest discards to create high value product. Similarly, the Alliance to End Plastic Waste approved 14 projects in 2020 to address recycling challenges in France, Ghana, Indonesia, Singapore, Thailand, the U.S. and Vietnam. And new plastic credit offset programs such as PlasticBank are emerging to help organizations offset plastic use by supporting plastic collection infrastructure and rewards, reducing plastic pollution and poverty around the world.
At the same time, the risk of greenwashing around recycled content claims that rose when the supply / demand curves moved in opposite directions in 2019 is actually encouraging some organizations to double down on commitments – and establish requirements for validation of recycled content. For example, the Association of Plastic Recyclers launched its APR Postconsumer Resin (PCR) certification program in 2020, endorsing companies that provide third-party certification of PCR and promoting APR member companies that receive certification. UL is one of three endorsed third-party certifiers. The APR certification program is a companion to its demand champion program, through which organizations make commitments purchase post-consumer recycled (PCR) content products and expand their current use of PCR.
Looking at the typical structure of a retailer’s operational waste diversion goal(s), where are the biggest areas of risk? And are there any non-market related increased risk areas also being exacerbated by COVID?
The recycling challenges that preceded the pandemic as noted above are still present for retailers who are trying to meet waste diversion requirements, amplified now in an increasingly cost sensitive market. Until such time that the infrastructure investment and market pricing drivers align, certain materials like glass and mixed plastic will continue to be challenging for retailers to recycle (in certain markets) from a cost perspective. Finding ways to eliminate certain wastes altogether, establishing and tracking donations, and increasing reuse of items like shipping containers and hangers as safe and appropriate for the circumstances may help retailers weather certain market fluctuations. At the same time, evaluating and reestablishing vendor contracts, and considering on-demand service providers where relevant to operations may help retailers better the balance between costs and waste reduction commitments.
From the perspective of product and packaging recycled content, shifts in material flows away from commercial settings to residential settings, combined with all of the challenges noted above, have decreased recycling rates and impacted the amount of recycled content available for production of new products. As a consequence, there could be potential impacts on the ability to meet recycled content packaging goals, but these might be offset by levers such as dematerialization goals, eliminating the use of certain materials altogether, or evaluating plastic credit programs for potential integration into a portfolio of interventions. This crisis, in fact, might enable retailers and their suppliers to identify and eliminate excess packaging at the source, before they become waste.
Regarding non-market related risks, increased used of personal protective equipment and single-use plastics generated or brought onsite and misunderstanding about proper disposal may exacerbate material management issues in the short term. Repetitive messaging and education to promote the right behaviors will help mitigate these risks.
What if a retailer thinks they need to adjust their goal? Is there any insight into whether consumers would be more upset by an altered goal (and altered in what way?) or a missed goal (but with lots of transparency about what happened)?
Even before the pandemic, we heard from companies fearful of missing stated sustainability goals. In fact, according to a 2017 report by the consultancy SustainAbility, the top reason companies do not set ambitious goals is the possibility that they might fail to achieve them – and experience negative repercussions for failing to meet these targets as a result.
UL’s experience comports with SustainAbility’s research: there is little evidence of negative financial impacts from companies failing to achieve sustainability goals. In fact, in several cases, SustainAbility found that being candid about why goals were missed and what would be done to course correct going forward helped stakeholders better understand the context for missed goals and built credibility and trust.
Finally, despite the challenges of these times, there is one single advantage today for retailers who think there may be significant disconnects between 2020 goals as a result of the current pandemic: they are not alone. Humanity’s shared experiences create a platform for understanding and empathy that may be unique to this time. Helping customers and other stakeholders understand what aspects of the pandemic influenced reported outcomes and how the company plans to move forward – and how it will treat 2020 results in the context of its overall program aspirations in this Decade of Action – is precisely the kind of transparency and authenticity customers seek.
Interested in learning more about this topic?
Contact Catherine Sheehy, global lead of sustainability partnerships, to learn more about UL’s work on waste and sustainability
Interested in learning more about RILA’s Sustainability or Zero Waste work?
Contact Erin Hiatt, Sr. Director of Sustainability & Innovation.
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