With only 16% of global plastics recycled, society is under pressure to address plastic waste. Our Research analysts believe Polyethylene Terephthalate (PET) bottles are here to stay, though significant investment is required in its waste management. Consumer Deposit Schemes and emerging recycling technology could support the transition to a circular economy for PET.
The plastics industry is undergoing a revolution as it seeks to address the c160mn metric tonnes of plastic waste which leaks into the natural environment or ends up in landfill each year, representing more than 55% of the total plastic waste produced. We view PET plastic packaging — and in particular beverage bottles — as pivotal to this issue: it constitutes more than 10% of plastic waste. However, since PET bottles provide significant advantages (weight, durability and versatility) over alternative materials, it is likely they are here to stay, unlike other single-use plastics which have been subject to widespread bans.
Heightened consumer awareness is forcing companies and governments to set ambitious recycling targets, but PET waste management will have to adapt in order for these targets to be met. To boost low collection rates and poor PET recycling yields, our analysts see a Consumer Deposit Scheme as the policy instrument of choice, further supported by emerging technology.
We believe Consumer Deposit Schemes and emerging technology will support the transition to a circular economy.
Unwrapping the PET issue
The PET packaging industry is currently worth over $50bn (4% CAGR)
With 160mn tonnes of plastic waste leaching into the environment each year, plastic bottles have come to symbolise environmental damage for consumers.
Out of all the plastic, PET is pivotal to the issue, as it constitutes >10% of plastic waste.
Recycling is the way forward
With every tonne of PET that is recycled and not sent to landfill, 1,705kg of CO2 is saved. However, recycling rates are low when compared to ambitious targets set by companies and regulators.
However PET recycling rates must increase
Despite the preference for recycling PET, it is unlikely to yield 100% rPET due to the three key pressure points in the waste management chain.
Tackling PET plastic waste
Consumer Deposit Schemes
A Consumer Deposit Scheme is a policy tool that is being considered by the UK government. They are popular as they help boost collection rates of plastic waste and reduce the contamination of waste, which in turn improves recycling rates.
Innovative chemical and biological recycling technologies can be used to boost yield and extract value from plastic waste which would otherwise go to landfill or be incinerated. This technology will complement the improvements to recycling rates resulting from the use of Consumer Deposit Schemes.
Consumers, companies and regulators are pursuing the plastic waste agenda
The plastic revolution was initially consumer led, after documentaries such as ‘Blue Planet’ (BBC), highlighted the extent of environmental damage caused by plastic waste. These consumer concerns over plastic encouraged companies to set ambitious targets in respect of including substantial amounts of recycled contents in their bottles. For example, Coca-Cola has pledged to include 50% recycled material in their bottles by 2030. Meanwhile regulators are mandating minimum recycled PET content in bottles: the EU will require 30% minimum rPET content in bottles by 2030. Consumer Deposit Schemes and emerging technology will be critical to help companies meet these ambitious targets.
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About the analysts
Katy Ogundiya is a member of the Sustainable & Thematic Investing team within Equity Research at Barclays. She joined the team in August 2018, following completion of the Compliance graduate scheme at Barclays. Katy read Law at the London School of Economics.
Hiral Patel is the Head of Sustainable & Thematic Investing, Equity Research. Hiral joined the team in June 2018 following five years covering the European Technology, Payments and FinTech sector. Prior to that, Hiral qualified as a Chartered Accountant with KPMG where she worked in Audit covering Financial Services. Hiral graduated from the University of Warwick with a degree in Economics, Politics and International Studies.