What is the best way to tackle plastic waste?

Ted Franks

Pengana Capital Group

Whether you love or loathe the organisation, Greenpeace knows how to produce a good campaign video. Personally, I love them, but even for me, its ‘KitKat video’ was quite hard to watch. The organisation's latest offering stars the British Prime Minister and illustrates the huge challenge in reducing plastic waste.

Recycling plastic is difficult

As an Environmental Science undergraduate in the mid-1990s, I wrote my thesis on ways to recycle high-density polyethylene (‘HDPE’) that is used to make laundry detergent bottles. The best we could do back then was recycling the material into toilet and shower cubicles. Depressingly, plastic recycling has hardly advanced since then.

Some countries are better than others of course. But as the Greenpeace video makes clear, even where waste plastic is collected, it is not always recycled.

The petrochemical industry meanwhile still plans for continued growth. But there is now significant momentum behind efforts to reduce plastic use, particularly in packaging. The ‘Global Commitment’ for example, is supported by 118 businesses that produce, use, and recycle large volumes of plastic. In 2019, 65% of these signatories had committed to ensuring that 100% of their plastic packaging is reusable, recyclable, or compostable by 2025. Being recyclable is one thing, being recycled is another. So far only 1.9% of their plastic packaging is composed of recycled material.

New momentum in reducing plastic waste

Makers of virgin fossil plastics should not, in our view, take too much comfort from this slow progress. 56% of those same Global Commitment signatories are now actively involved in recycling pilot projects.

Moreover, regulatory activity is also accelerating. The European Union has policies to reduce the amount of single-use plastic such as bans on plastic straws, cutlery, stirrers etc. In addition, a new plastics tax of €0.80/kg on non-recycled plastic packaging was introduced on 1 January 2021. This regulation is expected to lead to an increase in recycled plastic packaging across the EU. Similar proposals are being mooted in other jurisdictions as well.

Are the ‘solutions’ solving the problem?

The industry is now busy experimenting with different techniques to reduce plastic waste. Some are familiar such as mechanical sorting and recycling. Others, such as chemical recycling, involve returning polymers to their base chemicals before reformulating them into new material. Novel plastic materials are also being explored. Some of these, such as polylactic acid-based polymers (‘PLA’) and polyhydroxyalkanoates (‘PHA’) can be derived from biomass. There are even businesses developing additives that help traditional fossil-based plastics biodegrade in the natural environment. (See, for example, Polymateria.)

Each of these approaches brings different strengths and weaknesses. For all of them, however, a healthy dose of scepticism is advised. This situation is made worse by a lack of clear standards and the complexity of the issues. PLA for example can be manufactured from biomass and is compostable in industrial facilities. However, it takes decades to break down in home composting facilities and like traditional plastics, takes centuries to break down in the ocean. PHA meanwhile is home compostable but is still subject to a heated debate on whether it is marine biodegradable.

Both PLA and PHA can contaminate otherwise recyclable waste streams. For this reason, many are reluctant to embrace them. For example, Tesco has now formally removed PLA from its preferred material list.

WHEB’s approach

Plastic pollution remains a major environmental concern and may pose significant risks to human health. (Among other health impacts, a recent study has suggested microplastics represent a threat to male fertility.) At WHEB we remain intensely interested in potential solutions to this problem. We have researched companies that make bioplastics, as well as compostable plastics and chemical recyclers.

But so far, we are not convinced that any of these offer a sustainable long-term solution to the problem of plastic waste and microplastics in the environment. Instead, through our investment in Smurfit Kappa, we remain committed to recycled cardboard, an inherently biodegradable and compostable material that is also easily recycled. Cardboard is not appropriate for every application, but new design innovations mean that it has become the most popular alternative material for companies committed to reducing plastic waste.

Over 40% of the companies signed up to the Global Commitment have opted to use recycled cardboard in preference to plastic. We continue to research what the other 60% are doing and remain ready to invest in companies where we have conviction in the environmental integrity of the solution and the quality of the business model.

Learn more

Read more about Pengana’s WHEB Sustainable Impact Fund, or watch our recent webinar on the charge of impact investing HERE. CPD Points are available for Australian Financial Planners. 

Pengana Capital Limited (ABN 30 103 800 568, AFSL 226566) is the issuer of units in the Pengana WHEB Sustainable Impact Fund (ARSN 121 915 526). A product disclosure statement for this fund is available and can be obtained from our distribution team. A person should consider the product disclosure statement carefully and consult with their financial adviser before deciding whether to acquire, or to continue to hold, or making any other decision in respect of, the units in the Fund. This report was prepared by Pengana and does not contain any investment recommendation or investment advice. This report has been prepared without taking account of any person’s objectives, financial situation or needs. Therefore, before acting on any information contained within this report a person should consider the appropriateness of the information, having regard to their objectives, financial situation and needs. Neither Pengana nor its related entities, directors or officers guarantees the performance of, or the repayment of capital or income invested in, the Fund.

Ted Franks
Pengana WHEB Sustainable Impact Fund, Fund Manager
Pengana Capital Group

Ted is the Fund Manager for the Pengana WHEB Sustainable Impact Fund and helped to found WHEB Asset Management in 2009.

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