INSIGHT: Sustainability and recycling set to dominate 2021 agenda

LONDON (ICIS)–The events of this year may have been unpredictable but 2021 offers no improved certainty given the continuing effects of the coronavirus pandemic and onset of a global economic downturn.

Sustainability may have slipped in the focus, if not agenda, of consumers to corporates alike due to other priorities, but it is set to return with fervour next year.

There had been an expectation that demand from the packaging sector would grow sharply in 2020 from recycled high density polyethylene (R-HDPE) and recycled polypropylene (R-PP) amid the growing focus on sustainability, but much of this growth was curtailed by the impact of coronavirus.

Backlogs at testing facilities, concerns about entering new supply chains amid the pandemic, and workforce and financial pressures led firms to concentrate on core products.

With ambitious recycling targets from Fast Moving Consumer Goods (FMCGs) and brands for 2025, a current shortage of available recycled material suitable for primary packaging use – particularly food grade – across polymers investment, as well as project delays, are likely to make sustainability goals more difficult to reach, increasing competition for material.

The recycling supply chain and end users are all looking to press restart on goals set at the beginning of 2020, pushing onward projects for capacity, technology and solutions that will progress greater sustainability in plastic products and packaging.

Although some projects began coming on-stream in the second-half of the year, these have typically been from the non-packaging sector, with most of the packaging sector’s delayed projects expected to come on-stream in 2021.

In the second half of 2020, several global beverage brands made pledges to use 100% recycled polyethylene terephthalate (R-PET) across certain product lines in certain EU countries from 2021 onwards, welcome news to the R-PET market.

Even if overall beverage bottle demand is impacted by further lockdowns or travel restrictions, the volume of recycled content going into these bottles should increase, improving demand for food-grade R-PET next year.

This will not be without challenges, especially as financing at national government levels will be unavailable so no investment in the waste management system can be expected and industry may potentially find itself contributing more to costs in this area.

With steps to bulwark against the coronavirus pandemic having depleted public finances it is likely that governments around the world will look to measures to recoup lost funds in the coming years.

‘Social taxes’ such as those on plastics, and revenue-raising measures like Extended Producer Responsibility (EPR) schemes that can generate public support, may well be seen as a more favourable way to achieve this than regressive taxes such as VAT rises.

In Europe, the challenge is heightened by European Food Safety Authority (EFSA) requirements that 95% of material used in food-contact approved recycled material must have originated from a food contact source.

For recycled polyethylene terephthalate (R-PET) this is relatively easy to ensure since the bulk of collected material is from post-consumer drinks bottles.

For other polymers where end-use sources are varied and typically collected in a single input stream, it is an intense challenge and barrier to market growth.

The only currently available source of post-consumer food-grade recycled polyolefins (R-PO) currently available in the market is limited to the UK R-HDPE market where used milk bottles create a separable and easily identifiable source of input material, but there is a hard limit to this of around 100,000 tonnes/year of used milk bottles entering the waste system. Milk bottles in the majority of the rest of Europe are manufactured from PET.

There is also some food-grade mechanically recycled polyolefins currently available from post-industrial secondary packaging sources from the meat and agriculture sector, but volumes remain minimal and there is a limited ability to scale up.

As a result, many players do not expect industrial scale food-grade R-PO to be available until chemical recycling reaches maturity.

The growth in demand for more recycled material in packaging could lead to issues around raw material availability, which may increasingly become a bottleneck in 2021.

ICIS data show collection rates for post-consumer PET in Europe are still too low to meet industry needs, and would be even lower for the R-PO market. Only with improvements in collection and sorting would the packaging industry be able to find enough recycled material to meet its growing needs.

However, the brands and FMCGs are one year closer to targets set under EU regulation as well as their own individual pledges and as such, moving forward in achieving those goals is crucial.

2021 offers as many challenges as it does opportunities for the recycling sector.  With the pandemic hanging heavy over global markets, there is much uncertainty around consumption patterns, economic downturn, the impact of national pandemic recovery packages and most significantly the developments in legislation.

Yet the resurgence in focus on sustainability by both consumer and FMCGs will be the motivation for the supply chain to strive for improved volumes and quality of recycled material to fulfil those ambitions.

Collaboration across the supply chain has reaped rewards in progressing towards achieving goals but also contributing to greater circularity of resources, and strategies that will certainly be built upon into 2021.

Insight by ICIS analyst Helen McGeough

Additional reporting by Mark Victory and Matt Tudball

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