A Storm Is Raging over the EU Plastics Packaging Sector

Over the last two weeks, the UK government and the European Commission both presented their respective strategies for dealing with the growing challenge of plastic packaging waste. The proposed legislation will have far-reaching implications for the plastic packaging industry, but will also affect producers of glass, metal, and paper-based packaging as they eye opportunities to acquire market share from plastic packaging. What are the implications for EU-based plastic packaging producers, and how might they respond to these new developments?

photo of packaged bell peppe

The new legislative initiatives in a nutshell

On 16 January 2018, the EC published its long-awaited ‘A European Strategy for Plastics in a Circular Economy Background’, as part of its Circular Economy Package (‘The EU Action Plan for the Circular Economy’), which was adopted in December 2015. A few days earlier, on 12 January 2018, the UK published its 25-Year Environmental Plan (‘A Green Future: Our 25 Year Plan to Improve the Environment’), which includes a broad range of initiatives and measures to make the UK more sustainable post-Brexit and in the long term—it also includes specific ambitions related to plastics packaging.

While the UK’s strategy aims to achieve “zero percent avoidable plastic packaging waste” by 2042, the EC focuses on ensuring that, by 2030, 100% of plastic packaging is either recycled/recyclable or re-used. Although there many differences, in a nutshell, both strategies support the creation of more efficient plastic waste collection, sorting, and recycling industries in order to increase the levels of (high-quality) recycled material in the production of plastics packaging, and aim to support developments in alternatives, such as bio-based plastics. They also both focus on further reducing the use of single-use plastic bags. Finally, both initiatives will investigate the feasibility of introducing fiscal measures on plastic packaging—the EC even suggests (not part of the strategy document) that such a tax should be spent to cover part of the financial gap from Brexit.

What is driving these initiatives?

Changes in demographics and consumer behaviour lead to a constantly growing demand for plastic packaging. In 2017, EU consumers combined used an estimated 422 billion plastic packaging units (an increase of 76 billion units in about 10 years), of which 26% were bags/sachets and 17% were PET bottles. In the same period, the use of plastic packaging in the UK increased from 56 billion units to around 71 billion units. This led to an increase of more than 100 units in the annual per capita use of plastic packaging, while the EU use only increased by 12 units per capita. As of 2017, growth numbers in the UK and the EU are estimated to increase in tandem at about 10 units per capita per year (see Figure 1). This trend of per-capita use growing steadily is one of the major concerns for legislators, and also one of the reasons for the UK’s proposal to ‘work towards plastic-free aisles’ in supermarkets.

Figure 1: Per capita use of primary plastic packaging in the EU vs the UK, selected years (# units)

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Source: RaboResearch 2018, based on GlobalData and Eurostat

Another major concern is related to the post-use of, in particular, single-use plastic packaging. Consumers all over the world are familiar with the ‘plastic soup’ and all the negative effects that a lack of proper collection and recycling/re-use of (plastic) packaging has on the environment. This is not only a problem in developing countries. Countries in the EU are struggling to recycle plastic packaging for example due to a lack of sufficient sorting and treatment facilities and the complexities related to sorting plastics—there is a plethora of compositions of polymers with different characteristics. These cannot all be identified and often do not mix well (or at all) during the recycling process. In addition, not all polymers can be recycled using the current technology—multi-layer plastic films, for example, which are increasingly popular due to their flexibility and excellent barrier properties in increasing the shelf life of food products, can’t.

As a result, the ambition of both the UK and the EU is to increase the recovery/re-use and recycling rates of plastic packaging. Although both the UK and the EU as a whole have realised steadily growing recovery rates (recycling and incineration), the UK has only recently realised a steep increase and lags behind the EU total (see Figure 2). Both strategies include numerous qualitative proposals to address this challenge, and in addition, the EU has proposed a recycling rate of at least 55% of plastic packaging by 2030 (40% was recycled in 2015).

Figure 2: Developments in plastic packaging recovery in the EU vs the UK

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Source: RaboResearch 2018, based on Eurostat

How will the plastics packaging industry respond?

The recent legislative proposals, in combination with the surge in retailers, and beverage and food companies that have announced their own stricter and ‘more sustainable’ (plastic) packaging strategies, means that the pressure is increasing for the plastic packaging industry. The industry will face a growing degree of competition from alternative materials, which means innovation will become even more crucial than it is today. Innovation includes increasing the recycled content, improving recyclability (e.g. through markers or mono-polymer products for easier sorting), or developing new materials (e.g. bio-based or biodegradable).

In our view, there is no threat in the short term that all plastic packaging will be eliminated or substituted overnight. It simply isn’t possible, as the potential for substitution, or avoidance of packaging, depends on the type of product being packaged, the consumption moment, the availability of viable alternatives, costs, logistics, offtaker and consumer preferences, and so on. There is also no evidence yet in overall consumption figures of drastic falls in demand. In order to face the medium and long-term challenges, however, the plastic packaging industry will need to make investments to stay ahead of competition and offer solutions in line with changing market expectations. This pressure to innovate will most likely force cooperation between players along the whole supply chain – as intended in both the proposal of the EU and the UK. This might also well be driving investment decisions to, for example, acquire companies with niche technologies or specific knowledge, or drive companies to merge in order to create sufficient scale for research into, and development of, more sustainable products.

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