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Sophie Benson
Unsurprisingly, brands find saying no to such a cheap and versatile material difficult. Even as evidence of the social and environmental dangers of plastic has stacked up (plummeting fertility rates, extensive marine pollution, and the so-called “toxicity debt” to name just a few), and as myriad viable alternatives have emerged, the use of plastic has only increased. Under business-as-usual, we can expect the plastic industry to use a 19% share of the carbon budget by 2040, and by 2060, we can expect global plastic waste to almost triple.
But the clock is ticking on the ‘cheap’ claim because it is increasingly necessary to factor in the costs associated with the continued use of plastic: environmental clean-ups, healthcare, climate-related relocation, and costs to the wider economy. The USD 216 billion that plastic marine debris will cost Asia-Pacific economies in 2050, for instance, will not necessarily be factored into the market price of plastic, but it’s a cost that will be shouldered by many. Far from a bargain.
It’s undeniable that such external costs may not convince those who are focused solely on corporate finances, but more tangible recalculations - which will skew the balance sheets - are on the horizon too. The hike in oil prices has directly impacted the price of plastic, but we know market prices can drop as quickly as they rise. Rather than one single factor driving costs, it’s the convergence of a plethora of external circumstances - from legislation and taxes to legally binding global agreements - which are set to rock plastic’s position as a cheap first-choice material.
The continued use of plastic as the economical choice is a here-and-now decision, but as we unpick its real cost, the need for long-term thinking and pre-emptive shifts in materials and systems will become crystal clear.
An average of 75% of people across 28 countries believe single-use plastic should be banned as soon as possible, and 82% agree they prefer products that use as little plastic packaging as possible. Even at the height of the pandemic, when reuse and refill were often considered risky and demand for single-use plastic increased on many fronts, consumers still altered their shopping habits to avoid plastic packaging. In fact, the number of people across 24 countries who avoid single-use plastic and steer clear of products with a lot of packaging increased between 2019 and 2021.
A huge 91% of Americans consider the amount of plastic used in a product when making purchase decisions, and 45% believe that producers are most responsible for solving plastic pollution - far outstripping the 25% who believe the government is. It's clear that consumer attitudes towards plastic are shifting, and that producers can no longer rely on calling consumers ‘litterbugs’ and placing the blame at their feet.
In some cases the tables are turning completely, and brands and producers are beginning to absorb the blame as activists and consumer groups lean on precedents set in other sectors to enforce corporate liability in the courts. In early 2023, ClientEarth, Surfrider Foundation Europe, and Zero Waste France filed a lawsuit against French yoghurt and bottled water company Danone - named as one of the world’s top 10 plastic polluters in December 2022 - for its ongoing use of plastic packaging, which totalled 750,000 tonnes in 2021. Another lawsuit against brands including Coca-Cola and PepsiCo was filed in California in 2022, alleging they have not accepted their role in plastic pollution.
According to Minderoo Foundation’s report The Price of Plastic Pollution, “meaningful advances in scientific methods and in the evolution of legal doctrines and standards ... will lead to a marked increase in future liability claims”. The foundation says progress in directly attributing specific harms to plastic-related pollution, ongoing advancement in toxicology, recognition of long-term cumulative exposure effects, and evolving regulations on plastic-related pollution will all play into future plastic-related litigation, which insurers have likely not priced into coverage yet. Per the foundation, liability claims “could exceed USD 100 billion” which “may well dwarf the near-term corporate liabilities”.
This anticipated rush of plastic lawsuits is troubling news for big polluters, after a 2023 study by LSE found that “climate litigation filings or unfavourable court decisions reduced [carbon major] firm value by -0.41% on average”. Novel cases result in even larger market reductions, something that the upcoming Global Plastics Treaty (which we cover further on) will undoubtedly feed into.
of people believe that producers are most responsible for solving plastic pollution
The ongoing intensive use of plastics will have an estimated externality cost on society of USD 350 billion
Climate litigation filings or unfavourable court decisions reduce firm value by -0.41% on average
Plastic producers and plastic-reliant brands are finding themselves squeezed between ground-up consumer pressure and top-down investor pressure. In May 2023, a coalition of 185 investors with USD 10 trillion in assets called for “urgent action” from “intensive users of plastic packaging”. The letter, aimed at FMCG and grocery retail sectors including Campbell Soup, Coca-Cola, Colgate, Danone, Estée Lauder Companies, Kellogg, Nestlé, PepsiCo, Sainsbury’s, and Unilever, stated that “intensive production and use of plastics is causing untold damage to the health of people and planet… [imposing] an estimated externality cost on society of USD 350 billion per year arising from greenhouse gas emissions, ocean pollution and collection costs.” The coalition expects the companies to support ambitious policy, commit to and deliver absolute reduction of single-use packaging, and address toxicity in value chains.
At Dow’s AGM in May, nearly a third of votes backed a resolution from As You Sow which sought disclosure on how a significant reduction in virgin plastic demand would affect the company’s financial position. As long as brands and producers ignore the plastic problem, the pressure will increase from both sides.
A USD 350 billion per year externality cost, as referenced by the investor group, amounts to at least USD 1,000 per tonne of plastic produced. Over a lifetime, the costs compound. A 2021 report commissioned by WWF states that the lifetime cost to society of the plastic produced in 2019 will be at least USD 3.7 trillion. The plastic which becomes marine pollution will incur a cost of USD 3.1 trillion, according to the report, while the cost of GHG emissions from across the plastic lifecycle amounts to more than USD 171 billion, and the cost of plastic waste management is USD 32 billion.
Costs that were once intangible - and often unassignable - now have figures and expectations attached to them. At COP27, leaders from climate-vulnerable countries called for wealthy governments to pay for the damage to their economies. “While they are profiting, the planet is burning,” said Antigua’s prime minister Gaston Browne at the conference. It resulted in the establishment of a Loss and Damage Fund to address inequities such as Africa contributing the least to climate change, but spending up to five times more on adapting to the crisis than it does on healthcare as a continent.
Externality costs and international financial agreements will be shouldered in myriad ways by many bodies, but some will land directly at the feet of producers and polluters. Plastic use presents a USD 100 billion annual financial risk to industry by 2040 if “governments require them to cover waste management costs at expected volumes and recyclability”.
One analysis by One Earth has stated that fossil fuel companies owe at least USD 209 billion in annual climate reparations. Given that by 2050, 20% of global oil demand will go into the production of petrochemicals, and that in 2021 98% of single-use plastics were produced from fossil fuel feedstocks, the fossil fuel industry and the plastic industry are inextricably linked. One Earth's analysis is the first to “quantify the economic burden caused by individual companies” but - as has been witnessed with both legal action and legislation - it’s likely only a matter of time before a bill is presented to plastic polluters too.
The savings to be made from moving away from plastic are just as significant as the costs of sticking with it. A 2023 UN report projected USD 4.5 trillion of cost savings by 2040 if plastic pollution is slashed by 80%. The anticipated benefits of a new circular plastics economy include 700,000 additional jobs, USD 1.3 trillion in “direct public and private costs between 2021 and 2040”, and 0.5 gigatonnes of carbon dioxide equivalent emissions prevented annually.
As if the social, legal, and reputational costs weren’t enough, a raft of new legislative and policy changes is adding yet more figures to the bill. The UK’s Plastic Packaging Tax (PPT), in force since April 1 2022, means that a rate of GBP 210.82 (USD 261.07) per tonne - increased from GBP 200 (USD 247.67) in April 2023 - is applied to plastic packaging which contains less than 30% recycled plastic. In Spain, a tax of EUR 450 (USD 483) per tonne is levied on the “manufacturing, importation or intra-EU acquisition” of a range of plastic products. Spain’s tax followed the introduction of the EU’s plastic levy in 2021, which requires a contribution of EUR 0.80 (USD 0.86) per kilogram of non-recycled plastic packaging waste produced by member states.
Italy is set to introduce a tax, but it is currently suspended until further notice, and Poland, Germany, and Sweden have also announced they will implement plastic-related legislation. Belgium is likely to fold the EU levy into EPR fees.
The success of plastic taxes depends on who’s framing them. The UK's PPT is set to generate GBP 235 million (USD 290 million), significantly higher than the GBP 200 million (USD 247 million) estimated for the first year. But this implies businesses are simply paying the tax rather than making materials changes. In other instances, plastic taxes can ignite change. “There are brands that have said to us, ‘our most profitable product line has become non-viable overnight’. They had a dependency on virgin plastic, and because it’s a high volume, low margin business, the plastic tax has basically eradicated the margin and they’ve had to change that business model overnight,” says Stephen Jamieson, global head of circular economy at SAP.
Jamieson says the company already knows of at least 450 regulatory measures that are “classed as extended producer responsibility across material types around the world”. However, there’s more coming down the line. For instance, the EU’s Carbon Border Adjustment Mechanism will come into force in 2026, meaning companies importing carbon-intensive products into the EU will have to pay a levy linked to the EU’s carbon market price. Currently that price is approximately EUR 90 (USD 96) per tonne. Initially CBAM will cover scope 1 emissions of sectors including cement, aluminium, fertilisers, and electricity, but it’s likely the coverage will expand to scope 2 and other high carbon sectors, while there are calls to include bulk chemicals and plastics. There will be a report timetabling their inclusion by 2030. While many welcome CBAM, some studies show that it will exacerbate “economic-carbon inequality” by reducing trade profits of developing countries. In Vietnam, a USD 90 per tonne scenario could see forgone revenue of USD 830 million for exporters of steel, aluminium, and plastics, around 0.6% of GDP. While regulation is essential in the fight against plastic, it’s vital the Global North doesn’t make the Global South foot the bill.
A global, legally binding plastics treaty aims to take a more unified approach. Endorsed in 2022 and expected to be finalised by 2024 and adopted in 2025, the quick-moving agreement was spearheaded by UNEP and covers the entire lifecycle of plastics. “We rarely look at the full lifecycle. We never consider the toxicity of GHG emissions and where we extract it. All we ever look at is the little section that conveniently ends at the factory gates,” says Sian Sutherland, co-founder of PlasticFree.
Discussions are still ongoing, however possible core obligations of the treaty include phasing out and/or reducing the supply of (and demand for, and use of) primary plastic polymers; banning or phasing out problematic and avoidable plastic products and chemicals of concern; eliminating the release and emission of plastic to water, soil, and air; and protecting human health from the adverse effects of plastic pollution. Among the means of implementation are plastic fees, taxes, or levies, but the big costs could actually arise from the associated risk. “Already, we have massive countries like Japan and the US not wanting to have a human health impact discussion as part of the treaty process because of course, particularly in the US, as soon as you've got a human health impact being discussed so openly you've got risk. You've got contingent liability within big corporations in the most litigious country in the world,” says Sutherland. She points to Maine’s attorney general suing PFAS manufacturers including 3M and DuPont as an example of where litigation may head, the claim being that “the defendant manufacturers have wilfully introduced toxic chemicals into Maine’s environment in pursuit of profit for shareholders.” Certainly, the same could be said for many plastic manufacturers.
regulatory measures classed as 'extended producer responsibility' across material types are coming into play around the world
of Vietnam's GDP could be swallowed by the Carbon Border Adjustment Mechanism's restrictions
Innovative delivery models which encourage the reuse of packaging in the home could lead to USD 8 billion in cost savings
In the very short term, plastic remains an economical choice - but we’re at the crest of the wave. The risk associated with its continued use (whether for packaging, in clothing, in beauty formulations, or the near endless further applications) plus the effort required to remain compliant with new regulations means that investing in alternative materials and systems changes - long considered too expensive - is a must.
According to the World Economic Forum, innovative delivery models which encourage the reuse of packaging in the home could lead to 80-90% packaging material savings and at least USD 8 billion in cost savings. “It makes so much sense from a financial perspective, from an asset management perspective, and from a natural resource perspective,” says Sutherland.
“There is now a clear understanding that the solutions exist, and the solutions are possible, but the thing holding it back is scale,” says Jamieson. Therefore, investment in solutions such as Sway, Mirum, Again, and Apeel are essential in making them viable on a larger scale. “The business case [for alternatives] at the macro level is phenomenal, it’s just implementing it that’s the question.” But with so many looming factors about to send the price of dealing in plastics sky high, refusing to implement the alternatives is out of the question.