A new study by Planet Tracker has cautioned those within the plastics value chain that tightening regulation and rising litigation exposure threatens to unleash severe financial consequences. The research has assessed the risk priced into 150 companies in the plastic value chain through analysis of their equity risk premia- that is the difference between returns of individual stocks with that of the risk-free rate of return (e.g. a longer-term government bond, which assumes no default risk by the issuer). The research surprisingly found that the equity risk premium of the plastic supply chain has remained stable across the past 11 years. In other words, investors are not forecasting a change in the industry’s risk profile; even more surprisingly, there has been a clear, recent decline in investors’ risk perception for this value chain, with it reaching its lowest level in 2022.
However, the research cautions that liability cases linked to plastics pollution are expected to increase, with social costs amounting to $100 billion per annum by 2030, and corporate liabilities from plastics litigation between 2022 and 2030 are forecast to rise above $20 billion.
As the report also highlights, last June, the OECD released forecasts which suggest that plastic waste is set to almost triple by 2060- projecting that global plastics consumption will rise from 460 million tonnes (Mt) in 2019 to 1,231 Mt in 2060 should the world fail to introduce “bold new policies”. It also estimates that nearly two-thirds of plastic waste in 2060 will be from short-lived items such as packaging, low-cost products and textiles[i].
Recently EA Environmental Action reported that since January 2023, more than 40% of the global population has been living in places unable to manage the amount of plastic waste generated and discarded, and by July, this figure will reach 60%. Sarah Perrard, EA Environmental Action’s Co-CEO, was quoted by Edie.net as saying: “Twenty-nine countries around the world have already exceeded their capacity to manage their plastic waste, this must be a watershed moment for industry and policymakers to act in the interest of the planet and the health of human beings. Plastic Overshoot Day should be in everyone’s calendar.”[ii] Plastic Overshoot Day, which Perrard refers to, marks the point when the amount of plastic waste generated exceeds the world’s capacity to manage it, resulting in environmental pollution. In 2023, EA Environmental Action predicts Plastic Overshoot Day will occur on July 28th[iii].
As we reported last month, the UN’s Environment Programme (UNEP) announced what it believes will be the key policy changes required to deliver the goal of a treaty for plastics which it hopes will see an end to plastic waste. The headline finding is that plastic pollution could be reduced by as much as 80 per cent by 2040 if countries and companies make deep policy and market shifts using existing technologies[iv].
Since the launch of the UNEP report, a second round of negotiations relating to the plastics treaty has recently taken place between the 28th May and 2nd June[v]. These talks have reportedly led to some progress, despite fierce disagreement around procedure at the opening of proceedings (which some groups and delegates have suggested is a stalling tactic by oil- and plastic-producing nations). The Guardian states that: “A compromise postponed these procedural discussions to a later date, and observers to the closed-door negotiations said widespread agreement emerged on the potential core features of a future treaty. A majority of countries agreed that it should be global and legally binding, rather than voluntary.”[vi]
In terms of the next steps, a draft document will be constructed over the coming months as a springboard for granular discussions of the final treaty text. Progress on this plastics treaty should pose a warning for those operating across the plastics value chain- change is coming, and those who fail to tackle plastics usage are set to face increasingly detrimental consequences as corporate, consumer, and political opinion moves against plastic production, particularly ‘single use’ plastics.
[i] OECD Warns That Global Plastic Waste Set to Almost Triple By 2060 (zerocarbonacademy.com)
[iii] 2023 Report: New perspective on global plastic pollution! (plasticovershoot.earth)
[iv] UN roadmap outlines solutions to cut global plastic pollution (unep.org)
[vi] First steps agreed on plastics treaty after breakthrough at Paris talks | Plastics | The Guardian
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
