Sustainability pressures are expected to change the dynamics of plastic consumption with regulation, innovation, consumer preferences, and corporate responsibility all playing pivotal roles.
The prolific use of plastics today is a major sustainability problem that the world must solve. However, we would also caution that the media hype around plastic’s imminent demise, and the subsequent impact to the industry, is grossly overstated.
Understanding the scale of the problem, both in terms of the environmental impact as well as concerns relating to human health, is central to defining plastic’s role in a sustainable world. Ultimately, we believe the magnitude of plastic waste will drive change, and this will fundamentally reshape the plastics industry in certain key areas. Accordingly, we believe the plastic sustainability debate should ultimately be about how, not if, we use it and, crucially, how we dispose of it.
The Positive and Negative Impact of Plastics
Since their introduction in the early 1900s, plastics and plastic packaging have become integral to modern life.
Global demand for plastics has increased twentyfold over the past 50 years, and the International Energy Agency predicts that demand will grow by an additional 45% by 2040, with nearly two‑thirds of that growth coming from Asia.
The obsession with plastic is easy to understand—cheap, lightweight, and durable, the material is beneficial to society in a multitude of ways, including:
- Reducing food waste—by extending the freshness period
- Lowering vehicle emissions—by making cars lighter
- Increasing energy efficiency—through improved building insulation
Despite the many benefits, the vast consumption of plastic is a major sustainability problem that the world must solve. Meanwhile, most plastics have a very short life span (less than one year), yet they can take up to an estimated 450 years to break down, creating a major environmental impact if not disposed of properly.
Accordingly, we believe that the sustainability debate should center on how, not if, we use plastic and, most importantly, how we dispose of it.
Scoping the Problem
The environmental impacts of plastic are numerous, with implications for human and animal health.
- Ocean leakage—Estimates suggest that there are more than 150 million tons of plastic in the ocean, with a further 8–10 million tons leaking into oceans annually. It has been suggested that, by 2050, there could be more plastic in the oceans than fish. Plastic waste harms marine life in many ways:
— Sea animals ingest plastic, leading to injury or death
— Natural ecosystems vital to ocean health are polluted
— Microplastics consumed by marine life make their way into human food chains
- Land leakage—An estimated 25%–30% of plastic waste is left on land as it escapes waste collection systems or is never collected. As this plastic waste breaks down, chemical byproducts seep into soil, groundwater, and waterways.
- Landfill and incineration—Landfills account for 40%–45% of plastic waste disposal. In many countries, poor disposal practices lead to chemical seepage into soil and waterways. With proper disposal, the environmental impact can be contained. Incineration has negative consequences as it releases carbon back into the atmosphere. However, better practices such as high‑temperature incineration can greatly reduce the emissions impact, while the energy generated can be sold as a byproduct.
- Bisphenol A (BPA)—BPA is used in harder plastics for use in food containers and drink bottles. While the science is not conclusive, there are concerns about the potential health risk for humans and animals. As such, several countries have restricted BPA usage, and the U.S. has listed it as an endocrine disruptor.
Global Plastics—Where Does It All End Up?
Global plastics end usage by industry, and how it is ultimately disposed of
As of January 2018
Source: The New Plastics Economy, Ellen MacArthur Foundation (2018).
Source: IEA, The Future of Petrochemicals (2018) (adapted from “Production, use and fate of all plastics ever made”, Geyer, R., J.R. Jambeck, and K.L. Law (2017).
The Role of Plastic in a Sustainable World
Given the magnitude of the disposal problem, we believe the plastics industry will be fundamentally reshaped in four key areas: (1) reduced usage, (2) increased recycling, (3) increased incineration (waste to energy), and (4) replacement by plastic alternatives and/or new biodegradable plastics.
Today, the primary focus in terms of reducing plastic waste is on single‑use plastics. This is a shift from past decades where the focus was on reducing material usage through making plastic packaging lighter weight. Consumer goods companies are now turning their focus to packaging alternatives and/or redesigning packaging to make it recyclable.
On a global basis, only 14% of plastic packaging is collected for recycling, and only 10% is ultimately recycled. Certain plastic packaging materials are recycled at higher rates—such as polyethylene terephthalate (PET) bottles, high‑density polyethylene (HDPE) bottles, and post‑commercial films. Some geographies achieve much higher recycling rates, with the difference usually being dependent on recycling economics for the format and region.
PET used in beverage bottles has a higher recycling rate than any other type of plastic, but recycling rates for PET vary by region. On a global basis, it is estimated that only half of PET bottles are even collected for recycling, and then only 7% is recycled, bottle‑to‑bottle.
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. The views contained herein are those of the authors as of June 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.
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