An asset mindset is needed to make a circular economy a reality, says Planet Tracker
Latest research from Planet Tracker proposes a practical business solution to the problem of plastic waste whereby packaging is treated as an asset rather than a liability
LONDON, 3 August 2022: Currently, companies treat packaging as an asset up until the point that the product is sold. At the point of purchase – when the object is in the hands of the consumer – the packaging switches from being a corporate asset to a liability for the consumer or local municipality, which is responsible for its disposal.
The problem of plastic packaging is not going away – the latest OECD Plastic Outlook: Policy Scenarios 2060, predicts almost a tripling of global plastic waste by 2060, forecasting consumption to rise from 460 million tonnes (Mt) in 2019 to 1,231 Mt in 2060 in the “absence of bold new policies”. According to the latest insights from financial think tank Planet Tracker, if packaging remained an asset of the producer or seller throughout its life, it would optimise the recycling of packaging and turbocharge the transition towards a circular economy.
Whilst from a financial viewpoint it is preferable to make the liability and its costs someone else’s problem, if assets can be maximised then ownership through the entire lifecycle holds tangible financial value. Therefore, the continued ownership of the packaging asset by the product company is a more practical solution than the current model, with a ‘right of use and requirement to return’ taken on by the end consumer, establishing a modern ‘rent-not-own’ model.
Furthermore, this approach would come with a number of financial advantages. These include improved profitability and cash generation as a result of lower packaging input costs, greater balance sheet strength by growing the asset base and additional profit if packaging assets aren’t returned and where deposit levels exceed cost.
A similar strategy is already being trialled by LOOP, a global reuse platform enabled by a multistakeholder coalition of manufacturers, retailers and consumers that aims to eliminate the very concept of ‘waste’. Participants include leading international brands such as Procter & Gamble, Unilever and Coca-Cola as well as leading food retailers like Tesco and Carrefour. This solution also offers scope for a new out-sourced, third-party packaging industry to emerge, which could help commonality and scale.
John Willis, Director of Research at Planet Tracker, comments: “It’s abundantly clear that the plastics industry must find a way to urgently transition to a circular economy. A shift in mindset, away from viewing waste as a liability, is a practical way to ensure physical flows of packaging are redirected to reuse and recycling models and could be the step change required to achieve a circular economy. Planet Tracker’s proposed model represents a financial solution to the waste crisis that will ensure waste is valued rather than discarded”.
ABOUT PLANET TRACKER
Planet Tracker is an award-winning non-profit financial think tank aligning capital markets with planetary boundaries. Created with the vision of a financial system that is fully aligned with a net zero, resilient, nature positive and just economy well before 2050, Planet Tracker generates breakthrough analytics that reveal both the role of capital markets in the degradation of our ecosystem and show the opportunities of transitioning to a zero-carbon, nature positive economy.
ABOUT PLASTICS TRACKER
The goal of Plastics Tracker is to stem the flow of environmentally damaging plastics and related-products that are creating global waste and health issues by transparently mapping capital flows and influence in the sector, starting from the production of resins through to product-use. By illuminating risks related to natural capital degradation and depletion, investors, lenders and other corporate stakeholders across the economy will be enabled to create more sustainable plastics products.
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