Our ability to extract, transform and consume material resources defines us as a species. But the scale we’ve done this over the past 50 years is placing an unsustainable burden on the planet. In this complimentary report, Guy Bailey, Head of Intermediates, and Applications and Ashish Chitalia, Head of Polyolefins, ask what it would take to make the plastics value chain truly sustainable.
On the current trajectory, materials use is set to double and waste generation is projected to increase by 70% by 2050.
Proactive measures are the next steps to prevent the environmental impact of our materials consumption, with governments, companies, and consumers all playing a critical role. Ambitious regulation, investment in sustainable solutions, and smarter consumer choices are all expected. There are major, formidable challenges, but the transformation underway in the energy sector shows that systemic change is possible.
Change at that scale will create winners and losers. In this Insight, we look at the potential impact on the packaging industry and plastic demand. If the plastics value chain is to become sufficiently sustainable, demand will be displaced at different stages in the energy and petrochemical value chains, which will leave many existing or planned assets uncompetitive. In one scenario, this could lead to the loss of 1.5 million b/d of demand for oil in 2040, with requirements for petrochemical feedstock – the key to oil demand growth after 2030 in our base case – flattened by increased circularity.
The challenge is substantial, but the transformation underway in the energy sector shows that systemic change is possible
The petrochemicals, plastics, and packaging industry is beginning to grasp the challenge, but the solutions to make the industry more environmentally and economically viable are elusive. To move onto a more sustainable track, the industries that produce and consume our material resources will need to find new ways of working. Just as we are undertaking an energy transition to change the way we power the world, so we must engage in a material transition.
We are living in a material world…
Materials consumption was localised for most of human history; it was only with the onset of the Industrial Revolution that technologies were developed to stimulate demand for and transport materials around the world. Fast-forward to the latter half of the 20th century, and a powerful combination of rising populations, growing incomes, and new technologies have vastly expanded our appetite for materials. Between 1970 and 2017, the total mass of materials extracted grew nearly 250%, with the rate of growth accelerating.
This trend, however, is unsustainable; we will need to find ways to decouple growth from material consumption. The good news is that this has been occurring in numerous economies over the past 30 years – the mass of material consumed per unit of GDP dropped by 47% in the US over this period. That's not a result of offshoring the problem – the measure takes account of materials consumed in the production of imports. The simple fact is we need fewer materials to generate the same unit of output.
This relative decoupling of material inputs and growth is driven by several structural factors that are likely to hold true for the foreseeable future. In other words, this decline will likely continue and could even accelerate.
While this trend offers hope that a more sustainable future is around the corner, the reality is that we need more than a relative decoupling. In absolute terms, consumers in rich countries use more materials and produce more waste. Continuing these trends will lead to increasing pressure on the planet and a growing waste stream that threatens our ecosystems. The OECD forecasts that by 2060, given expected growth in population and wealth – as well as the trends highlighted above – materials use will grow by 111% compared to 2011, with metals usage growing by 150% and nonmetallic minerals by 132%.
Given these conditions, the industries that make use of these materials require a paradigm shift towards an absolute decoupling of materials consumption from growth of the economy.
Meet the new transition – same as the old transition
Materials-consuming industries can learn from the energy industry, which is faced with the monumental challenge of decarbonising to align with a global warming pathway of 2°C or lower. And it needs to do this in a world in which we forecast energy demand will continue to grow as populations increase and become wealthier.
Sunk capital and established technologies will make this transition commercially challenging, even as consumers and society expect producers to take the responsible, sustainable decisions necessary to address the challenge.
The energy analogy extends to the solutions as well. In both the materials and energy industries, significant investment into new technologies could reduce or eliminate the harm that existing business models cause. At the same time, political and regulatory responses can further encourage (or impede) innovation. However, the uncertainty shrouding any future technology and regulations makes the path to a more sustainable future arduous. Not to mention the impact of coronavirus, which complicates the picture further in the immediate term.
The materials sectors lag their counterparts in the energy sector in developing more sustainable business models. If we are to avoid the irreversible destruction of valuable ecosystem services, they will need to catch up – and fast. By following the route map plotted by those looking to decarbonise the energy system, the materials sectors can accelerate the speed of this transition.
Making materially better choices: a case study of the packaging sector
In this case study, Guy and Ashish take a hypothetical business to illustrate the challenges facing companies, and the value chains that support them, operating in the context of the materials transition. Read now.
If companies in the plastics and packaging sector put the materials transition at the heart of their strategy, to act responsibly and in line with its customers' expectations, how would that impact future plastics production and waste generation?
Two scenarios focused on the major packaging polymers – polyethylene (PE), polypropylene (PP) and polyethylene terephthalate (PET) – help us to explore the answer to this question.
Current path scenario
- Gradual increase in collection rates
- EU and Asia remain global leaders in managing post-consumer waste, reflecting legislation and recycling economics, respectively
Sustainable future scenario
- Increasingly stringent regulatory targets added – all global markets model EU Single Use Plastics Directive ambitions
- Chemical recycling receives major investment and adds capacity quickly post-2030, enabling fast growth in recycling of flexible and coloured packaging
The ‘Current Path’ represents the world if it continues as it is today. Recycling rates gradually rise, driven by a combination of increased demand from consumer-facing brands and legislative targets. The recycling rate for the selected polymers more than doubles in the 2020 to 2040 forecast, rising from 17% to 38% of polymer produced for packaging applications.
Under the ‘Sustainable Future’ scenario – one where the packaging sector as a whole follows the actions of our hypothetical company – we can see a marked difference in outcomes. With more stringent legislation to incentivise companies to be ambitious, we see a big increase in volumes of packaging going through mechanical recycling processes, and significant investment into chemical recycling technologies and capacities. Faster growth in the recycling of flexible, multi-material and coloured packaging follows.
The cumulative impact of these changes is another near doubling of the recycling rate, up to 67% of the observed packaging polymers. By 2040, this results in an additional 53 million tonnes of packaging plastic prevented from going into landfill, energy recovery or unmanaged waste streams in comparison to the ‘Current Path’ scenario. Cumulatively, from 2020 to 2040, this rises to 382 million tonnes.
The impact of this on the value chain will depend on how circular the recycling chain is. For instance, how much recycled plastic is ‘downcycled’ into non-circular products – such as reclaimed plastic bottles recycled into polyester fibres – and the precise split between recycling routes.
By 2040, if we assume that the industry focuses on maximum value retention by eliminating downcycling, and that chemical recycling hugely increases the recycling potential of polyethylene and polypropylene applications, we would see:
- 25 million tonnes of recyclate going back into the polymer stream, displacing virgin polymer demand
- 10 million tonnes equivalent going back into the value stream at the monomer level, displacing the need for ‘virgin’ feedstocks
- 60 million tonnes equivalent at the feedstock level, displacing demand for oil and gas inputs.
In total, 95 million tonnes of displaced demand across the value chain would represent a reduction of around 1.5% in global oil demand by 2040. However, the impact on the petrochemical feedstock sector is far more significant, equating to the loss of all petrochemical feedstock demand growth from 2032 in our base case outlook.
These changes will add to pressure on an already challenged refining sector, and pose searching questions about which assets will be most robust to these changes. The most competitive, integrated sites in the future may need to incorporate refining, petrochemical production, waste collection, sorting and chemical recycling hubs.
None of the scenarios above, however, are likely to describe the exact path we take. But they do illustrate the extent to which decision-makers can alter the current trajectory to achieve growth that satisfies society’s demands without further stressing the environment.
As in other sectors, the packaging industry – and the industries that support it – will need to navigate a complex mix of regulatory interventions and technological investments to thrive in the materials transition.
How will the materials transition impact other industries?
Textile and Apparel
- The textile & apparel value chain has multiple, competing materials, presenting a complex array of choices for consumer-facing brand to select from: cotton and wool use vast quantities of water as an input, while polyester breaks down into micro-fibres in the oceans.
- The processing of post-consumer waste lags far behind the packaging sector – much more needs to be done to prevent waste going to landfill and leaching into the environment.
- Most pressingly of all, the industry needs to work out if the ‘fast fashion’ model prevalent in developed economies is sustainable. If not, the industry will need to focus on reducing output – but how can the industry as a whole do this and continue to grow?
- Construction and infrastructure are the biggest users of materials, particularly of non-metallic minerals such as sand and aggregates. The extraction and processing of these materials can be destructive to local ecosystems, yet there are few obvious alternatives.
- Metals and plastics also contribute significantly to these sectors. Here we can see tentative steps at using new materials that have a smaller environmental impact, and at redesigning production systems to reduce waste:
- Replacement of metal and concrete in buildings with Cross Laminated Timber.
- Modular building systems, with ‘units’ of a building created in a factory setting to reduce waste given ease of precision production.
- Onsite use of 3D printing using composites to minimise waste/ offcuts.
Look out for further analysis on the material transition's impact across the energy and natural resources value chain in the coming months.