Sep 14, 2021

Circularity; Plastic Bank and The Renaissance Brigade

Procurement
Sustainability
ESG
ProcurementStrategy
We talk plastics circularity, capitalism, and the power of the new renaissance brigade with David Katz, CEO and Founder of Plastic Bank

Sustainability is having more than a moment; it’s a movement, a renaissance, if you will. The world is transitioning from greenwashing and GenZ placating to verifiable, science-based sustainability and now, regenerative efforts in a desperate attempt to save our earth- just as the buzzer is about to ring.

Climate change is, in scientific fact, widespread, rapid, and intensifying. In the first instalment of their 6th report, the Intergovernmental Panel on Climate Change (IPCC)- a UN panel that assesses the science around climate change- warns the earth is seeing “unprecedented rates of change” and that the report should stand as a “code red for humanity.” 

Heading the charge in tackling two of the world's biggest challenges against climate change and sustainability by creating a circular economy for plastics and helping to close the plastics circularity gap is David Katz. David Katz is CEO and Founder of Plastic Bank, a global network of micro recycling markets that empower the poor to transcend poverty by collecting plastic from the environment before it ends up in our oceans.

The man himself lays it out for us, “Plastic Bank is best expressed as a global chain of stores for the poor and for the ultra-poor, those that make less than $2 a day. Everything in the store is only available to be purchased using plastic garbage by weight to pay for school tuition, medical insurance, WiFi, cooking fuel and everything the poor truly need and struggle to afford. Now, using what would have entered a Marine ecosystem— a waterway, a canal, a river or a stream— we've created a monetary standard for the appropriate value exchange for material resources. We've built a global supply chain that returns the material that we call Social Plastic back into manufacturing. So the consumer themselves have the power. When they go to buy something, they can buy something that truly ends poverty and helps save the ocean simultaneously.”

Shifting the Paradigm; The Unfavourable Economics of Plastics Recycling

The unfavourable economics for plastics made from recycled resins compared to virgin resins has long detoured the increased usage of recycled resin. And yet, it doesn’t need to be this way. In partnership with AFARA and IHS Markit, Google has issued an executive summary, “Closing the Plastics Circularity Gap”, which reported that on average, between 2020- 2040, circular supply chains could produce plastic at a lower cost ($1,122/metric tonne) compared to virgin supply chains ($1,694/metric tonne).

Having been in plastics procurement for over 20 years, and having seen with my very eyes the hoards of plastic littering the beaches of Thailand, it’s an issue that’s close to heart. And it’s no small problem.

According to the report, under a business-as-usual scenario (BAU), recycled plastics reentering the economy are projected to more than triple to 77 million metric tonnes (14%) by 2040, but over the same period, 86% of plastics are projected to be landfilled, incinerated, or leaked into the environment.  Without comprehensive and large-scale interventions, we can expect that there will be more plastic than fish in the ocean by 2050.

Katz, with his hypnotic tone and passionate stance, was kind enough to spend some moments getting into with me. “If we actually want to change the world and engage more collectors to collect and exchange the material, price consistency and price buoyancy are the two key factors that will change the world. Plus, we need reliability and consistency in the supply chain. So when our customers are looking for the material, we know it's there. Lower prices do not mean more material. On the contrary, lower prices mean less material collected,” says Katz.

“Here's the plastics issue summarised. If every piece of packaging…  all plastics, every bottle you saw, was five US dollars, how many would you see in the street or in the waste bin? None… It's not a plastics problem. It's an ‘us’ problem. It's the way we view the material that has received us here, to look at it as free or disposable or worthless when it's not. And I'd argue that when you buy a bottle of water, the highest cost of goods in that product is the bottle. But yet, we discard it. So how do we shift the paradigm to have that material look like it is truly valuable?”

“In the Western world, the economics are not working, so it's not being recycled. It's not because the material is not recyclable. Economic equation is paralysis. Chemical, [mechanical] recycling, all the technology we need to fix all of this is available today. Companies will succeed by investing in what will be and not what is; if you overinvest in what is, you're doomed.”

Katz isn’t wrong. Investment in recycling infrastructure is exactly what is needed as existing global supply chains are equipped to produce and use virgin plastic, but not so much to take it back. In fact, since 1950, only about 9% has been recycled and returned back into the economy.

The mentioned study calculates that the equivalent of $426 billion-$544 billion in net present value (NPV) needs to be invested over the next 20 years to achieve the projected plastics circularity gap reductions.

For the time being, however, personal experience has shown me all too well that economics are most certainly getting in the way of increasing the use of recycled content. As much as end-users have begun vocalising their want and willingness to pay for more sustainable options, not everyone is on board if the math doesn’t add up, which it often doesn’t. 

Depending on where the markets are, there is little to no price disparity between prime virgin and recycled resin, whether it be Post-Consumer Resin (PCR) or Post-Industrial Resin (PIR). Yet recycled resin is harder to use, can increase your cycle times, cause wear on your machines, and inconsistencies in end products. All issues can be dealt with, yes, but only if the motivation is there.

Conscious consumerism aside, shareholders demanding retailers and the need for profits remain in the middle. Katz couldn’t be more right, economic equation is paralysis, and that’s exactly where we’re at.

It seems, however, that might be about to change.

The Sickness of Capitalism

“What has to be on board are the [shareholders]. Shareholders have to seat themselves second to the world because right now. There is a fiduciary duty to return materials at as low a price as possible. That's what's received us here. So, okay, it's capitalism that might have to shift a little bit. So we’re enlivened by B Corp*, by a movement towards conscious capitalism, creating a space for the world to do well in the world and be rewarded for it. It's deeper than the recycled content.”

THIS. The man knows how to make an old girl smile. It’s my hope, I say, that even shareholders will ultimately be led by the end consumer, so conscious buying may ultimately have the effect that’s intended. Katz responds, “Exactly. And in fact, I would actually argue that it's not even the consumer because what I witnessed is this; the corporations are having trouble hiring staff. They're not getting great minds anymore because Gen Z, and the next generation after them as well, are not going to be working at an organisation that's killing the earth. It's a purpose economy that we're entering. 

“Look at the tens of millions of students that march through the streets against climate change. Do you think that generation is going to work for you if you're just putting chemicals in a bottle and killing the earth? No, they're going to protest against you. You either get on board with the Renaissance, or you get out of the way.”

Henkel, for one, is getting on board. “Henkel is a family company. That's why they were such an early adopter because they just did it because they knew it was right. There's a fiduciary duty in a publicly held company. The CEO must steward the return of the shareholder above all else. They could be jailed if they don't. So they don't risk that. They make commitments, ‘in 20 years from now we'll use a hundred per cent recycled content’. But you're not going to be there. So it's safe for you to make that commitment because the CEO who takes over the role after you is not bound by that. This is capitalism. This is a capitalism issue. It's not a societal issue. It's not entrepreneurship. It's the sickness of capitalism. 

“Ultimately, what we need to do is tax virgin plastic and redistribute the taxation from the virgin material to have recycling become more profitable and more efficient and create a greater reward for it all. That's what has to occur. It's very simple.”

“If virgin plastic was at parody with recycled content, everyone would be using recycled content, period. They would just make the shift because they know it's a good thing as well and price parody. And then we'd have more investments into appropriate infrastructure that returns the material to virgin state, and all of that would then become available for the world. And we see it occurring. We see new taxation occurring in the EU and other places. So it's coming. It's coming slowly. It should be much faster.”

Perhaps it really is just that simple, or, at least, it’s one piece of the puzzle. According to the above-referenced study that gives a roadmap for closing the circularity gap, “pricing the negative environmental impacts through a virgin plastic production tax can close the gap by 13% through the decreased demand for certain packaging and product use cases.”

The Regeneration Economy

REDUCE. The first R seems to have long since been forgotten, an inconvenience in a world built on overconsumption.

As the summary states, humanity is consuming natural resources at an astonishing rate. During the 20th century, global raw material use rose at about twice the rate of population growth. In 2020, global demand for resources was 1.6 times what the earth’s ecosystems can regenerate in a year. 

“We have to reduce, no question. We have to reduce anything that demands virgin plastic production. That's number one. We have to create a greater demand for materials that are regenerative. It's not about sustainability. It's not about saying let's do less damage this year than we did last year. That's a thin veil. It's just a line,” says Kratz.

“What we're entering is a regeneration economy. The regeneration economy is those companies that are going to repair the damage that they and their competitors have done. And they show up and say, look at what's occurred in the world. We're beyond sustainable. We're so far into the damage that we need to repair the damage. Which companies will exhibit that? Those are the ones that will win. That's the blue ocean strategy of today.”

“We're going to see a rapid acceleration because we're not really waiting for corporations to provide the space anymore. I can't use the word Renaissance enough. It's a Renaissance. The power is coming back into the hands of the people.”

Let’s hope it comes fast enough. As Google says, “each of us, every day, can keep the circular economy turning by choosing circular products and services for our own lives and playing our part to keep resources in use longer.”

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