The Next Economy
Report:
An Asset Mindset Is Needed to Make a Circular Economy a Reality

Companies currently treat packaging as an asset, up until the point that the product is sold. After purchase, product 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.”

Much as visionary architect and designer William McDonough proposed reframing our relationship to another problematic element — carbon — by viewing it as an asset, a new study by financial think tank Planet Tracker astutely asserts if packaging remained an asset of the producer or seller throughout its life, it would optimize the recycling of packaging and turbocharge the transition towards a circular economy.

From a financial viewpoint, it is preferable to make the liability and its costs someone else’s problem (an approach that has created our global plastic pollution problem); but if assets can be maximized, then ownership through the entire lifecycle holds tangible financial value. Therefore, the continued ownership of packaging assets 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.

Attempts at keeping product manufacturers engaged and packaging materials in play can be seen in the growing number of extended producer responsibility (EPR) schemes popping up in Europe and North America; but they remain piecemeal (state-by-state regulations in the US) and somewhat flawed (ex: opponents say California’s recent extended producer responsibility bill will raise the cost of consumer goods sold in the State) — making compliance and standardization nearly impossible, and garnering pushback from industry and policymakers.

Creating stakeholder paradigm shifts

But Planet Tracker’s approach, in which packaging is viewed as an asset from the beginning, could cause a step change in achieving the mentality necessary to implement a robust circular economy; and it would also come with several financial advantages — including 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 trialed 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 CPG companies such as Coca-Cola, Nestlé, Procter & Gamble and Unilever; as well as leading retailers including Carrefour, Kroger and Walgreens. This solution also offers scope for a new outsourced, third-party packaging industry to emerge, which could help commonality and scale.

As platforms such as Loop continue to proliferate, they help consumers shift their view of packaging from something to discard to an asset that belongs to someone else, with ongoing value — which should support increased reuse and recycling rates, both key elements of a functioning circular economy.

From a business perspective, the report points out an asset approach to packaging would help industry shift from treating it as a one-time-use liability to seeing an asset with ongoing utility. And the resulting increase in asset availability (security of supply of recycled feedstock) should support investment in new processes and infrastructure built around refining and refreshing recycled material.

John Willis, Director of Research at Planet Tracker, says: “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.”