Plastic: The World’s Growing Addiction
Global plastics' use will have tripled by 2060 if nothing is done to curb the current binge-like consumption. Even in the best-case scenario, production volumes will practically double.
By Bertrand Beauté
Plastic has permeated every aspect of our lives. We package our food with it and can find it n most everyday objects, such as our computers, cars, clothes and toothbrushes. Plastic is also omnipresent in the medical field, where its properties make it the ideal material for keeping catheters and transfusion bags sterile. Less visibly, it also contaminates the air we breathe, the water we drink, and the soil we cultivate. In 2021, global plastic production totalled 390.7 million tonnes, estimates the trade association Plastics Europe. The Organisation for Economic Cooperation and Development (OECD) sets this figure at 460 million tonnes. The experts we consulted cut it somewhere in the middle, estimating production at "more than 400 million tonnes per year".
But whatever the source, one fact is generally agreed upon: the world has never used as much plastic as it does today, and the curve is not about to flinch. "Consumption and production will continue to increase, because we need this material," says Tzoulianna Leventi, investment and ESG analyst at Abrdn. Everything even seems to be gathering pace. Although the first plastic was invented at the end of the 19th century, almost 60% of all plastics produced were invented after 2000.
In its "business-as-usual" scenario, "Global Plastics Outlook: Policy Scenarios to 2060", an OECD report published in June 2022, predicts that global plastics use could triple by 2060 to 1,231 million tonnes per year. "Around the world, lots of regulations are being passed to curb this expected growth," says Clément Maclou, thematic asset manager at ODDO BHF.
But despite increasingly hardline measures, the use of plastic will continue to rise. The OECD’s Regional Action policy scenario would rein in plastics use to 1,018 million tonnes per year by 2060. In the unlikely scenario of global, coordinated action, the use of plastics would come to 827 million tonnes per year. Although lower than the baseline scenario, that is still an 80% increase from current levels. "The plastics industry is a huge market, generating almost $600 billion a year," says Kokou Agbo- Bloua, Global Head of Macro Research at Société Générale. "And most studies size the industry at $800 billion by 2030." This outlook is corroborated by Grand View Research. The firm estimates that the plastics market will grow from $609 billion in 2022 to reach $811 billion in 2030, a growth rate of 3.7% per year.
This colossal pie is divided among a handful of multinationals that produce most of the world’s plastic. They are mainly oil giants, including the US firm Exxon Mobil and the Italian group Eni, as well as chemical behemoths, such as BASF from Germany, Ineos from the UK, LyondellBasell from the United States and Sabic from Saudi Arabia.
But how can we explain why the use of plastic continues to rise, when awareness of the problem appears to be growing? "The consumption of plastic is strongly linked to GDP. The richer a country is, the more it uses," Kokou Agbo-Bloua explains. In other words, the emergence of a middle class in some countries, namely China, will stoke up plastic consumption for years. Meanwhile, rich countries are unable to curb their appetite for the material. Plastics Europe reports that annual demand for plastics continues to grow on the Old Continent: 50.3 million tonnes in 2021, up from 49.9 million tonnes five years earlier. Consumption is therefore still on the rise, despite the measures taken in Europe to limit the use of plastic.
"Reducing the use of plastic is difficult because it is a great material," admits Julien Boucher, president and founder of Environmental Action, in our interview with him. Plastic is lightweight, easy to produce, cheap and has excellent properties. Precisely, what other material can boast of being flexible or rigid, transparent or opaque, strong or brittle, soft or rough, depending on how it is made? Glass, for example, is always heavy and breakable. Cardboard, on the other hand, is not waterproof and falls apart. But the dilemma does not only concern the packaging industry. In fashion, for example, plastic fibres (polyamide, polyester, acrylic and nylon) provide much needed functionality. They are elastic and soft to the touch, dry quickly and are more lightweight than natural fibres like cotton.
Lightweight and therefore transportable
Another key advantage of plastics is that, over their entire life cycle, their carbon footprint is often better than that of alternative materials. "If you account for transport, a plastic product generates comparatively little CO₂, over its entire life cycle" says Pieter Busscher, senior portfolio manager for the Smart Materials investment strategy at Robeco in Switzerland. "For this reason, the versatility of plastics and the fact that we use them in almost all areas, it is difficult to replace them with other materials." One of the most striking examples is PET bottles, which are much lighter than their glass counterparts and therefore require less energy to transport. In another example, Switzerland’s Federal Office for the Environment (FOEN) writes on its website how plastic films for mailing magazines generally have a better environmental footprint than paper envelopes. In terms of greenhouse gas emissions alone, plastic is therefore sometimes the best choice compared to other options available.
But there is a problem with that. "Plastic has many advantages, but it also has many drawbacks," Kokou Agbo-Bloua reminds us. "The most glaring disadvantage is its disastrous impact on biodiversity." Environmental pollution due to plastic is by far the biggest problem. The OECD estimates that 353 million tonnes of plastic waste was produced worldwide in 2019.
Out of that eye-popping pile, only 32 million tonnes (9%) was recycled. What happened to the rest? Estimates show that 19% was incinerated, 50% went to landfill and 22%, or 77 million tonnes, was dumped. Despite its legendary cleanliness, Switzerland has not been spared. The FOEN reports that 14,000 tonnes of plastic is thrown away in our country every year.
"Many small and very innovative companies are taking on the plastic challenge and putting out viable and sustainable solutions"
Tzoulianna Leventi, analyst at Abrdn
Because of their long lifespan (sometimes several hundred years), plastics then accumulate in the environment, with catastrophic consequences for biodiversity and probably for human health. And the worst may be yet to come. According to the OECD, the amount of plastic waste could triple by 2060 if no action is taken, in line with the increase in production.
Fortunately, things are starting to change. "Even if global plastic production continues to rise, we are moving in the right direction," says Clément Maclou of ODDO BHF. "Consumers are increasingly aware of the issue and more and more countries are passing regulations to reduce the use of plastic. Europe, which adopted its green deal during the pandemic, is well ahead of the game in this area." And since investors also have a role to play, the feature story of this issue of Swissquote focuses on small, innovative companies that are tackling the plastic problem. So are they good investments? "The adoption of regulations to limit the use of plastic and societal pressure will be favourable to companies offering solutions that address the issue," Clément Maclou says, "whether they aim to reduce the use of plastic, promote its reuse or improve its recycling".
Tzoulianna Leventi agrees. "The good news is that many small and very innovative companies are taking on the plastic challenge and putting out viable and sustainable solutions," the Abrdn analyst says. "Some are finding new uses for centuries-old traditional materials, such as cork and pine resin. Others are concocting sustainable, even bio degradable, products in the lab to replace the petroleum-based products we are so dependent on." Many of these companies are still in the early stages of development and therefore represent a risky investment. But the best may be yet to come, as Tzoulianna Leventi suggests. "As the demand for these sustainable products increases, these companies may have promising growth opportunities in the future."
What is plastic anyway?
The term plastic refers to a set of synthetic materials made by polymerisation, a process involving a series of chemical reactions carried out on organic compounds (i.e., containing carbon). Although 90% of plastic is currently produced from hydrocarbons, it can also be made from other materials, notably plants. Its properties differ depending on the type of polymerisation. For example, plastic can be hard or soft, opaque or transparent, flexible or rigid. Most plastics were invented between 1850 and 1950, but their properties have since been improved with the addition of chemical additives such as plasticisers, flame retardants and dyes to make them more flexible, stronger and less flammable.
The first plastics had a limited market but the sector really took off after World War II. The material developed further thanks to the positive image of plastic prevailing in the 1960s. It began to squeeze out other materials until it was present almost everywhere. A turning point came in 1978, when Coca-Cola replaced its iconic glass bottle with a PET container. The era of disposable plastic had begun.