Has the pivot point been reached? That is the question investors, regulators and politicians must ask themselves according to a new report from Planet Tracker. In fact, the new ‘Breaking the Mould’ report postulates that the plastic industry’s business-as-usual model may well pose a greater risk than embarking on a transition towards a sustainability-driven strategy.
While the plastics industry has long been an essential source of jobs in the EU27 and for years has been a steady driver of this economy, the industry’s rapidly declining ability to compete globally suggests that the industry is primed for disruption. A transition towards a more sustainable business model is now the most viable route to avoid stranding investor assets, the authors write, with such a model posing less risk, and longer term, more profitability.
This report identifies the companies capable of catalysing this shift - industry leaders, responsible for 75% of capacity across the EU plastic production supply chain (105,311 kt), and largely clustered within the Trilateral Chemical Region (spanning North Rhine Westphalia (DE), Flanders (BE) and the Netherlands), which accounts for 45% of total EU27 plastic production capacity.
According to John Willis, Director of Research at Planet Tracker, the EU plastic industry is on the precipice.
“Its current model is increasingly unsustainable. It is struggling to compete globally. With the threat of new regulatory changes increasing, and consumers beginning to understand the impact of plastic pollution on human health, the current model appears a high-risk option for investors,” he said.
Currently, 40 banks, brokers, insurers and investment managers provide financial backing to a group of 87 publicly traded companies that account for 75 percent of plastic production across the EU supply chain, which amounts to €678 billion (US$ 710 billion) worth of shares. This suggests that, in theory, decision-making is well concentrated. However, analysis reveals that in the last five years, only nine resolutions to introduce new policies have been raised at annual general meetings, reflecting the current level of ambivalence towards the issue.
Moreover, to date there have been low levels of EU investment in new production processes and facilities, progress on a sustainable transition is still slow. Planet Tracker’s analysis of 990 corporate bonds and loans issued by the world-leading plastics manufacturers revealed that only three are linked to decreasing plastic pollution.
The report notes that the economic turnover of the EU27’s plastic sector has already flatlined, with zero growth recorded from 2010 to 2019, despite an uptick in global plastics production.
The past 10 years have seen a decline in the EU27 global chemical market share, and plastics as a percentage of EU27 chemical sales. By comparison, China grew its global chemical sales from €609.5 billion to €1,488.0 billion (US$ 639 billion/1,559 billion) and expanded its global market share from 25.8 per cent to 40.6 per cent, making it the leading chemical producer globally by some margin.