Can plastic credits be a viable tool on the road to a circular economy?

Plastics are the poster child of the broken, linear economy.

New research published on Friday (26 May)  by EA Environmental Action found that more than 40% of the world’s population currently lives in areas where plastic waste generated has already exceeded the capacity to manage it. The figure is projected to rise to 60% by 28 July 2023, meaning that a Plastics Overshoot Day will continue to move forward in the calendar.

The Ellen Macarthur Foundation estimates that 95% of the value of plastic packaging materials produced each year is lost through pollution, landfilling, incineration or downcycling. This is equivalent to at least $80bn.

Reducing single-use plastics (SUPs) is therefore one of the greatest challenges facing society and businesses and many corporates have set ambitious targets to phase out SUPs and transition to circular business models.

The plastic tap cannot be turned off overnight and while some businesses are willing to fund change, there is an understanding that supply chains and waste management systems will need to be overhauled to reach this vision.

As long-term trajectories take shape, more immediate tools have emerged. One that continues to be examined by businesses and green groups alike is that of “plastic credits”.

Plastic credits work akin to carbon credits by giving companies the option to tackle plastic pollution that sits outside of their value chain in exchange for credits that can “offset” the plastic use that the business is responsible for.

Much like carbon credits, plastic credits are meant to be used to tackle unavoidable usage of SUPs, but many green groups express concern that it enables business as usual for companies with huge plastic footprints to carry on production.

‘Festival of greenwashing’

One such organisation expressing these concerns is A Plastic Planet. The organisation’s co-founder Sian Sutherland told edie that plastic credits “fundamentally will never fix the problem”.

“Plastic credits are yet another example of the biggest plastic users kicking the can down the road,” Sutherland tells edie.

“As a system, it is ineffective with no clear proof that it reduces plastic waste. With no strict regulations that govern the scheme and a lack of policy holding organisations to account, plastic credits simply enable the festival of greenwashing to continue. We cannot condone any system that results in environmental brownie points being handed to those with the biggest wallet.”

A lot of larger businesses have pioneered the use of plastic credits, and questions have been raised as to the validity of this process.

Back in 2019, major users and producers of plastics packaging including Danone, Veolia and Nestlé jointly launched a global initiative aimed at standardising and accelerating corporate action on plastics, with a focus on utilising credits.

Called the 3R Initiative and operated through a partnership with non-profits Verra and BVRio – which set international environmental standards and assist with the development of green markets respectively – the scheme enables companies to access a digital tool that allows them to trade plastics credits issued by recycling and recovery providers worldwide. These credits can then be used to prove compliance and to “offset” corporate plastic use.

Two years on from its creation, the 3R Initiative launched the Plastic Waste Reduction Standard, designed to quell some of the fears as to the transparency and usage of plastics credits. It is managed by Verra, which has faced criticism in recent months over the validity of its carbon credits.

Research from the Guardian found that 90% of Verra’s most common carbon credits – rainforest offset credits – were “likely to be phantom credits and do not represent genuine carbon reductions”. The investigation found that 94% of the credits had no benefit to the climate and that threats to the forests where projects were based had “been overstated by about 400% on average”.

Verra, which certifies projects and issues credits, has heavily disputed the findings. Verra’s updated REDD methodology is expected to be finalised later this year and has been in development since 2020.

Plastic credits will need to avoid the common pitfalls the carbon credits commonly fall into in order to negate greenwashing accusations. Junk credits, poor transparency and questions over how much carbon savings are actually generated per credit are all major challenges in the carbon offsets market.

Plastics should be easier to manage, especially when it comes to transparency.

Recovery not avoidance

Another major player in the plastics credit market is rePurpose Global. The company’s chief executive Svanika Balasubramanian recently told CNBC that plastics credits were easier to calculate because they aren’t focused on avoidance, but rather on the actual recovery of ocean-bound plastics.

“We’re not thinking about avoidance, we’re thinking about actual recovery, right? So we’re not calculating what was avoided from the oceans,” Balasubramanian says. “In a sense, we’re actually calculating what we recovered. And so the math becomes a lot easier.”

The percentage of recovered and recycled plastics needs to increase massively if the circular economy is to be realised. Recycled plastics account for just 9% of materials used in plastic products, but with the market valued at $593bn in 2021, it is clear that investors and businesses are attempting to finance solutions.

There is also the argument that plastic credits can help finance wider change in the interim, and given that plastic production isn’t being scaled down at a quick enough pace, businesses that invest n these markets can help speed up the process.

The UN believes that the world will still be producing some 100 million metric tonnes of plastics from single-use and short-life products by 2040. As such, there is also a need for scaled investment in waste management systems. Developing nations in particular need investment in collection and sorting systems,

The UN states it is possible to grow the global mechanical recycling capacity by 50% by 2027, against a 2016 baseline. Other controlled waste disposal options will need to be scaled by six million metric tonnes in the Global South each year. Further acceleration will then be needed through to 2040.

It is here where advocates of plastic credits see the biggest impact.

UpCircle operates in the global cosmetics industry – which produces 120 billion units of packaging annually including hard to recycle components such as lids, multi-layered boxes and cellophane.

The packaging across B Corp UpCircle’s range is 99% plastics free. For the remaining 1% plastic-free refill options are offered and customers can return empty packaging to the company to be refilled at a 20% discount.

UpCircle utilises rePurpose’s plastics credit scheme and the company’s co-founder Anna Brightman believes that credits can be used by companies provided they’ve already showcased the steps they’ve taken to move as far away from unnecessary plastics as possible beforehand.

“We are most well known for our total commitment on circularity, even down to the brand name,” Brightman tells edie. “It is front and center of every single thing that we do. But we can’t deny that were still actively produce packaging to house our products, so we wanted to turn our attention to the small amount of plastic usage we still have and look at how we can contribute to impact projects that are happening.

“I like to think we’re putting our money where our mouth is. We’re not just recovering as much plastic as we produce, but we’re actually recovering twice as much through the credits.”

Brightman does note the concerns about plastics production and that for some brands, credits could be used to create the notion that they are tackling the issue without actually reducing usage, but that credits can be used correctly to make a difference.

Through the partnership with rePurpose Global. UpCircle funds an impact project in India that has removed nearly one million single-use plastic pouches from Goa’s coastline.

This criteria is key for Brightman, who claims that the rePurpose Global’s schemes provides accountability assurances that the recovered plastics would’ve ended up in the oceans without the intervention of the impact projects.

Waste management hierarchies

One of the main attractions of plastic credit schemes is that they essentially funnel finance into waste management and infrastructure in nations that desperately need it. NGOs are calling for the price of that required infrastructure to be baked into the cost of the credit, alongside user guidelines to ensure businesses only turn to credits once they’ve done all they can to reduce plastics.

WWF, for example, has issued a public standpoint on the use of plastic credits. While “cautious” of the market, the charity does acknowledge that “if developed appropriately, plastic crediting has the potential to drive investment towards circular systems.”

“WWF is cautious in regard to plastic crediting because there are not yet clear standards/processes associated with this concept and, depending on how they are developed, crediting mechanisms may enable companies to claim they are taking action without making substantial changes to their business,” the statement says. “Business as usual will not solve the global plastic pollution crisis.”

3R Initiative’s Corporate Plastic Stewardship Guidelines have therefore been developed to try and ensure that businesses only access credits through a reduction-first mindset, but questions remain as to how this market will be governed, especially given Verra’s issues in the carbon markets.

Indeed, some businesses may feel reluctant to enter into the plastics credit market over fears that they’ll be branded misleading.

UpCircle’s Brightman believes concerns of greenwashing can be alleviated by brands that can showcase leadership on embracing circularity, and that financing change for critical waste infrastructure and collection projects adds a different kind of value for a company.

“It’s nice to know that we are supporting the wages waste workers in India to do good,” Brightman adds, “But this can’t just be the only thing a brand does and circularity is built into everything we do. But our financing for this is tangible and creates a measurable impact, so it feels more certain than some of the carbon [markets].

“It’s not just speaking on the need for change, but actually driving it in the short term and I like to think that removes potential skepticism from the equation because we are putting some of our profits and revenues into projects that remove plastics and support workers. We’re doing this because in the current climate, not all countries have the right recycling and collection infrastructure right now.”

Plastic policies

Brightman, like many other business leaders, notes that policies will be critical to shaping the circular economy in the long-run.

Many nations are pushing for reformed extended producer responsibility (EPR) schemes that would place extra emphasis on packaging producers to pay for the management of the materials they use. These policies and practices can take a long time to introduce however, with the UK still sorting out its reporting requirements for the scheme two years after launching a consultation on the matter.

A Plastic Planet’s Sutherland echoes the calls that EPR “is the answer” to deliver a widespread shift to the circular economy.

“If real change is the goal, a successful Global Plastics Treaty with robust accountability in full EPR is the answer,” Sutherland says. “Anything that doesn’t result in the most important actions – reduce and replace – will ultimately prove a band-aid on a broken system.

“Plastic credits will prove even less successful at actually reducing pollution than a plastic tax. To deliver the drastic changes needed to secure the future of the planet, mandatory and global measures and clear legislation are needed, not more clever ways to sidestep the ever-growing problem of plastic.”

But as these policies slowly take shape many businesses will still be attracted to the immediate impact of plastic credits, provided the governance is in place to ensure that plastics are extracted and recycled through impact projects.

With the Pew Trusts warning that companies face at least $100bn of annual financial risk in the 2040s if governments require them to cover waste management costs at expected volumes, and the Minderoo Foundation estimating that companies are likely to be ordered to pay at least $20bn in legal costs for plastic-pollution-related cases between now and 2030, many corporates may move to act now.

Ultimately, Brightman believes that as long as plastic continues to be a waste stream, then plastic credits are a viable tool – but not the only one – to respond. As the transition to a circular economy speeds up though, Brightman does say that there may be no need for plastic credits in a best case scenario.

“We know that some [materials] struggle to get recycled, which is why we’re paying our bit to recover plastics elsewhere in a measurable way,” Brightman says. “If every single item was recoverable and fully circular then our calculation towards plastic credits would be zero.

“Unfortunately that’s not the case, but waste is currently still inevitable and that’s unfortunate. The dream is that there would be no use for plastic credits because there would be nothing to recover.

“That’s something to aim for.”