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May 26, 2020 11:01 AM

CPG firms pushing resin fees a sign of changing times

Steve Toloken
Assistant Managing Editor
Plastics News Staff
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    How's this for a shot across the bow for the plastics packaging industry: major consumer brands like Coke, Pepsi, Clorox and others endorsing a fee on virgin resin in the U.S. to help boost recycling.

    Those companies, through the Consumer Brands Association trade group, are suggesting a surcharge on virgin resin to correct the price disparity with recycled materials.

    The idea was part of a fairly detailed policy plan that CBA recently came out with for fixing the country's recycling systems.

    It's a big shift in thinking. One longtime recycling industry watcher summed up one of my reactions when he said it shows how ideas that were "unthinkable" a few years ago have now gone mainstream.

    There are no details on any resin fee; it's more of a concept. But having CBA companies pushing it will make it part of mainstream U.S. political debate.

    It's become a truism in that debate that we don't do enough recycling here now, especially for plastics. But there's no agreement on how to pay to fix that.

    Another thing that will change the debate is COVID-19.

    Post-coronavirus, governments will be short on cash but will still want to address recycling problems. So will consumer brand companies like Coke and Pepsi. I think they'll continue with the commitments they've made around plastics sustainability, using less virgin material and more recycled resin.

    Part of CBA's strategy here is to nationalize recycling policy and have Washington play a bigger role in what has historically been a state and local problem.

    A cynic might say that the consumer product goods companies are motivated partly by all the state legislative activity around recycling that they don't like — think California — and they're hoping for a friendlier platform in D.C.

    But the specificity that the group has in its new recycling platform suggests it has given serious thought to practical financial considerations.

    They lay out a number of financing mechanisms, from higher landfill tipping fees to surcharges on packaging and call for more work around end market demand for recyclables.

    Another interesting wrinkle is that some of the companies now endorsing resin fees have also bailed out of the Plastics Industry Association in the last two years.

    Clorox CEO Benno Dorer, who is CBA's vice chairman, wrote in 2018 that his company was leaving the plastics association in favor of groups that "most align with our business and corporate responsibility priorities."

    You also might remember that last year Coca-Cola Co., which also sits on the CBA board, left the plastics association, saying that it withdrew "as a result of positions the organization was taking that were not fully consistent with our commitments and goals."

    There's a real temptation in the plastics industry to say those companies left over "virtue signaling," that they wanted to make a public statement to consumers who don't like plastics waste, without actually having to do much.

    But, to me, saying they support a resin tax doesn't seem like they're virtue signaling.

    I've heard some — not all, but some — people in the trade association world say that the main problem for the plastics industry is it faces well-funded environmental groups.

    I think that misses the mark. Right now, the best case estimate from the Ellen MacArthur Foundation and its New Plastics Economy project is that in 2018 we had about 4 percent recycled resin content in plastic packaging.

    That's way too low. We don't recycle enough plastic or use enough recycled content. We all know that.

    Such low use of recycled content is more of a problem than any perception of "virtue signaling" or funding levels of environmental groups ever could be.

    Plastics companies are making sizable investments to fix that, and many CBA companies have made major public commitments to use more recycled plastic and make plastic a more circular material.

    Post-COVID — whenever that may be — I think weaker government finances will make ideas that the CBA is floating more likely.

    Assuming the public and consumer companies still want to fix plastics recycling (a good assumption), the much higher U.S. budget deficits after coronavirus will mean that governments are going to ask the industry for more skin in the game.

    A resin fee, at first glance, seems like a pretty radical idea, and it could be too difficult to structure. But I wouldn't be so sure. It has the advantage of being able to generate money to fix a problem without the consumer ever feeling it directly. Politicians will like that.

    The main takeaway from the CPG industry endorsing resin fees is that the plastics industry could find itself in a position around policy and new laws where what was unthinkable a few years ago becomes the new normal.

    Steve Toloken is a Washington-based Plastics News assistant managing editor. Follow him on Twitter @Steve_Toloken.

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