Report: EU plastics sector facing €678bn stranded asset risk due to ‘unsustainable’ business model

    30 May 2022

    EU plastics industry ‘on the precipice’ due to unsustainable business model, tightening green regulations and competition from China, Planet Tracker warns

    The European plastics industry is “on the precipice” of stranded asset risk due to an increasingly unsustainable business model that is putting €678bn investor capital under threat, unless it rapidly shifts gear towards a more circular plastics system based on reuse, recycling and waste reduction.

    That is the conclusion of fresh research released today by Planet Tracker, which highlights the growing threats posed to EU plastics companies from tightening environmental and climate regulations, greener consumer preferences and the ascendency of China’s chemicals sector.

    Based on its assessment of 87 publicly traded plastics companies across the EU’s 27 member states, which make up 75 per cent of plastic production across the trading bloc, the think tank said the industry’s economic turnover was already flatlining with zero growth recorded between 2010 and 2019.

    The EU27 global chemical market share, and plastics as a percentage of EU27 chemical sales, both declined over the period, even despite an uptick in global plastics production over the period, according to Planet Tracker.

    Meanwhile, China’s global chemical sales grew from €609.5bn to €1,488bn over the same period while expanding its global market share from over 25 per cent to more than 40 per cent, which means it is now the leading chemical producer globally by some margin, it said.

    But report argues that a more sustainable plastic business model based on circular principles such as more reuse, recycling and reduction of waste and greenhouse gas emissions offers the most viable route for EU plastics companies to better compete on the global stage, and to avoid stranding investor assets.

    It warns that the sector is under increasing scrutiny and pressure due to its role as a major greenhouse gas emitter, as well as growing concern about the impact of vast plastic pollution worldwide on the environment and human health.

    In order to remain competitive, the report calls on plastics companies to assess whether their current business-as-usual strategies are financially sustainable, and to adopt more circular business models by 2025, which it said would be a more profitable option in the longer term.

    John Willis, director of research at Planet Tracker, warned that the EU plastic industry was “on the precipice”, and needed to change tac towards a green future quickly.

    “Its current model is increasingly unsustainable,” he said. “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.”

    At present, however, Planet Tracker’s research indicates sluggish, if any, progress among Europe’s leading plastics companies to address its apparent decline in fortunes and its environmental impact.

    Over the last five years, only nine resolutions have been introduced at the AGMs of these companies focused on improving the circularity of the plastics business model, which the think tank said reflected “the current level of ambivalence towards the issue”.

    Moreover, its analysis of 990 corporate bonds and loans issued by the world-leading plastics manufacturers found that only three are linked to decreasing plastics pollution.

    It comes amid increasing concern about the impacts of plastic pollution on the climate, environment and human health, with waste microplastics having been found in almost every corner of the Earth, including rivers, food and even in human lungs.

    Earlier this year countries around the world therefore came together to agreed to draw up a landmark global plastics treaty aimed at combatting the growing mountain of plastics pollution worldwide.

    The EU plastics trade body, Plastics Europe, was considering a request for comment at the time of going to press.

    However, the trade body commissioned research last month which concluded current commitments and regulatory efforts to tackle the plastic waste crisis are too sluggish and lack the ambition required to align with agreed net zero goals and waste and recycling targets. That research recommended plastics firms work closely with policymakers towards building a more sustainable plastics system that addresses waste as well as helping plastics manufacturers move away from fossil fuels towards plant-based polymers.


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