Plastics legislation & how to make your business model fit for the future

The EU passed the Green Deal, and in the US, California is leading the way to a circular economy. All around the world, our way of doing business will change in the next few years in order to limit climate change to a level that is still manageable.

Here we analyze what this means for plastics.

The Basics

The realization that humankind needs to live and work more sustainably has become widespread. The United Nations has put this into its 17 Sustainable Development Goals (SDGs).

The actions of an overwhelming number of countries globally are guided by these when it comes to development goals and sustainability.

In the EU, the European Commission additionally passed the European Green Deal in 2019. Its aim is not only to make the EU climate-neutral by 2050, but also to transform the European economy into a sustainable circular economy. This will enable the EU to continue to compete and grow in a transforming global economy.

In the context of the Green Deal, there are three major initiatives:

The Action Plan on Sustainable Finance including the EU taxonomy under EU 2020/852.
The Action Plan on Circular Economy defines targets to reduce CO2 emissions in the economy, to conserve resources and to reduce pollution.
The EU Climate Change Act, meanwhile implemented in the EU states, sets the target to reduce the CO2 footprint by 50% by 2030 and by 100% by 2050 compared to levels in 1990. After that, the EU aims to be climate positive, i.e. to bind CO2 on a net basis.

Under the term "Fit for 55", the EU has adopted a large package of regulations and directives that flesh out and operationalize these goals.

But what does this mean exactly?

Deep Dive

Impact on the Plastics Industry

In our view, there are two categories of impact: First, the transformation to a circular economy with CO2 neutrality. This concerns the products, their materials and business models. Second, the financing of companies and the costs incurring in various areas.

Circular Economy

In the plastics industry, it is the transformation to a circular economy in particular that is having a massive impact. The Action Plan aims to eliminate the use of fossil resources wherever possible. First of all, this means recycling quotas for plastics. Furthermore, it also means the use of renewable raw materials wherever it offers an ecological advantage. And that is now the case in most applications.

Apart from mere material substitution, new business models will also find their way into areas where leasing and the return of products are not practiced as of today. Nevertheless, this follows the requirement to establish material cycles in order to conserve resources. Repairability and refurbishment are key concepts here.

When it comes to environmental protection, the topic of microplastics is also of note. The EU explicitly wants to avoid microplastic emissions. This particularly affects the tire and textile industries. You can read more on the subject of microplastics here.

Financing

The EU taxonomy (EU 2020/852) also has a major impact on the financial position of companies. Investments in non-sustainable businesses will become unattractive and for institutional investors no longer possible. Credit ratings will be linked to the fulfillment of ESG criteria and even insurance premiums will depend on the sustainability of a company's actions.

In short, those who do not act sustainably will face a cost problem that is greater than the additional costs of sustainable management.

How is all of this supposed to be reported?

Reporting Obligations

Corporate Reports must already contain sustainability reports. In the coming years, this obligation will also be extended to medium-sized companies. This will soon affect almost all clinics and hospitals, as well. A reporting obligation on sustainability of the company and the achievement of targets will therefore affect almost everyone.

In a Nutshell

In a nutshell, the EU will (fortunately) change the way we do business and place a very strong focus on reducing CO2 emissions and conserving resources. Fossil raw materials will not fare well, while renewable raw materials, if used wisely, will fully meet the requirements of future regulation.

For companies, this means competition for the most sustainable solutions. After all, your customers want to reduce their Scope 3 emissions, as well.

For bioplastics as well as for fossil plastics, the issue of recycling must be considered as the most valuable material cycle.

Schedule a free consultation now to learn how we can make your plastic products regulatory fit for the future.