The circular economy and plastics value chain

Dominique Barker: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape with a view on addressing current issues in a concise format to help you navigate and take action. I’m your host, Dominique Barker. Please join me as we explore today’s most pressing matters with special guests that will give you some new perspective and help you make sense of what really matters.

Babatunde Olateju: You know, when I put my recyclables in a blue bin, we put everything in one bag. You know, metals,  plastic, paper, glass, what have you in one bag. Whereas in places like BC, you often have what we call multi-stream recycling, whereby you separate your paper from your plastic, from your metals, from your glass.

Dominique Barker: We’re pleased to welcome you to our podcast series on the circular economy, where we’re going to be speaking to leaders and experts from different industries that will provide insights on the circular economy, global trends and the rules that corporates, financial institutions and governments can play in the transition towards a circular economy. We’re pleased to announce that CIBC will be hosting a Circular Economy Roundtable, and that’s going to be held April 13, 2022. Contact your CIBC rep for more details. On today’s episode, we’re going to be focusing on plastics and sustainable finance’s role in the circularity of plastics and policies that can really accelerate circularity in Canada. I’m pleased to be speaking today with Babatunde Olateju. He’s Principal Research Associate of Sustainability at the Conference Board of Canada, and he and I have been working on a number of things together and it’s been a pleasure. The Conference Board of Canada is an independent applied research organization which is dedicated to building a leadership capacity for a better Canada by delivering insights on economic trends, public policy and organizational performance. So we’re pleased to welcome Tunde to today’s episode of The Sustainability Agenda. Good morning, Tunde. How are you doing?

Babatunde Olateju: Good morning, Dominique. How are you today?

Dominique Barker: Great. Great. Ok, so the Conference Board of Canada did release two papers recently around the circular economy in plastics, and both of those reports are available on the Conference Board of Canada’s website, and they’re called Banking on a dual transition and the second report Bagged capital: attracting private investments in Canada’s plastic recycling industry. So Tunde, why don’t you set the stage and define the circular economy for us?

Babatunde Olateju: Right. Thank you. Dominique, it’s a great week to set the scene for the conversation. A circular economy essentially is a regenerative economy, so our current economy in Canada specifically involves a linearized economy whereby we take resources and produce materials and consume these materials or products, whether embedded and we simply just throw them away. That’s what happens by and large to our natural resources and the materials that we consume in the economy. So a circular economy represents a paradigm shift whereby rather than his take, make, use, dispose culture, we keep these materials and product in circulation in the economy for much longer. And in that way, we’re able to minimize the environmental and social impacts, particularly as it pertains to pollution associated with these materials and products and able to maximize the economic returns, be able to use natural resources more efficiently and be able to reduce costs associated with production as well. So this is the essence of a circular economy, Dominique.

Dominique Barker: Then let’s talk about why it’s important to really accelerate the transition to a circular economy.

Babatunde Olateju: Right. So, Dominique, it’s a great question. It’s important for multiple reasons. The first is that it advances progress on climate change and climate change mitigation. As I mentioned earlier, the use of natural resources becomes much more efficient in a circular economy and on the production side of the ledger, we’re able to minimize the greenhouse gas emissions associated with production. Like I said, because we use these sources much more efficiently on the consumption side, we’re also able to keep materials and products in use for longer, and that translates into lower consumption related emissions as well. But that’s not all that a circular transition affects. It has impacts, for instance, on biodiversity. We are all cognizant of plastics pollution, for instance, in the oceans whereby we see turtles with plastic straws in their noses, whales with plastics in their bellies. These have impacts on biodiversity and the health of our ecosystem, and it’s consequential for human health. Plastics are permeating or getting into the food chain and putting human health at risk. Like I mentioned, they’re impacting our aquatic animals in the oceans, and this has the potential to alter the balance that we have in these ecosystems. So it’s important for biodiversity. And then lastly, I’ll just stress that currently we actually landfill a lot of the plastic materials and products that we consume. Landfills have a social dimension to the most social impact, they affect real estate prices, they affect the socio economic livelihoods of nearby communities. So the circular transition has multiple benefits, societal benefits in its advancement.

Dominique Barker: Ok. And so I mean, we know that it’s an issue and that Canadians care about, and I believe you covered it in your report, Banking on a dual transition. So what are some of the key findings that can help make plastics more circular?

Babatunde Olateju: Right. And I think that’s an excellent question, Dominique. I would answer that question by splitting it into two. There’s a supply side of the conversation that we need to have. And I think on the supply side, we need to start with design, why we need to revisit, rethink, reimagine the way that we produce plastics. First of all, we need to make them reusable. First and foremost, even before we come to recycling, we need to make them reusable. And this is particularly the case for your non-durable plastics. So plastics that have a product lifetime of less than a year, then we need to talk about making them recyclable. So avoiding the use of multiple resins, avoiding the use of unwarranted additives and performance enhancers that we can do without to simplify the material constituents in plastics that can really help, particularly as pertains to non-durable plastics, and then there needs to be an increased connectivity into the design decisions we make, the material specifications we have with the end market, the downstream in terms of the infrastructure, the capability and the end markets associated in those markets for plastics. So there needs to be increased connectivity there. And then let me talk about durable plastics, which is where we have products lasting for more than a year and in some cases, decades. In this case, we really need to think about design for longevity, designing plastics to allow them to be much more amenable to being repurposed, refurbished and for just lasting longer and avoiding landfilling these plastics, Only two percent of durable plastics are recycled,

Dominique Barker: And that would be like PET, right? Remind us what PET is. Would that be considered the durable plastic?

Babatunde Olateju: Well, PET is mainly non-durable, actually mainly used in packaging applications. So, for instance, your plastic water bottles, your packaging for the grapes that you get from the grocery store, et cetera. What we are talking about are, when I say doable plastics, those plastics that are used in things like washing machines, automobile parts for construction applications, for instance, the pipes in your home, et cetera, et cetera. We need to really think about longevity and the ability to repurpose, refurbish those sorts of plastics.

Dominique Barker: So it sounds like there definitely would be a role for regulation and government in what you’re saying. But let’s focus on financial institutions because we often have a role to play as well. What are some things that financial institutions can do to help enable the transition towards a circular economy.

Babatunde Olateju: Right. I think financial institutions, they can make plastics really a boardroom issue going from a backyard issue because we often have these conversation about plastics, sustainability, circularity in the context of residential consumers and context of residences. We need to make this much more of an issue for businesses and firms. Why is that? You know, if you think about it, majority of plastic waste is produced from business institutions in Canada, and by and large business institutions in Canada are not required to recycle or they have no regulations at the moment, they’re actually required to recycle. So in terms of what financial consumers can do to help advance circularity, you know, a couple of things come to mind. One is that we need to increase disclosures, right? There’s a lot of conversation about disclosures on the carbon front. A lot of conversations about institutions, companies, firms having a climate change strategy and a transition strategy in particular. But we don’t have as many conversations regarding a circular economy strategy. Most publicly traded businesses, firms don’t have a circular economy strategy in Canada. We need to change that. Financial institutions can help by encouraging disclosures in terms of how much waste do you produce? Where is your waste going? How are you managing that? How are you ensuring that you’re taking into account the risks that come with linear business models in your firm? How are we ensuring that across your supply chain, these risks are also accounted for? You know, we need to have those sort of conversations, so engagement by the financial institutions with firms can really help. Then the other thing I would emphasize is that firms, for instance, let’s take a look at the plastics value chain, say the petrochemical industry. You know, they’re facing challenges, transitioning to a net zero transition to a circular economy transition. Financial institutions can help them access capital, which is increasingly tied to environmental social governance criteria, by getting them to transition credibly and defining what the goalposts are for a credible transition such that it can elicit, you know, access to sustainable finance, for instance. So I think those are the mechanisms that financial institutions can implement to allow for much more circular transitions.

Dominique Barker: And one thing we always say in the sustainability community is what gets measured, gets managed. So it’s a good point making sure that there’s disclosure and following so that we can manage it. So let’s turn to policy and regulation. There’s a recent study that was sponsored by the Government of Canada that estimates that circularity rates in Canada are only six point one percent, which is really low. And that compares to equally low, frankly, eleven point five percent for EU countries. But we’re quite behind the EU. What policies and regulations can play a role in incentivizing consumer behaviour?

Babatunde Olateju: Right. Yeah, you know, consumer behaviour is a really important dimension, Dominique. So thanks for raising that. I’ll hone in on the plastic side of this circularity conversation, essentially, because it’s really the arena, the material that is quite ubiquitous. And that’s the area where we have the most challenges. First and foremost, let’s define consumers. There’s always this tendency to look towards residences households as consumers, but we also need to increasingly include businesses and institutions, as I mentioned earlier, who by and large across Canada are not even obligated to think about circular economy issues, for instance, are not obligated to recycle in Canada. So that’s the first thing. So how do we incentivize them? Well, first and foremost, we need consistency in regulation, right? There’s really a patchwork, almost like a mosaic of guidelines and regulations across Canada. So for instance, where I live in Edmonton, when I put my recyclables in a blue bin, I put everything in one bag, you know, metals, plastic, paper, glass, what have you in one bag. Whereas in places like BC, you often have what we call multi-stream recycling, whereby you separate your paper from your plastic, from your metals from your glass. And as a result, the level of contamination you have in places like Edmonton with single stream recycling tends to be quite high relative to places where you have a separation of these different material types. And that contamination really has a domino effect because the ability of your material recovery facilities, for instance, to be able to actually sort through these materials and to have these materials be marketable has a lot to do with the degree of contamination that is contained with them. So if we can make regulations guidelines much more consistent within provinces between provinces and Canada, we sort of set ourselves up for success in advancing circularity. And then, as I mentioned in terms of businesses, we really need to think about the embedding circularity as a risk factor, as a risk component in assessing businesses, whereas in the valuation of businesses on the assessments of credit risks to businesses. Like I said, circularity has dimensions. It has implications for our climate change ambitions, has implications for our biodiversity issues, has impacts on the social front. So it needs to be part and parcel of the way that we simply do business in Canada. So those are some of the ways that we can go about incentivizing consumer behaviour.

Dominique Barker: And how many frameworks are there across Canada. I seem to remember it was some huge number, like 6,000 different recycling regulations.

Babatunde Olateju: Right. You know, I can’t think of the exact number off the top of my head, Dominique, but the short answer is that it’s a lot, right? And there is very limited consistency. In some cases, they are contradictions. So, for instance, black plastics in some municipalities in Canada are considered to be trash, whereas in other municipalities, these are actually accepted for recycling.

Dominique Barker: So it sounds like there’s also an opportunity for education for consumers as well, which is probably, you know, the low hanging fruit. Thank you very much. Last question. Any global practices that Canada could leverage?

Babatunde Olateju: Right. Plastics pollution is a global issue. I mean, what we see in places like Europe are landfill bans. So banning the landfilling of recyclable plastics, you know, it’s quite commonplace. And I think that is much more pervasive in Europe than we see North America. So giving an incentive to look beyond landfills. So actually, what do you do with these recyclable plastics and how can we put them to better use? But I should say that Europe also benefits from having a lot of its plastics waste being addressed through incineration with energy recovery. It’s often termed energy recovery, but really it’s incineration, which in North America there is much more aversion to having incineration plants here. So we need to talk about, when we talk about circularity, we also need to talk about the sort of the intermediary period between being a linear economy and being a fully circular economy. So how can we perhaps put plastics, keep them away from landfills or put them to good uses? So, for instance, there are some companies that are looking into converting plastic waste to chemical feedstocks like methanol and ethanol, for instance, which doesn’t necessarily create another, you know, a new plastic to be used in the economy. But at least it doesn’t end up in a landfill, and it’s at least put into a use that actually has value in the economy. So we also need to have that conversation about what happens in the interim before we get to a fully circular economy.

Dominique Barker: Great. And as we think about designing out waste, I mean, which is, I think, a key topic in the circular economy. Sometimes I think we should be thinking about how we lived in the sixties and seventies and we think about it, plastics and throwaway materials and fast fashion was not part of our economy. And so I remember the times when my dad and I used to go and bring our recycled bottles of pop to the pop shop in Quebec. And I mean, that does just doesn’t exist anymore. So sometimes maybe we should be learning from our past for a better future. Tunde, thank you so much for taking the time today to discuss this with us and really appreciate and you’ll be participating in our conference as a moderator. So thank you very much for that and for our listeners and our CIBC clients who wish to participate to tune in for that April 13. Thank you very much, Tunde.

Babatunde Olateju: You’re most welcome, Dominique. Thanks for having me.

Dominique Barker: Please join us next time as we tackle some of sustainability’s biggest questions providing different perspectives to help you move forward. I’m your host, Dominique Barker, and this is The Sustainability Agenda.

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