The circular economy ecosystem – a conversation with TC Transcontinental

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.

Magali Depras: We’ve been engaging with our resin suppliers. We’ve been engaging with our customers to develop solutions. We engage with recyclers. It’s really a collective effort that makes sure that you get the right innovation and that you accelerate the past.

Dominique Barker: We are pleased to welcome you to our Circular Economy miniseries. In this series, leaders and experts from different industries and think tanks will provide insights into the circular economy, the global trends and the role of corporates, financial institutions and governments. The role that they play in the transition towards a circular economy from what we call a linear one. And maybe for those who never heard the term circular economy, it just means it’s recycling. I mean, it means not using virgin materials. We’re pleased to announce that CIBC will host a Circular Economy Roundtable Conference on April 13, 2022. So if you’re interested in attending that, please do reach out to your CIBC relationship manager. So in today’s episode, I’m speaking with Magalia Depras. She is Chief Strategy and CSR officer at TC Transcontinental. We’re pleased to welcome her today to The Sustainability Agenda. How are you, Magali?

Magali Depras: Hello, Dominique. I’m very well. Thank you. Pleased to be here. Thank you for having me.

Dominique Barker: Great. So first off, congratulations, you’ve recently ranked in the Corporate Knights 100 Most Sustainable Corporations for 2022. Maybe you could briefly introduce the company for our listeners who might not be so familiar with TC Transcontinental?

Magali Depras: Sure. So TC Transcontinental is a family controlled and publicly traded company. We’re headquartered in Montreal, Quebec. We have two point six billion dollars in revenues and about 8000 employees. We have become a leader in flexible packaging in the United States, in Canada and in Latin America. Our packaging division, in fact, now accounts for more than half of our revenues and half of our employees. We offer a variety of flexible plastics products, such as shrink films, roll stocks, bags, pouches that we produce and we print. And we serve multiple market segments in the food and in the consumer goods sector, as well as in the agriculture. We also produce coating solutions for sectors such as medical, electronics or automotive. Last but not least, and we’ll speak more about it today, we also invested in our own recycling capabilities. The other major division for TC Transcontinental is TC printing. It’s actually where we started 40 years ago, and we are Canada’s largest printer. We have a deep sense of legacy and a willingness to be a good corporate citizen. So indeed, thank you for the word of introduction. We are honoured to have been ranked for the past 17 years, in fact, amongst the top 50 Most Sustainable Canadian companies by Corporate Knights. And in the last two years, amongst the top 100 Most Sustainable corporations. That’s DC transcontinental, in a nutshell.

Dominique Barker: Great. We’re going to do a bit of a deep dive into some areas that are of interest to the circular economy. So we believe that TC Transcontinental has had a long term focus on innovation and R&D. Why is innovation necessary for the circular economy transition and what areas or themes are you focused on?

Magali Depras: Yes, innovation is definitely essential if we want to create a circular economy for plastics. Our focus is definitely on the development of recyclable structures and integrating recycled plastics into our packaging. I wanted to mention as an example of the investments we’ve made that last year we opened our new technology centre in the US in Menasha, Wisconsin. It’s called ASTRA. ASTRA standing for Art, Science and Technology Research and Application Centre. Sure. It’s actually a large facility to twelve thousand two hundred square foot facility, and we have a group of more than 20 engineers who are behind this and we are focusing on four areas. We have an analytical and testing service laboratory that simulates, in fact, real life use of packaging from feeling to transportation and distribution. We also have an application in packaging development lab. It’s actually dedicated to test the different films that we produce, the new structures that we produce to avoid any surprises on the customer’s equipment and ensure that the performance of the packaging remains high. We have something unique. I think it’s the first of its kind in a packaging manufacturer. We have an advanced compost lab. It’s really a lab that makes sure that we can certify compostable packaging. We will have very soon the in-house recyclability assessment lab for the structures, including integrating recycled plastics. So as you can see, Dominique, we’re really investing in new technologies. We’re putting all the resources it takes to make the circular economy for plastics become a reality.

Dominique Barker: Great. So TC Transcontinental started to grow its packaging business from 2018. And what are some of the opportunities and challenges for flexible plastics and flexible packaging?

Magali Depras: Yes, so I’ll start with maybe explaining the benefits of flexible plastics because some of them may be unknown. Actually, flexible plastics significantly improves the protection and the freshness of products. It increase the shelf life and it reduces food waste thanks to the barrier properties that you have in flexible plastics. It also offers an optimal product to package ratio, and it optimizes transportation because it’s lighter weight and it has a flat shape compared to other types of containers. On the other side, you mentioned the challenges. We know that plastics have not been well recycled in the past. As you may know, packaging materials, they were largely shipped to Asia and they were being reprocessed there. I guess no one was really looking at improving their recycling here locally and multi-layer plastics because of their complex structure, which is required to protect the food could not be, well, recycled. So now the entire industry has to do something about it, and he’s working to find solutions so that plastics never become waste and are truly recycled.

Dominique Barker: And maybe you can tell us what is being done to make them more sustainable. So, for example, how do you measure the total environmental impact and benefits of your sustainable packaging?

Magali Depras: In 2019, we were the first Canadian based manufacturer to join the Ellen MacArthur’s Global Commitment to make sure plastics never become waste. We committed to ambitious objectives, including that by 2025 one hundred percent of our packaging portfolio will be either recyclable, compostable or reusable. And we also committed to achieve a 10 percent use of recycled plastics on average by weight across our product portfolio. So how do we do this? We have committed to invest at least one percent of our packaging revenues in research and development. We invest in new technology. And we develop new solutions that are fully recyclable. In 2019, we acquired our first recycling facility in Montreal that allows us to produce recycled resins that we can then reintroduce in our packaging. And finally, we joined forces with multiple stakeholders across the supply chain in order to accelerate innovation. As an example, we co-founded a group called the Circular Plastics Task Force in Quebec, including brands such as Danone or Keurig, Dr. Pepper, other packaging manufacturers such as Cascades and Dinah Pack. Industry associations such as the Plastics Division of the Chemistry Industry Association of Canada. And we have received government support. We have in fact received half a million dollars of subsidy through Climate Change Canada. And finally, Dominique, you ask me, how do we measure the environmental impact and the benefits? Packaging accounts for 10 percent of the total carbon footprint of a product. That being said, as packaging manufacturer, we’re interested to understand the lifecycle of our packaging. I’ll make the example of ground coffee. You know, coffee can be packed in various materials. It can be packed in steel, it can be packed in plastic canisters. It can be packed in flexible plastic pouches. A flexible pouch requires 16 times less water compared to a steel can, and the production of a flexible pouch emits four to seven times less greenhouse gas than a rigid canister or a steel can. So, yes, flexible plastics demonstrate positive lifecycle analysis results. And at the end of the day, I think we have to focus on the end of life and how plastics can be recycled.

Dominique Barker: Right, so those pouches, while they’re less carbon intensive, they do need to be recycled and reused, and that sounds like something that you’re working on. So you’re the first signatory onto the Ellen MacArthur Foundation New Plastics Economic Global Commitment, which is fantastic. What advice would you give to those in the industry to help accelerate circularity?

Magali Depras: You don’t work individually. You need to engage with the entire supply chain. If I take TC Transcontinental as an example, we’ve been engaging with our resin suppliers. We’ve been engaging with our customers to develop solutions. We engage with recyclers. It’s really a collective effort that makes sure that you get the right innovation and that you accelerate the past because again, it’s a collective responsibility we all have.

Dominique Barker: Great. And I want to quote from president of TC Transcontinental Packaging from Thomas Morin. He said our vision of a circular economy inspires our actions, including responsible procurement, recycling of materials and the design of sustainable products. End of quote. So TC Transcontinental launched a sustainability linked loan last year, and one of the KPIs or key performance indicators was the percent of recycled material used in production. So as we seek to advance the circular economy, how can sustainable finance help? Was this tool helpful? Maybe you can just talk us through that sustainable financing.

Magali Depras: Sure. I think innovation needs financing right? And I think we saw the sustainability linked loan as a perfect alignment with our strategy, with our priorities and our sustainability vision. And this is definitely one of our targets, it’s part of our Ellen MacArthur’s commitment to integrate recycled plastics in our portfolio, and it’s part of our strategic roadmap to develop our own recycling and recycled resins recipe as well, thing that allows us to learn, you know, and to develop new products for our customers and develop the right technology.

Dominique Barker: And are there any specific trends that you’re seeing in your customer base related to more sustainable packaging? But if you could talk to some of the trends and how you would describe the demand profile for your sustainable packaging products.

Magali Depras: When we look at our customers, when we look at the brands and even the retailers, we all share the same objectives and vision. I think there are various trends that we see. First, we see the trend towards having plastics, which are 100 percent recyclable. And there’s always, of course, what we call eco design, you know, the need and the request to have the optimal product to packaging ratio. So to start with the one hundred percent recyclable solutions, this is definitely something the entire industry is requesting. You know, we want to have plastics, which is easy to recycle. What it means for us, what it means for our team is to develop structures which keep and maintain the properties of virgin plastic, but at the same time which are recyclable and replace, you know, structures and complex structures which were not recyclable before. We received an award last year, which is our new integrated film, which is made of 30 percent recycled plastics and which has been listed by Coca-Cola for their shrink wrap. These are definitely the trends I think everyone is really targeting you to make sure that plastics never becomes waste.

Dominique Barker: Well, thank you, Magali. And I can say from a trend perspective, we see the circular economy as being an important emerging area for investors and in particular, private equity, it seems, actually. And so we thank you for your comments today and we will be hosting an event April 13. CIBC and Magali will be part of that. So thank you for helping us today and for helping us when we hold our event April 13th. Thank you Magali for coming on the show today, and thank you to our listeners for tuning in.

Magali Depras: You’re welcome. That was my pleasure. Thank you, Dominique.

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.

Disclaimer: The materials disclosed on this podcast are for informational purposes only and subject to our Code of Conduct as well as IIROC rules. The information and data contained herein has been obtained or derived from sources believed to be reliable, without independent verification by CIBC Capital Markets and, to the extent that such information and data is based on sources outside CIBC Capital Markets, we do not represent or warrant that any such information or data is accurate, adequate or complete. Notwithstanding anything to the contrary herein, CIBC World Markets Inc. (and/or any affiliate thereof) shall not assume any responsibility or liability of any nature in connection with any of the contents of this communication. This communication is tailored for a particular audience and accordingly, this message is intended for such specific audience only. Any dissemination, re-distribution or other use of this message or the market commentary contained herein by any recipient is unauthorized. This communication should not be construed as a research report. The services, securities and investments discussed in this report may not be available to, nor suitable for, all investors. Nothing in this communication constitutes a recommendation, offer or solicitation to buy or sell any specific investments discussed herein. Speakers on this podcast do not have any actual, implied or apparent authority to act on behalf of any issuer mentioned in this podcast. The commentary and opinions expressed herein are solely those of the individual speaker(s), except where the author expressly states them to be the opinions of CIBC World Markets Inc. The speaker(s) may provide short-term trading views or ideas on issuers, securities, commodities, currencies or other financial instruments but investors should not expect continuing analysis, views or discussion relating to those instruments discussed herein. Any information provided herein is not intended to represent an adequate basis for investors to make an informed investment decision and is subject to change without notice. CIBC Capital Markets is a trademark brand name under which Canadian Imperial Bank of Commerce (“CIBC”), its subsidiaries and affiliates provide products and services to our customers around the world. For more information about these legal entities, as well as the products and services offered by CIBC Capital Markets, please visit www.cibccm.com.