Scarcity of Discarded Plastic Bottles Leaves Coca-Cola and Nike Fighting Over Trash
Ambitious Goals
As sustainability efforts expand, some large companies like Coca-Cola (KO) and Nestlé (NSRGY) have pledged to reduce their carbon footprint by using recycled plastic. Coca-Cola has announced goals to make 100% of their packaging recyclable by 2025 and to use recycled material in a minimum of half their packaging by 2030.
The prices of recycled materials are reflecting the shift in demand. Data from Independent Commodity Intelligence Services show that in Europe the price of recycled polyethylene terephthalate, or PET, has increased by about 35% since January.
Green Legislation
Government initiatives in the US and Europe increasingly mandate the use of recycled materials in bottles. This will likely drive prices of recycled PET higher as more companies compete for access to the plastics. California has legislation in place requiring companies to use 50% recycled material in their plastic bottles by 2030. The European Union has issued directives limiting the manufacture of plastics and setting minimum percentage recycled materials for plastic bottles.
The problem is the small percentage of PET bottles that are collected for recycling – only 27% of discarded bottles are recovered in the US according to the National Association for PET Container Resources.
Hot Garbage
The market for old bottles is hot. A diverse range of companies focused on environmental impact are vying for recycled plastics. As a result, only about 30% of recycled bottle materials are reclaimed by the original manufacturers. Clothing companies such as H&M (HNNMY) repurpose plastic bottles into polyester. Sportswear giant Nike (NKE) uses materials from more than a billion plastic bottles in its products. Carpet and auto manufacturers are also in the market for recyclable plastics and could see their bottom lines pressured by new competition for these inputs.
It seems global efforts toward environmental responsibility has had the unexpected consequence of making trash a valuable commodity.
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