Ominous News for the Circular Economy
Plenty of CPG brands have set ambitious sustainability goals but how well are they really doing?
At a Glance
- A new report from BloombergNEF (BNEF) ranks 40 CPG brands' progress with sustainable packaging materials.
- Eleven of 20 brand owners in BNEF's 2024 ranking target an increased share of recycled packaging materials by 2025 or 2030.
- Companies set circular economy goals and plastic producers make big claims, but many aren't pulling their weight.
In the race to improve the environment, packaging liability has become a central issue for brands that want to align themselves on the right side of the pollution problem. A new report from BloombergNEF (BNEF) confirms that a wobble in sustainable packaging material goals of consumer packaged goods (CPG) companies is casting a concerning shadow on the collective progress toward a circular economy. While companies are setting circular economy goals and plastic producers are making big claims about more sustainable options, not everyone is pulling their weight.
BNEF’s comprehensive 2024 Circular Economy Company Ranking assesses 40 firms (20 brand owners and 20 plastic producers) to identify those that are leading the charge to use or develop more sustainable packaging materials and those that are falling behind.
Overall, BNEF found a slowdown in efforts toward achieving a circular economy in 2023, with many companies reporting challenges in sourcing sustainable materials and feedstock, compounded by inadequate infrastructure for sorting and recycling — all while facing increasing costs.
Key takeaways.
Leading the brand owners in this year’s report are Coca-Cola, L’Oréal, and PepsiCo, who have been pioneers in setting circular economy strategies and investing in new forms of packaging. Danone also moved up in the latest ranking as the only brand owner in this ranking with an absolute packaging reduction target beyond 2030.
On the plastic producers’ side, LyondellBasell, Braskem, and Dow took the highest three spots, having each set their own targets to ramp up sustainable material production, with some even pausing investment in new production units that use virgin materials. LyondellBasell and Sabic moved up six places in the plastic producer pecking order, to take first and sixth place, respectively. LyondellBasell has one of the most ambitious targets to produce 2 million metric tons of circular polymers by 2030. Sabic also announced a new circular polymer production target for 2030 at the end of 2021. Such a goal carries the highest weight in the ranking as it highlights a strong commitment towards a circular economy.
Among the companies that moved down in the ranking were Colgate-Palmolive, which lost its top position in the ranking and dropped to fifth. Despite being a circular economy pioneer, its target only covers plastic packaging. The company’s goal for 25% recycled content in plastic packaging by 2025 also lags peers including L’Oréal and Danone, who aim to achieve 50% recycled content by the same year.
On the plastic producer side, Borealis lost its top position in the ranking this year. It performed well overall, with a target to produce 1.8 million metric tons of recycled and renewable polymers by 2030. However, its ambition fell short of peers, who have also set targets to achieve 100% recyclable, reusable and recoverable plastics in their production.
“Those lagging have weaker ambition compared to those at the top with fewer targets or limited data disclosure,” comments Kirti Vasta, BNEF Senior Associate of Sustainable Materials. “Some of the lagging brand owners are those that rely heavily on the ‘hard-to-recycle’ films and wrappers and are yet to set packaging targets.”
Missing recycled content targets, revising goals.
Eleven of the 20 brand owners ranked have set targets to increase the share of recycled materials in their packaging by 2025 or 2030. L’Oréal and Danone have the highest share of packaging from bio-based or recycled sources, accounting for more than 30% in 2023. Both companies also have some of the most ambitious 2025 targets. This will require them to rapidly increase their recycled or bio-based content by around 8-10 percentage points per year, much faster than what they have achieved in the past. L’Oréal also has an even more ambitious 2030 target — to make 100% of its packaging from sustainable sources by the end of the decade.
The undersupply of high-grade recycled plastic in many markets is stifling brand owners’ ability to achieve their targets, resulting in some delaying or revising their goals. For example, PepsiCo previously had a target to achieve 25% post-consumer recycled (PCR) content in its packaging by 2025, but this target is no longer mentioned on its website and the company is instead aiming for 50% PCR content by 2030. In 2023, Unilever revised its original goal to halve virgin plastic consumption by 2025, shifting the target to 30% by 2026 and 40% by 2028.
Some brand owners are losing the gap by investing directly in recycling infrastructure to increase recycled plastic supply, while other are focusing more on targets to cut their absolute virgin plastic packaging use altogether by light-weighting, re-designing and investing in reusable and refillable packaging.
On the supply side, more than 80% of the producers in BNEF’s ranking have set targets to produce millions of tons of sustainable (recycled or bio-based) materials by 2030 or earlier. Fourteen of these companies have set clear production targets by 2030, while two (Shell and Hanwha) have goals that do not specify the volume or the targeted date. If these 14 companies meet their targets, they alone would supply around 15.5 million tons of sustainable plastics per year by 2030. This equates to roughly the total polymer production capacity of PetroChina, the second-largest producers ranked.
Production targets hold the highest weight in BNEF’s ranking methodology. Only a few producers have disclosed their current progress, as many are still waiting for more recycling capacity to be commissioned. Companies also face challenges in sourcing scrap or sustainable feedstock to produce circular plastics. To add to the pressure, some producers reported weaker financial results in 2023 due to global overcapacity and flagging demand.
Nevertheless, BNEF says producers are counting on chemical recycling to achieve their production targets. All ranked producers (except PetroChina) have announced projects or partnerships involving chemical recycling technologies. Such processes use chemicals to convert plastic waste into virgin-grade feedstock materials such as recycled naphtha. Data tracked by BNEF shows chemical recycling capacity could reach around 5.3 million tons by 2030, if all the announced capacity comes online.
Advice for struggling companies.
For companies struggling to contribute to a circular economy, Vasta says that setting ambitious targets and following up with partnerships and investments across the value chain from design to the end-of-life of packaging can be a real differentiating factor between leaders and those who follow behind. “This means collaboration across the value chain and investment in the necessary infrastructure are key,” she says. “For example, both Nestlé and PepsiCo. recently announced direct investments in new recycling plants. Similarly, some plastics producers are investing in waste-sorting facilities.
“As a result,” she concludes, “the leading companies are paving the path for the rest of the industry to follow suit however, all companies will eventually need to take action to achieve a circular economy."
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