Why plastic waste is a C-suite issue
Why plastic waste is a C-suite issue
April 30, 2020
Morgan Stanley’s chief sustainability officer and chief marketing officer, Audrey Choi, beliebes that leaders who generate innovative ideas and take bold action at every stage of the plastic value chain can use their collective intellect, influence, and business impact not only to capture millions of dollars of value but also solve a problem that urgently needs addressing
Since its invention and widespread introduction into the economy some 70 years ago, plastic has become a valuable part of business and daily life. So much so, in fact, that we have created more than 8.3 billion metric tons of it around the world. If we were able to take all of that plastic and turn it into a single grocery bag, it could hold the entire planet. If business continues as usual, 30 years from now projections say we will have produced enough plastic waste to double-bag the Earth.
The problem is that more than 76% of all plastic has ended up as waste, and nearly 50% of the plastic waste we now produce each year is used just once, often only for a few minutes. In the time it takes you to read this article, about five million single-use plastic bottles will be discarded. The single-use packaging that we throw away each year represents US$100 billion of economic value. That’s a figure worth keeping in mind: recouping those losses and developing solutions to preventing plastic waste more broadly could amount to a trillion-dollar opportunity.
It’s time for members of the C-suite to embrace that opportunity, especially because plastic is more pervasive across our global economy than just about any other manufactured substance. From basic chemicals to high tech, from heavy industry to fast fashion, and from agricultural commodities to lifestyle brands – virtually every industry has plastic as an integral part of its products, supply chain, distribution, and customer interactions. For virtually every business leader, reducing plastic waste represents a strategic business opportunity.
We’ve identified five clear benefits that reducing plastic waste can deliver to businesses, whether your remit is innovation, operations, finance, risk, growth or brand.
1.) Drive innovation: Scientists, innovators, and entrepreneurs are already hard at work on finding ways to deliver the benefits of plastic without the problems of plastic waste. We’re seeing the beginnings of those innovations in spades. Chemical companies, for example, are investing in research into bioplastics or other formulations for plastic to increase recyclability, and the iconic retailer IKEA has taken note: the company recently announced that it is replacing all of its plastic foam packaging with a mushroom-based compostable packaging material. The material can be grown in a week, re-used repeatedly and takes just 30 days to decompose when no longer needed.
2.) Reduce operational costs: One of the obstacles often cited for not getting rid of plastic waste is that the alternatives are more costly, or that switching costs would be prohibitive. But consider a consumer goods company that sells shampoo or cleaning products. Today’s business model entails shipping large volumes of liquid in single-use plastic bottles, which become waste once the product is used. But in almost all cases, the largest ingredient by weight and volume in that product is water. If the company were to focus, say, on a concentrate or powder that the consumer could reconstitute at the point of consumption, in a re-usable container, this would reduce not only the company’s plastic waste but also its shipping costs and carbon footprint. The company would also bring its systems and cost outlays into better alignment with the true value-add aspect of its products.
3.) Reduce capital costs: Investors lately have become increasingly interested in aligning their investments with sustainable brands. As a result, we have recently seen the emergence of plastic-focused green bonds that enable companies to benefit from lower cost of capital when they issue corporate debt. Last year, for example, PepsiCo issued an inaugural billion-dollar green bond with a significant portion of the proceeds dedicated to reducing the virgin plastic in its beverage line. This innovative offering enabled Pepsi to raise capital extremely efficiently, something that the CFOs of other companies have taken note of.
4.) Mitigate risk: Chief risk officers and chief legal officers don’t generally think of plastic-waste reduction as part of their remit – yet. But regulators, consumers and activists are increasingly focusing their attention on plastic waste, which means that corporations in the years ahead will face a growing set of risks and possibly fines, penalties, or lawsuits if plastic waste (often indelibly emblazoned with their brand names) shows up where it does not belong. Already, a patchwork of regulations from various state, local and national governments has emerged around the world, focusing on banning plastic straws, bags, beverage lids and, in some cases, plastic waste more generally. Waiting for those regulations to change before reacting on a local level can lead to higher logistical and regulatory costs. The more proactive approach, for national and international retailers alike, would be to advance solutions ahead of the rising curve of regulation. Partnering with operations on issues like this is one way that CROs and CLOs can reduce potential risks to their business arising from plastic waste.
5.) Win new customers and increase loyalty. Consumers today have clearly expressed their desire for brands to align with their values. Nowhere is that clearer than in the desire for products that generate less plastic waste. Millennials have led the way, but according to the most recent survey by the Morgan Stanley Institute for Sustainable Investing, other generations have begun to close the gap. Plastic waste and climate change are now at the top of the list of issues that investors of all generations say they are most concerned about.
Chief marketing officers know how much brand value can be created or destroyed if a brand is on the right or wrong side of a debate, and they have begun to recognize that focusing on plastic waste reduction can be a true differentiator. Interestingly, some of the operational solutions for reducing plastic waste can also drive customer stickiness. Selling your product in a beautiful, branded, re-usable container comes with the added benefit of the consumer looking to you, and only you, to refill that container. Nestlé has begun piloting a reusable Häagen-Dazs ice cream canister that is delivered to homes. When empty, it can either be sent back to the factory or brought into a Häagen-Dazs retail shop to be refilled.
CMOs should also see a special role for themselves combatting plastic waste, because, ironically, some 60 years ago they were the ones who helped convince American consumers to embrace our ‘throwaway’ plastic culture. Coming out of years of the Great Depression and the shortages of World War II, Americans initially saved plastic containers, even those designed to be disposable. Only after marketers got involved did Americans come to believe that plastic could be used just once and thrown away. Today, marketers can take the lead again, this time by encouraging consumers to make sustainable choices and reduce plastic waste.
Despite the scale of the plastic waste problem, business leaders should recognize that it is especially well-suited to market-based solutions. Everybody can do their part. Last year, for example, through the Morgan Stanley Plastic Waste Resolution, we made a firm-wide commitment to facilitate the prevention, reduction, and removal of 50 million metric tons of plastic waste from rivers, oceans, landfills and landscapes by 2030.
We believe that leaders across all industries, and in all different C-suite seats, have a unique ability to turn the tide on plastic waste. Scientific discovery, industrial R&D, ingenuity, entrepreneurship and marketing were responsible for creating plastic, convincing consumers to adopt it, and conditioning those same consumers to throw it away. Now is the time to turn the tide.
Audrey Choi is Morgan Stanley’s chief sustainability officer, chief marketing officer and serves on the firm’s Management Committee. A pioneer in sustainable investing, she founded the Morgan Stanley Global Sustainable Finance Group in 2009 and the Institute for Sustainable Investing in 2013
Plastic Free World Conference & Expo North America 2020 will take place at the Cobb Galleria Centre, Atlanta, Georgia, on Tuesday 27 October and Wednesday 28 October. To register for this highly focused, solutions-driven event, please click here. For sponsorship and exhibition opportunities, please email firstname.lastname@example.org