The 2-year journey towards the UN Global Plastics Treaty is nearing its conclusion, with the fifth Intergovernmental Negotiating Committee (INC-5) session set for South Korea this winter.
This is a crucial time to advocate for a legally binding treaty and for investors to understand the importance of tackling the global plastics crisis given the serious systemic risks it poses to economies, the environment and biodiversity.
The alarming state of plastics pollution and the systemic risks it poses
With over 460 million metric tonnes of plastic being produced annually and a significant portion ending up in the environment, plastic pollution is one of the world’s most pressing environmental issues. Every year, 19-23 million tonnes of plastic waste leak into aquatic ecosystems, affecting lakes, rivers, the ocean and seas. This pollution does great harm to marine biodiversity, ecosystems and human health.
Single-use plastics from food packaging to cigarette butts and cosmetics account for 40% of production and can persist in the environment for centuries. They are estimated to affect around 700 species, either through toxic or mechanical effects, with marine animals ingesting or becoming entangled in plastic waste.
These same plastics also cause harm to humans, through the toxic chemicals they contain or microplastics found everywhere, from Mount Everest to Antarctica – and in the water we drink. Rising plastics consumption should be seen as an unequivocal driver of climate change, as it heightens the demand for petrochemicals and causes air pollution through waste incineration.
The UN Global Treaty on Plastic Pollution: A global response effort
To address this crisis, the UN Environment Assembly passed Resolution 5/14 in March 2022, initiating the development of an international legally binding instrument to tackle plastic pollution. This two-year negotiation process aims to cover the full plastics lifecycle, from production to disposal.
A global approach is the best path considering the limitations of piecemeal measures and voluntary corporate initiatives. Still, inconsistent local regulations make it more complex to implement relevant measures within global supply chains, and voluntary corporate initiatives – not always taken on a level playing field – are limited in the context of competitiveness. A cohesive treaty is thus needed.
Business Coalition for a Global Plastics Treaty: an ambitious vision
Launched in September 2022, the Business Coalition for a Global Plastics Treaty comprises more than 200 companies, financial institutions, NGOs and academics advocating for a robust treaty. It aims to build business confidence in the benefits of an ambitious treaty, including through global standards applying to product design, avoidable plastic products or chemicals of concern, to advance the negotiations.
Without ‘radical action’, the OECD states, ‘the amount of plastic waste produced globally is on track to almost triple by 2060, with around half ending up in landfill and less than a fifth recycled’.
The importance to investors of an ambitious treaty and accessible data
Plastic-dependent companies face increasing regulatory scrutiny and potential financial liabilities. The Minderoo Foundation estimates US clean-up costs and legal liabilities related to plastic pollution could reach USD 100 billion for cases arising between 2020 and 2030.
In Japan, the World Wide Fund for Nature (WWF) estimates the minimum lifetime cost of plastic pollution from 2019 production alone at $108.69bn (£85.9bn). The WWF further demonstrates how an effective UN treaty could support the country’s efforts to implement an EPR scheme, suggesting that it will ‘shift some of the burden from municipalities to companies’ and reduce pollution impacts on tourism.
On the positive side, there are investment opportunities in sustainable alternatives and waste management solutions. By 2030, recycled plastics will need up to $50bn (£40bn) in investments. Companies that develop biodegradable materials, improve recycling technologies, or provide alternatives to single-use plastics are likely to benefit from growing market demand and supportive regulatory frameworks.
Quality plastic data is crucial for investors to manage risks in corporate supply chains and investment portfolios and to capitalise on these opportunities. Ahead of INC-3 in November 2023, several financial institutions called Member States for mandatory corporate disclosure of plastic data as part of the treaty to facilitate this process.
Current status and expectations for INC-5
Treaty negotiations began in late 2022, culminating in a “Zero Draft” for a Global Plastics Treaty (UNEP/PP/INC.3/4). Despite some contrary forces, breakthrough statements like the G7 communiqué and the Bridge to Busan Declaration reaffirmed the need for a global binding treaty and the unquestionable argument that it should include the production of primary plastic polymers.
The upcoming INC-5 session in Busan, South Korea, rightfully crystallises significant expectations. As members of the Business Coalition, we believe it should secure, at a minimum: (i) common obligations to address problematic plastic products, chemicals of concern and product design, (ii) a comprehensive package for treaty implementation, including public and private finance mobilisation, (iii) sector-specific programmes for areas like packaging and fishing gear, and (iv) mechanisms for reporting, monitoring and evaluating the treaty’s effectiveness, so that policy can be reinforced over time.
With global plastics pollution raising major challenges, an ambitious UN treaty can offer a potential recovery pathway. Circular economy solutions could help reduce annual plastic pollution volumes by 80% by 2040 and achieve near-zero pollution by 2060.
Investors can play an important role by making the most of their influence to engage with corporates and policymakers, thereby promoting a new plastics economy.
