The 'Intel Inside' of circular plastics
This article is drawn from the Circular Weekly newsletter from GreenBiz, running Fridays.
One of the big, thorny challenges in circular plastics is how to affordably turn old plastic into new feedstock. As more companies commit to producing plastic packaging from recycled materials, the question remains about where all the recycled feedstock will come from. Up to now, recycling common items such as plastic water bottles has proved difficult and usually not cost-effective.
Canada-based startup Loop Industries is trying to change that. It is emerging as a leader in meeting the growing demand for high-quality post-consumer recycled (PCR) plastics. This week, Loop announced a multi-year supply agreement with PepsiCo that will enable the food and beverage giant to purchase production capacity from Loop’s United States facility, and to incorporate Loop’s 100 percent recycled PET plastic into its packaging by early 2020.
Loop Industries is on a roll. The partnership announcement comes shortly after the startup entered into a joint venture last month with one of the world’s leading petrochemical producers, Indorama Ventures, based in India. The 50-50 partnership will focus on retrofitting existing Indorama facilities, leveraging the company’s global footprint to scale the manufacturing and production of Loop’s technology.
"We are fast becoming nothing less than the ‘Intel Inside’ of the circular economy," said Loop Industries Chief Growth Officer Nelson Switzer, who formerly headed sustainability at Nestlé Waters North America, in a recent interview.
So what’s all the fuss about? While recycling PET is nothing new, the widespread approach of mechanical recycling — basically, grinding used plastic into tiny bits — degrades the quality of plastics, as well as its consistency in color. That means recycled PET must be either blended with virgin materials for commercial packaging or downcycled to lower-quality applications that may not be recyclable. That doesn’t pass the circular sniff test.
Loop Industries takes a different approach. "The analogy I use is starting with a chocolate cake," said CEO Daniel Solomita in a recent interview. "You take that chocolate cake and break it down into its base ingredients — the egg, flour, sugar and chocolate. You purify each one of those — take that egg and put it back into its shell and put the chocolate back into its wrapper — and then you take the ingredients and build a brand new cake. [Our technology] can do that an unlimited number of times."
The market for chemical recycling is immature. According to Rob Kaplan, founder and CEO of Circulate Capital, "Scaling chemical processing is difficult without two things: a business model that competes with the price of virgin resin; and the scale to drive efficiency for billions of pounds of material to be reintroduced into existing supply chains."
The economics of all this are still unclear. While Loop Industries is making progress to unlock a profitable, scalable model through its partnership with Indorama Ventures and longer-term supply contracts, virgin plastic is still cheap, convenient and established.
"There are considerations around aesthetics, performance and cost, but the use of PCR content creates a powerful market demand that ensures recyclable plastics actually get recycled and stay out of our oceans," said Adam Gendell, associate director of the Sustainable Packaging Coalition.
As the conversation about chemical recycling grows within in the packaging industry, Loop Industries is a company to watch while the market matures.
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