The beverage container touches many industries, upstream and downstream, and presents logistical and environmental challenges at each step. ClearBridge takes a life cycle approach to the beverage container’s challenges, finding that there are several entry points for action that can reduce environmental impact.
While plastic bottles are light, durable, versatile, and lower the carbon footprint from transportation costs, recycling plastic remains a major challenge as increased use results in high levels of plastic waste.
There are several ways businesses can improve the situation up and down the beverage container supply chain. One much-discussed option is to switch some uses to aluminum cans, which have much higher recycling rates (75 percent globally) than plastic bottles. This shift is being made possible in part by Ball Corporation, the largest manufacturer of recyclable aluminum beverage cans in North America. While aluminum is more carbon intensive to manufacture, and it releases greenhouse gases in its production process, it is infinitely recyclable, which indicates the overall life cycle impact would be less than that of plastic.
Some beverage companies are working to improve the recyclability of plastic. PepsiCo, for example, announced in June 2019 that its LIFEWTR brand will be packaged in 100 percent recycled polyethylene terephthalate. Using more recycled plastic could start a virtuous cycle of raising plastic’s waste value, encouraging more recycling.
Whether we’re using plastic or aluminum, recycling practices likewise show considerable room for improvement. Recycling rates in the United States have been flat at 35 percent since 2012. In addition, as we’ve learned from engaging with Waste Management, contamination—non-recyclable material or garbage that ends up in the recycling system—has increased as more people have begun recycling. U.S. recyclers have reduced contamination in their recycling baskets although this has raised costs for municipalities, in some cases threatening recycling programs.
Another waste disposal option is to turn waste into energy. Covanta, for example, operates energy-from-waste facilities that convert over 21 million tons of waste into power for over one million homes and recycles roughly 400,000 tons of metal every year. Combustion does release CO2 into the atmosphere, albeit less than would be generated by the waste going to a landfill over a long period of time.
The practices of recycling and, to a lesser extent, combustion with energy recovery have grown in the past 30 years, helping slow the amount of waste entering landfills. Shareholders have played an important role in moving companies to improve their recycling and waste practices. For more than 20 years, shareholders have been filing resolutions on beverage containers, sustainable packaging, and extended producer responsibility. To help continue this trend, as active investors, we seek to partner with companies producing beverages, those producing their containers, and those working to improve recycling practices. All are part of an international effort that is gaining strength.
Mary Jane McQuillen
Head of Environmental, Social and Governance Investment, ClearBridge Investments
Humphrey Oleng
Director, Senior Research Analyst for Materials, ClearBridge Investments