TOKYO — When Circulate Capital announced the first close of its Ocean Fund in December 2019, plastic pollution seemed to have become an urgent global crisis.
With 8 million tons of waste entering the oceans each year — 60% of which comes from Asia — social pressure reached a tipping point, forcing consumer goods companies to react.
Singapore-based Circulate raised $106 million from companies including PepsiCo, Danone and Dow Chemicals to invest in businesses across South Asia and Southeast Asia offering solutions to the issue.
Four months later, as it announced its first investments — $6 million divided between Mumbai-based Lucro Plasticycle and Jakarta-based Tridi Oasis — the onset of the coronavirus crisis means that the Ocean Fund’s immediate focus has shifted to helping recyclers keep the lights on.
“The business plans that we’ve invested in … are all based on these pre-Covid assumptions and scenarios,” Circulate CEO Rob Kaplan told the Nikkei Asian Review.
The impact of the COVID-19 pandemic is so severe that it’s starting to threaten the economics of the entire Asian recycling sector, with countrywide lockdowns devastating many of the small-scale businesses that normally collect and sort the waste that supplies recyclers.
Crashing oil prices could also see a glut of cheap virgin plastic flooding the market and reducing the competitiveness of recycled material. The looming global recession could also make manufacturers and consumers more price sensitive and less likely to recycle plastic.
Another unforeseen consequence of the coronavirus outbreak is that it has diverted attention from plastic pollution, which could take some of the impetus out of the global campaign against waste.
“Now there’s this big outstanding question,” Kaplan said. “How does consumer behavior and the plastics conversation evolve coming out of Covid? We came here because of consumer outrage. Will that outrage still exist in six to 12 months?”
The waste management problems caused by the pandemic are particularly evident in India, where an estimated 2 million informal workers collect and sort recyclable material and then sell it up the value chain to aggregators and processors.
“It’s a very vibrant system,” said Chitra Mukherjee, head of advocacy and policy at Chintan, a New Delhi-based NGO that supports low-income workers in the waste management sector. “Although it’s supposed to be informal and unorganized, if you look at the internal workings it’s actually pretty organized.”
The nationwide lockdown imposed in March has left many workers who depend on waste on a daily basis “in a pretty desperate situation,” Mukherjee added. “Something like this [lockdown] puts their livelihoods at stake and their lives at stake.”
Companies further up the chain like Lucro, which specializes in processing hard-to-recycle flexible plastics, have had to drastically scale back operations.
Lucro CEO Ujwal Desai told Nikkei that with the exception of those facilities making medical waste bags, masks and other healthcare-related products, “all of our factories are closed.”
“In India recycling is not considered an essential business, so we have had to cease all of our operations,” Desai said.
Strict lockdowns across India have meant that informal collectors of plastic waste have been unable to supply recyclers with raw material.
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Even though waste is piling up at some of Lucro’s suppliers, the company cannot collect it. Many of those businesses may struggle to recover.
Still, Desai is pressing ahead with plans to increase the company’s processing capacity fivefold, and political support for recycling remains strong in India.
The government of Maharashtra, India’s second-most populous state with over 120 million residents, recently announced that industrial packaging produced in the state must include at least 20% recycled material.
India’s central government has also flirted with a full-scale ban on single-use plastics by 2022 but has held off on writing the target into law. That should drive demand for locally processed, traceable recycled plastics, Desai said.
In Indonesia, the world’s second-largest source of ocean plastic behind China, according to research by the Ocean Conservancy and McKinsey, Tridi Oasis CEO Dian Kurniawati told Nikkei that he is also planning to scale up recycling capacity.
Tridi Oasis recycles bottles into PET flakes, which are used for packaging and textiles, and also relies on the informal sector for raw material supplies.
Kurniawati said informal workers often find themselves on the frontlines, where they are “exposed to higher risks in terms of health and safety issues.”
Even though most of Tridi Oasis’ clients are international, Kurniawati said many Indonesian consumer goods companies had begun to yield to social pressure to use locally produced recycled materials.
That should continue despite the crisis, she said, albeit mainly at larger companies. “Apart from the big brands, most of them are driven by cost,” she said.
Price sensitivity is emerging as a major challenge for recyclers.
Not only has economic growth slowed to a crawl due to the pandemic, but the collapse in oil prices means a likely surge in the availability of cheap virgin plastic.
That could be more attractive for companies struggling against tightening margins and more likely to sacrifice sustainability.
Despite the gloomy outlook, the unprecedented social changes wrought by the pandemic could also create momentum for sustainable, local solutions to global problems.
Beau Baconguis, Asia-Pacific coordinator of Break Free From Plastic, a pressure group, said a breakdown in supply chains for many products has created an opening to address issues of waste and consumption.
“We know that the petrochemicals sector will push hard to take advantage of this. For them it’s an opportunity,” Baconguis said.
“But for us, it’s also an opportunity to talk about the systems that need to be changed so that we can have a more sustainable way of living.”