A new report from Moody's has suggested that efforts by the European Union to reduce marine pollution from plastics may raise costs for packaging firms.
New measures, announced recently, envisage banning certain single-use plastics, reductions in the use of plastic food containers and drinks cups at a national level, and requirements for producers to help cover the costs of waste management and clean-up.
Incremental Costs
"We believe the proposals, if adopted in their current form by the European Parliament and EU member states, could result in some incremental cost for European plastic-packaging manufacturers and further increase pressure on the industry to design for sustainability and use more recycled materials," commented Tobias Wagner, vice-president and senior analyst at Moody’s.
"However, we consider the proposed ban on certain single-use plastic packaging products as immaterial for rated European plastic-packaging companies because they do not tend to produce these products," added Wagner.
Moody's believes that the proposed extended producer responsibility (EPR) scheme outlined by lawmakers, coupled with the potential consumption reduction targets, may be the most negative for the industry because a broad range of plastic-packaging products could potentially be covered under the planned legislation.
'For example, the proposed provision on consumption reduction targets refers to packaging for “food that is intended for immediate consumption from the receptacle”, while under the EPR scheme it refers additionally to “packets and wrappers made from flexible material containing food that is intended for immediate consumption” and “beverage containers”,' Moody's wrote.
'This could cover a broad range of fast-food containers, as well as convenience and ready-to-consume packaging, which has been one of the faster-growing markets for plastic-packaging companies,' it added.
'Degree of Uncertainty'
The ratings agency added that there is still a 'degree of uncertainty' regarding the exact definitions, with draft legislation expected to take some time to implement.
'The draft bill will need to be approved by the European Parliament and EU member states, which the European Commission hopes will happen before May 2019," Moody's said. "EU member states will then need to transpose it into their national laws, which may also take considerable time. As such, there is time for manufacturers to plan for any changes and potential additional costs."
Moody's also suggested that the increasing importance of sustainability could create opportunities for the packaging sector to develop 'value-added' products, for which higher prices could be charged.
'However, such a scenario would imply that packaging companies are able to pass on a substantial amount of the associated development expenses and investment costs to consumer goods companies, retailers and potentially end consumers,' it noted.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
