Good morning from New York.
Yesterday, Stockholm District Court approved the bankruptcy application for Renewcell, a Swedish start-up that produces clothes from recycled textiles. Apparel giant H&M was among Renewcell’s investors, as the FT reported back in 2019. I mention this in part because of today’s newsletter theme, which focuses on finding cleaner materials for ubiquitous consumer products made from plastic.
Concerns about the Great Pacific Garbage Patch, and worries over the quantity of microplastics we are ingesting, have fuelled business opportunities in seaweed and bioplastics. But these start-ups face big challenges in scaling their product to combat the plastics problem. Will they survive?
Thanks for reading.
Plastic alternatives
Confronting the hurdles to larger bioplastic uptake
For toymaker Lego, the “magic” of oil-free plastic never materialised.
Last year, the family-owned Danish company ditched its plan to substitute oil-based plastics for recycled materials in its world-famous bricks. The announcement came two years after Lego said it made a big breakthrough in its attempt to move away from oil-based plastics with recycled drinks bottles.
“The belief was that it [would be] easier to find this magic material or this new material” that would solve the sustainability issue, Lego’s chief executive Niels Christiansen told the Financial Times last year. “We tested hundreds and hundreds of materials. It has just not been possible to find a material like that.”
Lego’s failed attempt underscores the reality that plastic is a cheap — often unavoidable — part of daily life, which is also dangerous. The life cycle of plastic generates about 4 per cent of total greenhouse gas emissions, the OECD said in a report last year. Worse, there is alarming evidence that people and animals are ingesting a harmful amount of plastic. People now consume up to five grammes of microplastics a week through food, drink and polluted air, according to a 2021 study.
As these problems increase demand for biodegradable plastic substitutes, businesses are turning to seaweed as an alternative. New York-based Loliware raised $6mn last year to make biodegradable straws and other alternatives for single-use plastics. London-based Notpla has partnered with food delivery company Just Eat Takeaway to make biodegradable packaging from seaweed. Earlier this month, Sway, a California-based seaweed packaging provider, announced a $5mn fundraising round to scale its products. Julia Marsh, Sway’s co-founder and chief executive, told me the business has deals with apparel companies Burton and JCrew.
Other materials derived from corn or potatoes have been tried in bioplastics. Sugar cane bioplastics made a big splash in Brazil more than a decade ago. But these sources require more land and fresh water — two ingredients that are not a problem with seaweed, Marsh said.
Sway’s products “displace some of the most prevalent and damaging everyday petroleum-based products that have polluted not only our pristine and vibrant natural lands, waterways and oceans, but have also been confirmed to have penetrated our own human bodies with damaging and deadly effect,” said Jason Ingle, co-founder of Third Nature Investments, an impact venture fund and investor in Sway.
But bioplastic companies using seaweed face a couple of challenges, Martin Mulvihill, managing partner of Safer Made, an investment fund specialising in businesses that remove and reduce harmful chemicals in packaging, told me. Seaweed does not work as well as plastic to package food that needs to be airtight to pass regulations, he said.
However, “[for] covering a T-shirt, that’s great”, Mulvihill said of the seaweed substitute, adding that he was familiar with Sway but had not invested in the company. Ikea has been interested in seaweed packaging for the small bags it uses to package screws, he said. Airlines and hotels are sniffing around too, for replacements for products that do not have stringent safety needs, he added.
Other challenges for bioplastic challengers include the plastic industry’s entrenched relationship with big oil producers, which rely on plastics as a major revenue source.
China’s surging petrochemicals consumption continues to drive oil demand. “The speed and scale of the expansion of China’s petrochemical sector dwarfs any historical precedent,” the International Energy Agency said in December. “China is set to add as much production capacity for ethylene and propylene — the two most important petrochemical building blocks — as presently exists in Europe, Japan and Korea combined.”
In November, oil-producing countries were accused of stalling the first international agreement on cutting plastic pollution.
“Big Oil is betting on plastic to save itself,” Marsh said. “There are a lot of incentives for it to be easy and continue using the same material.”
But regulations are in the works to reduce single-use plastics. New York City this month introduced legislation that would prohibit the sale of laundry and dishwasher pods that use polyvinyl alcohol, with the aim of limiting microplastic pollution. The American Cleaning Institute, a US lobbying group that represents BASF, Clorox and other companies, blasted the New York legislation.
The European Union has adopted a goal to cut plastic by targeting bags and coffee cups. Beverage bottles will need to comprise 25 per cent recycled plastic beginning in 2025, and increasing to 30 per cent in 2030.
Packaging waste in the EU has increased about 20 per cent between 2009 and 2020 — a rate much faster than the bloc’s economic growth — to an average of 177kg per capita, despite an increase in recycling.
From Lego bricks to laundry detergent pods, consumers are calling for options that are more sustainable than plastic. With well-known brands dipping their toes into these products, and regulators tilting the playing field towards bioplastics, venture capitalists and other investors are starting to recognise the value of plastic alternatives. Combined, these three forces may offer hope that bioplastics businesses can survive to challenge the dominance of conventional oil-based plastics.
Smart read
I recommend this story from our Energy Source colleagues about surging profits at the biggest US oil and gas producers even as the industry laments “hostile” policies from the Biden administration.
Read the full article here