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Recycling – worthy cause or waste of time?

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Frank Jasper, Chief Investment Officer

Recycling – it’s not what it appeared to be

You may have seen a "keep cup" on sale at your local café, or you may even have one from last year's roadshow. A glass or plastic cup that means we no longer have to use a disposable cup for our daily takeaway, and at least in my case, desperately needed shot of coffee.

Recycling – it’s not what it appeared to be

It turns out that your keep cup has become even more important.

In waste management circles they refer to the three Rs — reduce, reuse and recycle. The third R, recycling, has become a lot more challenging in recent times.

Recycling feels good. Like many of you, I dutifully sort my rubbish into piles, some going to landfill and some into the recycling bin. It makes me feel good when I wheel out that recycling bin knowing I am doing my bit for the world. Unfortunately my good vibes have been a little misguided.

According to the US EPA, and the situation is worse in New Zealand, about one-third of material to be recycled is exported to China for reprocessing. A recent law change in China has changed all of this. Since Jan 1st 2018, the Chinese government has banned the import of a range of materials that were previously recycled there (this includes commonplace plastics like PET used in soft drink bottles) and has reduced imports across a number of other categories. We can no longer rely on China to deal with our waste.

The means that the 41m tonnes of plastic wastes that, as Kiwis, we had loaded onto ships last year and sent overseas, will now begin to accumulate in storage centres or be diverted to landfill. That is not what I, or I suspect any of us, have in mind as we wheel out that bin each week.

The use of plastics and other materials that end up in landfill, or worse our oceans, is of concern to us as investors. This is something we have begun to consider through our responsible investing framework.

While there is still a lot to be done, it is pleasing see a number of companies beginning to get active in this space.

Amazon, for instance, has set strict rules around packaging for companies wanting to sell on its retail platform. It's sustainable packaging initiatives have eliminated 244,000 tonnes of packaging over the past decade and it reduced waste, including its own packaging use, by 16% in 2017 alone.

Both Nike and Adidas is moving towards 3D printed shoe technologies which dramatically reduce waste. Nike, in an investor roadshow, noted that it spends $1b on materials that end up on the cutting room floor. Adidas has launched a shoe range, Adidas x Parley, that is made from recycled ocean waste.

Initiatives like these help and we, as one factor in our investment decision making, favour companies with a proactive approach to waste mitigation. This is just good business. Waste is going to be an increasing cost for business and importantly speaks to a firm's brand with consumers.

Our fourth R, responsible investing, can of course only go part of the way to helping. Reducing and reusing are by far and away the most critical element in reducing waste volumes, reducing the need for recycling and protecting the environment. We all have a role to play in changing how we live.

This is important for all of us. So last year it was keep cups at the roadshow, maybe this year it should be recycled bags for picking up the weekly shopping? Time for me to talk to the marketing team!! 

 

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