Outlook for Petrochemicals Darkens as Plastics Pact Launches U.S. Chapter

Several years ago, stakeholders in the fossil fuels sector began a hard pivot toward petrochemicals as a hedge against the growing threat of renewable energy. Now it looks like that door is slamming shut as well. A multinational circular economy effort called the Global Plastics Pact has just kicked off a U.S. chapter with the aim of fostering innovations that will all but certainly reduce the need for fossil-based plastics and other petrochemicals.

Shell and BP read the circular economy tea leaves; ExxonMobil didn’t

ExxonMobil, Shell, and BP illustrate contrasting approaches to the rise of the circular economy.

Here in the U.S., ExxonMobil doubled down on its fossil fuels portfolio throughout the shale gas boom, including a major expansion of its petrochemical plant in Bayway, Texas.

Meanwhile, the company’s activity in the area of renewable resources has been negligible, with the exception of a commitment to foundational research in the field of algae biofuel.

That turned out to be a bad decision. The COVID-19 crisis exposed cracks in ExxonMobil’s business model, and yesterday the company was booted from the Dow Jones Industrial Average.

In contrast, Shell has taken a more diversified approach, highlighted by significant investments in wind energy, solar technologies and vehicle electrification.

BP has taken the diversification pathway to a whole new level. In addition to investments in renewable energy, green hydrogen and other clean technologies, earlier this year the company sold all but one of its petrochemical facilities. More recently, BP announced an ambitious plan to cut back on its oil and gas operations.

Enter the U.S. Plastics Pact

The circular economy has been slow to materialize. However, companies like Shell and BP appear to recognize that the movement is gathering steam. They are positioning themselves to become participants - and not a moment too soon. The U.S. Plastics Pact is a collaborative effort led by The Recycling Partnership and World Wildlife Fund, and it will become part of the Ellen MacArthur Foundation’s Global Plastic Pact network.

“The U.S. Plastics Pact is an ambitious initiative to unify diverse public-private stakeholders across the plastics value chain to rethink the way we design, use, and reuse plastics, to create a path toward a circular economy for plastic in the United States,” The Recycling Partnership explained in a press release announcing the new partnership.

The U.S. Plastics Pact has set high-impact goals that would be difficult if not impossible for companies to achieve on their own.

For example, the organization pledges that problematic and unnecessary packaging will be defined by 2021 and eliminated by 2025.

The remaining plastic packaging will be 100 percent reusable, recyclable, or compostable by 2025. Within that goal, the Plastics Pact expects 50 percent of plastic packaging to be recycled or composed by 2025.

Private sector partners have not been announced as of this writing, but a glance at the Ellen MacArthur Foundation’s 850-member global circular economy network hints that the impact will be a powerful one.

The list of participating companies in the circular economy network includes many iconic U.S. brands, including 3M, BASF, Cargill and DuPont.

The participation of U.S. companies in the effort is important, because the Global Plastics Pact says it can tailor solutions for countries and regions.

“The U.S. Plastics Pact brings together plastic packaging producers, brands, retailers, recyclers, waste management companies, policymakers, and other stakeholders to work collectively toward  scalable solutions tailored to the unique needs and challenges within the U.S landscape, through vital knowledge sharing and coordinated action,” the Plastics Pact explained.

A sea change for the plastics and petrochemicals problem

Now that the ocean plastic crisis is firmly embedded in the public eye, companies have a strong bottom line motivation to rethink petrochemicals and push the circular economy into high gear.

Some recent developments in services and technology are already providing an assist.

The interest in reusable containers recently got a boost from the startup Loop, which has enlisted a growing number of leading household brands in a returnable container service reminiscent of old-time milk bottle delivery. Loop has partnered with UPS to drop off and pick up the containers.

New recycling technology will also play a part. In contrast to simple shredding or melting, researchers are developing next-generation methods for breaking down paper, plastic and other materials into molecular elements that can be reconfigured into new high quality products.

The rise of bio-based materials in the supply chain will also help the Plastic Pact meet its goals. Coca-Cola and Ford are among the U.S. companies pushing their supply chains in the direction of renewable resources.

The Plastic Pact 2025 goal is less than five years away, but with a strong collaborative effort - and support from consumers - there is a strong possibility that companies participating in the effort will meet that goal.

As for other companies still focused on petrochemicals and plastics, they could find themselves left behind. Now would be a good time for ExxonMobil to take its algae research out of the lab and into the streets.

Image credit: Zbynek Burival/Unsplash