Plastic Packaging

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Plastic Packaging – the

sustainable and smarter choice

May 2015 Perspective

Why banning plastic packaging in Indian

FMCG is not a viable option

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Prepared for FICCI Strategy&

Plastic Packaging - the sustainable and smarter choice -Report-vF.pptx

Purpose and scope of this study

May 2015

Confidential property 1

Purpose of this study

• Evaluate the broad-based impact (i.e. on consumers, economy and environment) of a ban on plastic packaging

• Share Strategy& perspective on the way forward to address the health and environmental concerns raised

Scope of this study

• Limited to all plastic packaging used in FMCG sector in India

• Does not address use of plastics in pharmaceutical sector and other non-

packaging use

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Executive Summary Context

Plastic Packaging – the Smarter Choice Banning Plastic Packaging –

Impact on Consumers, Economy and Environment Suggested Way Forward

May 2015

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Executive Summary (1 of 3) - Plastics are THE packaging material of universal choice for FMCG products

May 2015

Plastics are the packaging material of universal choice for FMCG products

• Plastic is the material of choice in packaging FMCG products across categories globally

– Across developed as well as developing economies, including India, plastic is the predominant packaging material used for most FMCG categories

– Plastic penetration for packaging varies from 60%-85% globally, depending on category – Seven types of plastics are primarily used in FMCG packaging – PET, HDPE, LDPE, PVC,

Polypropylene, Polystyrene and others

• Plastics are ubiquitously used for FMCG packaging in India as well

– Some categories are almost entirely dependent on plastic packaging (e.g., biscuits, processed food, dairy, hair care, laundry)

– Penetration of plastic packaging in most categories is >75%

Plastics are universally used due to several benefits

• Use of plastic packaging results in:

– Increased food safety, quality and shelf life: Plastic provides greater protection against moisture and oxygen transmission, ensuring freshness and preserving the content for a longer time

– Reduced environmental impact: Plastic is lighter weight and shatter proof vs. alternatives, resulting in low breakage and low wastage. Use of plastic packaging results in lower GHG emissions

– Consumer convenience: Plastic is highly versatile, allowing consumer friendly designs and packaging

innovation. Plastic packaging is easy to carry, store, clean and can be made re-sealable and/ or re-usable

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Executive Summary (2 of 3) - The impact of an outright ban on plastic packaging will be far fetched

May 2015

Impact on Economy and Employment Impact on Consumers

Environmental Impact

Low price point products will disappear

from the market

Packaging Industry Turnover: ~₹53,000

cr.+ growing at ~20%

Jobs: ~13 lakh jobs across ~10,000 firms

Multiplier effect

2-2.5x

turnover

3-5x

employment

Imports &

Investments

will be required to increase

many fold

Natural resource usage

Higher material requirement, energy and water usage, more fuel burnt during transport

Emissions

Higher Green House Gas emissions

Cost to Consumer

Higher by upto 3 times

depending on categories and alternatives

Impact beyond Industry

Kirana Shops, waste pickers,

farmers

Consumer Hygiene and

Food Safety

issues with unpackaged food

Processed Food Industry

~ ₹90,000 cr.+ turnover

Source: Industry Interviews, Strategy& Analysis

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Executive Summary (3 of 3) - More prudent actions vs. an outright ban need to be considered

May 2015

Suggested Way Forward…

… to address Health Concerns

• Multiple studies indicate that PET is a safe material for use in packaging. Since contradictory evidence is available on health impact, further study is recommended to address health concerns raised

… to address Environmental Concerns

Segregate waste at source - make waste usable

•

Municipal governments must be encouraged to undertake necessary action to segregate waste at source

-- and move waste collection from one unusable waste stream to multiple segregated and usable streams.

•

State governments can mandate this, and authorize action against establishments/societies/wards for

non-compliance

Enhance economic value of plastic waste through regulation

•

Central and state governments can play a role in enhancing demand for non-PET plastic waste in

multiple ways – such as a) mandatory usage thresholds in industries that can reuse (such as road construction, cement kilns), b) incentives to these industries to make the switch and c) education of the industries on benefits from use of plastic waste

Educate the masses

•

Industry can partner with the government by:

a) Running multiple campaigns to generate mass awareness – to educate and encourage stakeholders to segregate at source and modifying packaging label to educate citizens

b) Carrying out tests for proof of concept, conducting pilot projects and investing in recycling plants

Invest in and pilot re-

use technologies

Government can also consult the industry for best ways to enhance producer responsibility in post-consumer use

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Executive Summary Context

Plastic Packaging – the Smarter Choice Banning Plastic Packaging –

Impact on Consumers, Economy and Environment Suggested Way Forward

May 2015

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Our understanding of the situation

May 2015

• The National Green Tribunal (NGT) is considering a ban to restrict the use of all “non- essential” plastic packaging used in the FMCG sector

• The ban is being considered as a response to address two concerns:

Environmental Concerns (All Plastic)

Health Concerns (PET-specific)

• Plastics are non-biodegradable and unless collected and reused, leads to littering, dumping in land fills, ecosystem damage (e.g., rivers, oceans)

• Municipal plastic waste management has been a challenge due to plastic disposal along with municipal solid waste - posing problems in collection, segregation, reuse & recycling

• Concern that “leaching” (penetration of chemicals from the packaging to liquid/food products) of toxic chemicals used in the PET bottles occurs

under varying storage temperatures and also when the packaging becomes old

– PET bottles are tested for permissible levels of harmful chemicals at storage temperatures of ~20 ^o C, leaching may increase at higher temperatures

– Consignments could be left stranded in sub-optimal storage conditions and temperatures since logistics is largely an unorganized sector in India

• “Leaching” can lead to several diseases

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Executive Summary Context

Plastic Packaging – the Smarter Choice Banning Plastic Packaging –

Impact on Consumers, Economy and Environment Suggested Way Forward

May 2015

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Plastics – primarily of seven types - are the ubiquitous

packaging material of universal choice for FMCG products …

May 2015

• Plastic bottles for soft drinks, water, juice, beer

• Food jars for jelly, jam

• Microwavable food trays

• Bottles for milk, cosmetics, shampoo, household cleaners

• Bags for grocery

• Cereal box liners, oil bottles

• Rigid

packaging like blister packs

• Flexible

packaging like blood bags, medical tubes.

• Food wrap, vegetable oil bottles

• Plastic bags for breads, frozen foods, household garbage

• Squeezable bottles

• Coating for paper milk cartons and beverage cups

• Containers for takeout meals

• Medicine Bottles

• Bottle caps

• Yogurt containers, wrapping to replace cellophane

• Food service items – cups, plates, bowls, cutlery

• Egg cartons, disposable plastic silverware

• 10 or 20 liters reusable water cans

• Custom packaging

Plastic Packaging used in FMCG

Polyethylene Terephthalate

High Density Polyethylene

Polyvinyl Chloride

Low Density

Polyethylene Polypropylene Polystyrene Other

Note: Images are used for illustrative purposes only, and have been sourced via Google Images Source: American Chemistry Council, Strategy& Analysis

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… due to a variety of reasons

May 2015

Inert, inherent barrier against oxygen and

moisture

Light weight and shatter

proof Highly versatile

• Increased food safety, quality and shelf life

• Better Product Hygiene

• Reduced environmental impact

• Innovative Packaging Options for Consumers

• Consumer Convenience

Greater protection against moisture

Protects and preserves the content for a longer time Barrier against oxygen transmission ensures freshness

High product to package ratio

 Lighter (e.g., flexible stand up pouch product: package ratio is 35x that of glass bottles)

Consumer friendly package and cap designs

Impact and scratch resistant

 Low breakage, low wastage Recyclable

Easy to store

Easy to clean

Easy to carry - portable

Re-sealable

Use of plastic packaging results in…

Properties of plastic that enable this…

Lower energy requirement (e.g., 25% less energy in production), lower GHG

Emissions Re-usable

Reasons for universal use of plastic in Packaging ¹

1) vs. alternative materials such as glass, paper and metals

Source: British Plastics Federation – Benefits of PET Plastic Bottles, Canadian Plastics Industry Association Report, NAPCOR Report on PET Basics, Secondary Research

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Brazil 52%

China 59%

Europe 64%

USA 64%

India 55%

Packaging Mix across Categories - Country-wise Comparison Share of total packaged units sold in 2014

India 59%

Brazil 77%

China 71%

Europe 63%

USA 60%

India 83%

Brazil 70%

China 69%

Europe 66%

USA 62%

India Brazil

83%

83% 85%

China Europe

74%

USA 73%

Note: Images are used for illustrative purposes only, and have been sourced via Google Images Source: Euromonitor, Strategy& analysis

Plastic is THE material of choice in packaging FMCG products across categories globally

Beauty and Personal

Care

Packaged Food

Beverages

Home Care

Non-Plastic Packaging Plastic Packaging

Confidential property May 2015 11

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Prepared for FICCI

Strategy& Confidential property May 2015 12

In India – An overwhelming majority of the products that households buy are packaged in plastic

75% 93% 98% 90%

61% 49%

98% 97% 82% 93%

54%

85%

Non Plastic packaging Plastic Packaging

Packaging Mix of Products sold in India – Example Categories Share of total packaged units sold in 2014

Confectionary 62.5 bn units

Dairy 31.3 bn units

Biscuits 18.7 bn units

Laundry 9.8 bn units

Oral Care 4.0 bn units

Baby Food 0.2 bn units

Dried Processed Food 6.6 bn units

Hair Care 6.3 bn units

Oils and Fat 5.7 bn units

Baked Goods 4.1 bn units

Carbonates 3.8 bn units

Skin Care 0.8 bn units

Source: Euromonitor, Strategy& analysis

Across categories,

plastic packaging dominates

most household purchases of consumer

goods in

India

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Executive Summary Context

Plastic Packaging – the Smarter Choice Banning Plastic Packaging –

Impact on Consumers, Economy and Environment Suggested Way Forward

May 2015

(15)

The impact of an outright ban on plastic packaging will be far fetched

May 2015

Impact on Economy and Employment Impact on Consumers

Environmental Impact

Low price point products will disappear

from the market

Packaging Industry Turnover: ~₹ 53,000

cr.+ growing at ~20%

Jobs: ~13 lakh jobs across ~10,000 firms

Multiplier effect

2-2.5x

turnover

3-5x

employment

Imports &

Investments

will be required to increase

many fold

Natural resource usage

Higher material requirement, energy and water usage, more fuel burnt during transport

Emissions

Higher Green House Gas emissions

Cost to Consumer

Higher by upto 3 times

depending on categories and alternatives

Impact beyond Industry

Kirana Shops, waste pickers,

farmers

Consumer Hygiene and

Food Safety

issues with unpackaged food

Processed Food Industry

~ ₹ 90,000 cr.+ turnover

Source: Industry Interviews, Strategy& Analysis

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If a ban on plastic packaging occurs, the consumers are likely to see a two-fold impact

May 2015

Low price point products will disappear from the

market -- as production becomes unviable for

manufacturers

Higher price point products will see a

cost increase --

as manufacturers shift packaging to

alternatives

Impact on Economy and Employment

Impact on Consumers Impact on Environment

Lesser choice, and lower quality of life

More dependence on unpackaged foods  less food safety and hygiene

Access to fewer categories, especially for price sensitive consumers

Resulting in…

Source: Industry interviews, Strategy& analysis

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Industry will be compelled to use alternative materials to package their products

Food

Beverage

Personal Care

Current Plastic Packaging Alternatives

Alternative Packaging Materials Available

PVC PVC / PP Glass Stainless Steel

Glass Tin Stainless Steel

Bioplastics Paper No Packaging (sold loose) PET / PE PET / PP Tetrapak

PET

PP PE / PP

Available alternatives are glass, metals, bio-degradable materials (e.g., jute, bamboo), paper or bio-plastics

Impact on Economy and Employment

Impact on Consumers Impact on Environment

Note: Images are used for illustrative purposes only, and have been sourced via Google Images Source: Secondary Research, Industry interviews, Strategy& analysis

May 2015

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Use of alternatives could result in up to 3x higher cost to consumer

May 2015

1.00 PET Bottle

40% – 60% increase

Glass Bottle 1.4-1.6

Normalized Cost of Packaging PET vs. Glass Bottles

Source: (1) Sustainability Outlook Report on Indian FMCG Market; Centre for Development ACP-EU, Industry Interviews, Secondary Research, Strategy& Analysis

• Packaging costs constitute ~3-11% of the total costs of FMCG products currently

⁽¹⁾

• Innovations in Plastic Packaging over the years have been able to reduce packaging weights for products, allowing introduction of lower cost products as well as efficient logistics and distribution

• The increase in cost to consumer from a switch to alternatives will vary depending on the type of plastic packaging currently used and alternatives usable for that product category

• Switching to alternatives will increase costs of the packaging material used by anywhere between 1.4-20x due to higher costs associated with higher material weight, higher costs of manufacturing and distribution

− Example: each unit of PET will need to be replaced with 8-10 units of glass in weight, higher energy is required in manufacturing, and lower packing density and higher breakage rates lead to higher distribution costs; resulting in an average of 40-60% higher cost per bottle of glass vs. PET

1.00 1400% – 1900% increase

15-20

Plastic Snack Wrapper

Metallic Container

ESTIMATES

~ 4% – 6%

increase in cost to consumer

Normalized Cost of Packaging Snacks in Plastic vs. Metallic Containers

~150% – 200%

increase in cost to consumer

Case Examples: Cost to Consumer Impact of switching to alternatives

Impact on Economy and Employment

Impact on Consumers Impact on Environment

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Low price point products – that largely serve the rural market - will disappear as production becomes unviable

May 2015

Discussion

• Low price points have been innovatively used by Indian FMCG companies to

– Allow first time consumers to experience the category at an affordable price

– Serve the rural market

– Allow consumers to control portion sizes

• Low price points are made possible in part through use of low cost, light weight

packaging materials

• It is estimated that FMCG companies currently take a hit on margins at very low price points (e.g., ₹5 and lower), and have low flexibility to pass on raw material hikes due to massive volume declines even with small price changes

• A ban on plastic packaging would make these price points unviable resulting in withdrawal of low price point products from the market

Example: Snacking Sales in India by price point

19%

₹ 11-20

₹ 6-10

₹ 0-5 12% 53%

₹ 21+

16%

Low Price Points are Critical in the Indian market

Note: Images are used for illustrative purposes only, and have been sourced via Google Images Source: Nielsen, Secondary Research, Industry interviews, Strategy& analysis

Impact on Economy and Employment

Impact on Consumers Impact on Environment

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As low price points disappear and costs to consumer increase, food safety and hygiene issues will come to the forefront

May 2015

TO FROM

Discussion

• As low price point products disappear from the market and costs to consumer increase,

consumer dependence on unpackaged foods will increase

• Example – Increased quantities of essentials like edible oils, biscuits and other snacks will be transported in bulk to outlets, and would need to be sold unpackaged/ loose over the counter

• Use of unpackaged food increases the chance of product contamination and compromises food safety due to:

– Environmental exposure: Moisture pick-up (or loss), heat and light exposure, or permeation of gases - this can lead to changes in flavors, cause rancidity and development of strong odors

– Likelihood of human touch/ handling during transportation and sale

– Exposure to non-conducive conditions and pollutants e.g., insects, dust

ILLUSTRATIVE Impact on Economy and Employment

Impact on Consumers Impact on Environment

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Economic impact will be huge as well -- A ban will directly

eliminate ~ ₹ 53,000 cr. industry turnover, growing at ~20% …

May 2015

Plastic Packaging Industry for FMCG Industry size (INR cr.) and annual growth

Discussion

• India is one of the fastest growing packaging markets in the world, set to become fourth largest global market by 2016

• Plastic packaging has increased penetration – growing faster than the overall packaging industry - somewhat driven by accelerated growth in the food and beverage sector

• Plastic packaging is ~53% of Indian packaging industry; FMCG sector contributes ~70-75% of total plastic packaging industry revenue

• India has one of the lowest per capita consumption of plastics globally (9.7 kg/ person)

– Vs. Brazil (32 kg/person), China (45 kg/person), United States (109 kg/person)

19,000 53,000 72,000

136,600

64,600

Plastic packaging for

non-FMCG

for FMCG Non-plastic

packaging

Plastic Packaging

Industry Packaging

Industry

~14% ~18% ~20%

Annual Growth

Industry Size

Impact on Economy and Employment

Impact on Consumers Impact on Environment

Note: Plastic Packaging in FMCG industry is estimated to be 70-75% of total Plastic Packaging (Industry Interviews)

Source: FICCI – A report on Plastic Industry, IBEF, Indian Institute of Packaging, Secondary Research, Industry Interviews, Strategy& analysis

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… and employing ~13 lakh people across ~10,000 SMEs and large firms

May 2015

Major Plastic Manufacturing Pockets in India

Use of plastic packaging for FMCG is estimated to provide employment

to ~13 lakh people across ~10,000 firms

Discussion

• Indian Plastic Processing Industry is highly fragmented, majority of the firms (~80-85%) are SMEs

– Plastic parks are taking shape in Haryana, Rajasthan, Gujarat, Karnataka and Kerala and provide pockets of employment as well

• ~10,000 companies employing

~13 lakh people are estimated to be directly involved in plastic packaging for fast moving consumer goods

• Indian Plastic Processing Industry has an installed capacity of 30 MMT, but the capacity utilization in 2013 was only ~ 40%

Impact on Economy and Employment

Impact on Consumers Impact on Environment

Note: Employment & No of companies have been estimated based on Industry Interviews and secondary research

Source: FICCI Knowledge Report, British Plastic Federation – Report on Indian Plastic Industry, Industry Interviews, Secondary Research, Strategy& analysis

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Prepared for FICCI

Estimated Impact on the Processed Food Industry

(INR cr.) Discussion

• Processed food industry is one of the largest in India

– Adds turnover of ~₹125,000 cr., growing at ~8.4%

– Accounts for ~32% of food market in India, also impacting the farmers and their income

• Industry estimates that the ban would cripple ~ ₹90,000 cr. of turnover…

• …and effectively shrink the industry to about a quarter of its current size

Source: Industry estimates, Secondary research

Additionally, ~ ₹ 90,000 cr. revenue of the processed food industry is estimated to be directly impacted

Impact on Economy and Employment

Impact on Consumers Impact on Environment

3,200 1,000

1,300 4,000

3,000

90,000

25,000

6,500

Confec- tionaries

15,000

Spices

10,000

Juices and Fruit Drinks

Salt Coffee

8,000

Tea

Impacted

Processed Food Industry

UHT

Milk

Noodles Others

Biscuits

13,000

Snacks

>70% of Total Processed Food Industry turnover!

Additionally, challenges are expected in segments

of atta and edible oil

categories as well

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The ban will have additional indirect impact – as ‘backward- linked’ and ancillary industries will “feel the burn” as well

23

The industries that form the ‘backward linkage’

to plastic packaging will see “indirect impact”

Plastic Packaging Producers

Petroleum Intermediate

Producers

Resin Producers

Naphtha Producers

Plant &

Machinery Producers

Mould Producers

Additives Producers

Discussion

• As the demand for plastic packaging declines, the

requirement for its inputs will also reduce

• Reduction in demand will affect the entire “backward linked” value

chain (tier-2 suppliers and beyond)

• Indirect impact will be seen on aggregate manufacturing revenue and employment of secondary and downstream industries (such as petroleum intermediates,

machinery, etc.)

Ancillary industries will see additional impact

Pre-packaging manufacturers

Impact on Economy and Employment

Impact on Consumers Impact on Environment

NOT EXHAUSTIVE

May 2015 Confidential property

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Prepared for FICCI

The revenue and employment losses due to the indirect impact will lead to a multiplier effect of 2-5 times

2-2.5

3-5

Estimated Output Multiplier

Estimated Employment

Multiplier

Annual Impact on Plastic Packaging and Backward-Linked Industry Revenues

INR cr.

13 Total Impact

~40-65

Indirect Impact

~26-52

Direct Impact 53,000

Total Impact

~106,000 – 132,000

Indirect Impact 53,000 –

79,000

Direct Impact

Annual Impact on Plastic Packaging and Backward-Linked Industry Employment

Lakh jobs Impact on Economy and Employment

Impact on Consumers Impact on Environment

Note:1) Output multiplier has been estimated based on comparables in international plastics industry as well as Indian manufacturing industries 2) Employment multiplier has been estimated based on comparables in international plastics industry as well as multiple Indian industries 3) Forward linkage to the Processed Food Industry is not included in estimates

Source: Secondary Research, NCAER computation, PlasticsEurope, Govt. of SA reports, IBEF, Indian Ministry of Mines reports, Strategy& analysis

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Plastic Packaging - the sustainable and smarter choice -Report-vF.pptx May 2015

Indian industry is not geared to replace plastic packaging;

attempting to do so requires huge investments and imports

Import Dependence will increase till domestic capacity catches up

1 Huge Investments will be required for domestic capacity to catch up

2 Case Scenario: Glass Capacity Requirement if PET replaced by Glass (LTPA)

Case Scenario: Investment Requirement if PET replaced by Glass (INR Crs.)

27 ~1.5x

~4

PET used in FMCG

~34-42

Current Container Glass Production Equivalent Glass

Capacity Required

Glass Bottling + Filling PET Bottling + Filling

~16,000-22,000

~2800-3500

New Investment

Required Becomes

Sunk Investment

Discussion

• Alternatives industries in India do not have sufficient excess capacity to replace plastic packaging

• Imposing the ban will lead to higher dependence on imports till the alternatives capacity catches up

• Additionally, the plastic packaging industry will be faced with humungous sunk investment; and additional new investment will need to be raised by alternatives industries to replace this

• Example: Import and investment implications of glass bottles replacing PET bottles used in FMCG industry

– Total glass production in India is ~27 lakh tpa; industry is estimated to be at ~70-75% capacity

– Equivalent glass capacity needed in the country to replace PET in FMCG packaging alone will be ~1.5 times the total annual glass production in India

– Import dependence will necessarily increase, likely from China (supplies ~30% of current glass imports)

– Glass bottling industry will need to raise ~16,000-22,000 cr. additional investment; while PET bottling industry will be left with non-performing assets/ “dead” investment Impact on Economy and Employment

Impact on Consumers Impact on Environment

ESTIMATES

Note: PET used in FMCG Industry has been estimated based on Industry input, equivalent glass capacity requirement has been estimated based on 1 Ton of PET equivalency to

~8-10 Tons of Glass. Cost of 1 line (6000 tons/yr) of PET manufacturing is estimated to require INR 40-50 cr., equivalent glass investment requirement has been estimated based on glass industry investment / capacity announcements and balance sheet analyses of major glass manufacturing players, assuming similar asset to investment ratios

Sources: AIGMF Reports, Secondary Research, Industry Interviews, Strategy & Analysis

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The impact felt will be much larger in scope than anticipated – on road side vendors, farmers, waste collectors

May 2015

Note: Images are used for illustrative purposes only, and have been sourced via Google Images

Source: (1) National Policy on Urban Street Vendors; (2) Make In India – Food Processing; (3) AIPMA Reports; Industry Interviews

 Farmers provide raw materials to the processed food industry, and will be impacted by the dramatic shrinkage of the industry turnover

 Example: Institutional buy

contributes more than 25% of open market sale of wheat and sugar – decline in atta and other processed food sales will impact the livelihood of farmers who harvest these crops

Farmers – Agricultural Sector

 4.3 million workers are engaged in retail trade on streets in urban and rural areas. Moreover there are over 8 million retail establishments. Major products sold include packaged drinking water, soft drinks, lower price point (< ₹10) packaged foods

 Ban on Plastic Packaging is likely to eliminate lower price point categories -- impacting the sales & livelihood of several lakh small vendors

Roadside Vendors/Kirana Shops

 More than 1.6 million Waste

Collectors depend directly on plastic (primarily PET) waste which

constitutes 30% of their income

⁽³⁾

 PET is the second most valuable waste material for collectors, fetching ~ ₹ 30-45/kg (behind metals that are valued at ~ ₹ 80/kg)

Waste Collectors

Impact on Economy and Employment

Impact on Consumers Impact on Environment

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Environmental impact will be negative as well – In general, alternatives are less environmentally friendly

May 2015

…Higher consumption of natural resources (since more and higher weight materials are

required)

…Higher energy and water usage during manufacturing

…More fuel spent to transport/

distribute the materials

• Lower packing density  more truck trips

• Lower shelf life  more truck trips

…More energy spent to recycle

…More GHG emissions over the life cycle of the

product

Compared to plastic, the use of alternatives would result in…

Impact on Economy and Employment

Impact on Consumers Impact on Environment

Source: FICCI, AIPMA, Secondary Research, Industry Interviews

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Case examples – Alternatives are less environmentally friendly compared to plastic packaging

May 2015 28

For carrying 1 lakh liters of milk Plastic Pouch

Glass bottle

Material Required (Mt) 0.4 45.4

Energy Required In Production of raw material

32.22 671.92

In Production of bottles/

pouches

4.56 530.27

In Recycling

(assumed 50% recycling)

2.28 250.83

Water Required in Manufacturing 25.6 1608

Fuel Required in Filling and Distribution 1120 2049 For packaging 1 lakh tons of ‘atta’ Plastic Film Bag Jute Bag

Material Required (Mt) 680 1960

Energy Required (‘000 GJ)

In Production of raw material

38.36 21.5

In Production of bags/

liners

24.22 47.19

In Recycling

(assumed 80%

recycling)

13.76 n/a

Water Required in Manufacturing 264 1677

Fuel Required in Distribution (GJ) Taken as basis

4663 Note : Jute has no barrier properties (i.e. cannot effectively guard food against oxygen and moisture) and thus cannot ensure food safety

315 500

571 Aluminium Can

Glass Bottle

PET Bottle

GHG Emissions over life cycle (lbs CO ₂ & eqvts. per 1000 units)

Note: Images are used for illustrative purposes only, and have been sourced via Google Images Source: FICCI, AIPMA

Environmental Impact of Plastic vs. Alternative Forms of Packaging

Less environmentally friendly More environmentally friendly

EXAMPLES Impact on Economy and Employment

Impact on Consumers Impact on Environment

Confidential property

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An outright ban will create its own share of increased

environmental problems – and will not be the right solution

May 2015

• Deforestation

• Damage to biodiversity

• River Bank Erosion

• Higher Carbon Emissions

• Mining Hazards

• Harmful emissions

Environmental Impact of Alternative Forms of Packaging

ILLUSTRATIVE Impact on Economy and Employment

Impact on Consumers Impact on Environment

Note: Images are used for illustrative purposes only, and have been sourced via Google Images Source: Strategy& Analysis

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Executive Summary Context

Plastic Packaging – the Smarter Choice Banning Plastic Packaging –

Impact on Consumers, Economy and Environment Suggested Way Forward

May 2015

(32)

A ban is not a prudent solution -- Problems associated with plastic waste management in India stem from two root causes

May 2015

All waste is collected in one, non-segregated

stream

Segregation and recycling is fully dependent on economic value to the informal sector

• All municipal solid waste (MSW) is collected in one stream

• Mixed solid waste minimizes reusability of components of the waste – e.g., in Delhi, of the 11,500 TPD of MSW generated, only 825 tonnes is composted

• Unusable waste has to be landfilled

• Waste generated by 2021 would need 590 sq.km. land fill – the area of Hyderabad; and by 2047, 1400 sq. km. will be needed – combined area of Hyderabad, Mumbai and Chennai

Waste collectors

Junk Dealers

Recycling Industry

• All recycling in India is entirely undertaken by the informal sector – comprising waste pickers, waste buyers

(Kabariwalas), waste dealers and recycling units

• Generally, recyclables are collected in two ways

– Paper, glass and metal are collected before they enter the MSW stream by Kabariwalas

– Plastics are collected by waste-pickers from litter on streets or from landfills

• Collection of recyclables is fully driven by economic value to the informal sector

• Hence, collection efforts focus on materials that have demand for recycling and are heavier weight – leaving single layer and multi-layer plastics back in MSW heaps

Waste Collection Value Chain

Note: Images are used for illustrative purposes only, and have been sourced via Google Images

Source: Ministry of Finance, GOI Position Paper on SWM; Columbia University study on MSWM; Strategy& analysis

Even though all plastic can be reused/ recycled, only a fraction of

the plastics in the MSW stream

make it back to be reused since

they are not separated from

other MSW - neither at source

nor by the

informal sector

Drivers of Problems associated with Plastic Waste Management Implications

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New technologies have been tested for reuse of plastic waste – availability of usable waste is the primary barrier

May 2015

Plastic Waste Management Technologies in India

Plastic Waste Mgmt.

Conventional technologies

Recycling

Landfills

Incineration

New technologies

Plasma Pyrolysis

Polymer Blended Roads

Co-processing in Cement

Kilns

Liquid Fuels

Technology What it does Status in India Plasma

Pyrolysis

• Intense heat generation to dispose of all types of plastic waste in a safe and reliable manner

• Tests are being conducted by CPCB

• Energy recovery being tested to make it economically viable

⁽¹⁾

Polymer

Blended

Bitumen Roads

• Plastic wastes mixed with granite to improve the life and strength of roads

• Lower pothole formation, reduced bitumen bleeding in summers

• Testing Phase - technology already used for road construction in Pune, Bangalore, Madurai

• Costs comparable to regular roads (2% more expensive)

⁽³⁾

Co-processing

in Cement Kilns

• High calorific value of plastic wastes can replace fossil fuels in cement kilns

• At 10% replacement rate, 170 cement kilns could dispose of the entire plastic waste generated in India

⁽²⁾

• Trials conducted by ACC Kymore Works (’08) and Ultratech Cements (’12)

• Hampered by availability of usable waste, cumbersome approval processes from statutory bodies

Liquid Fuels • Plastic waste heated at higher temperatures in absence of oxygen using a catalyst converts it into liquid RDF (Refuse-derived fuel)

• Materials and technology have been tested

• Availability of usable waste is the major issue

Source: (1),(2) CPCB reports (3) Journal of Chemical & Pharma Sciences; CII Waste Exchange – List of trials for Co-Processing, Secondary Research, Strategy& Analysis

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The problem of plastic waste needs to be tackled more holistically (1 of 2)

May 2015

Segregate waste at source -- make waste usable

Educate the masses Enhance economic

value of plastic waste through regulation

Invest in and pilot re- use technologies Government Industry

Recommendations – Health Concerns Recommendations – Environmental Concerns

GOVERNMENT

Segregate waste at source - make waste usable

• Segregation at source is successfully practiced in developed economies to separate and manage municipal solid waste and increasingly in developing countries - successful cases of source segregation on a city scale in Asian cities: Markina City in Philippines, Phitsanulok City in Thailand

• Municipal governments must be encouraged to undertake necessary action to move waste collection from one unusable waste stream to multiple segregated and usable streams

• State governments can mandate municipal governments to segregate at source, and authorize action against establishments/societies/wards for non-compliance

• Regulation must be accompanied by effective citizen education which can be industry/ NGO-led

Enhance economic value of plastic waste through regulation

• Creation of demand pockets via regulation will enhance economic value of plastic waste – which will encourage the informal sector to channel collection efforts on non-PET plastic. Demand for plastic waste can be created via

− Mandatory usage thresholds in industries that can reuse (such as road construction, cement kilns)

− Incentives for use of plastic waste to encourage switch from “business as usual”; could be recovered via plastic producer levies as in developed nations

− Education of these industries on technologies and benefits from use of plastic waste

In partnership with NGOs and industry associations

1

2

3 4 1

2

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The problem of plastic waste needs to be tackled more holistically (2 of 2)

May 2015

Segregate waste at source -- make waste usable

Educate the masses Enhance economic

value of plastic waste through regulation

Invest in and pilot re- use technologies Government Industry

Recommendations – Health Concerns Recommendations – Environmental Concerns

In partnership with NGOs and industry associations

INDUSTRY

Educate the masses to segregate at source

• Industry can lead citizen education on the importance of and ways to segregate at source via:

− Multiple campaigns to generate mass awareness of consumers and other stakeholders (e.g., waste pickers)

− Modified packaging labels e.g., specifying best uses and encouraging segregated disposal

• Government can specify industry participation levels and/or investment levels expected in mass awareness programs

• Industry Associations can act as rallying points and coordinate efforts

Invest in and pilot re- use technologies

• Carry out tests for proof of concept for additional technologies, conduct pilot projects and invest in recycling plants

1

2

3

4

3

4

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Additionally, Government can consult the industry to

evaluate the best ways to enhance producer responsibility

May 2015

• HUL is trying to create market value for discarded sachets and lighter plastic packaging to

incentivize the ragpickers to collect them from the streets

• Re-use: Entered into a partnership to turn such waste into fuel oil at a viable cost, and use this fuel to power the boilers of its plant in Pondicherry

• Dabur was reported to have partnered with TetraPak India to mobilize ragpickers to collect discarded packaging of food products.

• Re-use: Waste recycled to create products such as roofing sheets and office stationery

• Impact: Over 3,000 Kg of Tetra Pak cartons collected and recycled

Enhancing Producer Responsibility implies manufacturers’ involvement in post-consumer disposal of plastic waste – sharing the accountability and economics of waste management

along with the municipalities via various CSR initiatives

• The Indian Beauty and Hygiene Association (IBHA) has undertaken

‘Zero Waste Project’ with an NGO to incentivize rag pickers to pick multi-layer flexible waste, such as food packets and sachets.

• Re-use: Plans to recycle the waste to produce oil and carbon

• Impact: As of April 2015, 766 kgs of multi-layer waste collected in Mumbai; with plans to replicate in other metro cities.

Source: Newspaper Articles – The Economic Times, The Hindu – Business Line, Company Investor Reports, Strategy& Analysis

Indian Industry is already voluntarily leading efforts. Some examples…

Recommendations – Health Concerns

Recommendations – Environmental Concerns

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Case example: How Germany reduced its packaging waste through an industry-led approach

May 2015

• In 1991, Germany passed the ‘Green Dot Ordinance’ that – Required producers and distributors to be responsible for the

collection, sorting and recycling of their packaging material – Shifted the financial burden of waste management from public

sector to the private industry

• Established a non-profit organization, Duales System Deutschland GmbH (DSD), to facilitate the recovery and recycling of packaging waste

• DSD succesfully championed the regulation by:

– Working in association with 400 waste management partners including the municipalities, and establishing a system for waste collection

– Levying a license fee from manufacturers and distributors to put up a ‘green dot’ label on their products and taking responsibility of packaging bearing this mark

– Using the fee to finance waste disposal, charging fees in proportion to the disposal costs of the package

• Germany’s packaging waste recovery rates doubled in 10 years to

>75%, 26 European countries followed suit adopting similar systems

What the Industry did in response…

Note: All types of packaging material including plastics come under the purview of ‘The Green Dot’ ordinance Source: DSD Website, NTA Report

The Regulation

Results

Recommendations – Health Concerns Recommendations – Environmental Concerns

Illustration of Germany’s ‘Green dot’ System

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Opinions/ evidence vary on health impact – further study is recommended

May 2015

Select Conflicting Studies

Source Details

“FDA’s current perspective, based on its most recent safety assessment, is that BPA (Bisphenol-A) is safe at the current levels occurring in foods. Based on FDA’s ongoing safety review of scientific evidence, the available information continues to support the safety of BPA for the currently approved uses in food containers and packaging.” – FDA

WHO Prequalification of Medicines Program (PQP) helps ensure that the medicines supplied by or through international procurement agencies (UNICEF, UNITAID, etc.) meet acceptable standards of quality, safety and efficacy. The WHO prequalification of medicines is preceded and succeeded by extensive rounds of research and rigorous assessments to ensure that the specifications are continually met. Out of the 419 medicines in the PQP list (as of 23/4/2016) for priority diseases (HIV/AIDS, TB, Malaria, etc.), 383 medicines are available in different forms of plastic packaging including 8 that are available in PET packaging.

“The Swiss Federal Office of Public Health (SFOPH) mentions that the risk to consumers from possible migration of antimony from PET bottles is negligible .” – IDMA

“PET itself is biologically inert if ingested, is dermally safe during handling and is not a hazard if inhaled.. Negative results from Ames tests and studies into unscheduled DNA synthesis indicate that PET is not genotoxic..” - ILSI

“Polyethylene Terephthalate does not appear in the universe of 10,000 chemicals shortlisted from 85,000 chemicals for EPA’s ‘Endocrine Disruptors Screening and testing Program (EDSP).

Though, glass appears in the list as a potential Endocrine Disruptor.” - IDMA

“The NRDC has petitioned the FDA to ban the use of BPA in food packaging, but on 30 March 2012 the FDA issued an interim ruling denying that request, pending further research. Currently the FDA allows the use of BPA in food-contact applications.”

“BPA from food packaging is not a health risk to Canadians, including newborns and children.” – Govt. of Canada

• Concern that “leaching” of various chemicals used in the PET/plastic bottles occurs under varying storage temperatures and also when the packaging becomes old – PET bottles are tested for

permissible levels of harmful chemicals at storage temperatures of

~20

^o

C, leaching may increase at higher temperatures

– Consignments could be left stranded in sub-optimal storage conditions and temperatures since logistics is largely an unorganized sector in India

• “Leaching” can lead to several diseases

Health Concerns Raised

Source: FDA, ILSI, IDMA, NCBI, WHO, Canadian Government website, Secondary Research

Recommendations – Health Concerns

Recommendations – Environmental Concerns

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Appendix –

Plastic Waste Facts

May 2015

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India generates ~15,300 tons of plastic waste everyday – ~70%

of PET waste is recycled vs. only ~50% of non-PET plastic

30%-40%

Estimated Composition of Solid waste generated in India by Weight

Plastic Waste

~ 15,342 TPD

Non-Plastic Waste 30%-50%

50%-70%

Total Solid Waste

Dry Waste

Plastic Waste

Chips &

Confectionary bags

7%

12%

19%

10%

Bottles/Cap /Lids

4%

Supermarket /Retail bags

Cling wrap PET Bottles

21%

Straws 8% 7%

Garbage Bags Others

Food bags 5%

Packaging

8%

Category Recycling Rate Total Plastic Waste ~60%

PET ~70%

Non-PET ~45-55%

~40% of the plastic waste (~6,137 TPD) is

not recycled, especially non-

PET waste

Note: Recyclables separated before formal waste collection has been included in the estimates of generated waste based on data reported in Pune, more accurate national estimates of this may change the composition numbers

Source: Secondary Research, Industry interviews, International Science Congress Association, ISSUU

Wet Waste Dry Waste 60%-70%

May 2015

Plastic Packaging – the

Plastic Packaging – the

sustainable and smarter choice

May 2015 Perspective

Why banning plastic packaging in Indian

FMCG is not a viable option

Purpose and scope of this study

Purpose of this study

• Evaluate the broad-based impact (i.e. on consumers, economy and environment) of a ban on plastic packaging

• Share Strategy& perspective on the way forward to address the health and environmental concerns raised

Scope of this study

• Limited to all plastic packaging used in FMCG sector in India

• Does not address use of plastics in pharmaceutical sector and other non-

packaging use

Executive Summary Context

Plastic Packaging – the Smarter Choice Banning Plastic Packaging –

Impact on Consumers, Economy and Environment Suggested Way Forward

Executive Summary (1 of 3) - Plastics are THE packaging material of universal choice for FMCG products

Plastics are the packaging material of universal choice for FMCG products

• Plastic is the material of choice in packaging FMCG products across categories globally

– Across developed as well as developing economies, including India, plastic is the predominant packaging material used for most FMCG categories

– Plastic penetration for packaging varies from 60%-85% globally, depending on category – Seven types of plastics are primarily used in FMCG packaging – PET, HDPE, LDPE, PVC,

Polypropylene, Polystyrene and others

• Plastics are ubiquitously used for FMCG packaging in India as well

– Some categories are almost entirely dependent on plastic packaging (e.g., biscuits, processed food, dairy, hair care, laundry)

– Penetration of plastic packaging in most categories is >75%

Plastics are universally used due to several benefits

• Use of plastic packaging results in:

– Increased food safety, quality and shelf life: Plastic provides greater protection against moisture and oxygen transmission, ensuring freshness and preserving the content for a longer time

– Reduced environmental impact: Plastic is lighter weight and shatter proof vs. alternatives, resulting in low breakage and low wastage. Use of plastic packaging results in lower GHG emissions

– Consumer convenience: Plastic is highly versatile, allowing consumer friendly designs and packaging

innovation. Plastic packaging is easy to carry, store, clean and can be made re-sealable and/ or re-usable

Executive Summary (2 of 3) - The impact of an outright ban on plastic packaging will be far fetched

Impact on Economy and Employment Impact on Consumers

Environmental Impact

Low price point products will disappear

from the market

Packaging Industry Turnover: ~₹53,000

cr.+ growing at ~20%

Jobs: ~13 lakh jobs across ~10,000 firms

Multiplier effect

2-2.5x

turnover

3-5x

employment

Imports &

Investments

will be required to increase

many fold

Natural resource usage

Higher material requirement, energy and water usage, more fuel burnt during transport

Emissions

Higher Green House Gas emissions

Cost to Consumer

Higher by upto 3 times

depending on categories and alternatives

Impact beyond Industry

Kirana Shops, waste pickers,

farmers

Consumer Hygiene and

Food Safety

issues with unpackaged food

Processed Food Industry

~ ₹90,000 cr.+ turnover

Executive Summary (3 of 3) - More prudent actions vs. an outright ban need to be considered

Suggested Way Forward…

… to address Health Concerns

Recommended Four-Pronged Approach to tackle the Problem of Plastic Waste

• Multiple studies indicate that PET is a safe material for use in packaging. Since contradictory evidence is available on health impact, further study is recommended to address health concerns raised

… to address Environmental Concerns

•

-- and move waste collection from one unusable waste stream to multiple segregated and usable streams.

•

non-compliance

•

multiple ways – such as a) mandatory usage thresholds in industries that can reuse (such as road construction, cement kilns), b) incentives to these industries to make the switch and c) education of the industries on benefits from use of plastic waste

•

a) Running multiple campaigns to generate mass awareness – to educate and encourage stakeholders to segregate at source and modifying packaging label to educate citizens

b) Carrying out tests for proof of concept, conducting pilot projects and investing in recycling plants

1

– PET bottles are tested for permissible levels of harmful chemicals at storage temperatures of ~20 ^o C, leaching may increase at higher temperatures