Solving the waste problem

• Companies are being obliged to internalise costs that they once imposed externally
• Insisting on the ‘right to repair’ is one way to reduce waste
• Recycling the materials found in EV batteries will also be crucial

Most readers will be familiar with the concept of an economic externality. From a sustainability perspective, various forms (unfortunately) exist; the cost of air or water pollution to society isn’t necessarily reflected in the cost of using certain goods and services nor is the exploitation of labour.

Waste is a traditional (environmental) externality of course. Although as Justin McGuirk articulately states, waste is trending towards being internalised; both economically (good) but also biologically (very bad).

Plastic is a growing problem (Annual global polymer resin and fibre production measured in metric tonnes per year)

That nature and waste are becoming extrinsically linked reflects the scale of the plastics problem: ‘plastiglomerate’ describes a stone that contains mixtures of sedentary grains, other natural materials (like shells and wood) bound together by hardened molten plastic. That plastiglomerate could potentially form a marker horizon of human pollution on the geologic record is an idea I find both fascinating and depressing.

Plastic and climate change

That there is too much plastic in our oceans (and the intestinal tracts of all the organisms that reside there) is not new news although it took the dulcet tones of David Attenborough for the problem to really land with society. Less well appreciated is the extent to which plastic manufacture contributes to the climate crisis; most plastics are manufactured from fossil fuels and each tonne manufactured results in two tonnes of greenhouse gases (with estimates doubling or more when final disposal is taken into account). That we’ve produced more plastic in the last 20 years than we did in the 50 preceding years hasn’t helped. 

Plastiglomerate from Kamilo Beach, Hawai'i, displayed at Museon in The Hague 

And as other sources of demand (like transportation) fall, petrochemicals (of which plastic is the largest component) become increasingly important for the oil & gas industry’s growth prospects and as a proportion of its carbon footprint. BP forecasts that plastics account for 95% of demand growth; the IEA is more sanguine, with plastics accounting for ‘only’ 45% of demand growth. Either way, from a sustainability perspective, plastic appears to be on an untenable trajectory.

Right to repair

Unfortunately, the generation of electronic waste (‘e-waste’) looks to be on a similar trajectory, driven by higher consumption rates, short lifecycles and few repair options. The UN estimates that in 2019, approximately 53.6 million metric tonnes of e-waste (excluding PV panels) was generated, which is equivalent to 7.3kg per capita, with the highest per-capita rate being in Europe. 

If, like me, you have a drawer full of old chargers, headphones and speakers at home, it will not come as a surprise that only a small proportion of this waste stream is currently recycled. The problem is only likely to grow as electronic items become smaller.

The concept of the right to repair is to render electronics easier and cheaper to fix with the goal of prolonging their lifecycles and reducing electronic waste. Instead of designing for obsolescence, right to repair demands that: electronic devices are designed and constructed in a way that makes repairs easier and which won’t be hindered by software programming; that original spare parts and tools are made available (at a fair price); and that manufacturers make it clear that repair is a possibility.

The right to repair is slowly gaining traction. France leads the way in this repair revolution having introduced a ‘repairability’ index last year which covers smartphones, laptops, televisions, washing machines… and lawnmowers. Similar proposals are pending in Europe as part of the Green Deal and in numerous states in the US where there is broad bipartisan support.

Late last year – following months of growing pressure from repair activists, regulators and a proposed shareholder resolution – Apple announced that it would make spare parts and repair manuals available to the general public. It’s only the tip of the iceberg. But other electronics manufacturers faced with similar shareholder resolutions – such as Microsoft and Alphabet – are also (appearing) to shift their previously entrenched positions on the issue.

EV batteries

‘What will happen to the all the batteries in the future?’, should perhaps have been the sixth of our frequently asked EV questions. And it’s a fair one. 

The number of electric vehicle batteries in the EU available for recycling is expected to grow rapidly 

Although volumes won’t pick up until the end of this decade, waste from Li-ion battery packs is expected to grow hugely from there. And since battery materials account for around 25% of total manufacturing emissions and are valuable, recycling them is critical. 

China will be first to see massive battery retirements (starting with their e-buses) and has been progressive in establishing the necessary battery recycling regulations and ecosystem. Comprehensive coding and tracking for every cell, module and pack is required and automakers must build battery collection stations in cities where EVs are sold and where second-hand batteries have been deployed. Depending on their chemistry and a range of other factors, some of these batteries will also be given a second chance at life in energy-storage systems and other applications.

Regardless of jurisdiction, automakers are putting aside funds for every EV pack they sell in anticipation that they will have to pay recyclers to recover their costs and make a profit. And in many instances, auto manufacturers are partnering up (both up and down the value chain) to ensure the supply of new and recovered battery materials. 

In the recycling sector, a variety of business models are being developed by both established and new entrants. Tesla co-founder JB Straubel’s recycling start-up, Redwood Materials, estimates that the battery component supply chain currently stretches to tens of thousands of miles. Recycling more of these battery materials is therefore critical.

In summary

It seems inevitable that companies will increasingly be obliged to internalise costs that were previously imposed externally: on society, on their employees and on the environment. The acceptance that a company’s responsibility for its products and services should extend beyond the point at which they are sold implies a paradigm shift in the economics of some industries. That shift will produce winners and losers. As impact investors, our task is to find stocks in the first group – and to avoid those in the second like a plastiglomerate-strewn beach.

Relevant companies in our portfolio…

Tomra – Norwegian-listed Tomra is the global leader in waste-sorting systems including reverse-vending machines that enable deposit-return schemes. Where such schemes have been widely rolled out, recycling rates are often above 90%. Tomra estimates that in 2020 its equipment enabled the avoidance of 18 million tonnes of CO2. Per £1million invested in its shares, Tomra saves the most CO2 of any company in the portfolio (among those companies that report emissions saved).

ThredUp – US-listed ThredUp operates an online portal (and associated logistics) for the re-sale of second-hand women’s and children’s clothing. ThredUp’s own lifecycle analysis suggests that buying used versus new clothing reduces the carbon footprint by 82%.

Tesla – Maximising battery longevity is the best environmental option. But Tesla is also working with third-party recyclers while also developing its own in-house recycling capability. Tesla’s relationship with EV battery start-up Redwood Materials (founded by Tesla co-founder JB Straubel) is well documented.