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Plastic credits and circularity: Looking at the Benefits and Risks

As a continuation from our last article introducing the plastic credits scheme, science has proven that there is a need for transformation in the existing linear system to address the plastic waste problem. Yes, the systemic waste management and plastic circularity may still be far from reality – but there are interim solutions available to lessen the impacts of the plastic waste crisis. 

Plastic credits is one such mechanism –  an innovative and sustainable financial tool and funding system aiming to fill in the resource gaps in solid waste management     .  

Plastic credit is a voluntary scheme aiming to address the global plastic waste crisis and at the same time increase the income of the informal waste collectors from the marginalized communities by bringing funding from companies that aim to reduce their plastic footprint. There are several reasons why companies would and should be obliged to buy plastic credits.

What are the Benefits?

The environmental impacts of plastic credits can parallel the social impacts. Companies involved in this scheme are also supporting global programs aligned with Environment, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) policies, sustainability, and Sustainable Development Goals. Depending on the companies’ goals and desired results, the benefit may differ but can include the following:

  • Promote citizenship, education, employment, and gender empowerment
  • Improve community health, water quality, and sanitation
  • Protect biodiversity and food supplies
  • Mitigate plastic footprint
  • Provide additional income
  • Help attain plastic ESG and other sustainability goal

What are the risks?

There is a debate right now on the plastic waste crisis and the developing plastic credit scheme. Countries around the world studying this scheme are already starting to evaluate its risks. Mainstreaming plastic credits to local level may have risks for the informal waste collectors and the stakeholders involved. A recent study by UNEP identified the following risks of mainstreaming plastic credits to the informal waste management in Southeast Asia:

  1. Unequal income distribution along all stakeholders involved. There are many organizations and processes involved in plastic credit scheme; and the lack of standards in the plastic credit market causes lack of transparency in distributing the income to all stakeholders. The informal waste collectors, who work on the ground, are usually at the lower end of the plastic value chain. Thus, they do not receive major financial benefits because the greater proportion of the income is distributed to the stakeholders in the upper chain.
  1. Unstable funding. Plastic credit is only used as a voluntary scheme by companies to offset their plastic footprint. Thus, it does not guarantee stable funding to the informal sector. The informal waste collectors will be the most at risk since they greatly rely on additional income. The benefits they receive are not secured and may not be available when companies decide to invest their resources in other interventions.
  1. Considered only as commodity trade. So far, the compensation in plastic credit scheme is based on the quantity of the collected plastic wastes ⸻ commodity trade. Compensation based on quantity makes the informal waste collectors extremely vulnerable because the collected plastic waste types and quantities significantly vary.
  1. Overlooking the socio-economic impacts on local communities. Currently, the plastic credit scheme is directed primarily to the companies that want to offset their plastic footprint. Even though the local communities and the informal sectors are main players in the scheme, they are rarely addressed in promoting plastic credits. Also, the scheme is primarily assessing environmental impacts, creating risk of overlooking the socio-economic impacts⸻ working conditions, health, literacy⸻ on the local communities participating in the waste management activities.
  1. Limited participation of relevant stakeholders. International standards on plastic credits may limit relevant stakeholders working on the ground from participating in the scheme, which then also restrict their access to additional funding. For instance, there are standards that require the organizations that wish to participate in the scheme to provide proof that they have access to recycling facilities. Many Global South countries do not have access to such facilities. Thus, they are being excluded to conduct waste management activities.

How to Mitigate the Risks?

The following ways are recommended to policymakers and stakeholders to mitigate the identified risks for the informal sector:  

  1. Standardization in the plastic credit market. Creating standards in the plastic credit market will improve transparency on financial distribution to the stakeholders participating in the scheme.
  1. Adhering to principles of Extended Producer Responsibility (EPR). Generally, the scheme should be designed according to EPR principles to lessen the vulnerability of the informal sector that is greatly dependent on additional income. The EPR schemes include binding long-term funding to waste management systems.  Thus, EPR and plastic credit schemes should be aligned with each other to avoid unstable funding. 
  1. Compensation based on working hours. Since the quantities and prices of plastic waste collected vary significantly in local markets, it would be better if the compensation of informal waste collectors is based on the number of hours they spent on plastic waste management activities⸻ environmental services.
  1. Investment to local communities. Aside from considering the environmental impacts, the scheme should be designed that its funding will also be invested in the livelihoods and health of the informal stakeholders, local waste management infrastructures such as recycling facilities and landfills, and capacity building of communities.
  1. Regulating standards and participation criteria. The standards for participating in the scheme should be regulated to consider the waste realities on the ground. The standards and criteria should incorporate minimum adaptability to various local context. But of course, the fundamental environmental and social criteria such as waste burning and child labor should not be disregarded.

Going Forward

It’s obvious that we still have a lot of work to do to reduce plastic waste. This problem requires innovative solutions. Plastic credit has emerged as a promising and powerful tool to mitigate environmental and social problems caused by plastic pollution and has the potential to drive funding to waste management systems and restoration of environment. However, if the scheme is not planned and implemented well, then it could just do more harm than good.

Mitigating the risk can ensure that plastic credit can give a meaningful impact on plastic pollution and waste management. Of course, plastic credit should not just be used to offset plastic footprint. Companies will only contribute to meaningful impacts if plastic credit is just taken as supplemental strategy to a holistic plastic waste management strategy. The companies must prioritize reducing their own plastic footprint by eliminating excess plastics in the supply chains and increasing the composting, reuse, and recycling of their products. Going forward, collaborating to all stakeholders can help devise improved strategies to realize the vast potential of plastic credits. Working together, we can reduce plastic waste and restore the environment. As a continuation of this series on plastic, we’ll talk about EPR (Extended Producer Responsibility) as a mandatory mechanism in the coming days and recent developments around the same in the Philippines and other Southeast Asian countries.

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