Plastic recycling may generate more liability than recycled plastic

Plastic recycling may generate more liability than recycled plastic

“Just one word…are you listening?  Plastics.  There’s a great future in plastics.”  –Mr. McGuire to Benjamin in The Graduate.

Resilient, lightweight, and cheap – plastics are remarkable products that helped usher in the age of modern living.  Early on, some believed that moving from the standard paper and cardboard packaging of the time to plastic would provide a net environmental benefit because it would prevent trees from being cut down and conserve our forests.  In the 1980s and 90s, that idea gained further credence as the industry adopted the “chasing arrows” recycling symbol and most of us started collecting our plastic bottles and disposing them in the recycling bin with the belief that they would find another life as new bottles and the like.

Today, though, plastic recycling and its industry proponents – primarily the plastic manufacturers and industries who sell their products in single-use plastic packaging – are under fire for allegedly deliberately misleading the public about the economic and technical feasibility of recycling in several recently filed lawsuits.  The lawsuits further allege that plastic manufacturers always knew recycling would produce an inferior product compared to virgin plastic while simultaneously representing to the public that recycling would solve the problem of waste from single-use plastic.
(https://climateintegrity.org/uploads/media/Fraud-of-Plastic-Recycling-2024.pdf; https://oag.ca.gov/news/press-releases/attorney-general-bonta-sues-exxonmobil-deceiving-public-recyclability-plastic)
 

So how did we get here, and what does this mean for liability insurers?

Plastic manufacturing has been growing for most of the last century, with 2021 production approaching 400 million tonnes.  While some of this production is directed toward multi-use plastic that will be in service for months, years, or even decades, a large portion is used for single-use applications like water/soft drink bottles, plastic bags, food containers, and myriad other kinds of packaging.  As public concern about plastic waste grew alongside the amount that was being generated, plastic producers developed the now-ubiquitous chasing arrows symbol meant to indicate that the plastic could, in theory, be recycled.

Many of us remember the spread of curbside recycling collection during the 1990s along with the innovation of putting a number – the resin code – inside the chasing arrows symbol to indicate the type of plastic and help downstream recyclers sort the material into pure streams of plastic waste by polymer type.  This was intended to help the recycling process by ensuring materials with different properties didn’t mix and ruin the recycled plastic that would get incorporated into new products.

These efforts were scientifically sound but proved to be difficult to implement from a practical perspective.  Most recycling is done mechanically by grinding up the waste plastic into small pieces and then melting them down to incorporate into new plastic products.   Breaking plastic down this way has some unintended side effects.  First, as much as 30% of the plastic can be lost in the process (https://www.beyondplastics.org/plastics-recycling-rates).  Second, grinding plastic up into small pieces creates enormous amounts of microplastic that can get released into the wastewater from the recycling plant; one study (https://www.sciencedirect.com/science/article/pii/S2772416623000803?via%3Dihub) found that recycling plants without wastewater filters could release 13% of the total inbound plastic weight back into the environment as microplastic.  If the same plant was filtering its wastewater, it could still emit as much as 6% of its intake back into the environment as microplastic.  Third, workers in the plant can be exposed to high levels of airborne microplastic, 61% of which are smaller than 10 µm, a particle size that has been linked to increased risk of disease in many contexts.

After all this processing and material loss, mechanically recycled plastic is often combined with virgin plastic to strengthen it.  It is then sold to a processor that incorporates it into a new product, bringing us to another important issue stemming from plastic recycling: chemical contamination.  While solid data are hard to come by, scientists have estimated that as many as 16,000 chemicals are used in plastic production to modify its properties for its intended use.  (https://plastchem-project.org/wp-content/uploads/2024/03/PlastChem-Press-Release_English-v1.pdf)  More than one quarter of those may be hazardous to human health and the environment.  Yet recycled plastic is used largely without regulatory oversight or constraint, leading to heavy use in food-contact plastics.  For example, scientists have already identified (https://www.sciencedirect.com/science/article/pii/S0045653524022173?via%3Dihub) brominated flame retardants in black plastic kitchen utensils and takeaway sushi trays.  Discoveries like this open the door for potential plaintiffs to claim they’ve suffered injuries from exposure to these chemicals from food and cosmetics packaged in recycled material.

Seeing the mounting issues with mechanical recycling, compounded by the fact that less than 10% of plastic ever gets recycled, plastic and polymer producers have begun to invest in “advanced” or “chemical” recycling.  The idea is simple: chemically react plastic polymers back into their original chemical building blocks (i.e. monomers) and use that as feedstock for making new plastic.  Theoretically this solves multiple problems at once: plastic pollution would be reduced, chemical contamination of the recycled product would be eliminated, the need to extract more oil from the ground to make plastic would be lessened, carbon emissions from the oil & gas and plastic industries would fall, and companies would make significant progress on their “net-zero plastic” pledges.

So far, however, the theory has not panned out.  As recounted and alleged in the California Attorney General’s lawsuit against Exxon, advanced recycling yields are minimal and plastic made from the recycled chemicals contains virtually no recycled plastic.  This lawsuit has therefore accused Exxon of greenwashing its advanced recycling capabilities.  Similar allegations could be levelled against other companies selling plastic in this manner or advertising their products as being packaged in recycled plastic.

These developments could accelerate the growing skepticism that companies can meet their net-zero plastic goals using any kind of recycling.  In a highly litigious environment, perhaps being driven by litigation funding, it would not be surprising to see lawsuits emerge that allege shareholder damage when companies reveal that they need to expend significant amounts of money to move away from plastic packaging due to prior commitments to do so by 2025 or 2030.  Our scenario that models how this situation could play out shows total losses rising as high as $19.5 billion.

As we learn more about the gulf between the reality of plastic recycling and how it’s been sold to the public, companies and their insurers could find themselves facing lawsuits alleging anything from financial harm to bodily injury, widespread public nuisance, and fraud.  Insurance coverage questions notwithstanding, insurers need to be prepared to address these claims as they arise.