The socially responsible supply chain: An imperative for corporations

Supply chains have been consistently fraught with human rights challenges for decades, with violations being documented across industries, from agriculture and construction to plastics recycling. In recent years, stakeholders – from international regulators and NGOs to the general public, and investors – have turned their focus to companies’ supply chains.

The resulting awareness and advocacy against unethical sourcing practices have pushed many multinational corporations to commit to working only with suppliers that adhere to socially responsible standards. It is no longer simply a “nice-to-have”; it is an imperative for businesses to maintain their license to operate and competitiveness in the market.

Defining social responsibility in plastic supply chains

According to the NextWave Framework, responsible sourcing within the ocean-bound plastic supply chain network encompasses six key goals, namely freely chosen employment; fair and predictable payment; beneficial health and safety conditions; prioritized child welfare; strong business ethics; traceability and documentation; and support for marginalized populations. Although responsible and ethical sourcing in supply chains is increasingly prioritized by businesses and brands within the ecosystem, it is a complex goal to achieve.

Recycled plastics supply chains in South and Southeast Asia involve a large number of participants across two distinct source streams, comprising formal and informal sectors. Formal waste management remains low in the region due to a lack of funding, low interest in developing the industry and insufficient know-how on sustainable waste management. As a result, plastic waste collection is generally dominated by informal waste workers. For example, a 2021 study of nine Asian cities revealed that the informal sector contributed to the recovery of more than 95% of Polyethylene Terephthalate (PET) for recycling. Despite their contributions to the sector, informal waste workers are the ones most affected by human rights abuses, and yet are least likely to be able to bring attention to the problem themselves.

Informal workers overlooked in waste management systems

Informal waste workers make a living by collecting recyclable materials. They form the frontline of plastic waste collection and play a significant role in the recovery and recycling of waste, particularly in emerging markets. However, as we examine supply chains within the region, it is in the collection phase where responsible practices are most lacking, resulting in the exploitation of informal workers.

Workers often work long hours in difficult and dangerous conditions, and their vulnerability is further exacerbated by systems that fail to recognize their contribution. They are some of the most vulnerable members of society, subject to economic and social marginalization and low wages and employment standards. In many cases, it is impossible for these informal waste workers to move up the social ladder, due to systemic barriers in place.

The plight of these informal waste workers has garnered much attention, especially as companies place increasing pressure on their partners to ensure that their supply chains do not involve any discriminatory practices. Furthermore, as the demand for recycled plastics grows, the potential of informal waste workers to deliver positive environment and financial value is tremendous. By developing and uplifting this overlooked sector, companies can create a more sustainable and resilient ecosystem.

Increasing demand for recycled plastics elevates vital role of informal sector

Supportive government regulations to increase recycling of plastics can be observed globally, from recycled content mandates in Europe to the implementation of Extended Producer Responsibility (EPR) schemes in many South and Southeast Asian countries and the approval of food-grade recycled content in food contact applications. In India, the Central Pollution Control Board has set out progressive recycling targets for producers, importers, brand owners and plastic waste processors, which mandates minimum levels of recycling based on the type of entity and plastic packaging covered. They were introduced in 2021 and are expected to increase year-on-year.

Regulations for recycled packaging content have also pushed brands to take action. More than 80 global consumer-packaged-goods companies committed to use 15 to 50% recycled content in their packaging by 2025. Unilever, for instance, pledged to use 25% of recycled plastic in its packaging by 2025. In 2021, its use of recycled plastic was at around 17% of total plastic footprint, placing it on track to meet its goal.

Finally, consumers are becoming increasingly aware of their impact on the environment. There has been a shift in preference towards more environmentally-friendly products and packaging, with consumers indicating greater willingness to pay a premium for sustainable alternatives.

These factors combined have led to an increase in demand for recycled plastics, which is forecast to continue in the next decades. The use of mechanically recycled plastics to replace virgin polymer feedstocks is estimated to grow from 688,000 metric tonnes in 2020 to over 1.7 million metric tonnes in 2030.

Figure 1: Virgin Polymer Feedstocks Displacement by Recycled Plastics (Source: S&P Global Platts Analytics, 2021)

As the demand for recycled plastics continues on a positive trajectory, the role of informal waste workers, who are at the frontline of waste recovery, will similarly grow in importance. It is now more timely than ever for governments and businesses around the world to step up and work together to address the fundamental issues relating to their welfare and treatment, in order to ensure that supply chains are held to the highest standards.

Businesses need to create enabling environments for socially responsible development

As both contributors to the problem and potential drivers of impactful and widespread action, businesses have a significant and indispensable responsibility to implement prompt action, and guide the industry towards socially responsible sourcing. It is their duty to ensure compliance within their supply chains and place human rights at the very center of business development.

To support decision-making and help the private sector progress in their journey towards sustainable supply chains, The Circulate Initiative conducted a series of interviews with companies in India which work directly or indirectly with the informal sector to understand the types of responsible sourcing practices that have been employed. The insights from this study (to be published as a paper) provide an overview of the motivations of companies, such as recyclers, to ensure responsible sourcing in supply chains and the practices that have been adopted successfully.

This paper titled, ‘Responsible Sourcing in the Plastic Waste and Recycling Sector: Examples of Inclusive Practices in India’, will be published in the last quarter of 2022.

References:

NextWave Plastics. (2021). A Framework for Socially Responsible Ocean-Bound Plastic Supply Chains [Online]. Available from: https://www.nextwaveplastics.org/social-responsibility (Accessed 17 August 2022).

GA Circular. (2019). Full Circle: Accelerating the Circular Economy of PET bottles in Southeast Asia [Online]. Available from: https://www.gacircular.com/full-circle/ (Accessed 17 August 2022).

Ministry of Environment, Forest and Climate Change. (2022). Plastic Waste Management (Amendment) Rules, 2022 [Online]. Available at: https://cpcb.nic.in/uploads/plasticwaste/PWM-Amendment-Rules-2022.pdf (Accessed 17 August 2022).

McKinsey & Company. (2022). Advanced recycling: Opportunities for growth [Online]. Available at: https://www.mckinsey.com/industries/chemicals/our-insights/advanced-recycling-opportunities-for-growth (Accessed 17 August 2022).

Business Wire. (2021). Recent Study Reveals More Than a Third of Global Consumers Are Willing to Pay More for Sustainability as Demand Grows for Environmentally-Friendly Alternatives [Online]. Available at: https://www.businesswire.com/news/home/20211014005090/en/Recent-Study-Reveals-More-Than-a-Third-of-Global-Consumers-Are-Willing-to-Pay-More-for-Sustainability-as-Demand-Grows-for-Environmentally-Friendly-Alternatives (Accessed 17 August 2022).