More and more states are looking to set recycled content mandates—but is the available supply of rPET and rHDPE enough to meet demand?


Offering beverages packaged in containers made partially of recycled PET (rPET) and recycled HDPE (rHDPE) is swiftly moving from a “nice-to-have” product option to a “must meet” requirement for today’s bottled water companies. More and more, bottlers are leveraging recycled content—or making plans to add recycled content—in their containers. This trend is gaining speed as companies seek to contribute to the circular economy and prepare for legislation at the state and federal levels that would require specified amounts of recycled content in beverage containers.

However, as states like California and Washington begin to set mandates, bottlers may be challenged to comply with proposed legislation’s unrealistic postconsumer recycled plastic percentages and unrealistic deadlines. Even as well-meaning companies seek to do their part and adjust their operations to include more recycled content in their containers, access to adequate supplies of postconsumer recycled plastic is in question. Those complications, combined with continuing COVID-19-related setbacks, set the stage for a difficult transition.

Legislation Looms
On September 24, California became the first U.S. state to mandate recycled content in plastic bottles when Governor Gavin Newsom (D) signed the Energy Efficiency bill (AB 793). Th e new law phases in recycled plastic mandates, requiring the total number of plastic beverage containers filled with a beverage sold by a beverage manufacturer to contain no less than 15 percent postconsumer recycled plastic per year, beginning January 1, 2022; no less than 25 percent beginning January 1, 2025; and no less than 50 percent beginning January 1, 2030.

This landmark legislation is a game-changer for many bottlers. Some companies that do business in California are already exceeding the 15 percent recycled content requirements, but that’s not the case for most companies, says IBWA Vice President of Government Relations Cory Martin. “There’s definitely going to be a ramp-up,” Martin explains, as companies try to adjust their operations to meet the 15 percent requirement in California.

Martin says that Washington state considered legislation that is similar to California’s AB 793, except it would have mandated 10 percent recycled content by January 1, 2022. Although the bill passed the legislature last February, Governor Jay Inslee (D) declined to sign the bill due to the negative impact COVID-19 has had on the state’s finances. Washington legislators are expected to re-introduce this legislation next year, says Martin, but it may be different than the 2020 version. He expects the 2021 Washington bill to include Extended Producer Responsibility (EPR) verbiage, which would introduce new challenges for beverage manufacturers. EPR is a policy approach under which producers are given a significant responsibility, financial or physical, for the treatment or disposal of postconsumer products.

Martin predicts a domino effect regarding this type of legislation: “Once one state moves forward—especially California, which tends to lead on a lot of policy issues— other states will have a roadmap of what to include in their bills.” But unlike California, many states do not have the data to support recycled content availability within their borders. “In California, we have a good idea of the data, and what the state can and cannot support in terms of recycling, because the state has done a good job in collecting that type of data,” says Martin. “Other states—including Washington—aren’t there yet.” While California might be able to justify phasing in the new requirements, “other states would have to greatly increase their infrastructure to help the industry come close to meeting proposed mandates.”

“Anytime you’re looking at legislation for recycled content and water bottles or other containers, you have to think about supply,” says Laura Stewart, communications director at the National Association for PET Container Resources (NAPCOR). “We know that there simply is not enough supply of recycled PET being generated and collected today to meet all of the requirements.” A closer look at demand and supply issues across the country demonstrates how difficult it may be for bottlers to access enough recycled PET and HDPE to adhere to mandates.

COVID-19 Complicates Supply
Last spring, when the COVID-19 coronavirus first appeared in the United States, rPET became a more sought-after commodity. “The demand for PET in the container business, both virgin and rPET, is quite strong, and we owe a lot of that to the bottled water business, which is booming—in part, because more people are staying at home,” says Darrel Collier, executive director of NAPCOR. Although no authority directed consumers to stock up on bottled water in connection with the COVID-19 outbreak, consumers still turned to bottled water amid concerns about sanitation during the public health emergency, plus “there’s more use of plastics in the delivery of food and beverages in plastic containers than before COVID,” Collier explains. “Almost all of our recyclers still report good sales of rPET into beverage containers.”

However, over the past several months, fewer plastic bottles have been making their way to materials recovery facilities (MRFs) to be recycled. Both bottle deposit programs and curbside recycling programs have experienced setbacks. Given fears of contamination and statewide shutdowns, many of the bottle deposit programs stopped accepting recyclables. “Consumers have had concerns about returning empty containers, and operators of redemption centers have had concerns about COVID or their workforce has been affected by COVID,” explains Kate Krebs, director of industry affairs at Closed Loop Partners.

Of particular note, in California, Newsom signed Executive Order N-54-20 on March 4, 2020, which stated that recycling centers did not have to accept plastic bottles and cans due to the COVID-19 pandemic. “So, the opportunity to get more recycled content into the market was greatly diminished” until August 21 when the order expired, says Martin. Data from the state of California indicated a 30 percent drop in the volume of beverage containers reclaimed through its deposit program from March 14, 2020, to May 22, 2020, compared with 2019. According to information released by the California legislature, that decline in recycling activity is “believed to be caused by a combination of temporary redemption center closures and consumers voluntarily avoiding venturing into public spaces.”

In some states where curbside recycling is the norm, COVID-related labor shortages have had an impact— starting in the spring of 2020 and continuing today. In late August, for example, the Baltimore Department of Public Works announced that it was suspending recycling pickup throughout the city until at least November 1 to focus on trash routes, citing shortages of workers caused by an overwhelming demand for service due to the coronavirus pandemic and heat-related issues. Instead, the city has set up recycling drop-off centers, open for limited hours on workdays.

“Stoppages such as this will affect the flow of PET from households to reclaimers to bottle manufacturers,” says Krebs. “The disruption affects citizens that like to recycle, but it also affects material flow. Recycling collection and MRFs are the real behind-the-scenes infrastructure that process PET and other plastics after their use and feeds them back into the manufacturing supply chain, which is what beverage companies are dependent upon.”

Competing for Recycled Content Eventually, many of the bottles that sat in people’s homes during the early days of the pandemic will make their way to recycling facilities. And COVID-related employment shortages may dissipate as collection companies staff back up. But coronavirus-related complications are just one of the supply challenges for bottlers in search of rPET and rHDPE for their containers, as bottlers are already competing with other industries to acquire the commodity.

“What many people don’t realize is that it’s not totally a circular economy, from the perspective that many of those molecules that come back from the recovered postconsumer bottles are going into other applications, such as fibers, carpet, strapping,” and even thermoform packaging for produce, explains Collier. And those nonbottle applications comprise approximately half of all the molecules that come back. “So, if you said you had a flat market, and you wanted a minimum content [of recycled material] of 25 percent, you literally need to have 50 percent, because half of the molecules that come back are going into applications that are nonbottle.” And those noncontainer applications of rPET “are worthwhile as well.”

Competition for the appropriate type of recycled content can be fierce, agrees Martin. “Whether it’s PET or HDPE, we need food-grade, FDA-approved plastic” for bottled water, he says. “We want bottle to bottle. But for reclaimers, it’s harder to produce a food-grade recycled pellet; it’s easier to produce recycled PET or recycled HDPE that doesn’t have to go into food-grade products.” Some reclaimers will choose to sell recycled content to clothing manufacturers, or film or strapping companies, because they don’t require food-grade technical specification.

This problem is evident even in states like California, where recycling is common, says Martin. “California shows 62 or 63 percent recovery” of bottles back into the recycling system, but many of those containers don’t make it back into bottles, he says. “Eighty percent of those are being sold off to another industry—or lost in the process somewhere.”

In fact, there’s “shrinkage” in each step of the recycling process, with some loss occurring at MRFs and reclaimers. “If there are 100 bottles that go in [to be recycled], the bottled water industry typically only gets 20 bottles back, because the other 80 are lost or contaminated or sold off to other sources,” Martin says. “Once those bottles have been made into a carpet or into many types of clothing, you can’t recapture that plastic—it’s been downcycled, and it’s very difficult to recycle again—whereas a bottle can be recycled again and again.”

Seeking Sources of Recycled Content
For some companies that already use rPET in their bottles, the proposed state mandates on recycled content use are not as problematic. “A lot of larger beverage companies had already made recycled content commitments, so a mandate was not a surprise for them—their procurement teams had already been working on what they would need to do,” says Krebs.

Most early adopters already have a dedicated source for accessing rPET materials, and they have worked out agreements with suppliers to meet their internal goals, according to Martin. Smaller bottlers may not have the purchasing power to achieve the same goals.

“For the smaller companies, it’s hard to get your foot in the door and find, at a price that they can afford, that recycled content,” Krebs says, particularly given the price differential between virgin and rPET materials. “When a virgin bottle comes into the marketplace, there are very few steps to go from raw material input into a polymerization process into a bottle, whereas recycled PET has to travel from the consumer, to the MRF, to the reclaimer, to the converter, to the bottling plant,” says Krebs. “The competition between rPET cost and virgin cost when we’re talking about mandates for recycled content—it’s a very big reality. If rPET is going to compete with virgin at scale, we have to find every single way to make improvements across the system so that the price point is not such a factor.”

Fortunately, some small steps are being taken to move bottlers closer to integrating more recycled content into their bottles.

First, some MRFs are beginning to automate their processes to capture more of the recycled PET as it passes through their facilities. Several MRFs affiliated with Closed Loop Partners integrated new robotic sorting systems into their operations over the past 12 to 18 months— just in time for the pandemic. Once social distancing measures were put into place, MRFs were forced to rely on fewer employees and had to slow down their sort lines. But those MRFs with robotic sorting systems leveraged artificial intelligence to pick the more valuable PET and HDPE items out—and did so faster than is possible using humans, says Krebs. “The value of robotics, because of COVID, has definitely been proven out.”

And second, bottlers themselves can take a proactive approach. Krebs suggests that bottlers adhere to design recommendations to ensure their bottles are easily recyclable. The Association of Plastic Recyclers (APR) has published “The APR Design Guide for Plastics Recyclability,” which can help companies in designing packaging so “there is nothing that will contaminate that package when it hits the recycling process,” says Krebs. The APR guidelines address color, labeling, and other design aspects to “improve the feedstock going into the system . . . and remove ‘disruptors’—things that will disrupt a cleaning system at a reclaimer,” she says. “I think that will help accelerate the transition we need to make sure we have a system that works.”

Beyond bottle design, companies that have not already incorporated recycled content into their packaging “are going to have to identify a source” of rPET or a blend of rPET and virgin, then “start doing the technical workaround how a blend of virgin and rPET works in their facilities and in all their bottles,” says Collier. “And think about the distribution and marketing.”

For more favorable pricing of rPET materials, Krebs encourages bottlers to identify reclaimers with whom they can sign off-take agreements—long-term purchase agreements. For these types of contracts, bottlers agree to purchase either a specified volume or a specified percentage of the volume produced by the reclaimer, providing stability for both parties.

Partnerships will be key, agrees, Nina Bellucci Butler, a principal at More Recycling. “The new era will be less about straight traditional competition and more about collaboration,” she says. “So, what is your value chain doing? How are you partnering with those companies that have a value chain that is really moving toward circularity? It’s making those iterative changes and adjustments” to move toward circularity.

Embracing the Future
California is the first, but certainly not the last, state to adopt recycled content mandates. And there may come a day soon when national legislation regarding recycled content becomes law (see sidebar on p.13), so it’s important for bottlers to start preparing now. “Once we get past the COVID problems [like stoppages and holds on materials], I think we really need to be ready,” says Krebs. “Mandates are coming; we have to prepare.”

As states look to implement mandates, it will be important that each state examine the availability of recycled content within its borders, says Martin. “Remember that in California, reclaimers are already shipping in plastic content from other states, just to meet current demand,” he says. As more states consider mandates, “they need to be data-driven so we can meet demand,” says Martin. “If every state is facing supply problems, where will that recycled content come from?”

IBWA’s position has always been that “we support reasonable recycled content mandates,” concludes Martin. “How we define ‘reasonable’ means having the data to back up our ability to meet any percent mandates.” BWR