Nature and Biodiversity

How plastic credits could tackle the social impacts of climate change

Plastic credits can incentivize plastic waste collection but they must address risks and impacts to informal workers.

Plastic credits can incentivize plastic waste collection but they must address risks and impacts to informal workers. Image: Yunus Environment Hub

Christina Jaeger
Managing Director, Yunus Environment Hub
Julie Chrysler
Social Business Strategist, Yunus Environment Hub
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Climate and Nature

This article is part of: Centre for Nature and Climate

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  • Almost half of the world population does not have access to proper waste management services.
  • The collection of recyclables depends almost entirely on the informal sector, particularly in the Global South.
  • New financial instruments such as plastic credits are emerging as ways to incentivize collection of plastic waste but often lack critical social considerations.

As the world has, quite rightly, woken up to the environmental and climate crisis of our current age, there is also an ever-growing social crisis often overlooked. Almost half the world’s population cannot access proper waste management services. Especially in countries of the Global South, the collection of recyclables, including plastic waste, depends almost entirely on the informal sector, with informal waste collectors constituting the most relevant stakeholders for collecting and recovering waste material.

We must include the informal waste sector in designing holistic solutions to solve the growing environmental crisis. Ensuring these essential stakeholders’ human rights and social conditions is critical but has so far not been a priority.

In the Global South the collection and recovery of plastic waste depends almost entirely on the informal sector. Despite their integral contribution, informal waste collectors are amongst society’s most marginalized groups working under harmful health conditions and lacking access to sustainable sources of income and basic social services.

New financial instruments, such as plastic credits, are emerging to incentivize plastic waste collection. These voluntary mechanisms can potentially finance waste management activities and organizations in contexts where legally binding regulations and extended producer responsibility (EPR) – which means producers are responsible for a product’s end-of-life environmental impacts – are not yet in place. However, in their current state, EPR and plastic credits focus nearly exclusively on the environmental aspects of waste collection while leaving out critical human rights and social dimensions.

Despite the potential effects plastic credits may have on the informal waste management sector and its stakeholders, research on their risks and opportunities is still scarce. To help bridge the knowledge gap, Yunus Environment Hub recently published a study on behalf of the United Nations Environmental Program (UNEP) ’s SEA circular project, highlighting risks, opportunities and recommendations.

“The study provides insights into how plastic credits affect the informal sector, reminding businesses to be mindful of the welfare of informal waste collectors if plastic credit schemes are adopted,” said Vincent Aloysius, SEA Circular programme manager at UNEP.

Have you read?

Unlocking opportunities through plastic credits?

The report laid out how plastic credit schemes presented various opportunities to help the sector as a whole:

1. Professionalization of the waste management value chain

Due to the required due diligence, auditing processes and potential capacity-building efforts, plastic credit schemes may generally professionalize the waste management activities of informal waste collectors and semi-formal waste collection organizations.

2. Providing better data for policy making

It is no secret that data greatly inform evidence-based policy. Enabling waste management data with the crucial role of the informal sector within local municipal solid waste management (MSWM) systems could allow for better policies and decision-making. This information could also support relevant baseline data for establishing EPR systems.

As Eric Chocat, an associate from Systemiq, notes, “Plastic credits bring transparency and credibility into the system. This could inform policymakers and result in sound and efficient public policies. In other words, good data could result in good policies.”

3. Giving the informal waste management sector a voice

Despite their key role, the informal waste sector has historically been excluded from the discussion on improving waste management systems. Holistic schemes would create an opportunity to be part of the end-to-end processes, strengthen their role and acknowledge their relevant services.

Plastic credit schemes can enable business as usual, allowing companies to still make environmental claims without actually undertaking significant changes to their own operations.

Alix Grabowski, director of plastic and material science, WWF

The risks of a plastic credit scheme

There remain, however, risks that should be understood from implementing potential schemes:

1. Insufficient distribution of plastic credit income

The money from these financial schemes may not trickle down the value chain to the informal waste management stakeholders at the bottom of the pyramid. Schemes need to be designed to ensure value is added to the waste collector level.

“A question that I often receive from my clients is how they can ensure that the money they are providing to an organization that is selling plastic credits is really proving benefits to the local organizations and the local waste collectors?” said Laura Peano, global plastic lead, Quantis.

2. Unconsidered socio-economic conditions

With the emphasis on environmental benefits and enabling plastic footprint compensation to buyers, there is a risk of overlooking relevant social dimensions and long-term socio-economic effects on local communities and participating informal waste management stakeholders.

3. Manifesting status quo

To tackle the global plastic waste crisis and its regional consequences, today’s patterns and systems of plastic production, consumption and waste disposal require holistic change towards circularity. By giving companies an easy opportunity for plastic waste compensation without adjusting their manufacturing processes, supply chains or product design, plastic credits could normalize and manifest linear production, consumption and waste disposal systems.

As WWF’s director of plastic and material science, Alix Grabowski, notes, “Plastic credit schemes can enable business as usual, allowing companies to still make environmental claims without actually undertaking significant changes to their own operations.”

Hierarchy of plastic footprint and leakage mitigation activities. plastic credits
Hierarchy of plastic footprint and leakage mitigation activities. As plastic credits do not prevent future waste, they should only be considered after a company’s core efforts have been maximized. Image: Yunus Environment Hub

How to design and implement plastic credit schemes

Knowing the upshot of plastic credit schemes provides some insight into the key considerations or recommendations when it comes to putting them into practice:

1. An international plastic treaty is needed

An international agreement could serve as a relevant guideline for setting universal definitions, a common language and defining baseline criteria in terms of governance, environmental and social sustainability that funding programmes and financing mechanisms for plastic waste management must adhere to.

According to UNEP Director Inger Andersen, a binding agreement on plastics and plastic waste would constitute “the most important environmental deal since the Paris accord.”

2. Schemes must consider plastic waste management's social impacts

As mentioned, the impacts and needs of informal stakeholders is underserved. Third-party auditors should track the socio-economic impact of schemes on participating informal waste collectors over time.

3. Plastic credits should only complement a holistic plastic waste reduction strategy

Companies that bring plastic products and packaging to the market should assess and reduce their plastic footprint first. Secondly, where plastic materials use cannot be avoided, companies should aim to substitute virgin plastics with recycled materials for more sustainable supply chains. As plastic credits do not prevent future waste, they should only be considered after a company’s core efforts have been maximized.

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These findings are only a first step. Further research and actions regarding the potential effects of plastic credits are needed to ensure human rights are respected and long-term benefits are unlocked for all stakeholders in the informal waste management sector.

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