CASE 20: Plastics from Food Waste

Case 20: Plastics from Food Waste

The Market
The world market for biodegradable plastics is enjoying double digit growth expanding between now and 2015 to $6 billion, and doubling again to an estimated $12 billion by 2025. While at present 65 percent of all bioplastics are produced to serve the packaging of food and beverages, it is expected that by 2025 already a quarter of the market will focus on the higher margin application in the automotive and electronics segment. The bio-plastics industry has even targeted medicine as one of the core market niches with profit margins that are expected to be up to ten times the margin commanded today for plastic cups and utensils. The European Bioplastics trade group expects that their production capacity will more than triple between 2007 and 2011 to 1.5 million tons. It is expected that by 2025 some 15 to 20 percent of petroleum for plastics will be diverted to sources of plant, algae and bacteria-based origin.

An analysis of the world's production of bioplastics indicates that there are approximately 500 production and processing companies. Since the business is characterized by high growth and multiple innovations, it is a major magnet for entrepreneurs and investors. This is the underpinning logic behind the fact that the number of bioplastics-based companies is expected to increase tenfold to 5,000 over the next decade. The Helmut Kaiser Consultancy points out that less than 3 percent of all plastic waste gets recycled worldwide, compared to 30 percent for paper and 35 percent for metals. Numerous attempts to convert waste plastics into bags and clothing have received wide media attention, but failed to make a dent in the mountains of plastics or reduce the accumulation of plastics into artificial islands of garbage that disgrace the oceans.

Biodegradable plastics gain in popularity with a growing number of consumers eager to shift purchasing power towards green solutions. However, bioplastics are increasingly competing for agricultural land that otherwise would be reserved for generating food. Corn, the main produce from which bioplastics are made, competes with tortillas in Mexico and corn flakes in the Japan. The increase in demand and the subsequent increase in prices makes this basic food dearer. The complexity of the situation compelled the United Nations to warn policy makers and industry leaders that the drive towards green plastics could affect food security. In a world where over one billion people go to bed hungry each night, the choice between saving petroleum and providing a meal a day requires a rethinking of our business models. In addition, a cup made from bioplastics behaves no different than one made from fossil fuel. Once trapped in a landfill deprived of air and heat, it simply will not degrade.

The Innovation
The sourcing of the raw material for plastics has forced scientists and business developers to rethink the strategy forward. NatureWorks, the American-Japanese joint venture between Cargill and Teijin continues to work with corn as the main source of starch. This not only generated the debate about the use of genetically modified corn, which now dominates the US-market, and penetrates the European consumers with the recent announcement that NatureWorks is doubling its output on the Old Continent to 140.000 tons per year. The debate goes beyond genetics, it also centers on the need for fertilizers and herbicides which is a multiple for corn compared to soy.

Professor Yoshihiro Shirai from the Institute of Life Sciences at the Kyushu Institute of Technology (KIT) in Japan opted for a simple but rather innovative solution. He observed how restaurants in Japan discard vast amounts of food. As the stress on the local landfill increases, and the desire to reduce carbon emissions turned more articulate, Prof. Shirai combined all the available know-how and designed with his colleagues and students a production unit for poly-lactic acid (PLA) where the raw material is starch rich food waste. While the content is lower in starch than corn, its financial model is convincing, and the benefits for the environment outperform any other bioplastic, especially PLA produced from corn.

The First Cash Flow
The City of Fukuoka embarked early on on a composting program to reduce the stress on the landfill. Japan, an island with little livable space charges one of the highest tipping fees in the world. Diverting restaurant waste food from the landfill generates a first cash flow: restaurants continue to pay for waste collection, however the cash is now collected by the plastic producer who actually gets paid to take the waste. Thus instead of having to source a GMO corn, heavily irrigated depleting the aquifers, Prof. Shirai established the first factory in cooperation with the environmental company EBARA, which is committed to achieve the goal of zero waste and zero emissions. It is also the largest pump maker in Japan.

The volume of production is minor compared to the 100,000 ton production units the bioplastics industry operates. This implies that Prof. Shirai could not economically use the standard process technologies. Instead he opted for a simple fermentation process that generates the PLA overnight, through a batch process. While the conversion rates are much lower than corn, the energy cost in transport and transformation is a fraction of the standard on the market, while its size can be tailored to the local landfill.

The Opportunity
Prof. Shirai and KIT did not have the ambition to build a new industry, their main purpose was to demonstrate the technical and commercial viability of small scale processing of food waste into PLA-type plastics. Even at a rate of one ton per day, the process is commercially viable simply because the sales price for plastic bags, used for garbage collection is ten times the cost of their raw material - petroleum. This type of a profit margin is always bound to attract new players on the market. In this case, fossil fuel-based bags are substituted with polymers manufactured from food waste, that never competes with food for people, while eliminating methane emissions from decomposing food lengthening the economic life of the landfill. It certainly is a business model that can be implemented by entrepreneurs around the world.
 

GUNTER PAULI

For further background on the 100 cases: www.blueeconomy.de
The Blue Economy
All rights reserved. © 2010, Pauli

This article introduces innovations to produce bioplastics as one of the 100 innovations that shape "The Blue Economy". This article is part of a broad effort to stimulate entrepreneurship, competitiveness and employment.