Petrochemicals For Plastic Production Still On The Rise In 2022 | Finding Profits In Sustainable Packaging

3 min read

There must be a conscience in our consumerism if we are ever to make strides on behalf of the environment, especially with the rise in online shopping, which has seen exponential growth since the pandemic. Can there be a way for companies to embrace sustainable packaging, make a profit and put petrochemicals on the downtrend?

Most consumers enjoy the convenience of the packaged goods we pile into real and virtual shopping carts. But for anyone with a conscience, there is also a guilt factor.

The stats are sobering. Today, containers and packaging make up more than one-fifth of all U.S. landfill waste. Globally, more than 14 million tons of plastic end up in the ocean each year, endangering and killing scores of marine organisms. Meanwhile, production of petrochemicals used to make plastics remains on the rise.

Founders and investors seem to think there’s an opportunity to do better—and to potentially make some money in the process.

Venture Funding For Sustainable Packaging

Startups in the sustainable packaging space have pulled in hundreds of millions in venture funding in the past year, per Crunchbase data. And given that much of the other investment skews early or mid-stage, industry insiders see plenty of room for growth ahead.

“There are very few alternatives out there for sustainable materials available at scale,” said Bob Beckler, CEO of TemperPack, one of the more mature and heavily funded players in the space. Last week, the Richmond, Virginia-based company closed on $140 million in a venture round led by Goldman Sachs, bringing total funding to date to around $210 million.

TemperPack, as its name suggests, specializes in thermal packaging for temperature-sensitive goods, including perishable foods and pharmaceutical products. The company operates two production facilities, in Virginia and Las Vegas, churning out package insulation materials that are curbside recyclable and derived mostly from paper and cornstarch.

A Number Of Big Rounds

Seven-year-old TemperPack is one of a number of startups that have pulled in good-sized venture rounds in recent months. We put together a sample list of a dozen companies below:

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Singapore-based RWDC Industries, a developer of polyhydroxyalkanoates (PHAs), a kind of organic material that has plastic-like qualities, has been a particularly prodigious fundraiser. Over the past four years, the company has raised $263 million, per Crunchbase, including a $95 million Series B that closed in October.

RWDC isn’t singularly focused on packaging, but says its materials can be used to make a biodegradable, compostable alternative to polystyrene, the petroleum-derived plastic used to make styrofoam. End products include coated-paper goods, single-use food service items, and packaging materials.

Tipa, an Israeli startup developing compostable, flexible packaging, including clear films and resealable bags, raised $70 million in a January venture fund, bringing known funding to date to $130 million. The company says it focused on thin film packaging in part because it has previously been one of the least recyclable materials.

Notably, the funded startup list also includes two companies using seaweed to develop sustainable packaging materials. London-based Notpla develops a material derived from seaweed and plants that is currently in use in ketchup packets, food container coatings, and other products. San Francisco-based Sway makes compostable, seaweed-based packaging.

Packaging For The Public Markets

Several companies in the sustainable packaging space have also turned to public offerings, with the most recent choosing the SPAC route to market.

Danimer Scientific, a maker of bioplastics used in disposable container coatings, packaging and other products, was an early entrant in the SPAC boom of 2020-21. The Georgia company completed a merger with a blank-check acquirer in December 2020. After an initial surge, stock performance has been disappointing, with the shares recently trading below $6 each.

Origin Materials, a developer of technology turning the carbon found in biomass into useful materials, which includes a biodegradable plastic alternative, completed its SPAC merger process in June. Shares are currently well below the initial offer price.

Uninspiring SPAC aftermarket performance hasn’t deterred another company in the sustainable packaging space. Arizona-based Footprint, a maker of plant-based alternatives to plastic that have applications in packaging, announced plans in December to go public through a merger with a blank-check firm led by billionaire Alec Gores.

Plenty Of Pent-Up Demand

One bullish factor for the sustainable packaging space is that both consumers and enterprises are rooting for its success.

While sustainable materials can be price-competitive with polystyrene, per Beckler, it also helps that consumers and distributors are often willing to pay a bit more for eco-friendly packaging.

Sustainable packaging products can also have some features that polystyrene does not offer. For TemperPack, Beckler said, one advantage is that it ships flat before being folded to shape, allowing more efficient distribution and also provides a smooth, printable surface.

Other packaging companies are pitching intriguing features as well. Notpla, for instance, attests that its beverage and sauce pouches are actually edible. (Not that you’d want to eat them—but I suppose it’s nice to know you could.)

The rise in corporate commitments to sustainability also bodes well for compostable and recyclable packaging producers. Most of the biggest consumer brands have made some gestures in this direction. Amazon, P&G, Walmart and Target, alongside hundreds of others, for instance, are members of the Sustainable Packaging Coalition, a trade group that advocates to make packaging more environmentally friendly.

I must admit that personally, there’s a bit of irony above, as the four above-mentioned companies account for a major share of my least-sustainably packaged goods. But on the bright side, that means there’s plenty of room for progress.

Illustration: Li-Anne Dias

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