Disrupting the Single-Use Plastic Economy
It’s becoming common to see an irate customer admonishing employees at a food establishment for not having an alternative to plastic to-go containers. These passionate reactions stem from an awareness of the damage of single-use plastic. In the food and beverage industries, single-use plastic containers are the standard across the United States and much of the world. While the American consumer usually isn’t charged extra for the convenience of single-use plastic, others end up paying a price.
According to a study published in Science Advances, humanity has created 8.3 billion metric tons of plastic, “most of it now resid[ing] in landfills or the natural environment.” To put that into perspective, plastics are in third place, just behind steel and concrete. The World Economic Forum, hosted every January in the posh Swiss town of Davos, forecasts that the amount of plastic dumped in landfills is expected to grow to 12 billion metric tons annually by 2050 if nothing new is done.
From a purely commercial standpoint, single-use plastics, or SUPs, are a blockbuster innovation. Because they are cheap, durable and light, they have found global dissemination, particularly in the storage of food and beverage. Not having always been the case, they have become so cheap in the past decade that many of us use them routinely for only one usage and then discard them. Consequently, bottled water and food container manufacturers have responded by making them even thinner and cheaper, which causes more single usage in a vicious cycle.
Coastal cities in California, Washington state, Massachusetts and D.C. are leading the legislative battle to pass local laws that aim to curb SUP usage, starting in the restaurant industry. For instance, California passed a law in 2018 to reduce SUP straws. According to then Governor Jerry Brown, “our infatuation with single-use convenience has led to disastrous consequences.” And Boston’s mayor, Marty Walsh, has signed a new ordinance in the city to ban the free offering of single-use plastic bags at large retailers.
Why are these states and localities among the first to initiate change? Some say that more progressive people live there. One other explanation is that residents of these places have closer geographic proximity to large bodies of water, where the aftermath of SUP is a constant, visible reminder. Because SUPs are less dense than water, they float. Residents of such states just happen to see them more often than in states with less concentration of water as a percentage of total area, such as New Mexico (0.2 percent of area occupied by water) and West Virginia (0.8 percent). As the saying goes: out of sight, out of mind.
One way to teach people about the visible toll of using SUP water bottles, straws and take-out containers is to show them where they accumulate, in the seaside, lakes or the estuary of a river. If you live far from large water masses, then a trip to the closest landfill would do the trick. Unfortunately, landfills were created precisely to be out of reach and hard for the general population to see and be sensitized to the problem. But if we really want to disrupt the large and fast-growing SUP economy, then more than just awareness is necessary.
The reason people purchase and use products is because they provide them with value. However, in the process of buying things to use so as to “unlock” this value, consumers need to engage in a series of activities or tasks. For instance, in order to eat a restaurant meal at home, one needs to visit a restaurant, order a meal, pay for it, take it home and eat it. These are the activities in the “customer value chain.”
It is called that because these activities can be divided into one of three types: value-creating activities (e.g., eat the meal), value-charging activities (e.g., pay for the meal) and value-eroding activities (e.g., all others). Marketers tend to focus on mapping the customer activities but stop at the moment a sale is made. The customer value chain continues post-purchase. In the restaurant case, there is the disposal of the food and its containers.
Because SUP enables cheap, fast and easy disposal of food, the last stage of the customer value chain, while still a value-eroding activity, is not a particular costly one. An innovative business model aimed at disrupting the SUP industry should attack precisely the causes of its success: its low cost and high convenience. A three-pronged approach would work:
Have all stakeholders pay the price: If SUPs were more expensive, the laws of economics would take care of reducing its usage. All parties that have a decision to adopt this product should pay a portion of the societal cost. Manufacturers, distributors, retailers and consumers should all pay a per-item fee. SUP usage should move from a trivial cost-based pricing to a value-based pricing model. The actual amount should not be symbolic, such as the five or 10 cents paid in many states per glass bottle. Rather, the gained value of convenience across the supply chain is what should be charged.
Giving consumers a choice: While the idealist in me would like to think that people who buy SUPs should take the extra step in recycling them, the pragmatist in me says that different people should pay for this in different ways. Those that want to recycle SUPs should be freely allowed to do so. But those that would like to do the right thing but don’t want to take the extra effort to find a recycling station should be able to opt out of this activity by paying a reasonable monetary amount. While I will not pretend to know the exact amount to charge, it should be commensurate with the value of time taken for an average salaried person to find and dispose of their SUP. In California, the median hourly pay of residents is $30. Assuming average distance to a recycling bin of 1.5 minutes, the opportunity cost would be around 75 cents. At this rate, a grande Starbucks iced coffee in California would cost $2.65 cents plus tax if you bring a cup from home or $3.40 in a plastic cup, a non-trivial increase in price of 28%. For a Washington, D.C., resident, who has a higher average salary, the added SUP fee would amount to 89 cents.
Create a supply-side collection platform: The main drawback of the above recommendations is that they would require action from local and state governments. In lieu of that, what private-sector solution can emerge? Offer consumers a third option in addition to not using SUPs or using and properly recycling them. Consumers should be able to pay for using and having others properly disposing of them. This would require a non-trivial convenience fee where the consumer acknowledges the money raised will be used to pay someone else to collect and recycle the container. An opportunity exists for these consumers to “hire” an Uber-type gig workforce of SUP collectors to go to restaurants, public trash cans, homes and locations where large amounts of SUP can be found. Individual collection of other high-value recyclables, such as aluminum cans, already exists. An online platform for recruiting people and paying them for SUP collection would be more lucrative for these independent collectors, provide decent living wages, and be much more efficient at ridding public places of this nuisance.
Disrupting the all-powerful SUP economy will require a drastic new-thinking and innovative business model. Startups such as Airbnb and Rent the Runway decoupled the activities of using and owning stuff, creating a wave of sharing economy. Start-ups such as Uber and Task Rabbit decoupled the activities of offering a service and executing it themselves, bringing forth the on-demand economy. If we are to disrupt SUPs, we will need to decouple the convenience benefit of the usage of SUPs from the effort cost of having to personally dispose of the plastic oneself.
There is a theory in history that claims the seeds of the downfall of many of the world’s most powerful empires—the Roman, the Ottomans, the Qing Dynasty—is what made them great to begin with. If that is true, then the downfall of the vastly expansive single-use plastic economy will come from its cheapness, durability and lightness. Seeing water bottles, straws and other containers float all around, everywhere, for years in our oceans, rivers and lakes will cause us to take notice and either drastically reduce our usage of them or self-inflict our pockets by paying others for the convenience it bestows on us.
Single-use plastics will eventually get disrupted. All we need to do is to come up with an innovative business model that is centered around the fair value accrued to its customers.