Today, large multinational corporations are present in almost all growth markets. In the most poorly regulated countries where multinational corporations operate, important environmental concerns have largely been ignored in favour of profit. The result is no less than catastrophic. Read why in this article.
Plastics & the business model that ruined the world
Back in 2004, the influential book The Fortune at the Bottom of the Pyramid was published, written by Professor C.K. Prahalad. In his book, Prahalad argued that the four billion people who earned less than USD 1.500 a year were ignored by global corporations, even though they represented an enormous unexploited business potential if you knew how to use the right business models. These included, among other things, “special packaging for daily purchasing, and value pricing.” What Prahalad reffered to was the fact that the poorest people in the world may not have the money to buy an entire pack of chewing gum, but a single piece of gum is within their financial capacity. So, large companies should package their products in smaller quantities.
Prahalad summed up the challenge like this: “In short, the poorest populations raise a prodigious new managerial challenge for the world’s wealthiest companies: selling to the poor and helping them improve their lives by producing and distributing products and services in culturally sensitive, environ- mentally sustainable, and economically pro table ways.”
Now, more than a decade later, we can look back at the development in the world’s poorest countries. In China, infant mortality has been reduced from 5 to 1 percent since 1995, many African countries have seen GNP growth rates of more than 10 percent, and the proportion of the world’s population living in extreme poverty has been reduced from 30 percent in 2000 to approximately 10 percent today.
Today, large multinational corporations are present in almost all growth markets and have adapted their business models along the lines laid down by Prahalad. So, on the surface, the development seems to have progressed as he predicted. However, this is not the case, for Prahalad’s advice was only followed in part. In the most poorly regulated countries where multinational corporations operate, the environmental aspects stressed by Prahalad have largely been ignored. The result is no less than catastrophic.
The most immediate consequences have to do with trash and pollution. Detergents, cleaning products, and foods that are sold in one-litre bottles in the USA and Europe, are sold in Asia in portion-sizes, packaged in glittering plastic. This creates a massive waste problem which is made worse by the fact that waste management in some of these countries is poorly functioning, or even non-existent. Corruption and nepotism make matters worse. We can take the Philippines as an example. In some islands of the country, the local chief constable is elected by the people with the effect that candidates compete to remain popular among the voters – and handing out penalties for pollution does not make you popular. So, everything from dynamite fishing to the dumping of waste can continue locally, in contravention of national law.
For visitors who travel to the Philippines expecting to see palm- tree-lined white beaches, it can be a shock to see them turned into rubbish dumps. And to the locals, that is a problem because it affects one of their most important sources of income: tourism. In some places, locals agree to organise beach cleanups, but this is a Sisyphean task. The ocean keeps washing plastic ashore, and for the Philippines and other popular tourist destinations like Thailand, Bali, and Egypt, this bodes ill, since travelling and tourism form a substantial proportion of their GNP: about 9 percent of Indonesia’s GNP in 2014, 20 percent of that of the Philippines, and 21 percent of Thailand’s in 2016, according to the World Tourist Organisation. The threat to the tourism industry is far from the worst part. The catastrophic waste problems also have a profound effect on sea life. Fish absorb microplastics containing carcinogenic materials such as PCBs, and these substances work their way up the food chain and end in the bodies of poor people living in coastal areas who get a large part of their proteins from sh. The sustainability of fish stocks, already declining, may be additionally threatened by marine plastic pollution, adding more pressure, particularly to areas with food insecurity, such as Asia and Africa, where fish make up an essential part of the diet. According to the UN Environment Programme, 99 percent of all marine birds will have consumed plastic in 2050, which may influence the eco- system in yet unknown ways.
Other health problems will emerge as a result of environmental impacts. And this will not only affect poor countries. A study by researchers of the University of Minnesota shows that 94 percent of tap water in the USA is contaminated with microplastics; in Europe, the figure is 72 percent. The consequences are still unknown, but microplastics can absorb toxic chemicals related to cancer and other diseases.
Environmental pollution has also been linked to impaired sperm quality in men. A new study published in the medical journal Human Reproduction Update points out that men’s sperm quality has been reduced by 50-60 percent since 1973 in North America and Europe, and if this development continues, the majority of men in these regions may be infertile by 2060. The direct cause is unknown, but environmental pollution seems to be the culprit.
The relation between reduced sperm quality and plastics in the body is supported by a study from the University of Massachusetts that has pointed to a connection between phthalates, which can be found in everything from shampoo bottles to plastic bags, and reduced sperm quality.
Since Prahalad wrote his book, the consumption of plastics has been steadily increasing, and the quantity of plastic that is neither recycled or burned, but ends up as rubbish on the ground or in the ocean, is frightening. World Economic Forum predicts that by 2050, the mass of plastics in the world’s oceans will exceed that of fish.
Prahalad was right when he said that the West could contribute to improving life for the poorest people on the planet. The poor have become better off, and have gained access to services and products that were not available to them previously, but the same development has created enormous plastic pollution in the ocean, and in the long term, this will make it difficult for the same parts of the world’s population to secure their access to food. It does not have to be that way. In Western countries, waste has become a billion-dollar industry. For instance, according to Statistics Denmark, 10 percent of the country’s total power consumed is energy produced from waste. Despite this, the monetary value of refuse has not yet reached the countries with the greatest need for exploiting it. According to studies from the World Bank, efficient waste management may amount to 20-50 percent of municipal budgets in poor countries. So in areas that struggle with an in- effective public system, waste management is often given a low priority. In an attempt to do something, some countries have banned the use of plastic bags. This is the case in India, for instance, where plastic bags tended to clog up the drainage system and be eaten by holy cows.
In addition to improved regulation, enforcement of the law, radical cultural changes, and innovation of waste systems, a solution requires that Western companies operating in poor countries read Prahalad and take note of his important message about sustainability. For without an environmentally sustainable business model, their business model will not be economically sustainable in the long term either. A few governments have started to steer development in a new direction. For instance, the Indonesian government has formulated ambitious objectives for the country’s waste hand- ling. Together with the World Bank, the Indonesian government will invest USD 1.2 billion in better waste management. Bali plans to abolish plastic bags on the island from 2018 and reduce plastic pollution in the surrounding sea by 70 percent before 2025. It is difficult to imagine that we, as a technologically advanced civilisation, can reduce the production of plastics radically, so how do we avoid drowning in it? One possible solution is to switch the production from traditional plastics, made from oil and gas, to bioplastics, made from crops. Three technological challenges, however, stand in the way of more widespread use of bioplastics. The first challenge has to do with the resources for production. Bioplastics involve the same problem as biofuel. It requires a land area to produce biomaterials, and this land will be taken from food production. Today, this is a minor problem, since bioplastics only occupy a small fraction of the area that would otherwise be used for food crops. If, however, all plastics were to be converted to bioplastics, this would occupy a much larger part of the global land area, which could be problematic from a foodstuffs perspective. So, attempts are made to move from rst generation bioplastics derived from food crops such as corn, soybeans, and sugar beets, to second generation bioplastics derived from plants like grass and hemp, or third generation bioplastics derived from algae. This is costly in innovation, which leads to the other challenge: price. Plastics are a cheap byproduct from oil production, and their manufacture has been made increasingly more efficient over many years. All bioplastic materials with the same functionality are more expensive to produce, which brings us to the third challenge: Biodegradable plastics do not have the same properties as ordinary plastic, and innovative solutions are required to overcome bio- degradable plastics’ low melting point, fragility, and a low resistance to moisture and oxygen permeability, a problem particularly with regard to food packaging.
The good news is that the production of degradable bioplastics grows by 4.7 percent each year, according to figures from the European Bioplastics interest group. The bad news is that the total production of plastics grows by more than 6 percent a year. Without regulation, biodegradable plastics will never be able to make a difference and amount to more than the 0.2 percent of the plastic production they represent today. As history has shown us very clearly, you cannot leave it to the market to clean up after itself. Instead, you have to introduce regulations that encourage the development of innovative solutions to challenges. Right now, the amount of plastic that ends up in the oceans is similar to a refuse truck emptying its contents into the sea every minute. Therefore, innovative solutions have to appear soon. The clock is ticking.