1. Irrational Markets, the Struggles of Sustainable Packaging and Bag Regulations 2016 Annual Meeting June 1, 2016 Presented By: Phil Rozenski Senior Director of Sustainability NOVOLEX

2. Family of Brands Industry-leading manufacturer of recycled content high density polyethylene (HDPE) bags, paper bags, films and related packaging products Employs more than 6,200 people at 46 facilities in the United States, as well as three in Canada and one in Mexico

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4. Buggy Whip, Innovation, & Unintended Consequences Almost without fail, at every discussion of bag regulation we hear the analogy of: “Going the way of buggy whips” Or “typewriters” But is that even true? Products phased out through disruptive innovation Disruptive innovation occurs when a new or existing problem or consumer need is solved or optimized and the preferred solution diffuses across markets For Good or Bad, Product Mandates not Driven by Innovation Will Have Unforeseen Side Effects as Consumer Behavior Adapts or Applies the Mandate to the True Problem

5. Concepts of Packaging Sustainability Evolving The cold fact is that “sustainability depends…” –Packaging sustainability is rarely a one-size-fits-all solution—very situational –Sustainability can often be a factor of consumer application not the package The least sustainable option is always the one that doesn’t perform –Not likely to be adapted through innovation process / ignored by markets Total cost of ownership is a good assessment of sustainable impacts –Assumes product is safe / and regulatory compliant –Externalities captured through LCA approach Sustainable consumers are not a binary population –Consumers are analog with ranges of sustainability focuses, such as 20%, 40%,70% or the rare 100% (any percent is possible) Regulatory mandates are binary approaches (all or nothing) –Binary solutions produce unintended consequences in analog systems –Mandate vs. Disruptive Innovation (previous slide) Problems solved or the solution dictated –Large populations of consumers will always move toward solving the problem over accepting a solution

6. Sustainable Impact / Debate with Packaging Occurs Manufacturing PhaseUse PhaseEnd of life Phase Total Life Cycle Impacts Products tend to have a good, better and best phase Some phases more dependent on consumers than brand Use and End of Life heavily consumer dependent Consumer habits hardest to design for—they innovate End of life systems evolve independent of packaging MRF design / Recycling Technology / Unforecasted Reuse Packaging debates often about just one of the phases Improving manufacturing may not impact end of life Improving end of life impact may degrade use and manufacturing performance—think substrate mandate

7. Are Regulations Based on Sustainable Design Regulatory process often biased by special interests Special interests typically focus on impacts of one lifecycle phases and rarely a balance of all because most of their charters are designed that way Sustainable packaging design focuses on all three phases of performance Innovation may be in manufacturing or use impact with a major reduction in GHG, but if regulatory debate is in marine debris, it could be lost Think of the dynamic opposites of compostable paper service ware compared to recyclable plastic Packaging Innovation Doesn’t Resolve All Sustainability Debates, Over Time it Shifts To Different Impact Phase

8. Post Regulation Research Starting to Evolve Primarily Three Types Opinion surveys –Does public feel it is effective –Accounting for bias generally consumer feel o Something has to have occurred because there is regulation, but little quantitative support o Support feel good model Scientific work –Very little quantitative data to support belief that change occurred –Unintended consequences becoming known and measured Investigative journalism Has questioned the political process behind some of the work and results that have occurred

9. Bag Regulation and Hidden Trade-Offs of Reusable Bags Reusable Bag TypeLDPENWPP Reuses need to out perform plastic retail bag9.533.9 Average Reuses Unregulated0 (no market)13.9 Average Reuses Regulated Market3.117.3 Data based on: 2014 Clemson Retail Bag LCA 2014 Edelman Berland national consumer survey of reusable bag users with over sampling in regulated areas Retail bag bans and fees were based on a the belief that limiting options and creating pricing tools would make most consumers optimal users of retail bags What we learned: The optimal users (near 100% sustainably focused) already used reusable bags New users were not optimal users and actually created greater impacts Consumer impacts shifted from litter and marine debris to GHG, ecotoxcicity, landfill and others…but the groups focused on regulation focused only on litter and marine debris so new impacts have gone unnoticed for the time being

10. Bag Regulations Begin to Show Hidden Trade-Offs Austin—Post bag ban study showed tonnage of reusable bags in recycling (waste) stream now exceed volume of banned products pre-regulation Hawaii—Activists now calling for bans on some types of reusable bags types San Francisco—Conducted pre- and post- bag ban, studies found no impact on litter stream composition Alameda County—Review of SF Bay area pre- and post- bag ban environment showed no reduction in litter volumes in to bay –Likely replacements took place of banned products USITC—Annual import reports show ~500 million NWPP reusable bags imported each year to support 30-45 million users, a range of 11-15/year/user –Much less reuse than forecasted or required to achieve sustainable or environmental improvements NCPA—Environmental costs mitigated mostly fixed costs, not variable costs, with little or no net positive impact in terms of quantitative sustainability

11. Lessons Learned for Sustainable Packaging Design Map of sustainable packaging concepts evolving Sustainable packaging impact phases Phase impact awareness (strengths / weakness) Understanding that regulation debates not always congruent with life-cycle sustainability science Unintended consequences starting to come to light –Supports concept that debate and science not always congruent