Summary: In this latest UK stock feature, David Gorman discusses how the chemicals company Croda is addressing the negative impact of microplastics on the environment, by developing innovative coatings for agricultural seeds. 

The United Nations forecasts that the global population will increase from around 8 billion people in 2022 to 10.4 billion by the end of this century[1]. It’s therefore not surprising that farmers around the world are under ever-increasing pressure to produce enough to feed this growing population. However, the battle to produce more and more crops on the same amount of land brings with it two unwanted side effects, land degradation and what is known as agricultural runoff.

Runoff happens when rainwater, melted snow or irrigation is not properly absorbed into the soil, perhaps because the ground is already saturated or is too dry and hard. Instead, this water moves over the ground, picking up pollutants along the way. Eventually, all these contaminants are deposited into our rivers, lakes and coastal waterways, and even underground sources of drinking water.

The U.S. Environmental Protection Agency (EPA) says run-off from farming is the leading source of impurities in the rivers and lakes it monitors. Complicating matters further is the fact that there’s no single source of this kind of runoff, therefore the problem is not easily fixed. Farmers try to limit agricultural run-off by being careful not to over-water their crops and avoiding excessive pesticide and fertilizer use[2].

When fertilizers find their way into watercourses, they can boost the growth of algae and aquatic weeds, which drain water habitats of the vital oxygen that has been absorbed. This in turn inhibits the ability of fish, insects and even other important plant species to survive in the depleted and darkened waters. Excess fertilizer spread on the land is one of the main culprits in degrading the quality of watercourses in this way, with the other being the runoff of animal waste. By reducing the amount of fertilizer spread on the land initially, seed coatings have the ability to improve the biodiversity of our aquatic habitats.

Other contaminants can also find their way into water runoff with further consequences for our environment and one of these is microplastics[3]. Microplastics are defined as pieces of plastic less than five millimetres long and there are two types: primary microplastics are particles designed for commercial use, such as in cosmetics (microbeads), as well as microfibres shed from synthetic clothing and other textiles, such as fishing nets. Secondary microplastics are particles that result from the breakdown of discarded larger plastic items, such as drinks bottles or packaging material. This breakdown is caused by exposure to environmental factors, mainly the sun’s radiation and ocean waves[4].

Not all seed coatings are the same, and in the drive for increased agricultural yields whilst reducing overall fertilizer and pesticide use, farmers need to show increasing selectively about the solutions they seek. Seed coatings have some common features, including treatments that provide vital protection against pests and diseases and a small dose of fertilizer to promote growth. These are typically encased in a protective coating which breaks down when the seeds are planted. However, many seed coatings contain polymer-based binders which have poor biodegradability properties and leave small plastic particles in the soil. Although agriculture only accounts for a small percentage of overall microplastic release, the problem is considerable and likely to grow without positive action.  

As part of its commitment to be “Land Positive,” Croda International PLC, whose shares we own in our CFP Castlefield Sustainable UK Opportunities Fund, is working hard to address the problem of microplastics. In their test facilities, Croda scientists trialled different formulations to develop new, microplastic-free coatings for corn and sunflowers seeds. They are now working on coatings for other major crops such as rice and soya which are derivatives of current solutions, as well as for oil-seed rape. This crop is more complicated to deal with in that its smaller seeds require a higher volume of treatment and the coating needs to be formulated to dry more quickly[5]. The next step for Croda is to work with its clients on larger scale tests, which can take up to four years. However, this will be time and money well spent if it helps reduce the amount of harmful micro-plastics in the environment.

Croda may not be a household name to many, but it is a FTSE-100 company and long-established at its base in East Yorkshire. It is engaged in the sales, marketing and research activities of speciality chemicals across two principal global market sectors; Consumer Care and Life Sciences. The company’s ethos is summed up in the phrase “smart science to improve lives.”[6]

Companies like Croda can play a critical role in reducing the environmental impact of microplastics within agriculture. As well as meeting the requirements of Castlefield’s positive investment theme of Health & Wellbeing, some of Croda’s activities also highlight our theme of Environmental Management. The environment provides the raw materials which are the foundation of life, therefore Environmental Management is an important theme for us. It covers companies which are involved in emissions management, waste control, pollution monitoring and water use.

Not surprisingly, legislation to ban the use of microplastics in seed coatings is coming down the road; for example from the European Commission via the European Chemicals Agency[7] and other regions are likely to follow suit. In anticipation of upcoming legislation, expected to become law in 2024-5, Croda launched its range of microplastic-free seed coatings in 2021.

Croda also scores well in numerous other areas of sustainability; everything from reducing its own carbon emissions, to being part of Phase III clinical trials for WHO-listed vaccines, to improving sunscreen products which help reduce skin cancer.

From an investment perspective, we like the fact that Croda’s portfolio of businesses is well-aligned with global megatrends such as health and wellbeing, feeding the planet and living sustainably and it is pleasing to see the company become much more tightly focused on ingredients for Consumer Care products and Life Sciences.

Written by David Gorman

Information is accurate as at 12.06.2023. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment, capital is at risk.

[1] Future Population Growth - Our World in Data

[2] What Is Agricultural Runoff, and How Is It Harming Our Waters? - Environment Co

[3] Microplastics in Agriculture: Challenges for Regulation - AgriBusiness Global

[4] Microplastics (nationalgeographic.org)

[5] Going microplastic free blog | Croda Crop Care

[6] Croda Home | Croda

[7] REACH committee votes to restrict intentional microplastics (europa.eu)