Tax and seaweed – two years on

Two years ago, we discussed the “Plastic Packaging Tax”. Back in April 2019 this had been mooted by the UK Government as a possible means of forcing manufacturers to move toward using recyclable raw materials, with the proposed tax applying to non-reusable packaging like plastic straws, bags and Styrofoam cups.

This legislative aim is now a pending reality after Rishi Sunak announced in April this year that the tax would be included as part of the Finance Bill 2021. From April 2022, businesses will now face a tax on any plastic packaging manufactured in or imported into the UK which is not at least 30% recycled.

The message is now clear for UK businesses: reduce your carbon footprint or face a significant tax hike.

But what innovative alternatives are there to plastic? Well, in 2019 we made a somewhat unusual suggestion: seaweed. We discussed how seaweed can be used as a source of disposable biodegradable packaging, allowing for wholly recyclable packaging that absorbs carbon dioxide and nitrogen, and reduces environmental waste.

As we noted in 2019, it is not just environmentally friendly packaging where seaweed can be used. Seaweed extract has been used as an ingredient in cosmetic products, as fertiliser, and of course as a food in its own right. There is even seaweed-flavoured or infused whisky, vodka, beer and gin, if that is more to your taste. From skin creams to sushi rolls, we thought that Scotland had a unique opportunity to capitalise on a sustainable raw material sitting on its shores.

So, after two eventful years, we decided to take a look at how Scotland’s seaweed industry has developed and what opportunities and challenges remain.

What’s happened since 2019?

There have been some significant strides forward for Scottish seaweed producers.

In June 2020, New Wave Foods (trading as SHORE, The Scottish Seaweed Company), raised an equity investment totalling £1.2 million, led by the Scottish Investment Bank. SHORE harvest seaweed to manufacture seaweed-infused crisps, pestos and protein bars, with the investment used to expand the company’s product range.

Similarly, in May this year, Oceanium, an Oban-based seaweed processor, raised a £2 million angel investment as part of their expansion plans. Notable investors included Green Angel Syndicate, a climate-focused venture fund, and the World Wildlife Fund (WFF). Oceanium use patented refinery technology to produce bio-packaging material, food and cosmeceuticals, with the May investment being used to scale up the company’s proprietary technology.

Trade bodies such as the Scottish Seaweed Industry Association continue to promote the sector along with government agencies like Marine Scotland, with The Sustainable Inshore Fisheries Trust noting a rise in seaweed farming license applications over the past 2 years. Clearly, more and more would-be Scottish seaweed entrepreneurs are looking to ride the green wave.

The experience of SHORE and Oceanium shows that the Scottish seaweed industry is ripe for investment. Both companies have taken advantage of the growth of green investment funds, with the past few years seeing the introduction of many of these “ESG” vehicles, as many asset management funds are keen to commit money to new climate-focused products. Within Scotland, public sector organisations like the National Investment Bank and Scottish Enterprise are also eager to invest in innovative, eco-friendly initiatives which offer a double-whammy of stimulating economic activity while combatting the climate emergency. Seaweed manufacturers therefore have a golden opportunity to latch onto significant capital investment from both private and public funds.

What challenges remain?

For all the progress that’s been made, Scotland is still a small player in the global seaweed market. Asia remains dominant both in terms of production and consumption, with around 96% of the global trade. Countries such as China, Japan, Vietnam and Indonesia reap the benefit of massive domestic markets which regularly consume seaweed as a staple of their diet. The people of the UK, Europe and the Americas might still be some while away from placing seaweed into their packed lunches but the direction of travel looks promising.

Aside from the macroeconomic challenge of a small (but growing) market, there is the stark reality of what is actually required to set up a seaweed farm. Seaweed farming requires a license from Marine Scotland and a Lease from the Crown Estate, amongst other regulatory consents. Add to these administrative processes and consents, harvesting seaweed itself remains a gruelling, labour-intensive production activity, with most of it needing to be picked by hand. Despite also being largely dependent on hand-picking, Asian countries like Japan and South Korea benefit from large-scale processing techniques and operations built up over decades of cultivation, not to mention higher levels of research and development.

There’s no doubt that the seaweed sector is still a cottage industry in Scotland but despite the challenges it faces, Scotland is still well-placed when it comes to seaweed. With a diverse 6,000 mile coastline, the country has an obvious competitive advantage when it comes to harvesting and production.  

What next?

The plastic packaging tax is the first example of the UK government stepping in to punish businesses in the pocket for harmful environmental practices. Moving away from non-recyclable materials is no longer a solely ecological imperative but a commercial one too. Pivoting toward sustainable materials like seaweed will be a major theme for businesses over the coming years as the UK, and the world at large, transitions toward a net-zero future.

In 2019, we noted the potential for a game-changing industry on Scotland’s shores. The idea that seaweed had any significant economic potential might have seemed fanciful, but the past 2 years have shown the first glimmers of promise, with Scottish companies attracting investment and growing their operations.

With Scotland playing host to a potentially era-defining climate conference in COP26 this November, Scotland’s seaweed industry has the chance to boom. It will require patient investment, confidence and the occasional calculated risk, but we are excited to see what the next few years have in store.

This article was co-written by Trainee Solicitor, Joe Macfarlane.

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