Why it's not easy being green

NEW YORK (Fortune) -- As Kermit the Frog likes to say, "It's Not Easy Bein' Green."

Not even if you have the best of intentions.

Just ask NatureWorks, a unit of agribusiness giant Cargill that sells a renewable and compostable plastic packaging material that is made from corn. Environmentalists like the product, which is known as PLA, because it is a substitute for petroleum-based plastics. Wal-Mart (Charts), Wild Oats Markets (Charts), Del Monte (Charts) and Newman's Own are among the big brands that have embraced PLA.

A bottled water company called Biota, which uses PLA bottles, boasts that its spring water "is the World's First bottled water/beverage packaged in a Planet Friendly bottle."

Not so fast, say critics.

While bottles made from PLA sound good, they don't work well with today's recycling systems, which are geared up to recycle bottles made of an oil-based plastic called PET. So a coalition of recycling groups has called on NatureWorks to stop selling PLA for bottles until the bio-resin's recyclability has been demonstrated.

"We told them, don't go down the road with bottles," says Eric Lombardi, the executive director of Eco-cycle, a nonprofit recycler in Boulder, CO., and president of the Grassroots Recycling Network.

If NatureWorks does not cooperate with recyclers, Lombardi warns, "We will educate the public to avoid products bottled in PLA."

Yes, it's not easy being green - or even agreeing what is green.

For some uses, PLA is clearly superior to oil-based plastics. You can serve a meal on plates and cups made with PLA, eat it with plastic silverware made with PLA, and throw all the food and waste into a compost pile, where it will decompose.

PLA made by NatureWorks, which is based in Minnetonka, MN, winds up in the packages used to hold fruits and vegetables at Wal-Mart, tubs of lettuce for Newman's Own Organics, and in Del Monte fresh-cut produce. Mrs. Fields stores put smoothies in PLA cups. PLA also finds its way into bedding, clothing and furniture, and it is selling in Europe and Asia as well as in North America.

NatureWorks' sales have grown at an average annual rate of 45 percent over the past four years, according to Mary Rosenthal, global communications leader for the firm.

"Once oil got over $40 a barrel, we became price competitive with petroleum based resins," she says. "Oil is a finite resource. This, we can keep growing every year."

But bottles made of PLA cause problems for recyclers for a couple of reasons. First, they can't be easily separated from bottles made of oil-based PET, the most commonly used material in clear, plastic bottles. (Costly infrared sorting equipment will separate the two, but many small-scale recyclers separate different plastics by mechanical methods or even by hand.) Too many PLA bottles will contaminate the PET waste.

Second, PET is a valuable commodity - it can be sold for 15 or 20 cents a pound, and makes up 10 percent of the revenues of some recycling centers. The sale of recycled commodities helps finance the curbside pickup of bottles, cans and paper.

"We've worked hard for many years to make the economics work," explains Tim Brownell, chief operating officer of Eureka Recycling, a nonprofit that manages the recycling program in St. Paul, MN.

The recycling activists can't be easily dismissed. They have a presence in thousands of communities, and joined with environmental groups and social investors to convince Coca-Cola (Charts) to use recycled content in its PET bottles.

The big beverage companies also have a stake in PET. Scott Vitters, director of sustainable packaging for Coca-Cola, says of PET, "It's a very good environmental package...We have invested a significant amount of money in recycled content PET technology development and commercialization." But, he admits, PET is not sustainable in the truest sense because it's made from petroleum.

For its part, NatureWorks says it will continue talking with recyclers. "We intend to be very careful about putting this new material into the recycling stream," says Rosenthal.

But, as environmentalists scrutinized PLA, the company will have to prepare itself for other questions, too. Should PLA be made from corn, which requires lots of energy to grow and is frequently genetically modified, or could it be made from discarded agricultural or forestry feedstock? Can PLA be better labeled so that it is composted rather than thrown away? Can NatureWorks do more to promote local composting sites that would keep food waste and PLA out of landfills?

Gary Liss, a recycling industry consultant and an advocate of "Zero Waste" - meaning that everything we throw away gets recycled or reused - warns that PLA, especially in bottles, could end up creating as many problems as it solves.

"Don't introduce these into the system," Liss says "until you can figure out a way to identify them and keep them out of a whole elaborate system that has been developed."

Such questions reflect a fuller understanding of sustainability, which encompasses how products are made and consumed and where they end up.

As Kermit says, it's not easy being green.

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Rolling out the green carpet