The Loop Fraud Loophole: Why Traceabilityin Recycling Can’t Wait

‍The sustainability world is waking up to a troubling truth—recycled isn’t always recycled.

In recent years, the circular economy has emerged as the north star of sustainability. “100% recycled content” claims adorn everything from water bottles to sportswear, giving brands a green halo and consumers peace of mind.

But what if some of that recycled content was never used in the first place?

That’s the question that rocked the industry in 2023, when a Reuters investigation revealed instances of loop fraud—a troubling practice where virgin PET bottles are produced solely to be recycled, just to meet demand for rPET (recycled polyethylene terephthalate). These bottles, never touched by a consumer, were crushed and cycled back into the system to be sold as “recycled” content.

One industry insider estimated that up to 20% of rPET in certain supply chains could come from such practices. If true, this undermines not just the credibility of individual brands but the entire concept of recycled content as a sustainability metric.

What drives this? Economics and optics. Recycled PET is often more expensive than virgin plastic—but brands still face pressure from regulators and consumers to go green. With verification systems still catching up, the door remains open to abuse.

Traceability: The New Sustainability Frontier

Fast forward to 2025, and the conversation has shifted. From the EU to Southeast Asia, there's growing momentum behind traceability technologies—from digital watermarks to blockchain-backed audit trails. Certification systems like the Global Recycled Standard are also tightening their controls.

And it’s not just a technical fix—it’s a credibility fix.

Because here’s the hard truth: even if loop fraud isn’t wide spread today, the conditions for it still exist. The market value of recycled content is rising, but so is the temptation to fake it. Without robust systems to track where materials come from—and where they’ve been—“recycled” risks becoming another greenwashed label.

What’s Next?

Brands must treat traceability not as a compliance exercise but as a core part of their sustainability strategy. Supply chain partners, especially in high-risk regions, need deeper vetting. And consumers? They deserve transparency, not just assurances.

If we’re serious about closing the loop, we have to close the loopholes first.

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