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The concept was born out of a project Ms. Siddiqui pursued as the president of student social entrepreneurship club Enactus at the University of Toronto.

Alex Franklin/The Globe and Mail

Entrepreneur Nuha Siddiqui pitched her compostable replacement to plastics to her first venture capital investor in 2018 while snacking on a bowl of packing peanuts – foam nuggets used in packaging to prevent damage.

“When people didn’t believe that it was 100 per cent compostable, I would eat the product,” Ms. Siddiqui said. “People were shocked and concerned.”

A year later, Toronto-based EcoPackers Inc., a for-profit social enterprise that Ms. Siddiqui co-founded, has raised $4.3-million in preseed and seed financing led by Toronto-based Golden Ventures and billionaire Li Ka-shing’s Hong Kong-based Horizons Ventures. The company has also launched pilots with companies in China and Canada, leaping into a crowded space of social enterprises working to address plastic reduction. The fundraising rounds attracted angel investors including Ajay Agrawal, founder of the startup boosting Creative Destruction Lab (CDL), and Chen Fong, a Calgary entrepreneur.

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The concept was born out of a project Ms. Siddiqui pursued as the president of student social entrepreneurship club Enactus at the University of Toronto and developed through entrepreneurial leadership programs Next 36 and the CDL. It expanded from eco-friendly styrofoam packing made out of potato starch to cutlery, packaging casing and clothing hangers manufactured with agricultural byproducts from local farms.

Joined by fellow graduates Chang Dong, chief technology officer and chemical engineer, and Kritika Tyagi, chief operating officer and plant biologist, they booked one-way tickets to China, the largest global producer of plastic, to launch pilots with plastics companies to test manufacturing their products on a commercial scale.

Plastics pollution has garnered international attention, with large makers of household products, including Unilever PLC and PepsiCo Inc., signing onto global commitments to reduce their use of the material that is cluttering landfills and coastlines. As governments have introduced restrictions and fees to reduce single-use plastic products, Ottawa announced in June that it’s moving toward a ban in 2021.

The shift, spurred by changes in consumer demand amid rising climate-change concerns, has caught the attention of social entrepreneurs looking to market bioplastic alternatives to traditional polystyrene and polypropylene, which are used to make food containers and sandwich bags.

Bioplastics products – items that are made from plant or other biological materials such as corn husks – are on the rise as the most common replacement. The global bioplastic packaging market is expected to grow to US$24.84-billion by 2026 from US$5.94-billion in 2018, according to New Jersey-based market research company Fior Markets.

But not all bioplastics are biodegradable, meaning that the products do not completely break down in composts or landfills. That’s where EcoPacker’s products differ, according to Ms. Siddiqui.

“Our product is 100 per cent compostable,” she said. “So you can actually feed your plants with our product. You can put it in your backyard and after a few rainfalls, it will end up becoming part of your environment and you don’t have to put it through any industrial level composting systems, which is usually the case with a lot of bioplastics.”

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If a consumer is unaware that the product is compostable and it ends up in a traditional landfill, it will still biodegrade unlike most bioplastic products that require special conditions to break down, she said. To reduce costs, EcoPackers developed a manufacturing process that extracts materials from farm byproducts using a method that is faster and less expensive than typical bioplastics extraction processes, Ms. Siddiqui said.

The journey from making packing peanuts at the University of Toronto to piloting coat hangers on manufacturing lines in Hong Kong and China took less than two years, and the team’s quick pace and ability to learn and adapt attracted investment from Matt Golden, founder and managing partner of Golden Ventures.

EcoPackers’ pilots aim to prove that their product can be created on existing production lines without retooling the equipment, and that will be crucial to winning over large companies looking for low-cost solutions. They plan to sell their eco-resins – the substance extracted from farm byproducts that is used to create compostable plastic – to manufacturing companies or license the technology to producers.

“They had gone down this other path and shifted the model because it made infinitely more sense to tie into existing manufacturing infrastructure,” Mr. Golden said. “They hadn’t had tremendous commercial experience, but they have the capability to quickly scale and learn what will be effective in the commercial marketplace.”

But cost continues to pose a barrier for bioplastic adoption. Even as consumers demand environmentally sustainable options, few are willing to pay higher prices for biodegradable products. While 90 per cent of Canadians say that plastic packaging should be switched to green alternatives, only 38 per cent of respondents are willing to pay more for biodegradable packaging, according to a study by Dalhousie University.

In the packaging and single-use plastics industry, profit margins are already so thin that even a small increase in manufacturing costs could deter a business from adopting new bioplastics technology, according to Geoffrey Kistruck, a professor of social entrepreneurship at York University’s Schulich School of Business. And competition is increasing as more environmentally focused startups enter the market.

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“It’s a crowded space,” Prof. Kistruck said. “In the U.S., there are a lot of organizations for the purpose of saving the planet and reducing climate change because everyone sees that this is a win-win opportunity.”

With its latest round of funding, EcoPackers plans to hire 19 engineers to create products that meet the requirements of its partner companies while maintaining its 100-per-cent compostable mandate. EcoPackers is aiming to launch its products in 2021, with a goal of eliminating 20,000 tonnes of plastic waste by 2025.

“In the market, there is a huge need and gap for these environmentally friendly products that will truly be a viable business option for manufacturers,” Ms. Siddiqui said.

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