The £5m reclaimed fibre plant at James Cropper's production mill in Kendal, Cumbria, was opened today (17 July) by The Queen and Princess Anne, after four years of development.

"Until now the plastic content of cups made them unsuitable for use in papermaking," said chairman Mark Cropper. "In the UK alone around 2.5bn paper cups go to landfill. We separate the plastic in the cups leaving paper pulp for use in the highest quality papers.

"Pulp is a big cost, it is a global commodity that swings all over the place and, like other paper businesses, we have no control over it. As well as our environmental aspirations, if we can do more production ourselves we will have more control."

Cropper said the technology could be used on about a quarter of his company’s output. James Cropper produces 45,000 tonnes of paper a year for some of the biggest names in the world including Krug, Fendi, Selfridges and Dunhill.

He would not reveal how much he aimed to save or how much he hoped to add to the 500-staff company’s existing turnover of £80m, "but this is a major investment and it will earn its keep", he said.

Disposable cups are made of up to 95% high strength paper with a 5% thin coating of polyethylene. James Cropper recycles the fibre content in cup waste and the plastic coating, giving a sustainable solution to the global problem of disposable cup waste, he said.

The process involves softening the cup waste in a warmed solution, separating the plastic coating from the fibre. The plastic is skimmed off, pulverised and recycled, leaving water and pulp. Impurities are filtered out leaving high grade pulp for use in paper and packaging.

Cropper said: "Because the cups are designed to take hot drinks, the quality of the paper is very high. This will enable us to create a paper stream. We will be recycling 1bn cups a year, around 40% of the UK’s coffee cups. But there are 500bn around in the world, so potential is vast. This is a fantastically important project – the most important in a generation for sure."

Chief executive Phil Wild said: "This is the latest in a long history of innovation that has kept James Cropper ahead of the game for nearly 170 years and six generations. We were one of the world’s first producers of coloured paper."

"We were also a pioneer in the production of paper-like non-woven materials from carbon and other fibres. Today these are used in industries as diverse as US defence programmes to the latest composite cars and aeroplanes."