The agency, the Waste and Resources Action Programme (WRAP), is hopeful that successful trials of its plan to recycle HDPE resin will bring commercial backing to build the Britain's first plant for that purpose.
Recycled HDPE resin from milk cartons is in high demand across the food industry because it provides the most consistent quality for re-use in food packaging, WRAP says.
The group has argued for some time that such a recycling process would be possible to achieve.
It has almost completed a large-scale trial, alongside dairy and packaging firms, to examine the feasibility of a scheme that would pick up used milk cartons from consumers' homes and then recycle them to get food grade HDPE resin.
Paul Davidson, plastics technology manager at WRAP, said the trial had largely been a success so far.
The trial has found that using 30 per cent recycled HDPE in milk bottles did not alter the colour or appearance of the milk inside, indicating the practice would be acceptable to consumers.
One problem found was that the sticky, polypropylene labels used on the milk cartons were difficult to wash off.
Dairy Crest, one of Britain's top three processors, said it had discussed the problem with milk label suppliers but "was informed that this style of adhesive was an 'industry standard' and that it would be difficult to change this, and changing the adhesive could be costly".
Davidson said the label problem could be worked around, but "if dairies can eliminate these types of label it could make things a lot easier". He suggested using paper labels instead.
All the companies involved in the trial have responded positively, according to Davidson.
Growing environmental concerns among both consumers and governments have led to higher demand for sustainably-sourced products over the last year, while soaring costs for plastic packaging have also forced companies to assess other options.
Pressure on the food industry to cut waste also increased last year when the European Commission launched tougher recycling targets for EU manufacturers.
Davidson said the HDPE trial was an example of firms reacting to concerns. "I doubt whether finance is the main driver here. Whether or not there is a significant saving to be made is open to question," he said, adding that the groups involved wanted to make production more sustainable.
He said recycling schemes across the UK had made the idea of re-using HDPE resin in milk bottles more feasible.
"Collection rates are just jumping up. The material has always been there, but three years ago it was just not being collected. It is crystal clear to us and the authorities that this is something consumers want."