By Conor Dowdis
The circular economy will be disruptive to the current business models of waste and recycling companies while also providing new opportunities for sustainable growth.
Change is coming.
We are moving from a linear economy based on the principles of the ‘take-make-waste” approach to a circular economy based on the values of eliminating waste and pollution, recirculating products and materials (at their highest value) and regenerating nature.
The transition to a circular economy is being driven by global missions, such as mitigating climate change and protecting the earth’s finite resources and biodiversity.
The transition also is underpinned by emerging national and international policies and regulations, such as the European Union Circular Economy Action Plan, as well as by the global roll-out of policies such as extended producer responsibility (EPR).
In addition, initiatives by the private sector also are gaining momentum. Nearly 100 multinational companies signed the U.S. Plastic Pact, for example, pledging to make their plastic packaging either recyclable, reusable or compostable.
The direction of travel has been set, but the duration of the transition and final destination still must be worked out.
Like all change, the circular economy will be disruptive to the current business models of waste and recycling companies while also providing new opportunities for sustainable growth.
It is time now for waste and recycling companies to scan the horizon and plan how to best position themselves to exploit these emerging opportunities.
Change is opportunity
What is clear about the circular economy is that there will be less waste with the focus being on keeping resources in circulation and at their highest value.
The future is, therefore, about understanding, tracking and assigning resources at their highest value to where supply chains need them.
The circular economy is based on a strong integration of the value/supply chains as resource composition, quality and predictability gain in importance.
This means fundamental changes to the traditional business models of waste management companies.
While recycling can be seen as a lesser option in some views compared with repair, remanufacture, reuse, sharing, etc., advanced recycling undoubtedly will have a role to play for many resource types.
But it also means those companies that respond rapidly to customers’ new requirements will have the opportunity to achieve the most success.
Prospects from the circular economy for waste and recycling companies include:
- reducing waste;
- increasing resource productivity;
- helping secure increasingly scarce resources, such as precious metals;
- reducing the environmental impact of production and consumption;
- capturing and preserving the underlying value of a resource with advanced recycling;
- delivering a more competitive and optimized economy; and
- innovating with new business models, such as repair, reuse, remanufacture and sharing.
How can your recycling business be part of the circular economy?
An integrated supply chain will be a key feature of the circular economy.
A linear economy was a model where material was extracted, made into a product that was sold, consumed and then thrown away. This was our past but is unlikely to be our future.
In a circular economy, existing products are used as the building blocks for new products. This can be through recycling cardboard boxes, plastic bottles and metal cans but also by reusing packaging, electrical items and other goods where possible. It also means designing products that can be easily recycled rather than disposed of.
Waste and recycling companies already play a pivotal role in recycling in the linear economy, acting as an important intermediary between waste producers and those companies looking to source quality secondary raw materials to replace virgin materials.
Recycling (particularly advanced recycling that preserves the highest value of the materials) will remain a key part of the circular economy.
We expect that this role will evolve beyond recycling as waste and recycling companies become more integrated into the supply chains of the original producers of the material as well as a range of potential users of the transformed material.
Most likely your business traditionally moved waste or recyclables, but it is time to reposition yourself as a circular logistics/agile logistics company that is integrated within circular supply chains.
- collecting quality material to ensure it can be turned into new, high-value products, which is likely to result in higher prices for these commodities;
- integrating with your customers so they know when you will collect or supply their material;
- reducing your environmental impact through optimized collections and technology investments;
- increasing understanding of the quality and composition of the resources that you collect and accept into your facility;
- better understanding your inventory so you can forecast when the material will arrive and leave your facilities and ensure it is there when you need it;
- driving efficiencies in your business, which also has the benefit of reducing your costs;
- marketing yourself as forward-thinking in the context of the circular economy, helping you to gain brand loyalty and improving brand recognition;
- exploring new business models and services built around repair, reuse, remanufacturing, sharing, reverse logistics, etc. and
- partnering with manufacturers of goods on pilot schemes around EPR, take-back, reuse, remanufacturing, etc.
Circular economy checklist
What do you need to consider when changing your business from a linear waste company to a circular logistics provider?
1. Understand emerging circular policy developments and assess their likely impact on your collection logistics. EPR will mean those that create waste must pay for its collection, sorting and processing, giving them an incentive to design and manufacture products that are easy to reuse or recycle. Where can you cooperate with producers that are subject to EPR legislation?
Deposit return schemes already are popular in some countries but are being enacted in others as a way to ensure as much material is captured as possible. Drink bottles and containers are typically collected this way, as it often gives a purer and better-quality product that is easier to recycle.
Source-separated collections are commonplace in many European countries, while others, such as the U.K., China and Thailand, are introducing them to create better quality secondary materials for recycling with fewer impurities. It also means that high-quality recyclate is more likely to be accepted for import by countries that are part of a global circular economy.
Organics collection is becoming the norm in some countries as recognition of the circular value of organic waste that can be transformed into soil nutrients (regeneration of nature is circular economy value) and renewable energy are recognized.
We believe that these policy developments along with the rapid adoption of associated technologies require recycling companies to review their collection strategies and support technologies as logistics becomes increasingly data-driven.
We expect the following trends:
- an increase in source-separated collection, necessitating either multicompartment collection vehicles and/or more collections;
- an increase in focus on measuring the quality and composition of these resources;
- adoption of reverse logistics models where recycling companies will work with other logistics partners; and
- accelerated decarbonization of collection with a move to electric vehicles.
2. Invest in digital technology. You will need the latest digital technology to integrate within the circular supply chains.
Keeping a record of your trades and contracts in Excel will no longer be enough. You’ll need to understand your resource inventory in detail, including quality, composition, costs and valuation. You will need to forecast volumes of material coming in and how you will service customers that work on just-in-time raw material manufacturing schedules.
Digital technologies will help track each part, with sophisticated tools providing reporting and analysis when you need it but also automating processes to save resources. These technologies will be a key enabler for the circular economy given the centrality of data and analytics. AMCS believes that waste and recycling companies need to embrace new digital technologies that allow them to participate and collaborate across the value chain.
We have identified four key areas that we view as key technology enablers for the circular economy:
- Data infrastructure and analytics – An integrated supply chain to support a circular economy will be built upon data and analytics to track all resource movements and transformations and to share this information among all the supply chain partners.
- Optimization – A new generation of intelligent optimization tools designed to help decarbonize logistics by reducing mileage and emissions while leveraging technologies to deliver new levels of agility in terms of service. We anticipate the application of artificial intelligence (AI)and other digital solutions in forecasting, planning, operations and reviews across all resource management processes.
- Material recovery facility (MRF) 4.0 – A new concept of a data-driven, advanced recycling facility where all the processes and workflows are connected. There will be real-time visibility into inventory management, quality, valuations and adjustments. There will be a strong focus on the quality of input and output materials, which will be reviewed by AI and machine learning tools that can review images of resources at scale to determine resource composition and quality. All the key MRF functions, such as logistics, operational, financial, sales, demand planning, etc., will be integrated and aligned to provide complete visibility and control. All relevant data can be shared across the supply chain with partners.
- E-commerce platforms/digital engagement – These are platforms and portals that will connect the various actors (producers, users, consumers, waste and recycling companies, logistics companies, etc.) in the value supply chain to allow them to share, collaborate and trade. For example, these platforms could consist of digital material trading platforms to match sellers and buyers. These platforms could allow waste and recycling companies to collaborate with each other or third-party logistics companies on reverse logistics opportunities to reduce carbon emissions.
The circular economy is not entirely new. For example, metal has never been regarded as waste but instead as a circular resource since 300 BC. There is much to be learned from the approach of such early adopters of circularity in areas such as fiber, organics, metals and plastics.
These companies are deeply integrated into the supply chain of steel mills, smelters, paper mills, natural fertilizing companies and they have always tightly managed resource quality to produce a product to a demanding end specification.
The circular economy is driving our strategy at AMCS, ensuring we provide our customers with the tools and expertise they can rely on as we move toward a new future with both the opportunities and complexities that this entails.
One thing that is certain is that the circular economy will be digital, and AMCS plans to be a key partner and enabler for our customers on this journey of transition.