5 challenges to scaling the circular economy
Creating great products is any company's goal, but to those that think long-term about their value, making a profit "means nothing" unless they scale production in a way that doesn't harm consumers and the environment, said attendees at a circular economy summit during VERGE 17.
The circular economy, which moves away from the take-make-dispose system of "business as usual" and infuses manufacturer's material streams with recycled goods, is the mechanism that will allow companies to achieve this goal.
There are still massive barriers to implementing the circular economy as "business as usual," and it will require pulling a company's full value chain on board, said the panelists, meeting under Chatham House Rule. For example, the chemical processes that allow polymers to be dissolved and recirculated are still expensive to implement — and may have hidden health risks.
Getting into "full circularity at once isn't likely," said an attendee from an environmental nonprofit. Finding and optimizing the pipeline of circular opportunities means using the levers of technology, policy and investment from the consumer goods sector.
Here are five major challenges to proliferating the use of reclaimed goods, and the opportunities that may arise from them — because, essentially, circular thinking is about finding jewels in a waste stream.
1. American recycling facilities must up the ante
Recycling facilities in the United States and other Western countries need to scramble to increase capacity due to new regulations that China's Ministry of Environmental Protection filed with the World Trade Organization: Recycled PET, PE, PVC and PS plastics, as well as recovered mixed paper and some textiles, will be banned from import to the country by the end of 2017.
China is a major downstream destination for recovered materials, but the country recently has cracked down on its recycling facilities for violating environmental rules. Authorities are responding to large amounts of hazardous wastes mixed with the solid waste that can be reused as raw materials, polluting the environment and potentially harming workers.
"This will shake up our whole recycling industry unless we determine how to create new domestic markets," said Nina Goodrich, executive director of GreenBlue. She suggested that Chinese companies might even start recycling in Western facilities as a result of heavier regulation at home.
2. Don't depend on consumers
Consumer activism and choice can influence brands, but companies must do the heavy lifting to create widespread change in consumer recycling behavior.
Consumer perception is one reason that the push has to come from top down. A sustainability expert from a fashion company that is launching a line of recycled clothing said that the company had had to treat the product like any other of its offerings.
"[Customers won't buy it] because of the story, but because it was the right product at the right price point" and the color palette was no different from that of the non-recycled products, she said. "They wouldn't perform well if they looked 'green' or 'sustainable."
Another reason is the lack of consumer education around the recycling process. GreenBlue's Sustainable Packaging Coalition launched the How2Recycle label to guide product users in proper recyclables disposal because they often would make small changes to the material that would render it unrecyclable — for example, a mailing package can't be recycled once a sticker has been applied to it.
When large retailers such as Target and Walmart began to endorse the How2Recycle label for their brand of products, however, the companies that stocked their shelves had to start paying attention. Influence counts.
3. The devil is in the details
It won't be an easy trip to create a new business model based on recycled goods.
The first half of the recycling process was easy, said a representative from one company, but the journey became progressively harder.
"The last 5 percent took us eight months," said the representative of dealing with excess material feedstocks that the company was trying to send to a car manufacturer. "We had to size it perfectly."
Overcoming that hump was worth it, however: "When we sorted materials better, we got higher returns. ... By densifying materials and optimizing logistics, we were getting more money per truckload."
4. Everyone must be on board
From the CEO to the design floor to the manufacturing floor, the entire organization must understand the value of investing time, money and training in reusing raw materials.
"Executive sponsorship is essential and the chief operating officer is key, since logistics, supply chain, manufacturing and quality are all within his or her purview," said one participant at a working group that met during the summit to discuss integrating circularity into manufacturing processes.
When training manufacturing staff to use recycled materials, said another attendee, "Speak the language of folks who run factories and supply chain programs. Explain to them that circularity is about efficiency."
A representative from a global consumer goods company gave the following advice: "Find how the circular economy can live in their personal and professional lives — get them to feel a connection to their daily job."
5. Building trust
For the circular economy to become a reality, companies must share best practices and develop technologies that all consumer organizations can use to reclaim waste and economic value.
"We don't trust each other's approaches," said a representative from a technology company, realizing that this creates a barrier to a common cross-industry goal. "We think they're doing it for some nefarious purpose, while we have good intentions."
Publishing white papers can help companies clarify with themselves, and outside organizations, the successes and failures of their circular endeavors.
A sustainability expert at a university pointed out political turbulence as a barrier to uptake of the circular economy, especially for regulation between the federal, state and city levels in the United States.
"Is it the government's role to protect health and well-being?" she asked. To face these challenges, she said the university developed "ethical circular economy training" to ensure that the focus on technology and product recycling doesn't leave out human sustainability.
As GreenBiz Executive Editor Joel Makower closed out the session, he remarked that "the mirror of sustainability is that of the general, corporate stage."
It is as difficult to navigate the transition to the circular economy as any other major shift that companies have had to face recently: "The good news is that we now know a lot more about how to do that."